Exhibit 10.16

CONFIDENTIAL

Execution Version

SPECIFIC TERMS IN THIS EXHIBIT HAVE BEEN REDACTED BECAUSE CONFIDENTIAL TREATMENT
FOR THOSE TERMS HAS BEEN REQUESTED. THE REDACTED MATERIAL HAS BEEN SEPARATELY
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE TERMS HAVE BEEN
MARKED AT THE APPROPRIATE PLACE WITH THREE ASTERISKS [***].

OPTION AND COLLABORATION AGREEMENT

between

DENALI THERAPEUTICS INC.

and

TAKEDA PHARMACEUTICAL COMPANY LIMITED

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TABLE OF CONTENTS

 

         Page  

Article 1 DEFINITIONS

     1  

Article 2 COLLABORATION MANAGEMENT

     27  

2.1

  Joint Steering Committee      27  

2.2

  Joint Program Teams      28  

2.3

  General Provisions Applicable to Joint Committees      31  

2.4

  Alliance Manager      34  

2.5

  Denali Worldwide Royalty Option      34  

2.6

  Working Groups      35  

2.7

  Information      35  

2.8

  Expenses      35  

Article 3 DESIGNATED TARGETS; RESEARCH ACTIVITIES

     36  

3.1

  Designated Targets      36  

3.2

  Research Plans and Activities      37  

Article 4 DEVELOPMENT AND REGULATORY ACTIVITIES AFTER OPTION EXERCISE

     40  

4.1

  General      40  

4.2

  Development Plan and Activities      41  

4.3

  Disclosure of Technology for Development Purposes      45  

4.4

  Regulatory Matters      47  

4.5

  Records      49  

4.6

  Clinical Trial Register and Data Transparency      49  

4.7

  Patient Samples      50  

Article 5 MANUFACTURING

     50  

5.1

  Manufacturing Activities      50  

5.2

  Manufacturing Lead      50  

5.3

  Manufacturing Costs      51  

5.4

  Supply Agreements      51  

5.5

  Third Party Providers      51  

5.6

  Manufacturing Transfer      52  

Article 6 COMMERCIALIZATION

     53  

6.1

  General      53  

6.2

  Commercialization Activities      53  

6.3

  Commercialization Plans      55  

6.4

  Sales Representatives      56  

6.5

 

Advertising and Promotional Materials

     57  

 

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TABLE OF CONTENTS

(cont’d)

 

         Page  

6.6

  Medical Inquiries      58  

6.7

  Optioned Product Packaging      58  

6.8

  Sales and Distribution      58  

6.9

  Shipping and Returns      59  

6.10

  Recalls, Market Withdrawals or Corrective Actions      59  

6.11

  Product Trademarks      59  

6.12

  Markings      60  

Article 7 LICENSE GRANTS; EXCLUSIVITY

     60  

7.1

  License Grants to Takeda      60  

7.2

  License Grants to Denali      61  

7.3

  Sublicenses      62  

7.4

  Subcontracting      63  

7.5

  Third Party Intellectual Property      63  

7.6

  Retention of Rights      65  

7.7

  Confirmatory Patent License      65  

7.8

  Exclusivity      65  

Article 8 PAYMENTS

     66  

8.1

  Upfront Payments      66  

8.2

  Research Program Payments      66  

8.3

  Development Milestones      67  

8.4

  Reports and Payments for Research Milestones and Development Milestones     
69  

8.5

  Commercial Milestones      69  

8.6

  Cost-Profit Sharing      69  

8.7

  Denali Worldwide Royalty Option      72  

8.8

  Mode of Payment      75  

8.9

  Withholding Taxes      75  

8.10

  Indirect Taxes      76  

8.11

  Interest on Late Payments      76  

8.12

  Financial Records      76  

8.13

  Audit      76  

8.14

  Confidentiality      77  

8.15

  No Other Compensation      77  

Article 9 INTELLECTUAL PROPERTY

     77  

9.1

  Ownership of Intellectual Property      77  

9.2

 

Maintenance and Prosecution of Patents

     78  

 

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TABLE OF CONTENTS

(cont’d)

 

         Page  

9.3

  Enforcement of Patents      80  

9.4

  Infringement Claims by Third Parties      82  

9.5

  Invalidity or Unenforceability Defenses or Actions      82  

9.6

  Product Trademarks      83  

9.7

  Inventor’s Remuneration      84  

Article 10 PHARMACOVIGILANCE AND SAFETY

     84  

10.1

  Pharmacovigilance      84  

10.2

  Global Safety Database      85  

Article 11 CONFIDENTIALITY AND NON-DISCLOSURE

     85  

11.1

  Confidentiality Obligations      85  

11.2

  Permitted Disclosures      86  

11.3

  Use of Name      87  

11.4

  Public Announcements      87  

11.5

  Publications      88  

11.6

  Prior Confidentiality      89  

11.7

  Survival      89  

Article 12 REPRESENTATIONS, WARRANTIES AND COVENANTS

     89  

12.1

  Mutual Representations and Warranties      89  

12.2

  Additional Representations and Warranties of Denali      90  

12.3

  Additional Covenants of Denali      92  

12.4

  Additional Covenants of Takeda      92  

12.5

  DISCLAIMER OF WARRANTIES      92  

Article 13 INDEMNITY

     92  

13.1

  Indemnification of Denali      92  

13.2

  Indemnification of Takeda      93  

13.3

  Certain Indemnified Losses      94  

13.4

  Notice of Claim      94  

13.5

  Control of Defense      94  

13.6

  Special, Indirect, and Other Losses      96  

13.7

  Insurance      96  

Article 14 TERM AND TERMINATION

     97  

14.1

  Term      97  

14.2

  Termination for Material Breach      97  

14.3

 

For Convenience

     98  

 

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TABLE OF CONTENTS

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          Page  

14.4

   Termination for Insolvency      98  

14.5

   Termination for Patent Challenge      98  

14.6

   Termination for a Material Safety Event      98  

14.7

   Effects of Termination and Option Expiration      99  

14.8

   Transition      101  

14.9

   Remedies      103  

14.10

   Accrued Rights; Surviving Obligations      103  

14.11

   Rights in Bankruptcy      103  

Article 15 HSR COMPLIANCE

     104  

15.1

   HSR Act Compliance      104  

15.2

   HSR Filing      104  

15.3

   Cooperation      104  

Article 16 MISCELLANEOUS

     105  

16.1

   Force Majeure      105  

16.2

   Export Control      105  

16.3

   Acquisition, Change in Control, Assignment      105  

16.4

   Severability      106  

16.5

   Governing Law, Jurisdiction and Service      106  

16.6

   Dispute Resolution      107  

16.7

   Notices      108  

16.8

   Entire Agreement; Amendments      109  

16.9

   English Language      109  

16.10

   Equitable Relief      109  

16.11

   Waiver and Non-Exclusion of Remedies      109  

16.12

   No Benefit to Third Parties      110  

16.13

   Further Assurance      110  

16.14

   Relationship of the Parties      110  

16.15

   Performance by Affiliates And Sublicensees      110  

16.16

   Counterparts; Facsimile Execution      110  

16.17

   References      110  

16.18

   Construction      110  

 

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OPTION AND COLLABORATION AGREEMENT

This Option and Collaboration Agreement (the “Agreement”) is made and entered
into effective as of January 3, 2018 (the “Execution Date”) by and between
Denali Therapeutics, Inc., a Delaware corporation (“Denali”), and Takeda
Pharmaceutical Company Limited, a corporation organized under the laws of Japan
(“Takeda”). Denali and Takeda are sometimes referred to herein individually as a
“Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Denali has developed the ATV Platform (as defined herein) and certain
Biologics and Products (each, as defined herein) and Controls (as defined
herein) certain intellectual property and other rights with respect to such ATV
Platform, Biologics and Products in the Territory (as defined herein);

WHEREAS, the Parties wish to collaborate in the research and development of
Biologics Directed (as defined herein) to Designated Targets (as defined herein)
and Denali wishes to grant to Takeda an exclusive option to obtain a license
under Denali’s intellectual property with respect to such Biologics Directed to
such Designated Targets, and Takeda wishes to obtain such option, for purposes
of developing, manufacturing and commercializing Optioned Products (as defined
herein) in the Territory, in each case in accordance with the terms and
conditions set forth below; and

WHEREAS, on even date herewith, Denali and Takeda (or one of its Affiliates) are
entering into a stock purchase agreement (“Stock Purchase Agreement”) providing
for Takeda’s (or one of its Affiliate’s) purchase of stock of Denali, all in
accordance with the terms and conditions set forth in such Stock Purchase
Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual promises and
conditions hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties, intending
to be legally bound, do hereby agree as follows:

ARTICLE 1

DEFINITIONS

Unless otherwise specifically provided herein, the following terms shall have
the following meanings:

1.1    “Acceptance” of an IND shall be deemed to have occurred: (a) subject to
subsection (b), in the United States and any other applicable country or
regulatory jurisdiction, on the date of expiration of any required waiting
period following the filing of such IND; provided that, if prior to the
expiration of such required waiting period, the applicable Regulatory Authority
notifies the sponsor of such IND that a clinical study may not begin upon the
expiration of such required waiting period, then “Acceptance” shall be deemed to
occur as of the date a clinical study may legally begin; and (b) if required in
a particular country or regulatory jurisdiction (including the United States and
any such other applicable country or regulatory

 

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jurisdiction in the event such approval becomes required therefor during the
Term due to any change in Applicable Law), the date of receipt of any required
approval from the applicable Regulatory Authority to conduct a clinical study;
in each case whichever occurs first.

1.2    “Accounting Standards” means, with respect to Denali, the United States
Generally Accepted Accounting Principles, and, with respect to Takeda, the
International Financial Reporting Standards, in each case, as consistently
applied.

1.3    “Acquisition” means, with respect to a Party, an acquisition by such
Party of a Third Party (whether by merger or acquisition of all or substantially
all of the stock or of all or substantially all of the assets of a Third Party
or of any operating or business division of a Third Party or similar
transaction), other than a Change in Control of the Party.

1.4    “Additional Development Costs” means those Out-of-Pocket Costs and FTE
Costs incurred by the Proposing Party in performing the relevant Additional
Development Activities, which costs shall be determined using the same manner of
calculating Development Costs and Allowable Expenses as if such Additional
Development Activities had been incorporated into the Development Plan.

1.5    “Affiliate” means, with respect to a Person, any other Person that,
directly or indirectly, through one (1) or more intermediaries, controls, is
controlled by or is under common control with such Person. For purposes of this
definition, “control” and, with correlative meanings, the terms “controlled by”
and “under common control with” means (a) the possession, directly or
indirectly, of the power to direct the management or policies of a Person,
whether through the ownership of voting securities, by contract relating to
voting rights or corporate governance, or otherwise; or (b) the ownership,
directly or indirectly, of more than fifty percent (50%) of the voting
securities or other ownership interest of a Person (or, with respect to a
limited partnership or other similar entity, its general partner or controlling
entity). The Parties acknowledge that in the case of certain entities organized
under the laws of certain countries outside of the United States, the maximum
percentage ownership permitted by law for a foreign investor may be less than
fifty percent (50%), and that, in such case, such lower percentage shall be
substituted in the preceding sentence, provided that such foreign investor has
the power to direct the management or policies of such entity.

1.6    “Allowable Expenses” means, with respect to a Collaboration Program for
which Denali has not exercised the Denali Worldwide Royalty Option, all FTE
Costs and Out-of-Pocket Costs incurred by, or on behalf of, a Party after the
Option Exercise Date for such Collaboration Program that are specifically
identifiable or reasonably allocable to:

1.6.1    the Commercialization of Optioned Products within such Collaboration
Program in the Territory in a manner consistent with the applicable
Commercialization Plan and in accordance with associated Commercialization
Budget, including to the extent consistent with the applicable Commercialization
Plan and in accordance with associated Commercialization Budget: sales, pricing,
activities relating to obtaining and managing reimbursement from payers and
reimbursement authorities, contracting, launch timing, distribution (including
order handling, transportation and storage), activities directed to advertising
and marketing (including marketing messaging, product positioning, development
and distribution of selling, advertising

 

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and promotional materials), sales tracking and auditing, market research,
marketing studies and product usage surveys, provision of medical affairs
support staff and conduct of activities by such medical affairs support staff,
and scientific and medical advisory boards (including any global medical
conferences and other seminars and conventions), peer-to-peer activities and
speakers programs;

1.6.2    the sales force costs for Optioned Products within such Collaboration
Program incurred in a manner consistent with such Commercialization Plan and in
accordance with associated Commercialization Budget and calculated in accordance
with Section 6.4.5;

1.6.3    the training, operation and management of sales representatives and
medical affairs support staff in a manner consistent with the applicable
Commercialization Plan and in accordance with associated Commercialization
Budget;

1.6.4    activities pertaining to preparation for and the conduct of Phase IV
Studies of Optioned Products within such Collaboration Program in a manner
consistent with the applicable Commercialization Plan and in accordance with
associated Commercialization Budget;

1.6.5    the preparation of Regulatory Documentation as reasonably necessary to
conduct Commercialization activities for Optioned Products within such
Collaboration Program, including any Regulatory Documentation pertaining to
pricing and reimbursement approvals for such Optioned Products and any filing
fees incurred in connection therewith, all in a manner consistent with the
applicable Commercialization Plan and in accordance with associated
Commercialization Budget;

1.6.6    any product liability claims for Optioned Products within the
applicable Collaboration Program;

1.6.7    any recalls and withdrawals of such Optioned Products to the extent
treated as an Allowable Expense pursuant to Section 6.10;

1.6.8    payment made by (i) Denali to a Third Party under an In-License
Agreement or (ii) a Party to a Third Party in order to obtain a license or right
under a Patent or other intellectual property owned or controlled by such Third
Party, in each case, to the extent such payments will be shared by the Parties
as Allowable Expenses in accordance with Sections 7.5.1 or 7.5.2;

1.6.9    the defense, enforcement and cooperation activities (including any
freedom to operate analysis, intellectual property clearance or similar
activities) incurred in connection with the Optioned Products and to be shared
by the Parties to the extent provided in Sections 9.3, 9.4, and 9.5;

1.6.10    Indemnified Losses and other Out-of-Pocket Costs incurred in
connection with Third Party Claims described in Section 13.3 solely to the
extent such Indemnified Losses and other Out-of-Pocket Costs are specified in
Section 13.3 as to be included in Allowable Expenses;

 

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1.6.11    Prosecution and Maintenance of Patents pertaining to such
Collaboration Program to the extent provided in Section 9.2 and of trademarks to
the extent provided in Section 9.6;

1.6.12    the Manufacturing Costs for any samples of the Optioned Products
within such Collaboration Program, for any Commercial supply of such Optioned
Product for sale and for use in any Phase IV Study, all conducted and incurred
in a manner consistent with the applicable Commercialization Plan and in
accordance with associated Commercialization Budget;

1.6.13    the Manufacturing related activities pertaining to such Optioned
Products not otherwise included in Manufacturing Costs, including stability
testing and other CMC support costs for such Optioned Products, but only to the
extent such costs are not included in Development Costs and all conducted and
incurred in a manner consistent with the applicable Commercialization Plan and
in accordance with associated Commercialization Budget; and

1.6.14    any other FTE Costs and Out-of-Pocket Costs agreed to be shared by the
Parties as set forth in this Agreement that are not otherwise covered as a
Development Cost.

For clarity, Allowable Expenses are exclusive of and do not include Development
Costs.

1.7    “Alzheimer’s Disease” means an Indication [***]

1.8    “Annual Net Sales” means the total Net Sales throughout the Territory of
a particular Optioned Product in a given Calendar Year.

1.9    “Antibody” means an immunoglobulin (Ig) molecule or fragment thereof that
includes (a) a [***] and (b) an [***].

1.10    “Applicable Law” means federal, state, local, national and
supra-national laws, statutes, rules, and regulations, including any rules,
regulations, regulatory guidelines, or other requirements of the Regulatory
Authorities, major national securities exchanges or major securities listing
organizations, that may be in effect from time to time during the Term and
applicable to a particular activity or country or other jurisdiction hereunder.

1.11    “Aspect” means, with respect to any molecule, the structure or
functionality thereof.

1.12    “ATV Platform” means the proprietary platform technology owned or
in-licensed by Denali [***].

1.13    “ATV Platform Claim” means a Patent claim that (a) Covers the [***] or
(b) is deemed to be an ATV Platform Claim pursuant to Section 9.1.1.

1.14    “ATV Platform Know-How” means any Information [***].

1.15    “ATV Platform Patent” means [***].

 

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*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.16    “ATV Platform Technology” means ATV Platform Know-How and ATV Platform
Patents.

1.17    “Biologic” means an Antibody or Non-Antibody Protein.

1.18    “Biosimilar Competition Percentage” means, with respect to each Optioned
Product in a given country in the Territory in a given Calendar Quarter, the
total number of units of all Biosimilar Products sold by one or more Third
Parties divided by the sum of: (a) the total number of units of the applicable
Optioned Product sold by Takeda, its Affiliates and Sublicensees, and (b) the
total number of units of all Biosimilar Products sold by one or more Third
Parties, where, in each case, the number of units of the Optioned Product and
each Biosimilar Product sold in the relevant country and Calendar Quarter shall
be as reported by IMS America Ltd. or any successor thereto and normalized to
equivalent units (“IMS”) (or based on equivalent data reported by any other
independent sales auditing firm mutually agreed upon by the Parties if IMS data
is not available).

1.19    “Biosimilar Product” means, with respect to a particular Optioned
Product and a particular country, a biologic therapeutic that (a) containing
[***]; or (b) is otherwise determined by the FDA or other Regulatory Authority
outside of the United States to be [***] with such Optioned Product, as set
forth in 42 U.S.C. 262(k) or other analogous Applicable Law outside the United
States. An Optioned Product licensed, marketed, sold, manufactured or produced
by Takeda, its Affiliates or Sublicensees shall not constitute a Biosimilar
Product.

1.20    “Business Day” means a day, other than a Saturday or Sunday, on which
banking institutions in San Francisco, California, U.S.A. or Tokyo, Japan are
open for business.

1.21    “Calendar Quarter” means each successive period of three (3) calendar
months commencing on January 1, April 1, July 1 and October 1, except that the
first Calendar Quarter shall commence on the Effective Date and end on the day
immediately prior to the first to occur of January 1, April 1, July 1 or
October 1 after the Effective Date, and the last Calendar Quarter shall end on
the last day of the Term.

1.22    “Calendar Year” means each successive period of twelve (12) calendar
months commencing on January 1 and ending on December 31, except that the first
Calendar Year shall commence on the Effective Date and end on December 31 of the
year in which the Effective Date occurs and the last Calendar Year of the Term
shall commence on January 1 of the year in which the Term ends and end on the
last day of the Term.

1.23    “Centralized Approval Procedure” means the procedure through which an
MAA filed with the EMA results in a single marketing authorization valid
throughout the European Union (or at least all continental Major European
Countries that are within the European Union).

1.24    “Change in Control,” with respect to a Party, shall be deemed to have
occurred if any of the following occurs after the Execution Date:

 

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*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.24.1    any “person” or “group” (as such terms are defined below) (a) becomes
the “beneficial owner” (as defined below), directly or indirectly, of shares of
voting capital stock (or similar interests (for instance partnership interests)
if a Party is not a corporation) (“Voting Stock”) of such Party representing a
majority of the total voting power of all outstanding classes of Voting Stock of
such Party or (b) acquires the power, directly or indirectly, to elect a
majority of the members of the Party’s board of directors (or similar governing
body if a Party is not a corporation); or

1.24.2    such Party enters into a merger, consolidation or similar transaction
with a Third Party (whether or not such Party is the surviving entity) and as a
result of such merger, consolidation or similar transaction the Persons that
beneficially owned, directly or indirectly, the shares of Voting Stock of such
Party immediately prior to such transaction 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 or the parent entity of the surviving Person; or

1.24.3    such Party sells or transfers to any Third Party, in one (1) or more
related transactions, properties or assets representing all or substantially all
of such Party’s consolidated total assets; or

1.24.4    the holders of capital stock of such Party approve a plan or proposal
for the liquidation or dissolution of such Party.

For the purpose of this definition of Change in Control, (a) “person” and
“group” have the meanings given such terms under Section 13(d) and 14(d) of the
United States Securities Exchange Act of 1934 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 said Act; (b) a “beneficial
owner” shall be determined in accordance with Rule 13d-3 under the aforesaid
Act; and (c) the terms “beneficially owned” and “beneficially own” shall have
meanings correlative to that of “beneficial owner.” Notwithstanding the
foregoing, a bona fide financing transaction (including any public offering of a
Party’s capital stock) shall not be deemed a Change in Control.

1.25    “Clinical Data” means the original source patient data and case report
forms (CRFs) collected or generated with respect to Clinical Studies of any
Optioned Biologic or Optioned Product, together with all analysis, reports, and
results with respect thereto.

1.26    “Clinical Studies” means any Phase I Trial, Phase II Trial, Phase III
Trial, Phase IV Study or any such other test or study in human subjects that is
performed pursuant to a Development Plan, Commercialization Plan or an
Additional Development Proposal.

1.27    “CNS Field” means [***].

1.28    “Co-Commercialization Plan” means, for each applicable Collaboration
Program, a detailed plan and detailed budget for the Commercialization in the
Field in the United States and/or China, as applicable, of Optioned Products
included in such Collaboration Program for which the Non-Commercial Lead has
exercised the co-commercialization option under

 

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*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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Section 6.2.4, which shall include for each of the United States and China, as
applicable: (a) [***]; (b) [***]; (c) the allocation of Commercialization
activities between the Parties to be undertaken with respect to the Optioned
Products within such Collaboration Program in the applicable country, including
the allocation of responsibility for the [***]; (d) an estimated annual sales
forecast in each of the United States and China; and (e) the corresponding
Commercialization Budget.

1.29    “Co-Commercialization Territory” means the United States and China.

1.30     “Collaboration Program” means, with respect to an Optioned Target, all
Optioned Biologics and Optioned Products Directed to such Optioned Target, and
the Development activities, Manufacturing activities and Commercialization
activities with respect to such Optioned Biologics and Optioned Products.

1.31    “Collaboration Program Annual Net Sales” means the total Net Sales
throughout the Territory of all Optioned Products included in a particular
Collaboration Program in a given Calendar Year.

1.32    “Combination Product” means an Optioned Product that is comprised of or
contains one (1) or more Optioned Biologics as an active ingredient together
with one (1) or more Other Active Ingredients, whether in the same or different
formulations, so long as both the Optioned Biologic(s) and Other Active
Ingredient(s) are sold as a single unit or for a single price.

1.33    “Commercial Lead” means the Party specified as the “Commercial Lead”
pursuant to the terms of Section 6.2.3.

1.34    “Commercialization” means any and all activities directed to the
preparation for sale of, offering for sale of, or sale of an Optioned Product in
each case, as performed in a manner consistent with the applicable
Commercialization Plan, including activities related to conducting Phase IV
Studies, marketing, promoting, distributing, medical affairs, obtaining pricing
and reimbursement approval for an Optioned Product, Manufacturing Optioned
Products for commercial sale, samples and Phase IV Studies, importing and
exporting such Optioned Product, and the preparation and submission of
Regulatory Documentation and interacting with Regulatory Authorities regarding
any of the foregoing. When used as a verb, “Commercialize” and “Commercializing”
means to engage in Commercialization, and “Commercialized” has a corresponding
meaning. When used as an adjective, “Commercial” modifies the following noun to
allow for the foregoing activities.

1.35    “Commercialization Budget” means a rolling [***] Calendar Year budget
setting forth the budgeted amounts estimated to be incurred in performance of
the related Commercialization Plan in the first Calendar Year (or part thereof)
of such budget and the overall estimated budget to be incurred in performance of
the related Commercialization Plan next [***] successive Calendar Years
thereafter. For each Collaboration Program for which Denali has not exercised
the Denali Worldwide Royalty Option, each such Commercialization Budget shall
include a reasonably detailed budget for FTE Costs and Out-of-Pocket Costs,
broken down by Calendar Quarter for the first Calendar Year (or part thereof)
and a then current estimate of such FTE Costs and Out-of-Pocket Costs for the
next [***] successive Calendar

 

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*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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Years. For each Collaboration Program for which Denali has not exercised the
Denali Worldwide Royalty Option, the Global Commercialization Plan shall also
include a breakout of costs by functional area or category as determined by the
JPT. For each Collaboration Program for which Denali has not exercised the
Denali Worldwide Royalty Option and for each country for which the
Non-Commercial Lead has exercised the co-commercialization option under
Section 6.2.4, each Co-Commercialization Plan shall also include a breakout of
costs by functional area or category as determined by the JPT.

1.36    “Commercialization Plans” means, collectively, (a) for each
Collaboration Program for which Denali has not exercised the Denali Worldwide
Royalty Option, the Co-Commercialization Plan, Exclusive Market
Commercialization Plan, and Global Commercialization Plan, and (b) for each
Collaboration Program for which Denali has exercised the Denali Worldwide
Royalty Option, the Global Commercialization Plan, in each case including the
corresponding budgets for each such plan.

1.37    “Commercially Reasonable Efforts” means, with respect to the efforts to
be expended by a Party in connection with a particular activity or objective to
be conducted under this Agreement, that level of efforts that [***] would
normally use, in the exercise of its prudent scientific and business judgment,
for the development and commercialization of a bio-pharmaceutical product that
it is actively developing or commercializing for a similar patient population at
a similar stage of its development or commercialization, taking into account all
[***] factors that such Party would reasonably take into account, including
[***], but not taking into account [***].

1.38    “Confidential Information” means any Information or data provided
orally, visually, in writing or other form by or on behalf of one (1) Party (or
an Affiliate or representative of such Party or such Party’s Affiliate) to the
other Party (or to an Affiliate or representative of such Party or such Party’s
Affiliate) in connection with this Agreement, whether prior to, on, or after the
Execution Date, including Information pertaining to the terms of this Agreement,
a Research Biologic, Optioned Biologic or any Optioned Product (including the
Regulatory Documentation and Regulatory Data), any Exploitation of an Optioned
Biologic or Optioned Product, any know-how with respect thereto developed by or
on behalf of the disclosing Party or its Affiliates (including Takeda Know-How
and Denali Know-How), or the scientific, regulatory or business affairs or other
activities of either Party. Notwithstanding the foregoing, Joint Program
Know-How and all Regulatory Documentation generated after the Execution Date and
owned by a Party pursuant to this Agreement shall be deemed to be the
Confidential Information of both Parties, and the restrictions on use and
disclosure in Sections 11.1 and 11.2 shall be deemed to apply to each Party as a
receiving Party, regardless of which Party initially generated or disclosed the
relevant Joint Program Know-How or Regulatory Documentation, as applicable, to
the other Party in connection with this Agreement.

1.39    “Consent Matter” means:

1.39.1    [***] and

1.39.16    any other matter that is explicitly identified as a Consent Matter in
this Agreement.

 

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*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.40    “Control” or “Controlled” means, with respect to any item of
Information, Regulatory Documentation, material, Patent, or other property
right, the possession of the right, whether directly or indirectly, and whether
by ownership, license, covenant not to sue or otherwise (other than by operation
of the license and other grants in Sections 7.1 and 7.2), to grant access to or
a license, sublicense or other right (including the right to reference
Regulatory Documentation) to or under such Information, Regulatory
Documentation, material, Patent, or other property right as provided in this
Agreement, without violating the terms of any agreement or other arrangement
with any Third Party.

1.41    “Controlling Party” means the Party specified as the “Controlling Party”
in Section 9.2.1.

1.42    “Corporate Names” means the Trademarks and logos identified on
Schedule 1.42 and such other names and logos, in each case as Denali or Takeda
may designate in writing from time to time.

1.43    “Cover” “Cover”, “Covering” or “Covered” means, with respect to a
product, technology, process or method, that, in the absence of ownership of or
a license granted under a Valid Claim, the practice or Exploitation of such
product, technology, process or method would infringe such Valid Claim (or, in
the case of a Valid Claim that has not yet issued, would infringe such Valid
Claim if it were to issue).

1.44    “Data Package” means, with respect to a Designated Target and the
applicable Research Biologics Directed to such Designated Target, [***] set
forth in Schedule 1.44 or that are otherwise set forth in the applicable
Research Plan or approved by the JSC in accordance with Section 2.3.6 (which,
for clarity, shall be a Consent Matter and not subject to either Party’s final
decision making authority), which shall include:

1.44.1    for the then-lead Research Biologics Directed to such Designated
Target, [***]; and

1.44.2    other [***] from the activities conducted under the applicable
Research Plan for such Designated Target with respect any other (a) Antibody
that is a Research Biologic Directed to such Designated Target and for which
[***] and/or (b) Non-Antibody Protein that is a Research Biologic Directed to
such Designated Target and for which [***].

1.45    “Denali Business Partner” means any Third Party to which, as of the
Execution Date or during the Term, [***].

1.46    “Denali Know-How” means Information, including any related Regulatory
Documentation and Clinical Data, Controlled by Denali or any of its Affiliates
during the Term that is reasonably necessary or actually used to Exploit a
Biologic or a Product, in each case, Directed to one (1) or more Designated
Target(s), in the Field in the Territory.

1.47    “Denali Patents” means Patents Controlled by Denali or any of its
Affiliates during the Term that: (i) claim the composition of matter of, or the
method of making or using, a Biologic or a Product, in each case, Directed to
one (1) or more Designated Target(s); or (ii) are otherwise reasonably necessary
or actually used to Exploit a Biologic or a Product, in each case, Directed to
one (1) or more Designated Target(s), in the Field in the Territory.

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.48    “Denali Technology” means, collectively, the Denali Patents and the
Denali Know-How.

1.49    “Designated Target” means any Target specified in Schedule 1.49, or
otherwise selected by the Parties during the Term in accordance with the
procedures set out in Section 3.1.3 and with respect to which the Parties intend
to develop Biologics and Products and to potentially commercialize Products
pursuant to this Agreement.

1.50    “Detail” means a face-to-face meeting, between a sales representative of
the applicable Party, and a health care professional, during which a
presentation of the Optioned Product’s attributes is presented in a manner
consistent with Applicable Law and industry standards and with the quality of
similar presentations made by a Party’s sales representatives for such Party’s
other products, if applicable. A Detail does not include a sample drop made by a
sales representative. The Parties may agree in the Commercialization Plan to
include real-time, electronic Detailing by means of information technology
(e.g., Skype).

1.51    “Development” means any and all activities related to research,
pre-clinical, other non-clinical testing and Clinical Studies (other than
Phase IV Studies), including test method development and stability testing,
toxicology, formulation, process development, Manufacturing in support of the
foregoing activities and manufacturing scale-up, qualification and validation,
quality assurance/quality control, any statistical analysis and report writing,
the preparation and submission of Regulatory Documentation pertaining to seeking
and obtaining Regulatory Approval for a therapeutic product (excluding any
activities required solely for obtaining pricing and reimbursement approval but
not for other elements of the Regulatory Approval) and interacting with
Regulatory Authorities regarding any of the foregoing. When used as a verb,
“Develop” means to engage in Development and “Developed” has a corresponding
meaning.

1.52    “Development Costs” means, with respect to a particular Collaboration
Program for which Denali has not exercised the Denali Worldwide Royalty Option:

1.52.1    all Out-of-Pocket Costs and FTE Costs incurred by or on behalf of a
Party in a manner consistent with the applicable Development Plan and in
accordance with associated Development Budget that are specifically identifiable
or reasonably allocable to Development of the applicable Collaboration Program
in the Territory. Subject to the foregoing, Development Costs shall include such
Out-of-Pocket Costs and FTE Costs incurred in connection with the following
activities for the relevant Collaboration Program, as applicable, to the extent
performed under and in a manner consistent with the applicable Development Plan
and in accordance with the associated Development Budget:

(a)    pre-clinical and non-clinical activities such as toxicology and
formulation development, test method development, stability testing, quality
assurance, quality control development, and statistical analysis;

 

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(b)    Clinical Studies for an Optioned Biologic or Optioned Product within such
Collaboration Program, including (i) the preparation for and conduct of such
Clinical Studies; (ii) data collection and analysis and report writing;
(iii) clinical laboratory work; (iv) regulatory activities in direct connection
with such studies, including adverse event recordation and reporting; and
(v) advisory meetings in connection with such an Optioned Biologic or Optioned
Product;

(c)    the preparation of Regulatory Documentation as reasonably necessary to
conduct Development activities in a manner consistent with then-current
Development Plan and in accordance with the associated Development Budget,
including any Regulatory Documentation reasonably necessary to obtain or
maintain any Regulatory Approval for an Optioned Product within such
Collaboration Program and, in all cases, any filing fees incurred in connection
therewith, but excluding any Regulatory Documentation pertaining to pricing and
reimbursement approvals and any filing fees associated therewith;

(d)    the Manufacturing Costs for any Optioned Biologic, Optioned Product,
comparators or placebo reasonably necessary to conduct Development activities in
a manner consistent with the then-current Development Plan and in accordance
with the associated Development Budget;

(e)    the disposal of Biologics, Products and other supplies used in the
conduct of Development activities in a manner consistent with the then-current
Development Plan and in accordance with the associated Development Budget;

(f)    the development of the manufacturing process for an Optioned Biologic or
Optioned Product included in such Collaboration Program, manufacturing process
validation, including validation batches, and qualification and validation of
manufacturing Third Party Providers; and

(g)    Indemnified Losses and other Out-of-Pocket Costs incurred in connection
with Third Party Claims described in Section 13.3 solely to the extent such
Indemnified Losses and other Out-of-Pocket Costs are specified in Section 13.3
as to be included in Development Costs;

1.52.2    All FTE Costs and Out-of-Pocket Costs incurred by either Party prior
to the Option Exercise Date for such Collaboration Program to the extent such
activities: [***] (such activities, the “Pre Opt-In Development Activities”),
including such corresponding payments to clinical trial sites and clinical
research organizations, Manufacturing Costs for an Optioned Product or Optioned
Biologic intended for use in such Clinical Studies, manufacturing process
development activities and qualification and validation of Third Party Providers
for such Manufacturing activities; and

1.52.3    any other FTE Costs and Out-of-Pocket Costs agreed to be shared by the
Parties as a Development Cost as expressly set forth in this Agreement.

Except as set forth in Section 1.52.2 and Section 1.52.3, Development Costs
shall only include those costs incurred by or on behalf of a Party for those
activities performed after the Option Exercise Date. For clarity, Development
Costs are exclusive of and do not include Allowable Expenses.

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.53    “Development Lead” means the Party specified as the “Development Lead”
pursuant to the terms of Section 4.2.3.

1.54    “Development Plan” means, on a Collaboration Program-by-Collaboration
Program basis, the plan for the Development of Optioned Biologics and Optioned
Products under such Collaboration Program, which plan shall include (a) the
activities within the Early Stage Development Activities and Late Stage
Development Activities to be conducted by each Party to obtain Regulatory
Approval for [***]; and (b) budgeted amounts estimated to be incurred for
conducting activities to be undertaken in a manner consistent with the
Development Plan (the “Development Budget”); and (c) the number of FTEs of each
Party or its Affiliates to be allocated to the relevant Development activities.
Each Development Plan and Development Budget shall be reasonably detailed with
respect to the Development and Manufacturing activities and estimated FTE Costs
and Out-of-Pocket Costs, broken down by Calendar Quarter for the first Calendar
Year (or part thereof) and by Calendar Year for the next [***] successive
Calendar Years.

1.55    “Directed” means (a) in the context of a protein-based therapeutic,
including an antibody or portion thereof, and a Target that is a Binding Target,
that the primary intended mechanism of action of such protein-based therapeutic
is to [***] such Target or (b) in the context of a protein-based therapeutic,
including an non-antibody protein or portion thereof, and a Target that is a
Function Target, that the primary intended mechanism of action of such
protein-based therapeutic is to [***] such Target.

1.56    “Divestiture” means (a) the divestiture of a Competing Product through
(i) an outright sale or assignment of all material rights in such Competing
Product to a Third Party or (ii) an exclusive out-license of all development and
commercialization rights with respect to such Competing Product, in each case in
the Field with no further material role, influence or authority of the
applicable Party, directly or indirectly, with respect to such Competing Product
in the Field or (b) the complete cessation of all development and
commercialization activities with respect to such Competing Product in the
Field. For clarity, the right of the applicable Party to receive royalties,
milestones or other payments in connection with an acquiror, assignee or
licensee’s development or commercialization of a Competing Product pursuant to
sub-section (a) above, shall be permitted for any such Divestiture. When used as
a verb, “Divest” and “Divested” means to cause a Divestiture.

1.57    “Dollars” or “$” means United States Dollars.

1.58    “Drug Approval Application” means a Biologics License Application as
defined in the FFDCA, or any corresponding application for regulatory approval
in the Territory, including, with respect to the European Union, a Marketing
Authorization Application (a “MAA”) filed with the EMA pursuant to the
Centralized Approval Procedure or an MAA filed with the PMDA, including, in each
case, all supplements, amendments, variations, extensions and renewals thereof.

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.59    “Early Stage Development Activities” means, with respect to an Optioned
Product(s) within a Collaboration Program, [***].

1.60    “Effective Date” means the Business Day following the HSR Clearance
Date.

1.61    “EMA” means the European Medicines Agency and any successor agency(ies)
or authority having substantially the same function.

1.62    “Enforcing Party” means the Party specified as the “Enforcing Party” in
Section 9.3.2.

1.63    “European Union” means the economic, scientific, and political
organization of member states known as the European Union, as its membership may
be altered from time to time, and any successor thereto.

1.64    “Exclusive Market Commercialization Plan” means the plan for
commercializing an Optioned Product in each Major Market in which the Parties
are not co-Commercializing such Optioned Product, which plan shall include a
description of the material pre-launch, launch, and subsequent material
commercialization activities to be undertaken in such Major Markets and a
reasonably detailed budget for such activities.

1.65    “Exclusivity Period” means, with respect to each Designated Target, the
time period: (i) beginning on: [***] and (ii) ending on the earlier of [***]
whichever [***] occurs first.

1.66    “Existing Regulatory Documentation” means the Regulatory Documentation
Controlled by Denali or any of its Affiliates as of the Execution Date.

1.67    “Exploit”, “Exploitation”, or “Exploiting” means to make, have made,
import, export, use, have used, sell, have sold, or offer for sale, including to
Develop, Commercialize, register, modify, enhance, improve, Manufacture, have
Manufactured, hold, or keep (whether for disposal or otherwise), or otherwise
dispose of. “Exploited” has a corresponding meaning.

1.68    “F-Star Agreements” means those agreements listed on Schedule 1.68
between Denali and F-Star Gamma Limited, F-Star Biotechnology Limited, F-Star
Biotechnologische Forschungs-Und Entwicklungsges M.B.H. or the shareholders of
F-Star Gamma Limited, as applicable, and as may be amended from time to time.

1.69    “FDA” means the United States Food and Drug Administration and any
successor agency(ies) or authority having substantially the same function.

1.70    “FFDCA” means the United States Federal Food, Drug, and Cosmetic Act, 21
U.S.C. § 301 et seq., as amended from time to time, together with any rules,
regulations and requirements promulgated thereunder (including all additions,
supplements, extensions, and modifications thereto).

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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1.71    “Field” means the diagnosis, treatment or prevention of any condition,
disorder and/or disease in humans.

1.72    “First Commercial Sale” means, with respect to an Optioned Product and a
country, the first sale for monetary value for use or consumption by the end
user of such Optioned Product in such country after Regulatory Approval for such
Optioned Product has been obtained in such country and where such sale results
in a recordable Net Sale in accordance with the applicable Accounting Standards.
Sales prior to receipt of Regulatory Approval for such Optioned Product, such as
so-called “treatment IND sales,” “named patient sales,” and “compassionate use
sales,” in each case to the extent such Optioned Product is sold at or below
cost, shall not be construed as a First Commercial Sale.

1.73    “FTE” means the equivalent of the work of one (1) employee full time for
one (1) Calendar Year (consisting of at least a total of [***] hours per
Calendar Year). Each employee utilized by a Party in connection with its
performance under this Agreement may be less than or greater than one FTE based
on the hours actually worked by such employee performing Development,
Commercialization or Manufacturing activities with respect to a Collaboration
Program and shall be treated as an FTE on a pro rata basis based upon the actual
number of such hours worked divided by [***]. For the avoidance of doubt, FTE
only applies to employees of a Party, and does not apply to contractors of a
Party.

1.74    “FTE Costs” means, with respect to a Party for any period, the
applicable FTE Rate multiplied by the applicable number of FTEs of such Party
performing Development, Commercialization or Manufacturing activities during
such period in accordance with the applicable Research Plan, Development Plan,
Additional Development Proposal or Commercialization Plan, as the case may be.

1.75    “FTE Rate” means, for the period commencing on the Option Exercise Date,
the rate agreed upon by the Parties for a particular category of FTE’s
activities conducted in the United States. For all other geographic locations
outside the United States, the FTE Rate for such locations will be calculated by
multiplying the agreed FTE Rate in the United States by a cost of living
adjustment between the US and such other geographic location as set forth in
[***]. The FTE Rate will be increased by a percentage equivalent to the change
over the preceding twelve (12)-month period in [***].

1.76    “Global Commercialization Plan” means, for each Collaboration Program, a
high-level global commercialization plan and high-level estimated budget for the
Commercialization of Optioned Products included in such Collaboration Program in
the Field in the Territory, which shall include: (a) an outline for the strategy
for the Commercial launch of, and subsequent Commercialization of, such Optioned
Product in the Territory; (b) a summary of pre-launch Commercialization
activities to be taken by the Parties, including procurement of any necessary
pricing and governmental reimbursement approvals; (c) general marketing and
promotional plans for such Optioned Product; (d) an estimated annual sales
forecast; and (e) the corresponding Commercialization Budget.

1.77    “Good Clinical Practices”, “GCP” or “cGCP” means the then-current
standards, practices and procedures promulgated or endorsed by the FDA as set
forth in the guidelines

 

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adopted by the International Conference on Harmonization (“ICH”), titled
“Guidance for Industry E6 Good Clinical Practice: Consolidated Guidance,” (or
any successor document) including related regulatory requirements imposed by the
FDA and comparable regulatory standards, practices and procedures promulgated by
the EMA, PMDA or other Regulatory Authority applicable to the Territory, as they
may be updated from time to time.

1.78    “Good Laboratory Practices”, “GLP”, or “cGLP” means the then-current
standards, practices and procedures promulgated or endorsed by the FDA as set
forth in 21 C.F.R. Part 58 (or any successor statute or regulation), including
related regulatory requirements imposed by the FDA and comparable regulatory
standards, practices and procedures promulgated by the EMA, PMDA or other
Regulatory Authority applicable to the Territory, as they may be updated from
time to time, including applicable guidelines promulgated under the ICH.

1.79    “Good Manufacturing Practice” or “GMP” means the then-current good
manufacturing practices required by the FDA, as set forth in the FFDCA, as
amended, and the regulations promulgated thereunder, for the manufacture and
testing of pharmaceutical materials, and comparable Applicable Law related to
the manufacture and testing of pharmaceutical materials in jurisdictions outside
the U.S., including the quality guideline promulgated by the ICH designated ICH
Q7A, titled “Q7A Good Manufacturing Practice Guidance for Active Pharmaceutical
Ingredients” and the regulations promulgated thereunder, in each case as they
may be updated from time to time.

1.80    “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.

1.81    “Humanized” means: (a) with respect to an Antibody, [***] (b) with
respect to a Non-Antibody Protein [***] and “initiation of activities” to
Humanize a Biologic shall be deemed to have occurred (x) with respect to an
Antibody [***] (y) with respect to a Non-Antibody Protein, [***]. “Humanize” and
“Humanization” have corresponding meanings.

1.82    “In-License Agreement” means the Product In-License Agreements and the
Platform In-License Agreements.

1.83    “IND” means an application filed with a Regulatory Authority for
authorization to commence Clinical Studies, including (a) an Investigational New
Drug Application as defined in the FFDCA or any successor application or
procedure filed with the FDA, (b) any equivalent of a United States IND in other
countries or regulatory jurisdictions, (e.g., Clinical Trial Application (CTA))
and (c) all supplements, amendments, variations, extensions and renewals thereof
that may be filed with respect to the foregoing.

1.84    “Indication” means a disease or condition and all of its associated
signs, symptoms, stages or progression (including precursor conditions).
Notwithstanding the foregoing, [***] shall be deemed to be separate
“Indications” for the purposes of this Agreement.

1.85    “Information” means all knowledge of a technical, scientific, business
and other nature, including know-how, technology, methods, processes, practices,
formulae, instructions,

 

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skills, techniques, procedures, experiences, ideas, technical assistance,
designs, drawings, assembly procedures, computer programs, apparatuses,
specifications, data, results and other material, Regulatory Data, and other
biological, chemical, pharmacological, toxicological, pharmaceutical, physical
and analytical, pre-clinical, clinical, safety, manufacturing and quality
control data and information, including study designs and protocols, reagents
(e.g., plasmids, proteins, cell lines, assays and compounds) and biological
methodology; in each case (whether or not confidential, proprietary, patented or
patentable, of commercial advantage or not) in written, electronic or any other
form now known or hereafter developed.

1.86    “Initiation” means, with respect to any Clinical Study, the [***] in
such Clinical Study. “Initiate” means to engage in Initiation and “Initiated”
has a corresponding meaning.

1.87    “Joint Committee” means the JSC or a JPT, as applicable.

1.88    “Late Stage Development Activities” means, with respect to an Optioned
Product(s) within a Collaboration Program, all Development activities that are
not Early Stage Development Activities.

1.89    “Limited Funding Cap” means [***].

1.90    “Major European Country” means any of France, Germany, Italy, Spain or
the United Kingdom.

1.91    “Major Markets” means the United States, Japan, and each Major European
Country.

1.92    “Manufacture”, “Manufacturing”, and “Manufactured” means all activities
related to the synthesis, making, production, processing, purifying,
formulating, filling, finishing, packaging, labeling, shipping, and storage of a
Biologic, any Product, or any intermediate thereof, including process
development, process qualification and validation, scale-up, pre-clinical,
clinical and Commercial production and analytic development, product
characterization, stability testing, quality assurance, and quality control.

1.93    “Manufacturing Cost” means the costs that pertain to an Optioned
Biologic or Optioned Product within a Collaboration Program in the Territory
that is either (i) supplied by a Third Party, or (ii) manufactured directly by a
Party or an Affiliate of a Party, determined as follows:

1.93.1    In the case of clause (i) above, Manufacturing Costs means [***].

1.93.2    In the case of clause (ii) above, Manufacturing Costs means [***].

1.94    “Manufacturing Lead” means the Party specified as the Manufacturing Lead
in Section 5.2.

1.95    “Net Revenues” means, for each Collaboration Program with respect to
which Denali has not exercised the Denali Worldwide Royalty Option: (a) the
total Net Sales of all

 

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Optioned Products included in the applicable Collaboration Program plus
(b) Other Income received in connection with the Optioned Products included in
such Collaboration Program, minus (c) the following items, to the extent
applicable, and subject to this Section 1.95:

1.95.1    the standard inventory cost (actual acquisition or manufacture cost)
of devices used for dispensing or administering the applicable Optioned Product
that are shipped with such Optioned Product and included in the gross invoiced
sales prices;

1.95.2    any import or export duties or their equivalent borne by the relevant
Party, Affiliate or Sublicensee and specifically attributable to the applicable
Optioned Products; and

1.95.3    the actual insurance, packaging, shipping and freight costs directly
related to the delivery of such Optioned Product and special packaging.

For clarity, a particular deduction may only be accounted for once in the
calculation of Net Revenues and any deduction included in the calculation of Net
Sales shall not be included in Net Revenues. For the avoidance of doubt, and for
all purposes under this Agreement, Net Revenues shall be accounted for in
accordance with the applicable Party’s standard accounting practices, as
practiced in the relevant country in the Territory, but in any event in
accordance with the applicable Accounting Standards, as consistently applied by
such Party in such country in the Territory.

1.96    “Net Sales” means, with respect to an Optioned Product for any period,
the total amount billed or invoiced on sales of such Optioned Product during
such period by a Party, its Affiliates, or Sublicensees in the Territory to
Third Parties (including Third Party wholesalers or distributors), in bona fide
arm’s length transactions, less the following deductions, in each case related
specifically to such Optioned Product and actually allowed and taken by such
Third Parties and not otherwise recovered by or reimbursed to such Party, its
Affiliates, or Sublicensees, to the extent deducted in accordance with the
applicable Accounting Standards in calculating the “gross to net” revenue
adjustment:

1.96.1    trade, cash and quantity discounts;

1.96.2    price reductions or rebates, retroactive or otherwise, imposed by,
negotiated with or otherwise paid to governmental authorities or other payees;

1.96.3    taxes on sales (such as sales, value added, or use taxes) to the
extent added to the sale price and set forth separately as such in the total
amount invoiced and [***];

1.96.4    amounts repaid or credited by reason of rejections, defects, return
goods allowance, recalls or returns, or because of retroactive price reductions,
including rebates or wholesaler charge backs;

1.96.5    the portion of administrative fees paid during the relevant time
period to group purchasing organizations, pharmaceutical benefit managers or
Medicare Prescription Drug Plans relating to such Optioned Product;

 

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1.96.6    any invoiced amounts from a prior period which are not collected and
are written off by a Party or its Affiliates, [***]; and

1.96.7    freight, insurance, import/export, and other transportation charges to
the extent added to the sale price and set forth separately as such in the total
amount invoiced, as well as any fees for services provided by wholesalers and
warehousing chains related to the distribution of such Optioned Product.

Net Sales shall not include transfers or dispositions without charge or for a
price less than Manufacturing Cost for charitable, promotional, pre-clinical,
clinical, regulatory, or governmental purposes. Net Sales shall include the
amount or fair market value of all other consideration received by a Party, its
Affiliates or Sublicensees in respect of the Optioned Product, whether such
consideration is in cash, payment in kind, exchange or other form. Net Sales
shall not include sales of Optioned Product between or among a Party, its
Affiliates, or Sublicensees for resale, but the subsequent resale of such
Optioned Product to a Third Party shall be included within the computation of
Net Sales. For purposes of determining Net Sales, an Optioned Product shall be
deemed to be sold when recorded as a sale in accordance with the applicable
Accounting Standards. For clarity, a particular deduction may only be accounted
for once in the calculation of Net Sales. For the avoidance of doubt, and for
all purposes under this Agreement, Net Sales shall be accounted for in
accordance with the applicable Commercial Lead’s accounting principles, as
practiced in the relevant country in the Territory, but in any event in
accordance with the applicable Accounting Standards, as consistently applied by
such Party in such country in the Territory.

In the event an Optioned Product is a Combination Product, the Net Sales for
such Combination Product shall be calculated as follows:

(x)    If a Party, its Affiliate, or Sublicensee separately sells in substantial
volumes in such country or other jurisdiction in the same reporting period,
(A) a product containing as its sole active ingredient an Optioned Biologic
contained in such Combination Product (the “Mono Product”) and (B) products
containing as their sole active ingredients the Other Active Ingredients in such
Combination Product (“Other Product”), the Net Sales attributable to such
Combination Product shall be calculated by [***].

(y)    If a Party, its Affiliates, and Sublicensees do not separately sell in
such country or other jurisdiction as described above [***].

1.97    “Non-Antibody Protein” means a protein molecule that is not an Antibody
or fragment of such protein molecule that includes (a) [***] (“Functional
Moiety”) and (b) [***].

1.98    “Non-Commercial Lead” means the Party that is not the Commercial Lead.

1.99    “Non-Controlling Party” means the Party that is not the Controlling
Party.

1.100    “Non-Enforcing Party” means the Party that is not the Enforcing Party.

1.101    “Non-Manufacturing Lead” means the Party that is not the Manufacturing
Lead.

 

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1.102    “Non-Regulatory Lead” means the Party that is not the Regulatory Lead.

1.103    “Option Deadline” means, with respect to a Designated Target and
subject to Section 3.2.3(g), the earlier of (a) [***] days following Takeda’s
receipt of [***], or (b) (i) for each Initial Designated Target, the [***]
anniversary of the Effective Date or (ii) for any Replacement Designated Target,
the [***] anniversary of the date that the applicable Proposed Target was
deemed, pursuant to Section 3.1.3, a Replacement Designated Target, as
applicable.

1.104    “Optioned Biologic” means: (a) the lead Research Biologic at the time
of the applicable Option Exercise Date that is Directed to a Designated
Target(s) Developed under a Research Program for such Designated Target(s), (b)
[***], (c) if [***] and (d) any derivatives or fragments of any Biologic that is
an Antibody described in subsections (a), (b), and (c) (if any), so long as
[***]. Notwithstanding the foregoing, “Optioned Biologic”, with respect to a
Designated Target that is [***].

1.105    “Optioned Product” means any Product which contains an Optioned
Biologic.

1.106    “Optioned Target” means any Designated Target for which Takeda has
exercised the Option.

1.107    “Other Active Ingredient” means any standalone active pharmaceutical
ingredient, which active pharmaceutical ingredient is not covered by any Denali
Patents or Takeda Patents. For purposes of clarity, specifically excluded from
“Other Active Ingredients” are (a) delivery technologies that increase delivery
or exposure of therapeutic proteins in the brain or provide for tissue or cell
targeting, and (b) components or modifications to a Biologic that provide
additional pharmacological activity (e.g., addition of components or
introduction of mutations that would render it bi-specific or multi-specific) or
altered pharmacokinetic qualities (e.g., PEGylation).

1.108    “Other Income” means any payment (other than Net Sales) when recognized
as income or an offset to an expense in accordance with the applicable
Accounting Standards by a Party or its Affiliate from a Third Party that is
attributable to an Optioned Biologic or Optioned Product within a particular
Collaboration Program, including any such payment received in connection with
the grant of a sublicense or other right or activity with respect to an Optioned
Biologic or Optioned Product, including the grant of an option to obtain such
sublicense or other right with respect to an Optioned Biologic or Optioned
Product. For clarity, any portion of such payment that is recognized by a Party
as an offset to an expense and recorded as Other Income as part of the quarterly
reconciliation and true-up process in accordance with Section 8.6.3, shall not
also be recorded as an offset against Development Costs or Allowable Expenses
for the purposes of such reconciliation and true-up.

1.109    “Out-of-Pocket Costs” means amounts actually paid to Third Party
vendors or contractors, for services or materials: (a) provided by such Person
directly in the performance of activities under and in a manner consistent with
a Development Plan or Commercialization Plan and in accordance with the
associated Development Budget or Commercialization Budget, as applicable, or
(b) to the extent such services or materials apply directly to an Optioned
Biologic, an Optioned Product or a Collaboration Program and for which this
Agreement provides that

 

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such costs are sharable between the Parties as a Development Cost or Allowable
Expense. For clarity, out-of-pocket costs do not include payments for internal:
salaries or benefits; facilities; utilities; general office or facility
supplies; insurance; information technology, capital expenditures or the like.

1.110    “Parkinson’s Disease” means an Indication [***].

1.111    “Patents” means: (a) all national, regional and international patents
and patent applications, including provisional patent applications; (b) all
patent applications filed either from such patents, patent applications or
provisional applications or from an application claiming priority from either of
these, including divisionals, continuations, continuations-in-part,
provisionals, converted provisionals and continued prosecution applications;
(c) any and all patents that have issued or in the future issue from the
foregoing patent applications (i.e., described in clauses (a) and (b) above),
including utility models, petty patents and design patents and certificates of
invention; (d) any and all extensions or restorations by existing or future
extension or restoration mechanisms, including revalidations, reissues,
re-examinations and extensions (including any supplementary protection
certificates and the like) of the foregoing patents or patent applications
(i.e., described clauses (a), (b), and (c) above); and (e) any similar rights,
including so-called pipeline protection.

1.112    “Person” means an individual, sole proprietorship, partnership, limited
partnership, limited liability partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or other similar entity or organization, including a government or
political subdivision, department or agency of a government.

1.113    “Phase I Trial” means a human clinical trial of an Optioned Biologic or
Optioned Product, the principal purpose of which is a preliminary determination
of safety, tolerability and/or pharmacokinetics in healthy individuals or
patients or similar clinical study prescribed by the Regulatory Authorities,
including the trials referred to in 21 C.F.R. §312.21(a), as amended. Phase I
Trial shall include [***].

1.114    “Phase II Trial” means a human clinical trial of an Optioned Biologic
or Optioned Product, the principal purpose of which is to explore efficacy,
Target engagement, pharmacodynamics and/or biological activity in one (1) or
more specified doses in the target patient population, or a similar clinical
study recommended by the Regulatory Authorities, from time to time, pursuant to
Applicable Law or otherwise, including the trials referred to in 21 C.F.R.
§312.21(b), as amended. For the purpose of Section 8.3.1, a Phase II Trial shall
be [***].

1.115    “Phase III Trial” means a human clinical trial of an Optioned Biologic
or Optioned Product on a sufficient number of subjects in an indicated patient
population that is designed to establish that an Optioned Biologic or Optioned
Product is safe and efficacious for its intended use and to determine the
benefit/risk relationship, warnings, precautions, and adverse reactions that are
associated with such product in the dosage range to be prescribed, which trial
is intended to support a Drug Approval Application for such Optioned Biologic or
Optioned Product, including all tests and studies that are required by the
applicable Regulatory Authority from time to time, pursuant to Applicable Law or
otherwise, including the trials referred to in 21 C.F.R. §312.21(c), as amended.

 

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1.116    “Phase IV Study” means: (a) a post-approval clinical study for an
Optioned Product with respect to any Indication for which Regulatory Approval
has been received or that is required or agreed to be conducted as a condition
of receiving Regulatory Approval in a country; as well as (b) any marketing
study, epidemiological study, modeling and pharmacoeconomic study,
investigator-initiated clinical trial or post-marketing surveillance study of an
Optioned Product, in each case (for this clause (b)) that is not intended for
use as a basis for obtaining Regulatory Approval (including expanded labeling)
with respect to such Optioned Product.

1.117    “PHSA” means the United States Public Health Service Act, as amended
from time to time.

1.118    “Platform In-License Agreement” means any agreement between a Party and
a Third Party existing as of the Execution Date or entered into during the Term
pursuant to which such Party obtains rights to any intellectual property that is
[***]. Those Platform In-License Agreements as of the Execution Date are listed
on Schedule 1.118, and include the F-Star Agreements.

1.119    “PMDA” means Japan’s Pharmaceuticals and Medical Devices Agency and any
successor agency(ies) or authority having substantially the same function.

1.120    “Post-Grant Proceedings” means proceedings conducted with respect to a
Patent before a patent office or other administrative agency that is not a court
of law following the grant or issuance of such Patent and pursuant to which the
validity, enforceability or scope of such Patent is challenged by a Third Party,
including a post-grant opposition proceeding, ex parte re-examination (but only
if such re-examination is requested by a Third Party), inter partes review and
other post-grant review proceedings. An appeal, including to a court of law,
from such Post-Grant Proceeding, shall be understood to be encompassed by the
term Post-Grant Proceedings.

1.121    “Product” means any pharmaceutical product containing a Biologic,
including all forms, presentations, strengths, doses and formulations (including
any method of delivery).

1.122    “Product Claim” means a Patent claim that (a) Covers [***].

1.123    “Product In-License Agreement” means any agreement between a Party and
a Third Party pursuant to which such Party has obtained rights to any Third
Party intellectual property which is [***], but excluding in all cases any
Platform In-License Agreement. Those Product In-License Agreements existing as
of the Execution Date are listed in Schedule 1.123.

1.124     “Product Labeling” means, with respect to an Optioned Product in a
country or other jurisdiction in the Territory, (a) the full prescribing
information for such Optioned Product for such country or other jurisdiction,
including any required patient information, approved by the applicable
Regulatory Authority and (b) all labels and other written, printed, or graphic
matter upon a container, wrapper, or any package insert utilized with or for
such Optioned Product in such country or other jurisdiction.

 

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1.125    “Product Patent” means (a) any Denali Patent or Joint Program Patent
that includes a Product Claim or (b) any Takeda Patent that includes only
Product Claims that are specifically directed to [***].

1.126    “Product Trademarks” means the product specific Trademark(s) to be used
by a Party or its Affiliates or its or their respective Sublicensees for the
Development or Commercialization of Optioned Products in the Territory and any
registrations thereof or any pending applications relating thereto in the
Territory (excluding, in any event, any trademarks, service marks, names or
logos that include any corporate name or logo of the Parties or their
Affiliates, including the Corporate Names of the Parties).

1.127    “Proposed Target” means a Target that has been nominated by a Party
after the Effective Date for consideration by the Parties to replace a
Designated Target in accordance with the procedures in Section 3.1.3.

1.128    “Prosecution and Maintenance” (including variations such as “Prosecute
and Maintain”) means, with respect to a Patent, the preparing, filing,
prosecuting and maintenance of such Patent, including paying all maintenance
and/or governmental fees to maintain such Patent in force, and requests for
patent term extensions and the like with respect to such Patent, together with
the conduct of interferences, Post-Grant Proceedings and other similar
proceedings with respect to a Patent, but excluding any Post-Grant Proceedings
arising in connection with prosecution of any Product Infringement.

1.129    “Regulatory Approval” means, with respect to a country or other
jurisdiction in the Territory, all approvals (including Drug Approval
Applications), licenses, registrations, or authorizations of any Regulatory
Authority necessary to Commercialize an Optioned Biologic or Optioned Product in
such country or other jurisdiction, including, where applicable, (a) pricing or
reimbursement approval in such country or other jurisdiction, (b) pre-and
post-approval marketing authorizations (including any prerequisite Manufacturing
approval or authorization related thereto), and (c) approval of Product
Labeling.

1.130    “Regulatory Authority” means any applicable supra-national, federal,
national, regional, state, provincial, or local governmental or regulatory
authority, agency, department, bureau, commission, council, or other entities
(e.g., the FDA, EMA and PMDA) regulating or otherwise exercising authority with
respect to activities contemplated in this Agreement, including the Exploitation
of the Optioned Biologic or Optioned Products in the Territory.

1.131    “Regulatory Documentation” means all (a) applications (including all
INDs and Drug Approval Applications and other Major Regulatory Filings),
registrations, licenses, authorizations, and approvals (including Regulatory
Approvals) and designations (including designations of a product as an “orphan”
drug or its equivalent outside of the United States), (b) correspondence,
materials and reports submitted to or received from Regulatory Authorities
(including pre-meeting submissions and minutes and official contact reports
relating to any communications with any Regulatory Authority) and all supporting
documents with respect

 

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thereto, including all regulatory drug lists, advertising and promotion
documents, adverse event files, and complaint files, and (c) Clinical Data and
data contained or relied upon in any of the foregoing, in each case (i.e.,
clauses (a), (b), and (c) above), to the extent pertaining to an Optioned
Biologic or Optioned Product.

1.132    “Regulatory Exclusivity” means, with respect to any country or
jurisdiction, any exclusive marketing rights or data exclusivity protection
conferred by an applicable Regulatory Authority or other governmental body in
such country or jurisdiction with respect to a biologic or pharmaceutical
product, including any regulatory data protection exclusivity and any extensions
to such exclusivity rights.

1.133    “Regulatory Lead” means the Party specified as the “Regulatory Lead” in
Section 4.4.1.

1.134    “Research Biologic” means any Biologic Directed to a Designated Target
that is Developed by or on behalf of Denali (or, if applicable, Takeda) in the
performance of the Research Program for such Designated Target under this
Agreement.

1.135    “Research Milestone Criteria” means, with respect to each Research
Program and a particular Research Milestone Event, the criteria to be satisfied
prior to the payment of the milestone payment corresponding to such particular
Research Milestone Event, subject to the terms of Section 3.2.3(f).

1.136    “Research Plan” means, with respect to a Research Program, an
individualized research plan, which will include (a) all key Development,
Manufacturing and regulatory activities (if any) to be conducted to advance
[***] to be ready for [***]; (b) target criteria for the advancement of
activities with respect to each Designated Target, including the Research
Milestone Criteria with respect to each Research Milestone Event; (c) the
Information to be included in the Data Package and (d) the allocation of
responsibilities between Parties for such activities; and in the case of each
such research plan, that has been agreed to by the Parties or approved by the
JSC in accordance with Section 2.3.6.

1.137    “Research Program” means, with respect to a Designated Target, all
Research Biologics Directed to such Designated Target and the Development
activities with respect to such Research Biologics under the Research Plan.

1.138    “Research Term” means, with respect to a Designated Target, the period:
(a) beginning on (i) Effective Date for the Initial Designated Targets or
(ii) for a Replacement Designated Target, the date the applicable Proposed
Target was deemed a Replacement Designated Target in accordance with
Section 3.1.3; and (b) ending on the earlier of (i) Takeda’s exercise of the
Option with respect to such Designated Target, or (ii) the Option Deadline with
respect to such Designated Target.

1.139    “Segregate” means, with respect to a Denali Competing Product or Takeda
Competing Product, as applicable, to use Commercially Reasonable Efforts to
segregate the Development, Manufacture and Commercialization activities relating
to such product, as applicable, in the Field from Development, Manufacture and
Commercialization activities with

 

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respect to Optioned Biologics and Optioned Products under this Agreement,
including using Commercially Reasonable Efforts to ensure that: (a) [***]; and
(b) [***]; provided, that, in either case of (a) or (b), [***].

1.140    “Small Patient Population Indication” means an Indication [***].

1.141    “Subcontract Agreement” means, with respect to a Third Party Provider,
a written agreement between a Party and such Third Party Provider.

1.142    “Sublicensee” means a Person that is granted (directly or indirectly) a
sublicense by a Party or its Affiliate under the grants in Section 7.1 or
Section 7.2, as applicable and as provided in Section 7.3 or other rights to
Develop and/or Commercialize an Optioned Biologic or Optioned Product.

1.143    “Takeda Know-How” means Information Controlled by Takeda during the
Term that is necessary or actually used to Exploit a Biologic or a Product, in
each case, Directed to a Designated Target, in the Field in the Territory,
including any related Regulatory Documentation and Clinical Data.

1.144    “Takeda Patents” means Patents Controlled by Takeda during the Term
that are necessary or actually used to Exploit a Biologic or a Product, in each
case, Directed to a Designated Target, in the Field in the Territory.

1.145    “Takeda Technology” means, collectively, the Takeda Patents and the
Takeda Know-How.

1.146    “Target” means any biological target(s) (a) to which an antibody,
protein or other pharmaceutical product binds in order to elicit a therapeutic
or other pharmacodynamic response (any such biological target, a “Binding
Target”) or (b) that is a protein molecule, such as non-antibody protein
molecule, the level of which may be modulated, including by supplementation or
replacement, to elicit a therapeutic or other pharmacodynamic response (any such
biological target, a “Function Target”). Notwithstanding the foregoing, [***]
shall not be a Target for purposes of this Agreement. [***].

1.147    “Tax” or “Taxes” means any form of tax or taxation, levy, duty, charge,
social security charge, contribution or withholding of whatever nature
(including any related fine, penalty, surcharge or interest) imposed by, or
payable to, any government, state or municipality, or any local, state, federal
or other fiscal, revenue, customs, or excise authority, body or official in the
Territory.

1.148    “Terminated Program” means (a) with respect to the termination of this
Agreement for a Collaboration Program, all Optioned Biologics and Optioned
Products within such Collaboration Program subject to such termination, (b) upon
expiration of the Option Period for a Designated Target for which Takeda does
not deliver an Option Exercise Notice on or prior to the applicable Option
Deadline, all Research Biologics within such Research Program, and (c) with
respect to termination of this Agreement in its entirety, all Research
Biologics, Optioned Biologics and Optioned Products for each Collaboration
Program.

 

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1.149    “Territory” means the entire world.

1.150    “TfR” means [***].

1.151    “Third Party” means any Person other than Denali, Takeda and their
respective Affiliates.

1.152    “Third Party Provider” means a Third Party service provider to which a
Party has subcontracted its activities under and in accordance with this
Agreement.

1.153    “Trademark” means any word, name, symbol, color, designation or device
or any combination thereof that functions as a source identifier, including any
trademark, trade dress, brand mark, service mark, trade name, brand name, logo,
business symbol or domain names, whether or not registered.

1.154    “Transition Plan” means the plan, approved by the Parties, for the
transfer of the Development Lead and Regulatory Lead from one Party to the other
Party, which plan will set forth those activities necessary to transition
relevant responsibilities related to such Optioned Product or such Collaboration
Program, as the case may be, including the transfer of regulatory
responsibilities and pharmacovigilance responsibilities.

1.155    “United States” or “U.S.” means the United States of America and its
territories and possessions (including the District of Columbia and Puerto
Rico).

1.156    “Valid Claim” means (a) a claim of an issued and unexpired Patent to
the extent such claim has not been revoked, held invalid or unenforceable by a
patent office, court or other governmental agency of competent jurisdiction in a
final order, from which no further appeal can be or has been taken, and which
claim has not been disclaimed, denied or admitted to be invalid or unenforceable
through reissue, re-examination or disclaimer or otherwise; or (b) a claim
within a patent application to the extent such claim has not been pending for
more than [***] years from the earliest filing date to which such claim or the
applicable patent application is entitled to claim priority and which claim has
not been revoked, cancelled, withdrawn, held invalid or abandoned.

1.157    Additional Definitions. In addition, each of the following terms shall
have the meaning described in the corresponding Section of this Agreement
identified below.

 

Term

   Section

Additional Development Activities

   4.2.4

Additional Event Payment

   8.3.3

Additional Development Opt-In Notice

   4.2.4(e)(i)

Additional Development Proposal

   4.2.4(a)

Additional Upfront Consideration

   8.1.2

Adverse Ruling

   14.2

AEs

   10.1

Term

   Section

Agreement

   Preamble

Aggregate Stock Purchase Price

   8.1.1

Alliance Manager

   2.4

Bankruptcy Code

   14.11

Biosimilar Application

   9.3.3

Binding Target

   1.146

Breaching Party

   14.2

CMO Supply Agreement

   5.6.4

Co-Funding End Date

   8.7.1

Co-Funding Termination

   8.7.2

Commercialization Wind-Down Period

   14.8.2

 

 

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Term

   Section

Competing Product

   7.8.1

Consenting Party

   3.1.3(c)

Covered ATV Platform Technology

   9.1.1

Criteria Achievement Notice

   3.2.3(f)

Declining Party

   4.2.4(c)

Default Notice

   14.2

Denali

   Preamble

Denali Indemnitees

   13.1

Denali New Technology

   7.5.1(b)

Denali Worldwide Royalty Option

   8.7.1

Development Budget

   1.54

Development Milestone

   8.3.1

Development Wind-Down Period

   14.8.1

Dispute

   16.6

DOJ

   15.2

Excluded Target

   3.1.3(a)

Execution Date

   Preamble

Existing In-License Agreements

   7.5.1(a)

Existing Patents

   12.2.1

Fabs

   1.9

Finance Working Group

   8.6.5

Force Majeure Event

   16.1

FTC

   15.2

Function Target

   1.146

Functional Moiety

   1.97

HSR Clearance Date

   15.1

HSR Conditions

   15.1

ICH

   1.77

IMS

   1.18

Indemnification Claim Notice

   13.4

Indemnified Losses

   13.1

Indemnified Party

   13.4

Indirect Taxes

   8.10

Initial Designated Target / Initial Designated Targets

   3.1.1

Joint Program Know-How

   9.1.1

Joint Program Patents

   9.1.1

JPT

   2.2.1

JSC

   2.1.1

MAA

   1.58

Major Indication

   8.3.1

Major Regulatory Filings

   4.4.2(c)

Manufacturing Process

   5.6.1

Manufacturing Technology Transfer

   5.6.1

Manufacturing Transfer Plan

   5.2

Material Safety Event

   14.6

Minor Indication

   8.3.1

Term

   Section

Mono Product

   1.96(x)

Neutral Expert

   Schedule
16.6.4

Nominating Party

   3.1.3(c)

Non-Breaching Party

   14.2

Option

   3.2.4(a)

Option Exercise Date

   3.2.4(c)(ii)

Option Exercise Fee

   8.2.2

Option Exercise Notice

   3.2.4(c)

Option Period

   3.2.4(c)

Other Product

   1.96(x)

Partial Data Package

   3.2.3(g)

Party / Parties

   Preamble

Patent Working Group

   9.2.4

Patient Samples

   4.7

Payments

   8.9.1

Pharmacovigilance Agreement

   10.1

Phase 2 Update

   4.2.4(e)(i)

Phase 3 Update

   4.2.4(e)(ii)

Pre Opt-In Development Activities

   1.52.2

Pre-Option Expenses

   8.6.3

Product Infringement

   9.3.1

Promotional Materials

   6.5

Proposed Target Nomination Notice

   3.1.3(c)

Proposed Target Response Notice

   3.1.3(c)

Proposing Party

   4.2.4(a)

Prosecuted Infringements

   9.3.2

Regulatory Approval Update

   4.2.4(e)(iii)

Regulatory Data

   4.4.3

Replacement Designated Target

   3.1.2

Representative Expert

   Schedule
16.6.4

Required Assigned Technology

   9.1.1

Research Milestone

   8.2.1(a)

Royalty Term

   8.7.5(c)

Sales Milestone

   8.5

Significant Biopharmaceutical Company

   7.3.2

Stock Purchase Agreement

   Recitals

Supply and Quality Agreement

   5.4

Takeda

   Preamble

Takeda Indemnitees

   13.2

Takeda New Technology

   7.5.2

Term

   14.1

Terminated Biologic

   14.7.1(g)

Terminated Product

   14.7.1(g)

Terminated Target

   14.7.1(g)

Third Party Claims

   13.1

Unavailable

   3.1.3(e)

Working Group

   2.6

 

 

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ARTICLE 2

COLLABORATION MANAGEMENT

2.1    Joint Steering Committee.

2.1.1    Formation. As soon as practical, but no later than [***] days after the
Effective Date, the Parties shall establish a joint steering committee (the
“JSC”), which shall perform the functions set forth in Section 2.1.2, oversee
the conduct of the Research Programs as set forth in Section 2.1.3, and, if
applicable, oversee the conduct of the Collaboration Programs in the Territory.
The JSC shall consist of an equal number of representatives from each of the
Parties, unless otherwise agreed by the Parties in writing.

2.1.2    Specific Responsibilities. Prior to Takeda’s exercise of the Option for
a Collaboration Program, the JSC shall oversee the Development of the Research
Biologics under the Research Programs. From and after Takeda’s exercise of the
Option for a Collaboration Program (or any subsequent Collaboration Program),
the JSC shall oversee the Development and Commercialization of Optioned
Biologics and Optioned Products in the Territory. The JSC shall serve as a forum
for the coordination of Development and Commercialization activities for
Research Biologics, Optioned Biologics, and Optioned Products in the Territory.
In particular, the JSC shall:

(a)    [***];

(b)    review and approve any Additional Development Proposal in accordance with
Section 4.2.4;

(c)    form Working Groups as needed to fulfill the obligations of the JSC under
this Agreement, including a Finance Working Group (unless Denali has exercised
the Denali Worldwide Royalty Option for all Collaboration Programs) with
responsibilities as provided in Section 8.6.5 and a Patent Working Group with
responsibility as provided in Section 9.2.4;

(d)    oversee the Working Groups created by the JSC on all significant
strategic issues that fall within the purview of each such Working Group;

(e)    except with respect to matters within the responsibility of the Patent
Working Group or as otherwise agreed in writing by the Parties, resolve issues
presented to the JSC by any Working Group established by such JSC;

(f)    resolve issues presented to the JSC in accordance with this Agreement;
and

(g)    perform such other functions as are set forth herein or as the Parties
may mutually agree in writing.

 

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2.1.3    Research-Specific Responsibilities. In addition to the responsibilities
set forth above, during each Research Program, the JSC shall:

(a)    review and approve the initial Research Plan for each Replacement
Designated Target (if any), other than those Research Plans set forth in
Schedule 3.2.1;

(b)    serve as a forum for discussing the conduct of activities in connection
with such Research Program and the results of such activities;

(c)    for any Research Program, approve a change to Research Milestone
Criteria, a change to the categories of data, or a material decrease to the
scope of data, in each case that need to be included in any Data Package; and

(d)    determine whether, for a particular Research Program, the applicable
Research Milestone Criteria for Research Milestone Event 1 or Research Milestone
Event 2 in the table in Section 8.2.1(a) have been satisfied.

2.2    Joint Program Teams.

2.2.1    Formation. Unless otherwise agreed by the Parties at the JSC, within
[***] days after Takeda’s receipt of notice from Denali that it has [***] (and
Denali shall notify Takeda of such [***] within [***] Business Days), the
Parties shall establish a joint program team for each Research Program (each, a
“JPT”), which will become the JPT for the corresponding Collaboration Program if
Takeda exercises its Option for such Research Program in accordance with
Section 3.2.4; provided that the Parties may agree to appoint a single JPT for
one (1) or more Collaboration Programs. References in this Agreement to “the
JPT” with respect to activities or matters occurring in connection with a
particular Collaboration Program shall mean the JPT established by the Parties
for such Collaboration Program, as the case may be. The composition of each JPT
shall be mutually agreed by the Parties, with the understanding that the number
of representatives from each Party on a JPT may vary over time; provided that
the JPT shall include at least one (1) representative from each Party at all
times. For clarity, a representative from a Party may be a member of more than
one (1) JPT.

2.2.2    Specific Responsibilities. Each JPT shall oversee the Development of a
Research Biologic under the applicable Research Plan and the Development Plan
and Commercialization of Optioned Biologics and Optioned Products under the
applicable Collaboration Program, in each case, in the Territory. In particular,
the JPT shall have the responsibilities set forth in this Section 2.2.2:

(a)    General Activities and Pre-Option Exercise Development Activities. Each
JPT shall:

(i)    form Working Groups as needed to fulfill the obligations of such JPT
under this Agreement;

(ii)    review the budget for any activities conducted prior to the Option
Exercise Date if the costs incurred in connection with such activities may be
included in Development Costs or Allowable Expenses upon Option exercise for
such Collaboration Program;

 

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(iii)    oversee the Working Groups created by such JPT on all significant
strategic issues that fall within the purview of each such Working Group;

(iv)    resolve issues presented to such JPT for a decision by any Working Group
established by such JPT; and

(v)    perform such other functions as are set forth in this Agreement, or as
the Parties may mutually agree in writing.

(b)    Development Activities After Option Exercise. With respect to Development
activities for a particular Collaboration Program following Takeda’s exercise of
its Option for such Collaboration Program (unless Denali exercises the Denali
Worldwide Royalty Option for such Collaboration Program), the JPT shall:

(i)    review and finalize, for the JSC’s approval, the initial Development Plan
and the associated Development Budget for such Collaboration Program;

(ii)    review and finalize, for the JSC’s approval (if applicable), any
amendment to the Development Plan and the associated Development Budget for such
Collaboration Program;

(iii)    review and monitor the activities being conducted under the Development
Plan and the progress of such activities;

(iv)    review and discuss the selection of clinical trial sites, clinical
research organizations and other key Third Party Providers for Clinical Studies
included in the Development Plan;

(v)    prepare and approve, the Parties’ strategies related to:

(A)    field-based medical education activities by either Party and grant-based
medical education programs in each country within the Co-Commercialization
Territory; and

(B)    funding for any investigator-initiated clinical trials for the Territory,
including Clinical Studies involving a safety issue or the head-to-head
comparison of an Optioned Product with any other pharmaceutical agent; provided,
that the decision to authorize the undertaking of such Clinical Study is subject
to JSC approval;

(vi)    review and finalize, for the JSC’s approval, any Additional Development
Proposal pertaining to such Collaboration Program; and

(vii)    review and approve the overall strategies for obtaining Regulatory
Approvals for Optioned Products included in such Collaboration Program.

 

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(c)    Commercialization Activities. With respect to Commercialization
activities for a particular Collaboration Program in the Territory (unless
Denali exercises the Denali Worldwide Royalty Option for such Collaboration
Program), the JPT shall:

(i)    discuss, review, and finalize for the JSC’s approval each initial Global
Commercialization Plan and each Co-Commercialization Plan (if any) for such
Collaboration Program (including the associated Commercialization Budget);

(ii)    approve the Exclusive Market Commercialization Plan (including the
associated Commercialization Budget); provided that such approval shall only be
withheld to the extent the Exclusive Market Commercialization Plan (if any)
(including the associated Commercialization Budget) is inconsistent with the
Global Commercialization Plan, the associated Commercialization Budget, or this
Agreement;

(iii)    discuss, review, and finalize for the JSC’s approval (if applicable),
any amendments to a Global Commercialization Plan or Co-Commercialization Plan
and the associated Commercialization Budgets related thereto;

(iv)    review and approve any decision to launch commercial sales of an
Optioned Product in a region or country within the Territory; and

(v)    discuss, review, and finalize reasonably in advance of the first
Regulatory Approval for an Optioned Product, and annually thereafter, a
non-binding [***] year estimated sales forecast for the Optioned Products within
such Collaboration Program;

(vi)    monitor the competitive landscape for the Optioned Products in the
Territory;

(vii)    discuss, review, and finalize the Parties’ strategies related to
Phase IV Studies;

(viii)    discuss pricing of Optioned Products included in such Collaboration
Program; and

(ix)    establish a process for reviewing and approving (a) Promotional
Materials and (b) training materials and programs for sales representatives, in
each case (a) and (b), that are intended for use in any country within the
Co-Commercialization Territory.

(d)    Manufacturing Activities. With respect to Manufacturing activities for a
particular Collaboration Program in the Territory following Takeda’s exercise of
its Option for such Collaboration Program, the JPT shall:

(i)    oversee supply of the Optioned Biologics and Optioned Products as
reasonably necessary to conduct Development activities in a manner consistent
with the Development Plan and the conduct of Commercialization activities in a
manner consistent with the Global Commercialization Plan in order to be able
meet expected demand (as reflected in such Global Commercialization Plan);

 

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(ii)    discuss the worldwide manufacturing, licensure, and sourcing strategies
in support of the Manufacturing of the Optioned Biologics and Optioned Products;

(iii)    review Manufacturing Costs of the Optioned Biologics and Optioned
Products, including yields, success rates and other relevant production
statistics;

(iv)    review a supply forecast for the Optioned Products prepared by the
applicable Commercial Lead;

(v)    discuss and make recommendations to the Manufacturing Lead regarding
results of regulatory inspections related to an Optioned Biologic or Optioned
Product and review steps to be taken by either Party to address any deficiencies
noted, it being understood that resolution of any such deficiency shall remain
in the sole control of the Manufacturing Lead; and

(vi)    discuss and make recommendations to the Manufacturing Lead regarding
changes in manufacturing sites, testing sites, and responsibilities in the
supply chain for each Optioned Biologic and Optioned Product, it being
understood that decisions regarding selection of which of internal or Third
Party manufacturing and testing sites shall be used to Manufacture the Optioned
Biologics and Optioned Products shall remain in the sole control of the
Manufacturing Lead, subject to the terms of Section 5.2.

2.3    General Provisions Applicable to Joint Committees.

2.3.1    Meetings and Minutes. The JSC shall meet at least [***], or as
otherwise agreed to by the JSC. Upon formation, the JPT shall meet at least
[***] per Calendar Quarter, or as otherwise agreed to by the JPT. Meetings of
the JSC and each JPT may be conducted by telephone, video-conference, or
in-person as determined by the JSC or JPT, as applicable. In-person meetings of
each Joint Committee, unless otherwise agreed, shall be held at Denali’s offices
prior to Takeda’s exercise of its Option with respect to each Collaboration
Program and shall alternate between Denali’s offices and Takeda’s offices after
Takeda exercises its Option with respect to the relevant Collaboration Program.
Regularly scheduled meetings of each Joint Committee may be called by either
Party on no less than [***] Business Days’ notice, or such shorter time period
as agreed by the members. Each Party shall make all proposals for agenda items
for regularly scheduled meetings of a Joint Committee, and shall provide all
appropriate information with respect to such proposed items, to the applicable
meeting managers at least [***] Business Days in advance of the applicable
meeting, or such shorter time period as agreed by the Parties. Each Party may
also call a special meeting of a Joint Committee to resolve particular matters
requested by such Party, on no less than [***] days’ notice (or such shorter
time period as may be appropriate under the circumstances, but in no event less
than [***] Business Days’ notice). In the case of a special meeting of a Joint
Committee called by a Party, the proposed agenda items and appropriate
information with respect to such proposed items shall be provided to the
applicable meeting managers together with the notice calling for such special
meeting to the other Party.

 

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2.3.2    Chairpersons. During the Research Programs, the chairperson for the
JSC, and any JPT that has been created, shall be appointed by Denali. At the
beginning of the first Calendar Year following Takeda’s exercise of its Option
for a Collaboration Program, the Joint Committees shall each have
co-chairpersons. Denali and Takeda shall each select from their representatives
a co-chairperson for each of the Joint Committees. Each Party may change any of
its designated chairpersons from time to time upon written notice to the other
Party. In the event Denali exercises the Denali Worldwide Royalty Option for all
Collaboration Programs, the chairperson for the JSC shall be appointed by
Takeda.

2.3.3    Meeting Managers. Unless otherwise agreed by the Joint Committee, each
Joint Committee shall have meeting co-managers, who need not be a voting member
of such Joint Committee. The co-managers will coordinate in good faith for an
appropriate distribution of responsibilities between them. The meeting
co-managers for the Joint Committees, with assistance and guidance from the
Alliance Managers (as appropriate), shall be responsible for calling meetings
and for preparing and circulating an agenda in advance of each meeting of such
Joint Committee. The meeting co-managers shall prepare and circulate, for review
and approval of the Parties, minutes of each meeting within [***] Business Days
after such meeting. The Parties shall agree on the minutes of each meeting
promptly, but in no event later than [***] days after such meeting.

2.3.4    Procedural Rules. Each Joint Committee shall have the right to adopt
such standing rules as shall be necessary for its work, to the extent that such
rules are not inconsistent with this Agreement; provided that such rules shall
not be subject to a deciding vote of either Party having final decision-making
authority for such committee. At least (1) representative from each Party on
each Joint Committee shall have the requisite seniority to make decisions on
behalf of the relevant Party with respect to the issues falling within the
decision-making authority of the relevant Joint Committee. A quorum of the Joint
Committee shall exist whenever there is present at a meeting at least [***]
representative appointed by each Party with the requisite seniority to make
decisions described in the second sentence of this Section 2.3.4. From time to
time, each Party may substitute one (1) (or more, if applicable) of its
representatives to a particular Joint Committee on written notice to the other
Party, provided that the criteria in the second sentence of this Section 2.3.4
shall continue to be satisfied. Representatives of the Parties on a Joint
Committee may attend a meeting either in person or by telephone, video
conference, or similar means in which each participant can hear what is said by,
and be heard by, the other participants.

2.3.5    Meeting Attendance. Employees of either Party (or a Party’s Affiliate)
that are not representatives of such Party on a Joint Committee may attend
meetings of such Joint Committee; provided, that the Party wishing such persons
to participate in a meeting has provided reasonable advance notice to the other
Party. Non-employees may only attend meetings of a Joint Committee if
such non-employee is bound by written obligations of confidentiality and
non-disclosure substantially equivalent to those set forth in Article 11 and
with the prior written approval of the other Party (such approval not to be
unreasonably withheld, delayed or conditioned).

 

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2.3.6    Joint Committee Decision Making.

(a)    The decisions of each Joint Committee shall be by unanimous agreement.
Each Party shall have a single vote on a matter to be decided by the applicable
Joint Committee irrespective of the number of representatives of such Party in
attendance at the applicable Joint Committee meeting. Decisions of a Joint
Committee may also be made by a written resolution unanimously agreed by the
Parties and signed by at least one representative of each Party appointed to the
applicable Joint Committee; it being understood that such unanimous written
agreement may be provided by email if the Parties so agree.

(b)    If a Joint Committee does not reach unanimous agreement on an issue for
decision by the Joint Committee within [***] Business Days after the meeting at
which such issue was first presented for decision by the Joint Committee,
despite good faith efforts to do so, then, unless such issue is a Consent Matter
or otherwise to be resolved in accordance with Section 2.3.6(c) below: (i) [***]
shall have final decision making authority with respect to [***] respectively,
(ii) the [***] shall have final decision making authority with respect to [***]
matters, and (iii) the [***] for shall have final decision making authority with
respect to [***] matters [***]. The decision of the applicable Party’s
representative on a Joint Committee with respect to an issue within such Joint
Committee’s decision making authority and for which such Party has the deciding
vote shall become the decision of the applicable Joint Committee. All Consent
Matters must be [***]. If the JSC does not reach unanimous agreement on a
Consent Matter or any other matter within the decision-making authority of the
JSC within [***] Business Days after the JSC meeting at which the applicable
issue was first presented to the JSC for decision, such issue shall be resolved
in accordance with Section 2.3.6(c) and the resolution of such issue in
accordance with Section 2.3.6(c) below shall become the decision of the JSC with
respect to such issue.

(c)    With respect to any Consent Matter on which the JSC does not reach
unanimous agreement within [***] Business Days after the first meeting of the
JSC at which such issue or dispute is considered, or any other matter or dispute
to be resolved in accordance with this Section 2.3.6(c), then, either Party may
refer the dispute in writing to the senior executive officers of the Parties,
who shall confer in good faith on the resolution of the dispute. Any final
decision mutually agreed to by the senior executive officers shall be conclusive
and binding on the Parties. If the senior executive officers are not able to
agree on the resolution of any such dispute within [***] days after such issue
was first referred to them, then such dispute shall be [***].

(d)    Disputes arising between the Parties in connection with or relating to
this Agreement or any document or instrument delivered in connection herewith,
and that are outside of the decision-making authority of the Joint Committees
and not within a Party’s sole decision-making authority shall be resolved
pursuant to Section 16.6.

2.3.7    Limitations on Authority. Each Party shall retain the rights, powers,
and discretion granted to it under this Agreement and no such rights, powers, or
discretion shall be delegated to or vested in a Joint Committee unless such
delegation or vesting of rights is expressly provided for in this Agreement or
the Parties expressly so agree in writing. No Joint Committee shall have the
power to, and no deciding vote of a Party or decision of the Neutral Expert on a
matter referred to such Person, shall, amend, modify, or waive compliance with
this Agreement, which may only be amended or modified as provided in
Section 16.8 or compliance

 

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with which may only be waived as provided in Section 16.11. No decision of any
Joint Committee (including by a Party in the exercise of its deciding vote in
accordance with Section 2.3.6 or a decision of the Neutral Expert on a matter
referred to such Person,) shall (a) finally determine any interpretation of this
Agreement or the Parties rights or obligations hereunder, or (b) conflict with
any terms and conditions of this Agreement, nor be in contravention of
Applicable Law in any material respect.

2.3.8    Discontinuation of Joint Committees. Each Joint Committee shall
continue to exist until the first to occur of: (a) the Parties mutually agreeing
to disband the Joint Committee; and (b) Denali providing to Takeda written
notice of its intention to disband and no longer participate in such Joint
Committee, provided, that Denali shall not give such written notice prior to
Takeda’s exercise of the Option or the expiration of the last-to-expire Option
Period. Notwithstanding anything herein to the contrary, once one or more Joint
Committees have been disbanded, such disbanded Joint Committee shall be
terminated and thereafter (i) any requirement of a Party to provide Information
or other materials to such Joint Committee shall be deemed a requirement to
provide such Information or other materials to the other Party, and (ii) any
matters previously delegated to the Joint Committee shall be resolved by
unanimous agreement of the Parties, or, if the Parties do not reach unanimous
agreement, in accordance with the decision making provisions of
Sections 2.3.6(b)–2.3.6(c).

2.4    Alliance Manager. Each Party shall appoint a person(s) who shall be
responsible for the overall coordination and facilitation of the communication,
interaction, and cooperation between the Parties and shall have such other
responsibilities as the Parties may agree in writing after the Effective Date
(each, an “Alliance Manager”). Each Party may replace its Alliance Manager at
any time by notice in writing to the other Party.

2.5    Denali Worldwide Royalty Option. Notwithstanding any of the foregoing
provision in this Article 2, in the event Denali exercises the Denali Worldwide
Royalty Option with respect to any Collaboration Program, the following shall
apply with respect to such Collaboration Program from and after the Co-Funding
End Date for such Collaboration Program:

2.5.1    Takeda shall be designated the Development Lead, Regulatory Lead,
Manufacturing Lead (subject to Section 5.2), and Commercial Lead with respect to
the such Collaboration Program.

2.5.2    The applicable JPT with respect to such Collaboration Program shall
dissolve. On an at least an [***] basis thereafter, Takeda shall submit a
revised Development Plan and Global Commercialization Plan (if appropriate based
on the then-current Development stage of the Optioned Product) to the JSC for
review and comment. Without limiting Section 2.5.3, Takeda shall consider any
comments from Denali with respect to such Development Plan or Commercialization
Plan in good faith. For clarity, such Development Plans and Global
Commercialization Plans shall be limited to the Major Markets and shall only
include a description of material activities and a corresponding high-level
budget for such activities.

2.5.3    Takeda shall have the right to make decisions with respect to all
matters pertaining to such Collaboration Program previously subject to the
decision-making authority of the JSC, including all Consent Matters for such
Collaboration Program other than those Consent

 

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Matters described in Sections 1.39.10–1.39.15, which such matters shall be
resolved in accordance with Section 2.3.6(c) if the Parties are unable to reach
unanimous agreement with respect to any such matter; provided that Takeda may
only exercise such final decision making authority with respect to such Consent
Matters after escalation to the JSC and if such decisions by Takeda are
consistent with the terms and conditions of this Agreement.

2.5.4    The JSC shall no longer meet with respect to such Collaboration Program
after the [***] anniversary of the First Commercial Sale of an Optioned Product
from such Collaboration Program. Thereafter, Takeda shall provide Denali (via
the JSC if still in operation with respect to other Collaboration Programs)
[***] update of all [***] activities in the [***] that were completed [***] and
those planned for the [***].

2.6    Working Groups. From time to time, a Joint Committee may establish and
delegate duties to sub-committees or directed teams (each, a “Working Group”) to
oversee particular projects or activities (for example, joint finance group
and/or joint intellectual property group), provided that in no event shall a
Joint Committee have the right to, and no Joint Committee shall, delegate its
respective decision-making authority to any such Working Group. Each such
Working Group shall be constituted as the applicable Joint Committee determines
and shall establish its own procedures, to the extent that such procedures are
not inconsistent with this Agreement; provided that each Working Group shall
have adequate functional representation from each Party. Members of a Working
Group may also be members of a Joint Committee. Working Groups may be
established on an ad hoc basis for purposes of a specific project or on such
other basis as the applicable Joint Committee may determine. Each Working Group
and its activities shall be subject to the oversight, review, and approval of,
and shall report to, the Joint Committee that established such Working Group. In
no event shall the authority of a Working Group exceed the authority specified
for the Joint Committee that established the Working Group pursuant to this
Article 2. All decisions of a Working Group shall be made by unanimous
agreement. Any disagreement between the representatives of Takeda and Denali on
a Working Group shall be referred to the Joint Committee that established the
Working Group for resolution in accordance with Section 2.3.6. Employees of
either Party (or a Party’s Affiliate) that are not representatives of such Party
on a Working Group may attend meetings of such Working Group; provided, that the
Party wishing such persons to participate in a meeting has provided reasonable
advance notice to the other Party. Non-employees may only attend meetings of a
Working Group if such non-employee is bound by written obligations of
confidentiality and non-disclosure substantially equivalent to those set forth
in Article 11 and with the prior written approval of the other Party (such
approval not to be unreasonably withheld, delayed or conditioned).

2.7    Information. Each Party shall keep the Joint Committees reasonably
informed as to its efforts and activities with respect to the Development,
Manufacture, and Commercialization of the Research Biologics, Optioned
Biologics, and Optioned Products in the Territory, including by providing such
Information as the other Party may reasonably request from time to time.

2.8    Expenses. Each Party shall be responsible for all travel and related
costs and expenses for its representatives and, if applicable, its (or any of
its Affiliate’s) other personnel to attend meetings of, and otherwise
participate in, a Joint Committee or other Working Group. All other
Out-of-Pocket Costs incurred by the Joint Committees or Working Groups in
furtherance

 

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of a meeting, such as expenses associated with off-site meetings, shall be
(a) if the meeting is specific to a particular Collaboration Program prior to
the first Regulatory Approval of an Optioned Product in such Collaboration
Program, a Development Cost for such Collaboration Program, or (b) otherwise, an
Allowable Expense; provided that if Denali has exercised the Denali Worldwide
Royalty Option for all Collaboration Programs, such Out-of-Pocket Costs will be
shared equally by the Parties.

ARTICLE 3

DESIGNATED TARGETS; RESEARCH ACTIVITIES

3.1    Designated Targets.

3.1.1    General. The Parties may select up to three (3) Designated Targets at
any given time to be Developed and Commercialized under and in accordance with
this Agreement. Schedule 1.49 sets forth the initial three (3) Designated
Targets that have been mutually agreed by the Parties as of the Effective Date
(each, an “Initial Designated Target” and together, the “Initial Designated
Targets”).

3.1.2    Replacement Designated Targets. A Party may propose to replace an
Initial Designated Target with another Target in accordance with and subject to
the terms of Section 3.1.3 (such replacement Designated Target, a “Replacement
Designated Target”); provided that such proposal is provided in writing to the
other Party prior to the earliest to occur of the following events: (a) the
[***] year anniversary of the Effective Date; (b) the existence of a Biologic
Directed to such original Designated Target [***]; or (c) initiation of
activities under this Agreement to [***]. For avoidance of doubt, such
replacement shall be allowed no more than [***] for each Designated Target
without the Parties’ mutual written agreement, and [***] pursuant to this
Section 3.1.2 without the Parties’ mutual written agreement. Effective on and
after the date of selection of a Replacement Designated Target, (i) the
previously selected Designated Target shall no longer be, or be deemed to be, a
Designated Target for any purposes of this Agreement, (ii) the licenses granted
by each Party to the other Party in the Territory pursuant to Section 7.1 and
7.2 shall terminate with respect to such previously selected Designated Target,
and (iii) any exclusivity obligations of a Party with respect to such previously
selected Designated Target pursuant to Section 7.8 shall terminate.

3.1.3    Selection and Replacement Procedures. The following procedure shall
apply with respect to the selection of a Replacement Designated Target:

(a)    Neither Party may nominate a Proposed Target that is identified on the
excluded Target list set forth in Schedule 3.1.3(a) or that is otherwise not
applicable to [***] (each such Target, an “Excluded Target”).

(b)    Prior to the nomination of any Proposed Target pursuant to
Section 3.1.3(c), the Parties shall discuss any potential Proposed Target at the
JSC and the each Party shall consider the other Party’s comments on such
Proposed Target in good faith.

(c)    To nominate a Proposed Target as a Designated Target, a Party (such
Party, the “Nominating Party”) shall provide to the other Party (such Party, the

 

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“Consenting Party”) a written description of the Proposed Target specifically
referencing this Section 3.1.3(c), including to the extent available, the NCBI
Entrez Gene Symbol and NCBI RefSeq accession (each, a “Proposed Target
Nomination Notice”). Each Proposed Target Nomination Notice shall not include
more than [***] Proposed Target. Within [***] Business Days following the
Consenting Party’s receipt of the Proposed Target Nomination Notice with respect
to a Proposed Target, the Consenting Party shall notify the Nominating Party in
writing of its acceptance or rejection of such Proposed Target as a Replacement
Designated Target (each, a “Proposed Target Response Notice”), [***]. If the
Proposed Target Response Notice indicates that the Consenting Party accepts the
Proposed Target, Denali shall prepare, for the JSC’s approval, a Research Plan
with respect to such Proposed Target. Upon approval by the JSC of such Research
Plan, such Proposed Target shall be deemed to be a Replacement Designated
Target.

(d)    If a Nominating Party provides a Proposed Target Nomination Notice to the
Consenting Party, such Nominating Party shall not provide any other Proposed
Target Nomination Notice to the Consenting Party until the earlier of receipt of
a Proposed Target Response Notice from the Consenting Party or [***] Business
Days following the Consenting Party’s receipt of the Proposed Target Nominating
Notice.

(e)    For any of the first [***] Proposed Targets that is not Unavailable with
respect to the Consenting Party, if the Consenting Party rejects any such
Proposed Target under Section 3.1.3(c), then for a period beginning on the date
of the applicable Proposed Target Response Notice and ending [***] months
thereafter, the Consenting Party shall not, [***]. For avoidance of doubt, the
provisions of this Section 3.1.3(e) shall not limit a Party’s [***] Directed to
(i) any Target that is Unavailable or (ii) any Target that is not Unavailable
other than a Target that was one of the first [***] Proposed Targets that were
not Unavailable. As used herein, “Unavailable” means that, with respect to the
applicable Proposed Target and a Consenting Party, (A) such Proposed Target is
an Excluded Target or (B) such Consenting Party has: (i) [***]; (ii) [***], or
(iii) [***]. Where a Proposed Target comprises more than one Target, such
Proposed Target shall be Unavailable if any of such Targets are Unavailable.

(f)    For clarity, notwithstanding the provisions of this Section 3.1.3, the
Parties could mutually agree to select a Proposed Target that is an Excluded
Target or otherwise Unavailable as described in Section 3.1.3(e)(B)(ii) or
(iii) as a Replacement Designated Target.

3.2    Research Plans and Activities.

3.2.1    Research Plans. The initial Research Plans for the Initial Designated
Targets are set forth in Schedule 3.2.1. The initial Research Plan for a
Designated Target (other than an Initial Designated Target) shall be prepared by
Denali as provided in Section 3.1.3(c) and subject to the approval by the JSC in
accordance with Section 2.1.3(a) and Section 2.3.6.

3.2.2    Amendments to a Research Plan. The JSC shall review the Research Plan
for each Research Program on a regular basis, and in no event less frequently
than [***] Calendar Year, and the progress of activities being conducted for
each Research Program against the Research Plan. Either Party may propose
amendments to the Research Plan for a given

 

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Research Program from time to time as appropriate, to take into account
completion, commencement or cessation of activities contemplated in the
then-current Research Plan for, as well as any newly available Information
related to, such Research Program. Such amendments shall be effective upon JSC
approval and subject to the decision making in accordance with Section 2.3.6.

3.2.3    Research Activities.

(a)    Efforts. Each Party shall use Commercially Reasonable Efforts to [***].
Each Party shall perform any and all of its Development activities with respect
to a Research Program in good scientific manner and in compliance with all
Applicable Law, including applicable national and international (e.g., ICH, GCP,
GLP, and GMP) guidelines.

(b)    Allocation of Activities. Each Party shall be responsible for day-to-day
implementation of the research activities allocated to it under a Research Plan
or for which it is otherwise responsible under the applicable Research Program
pursuant to this Agreement. Denali shall be the Development Lead for each
Research Plan. Takeda shall conduct or otherwise be responsible for activities
under any Research Program only upon the mutual agreement of the Parties and to
the extent reflected in the then-current Research Plan for such Research
Program.

(c)    Research Reports. For each Research Program, Takeda may designate
internal subject matter experts with respect to such Research Program. For
clarity, Takeda may designate the same subject matter experts for multiple
Research Programs. Denali shall, on at least a [***] basis, informally
communicate with such designated subject matter experts with respect to the
ongoing Development activities for such Research Program. Without limiting the
foregoing, at each meeting of the JSC, each Party shall report on the
Development activities such Party has performed (or caused to be performed)
under the applicable Research Plan since the last meeting of the JSC, and the
results of such activities, all in accordance with reporting procedures
reasonably determined by the JSC from time to time. The JSC will evaluate the
progress of such Development activities and results in relation to the goals of
the applicable Research Plan and may request a Party provide such other
information as may be reasonably necessary to understand the status of the
applicable Research Program and the progress towards achievement of the Research
Milestones in such Research Program.

(d)    Research Plan Expenses. Each Party shall be solely responsible for any
Out-of-Pocket Costs or FTE Costs it incurs in furtherance of the activities
assigned to it under an applicable Research Plan.

(e)    Regulatory Activities. Denali shall be the Regulatory Lead for all
Research Biologics Directed to a given Designated Target prior to the Option
Exercise Date for such Designated Target. Prior to the Option Exercise Date for
a particular Designated Target, Denali shall provide Takeda with a reasonable
opportunity to review and comment on any material communications with the
applicable Regulatory Authorities with respect to Research Biologics included in
the Research Program for such Designated Target, including to the extent
existing prior to the Option Exercise Date, any INDs and other Major Regulatory
Filings. Denali shall consider in good faith any such comments of Takeda with
respect to such communications.

 

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Denali shall also keep Takeda reasonably informed, via the JSC and/or Takeda’s
designated subject matter experts, regarding any substantive meetings with any
Regulatory Authority regarding Research Biologics Directed to a particular
Designated Target.

(f)    Achievement of Research Milestone Criteria. For each Research Program,
Denali shall notify Takeda and the JSC if Denali determines in good faith that
the Research Milestone Criteria for a particular Research Milestone Event have
been satisfied by a Research Biologic within such Research Program (each a
“Criteria Achievement Notice”) and shall provide Takeda and the JSC with [***].
If, within [***] Business Days after the Criteria Achievement Notice, Takeda
does not notify the JSC in writing that it objects to Denali’s determination
that the applicable Research Milestone Criteria have been satisfied, such
Research Milestone Criteria shall be deemed to have been satisfied. If Takeda
issues an objection notice pursuant to the preceding sentence within the
applicable [***]-Business Day period, the matter shall [***].

(g)    Data Package Disclosure. For each Research Program, Denali shall deliver
to Takeda the Data Package as soon as reasonably practicable after completion of
the activities under the applicable Research Plan if such activities are
completed prior to the expiration of the applicable Option Deadline. In the
event Denali reasonably believes that [***], Denali shall, no later than [***]
days before the applicable Option Deadline for such Research Program, provide
Takeda with [***] (the “Partial Data Package”). Notwithstanding the foregoing,
if at the time the Partial Data Package is delivered to Takeda, there are [***],
Denali shall [***] and the applicable Option Deadline shall be extended by up to
[***] months, or, if earlier, until [***] days after Takeda receives such
Information. Along with the delivery of each of the Data Package, or Partial
Data Package, as the case may be, Denali shall provide Takeda with [***]. To the
extent Takeda has incurred or expects to incur, prior to the Option Exercise
Date, any FTE Costs or Out-of-Pocket Costs to be included as a Development Cost
under Section 1.52.2, Takeda shall provide to Denali details of such FTE Costs
and Out-of-Pocket Costs promptly following Denali’s disclosure of each of the
Data Package, or Partial Data Package, as the case may be. For avoidance of
doubt, the reference of the conduct of any specific Development activities under
this Section 3.2.3(g) shall not be construed as altering either Party’s
obligations under Section 3.2.3(a).

3.2.4    Option Grants to Takeda.

(a)    The Option. Subject to the terms and conditions of this Agreement, Denali
hereby grants to Takeda, on a Designated Target-by-Designated Target basis, the
exclusive right, but not the obligation, to obtain the licenses set forth in
Section 7.1.2 with respect to the Collaboration Program for such Designated
Target (each, an “Option”).

(b)    Review of the Data Package. Upon Takeda’s receipt of the Data Package or
Partial Data Package, as applicable, Takeda shall have the remaining Option
Period to determine whether it will submit the Option Exercise Notice. During
this review period, upon Takeda’s reasonable request, Denali shall make
reasonable efforts to promptly make available to Takeda: (i) its and its
Affiliates’ employees and consultants who performed the activities on behalf of
Denali under the Research Plan, including the preparation of the Data Package;
and (ii) any additional Information or data then-existing and under Denali’s
possession or control related to the Research Program that is reasonably
necessary in evaluating such Data Package or Partial Data Package, including
with respect to the then-current development CMC status.

 

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(c)    Option Exercise Mechanics. Takeda shall have the right to exercise its
Option with respect to a Designated Target by providing written notice of such
election to Denali (the “Option Exercise Notice”) at any time on or after the
Effective Date and prior to the occurrence of the Option Deadline with respect
to such Designated Target (the “Option Period”). Along with such Option Exercise
Notice, Takeda shall specify in writing [***]. For the avoidance of doubt,
Takeda’s election to exercise its Option for a particular Research Program prior
to Denali’s delivery of a Data Package or Partial Data Package pursuant to
Section 3.2.3(g) above, shall not otherwise affect the allocation of rights and
responsibilities between the Parties under this Agreement with respect to such
Research Program.

(i)    Option Exercise. If Takeda submits the Option Exercise Notice to Denali
with respect to a particular Designated Target, Takeda shall pay the Option
Exercise Fee in accordance with Section 8.2.2; [***]. For clarity, in the event
an approval from a governmental authority is required, the Parties shall seek
such approval in accordance with Article 15.

(ii)    Option Exercise Date. The exercise of the Option shall become effective,
and the licenses granted under Sections 7.1.2 and 7.2.2 with respect to such
Designated Target and the corresponding Collaboration Program shall be in full
force and effect, immediately upon Takeda’s payment of the Option Exercise Fee
set forth in Section 8.2.2 to Denali (the “Option Exercise Date”).

(iii)    Failure to Exercise Option. If Takeda does not provide Denali with an
Option Exercise Notice or if Takeda provides Denali with written notice of it
decision not to exercise the Option with respect to a Collaboration Program for
a Designated Target prior to the Option Deadline, then from and after the
expiration of the Option Period or Denali’s receipt of such notice not to
exercise the Option, as applicable, each Party will be free itself or with or
through an Affiliate or Third Party, to develop and commercialize any Biologics
or Products Directed to such Terminated Target, and the Parties’ respective
rights and obligations with respect to such Target under Section 7.8 shall
terminate. In such event, the provisions of Sections 14.7 and 14.8 shall apply
with respect to the Terminated Program and Takeda shall grant licenses to Denali
as provided in Section 14.7.1 (and subject to the procedures described therein),
in each case to the extent applicable.

ARTICLE 4

DEVELOPMENT AND REGULATORY ACTIVITIES AFTER OPTION EXERCISE

4.1    General. Subject to the terms of this Agreement, the JPT and the JSC (as
applicable) shall, following Takeda’s exercise of its Option with respect to a
particular Designated Target, oversee and coordinate the Development of Optioned
Biologics and Optioned Products within the applicable Collaboration Program in
the Field in the Territory.

 

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4.2    Development Plan and Activities.

4.2.1    Development Plan. Promptly after the formation of the JPT with respect
to an applicable Designated Target, the applicable Development Lead shall
prepare in consultation with the other Party, for the JPT’s review and the JSC’s
approval, the portion of a Development Plan corresponding to the Development
activities for which it is the Development Lead, for the Development of the
Optioned Products within the Collaboration Program for such Designated Target.
The Development Plan for each Collaboration Program shall reflect Commercially
Reasonable Efforts [***]. Unless Denali has exercised the Denali Worldwide
Royalty Option for a particular Collaboration Program, each Development Plan for
a Collaboration Program shall include a role for Denali, as mutually agreed by
the Parties. In the event Denali has exercised the Denali Worldwide Royalty
Option with respect to a Collaboration Program, the Development Plan for such
Collaboration Program shall be limited to [***]; provided that the foregoing
limitations on specific content of the Development Plan shall not be construed
as to limit (or be deemed to limit) Takeda’s diligence obligations under this
Agreement.

4.2.2    Amendments and Updates. The JPT shall review the Development Plan for
each Collaboration Program on a regular basis, and in no event less frequently
than [***] Calendar Year. Either Party, through its representatives on the JPT,
may propose amendments to a Development Plan and the associated Development
Budget for a given Collaboration Program from time to time. In any event, an
updated Development Plan, including the associated Development Budget, for each
Collaboration Program shall be provided by the JPT (and approved by the JSC as
required) no later than December 1 of each Calendar Year. If such revised
Development Plan (and associated Development Budget) is not approved by the JSC,
then, until such time as an updated Development Plan for such Collaboration
Program is approved by the JSC in accordance with Section 2.3.6: (a) the
then-current Development Plan (and associated Development Budget) shall continue
to govern the Parties’ Development activities under this Agreement with respect
to the applicable Collaboration Program; and (b) each Party shall be obligated
to conduct Development activities allocated to such Party under such
then-current Development Plan and shall be permitted to incur Development Costs
consistent with such associated Development Budget, which Development Costs
shall be shared by the Parties in accordance with Section 8.6.

4.2.3    Development Activities.

(a)    Efforts. Each Party shall use Commercially Reasonable Efforts to [***].
Each Party shall perform any and all of its Development activities with respect
to each Collaboration Program in good scientific manner and in compliance with
all Applicable Law, including applicable national and international (e.g., ICH,
GCP, GLP, and GMP) guidelines, informed consent and institutional review board
regulations, current standards for pharmacovigilance practice, and all
applicable requirements relating to the protection of human subjects.

(b)    Allocation of Activities. Each Party shall be responsible for day-to-day
implementation of the Development activities allocated to it under a Development
Plan. The Development Lead shall be responsible for preparing clinical trial
designs and protocols, sponsoring Clinical Studies, engaging Third Party
Providers, and shall be primarily responsible for the conduct of any such Early
Stage Development Activities or Late Stage Development Activities, as the case
may be, consistent with the then-current Development Plan for such Collaboration
Program.

 

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(c)    Designation of Development Lead. Unless otherwise agreed by the Parties,
for each Collaboration Program, Denali shall be the Development Lead with
respect to Early Stage Development Activities and Takeda shall be the
Development Lead with respect to Late Stage Development Activities; provided
that after initiation of Late Stage Development Activities with respect to any
Optioned Biologic or Optioned Product for a particular Indication, Takeda shall
be the Development Lead with respect to all subsequent Development of such
Optioned Biologic or Optioned Product for such Indication, including any
Clinical Study that is Initiated thereafter for such Indication, whether Early
Stage Development Activities or Late Stage Development Activities.
Notwithstanding the initiation of Late Stage Development Activities for a
particular Optioned Product within a Collaboration Program for an Indication,
unless otherwise agreed, Denali will continue to be Development Lead for [***].
In addition to any activities that the Parties agree the Non-Development Lead
may conduct, the Non-Development Lead shall have the right to have one (1) or
more of its employees attend, and participate in, all global advisory board
meetings and other meetings with key opinion leaders regarding each
Collaboration Program, or any Optioned Biologics or Optioned Products included
in such Collaboration Program. Neither Party shall conduct, directly or
indirectly, any Clinical Study or other Development of any Optioned Biologic or
Optioned Product within a particular Collaboration Program in the Field in the
Territory, except as expressly permitted in this Article 4.

(d)    Transition of Development Lead. Reasonably in advance of the Initiation
of Late Stage Development Activities for each Collaboration Program, the JPT
will prepare a Transition Plan to be approved by the Parties for the transfer of
the Development Lead with respect to such Optioned Product from Denali to
Takeda.

(e)    Development Reports. For each Collaboration Program, each Party shall
report on the Development activities such Party has performed (or caused to be
performed) under such Collaboration Program in accordance with the procedures
established by the JPT. The JPT shall evaluate the work performed in relation to
the goals of the applicable Development Plan. The Parties shall provide such
other Information as may be reasonably requested by the JPT with respect to such
Development activities.

4.2.4    Additional Development Activities. Each Party shall be permitted to
undertake Development activities for an Optioned Product within a particular
Collaboration Program for [***] (such activities, the “Additional Development
Activities”); provided that such Party complies with the provisions of this
Section 4.2.4.

(a)    Additional Development Proposals. If a Party (such Party, the “Proposing
Party”) desires to undertake Additional Development Activities, such Party shall
submit to the JPT a proposal for the addition of such Additional Development
Activities to the Development Plan that includes a proposed work plan, timeline
and budget for such Additional Development Activities (an “Additional
Development Proposal”). The Additional Development Proposal shall be prepared in
a similar scope and format of a Development Plan. The Proposing Party shall
provide the JPT with any additional Information related to the Additional
Development Proposal reasonably requested by the JPT.

 

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(b)    Inclusion of Additional Development Activities in the Development Plan.
The JPT shall review and decide on such Additional Development Proposal within
[***] days after its receipt of such Additional Development Proposal; provided
that such time shall be extended if the Proposing Party has not provided all
available Information reasonably requested by the JPT. If the JPT approves an
Additional Development Proposal, such Additional Development Proposal shall be
submitted promptly to the JSC for review. If the JSC approves an Additional
Development Proposal, the Development Plan shall be deemed to be amended to
include the Additional Development Activities and associated budget upon
approval of such Additional Development Proposal by the JSC. For the sake of
clarity, all FTE Costs and Out-of-Pocket Costs incurred thereafter by the
Parties in performing such Additional Development Activities shall be treated as
Development Costs until the Co-Funding End Date after Denali exercises the
Denali Worldwide Royalty Option for the applicable Collaboration Program. If the
JSC does not approve the Additional Development Proposal, inclusion of the
Additional Development Activities within the Development Plan shall not be
subject to resolution under Section 2.3.6, and instead the provisions of
Sections 4.2.4(c)–(e) shall apply.

(c)    Objection by the Other Party. If the JPT and JSC do not timely approve an
Additional Development Proposal within the time periods set forth in
Section 4.2.4(b), the other Party (the “Declining Party”) may, within [***]
Business Days of the JSC’s final vote with respect to the Additional Development
Proposal, initiate the dispute resolution arbitration procedures set forth in
Section 16.6.4, if, and only if, the Declining Party determines reasonably and
in good faith that (i) [***] or (ii) [***]. Upon initiation of dispute
resolution, the Proposing Party will be prohibited from [***] until such time
that dispute is finally determined in accordance with Section 16.6.4.

(d)    Performance of Additional Development Activities. If the JPT and JSC do
not timely approve an Additional Development Proposal within the time periods
set forth in Section 4.2.4(b) and either (i) the Declining Party does not timely
initiate the dispute resolution arbitration procedures set forth in
Section 16.6.4, or (ii) the dispute is finally determined in accordance with
Section 16.6.4 in favor of the Proposing Party, the Proposing Party may, upon
notice to the JSC, conduct the relevant Additional Development Activities
described in the Additional Development Proposal. For clarity, an Optioned
Product that is the subject of Additional Development Activities shall continue
to be an Optioned Product for all purposes of this Agreement. The Proposing
Party shall be the Development Lead and Regulatory Lead with respect to such
Additional Development Activities, including with respect to obtaining any
required Regulatory Approval, until the Proposing Party’s receipt of an
Additional Development Opt-In Notice for such Additional Development Activities,
after which the provisions of Section 4.2.3 shall apply. In the event the
Proposing Party is not the Manufacturing Lead for the applicable Optioned
Biologic or Optioned Product, if a Party so requests, the Proposing Party and
the Manufacturing Lead shall enter into a Supply and Quality Agreement in
accordance with Section 5.4. Additional Development Activities undertaken by the
Proposing Party shall be subject to the oversight of the JPT for the applicable
Collaboration Program; provided that the Proposing Party will have final
decision making authority with respect to any issue related to the Additional
Development Activities. The Proposing Party shall bear all costs

 

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associated with the Additional Development Activities it undertakes and such
costs shall not be taken into account as Development Costs or as Allowable
Expenses. Except as expressly set forth in this Section 4.2.4(d), the conduct of
the Additional Development Activities will be subject to all terms and
conditions of this Agreement relating to Development of Optioned Products. At
each meeting of the JPT, the Proposing Party shall report its progress with
regard to the Additional Development Activities in the same manner as the
Parties provide reports to the JPT with respect to activities covered by the
Development Plan for the relevant Collaboration Program, including providing
formal written reports of the results related to the Additional Development
Activities, as well as the actual costs incurred by the Proposing Party, along
with estimated future budgets.

(e)    Opt-In for Additional Development Activities.

(i)    Completion of a Phase 2 Trial. Within [***] days after the date of the
database lock for the first Phase II Trial related to the Additional Development
Activities, the Proposing Party shall furnish to the JPT and the Declining
Party, a written report of the results of such Clinical Study and the Additional
Development Costs incurred by the Proposing Party (the “Phase 2 Update”). The
Proposing Party shall also provide the JPT with any other Information related to
the Additional Development Activities which is reasonably requested by the JPT
and available to the Proposing Party. If, within [***] days of the Declining
Party’s receipt of the Phase 2 Update, it notifies the JPT and the Proposing
Party in writing that it desires to include the Additional Development
Activities into the Development Plan (an “Additional Development Opt-In
Notice”): (1) the Declining Party shall, subject the review rights set forth in
to Section 8.6.1(b), pay to the Proposing Party an amount equal to [***] of the
Additional Development Costs identified in the Phase 2 Update and (2) the terms
of Section 4.2.4(e)(iv) shall apply.

(ii)    Completion of Phase 3 Trial. In the event that the Declining Party does
not submit the Additional Development Opt-In Notice in accordance with
Section 4.2.4(e)(i), then within [***] days after the date of the database lock
for the first Phase III Trial related to the Additional Development Activities,
the Proposing Party shall furnish to the JPT and the Declining Party, a written
report of the results of such Clinical Study and the Additional Development
Costs incurred by the Proposing Party (the “Phase 3 Update”). The Proposing
Party shall also provide the JPT with any other Information related to the
Additional Development Activities which is reasonably requested by the JPT and
available to the Proposing Party. If, within [***] days of the Declining Party’s
receipt of the Phase 3 Update, the Declining Party submits an Additional
Development Opt-In Notice to the JPT and Proposing Party: (1) the Declining
Party shall, subject the review rights set forth in to Section 8.6.1(b), pay to
the Proposing Party an amount equal to [***] of the Additional Development Costs
identified in the Phase 2 Update and Phase 3 Update and (2) the terms of
Section 4.2.4(e)(iv) shall apply.

(iii)    Regulatory Approval. In the event that the Declining Party does not
submit the Additional Development Opt-In Notice in accordance with
Section 4.2.4(e)(i) or (ii), and the Proposing Party receives Regulatory
Approval in a Major Market country with respect to the Additional Development
Activities, the Proposing Party shall promptly notify the Declining Party in
writing of such Regulatory Approval and the Additional Development Costs
incurred by the Proposing Party (the “Regulatory Approval Update”).

 

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Promptly after receipt of a Regulatory Approval Update, the Declining Party
shall be required to submit an Additional Development Opt-In Notice to the JPT
and the Declining Party and the Declining Party shall, subject the review rights
set forth in to Section 8.6.1(b), pay to the Proposing Party an amount equal to
[***] of the Additional Development Costs identified in the Phase 2 Update,
Phase 3 Update and Regulatory Approval Update and the terms of
Section 4.2.4(e)(iv) shall apply; provided that such amount shall be reduced to
[***] of such Additional Development Costs if [***].

(iv)    Additional Development Opt-In Notice. Immediately upon the Proposing
Party’s receipt of the Additional Development Opt-In Notice: (i) the Additional
Development Activities (if any) for such Optioned Product and the applicable
Indication of the Additional Development Activities shall be deemed to be
included in the Development Plan for the relevant Collaboration Program;
(ii) the then-current plan and budget for such Additional Development Activities
shall be deemed to be included within and part of the Development Plan, and
shall control with respect to such Additional Development Activities unless and
until an amendment to the Development Plan providing for a different or modified
plan and budget is approved by the JSC in accordance with Section 4.2.2;
(iii) all Out-of-Pocket Costs and FTE Costs incurred thereafter in connection
with such Additional Development Activities shall be treated as Development
Costs and shared by the Parties until the Co-Funding End Date after Denali
exercises the Denali Worldwide Royalty Option for the applicable Collaboration
Program; and (iv) to the extent one or more Commercialization Plans for such
Optioned Product then-exist and the Phase 3 Update or Regulatory Approval Update
has occurred, the JPT will update such Commercialization Plans in accordance
with Section 6.3.4 to address Commercialization of such Optioned Product for the
applicable Indication in any country for which Regulatory Approval is obtained.

(v)    Worldwide Royalty Option. Notwithstanding the foregoing, in the event
Denali exercises the Denali Worldwide Royalty Option with respect to any
Collaboration Program, Denali shall not be permitted to undertake any Additional
Development Activities pursuant to this Section 4.2.4, and Takeda shall have the
right to conduct Additional Development Activities by amending the applicable
Development Plan, and this Section 4.2.4 will not apply to such activities by
Takeda.

4.2.5    Development Costs. Each Party will be solely responsible for all FTE
Costs and Out-of-Pocket Costs such Party incurs in connection with the
Development of Optioned Biologics and Optioned Products in any Collaboration
Program after the Co-Funding End Date following Denali’s exercise of the Denali
Worldwide Royalty Option for such Collaboration Program, except as otherwise
agreed by the Parties in writing.

4.3    Disclosure of Technology for Development Purposes.

4.3.1    Promptly after the Option Exercise Date for a particular Collaboration
Program, Denali shall disclose and make available to Takeda the Regulatory
Documentation, Denali Know-How, and Joint Program Know-How with respect to any
Optioned Biologics or Optioned Products within the Collaboration Program, in
each case that are Controlled by Denali and are necessary or reasonably useful
for Takeda to Develop, Manufacture, or Commercialize such Optioned Biologics and
Optioned Products within such Collaboration Program in the

 

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Territory in accordance with the terms of this Agreement. The JPT shall
establish a process pursuant to which, after the Effective Date, but before
Denali exercises the Denali Worldwide Royalty Option with respect to any
Collaboration Program, the Parties shall disclose and make available to the
other Party: Regulatory Documentation, Denali Know-How or Takeda Know-How
(including, in each case, any Joint Program Know-How), and other Information
claimed or covered by any Denali Patent, Takeda Patent, or Joint Program Patent
or otherwise relating, directly or indirectly, to Optioned Biologics and
Optioned Products within such Collaboration Program, in each case to the extent
Controlled by such Party and that are necessary or reasonably useful for the
other Party to Develop, Manufacture, or Commercialize such Optioned Biologics
and Optioned Products within such Collaboration Program in the Territory in
accordance with the terms of this Agreement, to the extent such items have not
previously been provided to the other Party. The Parties shall cooperate and
reasonably agree upon formats and procedures to facilitate the orderly and
efficient exchanges of Regulatory Documentation, Information, or inventions
contemplated under this Section 4.3.1.

4.3.2    After the Option Exercise Date for a particular Collaboration Program,
each Party shall, to the extent requested by the other Party, provide such other
Party with all reasonable assistance required in order to transfer to the other
Party the Regulatory Documentation, Denali Know-How and Takeda Know-How
(including, in each case, any Joint Program Know-How), and other Information
required to be provided pursuant to Section 4.3.1, in each case in a timely
manner, and shall assist the other Party with respect to the Exploitation of any
Optioned Biologic and any Optioned Products within the relevant Collaboration
Program in accordance with the terms of this Agreement; provided that such
Party’s requirement to provide the other Party any tangible items, including any
documentation, shall be limited to those items then-existing and Controlled by
such Party at the time of such request by the other Party; provided, further,
that in the event Denali exercises the Denali Worldwide Royalty Option with
respect to any Collaboration Program, Takeda shall not be required to make such
Regulatory Documentation, Takeda Know-How (including any Joint Program
Know-How), or other Information available to Denali. Without limiting the
foregoing, prior to Denali’s exercise of the Denali Worldwide Royalty Option, if
visits of a Party’s representatives to the other Party’s facilities are
reasonably requested by the other Party for purposes of transferring such
Regulatory Documentation, Denali Know-How, Takeda Know-How, Joint Program
Know-How, or other Information Controlled by a Party to the other Party or for
purposes of the other Party acquiring expertise on the practical application of
such Information or assisting on issues arising during such Exploitation, such
Party shall use Commercially Reasonable Efforts to [***].

4.3.3    Any Out-of-Pocket Costs incurred by the Parties in performing
disclosure and transfer activities pursuant to this Section 4.3, and if any
supplies of Optioned Biologics or Optioned Product are transferred to the other
Party in connection with such activities, the Manufacturing Cost of such
materials shall be included as Development Costs; provided that following the
Co-Funding End Date after Denali exercises the Denali Worldwide Royalty Option
for a particular Collaboration Program, each Party will be solely responsible
for all FTE Costs and Out-of-Pocket Costs it incurs to conduct such activities,
except that Takeda shall reimburse the Manufacturing Cost of any materials
supplied by Denali to Takeda. In addition, notwithstanding the above, neither
Party shall be obligated to provide or make available to the other Party
research tools, materials or Information generally applicable to Development of
products for the treatment of diseases or conditions, to the extent such items
are not reasonably necessary for the other Party to further Develop or
Manufacture the applicable Optioned Biologics or Optioned Products in the
Territory under this Agreement.

 

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4.4    Regulatory Matters.

4.4.1    Regulatory Lead. Effective from and after the Option Exercise Date for
a given Optioned Product (and any Optioned Biologic therein) on an
Indication-by-Indication and jurisdiction-by-jurisdiction basis: (a) Denali
shall be the Regulatory Lead until the commencement of regulatory activities
related to the Late Stage Development Activities with respect to such Optioned
Product (or, if earlier, Denali’s exercise of the Denali Worldwide Royalty
Option with respect to the applicable Collaboration Program); (b) Takeda shall
be the Regulatory Lead beginning on commencement of regulatory activities
related to the Late Stage Development Activities for such Optioned Product
[***]; and (c) on a jurisdiction-by-jurisdiction basis, the Commercial Lead
shall be the Regulatory Lead [***].

4.4.2    Regulatory Activities. The following shall apply with respect
regulatory activities relating to each Collaboration Program:

(a)    Subject to Section 4.4.2(c) below, the then-Regulatory Lead shall have
the lead role and responsibility with respect to the preparation, obtaining and
maintenance of all Regulatory Documentation necessary to perform the applicable
activities under the applicable Development Plan or Commercialization Plan. The
Non-Regulatory Lead shall support the Regulatory Lead, as may be reasonably
necessary, in the preparation, obtaining and maintenance of such Regulatory
Documentation, and in the activities in support thereof, including providing
necessary documents or other materials required by Applicable Law to obtain such
Regulatory Approvals, in each case in accordance with the terms and conditions
of this Agreement and the applicable Development Plan. Notwithstanding the
foregoing, to the extent the Regulatory Lead is not the same Party as the
Manufacturing Lead, the Manufacturing Lead shall prepare the CMC Module 3 of the
Common Technical Document in English for the Optioned Product, and the
Regulatory Lead will modify as appropriate, such module for use in Regulatory
Approvals in the Territory. Notwithstanding anything to the contrary in this
Section 4.4.2(a), during the period of time when (i) Denali is the Regulatory
Lead pursuant to Section 4.4.1(a), Takeda shall, to the extent permissible under
Applicable Law and notwithstanding Section 4.4.2(d), have the right to interact
directly with the respective Regulatory Authority on an interaction directly
related to the filing and preparation of Regulatory Documentation for the Late
Stage Development Activities, subject to prior notification and coordination
with Denali, and (ii) Takeda is the Regulatory Lead pursuant to
Section 4.4.1(b), if Denali is to be the Commercial Lead in the United States
with respect to a Collaboration Program, (A) Denali shall, to the extent
permissible under Applicable Law, have the right to interact directly with the
FDA on the Product Labeling for each Optioned Product in such Collaboration
Program, subject to prior notification and coordination with Takeda, (B) Takeda
shall not conduct any scheduled discussions, meetings, and conferences with the
FDA on Product Labelling for Optioned Products included in such Collaboration
Program without prior notification and coordination with Denali, and
(C) notwithstanding Section 4.4.2(d), Denali shall have the right to have [***],
or more if determined by the JPT, participate in all scheduled discussions,
meetings, and conferences with the FDA on Product Labelling for each Optioned
Product in such Collaboration Program for which Denali is to be the Commercial
Lead in the United States pursuant to Section 4.4.2(d).

 

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(b)    All Regulatory Documentation to the extent relating to an Optioned
Biologic or Optioned Product with respect to an Indication within such
Collaboration Program shall be owned by, and shall be the sole property and held
in the name of the then-Regulatory Lead for such Indication. All Regulatory
Documentation relating to the Optioned Biologics or Optioned Products that is
not specific to any particular Indication shall be owned by, and shall be the
sole property and held in the name of the then-Regulatory Lead for first
Indication for which the applicable Optioned Biologics or Optioned Product
received Regulatory Approval, or if no such Regulatory Approval has been
obtained, the most advanced Indication with respect to the applicable Optioned
Biologic or Optioned Product. In the event one Party replaces the other Party as
the Regulatory Lead, the Parties shall, in manner consistent with the Transition
Plan: (i) transition to such Regulatory Lead all applicable INDs for an Optioned
Product; (ii) hereby assign to such Regulatory Lead all of such other Party’s
right, title and interest in and to all Regulatory Documentation (to the extent
consistent with the above provisions of this Section 4.4.2(b) regarding
ownership of such Regulatory Documentation) in the Territory and Controlled by
such other Party during the Term; and (iii) duly execute and deliver, or cause
to be duly executed and delivered, such instruments and shall do and cause to be
done such acts and things, including the filing of such assignments, agreements,
documents, and instruments, as may be necessary under, or as such Regulatory
Lead may reasonably request to carry out more effectively the purpose of this
Section 4.4.2(b).

(c)    The Regulatory Lead in a Major Market for the applicable Optioned
Biologics and Optioned Products shall provide the Non-Regulatory Lead with an
opportunity to review and comment on all INDs, pre-meeting submissions, Drug
Approval Applications, Product Labeling, material labeling supplements,
Regulatory Authority meeting requests, core data sheets and other material
regulatory submissions, in each case, in the Major Markets (collectively, “Major
Regulatory Filings”). The Regulatory Lead shall consider in good faith the
Non-Regulatory Lead’s comments and use reasonable efforts to implement such
comments. The Regulatory Lead shall provide access to interim drafts of such
Major Regulatory Filings to the Non-Regulatory Lead via the access methods (such
as secure databases) established by the JPT, and the Non-Regulatory Lead shall
provide its comments on the final drafts of such Major Regulatory Filings or of
proposed material actions within [***] Business Days (or [***] Business Days in
the case of Drug Approval Applications), or such other period of time mutually
agreed to by the Parties. In the event that a Regulatory Authority in the
Territory establishes a response deadline for any such Major Regulatory Filing
(or material action with respect thereto) shorter than such [***]-Business Day
period (or [***]-Business Day period in the case of Drug Approval Applications),
the Parties shall work cooperatively to ensure the Non-Regulatory Lead has a
reasonable opportunity for review and comment within such deadlines. The
Regulatory Lead shall consider in good faith any such comments of the
Non-Regulatory Lead. Without limiting the foregoing, if Denali has elected to be
the Commercial Lead in the United States for a particular Collaboration Program,
all Drug Approval Applications to be filed in the United States for Optioned
Products included in such Collaboration Program shall be drafted and prepared in
close consultation with Denali.

 

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(d)    The Regulatory Lead shall provide the Non-Regulatory Lead with prior
written notice, to the extent the Regulatory Lead has advance knowledge, of any
scheduled substantive meeting, conference, or discussion (including any advisory
committee meeting) with a Regulatory Authority in the Major Markets relating to
an Optioned Product within such Collaboration Program, within [***] Business
Days after the Regulatory Lead first receives notice of the scheduling of such
substantive meeting, conference, or discussion (or within such shorter period as
may be necessary in order to give the Non-Regulatory Lead a reasonable
opportunity to attend such meeting, conference, or discussion). Subject to
Section 4.4.2(a), the Non-Regulatory Lead shall have the right to have [***] or
more of its employees attend as an observer(s) (but not participate in) all such
substantive meetings, conferences, and discussions.

(e)    All costs incurred after the Option Exercise Date with respect to
regulatory activities for to a particular Collaboration Program shall be a
Development Cost or Allowable Expense, as appropriate; provided that from and
after the Co-Funding End Date following Denali’s exercise of the Denali
Worldwide Royalty Option with respect to such Collaboration Program, each Party
shall be solely responsible for all such costs incurred by such Party.

(f)    The preceding sub-sections (c) and (d) will not apply to any
Collaboration Program after Denali’s exercise of the Denali Worldwide Royalty
Option with respect to such Collaboration Program.

4.4.3    Regulatory Data. To the extent not provided pursuant to Section 4.3.1,
the JPT shall establish a process pursuant to which each Party shall promptly
provide to the other Party copies of or access to non-clinical data and Clinical
Data, and other Information, results, and analyses with respect to any
Development activities for a Collaboration Program and its Additional
Development Activities (collectively, “Regulatory Data”).

4.5    Records. Each Party shall maintain records in accordance with its
standard practices, which in cases shall be consistent with standard practices
in the pharmaceutical industry and in compliance with Applicable Law. Such
records shall be retained by such Party for at least [***] years after the
Calendar Year to which such records relate, or for such longer period as may be
required by Applicable Law. Upon request, such Party shall provide copies of the
records it has maintained pursuant to this Section 4.5 to the other Party.

4.6    Clinical Trial Register and Data Transparency. The JPT will cooperate to
establish timelines and procedures for reviewing any public disclosure of
Clinical Data. The Development Lead will, in accordance with Applicable Law and
its internal data transparency policies, publish the results or summaries of
Clinical Studies relating to an Optioned Biologic or Optioned Product on a
clinical trial register maintained by it and the protocols of clinical trials
relating to such Optioned Biologic or Optioned Product on www.ClinicalTrials.gov
(or an equivalent register, or as otherwise required by Applicable Law or such
Party’s policies). In the event that the data transparency policies of the other
Party (regardless if such policy is based upon Applicable Law or other internal
guidelines) are materially different to the data transparency policies of the
Development Lead, the JPT shall meet in good faith to resolve such material
differences, provided that neither Party shall be permitted to prevent the
disclosure of data by the other Party as required by such other Party’s data
transparency policies.

 

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4.7    Patient Samples. All patient samples collected and retained in connection
with Clinical Studies involving an Optioned Biologic or Optioned Product that
are performed under a Development Plan or for which costs are shared as
Development Costs (together with compilations of Information comprising
annotations regarding patient histories or correlating patient outcomes, with
respect to such samples, “Patient Samples”) shall be a shared resource of the
Parties. Unless otherwise agreed by the Parties or otherwise set forth in this
Section 4.7, all Patient Samples shall be maintained and stored at the
facilities of a Third Party reasonably agreed by the Parties for the purposes of
the conduct of Collaboration Program activities, and the fees paid to such Third
Party in connection with such maintenance and storage shall be a Development
Cost. Each Party’s use of Patient Samples shall be in accordance with Applicable
Law, including any informed consent and institutional review board regulations
and all applicable requirements relating to the protection of human subjects.
[***].

ARTICLE 5

MANUFACTURING

5.1    Manufacturing Activities. The Manufacturing Lead shall be responsible for
Manufacturing or having Manufactured (using a reputable Third Party Provider)
each Research Biologic, Optioned Biologic and Optioned Product, as applicable.
The Manufacturing Lead shall use Commercially Reasonable Efforts to [***]. The
Manufacturing Lead shall obtain supply of the required quantities of Optioned
Biologics, Optioned Product and placebo used in Clinical Studies, or otherwise
to support the Development activities to be conducted under a Development Plan,
either by performing Manufacturing by itself or through its Affiliates, or from
a reputable Third Party Provider of manufacturing services, in each case until
[***]. Following [***], the Manufacturing Lead will have the sole right to
determine which of its or a Third Party Provider’s manufacturing sites will be
used to manufacture the Optioned Product or component of the Optioned Product
and may transfer the Manufacturing from one site to another, so long as such
transfer would not reasonably be likely to have a material adverse effect on
continued supply or, unless Denali has exercised the Denali Worldwide Royalty
Option with respect to the Optioned Product, [***] increase in costs incurred in
connection with or as a result of such transfer. Notwithstanding the foregoing,
prior to any such transfer, the Manufacturing Lead will notify the
Non-Manufacturing Lead of its intention to transfer Manufacturing from one site
to another and shall permit the Non-Manufacturing Lead to carry out an audit of
the proposed new site before such transfer takes place. In the event that the
Manufacturing Lead [***] then, at the request of the Non-Manufacturing Lead,
[***].

5.2    Manufacturing Lead. Denali shall be the Manufacturing Lead for each
Research Program and Collaboration Program until the completion of the transfer
of Manufacturing responsibilities to Takeda in accordance with this Section 5.2
and Section 5.6. If (a) Denali exercises the Denali Worldwide Royalty Option for
such Collaboration Program or (b) Denali proposes to the JPT and the JPT agrees
[***] that Denali should transfer Manufacturing Lead responsibilities to Takeda
for such Collaboration Program following Takeda’s exercise of the Option,
provided that no such JPT agreement or [***] shall be required where such
Manufacturing is performed by one or more Third Party Providers, then in each
case the JPT will

 

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prepare, for the Parties’ approval, a plan for the Manufacturing Technology
Transfer consistent with Section 5.6 (the “Manufacturing Transfer Plan”) to
transfer Manufacturing responsibilities for such Collaboration Program to
Takeda, after which Takeda shall become the Manufacturing Lead with respect to
such Collaboration Program. Without limiting the foregoing, Takeda shall not
become the Manufacturing Lead with respect to any Collaboration Program until
the completion of the applicable Manufacturing Transfer Plan.

5.3    Manufacturing Costs. Subject to Section 1.52.2, Denali shall be solely
responsible for all Manufacturing Costs incurred in furtherance of the
applicable Research Plan. All Manufacturing Costs incurred in furtherance of a
Development Plan or Commercialization Plan for a Collaboration Program shall be
a Development Cost or Allowable Expense, as appropriate; provided that if Denali
exercises the Denali Worldwide Royalty Option for a particular Collaboration
Program, Takeda shall, following the Co-Funding End Date, bear all Manufacturing
Costs and, to the extent that Denali is the Manufacturing Lead, shall reimburse
Denali for its FTE Costs and Out-of-Pocket Costs incurred in connection with the
Manufacture of Optioned Biologics and Optioned Products. The Manufacturing Lead
will promptly inform the JPT of any circumstance which could reasonably be
expected to result in a [***] or greater increase in the Manufacturing Costs for
any Optioned Biologic or Optioned Product during the Calendar Years covered by
any then-current applicable budgets. The JPT will discuss any reasonable
recommendations that either Party may have to mitigate against such increase to
the Manufacturing Costs.

5.4    Supply Agreements. If, in a given country or region, the Development Lead
or the Commercial Lead are a different Party than the Manufacturing Lead for
clinical supply of Phase III Trials or Commercialization use, then, upon either
Party’s request, the Parties shall enter into separate supply and associated
quality agreements (each, a “Supply and Quality Agreement”) covering the terms
of supply to the Non-Manufacturing Lead for such Development or
Commercialization activities. The Supply and Quality Agreement will contain
terms and conditions that are reasonable and customary for agreements of such
nature, including a right of the Non-Manufacturing Lead to include its
Manufacturing Costs as Development Costs or Allowable Expenses, as applicable.
If the Parties are unable to reach agreement on such provisions within [***]
days of a request by either Party to enter into a Supply and Quality Agreement
(which [***]-day period may be extended upon the mutual agreement of the
Parties), upon request by either Party, the same shall be determined pursuant to
Section 16.6.4. The terms of any such Supply and Quality Agreement, including
the Manufacturing Lead’s rights and the Non-Manufacturing Lead’s obligations
under such Supply and Quality Agreement, shall be consistent with rights of the
Manufacturing Lead under the applicable CMO Supply Agreements. To the extent
there is any conflict between the terms and conditions of such Supply and
Quality Agreements and this Agreement with respect to the matters expressly
covered by such Supply and Quality Agreements, then such Supply and Quality
Agreements shall control.

5.5    Third Party Providers. If a Manufacturing Lead utilizes one or more Third
Party Providers to supply Optioned Product to the Non-Manufacturing Lead, then
with respect to activities covered by any CMO Supply Agreement entered into
prior to the Effective Date or, if entered into after the Effective Date, in
accordance with the penultimate sentence of this Section 5.5, and so long as the
Manufacturing Lead uses Commercially Reasonable Efforts to [***]. If, after the
Effective Date, the Manufacturing Lead enters into any agreements with Third

 

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Party Providers for Manufacturing services for clinical or Commercial supply of
Optioned Biologics or Optioned Products under this Agreement, (a) the
Manufacturing Lead shall [***] and (b) the Manufacturing Lead shall [***]. For
clarity, the Manufacturing Lead is not required to [***].

5.6    Manufacturing Transfer.

5.6.1    Initial Transfer. In the event Takeda is to be the Manufacturing Lead
with respect to any Collaboration Program, the Parties shall design the
Manufacturing Transfer Plan such that the Takeda will become the Manufacturing
Lead for such Collaboration Program as soon as possible after Takeda is
appointed to become the Manufacturing Lead, provided that if such Manufacturing
Technology Transfer solely involves the transfer of responsibility for
manufacturing activities being conducted by a Third Party Provider under a CMO
Supply Agreement from one Party to the other without changing the manufacturing
facility, such Manufacturing Transfer Plan shall be completed within [***] or
shall otherwise be completed within the time period specified in the applicable
Manufacturing Transfer Plan. No Manufacturing Transfer Plan shall require Takeda
to assume any CMO Supply Agreements between Denali and its Third Party Provider
for Manufacturing activities for the relevant Collaboration Program unless
Takeda consents to do so. In such instance, Denali shall, in accordance with the
applicable Manufacturing Transfer Plan, [***]. In the event any such CMO Supply
Agreement cannot [***], Denali shall use Commercially Reasonable Efforts to
[***]. In the event the assignment of any such CMO Supply Agreement is
conditioned (other than for notice), the Parties shall discuss such conditions
in good faith and, if the Parties, mutually agree to satisfy such conditions for
the assignment of the applicable CMO Supply Agreement, the Manufacturing
Transfer Plan shall address such matter. As further provided in the
Manufacturing Transfer Plan, Denali shall cooperate with Takeda with respect to
such other steps as may be reasonably required to effect a full transfer to
Takeda or Takeda’s Third Party Provider of all Denali Know-How (including any
Joint Program Know-How) that are necessary or reasonably useful for Takeda to
implement the then-current process for the Manufacture of such Optioned Product
and Optioned Biologic (the “Manufacturing Process”) (together with the
assignment of CMO Supply Agreements and enablement and assistance to enter into
a new agreement with such Third Party Provider, the “Manufacturing Technology
Transfer”). As a part of the Manufacturing Technology Transfer, Denali shall
cause all appropriate employees and representatives of Denali and its
Affiliates, and appropriate analytical and quality control employees and
representatives of its Third Party Providers, at mutually convenient times, to
meet with, employees or representatives of Takeda or its designated Third Party
Provider at the applicable manufacturing facility: (a) to assist with the
working up and use of the Manufacturing Process and with any training to the
extent reasonably necessary to enable the use and practice the Manufacturing
Process; and (b) to make available all necessary equipment Controlled by Denali,
to support and execute the transfer of all applicable analytical methods and the
validation thereof (including, all applicable Denali Know-How, Joint Program
Know-How, methods, validation documents, manufacturing and release enabling
reports, and other documentation, materials and sufficient supplies of all
primary and other reference standards).

5.6.2    Subsequent Transfers. Without limiting the foregoing, after completion
of the Manufacturing Transfer Plan, Denali shall, and shall use Commercially
Reasonable Efforts to [***], provided that Denali shall use Commercially
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obtain such rights) to take the following actions, in each case, as reasonably
requested by Takeda:

(a)    make available, to Takeda or its designated Third Party Provider from
time to time, all Manufacturing-related Denali Know-How, Joint Program Know-How,
Information and materials relating to the Manufacturing Process Controlled by
Denali and not transferred to Takeda or such Third Party Provider during the
initial transfer, and all documentation constituting material support,
performance advice, shop practice, standard operating procedures, specifications
as to materials to be used and control methods, that are Controlled by Denali
and reasonably necessary to enable Takeda or its designated Third Party Provider
to use and practice the Manufacturing Process; and

(b)    provide such other assistance as Takeda, or designated its Third Party
Provider, as applicable, may reasonably request to enable Takeda or its
designated Third Party Provider to use and practice the Manufacturing Process
and otherwise to Manufacture the applicable Optioned Biologics and Optioned
Products.

5.6.3    Transfer Costs. All FTE Costs and Out-of-Pocket Costs incurred by
either Party in performing activities pursuant to this Section 5.6, including
Manufacturing Technology Transfer activities and activities under Section 5.6.2,
shall be included as Development Costs or Allowable Expenses, as applicable.

5.6.4    Third Party Agreements. Notwithstanding anything to the contrary in
this Agreement, each Manufacturing Transfer Plan and any Manufacturing
Technology Transfer shall be subject to the terms and conditions of the
agreements between the Manufacturing Lead and its applicable Third Party
Providers of manufacturing services and technology (each agreement, a “CMO
Supply Agreement”). A list of CMO Supply Agreements existing as of the Execution
Date are set forth on Schedule 5.6.4.

ARTICLE 6

COMMERCIALIZATION

6.1    General. Subject to the terms of this Agreement, following Takeda’s
exercise of its Option with respect to a particular Collaboration Program, the
JPT (and the JSC, as applicable) shall oversee and, to the extent applicable,
coordinate, the Commercialization of all Optioned Products within such
Collaboration Program in the Field in the Territory.

6.2    Commercialization Activities.

6.2.1    Efforts. With respect to each Collaboration Program, for each
jurisdiction in which Regulatory Approval is obtained, each Party shall use
Commercially Reasonable Efforts to [***]. Each Commercialization Plan for a
Collaboration Program shall reflect Commercially Reasonable Efforts to
[***].Each Party shall perform any and all of its Commercialization activities
with respect to each Collaboration Program, in good scientific manner and in
compliance with all Applicable Law.

6.2.2    Allocation of Activities and Costs. For each Collaboration Program,
each Party shall be responsible for day-to-day implementation of the
Commercialization

 

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activities with respect to the Optioned Products within such Collaboration
Program allocated to such Party under the applicable Commercialization Plan.
Unless otherwise agreed by the Parties, the Commercial Lead shall have the
responsibilities set forth in Sections 6.2.3 and 6.2.4. The Parties shall share
all FTE Costs and Out-of-Pocket Costs incurred in connection with
Commercialization activities to the extent included in Allowable Expenses;
provided that following the Co-Funding End Date after Denali exercises the
Denali Worldwide Royalty Option for a particular Collaboration Program, each
Party will be solely responsible for all FTE Costs and Out-of-Pocket Costs it
incurs to conduct Commercialization activities for such Collaboration Program,
except as otherwise agreed by the Parties in writing.

6.2.3    Commercial Lead. Takeda shall be the Commercial Lead for each
Collaboration Program in the Territory; provided however, that if Denali has not
exercised the Denali Worldwide Royalty Option with respect to at least [***],
Denali shall have the option to be designated as the Commercial Lead in the
United States for the [***] for which Denali does not exercise the Denali
Worldwide Royalty Option through the Development program. For clarity, Denali
shall not be the Commercial Lead for the first commercial Collaboration Program.
Denali may exercise such option by notifying Takeda and the JPT in writing of
its election prior to [***]. If Denali issues a notice of its election to be the
Commercial Lead in accordance with this Section 6.2.3 and a [***]. For clarity,
if Denali does not timely issue its notice of election to be the Commercial Lead
in the United States with respect to any Collaboration Program, Takeda shall be
the Commercial Lead worldwide with respect to such Collaboration Program.

6.2.4    Co-Commercialization in the Co-Commercialization Territory. The
Non-Commercial Lead in each country of the Co-Commercialization Territory for
any Collaboration Program shall have the option to co-Commercialize the Optioned
Products under such Collaboration Program in each country of the
Co-Commercialization Territory by providing the Commercial Lead with written
notification of its exercise of such option at least [***] months prior to the
anticipated date of the first Regulatory Approval for the first Optioned Product
under such Collaboration Program; provided that Denali shall not have the right
to exercise such co-commercialization option with respect to any Collaboration
Program for which Denali has exercised the Denali Worldwide Royalty Option. The
Non-Commercial Lead may conduct Details with respect to Optioned Products, Phase
IV Studies, and certain other marketing, promotional, and medical affairs
activities with respect to Optioned Products, in each case, in a manner
consistent with the Co-Commercialization Plan; provided that the Non-Commercial
Lead shall not conduct greater than [***] of any such activities. The Commercial
Lead shall consider in good faith the Non-Commercial Lead’s views on pricing of
the Optioned Products included in such Collaboration Program through the JPT,
for each Collaboration Program for which Denali has not exercised the Denali
Worldwide Royalty Option. For clarity, the Non-Commercial Lead shall not be
allocated responsibilities with respect to regulatory and compliance matters,
warehousing or distribution, sales, booking sales or reimbursement for the
applicable Optioned Product, unless requested by the Commercial Lead and agreed
to by such Non-Commercial Lead.

6.2.5    Commercialization Reports. For each Collaboration Program, each Party
shall report on the Commercialization activities such Party has performed (or
caused to be performed) under such Collaboration Program in accordance with the
procedures established by the JPT. The JPT shall evaluate the work performed in
relation to the goals of the applicable Commercialization Plan. Each Party shall
provide such other Information as reasonably requested by the JPT.

 

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6.2.6    Supply Forecast. The Commercial Lead shall prepare quarterly,
non-binding forecasts for the quantities of Optioned Product necessary pursuant
to the applicable Commercialization Plan and shall provide such forecast to the
applicable JPT for review at each JPT meeting.

6.3    Commercialization Plans.

6.3.1    Global Commercialization Plan. Reasonably in advance of the first
Regulatory Approval for the first Optioned Product within a Collaboration
Program, the Commercial Lead shall prepare for the JPT’s discussion, review and
finalization a Global Commercialization Plan for such Collaboration Program in
reasonable scope, as well as a corresponding Commercialization Budget for such
Global Commercialization Plan that complies with the requirements of this
Agreement. The JPT shall present such plan to the JSC for approval. The JPT
shall agree upon the appropriate level of detail to be included in the
respective Global Commercialization Plan; provided that if Denali has exercised
the Denali Worldwide Royalty Option with respect to such Collaboration Program,
the Global Commercialization Plan shall be limited to material Commercialization
activities in Major Markets with a high-level budget for such activities.

6.3.2    Exclusive Market Commercialization Plan. For each Collaboration Program
for which Denali has not exercised the Denali Worldwide Royalty Option, the
Commercial Lead shall also prepare, for the JPT’s approval, an Exclusive Market
Commercialization Plan, which shall be consistent with the Global
Commercialization Plan for such Collaboration Program. The JPT shall agree upon
the appropriate level of detail to be included in the respective Exclusive
Market Commercialization Plan, taking into consideration the relative size and
commercial potential of the applicable Major Market.

6.3.3    Co-Commercialization Plan. For each Collaboration Program for which
Denali has not exercised the Denali Worldwide Royalty Option and for each
country which the Non-Commercial Lead has exercised the co-commercialization
option under Section 6.2.4, the Commercial Lead shall prepare, in consultation
with the Non-Commercial Lead in each country and for the JPT’s discussion,
review and finalization, a Co-Commercialization Plan for such Collaboration
Program. The JPT shall present such plan to the JSC for approval. Each
Co-Commercialization Plan shall be consistent with the Global Commercialization
Plan for the applicable Collaboration Program and shall include a corresponding
Commercialization Budget for the activities covered by such Co-Commercialization
Plan. Each Co-Commercialization Plan shall allocate such Commercialization
activities between the Parties, taking into consideration the Parties’
respective actual or reasonably anticipated capabilities, infrastructure and
resources in each of the United States and China, as the case may be, relevant
to the applicable Optioned Product at the time of expected First Commercial Sale
in accordance with the terms of this Agreement.

6.3.4    Amendments and Updates. The JPT shall review the Commercialization
Plans (including, if applicable, the associated Commercialization Budgets)

 

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on a regular basis, and in no event less frequently than once each Calendar Year
(as provided below), or more frequently as needed to take into account
completion, commencement or cessation of Commercialization activities
contemplated in the then-current applicable Commercialization Plan for, as well
as any newly available Information related to, such Collaboration Program.
Either Party, through its representatives on the JPT, may propose amendments to
a Commercialization Plan (and/or, if applicable, the associated
Commercialization Budget) for a given Collaboration Program from time to time.
Any and all amendments to the Global Commercialization Plan or the
Co-Commercialization Plan shall be subject to approval in accordance with
Section 2.3.6. Any and all amendments to an Exclusive Market Commercialization
Plan shall be approved by the JPT. In any event, an updated Commercialization
Plan, including the associated Commercialization Budget (if applicable), shall
be provided by the JPT (and approved by the JSC as required) no later than
November 1 of each Calendar Year. If such revised Commercialization Plan (and
associated Commercialization Budget (if applicable)) is not approved by the JSC
by December 1 of a Calendar Year, then, until such time as such a revised
Commercialization Plan (and associated Commercialization Budget (if applicable))
is approved in accordance with Section 2.3.6: (a) the then-current
Commercialization Plan (and associated Commercialization Budget (if applicable))
for the relevant territory shall continue to govern the Parties’
commercialization activities under this Agreement with respect to the applicable
Collaboration Program; and (b) each Party shall be permitted to conduct the
activities allocated to such Party in such then-current Commercialization Plan
and to incur costs consistent with such associated Commercialization Budget,
which costs shall be shared by the Parties as Allowable Expenses in accordance
with Section 8.6.

6.4    Sales Representatives.

6.4.1    Denali and Takeda shall each ensure that its sales representatives do
not make any representation, statement, warranty or guaranty with respect to an
Optioned Product that is not consistent with the applicable, current package
insert of prescribing information or other documentation accompanying or
describing such Optioned Product, including mutually approved limited warranty
and disclaimers, if any. Denali and Takeda shall each ensure that its sales
representatives do not make any statements, claims or undertakings to any person
with whom they discuss or promote Optioned Products that are not consistent
with, nor provide or use any labeling, literature or other materials other than,
those Promotional Materials currently approved for use by the JPT in the
Co-Commercialization Territory. If at any time the Commercial Lead no longer
approves the use of specified Promotional Materials in any country of the
Co-Commercialization Territory, each Party shall take appropriate action to
remove the Promotional Materials from use destroy such Promotional Materials or
otherwise modify such Promotional Materials for an approved use.

6.4.2    Notwithstanding the foregoing, in the event the Non-Commercial Lead is
co-Commercializing the Optioned Products in any country within the
Co-Commercialization Territory, the Non-Commercial Lead shall have the right to
review and comment on the training materials and programs to be used in such
markets prior to the implementation of such training materials and programs, in
accordance with the process established by the JPT, and the Commercial Lead
shall give good faith consideration to the Non-Commercial Lead’s comments
regarding the training materials and programs, including any comments related to
the training materials and programs compliance with Applicable Law.

 

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6.4.3    Denali and Takeda shall each cause its sales representatives to comply
with Applicable Law and industry guidelines related to the performance of its
obligations hereunder.

6.4.4    Each Party shall maintain records of its sales representatives’
activities in the Territory and each Party shall allow representatives of the
other Party to inspect such records upon request during normal business hours
and upon reasonable prior notice; provided that Denali shall no longer have such
right with respect to a particular Collaboration Program after it exercises the
Denali Worldwide Royalty Option with respect to such Collaboration Program.

6.4.5    If Denali is the Non-Commercial Lead and exercises its
co-Commercialization rights in any country of the Co-Commercialization Territory
in accordance with Section 6.2.3, the applicable Co-Commercialization Plan shall
provide for sales representatives of each Party to be deployed to major
metropolitan areas.

6.4.6    Calculation of Sales Force Costs. For the purposes of calculating the
FTE Costs of each Party’s sales representatives performing activities under the
applicable Co-Commercialization Plan, the FTE Rate shall be deemed to be [***]
of the applicable mutually agreed FTE Rate for such sales representative on a
full-time basis; provided that for each sales representative who also engages in
promotion activities for a product other than an Optioned Product during the
relevant Calendar Quarter, the cost of such sales representative (for purposes
of calculating Allowable Expenses), shall be reduced proportionately based on
the Detail position of such other product(s) during such sales activities and a
reasonable apportionment of the value of such Detail position(s) for such other
product(s). For such purposes: (i) in a two-product Detail, the first position
Detail shall be deemed [***] and the second position shall be deemed [***] of
the value of the product Detail; (ii) in a three-product Detail, the first
position Detail shall be deemed [***], the second position shall be deemed [***]
and the third position shall be deemed [***] of the value of the product Detail;
and (iii) the value of other similar multi-product promotions shall be allocated
in a similar way. For example, if a sales representative is promoting only an
Optioned Product and no other products in a Calendar Quarter, [***] of the FTE
Rate for such sales representative shall be included for purposes of calculating
the Allowable Expenses for such Calendar Quarter, and if such sales
representative is promoting one other product and such other product is in the
second Detail position, only [***] of the FTE Rate for such sales representative
shall be included in calculating the Allowable Expenses for such Calendar
Quarter.

6.5    Advertising and Promotional Materials. The Commercial Lead for a
particular Collaboration Program and territory shall develop relevant sales,
promotion, market access and advertising materials relating to the Optioned
Products within such Collaboration Program and territory (collectively,
“Promotional Materials”) in each case consistent with Applicable Law, the
applicable Commercialization Plans and any determinations made by the JPT with
respect to such matters pursuant to Section 2.2.2(c)(ix). The Commercial Lead
shall be responsible for the medical, regulatory and legal review of Promotional
Materials and for the interpretation and

 

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adherence to the Applicable Law governing the preparation and use of such
Promotional Materials, including any advance review of the Promotional Materials
required by the applicable Regulatory Authority. Notwithstanding the foregoing,
in the event the Non-Commercial Lead is co-Commercializing the Optioned Products
in any country within the Co-Commercialization Territory, the Non-Commercial
Lead shall have the right to review and comment on the Promotional Materials to
be used in such markets prior to the implementation of such Promotional
Materials, in accordance with the process established by the JPT, and the
Commercial Lead shall give good faith consideration to the Non-Commercial Lead’s
comments regarding the Promotional Materials, including any comments related to
the Promotional Materials’ compliance with Applicable Law. The Commercial Lead
for each market will own all right, title and interest in and to any and all
Promotional Materials for an Optioned Product for use in such market (except
with respect to any Corporate Names of the other Party included in any
Promotional Materials). The Non-Commercial Lead will execute all documents and
take all actions as are reasonably requested by the Commercial Lead to vest
title to such Promotional Materials in the Commercial Lead.

6.6    Medical Inquiries. The Commercial Lead shall handle all medical questions
or inquiries from members of the medical profession in any country within the
Co-Commercialization Territory regarding the Optioned Products. In the event the
Non-Commercial Lead is co-Commercializing the Optioned Products a country within
the Co-Commercialization Territory, the Non-Commercial Lead shall, and shall
cause its sales representatives or medical science liaisons (as applicable
depending on the nature of the question or inquiry) to, refer to the Commercial
Lead all such questions and inquiries within [***] hours of receipt, unless
earlier notification is required pursuant to the Pharmacovigilance Agreement or
Applicable Law. The Commercial Lead shall respond appropriately to all such
inquires in a timely manner. The Parties’ costs and expenses incurred in
responding to medical questions and inquiries in accordance with this
Section 6.6 shall be included in Allowable Expenses, unless Denali has exercised
the Denali Worldwide Royalty Option for the relevant Collaboration Program.

6.7    Optioned Product Packaging. The Commercial Lead shall develop and approve
packaging and Product Labeling for each Optioned Product, which in all cases
shall be consistent with the applicable Commercialization Plan and in accordance
with Applicable Law. The Parties’ costs and expenses incurred in conducting such
activities shall be included in Allowable Expenses, unless Denali has exercised
the Denali Worldwide Royalty Option for the relevant Collaboration Program.

6.8    Sales and Distribution.

6.8.1    Booking Sales. The Commercial Lead in any jurisdiction or region for a
particular Collaboration Program shall (a) book all sales of Optioned Products
and (b) be responsible for warehousing and distributing the Optioned Products in
such jurisdiction or region. If the Non-Commercial Lead in a country or region
for a particular Collaboration Program receives any orders for an Optioned
Product, it shall refer such orders to the Commercial Lead for such
Collaboration Program in the applicable country or region.

6.8.2    Branding. The Commercial Lead for each jurisdiction or region shall be
responsible for determining positioning, messaging, and branding for each
Optioned Product in

 

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omitted and is the subject of a confidential treatment request.

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such jurisdiction or region; provided, that positioning, messaging, and branding
for each Optioned Product shall be consistent with the applicable
Commercialization Plans, and Applicable Law. The Parties’ costs and expenses
incurred in conducting such activities shall be included in Allowable Expenses,
unless Denali has exercised the Denali Worldwide Royalty Option for the relevant
Collaboration Program.

6.9    Shipping and Returns. The Commercial Lead with for each jurisdiction or
region shall be responsible for handling all returns of the Optioned Products in
such jurisdiction or region. If an Optioned Product sold in a jurisdiction or
region is returned to the Non-Commercial Lead, the Non-Commercial Lead shall
promptly ship such Optioned Product to a facility designated by the Commercial
Lead. The Commercial Lead for each jurisdiction or region shall also be
responsible for handling all aspects of such Optioned Product order processing,
invoicing and collection, distribution, inventory, and receivables for each
jurisdiction or region. The Parties’ costs and expenses incurred in conducting
such activities shall be included in Allowable Expenses, unless Denali has
exercised the Denali Worldwide Royalty Option for the relevant Collaboration
Program.

6.10    Recalls, Market Withdrawals or Corrective Actions. In the event that any
Regulatory Authority issues or requests a recall or takes a similar action in
connection with an Optioned Product, or in the event either Party determines
that an event, incident or circumstance has occurred that may result in the need
for a recall or market withdrawal, in each case, in any jurisdiction or region,
the Party notified of such recall or similar action, or the Party that desires
such recall or similar action, shall within [***] hours, advise the other Party
thereof by orally or in writing Unless Denali has exercised the Denali Worldwide
Royalty Option, the Commercial Lead, in consultation with the Non-Commercial
Lead, shall decide whether to conduct a recall in such jurisdiction or region
(except in the case of a government mandated recall, when the Commercial Lead
may act without such advance notice or consultation but, shall notify the
Non-Commercial Lead as soon as possible) and the manner in which any such recall
shall be conducted. Each Party shall make available to the other Party, upon
request, all of such Party’s pertinent records that such other Party may
reasonably request to assist such other Party in effecting any recall. The costs
and expenses of any recall in the Territory shall be included in calculating
Allowable Expenses, unless Denali has exercised the Denali Worldwide Royalty
Option for the relevant Collaboration Program.

6.11    Product Trademarks. Subject to Section 6.12, Takeda shall have the sole
right to determine and own the Product Trademarks to be used with respect to the
Exploitation of the Optioned Products on a worldwide basis. Subject to any
pre-existing Trademarks a Party may have, neither Party shall, directly or
indirectly: (a) use in their respective businesses, any Trademark that is
confusingly similar to, misleading or deceptive with respect to or that dilutes
any Product Trademark; and (b) do any act which endangers, destroys, or
similarly affects, in any material respect, the value of the goodwill pertaining
to the Product Trademarks. Each Party agrees to conform to the customary
industry standards for the protection of Product Trademarks for products and
such guidelines of Takeda with respect to manner of use (in the case of Denali,
as provided in writing by Takeda) of the Product Trademarks. Without limiting
any pre-existing Trademarks a Party may have, neither Party shall, directly or
indirectly, attack, dispute, or contest the validity of or ownership of such
Product Trademark anywhere in the Territory or any registrations issued or
issuing with respect thereto.

 

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6.12    Markings. To the extent required by Applicable Law in a country or other
jurisdiction in the Territory, the Promotional Materials, packaging, and Product
Labeling for the Optioned Products used in connection with the Optioned Products
in such country or other jurisdiction shall contain the Corporate Name of both
the Commercial Lead and the Non-Commercial Lead.

ARTICLE 7

LICENSE GRANTS; EXCLUSIVITY

7.1    License Grants to Takeda.

7.1.1    Subject to the terms and conditions of this Agreement (including
Section 7.1.4), with respect to each Designated Target, Denali hereby grants to
Takeda a co-exclusive (with Denali) non-sublicensable (except in accordance with
Section 7.3.1) license under the Denali Technology (including Denali’s interest
in the Joint Program Know-How and Joint Program Patents) solely to the extent
necessary for Takeda to perform its obligations under the Research Plan for such
Designated Target.

7.1.2    Subject to the terms and conditions of this Agreement (including
Section 7.1.4), and effective automatically on the Option Exercise Date with
respect to a Collaboration Program, Denali shall grant and hereby grants to
Takeda, with respect to the Designated Target of such Collaboration Program
(referred to as the Optioned Target below):

(a)    a co-exclusive (with Denali) license, with the right to grant sublicenses
in accordance with Section 7.3.2, under the Denali Technology (including
Denali’s interest in the Joint Program Know-How and Joint Program Patents), to
Exploit Optioned Biologics and Optioned Products Directed to such Optioned
Target in the Field in the Territory in a manner consistent with the applicable
Development Plan and the applicable Commercialization Plans;

(b)    a co-exclusive (with Denali) license and right of reference, with the
right to grant sublicenses and further rights of reference in accordance with
Section 7.3.2, under the Regulatory Approvals and any other Regulatory
Documentation that Denali may Control with respect to the Optioned Biologics or
Optioned Products Directed to such Optioned Target to Exploit such Optioned
Biologics and Optioned Products in the Field in the Territory in a manner
consistent with the applicable Development Plan and the applicable
Commercialization Plans; and

(c)    a co-exclusive (with Denali) license, with the right to grant sublicenses
in accordance with Section 7.3.2, to use Denali’s Corporate Names solely as
required by Applicable Law to Exploit Optioned Biologics or Optioned Products
Directed to such Optioned Target in the Field in the Territory in a manner
consistent with the applicable Development Plan and the applicable
Commercialization Plans.

7.1.3    Subject to the terms and conditions of this Agreement (including
Section 7.1.4 and Section 7.8), Denali hereby grants to Takeda a non-exclusive,
worldwide, perpetual, irrevocable, fully-paid, royalty-free license, with the
right to grant sublicenses in

 

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accordance with Section 7.3.3, under any [***] to Exploit [***]. For clarity,
the foregoing shall not include the grant by Denali to Takeda of a license under
any [***] to the extent Denali does not have the right to grant such license
[***].

7.1.4    Certain Restrictions. Notwithstanding any other provision of this
Agreement, the rights and licenses granted to Takeda under this Agreement shall
not include, or be deemed to include, [***], except as expressly set forth in
the Research Plan or as otherwise expressly agreed in writing in advance by the
Parties. In no event shall Takeda use (or authorize the use of) any Denali
Technology (other than Joint Program Know-How and Joint Program Patents) except
for the purposes of [***]. For clarity, notwithstanding Denali’s co-exclusive
rights with Takeda under this Agreement as set forth in Section 7.1 and
Section 7.2, during the Term with respect to each Collaboration Program, Denali
shall not have [***]. For the avoidance of doubt, the co-exclusive rights
granted by Denali to Takeda under this Agreement shall not prohibit Denali from
Exploiting, and Denali shall retain all rights to Exploit, the [***] and [***]
or [***], or [***] (other than any such [***]), for any purpose, subject to
[***].

7.2    License Grants to Denali.

7.2.1    Subject to the terms and conditions of this Agreement, with respect to
each Designated Target, Takeda hereby grants to Denali a co-exclusive (with
Takeda), non-sublicensable (except in accordance with Section 7.3.4) license
under the Takeda Technology (including Takeda’s interest in the Joint Program
Know-How and Joint Program Patents) solely to the extent necessary for Denali to
perform its obligations under the Research Plan for such Designated Target.

7.2.2    Subject to the terms and conditions of this Agreement, and effective
automatically on the Option Exercise Date with respect to a particular
Collaboration Program, Takeda shall grant and hereby grants to Denali, with
respect to the Designated Target of such Collaboration Program (referred to as
the Optioned Target below):

(a)    a co-exclusive (with Takeda) license, with the right to grant sublicenses
in accordance with Section 7.3.5, under the Takeda Technology (including
Takeda’s interest in the Joint Program Know-How and Joint Program Patents), to
Exploit Optioned Biologics and Optioned Products Directed to such Optioned
Target in the Field in the Territory in a manner consistent with the applicable
Development Plan and the applicable Commercialization Plans;

(b)    a co-exclusive (with Takeda) license and right of reference, with the
right to grant sublicenses and further rights of reference in accordance with
Section 7.3.5, under the Regulatory Approvals and any other Regulatory
Documentation that Takeda may Control with respect to the Optioned Biologics or
Optioned Products Directed to such Optioned Target to Exploit such Optioned
Biologics and Optioned Products in the Field in the Territory in a manner
consistent with the applicable Development Plan and the applicable
Commercialization Plans; and

(c)    a co-exclusive (with Takeda) license, with the right to grant sublicenses
in accordance with Section 7.3.5, to use Takeda’s Product Trademarks and
Takeda’s

 

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Corporate Names solely as required by Applicable Law to Exploit Optioned
Biologics or Optioned Products Directed to such Optioned Target in the Field in
the Territory in a manner consistent with the applicable Development Plan and
the applicable Commercialization Plans.

7.2.3    Without limiting Denali’s rights under Section 9.1, subject to the
terms and conditions of this Agreement (including Section 7.8 below), Takeda
hereby grants to Denali a non-exclusive, worldwide, perpetual, irrevocable,
fully-paid, royalty-free (subject to Section 7.5.2(d)) license, [***], under
Takeda’s and/or any of its Affiliate’s interest in any [***] to [***].

7.2.4    Certain Restrictions. In no event shall Denali use (or authorize the
use of) any Takeda Technology (other than Joint Program Know-How and Joint
Program Patents) except for the purposes of [***]. For clarity, notwithstanding
Takeda’s co-exclusive rights with Denali under this Agreement as set forth in
Section 7.1 and Section 7.2, Takeda shall not have the right to [***].

7.3    Sublicenses.

7.3.1    Takeda shall have the right to grant sublicenses under the licenses
granted to Takeda under Section 7.1.1, to its Affiliates (through multiple
tiers) and Third Party Providers (without the right to grant further
sublicenses) solely in accordance with Section 7.4; provided that any such
sublicenses shall be materially consistent with the terms and conditions of this
Agreement.

7.3.2    Takeda shall have the right to grant sublicenses (or further rights of
reference), through multiple tiers of sublicensees, under the licenses and
rights of reference granted in Section 7.1.2, to its Affiliates and other
Persons; provided that [***]. Notwithstanding the foregoing, Takeda shall not,
without Denali’s prior written consent, grant to a Sublicensee any such
sublicense or rights of reference with respect to [***] (a) [***], (b) [***], or
(c) unless such Sublicensee is a Significant Biopharmaceutical Company, [***].
For such purposes, a “Significant Biopharmaceutical Company” means [***].

7.3.3    Subject to Section 7.8 below, Takeda shall have the right to grant
sublicenses, through multiple tiers of sublicensees, under the licenses granted
to Takeda under Section 7.1.3, to its Affiliates and other Persons; provided
that [***] and any such Person to whom Takeda grants such rights has agreed
[***].

7.3.4    Denali shall have the right to grant sublicenses under the licenses
granted to Denali under Section 7.2.1, to its Affiliates (through multiple
tiers) and Third Party Providers (without the right to grant further
sublicenses) solely in accordance with Section 7.4; provided that [***].

7.3.5    Denali shall have the right to grant sublicenses (or further rights of
reference) under the licenses and rights of reference granted to Denali under
Section 7.2.2 to its Affiliates and other Persons: (a) [***]; (b) [***]; or
(c) otherwise solely in connection with the engagement of a subcontractor in
accordance with Section 7.4 for the performance of the activities that Denali
has the right to conduct in connection with a Collaboration Program under this
Agreement.

 

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7.3.6    Subject to Section 7.8 below, Denali shall have the right to grant
sublicenses, through multiple tiers of sublicensees, under the licenses granted
to Denali under Section 7.2.3, to [***] and [***]; provided that [***] and
[***].

7.3.7    Each sublicensing Party (or Party whose Affiliate grants a sublicense)
shall [***] and shall [***].

7.4    Subcontracting. Each Party and its Affiliates may subcontract the
performance of any of its research activities, Development activities and
Commercialization activities in the Territory with respect to each Collaboration
Program undertaken in accordance with this Agreement to one or more Third Party
Providers pursuant to a Subcontract Agreement which shall be consistent with the
terms of this Agreement; provided, that: (a) each Party shall [***] and shall
[***]; and (b) the Subcontract Agreement shall (i) contain [***] and
(ii) provide such subcontracting Party [***]. Notwithstanding the foregoing, the
subcontracting Party shall [***] and shall [***].

7.5    Third Party Intellectual Property.

7.5.1    Denali’s In-License Agreement.

(a)    Existing In-Licenses. It is understood that Denali’s In-License
Agreements existing as of the Execution Date (collectively, the “Existing
In-License Agreements”) may require that particular provisions be incorporated
into a sublicense granted thereunder. The text of any such provisions in the
Existing In-License Agreements are set out on Schedule 7.5.1 attached hereto and
shall be deemed incorporated by reference into this Agreement. Takeda agrees to
be bound by the provisions set out on Schedule 7.5.1 to the extent applicable to
Takeda in its capacity as a sublicensee under each such Existing In-License
Agreement for so long as the applicable Existing In-License Agreement is in full
force and effect and thereafter with respect to any surviving [***] obligations,
and, to the extent required by any such Existing In-License Agreement as of the
Execution Date, the relevant Third Party licensor shall be deemed to be a third
party beneficiary of this Agreement solely for the purposes of enforcing any of
such Third Party licensor’s rights against Takeda in its capacity as a
sublicensee under such Existing In-License Agreement.

(b)    Denali New Technology. If, after the Effective Date, Denali acquires from
any Third Party subject matter within the Denali Technology to be applied to a
Biologic(s) or Product(s) being Developed or Commercialized under this Agreement
(“Denali New Technology”), the following shall apply: Denali shall [***] and
provide [***]. In the event [***], then such Denali New Technology shall [***].
In the event [***], then such Denali New Technology shall [***].

 

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(c)    Payment Obligations for Denali’s Product In-License Agreements. If any
Denali Technology or Denali New Technology is subject to payment to a Third
Party under a Product In-License Agreement, the following shall also apply:

(i)    Prior to the Option Exercise Date for a Collaboration Program and after
the Option Exercise Date, except as set forth in clause (ii) below, Denali shall
be responsible for any payments due to a Third Party under any Product
In-License Agreement.

(ii)    Following the Option Exercise Date for a particular Collaboration
Program all amounts that become owing to such Third Party as a result of a
Party’s exercise of any such Denali Technology or Denali New Technology in
performance of activities under this Agreement shall be included as Allowable
Expenses, provided that [***], provided further that if Denali has exercised the
Denali Worldwide Royalty Option, such amounts shall be paid by Takeda but
subject to Takeda’s right to offset any such payment under Section 8.7.5(e)
against royalty payments by Takeda to Denali.

(d)    [***].

(e)    Payment Obligations for Denali’s Platform In-License Agreements. If any
Denali Technology or Denali New Technology is subject to payment to a Third
Party under a Platform In-License Agreement [***], the following shall apply:

(i)    Prior to the Option Exercise Date for a Collaboration Program and after
the Option Exercise Date, except as set forth in clause (ii) below, [***].

(ii)    Following the Option Exercise Date for a particular Collaboration
Program, [***].

(iii)    Notwithstanding the foregoing in clauses (i) and (ii) above, if any
subject matter included within a Platform In-License Agreement pertains to
[***], then the JSC shall [***].

7.5.2    Takeda’s In-License Agreements. If, after the Effective Date, Takeda
wishes to acquire or actually acquires from any Third Party subject matter
within the Takeda Technology to be applied to a Biologic(s) or Product(s) being
Developed or Commercialized under this Agreement, or incorporate any Third Party
subject matter already acquired by Takeda into any Biologic(s) or Product(s)
being Developed or Commercialized under this Agreement (any such acquired
subject matter, “Takeda New Technology”), the following shall apply:

(a)    Takeda New Technology that is [***]. For any subject matter that is
[***]. In such event, Denali shall [***]. In the event that [***]. For clarity,
such Takeda New Technology shall be [***].

(b)    Other Takeda New Technology. For any other subject matter, Takeda shall
so notify the JSC and provide the JSC with a summary of the terms of any license
or agreement under which Takeda acquired such Takeda New Technology that would
be applicable to such a Biologic(s) or Product(s). In the event the JSC agrees
in writing to apply such Takeda New Technology to Biologic(s) or Product(s)
under this Agreement, then such Takeda New Technology shall be included in
Takeda Technology and subject to the terms and conditions of this Agreement. In
the event the JSC does not agree in writing to apply such Takeda New Technology
to Biologic(s) or Product(s), then such Takeda New Technology shall thereafter
be deemed excluded from the Takeda Technology hereunder. [***].

 

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(c)    Payment Obligations for Takeda New Technology Allocated to Optioned
Biologics, Optioned Products and Collaboration Programs. Any royalties or other
amounts that become owing to such Third Party with respect to such Takeda New
Technology to the extent allocable to the Development, Manufacture or
Commercialization of an Optioned Biologic or Optioned Product or the
Collaboration Programs hereunder and incurred after the applicable Option
Exercise Date, shall be included in calculating Allowable Expenses, as
applicable, provided that [***], provided further that if Denali has exercised
the Denali Worldwide Royalty Option with respect to the applicable Collaboration
Program, any such royalties or other amounts shall be paid by Takeda, subject to
Takeda’s right to offset such payments under Section 8.7.5(e).

(d)    Payment Obligations for Takeda New Technology that is [***]. Any
royalties or other amounts that become owing to such Third Party with respect to
[***] to the extent allocable to [***] shall be the sole responsibility of
[***].

7.5.3    Coordination with Third Party Agreements. The obligations of each Party
and the rights of the other Party under this Agreement, including with respect
to Prosecution and Maintenance and enforcement of Patents, shall be subject to,
and limited by, any agreements pursuant to which such Party acquired or licensed
any particular Patents or Information or other subject matter.

7.6    Retention of Rights.

7.6.1    Except as expressly provided herein, Denali grants no other right or
license, including any rights or licenses to the Denali Technology, the
Regulatory Documentation, Denali’s Corporate Names, or any other Patent or
intellectual property rights not otherwise expressly granted herein.

7.6.2    Except as expressly provided herein, Takeda grants no other right or
license, including any rights or licenses to the Takeda Technology, the
Regulatory Documentation, Takeda’s Corporate Names, or any other Patent or
intellectual property rights not otherwise expressly granted herein.

7.7    Confirmatory Patent License. Each Party shall if requested to do so by
the other Party promptly enter into confirmatory license agreements in the form
or substantially the form reasonably requested by such other Party for purposes
of recording the licenses granted under this Agreement with the applicable
patent offices as such other Party considers appropriate. Until the execution of
any such confirmatory licenses, so far as may be legally possible, Denali and
Takeda shall have the same rights in respect of the Denali Technology and Takeda
Technology, as the case may be, and be under the same obligations to each other
in all respects as if the said confirmatory licenses had been executed.

7.8    Exclusivity.

7.8.1    On a Designated Target-by-Designated Target basis during the applicable
Exclusivity Period, except as permitted under this Agreement, each Party agrees
for itself and its Affiliates not to: (a) [***] (each a “Competing Product”),
nor (b) authorize or assist any Third Party to do any of the foregoing; provided
that if a [***], then a [***].

 

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7.8.2    Notwithstanding the provisions of Section 7.8.1, if, during the
Exclusivity Period, (i) a Party or any of its Affiliates acquires rights to a
Competing Product through an Acquisition, such Acquisition, and the
commercialization of such Competing Product thereafter, shall not constitute a
breach of Section 7.8.1 if such Party or such Affiliate, as applicable,
(x) [***] and (y) prior to [***]; or (ii) a Party [***]; provided, that, such
[***].

ARTICLE 8

PAYMENTS

8.1    Upfront Payments.

8.1.1    Initial Equity Investment. No later than [***] Business Days following
the Effective Date, Takeda shall purchase Four Million Two Hundred Fourteen
Thousand Five Hundred Fifty-Nine (4,214,559) shares of Denali common stock for
One Hundred Ten Million Dollars ($110,000,000) (the “Aggregate Stock Purchase
Price”) pursuant to the terms of the Stock Purchase Agreement. For the avoidance
of doubt, the Aggregate Stock Purchase Price represents a price per share of
approximately Twenty-Six Dollars and Ten Cents ($26.10), which represents [***],
plus a premium as partial consideration paid in return for those rights granted
to Takeda under the Agreement.

8.1.2    Additional Upfront Consideration. On or promptly after the Effective
Date, Denali shall submit an invoice to Takeda for the Additional Upfront
Consideration. Within [***] Business Days following the date of such invoice, in
partial consideration paid in return for those rights granted to Takeda under
this Agreement, Takeda shall pay to Denali a one-time payment in the amount of
Forty Million Dollars ($40,000,000) (the “Additional Upfront Consideration”).
The Additional Upfront Consideration shall not be refundable or creditable
against any future payments by Takeda to Denali under this Agreement.

8.2    Research Program Payments.

8.2.1    Research Milestone Payments.

(a)    With respect to each Designated Target and subject to Section 3.2.3(f),
Takeda shall pay to Denali, in accordance with Sections 8.4 and 8.8, the
milestone payments set forth below following the first achievement of each
corresponding research milestone event set forth below (each, a “Research
Milestone”) with respect to the [***] to achieve the applicable stage of
development:

 

Research Milestone Event

   Milestone
Payment

[***]

   [***]

[***]

   [***]

[***]

   [***]

 

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(b)    With respect to [***] and the achievement of Research Milestone 1, [***]
shall be payable upon the [***] and [***] shall be payable upon [***].

(c)    With respect to the Research Milestones for each Designated Target, if
Research Milestone 2 or 3 is achieved before a milestone payment has been made
with respect to a lower-numbered Research Milestone, or if a Development
Milestone is achieved by an Optioned Biologic or Optioned Product directed to
such Designated Target before a milestone payment has been made with respect to
one or more Research Milestone for such Designated Target, then all milestone
payments corresponding to such lower-numbered Research Milestones for such
Designated Target shall be deemed achieved upon achievement of the subsequent
Research Milestone or Development Milestone, as applicable. Notwithstanding the
foregoing, with respect to a particular Research Program, if [***], then [***].

(d)    For the avoidance of doubt, a Research Milestone may be achieved after
the Option Exercise Date with respect to the applicable Collaboration Program.

(e)    Each Research Milestone is payable [***] with respect to each Designated
Target, regardless of how many Research Biologics meet such milestone event, and
no Research Milestone payment shall be made more than [***] times under this
Agreement. The total amount payable by Takeda to Denali under this Section 8.2.1
shall not exceed (i) Twenty-Five Million Dollars ($25,000,000) with respect to
each Designated Target and (ii) Seventy-Five Million Dollars ($75,000,000) in
the aggregate. In the event the Parties replace any Designated Target with a
Replacement Designated Target, then Takeda shall not be required to make any
Research Milestone Payment with respect to such Replacement Designated Target to
the extent such Research Milestone Payment has already been made by Takeda for
the original Designated Target. Notwithstanding the foregoing, if [***] and, at
the time of such replacement, only [***] of the milestone payment corresponding
to Research Milestone 1 has been paid pursuant to Section 8.2.1(b), then a
milestone payment of [***] shall be due upon achievement of Research Milestone 1
with respect to the applicable Replacement Designated Target (which achievement
may occur prior to such replacement and the milestone shall be paid in
accordance with the terms of Section 8.4); provided that if such Replacement
Designated Target is [***] will be due upon [***].

8.2.2    Option Exercise Fee. On a Collaboration Program-by-Collaboration
Program basis, if Takeda submits the Option Exercise Notice to Denali, Denali
shall submit to Takeda an invoice for the one-time payment in the amount of Five
Million Dollars ($5,000,000) (the “Option Exercise Fee”). Takeda shall pay such
Option Exercise Fee by the later of [***] Days after: (i) receipt of such
invoice or (ii) the Parties have received all required approvals from all
applicable governmental authorities pursuant to Section 3.2.4(c).

8.3    Development Milestones.

8.3.1    With respect to each Collaboration Program for which Takeda exercises
its Option and each corresponding Optioned Target, Takeda shall pay to Denali,
in accordance with Sections 8.4 and 8.8, the milestone payments set forth below
following the first

 

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achievement of each of the following development and regulatory milestones
(each, a “Development Milestone”) for the [***] to achieve the applicable stage
of development:

 

Development Milestone Event

   Milestone
Payment

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

8.3.2    For purposes of this Section 8.3:

(a)    The [***] for the purposes of Development Milestones 1, 2 and 3 in the
table above may, but need not, be the same [***].

(b)    With respect to a given Optioned Target, if a [***] is [***], and a [***]
was not previously conducted for [***], then a [***] will be deemed [***] and
[***] solely for purposes of determining payments under this Section 8.3.
Similarly, if [***], and a [***] and/or [***] was not [***], then such [***]
will be deemed [***] solely for purposes of determining payments under this
Section 8.3. Any such event deemed to have been achieved, if it would have
triggered a payment under Section 8.3, will trigger a payment at the time it is
deemed to have occurred. For example, consider the following scenario: [***].

8.3.3    Upon [***], Takeda shall pay to Denali, in accordance with Sections 8.4
and 8.8, an additional milestone payment equal to [***], provided that such
milestone payment shall instead be [***] (such payment, as applicable, the
“Additional Event Payment”) if [***]. If at the time of [***], the Additional
Event Payment has not been paid or become payable, then upon [***], such
Additional Event Payment (with the amount thereof determined pursuant to this
Section 8.3.3 at the time of [***]) shall also become due and payable to Denali.
For clarity, the Additional Event Payment will be due one time only for all
Collaboration Programs.

8.3.4    Each Development Milestone shall be due [***] with respect to each
Collaboration Program, regardless of how many Optioned Biologics and/or Optioned
Products meet such milestone event, and no Development Milestone payment shall
be made more than [***] under this Agreement. The Additional Event Payment
payable pursuant to Section 8.3.3 shall be due only once under this Agreement.
The total amount payable by Takeda to Denali

 

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under this Section 8.3 shall not exceed: (i) [***] with respect to each
Collaboration Program, except for the Collaboration Program in connection with
which the Additional Event Payment is triggered, in which case the total amount
payable by Takeda to Denali under this Section 8.3 for such Collaboration
Program only shall not exceed [***]; and (ii) Seven Hundred Seven Million Five
Hundred Thousand Dollars ($707,500,000) in the aggregate.

8.4    Reports and Payments for Research Milestones and Development Milestones.
With respect to each Research Milestone set out in Section 8.2.1 and each
Development Milestone set out in Section 8.3, the Party who achieves such
Research Milestone or Development Milestone, as applicable, (or under whose
authority such Research Milestone or Development Milestone, as applicable, is
achieved) shall notify the other Party in writing within [***] Business Days
after the achievement thereof. If Denali notifies Takeda of such milestone
event, Denali shall include an invoice for the corresponding milestone payment
with such notice. If Takeda notifies Denali of such milestone event, Denali
shall promptly after receipt of such notice submit an invoice to Takeda for the
corresponding milestone amount. Takeda shall pay to Denali the corresponding
milestone payment set out in Section 8.2.1 or Section 8.3, as applicable, no
later than [***] days after receipt of the applicable invoice. If any Research
Milestone is achieved with respect to any Research Biologic Directed to an
Initial Designated Target prior to the Effective Date, then Denali shall notify
Takeda of the achievement of such milestone on or promptly after the Effective
Date and shall submit an invoice to Takeda for the corresponding milestone
payment (or include such amount in the invoice to be submitted to Takeda by
Denali pursuant to Section 8.1.2), which invoice shall become due and payable
within [***] Business Days after receipt. If any Research Milestone is achieved
with respect to any Research Biologic Directed to a Replacement Designated
Target prior to the approval of the initial Research Plan by the JSC for such
Replacement Designated Target, then Denali shall notify Takeda of the
achievement of such milestone and, promptly after such approval and notice,
Denali shall submit an invoice to Takeda for the corresponding milestone
payment, which invoice shall become due and payable within [***] days after
receipt. For example, if [***] occur prior to the Effective Date or prior to the
applicable approval of the initial Research Plan by the JSC, then Denali shall
notify Takeda and Takeda shall pay such corresponding milestone payment in
accordance with the foregoing provisions. For the avoidance of doubt, each
milestone payment set forth in Section 8.2.1 and Section 8.3 shall not be
refundable and shall not be creditable against future milestone payments or
other amounts paid or payable by Takeda to Denali under this Agreement.

8.5    Commercial Milestones. With respect to each Optioned Product Directed to
a particular Optioned Target, Takeda shall pay to Denali, in accordance with
Section 8.8, a one-time milestone payment (each, a “Sales Milestone”) in the
amount of Seventy-Five Million Dollars ($75,000,000) the first time Annual Net
Sales for such Optioned Product equal or exceed [***]. Promptly after the
achievement of such Sales Milestone, Denali shall submit an invoice to Takeda
for the corresponding milestone payment. Each such Sales Milestone shall be due
no later than [***] days after receipt of the applicable invoice. Each milestone
payment made under this Section 8.5 shall not be refundable or creditable
against any future payments by Takeda to Denali under this Agreement.

8.6    Cost-Profit Sharing. On a Collaboration Program-by-Collaboration Program
basis, beginning on the Option Exercise Date and until the Co-Funding End Date
if Denali

 

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exercises the Denali Worldwide Royalty Option with respect to such Collaboration
Program, Denali and Takeda shall share equally: (a) Development Costs,
(b) Allowable Expense and (c) Net Revenues as follows.

8.6.1    Costs.

(a)    General. Within [***] Business Days, unless such timing is adjusted by
approval of the JSC, after the end of each calendar month, each Party will
provide the other Party with a good faith estimate of the Development Costs and
Allowable Expenses it incurred for each applicable Collaboration Program in such
calendar month. The Finance Working Group will establish the level of detail
necessary in such estimate for each Party to satisfy its internal reporting
requirements. No later than [***] Business Days prior to the end of each
Calendar Quarter, unless such timing is adjusted by approval of the JSC, each
Party will provide the other Party with a reasonably detailed estimate of the
Development Costs and Allowable Expenses it incurred for such Collaboration
Program in such Calendar Quarter, which will include the actual costs for the
first two calendar months and good faith estimate for the last month of such
quarter. Within [***] Business Days after the end of each Calendar Quarter,
unless such timing is adjusted by approval of the JSC, each Party will provide
other Party with a report of actual Development Costs and Allowable Expenses for
such Collaboration Program for such Calendar Quarter, which report will contain
a detailed and itemized calculation of such costs for each Optioned Product.
Notwithstanding the foregoing, the JSC may agree to have different reporting
requirements for Development Costs and Allowable Expenses for any Collaboration
Program. In addition to the annual approval of the relevant budgets for each
Collaboration Program, prior to the end of each Calendar Year, each Party will
provide the Finance Working Group with a non-binding estimate of its Development
Costs and Allowable Expenses for each Collaboration Program for the [***] year
period (detailed on a Calendar Year basis) following the first Calendar Year
covered by such approved budget; provided, that the Parties will review and
discuss such estimated costs at the Finance Working Group and/or the JPT for the
relevant Collaboration Program.

(b)    Expense Review. Each Party shall have the right to review and submit any
reasonable objection to the Development Costs or Allowable Expenses set forth in
the other Party’s report within [***]. Any dispute as to respect to a
Development Cost or Allowable Expense shall be resolved by the Finance Working
Group in accordance with Section 8.6.6.

8.6.2    Net Sales and Net Revenues. In order to satisfy each Party’s internal
reporting requirements, within [***] Business Days, unless such timing is
adjusted by approval of the JSC, after the end of each calendar month, each
Party will provide the other Party with a good faith estimate of Net Sales and
Net Revenues for each applicable Collaboration Program for such calendar month
in the countries for which it is the Commercial Lead. The Finance Working Group
will establish the level of detail necessary in such estimate for each Party to
satisfy its internal reporting requirements and reporting requirements pursuant
to its applicable Accounting Standards. Within [***] Business Days prior to the
end of each Calendar Quarter, unless such timing is adjusted by approval of the
JSC, each Party will provide the other Party with a reasonably detailed estimate
of Net Sales and Net Revenues for such Calendar Quarter in the countries for
which it is the selling Party, which will include the actual Net Sales and Net

 

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Revenues for the first [***] calendar months and a good faith estimate for the
last calendar month of such Calendar Quarter. Within [***] days after the end of
each Calendar Quarter, unless such timing is adjusted by approval of the JSC,
each Party will provide the other Party with a report of Net Sales and Net
Revenue for such Calendar Quarter in the countries for which it is the
Commercial Lead, which report will contain a detailed and itemized calculation
of Net Sales and Net Revenues for each Optioned Product in such countries during
such Calendar Quarter.

8.6.3    Reporting, Reconciliation and True-Up. Within [***] days after the end
of each Calendar Quarter, Takeda will calculate and provide to each Party and
the Finance Working Group a report of the amount each Party is responsible for
with respect to all Collaboration Programs such that the Parties share equally
all Development Costs and Allowable Expenses, subject to Section 8.6.1, and all
Net Revenues, for each Collaboration Program for such Calendar Quarter
(excluding any Collaboration Program for which Denali has exercised the Denali
Worldwide Royalty Option after the Co-Funding End Date for such Collaboration
Program). The Parties will make a balancing payment between the Parties in order
to effect the net revenue and cost allocation set forth in this Section 8.6
within [***] days after delivery of such report. Notwithstanding the foregoing,
to the extent a Party incurs Development Costs or Allowable Expenses prior to
the Option Exercise Date for a particular Collaboration Program (collectively
“Pre-Option Expenses”), such Pre-Option Expenses shall be reconciled and
trued-up between the Parties as a part of the reconciliation with respect to
such Collaboration Program for the first Calendar Quarter after the Option
Exercise Date for such Collaboration Program (but only if Takeda exercises the
Option for the applicable Collaboration Program).

8.6.4    Certain Other Matters Relating to Cost Calculations.

(a)    On a Calendar Year basis, if the Development Costs and Allowable Expenses
incurred by a Party are in excess of the applicable Development Budget and/or
Commercialization Budget, such excess amounts may be included in calculating the
amount of Development Costs and Allowable Expenses incurred in such Calendar
Year and to be shared by the Parties only to the extent that such amounts do not
exceed [***] of the total amounts to be incurred by such Party in such Calendar
Year under all Development Budgets and Commercialization Budgets, in the
aggregate for such Calendar Year; provided however that [***].

(b)    Allocation of FTE Costs and Out-of-Pocket Costs. It is understood that
Development Costs and Allowable Expenses shall (A) [***], and (B) [***]. To the
extent that any activity is conducted (or an Out-of-Pocket Cost or FTE Cost is
incurred) in support of both an Optioned Product and other products, services or
efforts of a Party, or in support of more than one Collaboration Program, and to
the extent any Out-of-Pocket Costs or FTE Costs incurred are otherwise not
solely attributable to a particular Collaboration Program in the Territory, then
such Out-of-Pocket Costs and FTE Costs for the applicable activity shall be
included in Development Costs and Allowable Expenses only to the extent fairly
and reasonably allocated between the relevant Collaboration Program and such
other products, services or efforts or other Collaboration Programs,
respectively, in each case in accordance with Accounting Standards. [***].

 

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(c)    Treatment of Overhead; Other Matters. The Parties acknowledge and agree
that Development Costs and Allowable Expenses shall not include any allocation
of overhead except [***]. Except to the extent already included in FTE Costs,
Development Costs and Allowable Expenses shall not include either Party’s costs
to the extent pertaining to legal, accounting, finance or alliance management
activities associated with overseeing execution of and compliance with this
Agreement, unless otherwise agreed by the Parties under this Agreement or
otherwise in writing. Development Costs and Allowable Expenses shall also
exclude any costs attributable to a breach of this Agreement by either Party.

8.6.5    Financial Reporting Activities; Finance Working Group. With respect to
the financial reporting activities between the Parties, unless Denali has
exercised the Denali Worldwide Royalty Option for all Collaboration Programs,
the JSC shall establish a finance working group (“Finance Working Group”) to
coordinate the activities and reporting by the Parties as set forth in
Section 8.6.1 and to assist the JSC in its responsibilities with respect to the
review and resolution of financial matters. In particular, the Finance Working
Group shall:

(a)    facilitate the creation of Development Budgets and Commercialization
Budgets, including the annual updates thereto;

(b)    reconcile financial and accounting matters between the Parties;

(c)    initiate and execute an effective and efficient revenue and cost sharing
process (cross-charges);

(d)    cooperate to ensure that any Development Budget or Commercialization
Budget agreed to for a Calendar Year (or any other given period) can be
interpreted for the purposes of both Parties’ internal financial and audit
reporting requirements, including each Party’s fiscal year reporting;

(e)    monitor the budget, expense and revenue reporting requirements between
the Parties related to the Collaboration Programs to ensure that each Party is
able to comply with its respective internal financial and audit reporting
requirements and, as appropriate, recommending to the JSC for approval, changes
to the reporting requirements under this Agreement; and

(f)    undertake such other tasks with respect to the implementation and
reporting for the Parties’ sharing of Development Costs, Allowable Expenses and
Net Revenues as the Parties mutually agree.

8.6.6    Cost-Profit Sharing Disputes. [***].

8.7    Denali Worldwide Royalty Option.

8.7.1    Exercise by Denali. On a Collaboration Program-by-Collaboration Program
basis, after the Option Exercise Date, Denali may, upon prior written notice to
Takeda as specified in this Section 8.7.1, opt out of sharing future Development
Costs, Allowable Expenses and Net Revenues with respect to all Optioned Products
within the applicable Collaboration Program in the Territory and instead receive
a royalty on sales of such Optioned

 

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Products in the Territory (a “Denali Worldwide Royalty Option”). Denali shall
provide (a) [***] prior written notice if Denali exercises such right [***], and
(b) [***] prior written notice if Denali exercises such right [***]. The date on
which the applicable notice period expires is referred to in this Agreement as
the “Co-Funding End Date”.

8.7.2    Co-Funding Termination. Notwithstanding anything to the contrary in
this Agreement, on a Collaboration Program-by-Collaboration Program basis, if
[***] (a “Co-Funding Termination”), [***].

8.7.3    Applicability to the Agreement. Except as expressly set forth otherwise
in this Agreement, a Co-Funding Termination [***] pursuant to Section 8.7.2
shall for all purposes have the same effect as Denali having exercised the
Denali Worldwide Royalty Option.

8.7.4    Effect of Denali Worldwide Royalty Option. Following the exercise of
the Denali Worldwide Royalty Option with respect to a Collaboration Program,
without limiting the other terms and conditions of this Agreement applicable to
such Denali Worldwide Royalty Option, and effective from and after the
Co-Funding End Date or the effective date of the Co-Funding Termination pursuant
to Section 8.7.2, as the case may be: (a) Denali shall not be obligated or
allowed to share in Development Costs, Allowable Expenses and Net Revenues
accrued after such Co-Funding End Date or effective date of the Co-Funding
Termination, as applicable; (ii) Takeda shall make the applicable royalty
payments to Denali as set forth in Section 8.7.5; and (iii) Takeda shall be the
Development Lead, Regulatory Lead, Manufacturing Lead (subject to Section 5.2)
and Commercial Lead for Optioned Products included in the applicable
Collaboration Program in the entire Territory, and Denali’s right with respect
to the co-commercialization of such Optioned Products under Section 6.2.4
included in the applicable Collaboration Program shall expire; provided that
Denali may conduct certain Development activities as the Parties mutually agree
in writing. Once exercised with respect to a particular Collaboration Program
and the Optioned Products Directed to the Optioned Target of such Collaboration
Program, such Denali Worldwide Royalty Option shall be irrevocable.

8.7.5    Royalties. If Denali exercises the Denali Worldwide Royalty Option for
a Collaboration Program, Takeda shall make the following royalty payments to
Denali for sales of the relevant Optioned Products in the Territory:

(a)    Base Case Denali Worldwide Royalty Option Royalties. In the event Denali
exercises the Denali Worldwide Royalty Option pursuant to Section 8.7.1 (or a
Co-Funding Termination occurs) before Denali has co-funded Development Costs and
Allowable Expenses for such Collaboration Program that [***], Takeda shall pay
to Denali royalties at the applicable royalty rates specified in the table below
on the Net Sales of the Optioned Products included in such Collaboration Program
in the Territory.

 

Collaboration Program Annual Net Sales 

   Royalty Rate

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

 

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(b)    Denali [***] Royalties In the event Denali exercises the Denali Worldwide
Royalty Option pursuant to Section 8.7.1 (or a Co-Funding Termination occurs)
after Denali has co-funded Development Costs and Allowable Expenses for such
Collaboration Program that [***] in aggregate, in lieu of the royalties
specified in Section 8.7.5(a), Takeda shall pay to Denali royalties at the
applicable royalty rates specified in the table below on the Net Sales of the
Optioned Products included in such Collaboration Program in the Territory.

 

Collaboration Program Annual Net Sales

   Royalty Rate

[***]

   [***]

[***]

   [***]

[***]

   [***]

[***]

   [***]

(c)    Royalty Term. Royalties under Section 8.7 shall be payable on Net Sales
on a country-by-country basis beginning upon the First Commercial Sale of an
Optioned Product in a country in the Territory until the expiration of the
Royalty Term in such country (at which time sales in such country shall be
excluded from all calculations of aggregate Net Sales hereunder). “Royalty Term”
means, with respect to a country and Optioned Product, the period commencing on
the First Commercial Sale of such Optioned Product in such country and ending
upon the later of [***].

(d)    Reduction For Biosimilar Entry In A Country. On an Optioned
Product-by-Optioned Product basis, the royalty rates set forth in Section 8.7.5
for Net Sales of such Optioned Product in a country of the Territory shall be
reduced by [***] during which the Biosimilar Competition Percentage in such
country with respect to the applicable Optioned Product is [***] and shall be
reduced to [***] during which the Biosimilar Competition Percentage in such
country with respect to such Optioned Product is [***].

(e)    In-License Agreements. The Parties shall each be responsible for [***] of
any royalties related to the sale of an Optioned Product or other payments with
respect to Optioned Products due under any In-License Agreement to the extent
provided in Sections 7.5.1, 7.5.2, or 9.4, as applicable. At Denali’s request,
Takeda shall credit Denali’s portion of any such amount owed pursuant to this
Section 8.7.5(e), and which is paid by Takeda, against any royalties payable to
Denali pursuant to this Section 8.7.5. Takeda shall take such credit during any
Calendar Quarter for which royalties are payable hereunder; provided, that in no
event will such credit reduce such royalties for such Calendar Quarter and a
Collaboration Program by more than [***]. Any share of Denali’s portion that
remains uncredited due to the application of such floor may be carried forward
to subsequent Calendar Quarters.

 

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(f)    Manner of Royalty Payment. Within [***] days following the end of each
Calendar Quarter after the First Commercial Sale of an Optioned Product in the
Territory (or if later the first Calendar Quarter in which royalties are payable
by Takeda to Denali in accordance with this Section 8.7.5), Takeda shall provide
Denali with a report containing the following information for the applicable
Calendar Quarter and on an Optioned Product-by-Optioned Product basis (to the
extent applicable): [***]. Takeda shall pay all amounts due to Denali under this
Section 8.7, including with respect to Net Sales by Takeda, its Affiliates and
their respective Sublicensees, for such Calendar Quarter at the time of the
submission of such quarterly report.

8.8    Mode of Payment. All payments to either Party under this Agreement shall
be made from a U.S. or Japanese entity (through a banking institution located in
the United States or Japan) by deposit of Dollars in the requisite amount to
such bank account as the receiving Party may from time to time designate by
notice to the paying Party. For the purpose of calculating any sums due under,
or otherwise reimbursable pursuant to, this Agreement (including the calculation
of Net Sales expressed in currencies other than Dollars), a Party shall convert
any amount expressed in a foreign currency into Dollar equivalents using an
exchange rate equal to the daily average of the rates of exchange for the
currency of the country from which the amounts are payable as reported by
Bloomberg or an equivalent resource as agreed by the Parties, during the
Calendar Quarter for which a payment is due.

8.9    Withholding Taxes.

8.9.1    The amounts payable pursuant to this Agreement (“Payments”) shall not
be reduced on account of any Taxes unless required by Applicable Law. A payor
shall deduct and withhold from the Payments any Taxes that it is required by
Applicable Law to deduct or withhold. Notwithstanding the foregoing, the Parties
shall use commercially reasonable efforts to take all such acts and to sign all
such documents as will enable them to take advantage of any applicable double
taxation agreement or treaty, and if a recipient is entitled under any
applicable tax treaty to a reduction of rate of, or the elimination of, or
recovery of, applicable withholding tax, it may deliver to the payor or the
appropriate governmental authority the prescribed forms necessary to reduce the
applicable rate of withholding or to relieve the payor of its obligation to
withhold tax. In such case, the payor shall apply the reduced rate of
withholding, or not withhold, as the case may be, provided that the payor is in
receipt of evidence (e.g., the recipient’s delivery of all applicable
documentation), in a form reasonably satisfactory to the payor, at least [***]
week prior to the time that the Payments are due. If, in accordance with the
foregoing, the payor withholds any amount, it shall pay to the recipient the
balance when due, make timely payment to the proper taxing authority of the
withheld amount, and send the recipient proof of such payment within [***] days
following that payment.

8.9.2    If a Party that owes a payment under this Agreement assigns its rights
and obligations to any person as permitted in accordance with Section 16.3 and
if, solely as a result of such assignment, the withholding or deduction of taxes
required by Applicable Law with respect to payments owed by such assignee under
this Agreement is increased, then any amount payable under this Agreement shall
be increased to take into account such withheld or deducted taxes as may be
necessary so that, after making all required tax withholdings and deductions
(including tax withholdings and deductions on amounts payable under this
Section 8.9), the payee receives an amount equal to the sum it would have
received absent such assignment.

 

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8.10    Indirect Taxes. All payments are exclusive of value added taxes, sales
taxes, consumption taxes and other similar taxes (the “Indirect Taxes”). If any
Indirect Taxes are chargeable in respect of any payments, the paying Party shall
pay such Indirect Taxes at the applicable rate in respect of such payments
following receipt, where applicable, of an Indirect Taxes invoice in the
appropriate form issued by the receiving Party in respect of those payments. The
Parties shall issue invoices for all amounts payable under this Agreement
consistent with Indirect Tax requirements and irrespective of whether the sums
may be netted for settlement purposes. If the Indirect Taxes originally paid or
otherwise borne by the paying Party are in whole or in part subsequently
determined not to have been chargeable, all reasonably necessary steps requested
by the paying Party will be taken by the receiving Party to receive a refund of
these undue Indirect Taxes from the applicable governmental authority or other
fiscal authority and any amount of undue Indirect Taxes repaid by such authority
to the receiving Party (net of any amounts incurred with respect to the receipt
of such amounts) will be transferred to the paying Party within [***] days of
receipt.

8.11    Interest on Late Payments. If any payment or portion thereof due to
either Party under this Agreement is not paid when due, then such paying Party
shall pay interest thereon at a rate equal to [***], plus [***] or, if lower,
the maximum rate permitted by Applicable Law, calculated on the number of days
such payment is delinquent, compounded annually and computed on the basis of a
three hundred sixty-five (365) day year.

8.12    Financial Records. Each Party shall keep complete and accurate books and
records pertaining to Development Costs, Allowable Expenses and Net Revenues
with respect to the Optioned Products, and Development of the Optioned Biologics
or Optioned Products, including books and records of actual expenditures with
respect to the budgets set forth in each Development Plan and each
Commercialization Plan, in sufficient detail to calculate all amounts payable
hereunder and to verify compliance with its obligations under this Agreement.
Such books and records shall be retained by such Party until the later of
(a) [***] years after the end of the period to which such books and records
pertain, and (b) the expiration of the applicable tax statute of limitations
(including any extensions thereof), or for such longer period as may be required
by Applicable Law.

8.13    Audit. At the request of the other Party, each Party shall permit an
independent public accounting firm of nationally recognized standing designated
by the other Party and reasonably acceptable to the audited Party, at reasonable
times during normal business hours and upon reasonable notice, to audit the
books and records maintained pursuant to Section 8.12 to ensure the accuracy of
all reports and payments made hereunder. Such examinations may not (a) be
conducted for any Calendar Quarter more than [***] years after the end of such
quarter, (b) be conducted more than once in any [***] period (unless a previous
audit during such [***] period revealed an underpayment with respect to such
period) or (c) be repeated for any Calendar Quarter; except in each case, for
cause. The accounting firm shall disclose to the auditing Party whether the
reports are correct or not, and the details concerning any discrepancies
sufficient for the auditing Party to understand any such discrepancies. Absent
manifest error by such independent accounting firm, the determination of such
independent accounting firm shall be

 

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binding on the Parties. Except as provided below, the cost of this audit shall
be borne by the auditing Party, unless the audit reveals a variance of more than
the greater of [***] or [***] from the reported amounts for the inspected
period, in which case the audited Party shall bear the cost of the audit. If
such audit concludes that (i) additional amounts were owed by the audited Party,
the audited Party shall pay the additional amounts, with interest from the date
originally due as provided in Section 8.11, or (ii) excess payments were made by
the audited Party, the auditing Party shall, at its election, reimburse such
excess payments or elect that such excess payments shall be offset against
future payments due to the auditing Party under this Agreement, in either case
((i) or (ii)), within [***] days after the date on which such audit is completed
by the auditing Party.

8.14    Confidentiality. The receiving Party shall treat all information subject
to review under this Article 8 in accordance with the confidentiality provisions
of Article 11 and the Parties shall enter into a reasonably acceptable
confidentiality agreement with the independent accountant obligating such
accountant to retain all such financial information in confidence pursuant to
such confidentiality agreement.

8.15    No Other Compensation. Each Party hereby agrees that the terms of this
Agreement fully define all consideration, compensation and benefits, monetary or
otherwise, to be paid, granted or delivered by one (1) Party to the other Party
in connection with the transactions contemplated herein. Neither Party
previously has paid or entered into any other commitment to pay, whether orally
or in writing, any of the other Party’s employees, directly or indirectly, any
consideration, compensation or benefits, monetary or otherwise, in connection
with the transaction contemplated herein.

ARTICLE 9

INTELLECTUAL PROPERTY

9.1    Ownership of Intellectual Property.

9.1.1    Ownership of Patents and Know-How Generated under this Agreement. Each
Party shall solely own all rights, title and interest in and to all Information
and inventions that are conceived, discovered, developed or otherwise made by or
on behalf of such Party or its Affiliates and Sublicensees, in conducting
activities with respect to a Research Biologic, Optioned Biologic, Optioned
Product or a Designated Target under this Agreement, together with all
intellectual property rights therein, provided that Denali shall own [***] (the
“Covered ATV Platform Technology”) and any claim of a Patent Covering such
Information and invention shall be deemed an [***]. Takeda hereby assigns, and
agrees to assign, to Denali all right, title and interest in and to all Covered
ATV Platform Technology and the same shall be deemed to be Denali’s Confidential
Information for all purposes under this Agreement, notwithstanding
Sections 1.38, 11.1.2 and 11.1.5. Other than any Covered ATV Platform
Technology, the Parties shall each own an equal, undivided interest in any and
all rights, title and interest in and to all Information and inventions that are
conceived, discovered, developed or otherwise made by or on behalf of both
Parties or their respective Affiliates and sublicensees jointly, in conducting
activities with respect to a Research Biologic, Optioned Biologic, Optioned
Product or a Designated Target under this Agreement, together with all
intellectual property rights therein (such Information, the “Joint Program
Know-How” and the Patents

 

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claiming Joint Program Know-How, the “Joint Program Patents”). [***].
Notwithstanding the foregoing, the Parties acknowledge that, [***] under this
Agreement (the “Required Assigned Technology”). Without limiting the foregoing,
Takeda hereby assigns, and agrees to assign, to Denali such Required Assigned
Technology and the same shall be deemed to be Denali’s Confidential Information
for all purposes under this Agreement, notwithstanding Sections 1.38, 11.1.2 and
11.1.5.

9.1.2    Assignment and Disclosure Obligation. Each Party shall cause all
employees who perform activities for such Party under this Agreement to be under
an obligation to assign their rights in any Information and inventions resulting
therefrom to such Party. For clarity, the requirements of Sections 7.4 and 16.15
shall apply to each Party’s use of Third Party Providers, Affiliates and/or
Sublicensees, to perform activities for such Party under this Agreement.

9.1.3    Ownership of Corporate Names. Each Party shall retain all right, title
and interest in and to its Corporate Names.

9.2    Maintenance and Prosecution of Patents. As between the Parties, with
respect to Denali Patents, Takeda Patents, ATV Platform Patents, Product Patents
and Joint Program Patents:

9.2.1    Assignment of Controlling Party.

(a)    Product Patents. Denali shall be the Controlling Party with respect to
any Product Patents worldwide. Unless agreed to by the Parties, Denali shall
file the Product Patents in at least the countries and jurisdictions set forth
in Schedule 9.2.1(c) and use Commercially Reasonable Efforts to [***].
Notwithstanding Section 9.2.3, [***].

(b)    ATV Platform Patents and Other Denali Patents. Denali shall be
Controlling Party with respect to the (i) ATV Platform Patents and (ii) other
Denali Patents that are not Product Patents or Joint Program Patents, in each
case, worldwide and at Denali’s sole cost and expense. Notwithstanding
Sections 9.2.2 and 9.2.3, Denali’s obligations under Sections 9.2.2 and 9.2.3
with respect to ATV Platform Patents and such Denali Patents shall be [***]. For
avoidance of doubt, [***].

(c)    Takeda Patents; and Joint Program Patents that are not ATV Platform
Patents. Takeda shall be the Controlling Party with respect to (i) [***]
(collectively, such Patents described in (i) and (ii), “Takeda Prosecuted
Patents”), worldwide and at Takeda’s sole cost and expense. [***].

9.2.2    Controlling Party. Responsibility for the Prosecution and Maintenance
of the Denali Patents, Takeda Patents and Joint Program Patents shall be
allocated as set out above in Section 9.2.1. The Controlling Party with respect
to a Patent shall have the right, but not the obligation, through the use of
outside counsel reasonably acceptable to the Non-Controlling Party, to Prosecute
and Maintain such Patent worldwide, subject to the terms of this Section 9.2.
The Controlling Party shall keep the Non-Controlling Party fully informed of all
steps with regard to the Prosecution and Maintenance of such Patent, including
by providing the Non-

 

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Controlling Party with a copy of material communications to and from any patent
authority regarding such Patents, and by providing the Non-Controlling Party
drafts of any material filings or responses to be made to such patent
authorities sufficiently in advance of submitting such filings or responses so
as to allow for a reasonable opportunity for the Non-Controlling Party to review
and comment thereon. The Controlling Party shall consider in good faith the
requests and suggestions of the Non-Controlling Party with respect to such
drafts and with respect to strategies for Prosecution and Maintenance of such
Patent, and implement, as appropriate, such requests and suggestions of the
Non-Controlling Party. To the extent the Controlling Party does not agree with
any such comments from the Non-Controlling Party, such disagreement shall be
referred promptly to the Patent Working Group for resolution. If the Patent
Working Group cannot reach agreement on such matter [***], then [***].
Notwithstanding the foregoing, the Controlling Party shall promptly inform the
Non-Controlling Party of any adversarial patent office proceeding, including a
request for, or filing or declaration of, any interference, or Post-Grant
Proceeding relating to such a Patent. Subject to Section 9.3.2, the Parties
shall thereafter consult and cooperate to determine a course of action with
respect to any such proceeding and the Controlling Party shall consider in good
faith all comments, requests and suggestions provided by the Non-Controlling
Party.

9.2.3    Step In Rights. In the event that the Controlling Party decides not to
Prosecute and Maintain a [***], or any claim thereof in a country or other
jurisdiction, the Controlling Party shall provide reasonable prior written
notice to the Non-Controlling Party of such intention (which notice shall, in
any event, be given no later than [***] days prior to the next deadline for any
action that may be taken with respect to such Patent in such country or other
jurisdiction), the Non-Controlling Party shall thereupon have the option, in its
sole discretion, to assume the control and direction of the Prosecution and
Maintenance of such Patent at its expense in such country or other jurisdiction.
Upon the Non-Controlling Party’s written acceptance of such option, the
Controlling Party shall reasonably cooperate with the Non-Controlling Party in
such country or other jurisdiction as provided under Section 9.2.2.

9.2.4    Patent Working Group. The Parties shall establish a patent working
group (“Patent Working Group”) to the extent useful to facilitate cooperation
with respect to Prosecution and Maintenance activities contemplated by this
Section 9.2 and coordination between the Parties with respect to such matters.

9.2.5    Patent Term Extension and Supplementary Protection Certificate. The
Controlling Party shall be responsible for making decisions regarding patent
term extensions, including supplementary protection certificates and any other
extensions that are now or become available in the future, wherever applicable.
The Controlling Party shall have the responsibility of applying for any
extension or supplementary protection certificate with respect to such Patents.
The Controlling Party shall keep the Non-Controlling Party fully informed of its
efforts to obtain such extension or supplementary protection certificate. The
Non-Controlling Party shall provide prompt and reasonable assistance, as
requested by the Controlling Party, including by taking such action as patent
holder as is required under any Applicable Law to obtain such patent extension
or supplementary protection certificate. The Controlling Party shall pay all
expenses in regard to obtaining the extension or supplementary protection
certificate (except to the extent any such expense constitutes an Allowable
Expense).

 

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9.2.6    Patent Listings. The Commercial Lead for a particular Optioned Product
in a particular country of the Territory shall have the sole right to make all
patent listings of Denali Patents and Takeda Patents (including Joint Program
Patents, in each case) with Regulatory Authorities for such Optioned Product in
such country, provided that [***]. Subject to the foregoing proviso, the other
Party shall cooperate with the Commercial Lead’s reasonable requests in
connection therewith, including meeting any submission deadlines, to the extent
required or permitted by Applicable Law.

9.2.7    Prosecution and Maintenance Costs. Except as otherwise expressly
provided in this Section 9.2, Out-of-Pocket Costs incurred by a Party in
connection with the Prosecution and Maintenance activities undertaken by a Party
pursuant to this Section 9.2 shall be included in the Allowable Expense;
provided that if Denali has exercised the Denali Worldwide Royalty Option with
respect to any Collaboration Program, such Out-of-Pocket Costs related to such
Collaboration Program shall be shared equally between the Parties.

9.3    Enforcement of Patents.

9.3.1    Notice. Each Party shall promptly notify the other Party in writing of
any alleged or threatened infringement of the ATV Platform Patents, Product
Patents, or other Joint Program Patents, Denali Patents or Takeda Patents by a
Third Party of which such Party becomes aware based on the development,
commercialization, or an application to market a product containing a Research
Biologic, Optioned Biologic or any Optioned Product (each, a “Product
Infringement”).

9.3.2    Prosecuted Infringements.

(a)    First Right. Prior to the exercise of the Option with respect to a
Collaboration Program, Denali shall have the sole right to prosecute any Product
Infringement or Post-Grant Proceeding arising in connection with the prosecution
of any Product Infringement. Following exercise of the Option with respect to a
Collaboration Program, the Enforcing Party shall have the first right, but not
the obligation, to prosecute any Product Infringement or Post-Grant Proceeding
arising in connection with the prosecution of such Product Infringement,
including the defense of the validity and enforceability of any such Patent that
is the subject of such Product Infringement (the “Prosecuted Infringements”).
For any particular Collaboration Program in any particular territory subject to
the first sentence of this Section 9.3.2(b), the Party that is the Commercial
Lead for such Collaboration Program in such territory shall have the first right
to be the Enforcing Party with respect to prosecution of all Product
Infringement with respect to (i) [***] and (ii) [***], in each case, pertaining
to an Optioned Biologic or Option Product within such Collaboration Program in
such territory. Subject to Section 9.3.2(c), Takeda shall have the sole right to
be the Enforcing Party with respect to the prosecution of all Product
Infringement with respect to [***]. Denali shall have the sole right to be the
Enforcing Party with respect to the prosecution of all Product Infringement with
respect to [***], unless such [***] is (x) a [***] or (y) [***].

(b)    Backup Enforcement Rights for Product Patents. Subject to the last two
sentences of Section 9.3.2(a) above, if the Party having the first enforcement
right (but not the sole right) under Section 9.3.2(a) does not take commercially
reasonable steps to

 

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prosecute a Product Infringement (i) within [***] days following [***], or
(ii) provided such date occurs after the first such notice of the Product
Infringement is provided, [***] Business Days before [***], whichever comes
first, then the other Party may be the Enforcing Party and prosecute such
Prosecuted Infringement at its own expense.

(c)    Coordination of Enforcement Rights and Non-Enforcing Party Participation
Rights. In the event the Enforcing Party prosecutes any Prosecuted Infringement,
the Non-Enforcing Party, where necessary, shall furnish a power of attorney
solely for such purpose or shall join in, or be named as a necessary party to,
such action. The Non-Enforcing Party shall have the right to join as a party to
such claim, suit, or proceeding and participate with its own counsel at its own
expense; provided that the Enforcing Party shall retain control of the
prosecution of such claim, suit, or proceeding. During the conduct of any
Prosecuted Infringement by an Enforcing Party with respect to the alleged or
threatened infringement of Product Patents or Joint Program Patents by an
infringer, the Non-Enforcing Party agrees not to conduct a Prosecuted
Infringement with respect to the same infringer other than as a necessary party
to or joined in such Prosecuted Infringement prosecuted by the Enforcing Party
or with the prior written consent of the Enforcing Party.

9.3.3    Conduct of Patent Litigation Under the Biologics Price Competition and
Innovation Act. If either Party receives a copy of an application submitted to
the FDA under Subsection (k) of Section 351 of the PHSA or equivalent in any
other jurisdiction (a “Biosimilar Application”) naming an Optioned Product as a
reference product or otherwise becomes aware that such a Biosimilar Application
has been filed (such as in an instance described in Section 351(l)(9)(C) of the
PHSA), either Party shall, within [***] Business Days, notify the other Party so
that the other Party may seek permission to view the application and related
confidential information from the filer of the Biosimilar Application under
Section 351(l)(1)(B)(iii) of the PHSA or equivalent in any other jurisdiction.
If either Party receives any equivalent or similar certification or notice in
any other jurisdiction, either Party shall, within [***] Business Days, notify
and provide the other Party with copies of such communication. Regardless of the
Party that is the “reference product sponsor” for purposes of such Biosimilar
Application, the Commercial Lead in a particular country in the Territory with
respect to the applicable Collaboration Program shall be the Enforcing Party and
the Enforcing Party shall have the sole right, but not the obligation, to
initiate litigation against the filer of the Biosimilar Application, including
whether or not to utilize, in whole or in part, the procedures provided in
Section 351 of the PHSA or equivalent in any other jurisdiction, provided that
Denali shall be the Enforcing Party with respect to any [***] and [***] or [***]
and Takeda shall be the Enforcing Party with respect to any [***]. If an
Enforcing Party institutes any such litigation, then the other Party shall join
as a party to such claim, suit or proceeding in any country requiring it as a
party.

9.3.4    Cooperation; Settlement. The Parties agree to cooperate fully in any
infringement action pursuant to this Section 9.3 and consult with the other as
to the strategy for the defense of the Denali Patents, Takeda Patents, and Joint
Program Patents. During any such claim, suit, or proceeding, the Enforcing Party
shall: (a) provide the Non-Enforcing Party with drafts of all pleadings and
other material documents filed with the court or tribunal prior to their
submission, in sufficient time to allow the Non-Enforcing Party to review,
consider and substantively comment thereon; (b) reasonably consider taking
action to incorporate the Non-Enforcing Party’s comments on all such all
pleadings and other material documents; and (c) not settle any such claim, suit,
or proceeding in a manner that: (i) [***]; or (ii) [***].

 

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9.3.5    Expenses. Except as otherwise expressly provided in this Section 9.3,
Out-of-Pocket Costs incurred by a Party in connection with a Prosecuted
Infringement or otherwise in performing activities pursuant to this Section 9.3
shall be (i) included as Allowable Expenses; or (ii) otherwise born by the Party
who is the Enforcing Party if and after Denali exercises the Denali Worldwide
Royalty Option.

9.3.6    Recovery. Except as otherwise provided in this Section 9.3.6, any
recovery obtained as a result of litigation described in Section 9.3.1 or 9.3.3
(whether by way of settlement or otherwise) shall be, after first reimbursing
each Party’s Out-of-Pocket Costs, included in Net Sales. If Denali exercises the
Denali Worldwide Royalty Option, such recoveries received with respect to the
applicable Collaboration Program and any period after Denali exercised such
Denali Worldwide Royalty Option shall be first applied to reimburse each Party’s
Out-Of-Pocket Costs and the remainder shall be shared at a rate of [***] to
Takeda and [***] to Denali.

9.4    Infringement Claims by Third Parties. If the manufacture, sale, or use of
an Optioned Biologic or Optioned Product in the Territory pursuant to this
Agreement results in, or may result in, any claim, suit, or proceeding by a
Third Party alleging patent infringement by a Party (or its Affiliates or
Sublicensees), such Party shall promptly notify the other Party thereof in
writing. Unless the Parties otherwise agree in writing, each Party shall have
the right to defend itself against any such claim, suit, or proceeding that
names such Party as a defendant; provided that the other Party may participate
in any such claim, suit, or proceeding with counsel of its choice. Without
limitation of the foregoing, if a Party finds it necessary or desirable to join
the other Party as a party to any such action, such other Party shall execute
all papers and perform such acts as shall be reasonably required. Each Party
shall keep the other Party reasonably informed of all material developments in
connection with any such claim, suit, or proceeding. Each Party agrees to
provide the other Party with copies of all pleadings filed in such action and to
allow the other Party reasonable opportunity to participate in the defense of
the claims. The Party who is subject to an infringement action agrees not to
settle such action, or make any material admissions or assert any position in
such action, in a manner that [***]. Except as otherwise agreed by the Parties,
Out-of-Pocket Costs incurred by a Party in performing activities pursuant to
this Section 9.4 shall be included in Allowable Expenses, or if Denali has
exercised the Denali Worldwide Royalty Option with respect to the relevant
Collaboration Program, borne by Takeda subject to Takeda’s right to offset [***]
of such costs against its royalty obligations to Denali.

9.5    Invalidity or Unenforceability Defenses or Actions.

9.5.1    Notice. Each Party shall promptly notify the other Party in writing of
any alleged or threatened assertion of invalidity or unenforceability of any of
the Denali Patents, Takeda Patents or Joint Program Patents by a Third Party, in
each case of which such Party becomes aware.

 

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omitted and is the subject of a confidential treatment request.

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9.5.2    Product Patents and Joint Program Patents Not in Connection with a
Prosecuted Infringement. The Controlling Party with respect to the Prosecution
and Maintenance of a Product Patent or Joint Program Patent (other than a Joint
Program Patent that is a Takeda Prosecuted Patent), as determined in accordance
with Section 9.2.1, shall have the right, but not the obligation, to defend and
control the defense of the validity and enforceability of such Product Patent or
Joint Program Patent that does not arise in connection with any Prosecuted
Infringement. The Non-Controlling Party may participate in any such claim, suit,
or proceeding with counsel of its choice at its own expense; provided that the
Controlling Party shall retain control of the defense in such claim, suit, or
proceeding. If the Controlling Party elects not to defend or control the defense
of such Patents, or otherwise fails to initiate and maintain the defense of any
such claim, suit or proceeding, then the Non-Controlling Party may conduct and
control the defense of any such claim, suit or proceeding at its own expense.

9.5.3    [***] Patents and [***] Patents. As between the Parties, [***] shall
have the sole right, but not the obligation, to defend and control the defense
of the validity and enforceability of the (i) [***] Patents and (ii) other [***]
Patents that are not [***] Patents or [***] Patents, in each case, at its own
expense.

9.5.4    [***] Patents. [***] shall have the sole right, but not the obligation,
to defend and control the defense of the validity and enforceability of the
[***] Patents at its own expense.

9.5.5    Cooperation. Each Party shall assist and cooperate with the other Party
as such other Party may reasonably request from time to time in connection with
its activities set forth in this Section 9.5, including by being joined as a
party plaintiff in such action or proceeding, providing access to relevant
documents and other evidence, and making its employees available at reasonable
business hours, and consult with the other as to the strategy for the defense of
the Denali Patents, Takeda Patents, and Joint Program Patents. In connection
with any such defense or claim or counterclaim, the controlling Party shall not
settle any such claim, suit, or proceeding in a manner that: (i) [***]; or (ii)
[***]. Except as otherwise expressly provided in this Section 9.5, Out-of-Pocket
Costs incurred by a Party in performing activities pursuant to this Section 9.5
shall be (a) included in as Allowable Expenses, or (b) otherwise borne by the
Party who is the controlling Party if and after Denali exercises the Denali
Worldwide Royalty Option, to the extent not otherwise reimbursed.

9.5.6    Notwithstanding anything to the contrary in this Section 9.5, in the
event any invalidity and/or unenforceability action is a counterclaim to or part
of a declaratory judgment action in anticipation of an enforcement action, then
the terms and conditions of Section 9.3 shall apply, and not Sections 9.5.2
through 9.5.4.

9.6    Product Trademarks.

9.6.1    Ownership and Prosecution of Product Trademarks. Takeda shall own all
right, title, and interest to the Product Trademarks in the Territory, and shall
be responsible for the registration, prosecution, and maintenance thereof.
Denali shall provide all assistance and documents reasonably requested by Takeda
in support of its prosecution, registration, and maintenance of the Product
Trademarks.

 

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9.6.2    Enforcement of Product Trademarks. Takeda shall have the sole right and
responsibility for taking such action as Takeda, after consultation with Denali,
deems necessary against a Third Party based on any alleged, threatened, or
actual infringement, dilution, misappropriation, or other violation of, or
unfair trade practices or any other like offense relating to, the Product
Trademarks by a Third Party in the Territory.

9.6.3    Third Party Claims. Takeda shall have the sole right and responsibility
for defending against any alleged, threatened, or actual claim by a Third Party
that the use or registration of the Product Trademarks in the Territory
infringes, dilutes, misappropriates, or otherwise violates any Trademark or
other right of that Third Party or constitutes unfair trade practices or any
other like offense, or any other claims as may be brought by a Third Party
against a Party in connection with the use of the Product Trademarks with
respect to an Optioned Product in the Territory.

9.6.4    Notice and Cooperation. Each Party shall provide to the other Party
prompt written notice of any actual or threatened infringement of the Product
Trademarks in the Territory and of any actual or threatened claim that the use
of the Product Trademarks in the Territory violates the rights of any Third
Party. Each Party agrees to cooperate fully with the other Party with respect to
any enforcement action or defense commenced pursuant to this Section 9.6.

9.6.5    Out of Pocket Costs. All Out-of-Pocket Costs incurred by a Party in
performing activities pursuant to this Section 9.6 shall be an Allowable
Expense; provided that from and after the Co-Funding End Date following Denali’s
exercise of the Denali Worldwide Royalty Option with respect to a Collaboration
Program, each Party shall be solely responsible for all Out-of-Pocket costs it
incurs pursuant to this Section 9.6.

9.7    Inventor’s Remuneration. Each Party shall be solely responsible for any
remuneration that may be due such Party’s inventors under any applicable
inventor remuneration laws.

ARTICLE 10

PHARMACOVIGILANCE AND SAFETY

10.1    Pharmacovigilance. Within [***] days after the Option Exercise Date for
the first Collaboration Program, the Parties shall enter into an agreement to
initiate a process for the exchange of safety data (including post-marketing
spontaneous reports received by each Party and its Affiliates) in a mutually
agreed format in order to monitor the safety of the Optioned Biologics or
Optioned Products and to meet reporting requirements with any applicable
Regulatory Authority (the “Pharmacovigilance Agreement”). Notwithstanding the
foregoing, after the Option Exercise Date, in no case shall exchange of adverse
events (“AEs”) occur later than [***] days for fatal or life threatening AEs,
[***] days for other related serious AEs, and [***] days for non-serious AEs.

 

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omitted and is the subject of a confidential treatment request.

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10.2    Global Safety Database.

10.2.1    Denali shall initially set up, hold, and maintain the global safety
database for Optioned Biologics and Optioned Products with respect to safety
data obtained in connection with each Research Program and the Early Stage
Development Activities for each Collaboration Program.

10.2.2    In connection with the commencement of Late Stage Development
Activities by Takeda for a Collaboration Program and in accordance with the
Transition Plan, Denali shall transfer to Takeda, in the electronic format
agreed upon by the Parties at the JPT, the complete contents of the safety
database maintained by Denali pursuant to Section 10.2.1 for the Optioned
Biologics and Optioned Products corresponding to such Collaboration Program.
Thereafter Takeda shall maintain the global safety database for such Optioned
Biologics and Optioned Products. Each Party’s and its Affiliates’ costs incurred
in connection with receiving, recording, reviewing, communicating, reporting,
and responding to adverse events with respect to such Optioned Biologics and
Optioned Product and in establishing and maintaining a global safety database
for such Optioned Biologics and Optioned Products shall be included in the
calculation of Allowable Expenses; provided that from and after the Co-Funding
End Date following Denali’s exercise of the Denali Worldwide Royalty Option with
respect to a Collaboration Program, each Party shall be solely responsible for
all such costs it incurs.

ARTICLE 11

CONFIDENTIALITY AND NON-DISCLOSURE

11.1    Confidentiality Obligations. At all times during the Term and for a
period of [***] following termination or expiration of this Agreement in its
entirety, each Party shall, and shall cause its officers, directors, employees
and agents to, keep confidential and not publish or otherwise disclose to a
Third Party and not use, directly or indirectly, for any purpose, any
Confidential Information furnished or otherwise made known to it, directly or
indirectly, by the other Party, except to the extent such disclosure or use is
expressly permitted by the terms of this Agreement or is reasonably necessary or
useful for the performance of such Party’s obligations, or the exercise of
rights expressly granted to such Party under, this Agreement. Notwithstanding
the foregoing, to the extent the receiving Party can demonstrate by
documentation or other competent proof, the confidentiality and non-use
obligations under this Section 11.1 with respect to any Confidential Information
shall not include any information that:

11.1.1    has been published by a Third Party or otherwise is or becomes part of
the public domain by public use, publication, general knowledge or the like
through no wrongful act, fault or negligence on the part of the receiving Party;

11.1.2    is in the receiving Party’s possession prior to disclosure by the
disclosing Party, to the extent the receiving Party has the right to use and
disclose such information;

11.1.3    is subsequently lawfully received by the receiving Party from a Third
Party, to the extent the receiving Party has the right to use and disclose such
information without breach of any agreement between such Third Party and the
disclosing Party;

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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11.1.4    is published or otherwise generally made available to Third Parties by
the disclosing Party without restriction on disclosure; or

11.1.5    is independently developed by or for the receiving Party without
reference to, or use or disclosure of, the disclosing Party’s Confidential
Information.

Specific aspects or details of Confidential Information shall not be deemed to
be within the public domain or in the possession of the receiving Party merely
because the Confidential Information is embraced by more general information in
the public domain or in the possession of the receiving Party. Further, any
combination of Confidential Information shall not be considered in the public
domain or in the possession of the receiving Party merely because individual
elements of such Confidential Information are in the public domain or in the
possession of the receiving Party unless the combination is in the public domain
or in the possession of the receiving Party.

11.2    Permitted Disclosures. Each Party may disclose Confidential Information
to the extent that such disclosure is:

11.2.1    in the reasonable opinion of the receiving Party’s legal counsel,
required to be disclosed pursuant to law, regulation or a valid order of a court
of competent jurisdiction or other supra-national, federal, national, regional,
state, provincial and local governmental body of competent jurisdiction,
(including by reason of filing with securities regulators, but subject to
Section 11.4); provided, that the receiving Party shall, unless otherwise
prohibited, first have given advanced written notice (and to the extent
possible, at least [***] Business Days’ notice) to the disclosing Party and
(other than with regard to disclosures to securities regulators or to comply
with applicable securities law, which disclosures are covered in Section 11.4)
give the disclosing Party a reasonable opportunity to take whatever action it
deems necessary to protect its Confidential Information. In the event that no
such protective order or other remedy is obtained, or the disclosing Party
waives compliance with the terms of this Agreement, the receiving Party shall
furnish only that portion of Confidential Information which the receiving Party
is advised by counsel is legally required to be disclosed;

11.2.2    made by or on behalf of the receiving Party to the Regulatory
Authorities in connection with any filing, application or request for Regulatory
Approval in accordance with the terms of this Agreement; provided, that
reasonable measures shall be taken to assure confidential treatment of such
Confidential Information to the extent practicable and consistent with
Applicable Law;

11.2.3    made by or on behalf of the receiving Party to a patent authority as
may be reasonably necessary or useful for purposes of preparing, obtaining,
defending or enforcing a Patent in accordance with the terms of this Agreement;
provided, that reasonable measures shall be taken to assure confidential
treatment of such Confidential Information, to the extent such protection is
available;

11.2.4    made to its or its Affiliates’ financial and legal advisors who have a
need to know such disclosing Party’s Confidential Information and are either
under professional codes of conduct giving rise to expectations of
confidentiality and non-use or under written agreements of confidentiality and
non-use, in each case, substantially similar to the obligations of
confidentiality and non-use of the receiving Party pursuant to this Article 11;

 

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omitted and is the subject of a confidential treatment request.

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11.2.5    made by the receiving Party or its Affiliates to potential or actual
investors or acquirers as may be necessary in connection with their evaluation
of such potential or actual investment or acquisition; provided, that such
Persons shall be subject to obligations of confidentiality and non-use with
respect to such Confidential Information substantially similar to the
obligations of confidentiality and non-use of the receiving Party pursuant to
this Article 11;

11.2.6    made by a Party or its Affiliates or Sublicensees to its or their
advisors, consultants, clinicians, vendors, service providers, contractors,
existing or prospective collaboration partners, existing or prospective
licensees, existing or prospective sublicensees, or other Third Parties, in each
case, to the extent necessary or useful in connection with the Development of
Research Biologics, Optioned Biologics or Optioned Products, the Exploitation of
the Optioned Biologics, the Optioned Products, or otherwise in connection with
the performance of its obligations or exercise of its rights as contemplated by
this Agreement; provided, that such Persons shall be subject to obligations of
confidentiality and non-use with respect to such Confidential Information of the
other Party substantially similar to the obligations of confidentiality and
non-use in this Article 11; or

11.2.7    a disclosure of the terms of this Agreement, which is made only on a
need-to-know basis, to Persons who are subject to obligations of confidentiality
and non-use substantially similar to the obligations of confidentiality and
non-use in this Article 11.

For any disclosures made by the receiving Party pursuant to Sections
11.2.4–11.2.7 shall remain responsible for any failure of the relevant Person to
treat such Confidential Information as required under this Article 11. For
clarity, in any case where the foregoing disclosure must be subject to
obligations of confidentiality and non-use substantially similar to those under
this Article 11, it is understood that [***].

11.3    Use of Name. Except as expressly provided in this Agreement, neither
Party shall mention or otherwise use the name, logo, or Trademark of the other
Party or any of its Affiliates (or any abbreviation or adaptation thereof) in
any publication, press release, marketing and promotional material, website, or
other form of publicity, without the prior written approval of such other Party.
Notwithstanding the foregoing, the restrictions imposed by this Section 11.3
shall not prohibit either Party from making any disclosure identifying the other
Party that, in the opinion of the disclosing Party’s counsel, is required by
Applicable Law (including stock exchange rules); provided, that such Party shall
submit the proposed disclosure identifying the other Party in writing to the
other Party as far in advance as reasonably practicable (and in no event less
than [***] Business Days prior to the anticipated date of disclosure unless such
proposed disclosure is required under Applicable Law, or the rules of an
applicable securities exchange, in each case to be made in [***] Business Days
or less) so as to provide a reasonable opportunity to comment thereon.

11.4    Public Announcements. The Parties have agreed upon the content of a
joint press release to announce the collaboration which shall be issued
substantially in the form attached hereto as Schedule 11.4 upon execution of
this Agreement. Neither Party shall issue any

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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other public announcement, press release, or other public disclosure regarding
this Agreement or the Parties’ activities hereunder without the other Party’s
prior written consent (which shall not be unreasonably withheld, delayed, or
conditioned), except for any such disclosure regarding [***], or any such
disclosure that is, in the opinion of the disclosing Party’s counsel, required
by Applicable Law or the rules of a stock exchange on which the securities of
the disclosing Party are listed, or is otherwise expressly permitted in
accordance with this Article 11. In the event a Party desires to make a public
announcement regarding the exercise of any Option or payment of any milestone or
that is, in the opinion of its counsel, required by Applicable Law or the rules
of a stock exchange on which its securities are listed to make such a public
disclosure, such Party shall submit the proposed disclosure in writing to the
other Party as far in advance as reasonably practicable (and in no event less
than [***] Business Days prior to the anticipated date of disclosure, unless
such proposed disclosure is required under Applicable Law, or the rules of an
applicable securities exchange, in each case to be made in [***] Business Days
or less) so as to provide a reasonable opportunity to comment thereon.
Specifically and notwithstanding the foregoing, the Parties acknowledge that
[***]. As used in this Section 11.4, [***]. After release of any such press
release, public announcement, public disclosure or presentation by a Party in
accordance with this Section 11.4, such Party may further disclose the
information contained such press release, public announcement, public disclosure
or presentation without the need for further notice to or review by the other
Party under this Section 11.4 or otherwise.

11.5    Publications.

11.5.1    Neither Party shall publish, publicly present, or otherwise publicly
disclose any materials that [***] or pertain to [***], except in accordance with
Section 11.5.2, without the prior written consent of the other Party, not to be
unreasonably withheld, delayed, or conditioned. Each Party shall submit any such
proposed publication or presentation to the other Party in accordance with
Section 11.5.2.

11.5.2    Each Party shall have the right to review any paper proposed for
publication by the other Party, including any oral presentation or abstract,
that contains [***] or pertains to [***] or that includes [***]. Before any such
paper is submitted for publication or an oral presentation is made, the
publishing or presenting Party shall deliver a then-current copy of the paper or
materials for oral presentation to the other Party at least [***] days prior to
submitting the paper to a publisher or making such other presentation or
disclosure. The other Party shall review any such paper and give its comments to
the publishing Party within [***] days of the delivery of such paper to the
other Party. With respect to oral presentation materials, abstracts and the
like, the other Party shall make reasonable efforts to expedite review of such
materials and abstracts, and shall return such items as soon as practicable to
the publishing or presenting Party with appropriate comments, if any.
Notwithstanding the foregoing, the publishing or presenting Party shall comply
with the other Party’s request to delete references to such other Party’s
Confidential Information in any such paper and will withhold publication of any
such paper or any presentation of same for an additional [***] days in order to
permit the Parties to obtain Patent protection if either Party reasonably deems
it necessary. Any publication shall include recognition of the contributions of
the other Party according to standard practice for assigning scientific credit,
either through authorship or acknowledgement, as may be appropriate.
Notwithstanding the foregoing, prior to the Option Exercise Date for a
Collaboration Program, Denali shall have the sole right to [***], provided that
Takeda shall have [***]. Notwithstanding

 

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omitted and is the subject of a confidential treatment request.

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the foregoing it is understood that the requirements of this Section 11.5.2 are
subject to and limited by the provisions of Sections 11.2.1 and 11.4 (i.e., with
respect to disclosures required by Applicable Law), and [***]. Notwithstanding
the foregoing, following a Denali Worldwide Royalty Option exercise with respect
to a Collaboration Program, Takeda will have the [***] right to publish or
present [***] or results of [***], provided that Denali shall have the right to
review and comment on any such publication or public presentation as provided in
this Section 11.5.2. After release of any publication or presentation by a Party
in accordance with this Section 11.5.2, such Party may further disclose the
information contained in such publication or presentation without the need for
further notice to or review by the other Party under this Section 11.5.2 or
otherwise.

11.6    Prior Confidentiality. Any Information disclosed by a Party or its
Affiliate to the other Party or its Affiliate prior to the Execution Date under
that certain Confidentiality Agreement between the Parties or their respective
Affiliates dated [***] shall be deemed to have been disclosed under this
Agreement, and covered by the provisions of this Article 11.

11.7    Survival. All Confidential Information shall continue to be subject to
the terms of this Agreement for the period set forth in Section 11.1.

ARTICLE 12

REPRESENTATIONS, WARRANTIES AND COVENANTS

12.1    Mutual Representations and Warranties. Denali and Takeda each represents
and warrants to the other, as of the Execution Date, as follows:

12.1.1    Organization. It is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization, and has all
requisite power and authority, corporate or otherwise, to execute, deliver, and
perform its obligations under this Agreement.

12.1.2    Authorization. The execution and delivery of this Agreement and the
performance by it of its obligations hereunder have been duly authorized by all
necessary corporate action, and do not violate (a) such Party’s charter
documents, bylaws, or other organizational documents, (b) in any material
respect, any agreement, instrument, or contractual obligation to which such
Party is bound, (c) any requirement of any Applicable Law existing as of the
Execution Date and applicable to such Party, or (d) any order, writ, judgment,
injunction, decree, determination, or award of any court or governmental agency
in effect as of the Execution Date and applicable to such Party.

12.1.3    Binding Agreement. This Agreement is a legal, valid, and binding
obligation of such Party enforceable against it in accordance with its terms and
conditions, subject to the effects of bankruptcy, insolvency, or other laws of
general application affecting the enforcement of creditor rights, judicial
principles affecting the availability of specific performance, and general
principles of equity (whether enforceability is considered a proceeding at law
or equity).

 

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omitted and is the subject of a confidential treatment request.

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12.1.4    No Inconsistent Obligation. It is not under any obligation,
contractual or otherwise, to any Person that conflicts with or is inconsistent
in any material respect with the terms of this Agreement.

12.2    Additional Representations and Warranties of Denali. Denali further
represents and warrants to Takeda, as of the Execution Date (and [***], and
covenants, as follows:

12.2.1    All issued patents and patent applications owned by or exclusively
licensed to Denali or any of its Affiliates that meet the description of (i) or
(ii) of the Denali Patents definition are Controlled by Denali or such
Affiliate(s). Such patents and patent applications that Denali owns, or licensed
exclusively to Denali or any of its Affiliates, and to Denali’s knowledge that
are licensed non-exclusively to Denali or any of its Affiliates under any
Existing In-Licensed Agreements, in each case that exist as of the Execution
Date, are listed on Schedule 12.2.1 (the “Existing Patents”).

12.2.2    There are no claims, judgments, or settlements that have been brought
or obtained against Denali or any of its Affiliates relating to the Existing
Regulatory Documentation, the Existing Patents, or the Denali Know-How. No claim
or litigation has been brought or to Denali’s knowledge threatened in writing by
any Person alleging, that (a) the Existing Patents are invalid or unenforceable,
or (b) the Existing Regulatory Documentation, the Existing Patents, or the
Denali Know-How, or the disclosing, copying, making, assigning, or licensing of
the Existing Regulatory Documentation, the Existing Patents, or the Denali
Know-How, or the Development or Commercialization of the Research Biologics as
contemplated herein, does or will violate, infringe, misappropriate or otherwise
conflict or interfere with, any Patent or other intellectual property or
proprietary right of any Person.

12.2.3    Denali has not granted to any Third Party any rights under the Patents
and/or Information owned or in-licensed by Denali or any of its Affiliates for
use in connection with the Designated Targets, and is entitled to grant the
licenses to Takeda expressly provided herein.

12.2.4    (a) To Denali’s knowledge, Denali has the right to use all Information
and Patents necessary to conduct the activities under the Research Programs for
the Initial Designated Targets, and (b) the Development or Commercialization of
the Research Biologics Directed to the Initial Designated Targets as
contemplated herein will not conflict with any other license or agreement to
which Denali or any of its Affiliates is a party.

12.2.5    Neither Denali nor, to Denali’s knowledge, any counter party is in
material breach of any Product In-License Agreement or Platform In-License
Agreement. Denali has not threatened to terminate, nor alleged any material
breach under, any such Product In-License Agreement or Platform In-License
Agreement. Denali has not received any written notice from any counter party to
any Product In-License Agreement or Platform In-License Agreement threatening to
terminate an In License Agreement or Platform In-License Agreement or alleging
that Denali is in material breach of a Product In-License Agreement or Platform
In-License Agreement. To Denali’s knowledge, each Product In-License Agreement
and Platform In-License Agreement is in full force and effect. Schedules 1.118
and 1.123 list all Product In-License

 

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with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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Agreements and all Platform In-License Agreements in existence as of the
Execution Date, and Denali has provided or made available to Takeda a true and
complete copy of each such agreement to Takeda prior to the Execution Date.

12.2.6    To Denali’s knowledge, the Existing Patents are being prosecuted in
the respective patent offices in the Territory in accordance with Applicable
Law. To Denali’s knowledge, the Existing Patents have been filed and maintained
properly and correctly and all applicable fees have been paid on or before the
due date for payment.

12.2.7    To Denali’s knowledge, no Person is infringing or threatening to
infringe or misappropriating or threatening to misappropriate the Existing
Patents, the Denali Know-How, or the Regulatory Documentation.

12.2.8    No written claim has been filed, or to Denali’s knowledge, threatened
in writing, against Denali or any of its Affiliates by any Third Party alleging
that the conception, development, or reduction to practice of the Regulatory
Documentation, the Existing Patents, or Denali Know-How constitute or involved
the misappropriation of trade secrets or other rights or property of any Person.

12.2.9    Denali has conducted, and to Denali’s knowledge, its contractors and
consultants have conducted, all Development of the Research Biologics prior to
the Execution Date in accordance with Applicable Law. Denali and its Affiliates
have employed (and, with respect to such tests and studies that Denali will
perform, will employ) Persons with appropriate education, knowledge and
experience to conduct and to oversee the conduct of the pre-clinical and
Clinical Studies with respect to the Research Biologics.

12.2.10    Neither Denali nor any of its employees nor to its knowledge, any of
the agents performing hereunder, has ever been, is currently, or is the subject
of a proceeding that could lead to it or such employees or agents becoming, as
applicable, a Debarred Entity or Debarred Individual, an Excluded Entity or
Excluded Individual or a Convicted Entity or Convicted Individual. For purposes
of this provision, the following definitions shall apply:

(i)    A “Debarred Individual” is an individual who has been debarred by the FDA
pursuant to 21 U.S.C. §335a (a) or (b) from providing services in any capacity
to a Person that has an approved or pending drug or biological product
application.

(ii)    A “Debarred Entity” is a corporation, partnership or association that
has been debarred by the FDA pursuant to 21 U.S.C. §335a (a) or (b) from
submitting or assisting in the submission of any abbreviated drug application,
or a subsidiary or affiliate of a Debarred Entity.

(iii)    An “Excluded Individual” or “Excluded Entity” is (A) an individual or
entity, as applicable, who has been excluded, debarred, suspended or is
otherwise ineligible to participate in federal health care programs such as
Medicare or Medicaid by the Office of the Inspector General (OIG/HHS) of the
U.S. Department of Health and Human Services, or (B) is an individual or entity,
as applicable, who has been excluded, debarred, suspended or is otherwise
ineligible to participate in federal procurement and non-procurement programs,
including those produced by the U.S. General Services Administration (GSA).

 

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(iv)    A “Convicted Individual” or “Convicted Entity” is an individual or
entity, as applicable, who has been convicted of a criminal offense that falls
within the ambit of 21 U.S.C. §335a (a) or 42 U.S.C. §1320a - 7(a), but has not
yet been excluded, debarred, suspended or otherwise declared ineligible.

12.3    Additional Covenants of Denali. Denali covenants to Takeda as follows:

12.3.1    [***], Denali shall: (a) [***], (b) [***], (c) [***], (d) [***], or
(e) [***].

12.3.2    During the Term, Denali shall (a) [***], and (b) [***].

12.3.3    Denali will not [***].

12.3.4    If, during the Term, [***].

12.3.5    Denali shall be responsible for [***].

12.4    Additional Covenants of Takeda. Takeda covenants to Denali as follows:

12.4.1    During the Term, Takeda shall (a) [***], and (b) [***].

12.4.2    Neither Takeda nor any of its Affiliates will [***].

12.4.3    If, during the Term, [***].

12.4.4    Takeda shall be responsible for [***].

12.5    DISCLAIMER OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH
HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES,
EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR
OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER
WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY,
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR USE OR PURPOSE OR ANY WARRANTY AS
TO THE VALIDITY OF ANY PATENTS OR THE NON-INFRINGEMENT OF ANY INTELLECTUAL
PROPERTY RIGHTS OF THIRD PARTIES.

ARTICLE 13

INDEMNITY

13.1    Indemnification of Denali. Takeda shall indemnify Denali, its Affiliates
and its and their respective directors, officers, employees, and agents (the
“Denali Indemnitees”) and defend and save each of them harmless, from and
against any and all losses, damages, liabilities, penalties, costs, and expenses
(including reasonable attorneys’ fees and expenses) (collectively, “Indemnified
Losses”) in connection with any and all suits, investigations, claims, or
demands

 

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of Third Parties (collectively, “Third Party Claims”) incurred by or rendered
against the Denali Indemnitees arising from or occurring as a result of:

(a)    the Development of Research Biologics by or under the authority of
Takeda;

(b)    the Development, Manufacture, Commercialization or other Exploitation of
Optioned Biologics and Optioned Products by or under the authority of Takeda,
including any Additional Development Activities conducted by or under the
authority of Takeda; or

(c)    the negligence, reckless conduct or willful misconduct on the part of
Takeda or its Affiliates or their respective directors, officers, employees, and
agents in performing its or their obligations under this Agreement;

(d)    a breach by Takeda of this Agreement, including any breach of a
representation, warranty or covenant by Takeda made under Article 12;

except in the case of clauses (a) through (d), for those Indemnified Losses for
which Denali, in whole or in part, has an obligation to indemnify Takeda
pursuant to Section 13.2 hereof, as to which Indemnified Losses each Party shall
indemnify the other to the extent of their respective liability for such
Indemnified Losses.

13.2    Indemnification of Takeda. Denali shall indemnify Takeda, its Affiliates
and its and their respective directors, officers, employees, and agents (the
“Takeda Indemnitees”), and defend and save each of them harmless, from and
against any and all Indemnified Losses in connection with any and all Third
Party Claims incurred by or rendered against the Takeda Indemnitees arising from
or occurring as a result of:

(a)    the Development of Research Biologics by or under the authority of
Denali;

(b)    the Development, Manufacture, Commercialization, or other Exploitation of
the Optioned Biologics and Optioned Products, and any Research Biologics for
which Takeda does not exercise the Option, by or under the authority of Denali
either during the Term or after the termination of this Agreement (with respect
to a Terminated Biologic or Terminated Product), including any Additional
Development Activities conducted by or under the authority of Denali;

(c)    the negligence, reckless conduct or willful misconduct on the part of
Denali or its Affiliates or its or their respective directors, officers,
employees, and agents in performing its obligations under this Agreement;

(d)    a breach by Denali of this Agreement, including any breach of a
representation, warranty or covenant by Denali made under Article 12.

except, in the case of clauses (a) through (d) above for those Indemnified
Losses for which Takeda, in whole or in part, has an obligation to indemnify
Denali pursuant to Section 13.1 hereof, as to which Indemnified Losses each
Party shall indemnify the other to the extent of their respective liability for
the Indemnified Losses.

 

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13.3    Certain Indemnified Losses. Any Indemnified Losses and all Out-of-Pocket
Costs incurred by a Party to conduct its indemnification obligations under
Section 13.1 or 13.2, (other than those Indemnified Losses and Out-of-Pocket
Costs that result from [***], in connection with any Third Party Claim brought
against either Party resulting directly or indirectly from (a) [***]; (b) [***],
or (c) [***], shall be included as an Allowable Expense, except in each case
(b) and (c) with respect to any Collaboration Program for which Denali has
exercised the Denali Worldwide Royalty Option. If either Party learns of any
Third Party Claim with respect to Indemnified Losses covered by this
Section 13.3, such Party shall provide the other Party with prompt written
notice thereof. The Parties shall confer with respect to how to respond to such
Third Party Claim and how to handle such Third Party Claim in an efficient
manner. In the absence of such an agreement, each Party shall have the right to
take such action as it deems appropriate.

13.4    Notice of Claim. All indemnification claims in respect of a Party, its
Affiliates, or their respective directors, officers, employees and agents shall
be made solely by such Party to this Agreement (the “Indemnified Party”). The
Indemnified Party shall give the indemnifying Party prompt written notice (an
“Indemnification Claim Notice”) of any Indemnified Losses or discovery of fact
upon which such Indemnified Party intends to base a request for indemnification
under this Article 13, but in no event shall the indemnifying Party be liable
for any Indemnified Losses to the extent such Indemnified Losses arise from any
delay in providing such notice. Each Indemnification Claim Notice must contain a
description of the claim and the nature and amount of such Indemnified Loss (to
the extent that the nature and amount of such Indemnified Loss is known at such
time). The Indemnified Party shall furnish promptly to the indemnifying Party
copies of all papers and official documents received in respect of any
Indemnified Losses and Third Party Claims.

13.5    Control of Defense.

13.5.1    In General. Subject to the provisions of Sections 9.4, 9.5, and 9.6,
at its option, the indemnifying Party may assume the defense of any Third Party
Claim by giving written notice to the Indemnified Party within [***] days after
the indemnifying Party’s receipt of an Indemnification Claim Notice. The
assumption of the defense of a Third Party Claim by the indemnifying Party shall
not be construed as an acknowledgment that the indemnifying Party is liable to
indemnify the Indemnified Party in respect of the Third Party Claim, nor shall
it constitute a waiver by the indemnifying Party of any defenses it may assert
against the Indemnified Party’s claim for indemnification. Upon assuming the
defense of a Third Party Claim, the indemnifying Party may appoint as lead
counsel in the defense of the Third Party Claim any legal counsel selected by
the indemnifying Party which shall be reasonably acceptable to the Indemnified
Party. In the event the indemnifying Party assumes the defense of a Third Party
Claim, the Indemnified Party shall immediately deliver to the indemnifying Party
all original notices and documents (including court papers) received by the
Indemnified Party in connection with the Third Party Claim. Should the
indemnifying Party assume the defense of a Third Party Claim, except as provided
in Section 13.5.2, the indemnifying Party shall not be liable to the Indemnified
Party for any legal expenses subsequently incurred by such Indemnified

 

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Party in connection with the analysis, defense or settlement of the Third Party
Claim unless specifically requested in writing by the indemnifying Party. In the
event that it is ultimately determined that the indemnifying Party is not
obligated to indemnify, defend or hold harmless the Indemnified Party from and
against the Third Party Claim, the Indemnified Party shall reimburse the
indemnifying Party for any Indemnified Losses incurred by the indemnifying Party
in its defense of the Third Party Claim.

13.5.2    Right to Participate in Defense. Without limiting Section 13.5.1, any
Indemnified Party shall be entitled to participate in, but not control, the
defense of such Third Party Claim and to employ counsel of its choice for such
purpose; provided, that such employment shall be at the Indemnified Party’s own
expense unless (a) the employment thereof, and the assumption by the
indemnifying Party of such expense, has been specifically authorized by the
indemnifying Party in writing, (b) the indemnifying Party has failed to assume
the defense and employ counsel in accordance with Section 13.5.1 (in which case
the Indemnified Party shall control the defense), or (c) the interests of the
Indemnified Party and the indemnifying Party with respect to such Third Party
Claim are sufficiently adverse to prohibit the representation by the same
counsel of both Parties under Applicable Law, ethical rules or equitable
principles.

13.5.3    Settlement. With respect to any Indemnified Losses relating solely to
the payment of money damages in connection with a Third Party Claim and that
shall not result in the Indemnified Party’s becoming subject to injunctive or
other relief or otherwise adversely affect the business of the Indemnified Party
in any manner, and as to which the indemnifying Party shall have acknowledged in
writing the obligation to indemnify the Indemnified Party hereunder, the
indemnifying Party shall have the sole right to consent to the entry of any
judgment, enter into any settlement or otherwise dispose of such Indemnified
Loss, on such terms as the indemnifying Party, in its sole discretion, shall
deem appropriate. With respect to all other Indemnified Losses in connection
with Third Party Claims, where the indemnifying Party has assumed the defense of
the Third Party Claim in accordance with Section 13.5.1, the indemnifying Party
shall have authority to consent to the entry of any judgment, enter into any
settlement or otherwise dispose of such Indemnified Loss; provided, that it
obtains the prior written consent of the Indemnified Party (which consent shall
not be unreasonably withheld, delayed, or conditioned). If the indemnifying
Party does not assume and conduct the defense of a Third Party Claim as provided
above, the Indemnified Party may defend against such Third Party Claim.
Regardless of whether the indemnifying Party chooses to defend or prosecute any
Third Party Claim, no Indemnified Party shall admit any liability with respect
to, or settle, compromise or dispose of, any Third Party Claim in a manner that
would have a material adverse effect on the Indemnified Party or admit
wrongdoing on behalf of the Indemnified Party, without the prior written consent
of the indemnifying Party. The indemnifying Party shall not be liable for any
settlement, compromise or other disposition of an Indemnified Loss by an
Indemnified Party that is reached without the written consent of the
indemnifying Party.

13.5.4    Cooperation. Regardless of whether the indemnifying Party chooses to
defend or prosecute any Third Party Claim, the Indemnified Party shall, and
shall cause each indemnitee to, cooperate in the defense or prosecution thereof
and shall furnish such records, information and testimony, provide such
witnesses and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection therewith. Such
cooperation shall include access during normal business hours afforded to the

 

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indemnifying Party to, and reasonable retention by the Indemnified Party of,
records and information that are reasonably relevant to such Third Party Claim,
and making Indemnified Parties and other employees and agents available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder, and the indemnifying Party shall reimburse the
Indemnified Party for all its reasonable out-of-pocket expenses in connection
therewith.

13.5.5    Expenses. Except as provided above, the reasonable and verifiable
costs and expenses, including fees and disbursements of counsel, incurred by the
Indemnified Party in connection with any Third Party Claim shall be reimbursed
on a Calendar Quarter basis in arrears by the indemnifying Party, without
prejudice to the indemnifying Party’s right to contest the Indemnified Party’s
right to indemnification and subject to refund in the event the indemnifying
Party is ultimately held not to be obligated to indemnify the Indemnified Party.

13.6    Special, Indirect, and Other Losses. EXCEPT (A) [***], (B) FOR A PARTY’S
BREACH OF ITS OBLIGATIONS UNDER [***], AND (C) TO THE EXTENT ANY SUCH DAMAGES
ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY
PROVIDES INDEMNIFICATION UNDER THIS ARTICLE 13, NEITHER PARTY NOR ANY OF ITS
AFFILIATES SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR BUSINESS
INTERRUPTION (TO THE EXTENT THE SAME ARE CONSEQUENTIAL DAMAGES), HOWEVER CAUSED
AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF
STATUTORY DUTY OR OTHERWISE IN CONNECTION WITH OR ARISING IN ANY WAY OUT OF THE
TERMS OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE USE OF AN
OPTIONED BIOLOGIC OR OPTIONED PRODUCT, EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE.

13.7    Insurance. Each Party shall obtain and carry in full force and effect
the minimum insurance requirements set forth herein. Such insurance (a) shall be
primary insurance with respect to each Party’s own participation under this
Agreement, (b) shall be issued by a recognized insurer rated by A.M. Best
“A-VII” (or its equivalent) or better, or an insurer pre-approved in writing by
the other Party, (c) shall list the other Party as an additional named insured
thereunder, and (d) shall require [***] days’ written notice to be given to the
other Party prior to any cancellation or non-renewal thereof.

13.7.1    Types and Minimum Limits. The types of insurance and minimum limits
shall be:

(a)    Worker’s Compensation with statutory limits in compliance with the
worker’s compensation laws of the state or states in which the Party has
employees in the United States (excluding Puerto Rico).

(b)    Employer’s Liability coverage with a minimum limit of [***] per
occurrence; provided, that a Party has employees in the United States (excluding
Puerto Rico).

 

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(c)    General Liability Insurance with a minimum limit of [***] per occurrence
and [***] in the aggregate. Beginning at least [***] days prior to the
initiation of a Clinical Study, General Liability Insurance shall include
Clinical Trial Insurance. Beginning at least [***] days prior to First
Commercial Sale of an Optioned Product, General Liability Insurance shall also
include product liability insurance of [***].

13.7.2    Certificates of Insurance. Upon request by a Party, the other Party
shall provide Certificates of Insurance evidencing compliance with this
Section 13.7.2. The insurance policies shall be under an occurrence form, but if
only a claims-made form is available to a Party, then such Party shall continue
to maintain such insurance after the expiration or termination of this Agreement
for the longer of (a) a period of [***] years following termination or
expiration of this Agreement in its entirety, or (b) with respect to a
particular Party, last sale of an Optioned Product (or but for expiration or
termination, would be considered an Optioned Product) sold under this Agreement
by a Party.

13.7.3    Self-Insurance. Notwithstanding the foregoing, (a) Takeda may
self-insure, in whole or in part, the insurance requirements described above and
(b) Denali may self-insure, in whole or in part, the insurance requirements
described above [***].

ARTICLE 14

TERM AND TERMINATION

14.1    Term. This Agreement shall commence on the Execution Date (subject to
Section 15.1) and, unless earlier terminated as set forth below, shall continue
in force and effect until (a) the expiration of the last-to-expire Option Period
if Takeda has not exercised any of its Options prior to such expiration or
(b) if Takeda has exercised any of its Options prior to the expiration of the
applicable Option Period, for so long as an Optioned Biologic or Optioned
Product Directed to an Optioned Target is being Developed or Commercialized
pursuant to this Agreement (such period, the “Term”).

14.2    Termination for Material Breach. If either Party (the “Non-Breaching
Party”) believes that the other Party (the “Breaching Party”) has materially
breached any of its material obligations under this Agreement, then the
Non-Breaching Party may deliver notice of such material breach to the Breaching
Party (a “Default Notice”). If the Breaching Party does not dispute that it has
committed a material breach of any of its material obligations under this
Agreement and the Breaching Party fails to cure such breach within [***] after
receipt of the Default Notice, the Non-Breaching Party may terminate this
Agreement upon written notice to the Breaching Party; provided that if such
material breach is with respect to only a Collaboration Program (and not this
Agreement in its entirety), such termination shall be limited to such
Collaboration Program. If the Breaching Party disputes the Default Notice within
the [***] cure-period, the dispute shall be resolved pursuant to Section 16.6.4.
If, as a result of the application of such dispute resolution procedures, the
Breaching Party is determined to be in material breach of any of its material
obligations under this Agreement (an “Adverse Ruling”) and the Breaching Party
fails to complete the actions specified by the Adverse Ruling to cure such
material breach within any of the remaining [***] cure period after such ruling
is issued, then the Non-Breaching Party may terminate this Agreement upon
written notice to the Breaching Party; provided that if such material breach is
with respect to only a Collaboration Program (and not this Agreement in its
entirety), such termination shall be limited to such Collaboration Program.
Notwithstanding anything to the contrary, in the event [***].

 

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14.3    For Convenience. Beginning [***] after the Effective Date, Takeda may
terminate this Agreement: (a) in its entirety; or (b) with respect to a
particular Designated Target(s) (and the associated Collaboration Program(s)),
for any or no reason, upon [***] days prior written notice to Denali. Without
limiting Takeda’s obligations under [***], beginning after the completion of
Denali’s Early Stage Development Activities with respect to an Optioned Product
within a Collaboration Program, if at any time Takeda has not, for a period of
[***], either directly or through an Affiliate or Third Party, engaged in [***]
activities in support of [***] of any Optioned Product within such Collaboration
Program in or for a Major Market then except to the extent (i) [***] or (ii)
[***] was (1) [***], or (2) [***], Denali may, at its sole discretion, provide
written notice to Takeda of its intent to terminate this Agreement with respect
to such Collaboration Program and, if Takeda does not commence and sustain [***]
activities in support of [***] of any Optioned Product within such Collaboration
Program within [***] after such notice from Denali, Denali may terminate this
Agreement with respect to such Collaboration Program immediately upon written
notice to Takeda. For clarity, the determination of whether the activities being
undertaken by or on behalf of Takeda are [***] for the purposes of this
Section 14.3 shall be based on those activities taken as a whole, in light of
then-current facts and circumstances related to such Collaboration Program, and
such determination shall be subject to the dispute resolution procedures in
Section 16.6.4.

14.4    Termination for Insolvency. Either Party may terminate this Agreement in
its entirety at any time during the Term by giving written notice to the other
Party if the other Party files 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 for the other Party or its assets, or if the other Party is served with
an involuntary petition against it, filed in any insolvency proceeding, and such
petition shall not be dismissed with [***] days after the filing thereof, or if
the other Party makes a general assignment for the benefit of creditors.

14.5    Termination for Patent Challenge. Either Party may terminate this
Agreement upon notice to the other Party in the event that such other Party, or
any of its Affiliates or Sublicensees, or any Third Party designated by such
other Party, takes any action, directly or indirectly, or knowingly provides
financial or other assistance, including legal or technical advice, directly or
indirectly, to any Third Party to challenge the validity, enforceability, scope,
inventorship or ownership of any of such Party’s Patents that are licensed to
the other Party under this Agreement in any court or tribunal or any patent
office in a jurisdiction, or in any arbitration proceeding, including in
connection with an opposition proceeding, re-examination or post-grant
proceeding, but excluding any counter-claim filed by such Party or any of its
Affiliates or Sublicensees as a defense to a claim of patent infringement of the
applicable Patent licensed under this Agreement, and within [***] days after
written notice thereof by such Party, such other Party does not withdraw or
cause to be withdrawn such action.

14.6    Termination for a Material Safety Event. With respect to any
Collaboration Program for which Takeda has exercised the Option, Takeda may
terminate this Agreement with respect to such Collaboration Program, upon [***]
days prior written notice to Denali, if a

 

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Material Safety Event occurs with respect to such Collaboration Program;
provided that the JSC unanimously agrees that a Material Safety Event has
occurred as of the date of such written notice. For such purposes a “Material
Safety Event” means an event that [***], is reasonably likely to [***] that
(when considered in totality) is reasonably likely: (a) [***]; and/or (b) [***].

14.7    Effects of Termination and Option Expiration.

14.7.1    Licenses to Intellectual Property. In the event of any termination of
this Agreement in its entirety or with respect to a Terminated Program, subject
to Section 14.10 below:

(a)    all rights and licenses granted by Denali under Article 7, and all
obligations of Takeda with respect thereto, shall immediately terminate with
respect to the Terminated Programs;

(b)    all rights and licenses granted by Takeda under Article 7, and all
obligations of Denali with respect thereto, shall immediately terminate with
respect to the Terminated Programs;

(c)    subject to the terms of this Section 14.7.1(c) and solely with respect to
the Terminated Program(s):

(i)    Takeda shall, and hereby does effective as of the effective date of
termination, grant Denali a license, with the right to grant multiple tiers of
sublicenses, under (1) Takeda Know-How reasonably necessary to Exploit the
Biologics and Products Directed to the Terminated Target(s) for the Terminated
Program in the forms that are being or have been Developed and/or Commercialized
at the time of such termination and Takeda’s interest in any Joint Program
Know-How and (2) Takeda Patents reasonably necessary to Exploit (or that
otherwise Cover) the Biologics and Products Directed to such Terminated
Target(s) in the forms that are being or have been Developed and/or
Commercialized at the time of such termination and Takeda’s interest in any
Joint Program Patents, in each case solely for the purposes of Exploiting
Biologics and Products Directed to the Terminated Target(s) for such Terminated
Program(s). For avoidance of doubt, [***].

(ii)    Takeda shall assign to Denali or its designee all Regulatory Approvals,
Regulatory Documentation and Product Trademarks for the Terminated Products
Controlled by Takeda. In each case, unless otherwise required by Applicable Law
or requested by Denali, the foregoing assignment (or availability) shall be made
within [***] days after the effective date of any expiration or termination of
this Agreement, and if such assignment cannot be made under Applicable Law
within such period, as soon as practicable thereafter. Pending transfer of
Takeda’s Regulatory Approvals and Regulatory Documentation for the Terminated
Products, Takeda hereby grants to Denali (or its designee) a right of reference
to all such Regulatory Approvals and Regulatory Documentation for the Terminated
Product for all uses in connection with the Terminated Product. Takeda shall
provide the applicable Regulatory Authority a letter confirming this right of
reference at any time within [***] days after Denali’s request and shall take
such other actions and execute such other documents as Denali may reasonably
request to further confirm and give effect to this right of reference.

 

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Notwithstanding the definition of Confidential Information, all such Regulatory
Documentation and Regulatory Approvals for the Terminated Products and all Joint
Program Know-How that is [***] to the Terminated Products shall be deemed to be
the Confidential Information of Denali and not Takeda.

(iii)    Denali shall additionally have the right to immediately have Takeda
commence the transfer of the Manufacturing Process to Denali or its designee,
with such transfer to be carried out in accordance with the terms of Section 5.6
applied mutatis mutandis.

(iv)    Takeda shall provide to Denali the Takeda Know-How (to the extent
licensed under clause (i) above), Regulatory Documentation, Clinical Data and
other Information pertaining to the Terminated Program (to the extent such items
exist as of the date of such termination), and Denali shall have the right to
use and disclose the same in connection with the Exploitation of the Terminated
Program. Takeda shall have no obligation to translate any such Takeda Know-How,
Regulatory Documentation, Clinical Data or other Information into English or any
other language.

(d)    Promptly following any such termination, at either Party’s request, the
Parties shall [***]: (i) whether [***]; (ii) if [***]; (iii) the [***],
provided, that [***]; (iv) [***]; and (v) [***]. In the event the Parties [***].
It is understood that the Parties intend [***].

(e)    Denali shall be responsible for (A) making any payments (including
royalties, milestones and other amounts) payable by Takeda to Third Parties
under any Third Party agreements with respect to the Patents or Information that
are the subject of the licenses granted to Denali under the Takeda Know-How
and/or Takeda Patents in Section 14.7.1(c) by making such payments directly to
Takeda and, in each instance, Denali shall make the requisite payments to Takeda
and provide the necessary reporting information to Takeda in sufficient time to
enable Takeda to comply with its obligations under such Third Party agreements,
and (B) complying with any other obligations included in any such Third Party
agreements that are applicable to the grant to Denali of such license or to the
exercise of such license by Denali or any of its Affiliates or sublicensees; and
Takeda shall be responsible for paying or providing to any such Third Party any
payments or reports made or provided by Denali under this Section 14.7.1(e).
Upon request by Denali, Takeda shall disclose to Denali a true and complete
written description of the applicable payment and other obligations under such
Third Party agreements, and Denali’s obligation to reimburse Takeda such amounts
and comply with such obligations following such request shall be limited to
those payment and other obligations as so disclosed by Takeda.

(f)    Denali may terminate its license pursuant to Section 14.7.1(c) under any
Patent or Information with respect to a Terminated Product by so notifying
Takeda in writing, in which case the terminated Patent or Information,
respectively, shall be excluded from such license and Denali shall have no
obligation to pay royalties (if any are due with respect to such license) or
reimburse any Third Party payments (or abide by other Third Party obligations)
under Section 14.7.1 with respect to such Patent or Information to the extent so
excluded. For clarity, Denali agrees to indemnify the Takeda Indemnitees and
defend and save each of them

 

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harmless, from and against any and all Indemnified Losses in connection with any
and all Third Party Claims incurred or rendered against the Takeda Indemnitees
arising from or occurring as a result of the Development, Manufacture,
Commercialization, or other Exploitation of any Terminated Biologic or
Terminated Product in accordance with Section 13.2, and any such termination by
Denali shall not limit Denali’s obligation to indemnify Takeda for any such
Third Party Claims made by such Third Party related to the Exploitation of the
Terminated Biologic or Terminated Product after the effective date of
termination.

(g)    For clarity, upon any termination of this Agreement in its entirety or
with respect to a Terminated Program: (i) the Designated Target for such
Terminated Program (the “Terminated Target”) shall thereafter cease to be a
Designated Target, such program shall cease to be a Collaboration Program, any
Biologic Directed to the Terminated Target shall cease to be a Research Biologic
or Optioned Biologic, as applicable (each, a “Terminated Biologic”), and any
product containing such Terminated Biologic (each, a “Terminated Product”) shall
cease to be a Optioned Product, as applicable, in each case for all purposes of
this Agreement; and, in any case (ii) all rights of Takeda, and all obligations
of Denali, under this Agreement with respect to such Terminated Target,
Terminated Biologics and Terminated Products shall terminate, except for those
rights and obligations expressly surviving under Sections 14.7, 14.8 and 14.10.
For clarity: (A) Sections 11.4 and 11.5 shall not apply to public statements or
publications by or under the authority of Denali to the extent the same pertain
to the Terminated Program, Terminated Biologic, Terminated Product or Terminated
Target; and (C) the Joint Committees shall have no further authority or
oversight with respect to the Terminated Program.

14.8    Transition. In the event of termination of this Agreement, whether in
its entirety or with respect to a Terminated Program, the following also shall
apply.

14.8.1    Development. In the event Takeda is conducting (or is having conducted
on its behalf) any (a) on-going Clinical Studies of Optioned Biologic or
Optioned Product or (b) any ongoing non-clinical studies and/or manufacturing
process development activities (including, formulation studies, stability
studies, scale up tests, etc.) of Optioned Biologic or Optioned Product, in each
case following the date a notice of termination has been issued by Denali or
Takeda, as applicable, Takeda agrees, at Denali’s request (except as provided
below): (i) unless such termination was made in accordance with Section 14.6, to
continue for a period of [***] after the effective date of termination
(“Development Wind-Down Period”) any such Clinical Studies, non-clinical studies
or manufacturing process development activities, or any portion thereof; or
(ii) to the extent so requested by Denali, (A) to promptly transition to Denali
or its designee such Clinical Studies, non-clinical studies or manufacturing
process development, or portions thereof as then being conducted in accordance
with the Development Plan for such Terminated Program in effect immediately
prior to the applicable termination date or (B) to terminate such Clinical
Studies, non-clinical studies, manufacturing process development, or portions
thereof (provided that such termination would not be inconsistent with Takeda’s
ethical obligations). Notwithstanding the foregoing, if the relevant termination
is by Takeda pursuant to Section 14.2 or 14.4, Takeda shall have the right to
elect whether to continue, transition to Denali (or its designee) or wind-down
any such on-going Clinical Studies. [***].

 

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14.8.2    Commercialization. Except to the extent the applicable termination was
made in accordance with Section 14.6, if this Agreement is terminated after the
First Commercial Sale of a Terminated Product and Takeda is the Commercial Lead
with respect to the applicable Terminated Product, Takeda, its Affiliates and
its Sublicensees shall continue to distribute such Terminated Product, in
accordance with the terms and conditions of this Agreement, in each country for
which Regulatory Approval therefor has been obtained, until [***] after the
effective date of termination (the “Commercialization Wind-down Period”);
provided that Takeda, its Affiliates and its Sublicensees shall cease such
activities, or any portion thereof, in a given country upon [***] days’ notice
by Denali requesting that such activities (or portion thereof) be ceased.
Notwithstanding any other provision of this Agreement, during the
Commercialization Wind-down Period, Takeda’s and its Affiliates’ and
Sublicensees’ rights with respect to Terminated Products shall be non-exclusive
and, without limiting the foregoing, Denali shall have the right to engage one
or more other distributor(s) and/or licensee(s) of the Terminated Product in all
or part of the Territory. Any Terminated Product sold or disposed of by Takeda,
its Affiliates or its Sublicensees in the Territory during the Commercialization
Wind-down Period shall be subject to applicable payment obligations under
Article 8. Unless [***], any Terminated Product sold or disposed of by Denali,
its Affiliates or its Sublicensees (but not, for clarity any sales during such
period by Takeda, its Affiliates, or Sublicensees) in the Territory during the
Commercialization Wind-down Period shall be subject to applicable payment
obligations to Takeda under Section 14.7.1. Within [***] days of expiration of
the Commercialization Wind-down Period, Takeda shall notify Denali of any
quantity of Terminated Product remaining in Takeda’s inventory and Denali shall
have the option, upon notice to Takeda, to repurchase any such quantities of the
Terminated Product from Takeda at a price equal to [***] of such quantities (to
the extent [***]).

14.8.3    Supply Obligations. Upon Denali’s request, to the extent that Takeda
is the Manufacturing Lead for the Terminated Program prior to the termination of
this Agreement, Takeda shall either (a) assign to Denali Takeda’s agreement(s)
with its Third Party Provider for the Terminated Biologics, Terminated Products
and placebo, or alternatively, use reasonable efforts to facilitate Denali’s
entering into a direct supply agreement with such Third Party Provider of the
Terminated Biologics, Terminated Products and placebo on comparable terms to
those between Takeda and such Third Party Provider (in each case assuming Takeda
is then obtaining supply of Terminated Biologics, Terminated Products or placebo
from a Third Party Provider) and (b) except to the extent the applicable
termination was made in accordance with Section 14.6 (Termination for a Material
Safety Event), to the extent Takeda or its Affiliate is producing its own supply
of the Terminated Product, Terminated Biologic or placebo, use Commercially
Reasonable Efforts to [***], until the date on which Denali notifies Takeda in
writing that Denali has secured an alternative manufacturer for the Terminated
Biologics and/or Terminated Products, but in no event more for than [***] after
the effective date of any expiration or termination of this Agreement. In the
case of (b), Denali shall pay to Takeda a transfer price for the materials
supplied equal to [***] for Terminated Products delivered within the first [***]
after the effective date of termination, and, as the case may be, [***] for
Terminated Products delivered thereafter; provided, however, in the event the
applicable termination was made for Denali’s breach or insolvency, the transfer
price for materials supplied shall equal [***] beginning on the effective date
of the termination.

 

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14.8.4    Cooperation. Without limiting the foregoing, each Party shall use
Commercially Reasonable Efforts to [***]. If Takeda has entered into contracts
that solely pertain to a Terminated Program with Third Parties (including
contract manufacturers or vendors) whose services are reasonably necessary for
Denali to assume responsibility for the Terminated Program, then Takeda shall,
to the extent reasonably possible and requested in writing by Denali, assign all
of such Third Party contracts to Denali.

14.8.5    Grant of Rights. Without limiting the foregoing, Denali shall grant to
Takeda, its Affiliates or its Sublicensees (as the case may be) any licenses or
rights of reference to any Denali Technology, Regulatory Approvals and
Regulatory Documentation, Clinical Data, Information, Product Trademarks and
Denali’s Corporate Name reasonably necessary for Takeda, its Affiliates or its
Sublicensees to fulfill the obligations set forth in this Section 14.8.

14.9    Remedies. Except as otherwise expressly provided herein, termination of
this Agreement (either in its entirety or with respect to a Terminated Program)
in accordance with the provisions hereof shall not limit remedies that may
otherwise be available in law or equity.

14.10    Accrued Rights; Surviving Obligations. Termination or expiration of
this Agreement (either in its entirety or with respect to one (1) or more
country(ies) or other jurisdiction(s)) for any reason shall be without prejudice
to any rights that shall have accrued to the benefit of a Party prior to such
termination or expiration. Such termination or expiration shall not relieve a
Party from obligations that are expressly indicated to survive the termination
or expiration of this Agreement. Without limiting the foregoing, Sections [***]
of this Agreement shall survive the termination or expiration of this Agreement
for any reason. If this Agreement is terminated with respect to a Terminated
Program but not in its entirety, then following such termination, the foregoing
provisions of this Agreement shall remain in effect with respect to the
Terminated Program (to the extent such provisions would survive and apply in the
event this Agreement expires or is terminated in its entirety), and all
provisions not surviving in accordance with the foregoing shall terminate upon
termination of this Agreement with respect to the Terminated Program and be of
no further force and effect (and, for purposes of clarity, all provisions of
this Agreement shall remain in effect with respect to any Collaboration Program
that is not the Terminated Program).

14.11    Rights in Bankruptcy. All rights and licenses granted under or pursuant
to this Agreement are intended to be, and shall otherwise be deemed to be,
licenses of rights to “intellectual property” as defined under Section 101(35A)
of the Bankruptcy Code for purposes of Section 365(n) of the United States
Bankruptcy Code (the “Bankruptcy Code”) or any analogous provisions in any other
country or jurisdiction. The Parties agree that the licensee of such
intellectual property under this Agreement shall retain and may fully exercise
all of its rights and elections under the Bankruptcy Code, or any analogous
provisions in any other country or jurisdiction. If a bankruptcy proceeding is
commenced by or against either Party under the Bankruptcy Code or any analogous
provisions in any other country or jurisdiction, the non-debtor Party shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any
intellectual property licensed hereunder, and embodiments of such intellectual
property, which, if not already in the non-debtor Party’s possession, shall be
delivered to the non-debtor Party within [***] Business Days of such request;
provided, that the debtor Party is excused from its obligation to deliver such
intellectual property to the extent the debtor Party continues to perform all of
its obligations under this Agreement and this Agreement has not been rejected
pursuant to the Bankruptcy Code or any analogous provision in any other country
or jurisdiction.

 

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ARTICLE 15

HSR COMPLIANCE

15.1    HSR Act Compliance. Notwithstanding anything to the contrary in this
Agreement, this Agreement is binding upon the Parties as of the Execution Date
to the extent permitted by the HSR Act, but the provisions of
Article 2–Article 9 (other than Section 9.1) shall not take effect until the
Effective Date. As used herein, the “HSR Clearance Date” means such time as:
(a) the Parties shall have complied with all applicable requirements of the HSR
Act; (b) the waiting period under the HSR Act shall have expired or been
terminated early; (c) no judicial or administrative proceeding opposing
consummation of all or any part of this Agreement shall be pending; (d) no
injunction (whether temporary, preliminary or permanent) prohibiting
consummation of the transactions contemplated by this Agreement or any material
portion hereof shall be in effect; and (e) no requirements or conditions shall
have been formally requested or imposed by the DOJ or FTC in connection
therewith that are not reasonably and mutually satisfactory to the Parties
(collectively, the “HSR Conditions”). In the event that the HSR Conditions are
not met within [***], then either Party may terminate this Agreement upon
notice, in which case, notwithstanding any provisions that are stated to survive
under Section 14.10, all provisions of this Agreement shall terminate and be of
no force or effect whatsoever, except only that any liability of either Party
for failing to comply this Section 15.1 shall survive.

15.2    HSR Filing. Both Parties shall promptly file following the Execution
Date (and in any event, within [***] Business Days after the Execution Date)
their respective pre-merger notification and report forms with the United States
Federal Trade Commission (“FTC”) and the United States Department of Justice
(“DOJ”) pursuant to the HSR Act, which forms shall specifically request early
termination of the initial HSR Act waiting period.

15.3    Cooperation.

15.3.1    The Parties shall use diligent efforts to promptly obtain clearance
required under the HSR Act for the consummation of this Agreement and the
transactions contemplated hereby and shall keep each other apprised of the
status of any communications with, and any inquiries or requests for additional
information from, the FTC and the DOJ and shall comply promptly with any such
inquiry or request; provided, however, that neither Party shall be required to
consent to the divestiture, sale, license or other disposition or holding
separate of any of its or its Affiliates’ assets or to consent to any other
structural or conduct remedy, and each Party and its Affiliates shall have no
obligation to contest, administratively or in court, any ruling, order or other
action of the FTC or DOJ or any Third Party respecting the transactions
contemplated by this Agreement.

15.3.2    The Parties shall instruct their respective counsel to cooperate with
each other and use Commercially Reasonable Efforts to [***]. In the context of
this Section 15.3.2, diligent efforts and cooperation include counsel’s
undertaking: (i) to keep each other appropriately informed of communications
received from and submitted to personnel of the

 

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reviewing antitrust authority; and (ii) to confer with each other regarding
appropriate contacts with and response to personnel of the FTC or DOJ. Takeda
shall be responsible for the HSR Act filings fees and each Party shall be
responsible for the costs and expenses of its own legal and other advice in
relating to the HSR Act filing.

ARTICLE 16

MISCELLANEOUS

16.1    Force Majeure. Neither Party shall be held liable or responsible to the
other Party or be deemed to have defaulted under or breached this Agreement for
failure or delay in fulfilling or performing any term of this Agreement when
such failure or delay is caused by or results from events beyond the reasonable
control of the non-performing Party, including fires, floods, earthquakes,
hurricanes, embargoes, shortages, epidemics, quarantines, war, acts of war
(whether war be declared or not), terrorist acts, insurrections, riots, civil
commotion, strikes, lockouts, or other labor disturbances (whether involving the
workforce of the non-performing Party or of any other Person), acts of God or
acts, omissions or delays in acting by any governmental authority (except to the
extent such delay results from the breach by the non-performing Party or any of
its Affiliates of any term or condition of this Agreement) (such event, a “Force
Majeure Event”). The non-performing Party shall notify the other Party of such
force majeure within [***] days after such occurrence by giving written notice
to the other Party stating the nature of the event, its anticipated duration,
and any action being taken to avoid or minimize its effect. The suspension of
performance shall be of no greater scope and no longer duration than is
necessary and the non-performing Party shall use diligent efforts to remedy its
inability to perform.

16.2    Export Control. This Agreement is made subject to any restrictions
concerning the export of products or technical information from the United
States or other countries that may be imposed on the Parties from time to time.
Each Party agrees that it will not export, directly or indirectly, any technical
information acquired from the other Party under this Agreement or any products
using such technical information to a location or in a manner that at the time
of export requires an export license or other governmental approval, without
first obtaining the written consent to do so from the appropriate agency or
other governmental entity in accordance with Applicable Law.

16.3    Acquisition, Change in Control, Assignment.

16.3.1    Without the prior written consent of the other Party, neither Party
shall sell, transfer, assign, delegate (except as expressly permitted under this
Agreement), pledge, or otherwise dispose of, whether voluntarily, involuntarily,
by operation of law or otherwise, this Agreement or any of its rights or duties
hereunder; provided, that (a) either Party may make such an assignment without
the other Party’s consent to (i) [***], (ii) [***]; or (iii) [***] and
(b) Denali may [***]. With respect to an assignment to [***], the assigning
Party shall [***]. Any attempted assignment or delegation in violation of this
Section 16.3 shall be void and of no effect. All validly assigned and delegated
rights and obligations of the Parties hereunder shall be binding upon and inure
to the benefit of and be enforceable by and against the successors and permitted
assigns of Denali or Takeda, as the case may be. The permitted assignee or
transferee shall assume all obligations of its assignor or transferor under this
Agreement. Without limiting

 

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the foregoing, the grant of rights set forth in this Agreement shall be binding
upon any successor or permitted assignee of a Party, and the obligations of the
other Party, including the payment obligations, shall run in favor of any such
successor or permitted assignee of such Party’s benefits under this Agreement.

16.3.2    The rights to Information, materials and intellectual property:
(a) Controlled by a Third Party permitted assignee of a Party, which
Information, materials and intellectual property were Controlled by such
assignee immediately prior to such assignment; or (b) Controlled by an Affiliate
of a Party who becomes an Affiliate through any Change in Control of or
Acquisition by such Party, in each case (a) and (b) prior to such assignment or
transfer, as applicable, shall be automatically excluded from the rights
licensed or granted to the other Party under this Agreement, so long as such
Information, materials and intellectual property are not utilized by such Third
Party or Affiliate in connection with the Development, Manufacture or
Commercialization of a Research Biologic, Optioned Biologic or Optioned Product
that incorporates any non-public Takeda Technology or Denali Technology.

16.4    Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under any present or future law, and if the rights or
obligations of either Party under this Agreement will not be materially and
adversely affected thereby, (a) such provision shall be fully severable,
(b) this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part hereof, (c) the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid, or unenforceable provision or by its
severance herefrom, and (d) in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
legal, valid, and enforceable provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and reasonably acceptable
to the Parties. To the fullest extent permitted by Applicable Law, each Party
hereby waives any provision of law that would render any provision hereof
illegal, invalid, or unenforceable in any respect.

16.5    Governing Law, Jurisdiction and Service.

16.5.1    Governing Law. This Agreement or the performance, enforcement, breach
or termination hereof shall be interpreted, governed by and construed in
accordance with the laws of the State of [***], United States, excluding any
conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of
another jurisdiction; provided, that all questions concerning (a) determination
of whether Information and inventions are conceived, discovered, developed, or
otherwise made by a Party for the purpose of allocating proprietary rights
(including Patent, copyright or other intellectual property rights) therein,
shall, for purposes of this Agreement, be made in accordance with Applicable Law
in the United States and (b) the construction or effect of Patents shall be
determined in accordance with the laws of the country or other jurisdiction in
which the particular Patent has been filed or granted, as the case may be. The
Parties agree to exclude the application to this Agreement of the United Nations
Convention on Contracts for the International Sale of Goods.

16.5.2    Service. Each Party further agrees that service of any process,
summons, notice or document by registered mail to its address set forth in
Section 16.7 shall be effective service of process for any action, suit, or
proceeding brought against it under this Agreement in any such court.

 

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16.6    Dispute Resolution. Except for disputes resolved by the procedures set
forth in Section 2.3.6 or 16.10 or for which either Party has final
decision-making authority as provided in Section 2.3.6, if a dispute arises
between the Parties in connection with or relating to this Agreement or any
document or instrument delivered in connection herewith (a “Dispute”), it shall
be resolved pursuant to this Section 16.6.

16.6.1    General. Any Dispute shall first be referred to the senior executive
officers of the Parties, who shall confer in good faith on the resolution of the
issue. Any final decision mutually agreed to by the senior executive officers
shall be conclusive and binding on the Parties. If the senior executive officers
are not able to agree on the resolution of any such issue within [***] days (or
such other period of time as mutually agreed by the senior executive officers)
after such issue was first referred to them, then, except as otherwise set forth
in Section 16.6.2 or 16.6.4, either Party may, by written notice to the other
Party, elect to initiate a proceeding pursuant to the procedures set forth in
Section 16.6.4 for purposes of having the matter settled.

16.6.2    Intellectual Property Disputes. In the event that a Dispute arises
with respect the validity, scope, enforceability, inventorship or ownership of
any Patent, Trademark or other intellectual property rights, and such Dispute
cannot be resolved in accordance with Section 16.6.1, unless otherwise agreed by
the Parties in writing, such Dispute shall not be submitted to an ADR proceeding
in accordance with Section 16.6.4 and instead, either Party may initiate
litigation in a court of competent jurisdiction, notwithstanding Section 16.5,
in any country or other jurisdiction in which such rights apply.

16.6.3    Jurisdiction. Each of the Parties hereby submits to the jurisdiction
[***] in any proceeding arising out of or relating to this Agreement, agrees not
to commence any suit, action or proceeding relating thereto except in such
court, and waives, to the fullest extent permitted by law, the right to move to
dismiss or transfer any action brought in such court on the basis of any
objection to personal jurisdiction, venue or inconvenient jurisdiction. Any
rights to trial by jury with respect to any suit, action, proceeding or claim
(whether based upon contract, tort or otherwise), directly or indirectly,
arising out of or relating to this Agreement hereunder are expressly and
irrevocably waived by each of the Parties.

16.6.4    Expert Arbitration. Any dispute expressly stated in this Agreement to
be resolved pursuant to this Section 16.6.4 shall take place pursuant to the
procedures described in Schedule 16.6.4.

16.6.5    Interim Relief. Notwithstanding anything herein to the contrary,
nothing in this Section 16.6 shall preclude either Party from seeking interim or
provisional relief, including a temporary restraining order, preliminary
injunction or other interim equitable relief concerning a Dispute, if necessary
to protect the interests of such Party. This Section 16.6.5 shall be
specifically enforceable.

 

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16.7    Notices.

16.7.1    Notice Requirements. Any notice, request, demand, waiver, consent,
approval, or other communication permitted or required under this Agreement
shall be in writing, shall refer specifically to this Agreement and shall be
deemed given only if (a) delivered by hand, (b) sent by facsimile transmission
(with complete transmission confirmed), or (c) by internationally recognized
overnight delivery service that maintains records of delivery, addressed to the
Parties at their respective addresses specified in Section 16.7.2 or to such
other address as the Party to whom notice is to be given may have provided to
the other Party in accordance with this Section 16.7.1. Such notice shall be
deemed to have been given as of the date delivered by hand or transmitted by
facsimile or electronic mail (with complete transmission confirmed) or on the
[***] Business Day (at the place of delivery) after deposit with an
internationally recognized overnight delivery service. Any notice delivered by
facsimile or electronic mail shall be confirmed by a hard copy delivered as soon
as practicable thereafter. This Section 16.7.1 is not intended to govern the
day-to-day business communications necessary between the Parties in performing
their obligations under the terms of this Agreement.

16.7.2    Address for Notice.

If to Takeda, to:

Takeda Pharmaceutical Company Limited

1-1, Doshomachi 4-chome

Chuo-ku, Osaka 540-8645

Japan

Attention: Legal Department

Facsimile:

with a copy to:

Takeda Pharmaceuticals

1 Takeda Parkway

Deerfield, IL 60015

Attention: General Counsel

Facsimile:

with a further copy (which shall not constitute notice) to:

Cooley LLP

3175 Hanover Street

Palo Alto, CA 94304-1130

Attention:

E-mail:

If to Denali, to:

Denali Therapeutics, Inc.

151 Oyster Point Blvd

South San Francisco, CA 94080

Attention:

Email:

 

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with a copy (which shall not constitute notice) to:

Wilson Sonsini Goodrich and Rosati P.C.

12235 El Camino Real, Suite 200

San Diego, California 92130

Attention:

Facsimile:

16.8    Entire Agreement; Amendments. This Agreement, together with the
Schedules attached hereto, and the Stock Purchase Agreement, sets forth and
constitutes the entire agreement and understanding between the Parties with
respect to the subject matter hereof and all prior agreements, understandings,
promises, and representations, whether written or oral, with respect thereto are
superseded hereby (including that certain Confidentiality Agreement between the
Parties or their respective Affiliates dated [***]). Each Party confirms that it
is not relying on any representations or warranties of the other Party except as
specifically set forth in this Agreement or the Stock Purchase Agreement. No
amendment, modification, release, or discharge shall be binding upon the Parties
unless in writing and duly executed by authorized representatives of both
Parties.

16.9    English Language. This Agreement shall be written and executed in, and
all other communications under or in connection with this Agreement shall be in,
the English language. Any translation into any other language shall not be an
official version thereof, and in the event of any conflict in interpretation
between the English version and such translation, the English version shall
control.

16.10    Equitable Relief. Each Party acknowledges and agrees that the
restrictions set forth in Section 7.8, Article 9 and Article 11 are reasonable
and necessary to protect the legitimate interests of the other Party and that
such other Party would not have entered into this Agreement in the absence of
such restrictions, and that any breach or threatened breach of any provision of
such Section or Articles may result in irreparable injury to such other Party
for which there may be no adequate remedy at law. In the event of a breach or
threatened breach of any provision of such Section or Articles, the
non-breaching Party shall be authorized and entitled to seek from any court of
competent jurisdiction injunctive relief, whether preliminary or permanent and
specific performance. Nothing in this Section 16.10 is intended, or should be
construed, to limit either Party’s right to equitable relief or any other remedy
for a breach of any other provision of this Agreement.

16.11    Waiver and Non-Exclusion of Remedies. Any term or condition of this
Agreement may be waived at any time by the Party that is entitled to the benefit
thereof, but no such waiver shall be effective unless set forth in a written
instrument duly executed by or on behalf of the Party waiving such term or
condition. The waiver by either Party hereto of any right hereunder or of the
failure to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by such
other Party whether of a similar nature or otherwise. The rights and remedies
provided herein are cumulative and do not exclude any other right or remedy
provided by Applicable Law or otherwise available except as expressly set forth
herein.

 

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16.12    No Benefit to Third Parties. Except as provided in Article 13,
covenants and agreements set forth in this Agreement are for the sole benefit of
the Parties hereto and their successors and permitted assigns, and they shall
not be construed as conferring any rights on any other Persons.

16.13    Further Assurance. Each Party shall duly execute and deliver, or cause
to be duly executed and delivered, such further instruments and do and cause to
be done such further acts and things, including the filing of such assignments,
agreements, documents, and instruments, as may be necessary or as the other
Party may reasonably request in connection with this Agreement or to carry out
more effectively the provisions and purposes hereof, or to better assure and
confirm unto such other Party its rights and remedies under this Agreement.

16.14    Relationship of the Parties. It is expressly agreed that Denali, on the
one hand, and Takeda, on the other hand, shall be independent contractors and
that the relationship between the Parties shall not constitute a partnership,
joint venture, or agency, including for all tax purposes; provided, however,
[***] (and any disputes related thereto shall be resolved pursuant to
Section 16.6.4 of this Agreement). Neither Denali, on the one hand, nor Takeda,
on the other hand, shall have the authority to make any statements,
representations, or commitments of any kind, or to take any action, which shall
be binding on the other, without the prior written consent of the other Party to
do so. All persons employed by a Party shall be employees of such Party and not
of the other Party and all costs and obligations incurred by reason of any such
employment shall be for the account and expense of such Party.

16.15    Performance by Affiliates And Sublicensees. Each Party may use one
(1) or more of its Affiliates and/or (sub)licensees to exercise its rights
and/or perform its obligations and duties hereunder (including by licensing
rights hereunder where such rights are held in the name of any such Affiliate).
In such event: (a) [***]; (b) [***], and (d) [***].

16.16    Counterparts; Facsimile Execution. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one (1) and the same instrument. This
Agreement may be executed by facsimile or electronically transmitted signatures
and such signatures shall be deemed to bind each Party hereto as if they were
original signatures.

16.17    References. Unless otherwise specified, (a) references in this
Agreement to any Article, Section or Schedule shall mean references to such
Article, Section or Schedule of this Agreement, (b) references in any Section to
any clause are references to such clause of such Section, and (c) references to
any agreement, instrument, or other document in this Agreement refer to such
agreement, instrument, or other document as originally executed or, if
subsequently amended, replaced, or supplemented from time to time, as so
amended, replaced, or supplemented and in effect at the relevant time of
reference thereto.

16.18    Construction. Except where the context otherwise requires, wherever
used, the singular shall include the plural, the plural the singular, the use of
any gender shall be applicable to all genders and the word “or” is used in the
inclusive sense (and/or). Whenever this Agreement refers to a number of days,
unless otherwise specified, such number refers to calendar days. The captions of
this Agreement are for convenience of reference only and in no way

 

Confidential   110  

 

*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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define, describe, extend, or limit the scope or intent of this Agreement or the
intent of any provision contained in this Agreement. The term “including,”
“include,” or “includes” as used herein shall mean “including, but not limited
to,” and shall not limit the generality of any description preceding such term.
The language of this Agreement shall be deemed to be the language mutually
chosen by the Parties and no rule of strict construction shall be applied
against either Party hereto. Each Party represents that it has been represented
by legal counsel in connection with this Agreement and acknowledges that it has
participated in the drafting hereof. In interpreting and applying the terms and
provisions of this Agreement, the Parties agree that no presumption will apply
against the Party which drafted such terms and provisions.

[SIGNATURE PAGE FOLLOWS.]

 

Confidential   111  

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THIS AGREEMENT IS EXECUTED by the authorized representatives of the Parties as
of the Execution Date.

 

Denali Therapeutics Inc.     Takeda Pharmaceutical Company Limited By:  

/s/ Ryan J. Watts

    By:  

/s/ Fumihiko Sato

Name:   Ryan J. Watts     Name:   Fumihiko Sato Title:   CEO     Title:   Head
of Portfolio Strategic Relations

 

Confidential   [SIGNATURE PAGE TO OPTION AND COLLABORATION AFREEMENT]

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Confidential    

 

*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.

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Schedule 11.4

Press Release

[ATTACHED]

 

Confidential

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LOGO [g463296g04j25.jpg]    LOGO [g463296g16a42.jpg]

Takeda and Denali Therapeutics Collaborate to Develop and

Commercialize Therapies for Neurodegenerative Diseases

Collaboration includes three named programs for the treatment of Alzheimer’s
disease and other neurodegenerative diseases, utilizing Denali’s Antibody
Transport Vehicle (ATV) technology to enhance blood-brain barrier (BBB)
penetration.

Osaka, Japan and South San Francisco, CA, January 5, 2018 – Takeda
Pharmaceutical Company Limited (TSE: 4502) and Denali Therapeutics (NASDAQ:
DNLI) today announced that they have entered into a strategic option and
collaboration agreement to develop and commercialize up to three specified
therapeutic product candidates for neurodegenerative diseases. Each program is
directed to a genetically validated target for neurodegenerative disorders,
including Alzheimer’s disease and other indications, and incorporates Denali’s
ATV platform for increased exposure of biotherapeutic products in the brain.

“This partnership further exemplifies Takeda’s continued commitment to
developing genetically validated therapies for neurodegenerative diseases
through an enhanced portfolio comprised of new modalities,” said Emiliangelo
Ratti, Head of the Neuroscience Therapy Area at Takeda. “We are excited to
partner with the Denali team, whose innovative technology is uniquely poised to
deliver the next generation of antibody therapeutics for patients.”

“We are impressed with Takeda’s commitment to developing treatments for
difficult to treat neurodegenerative diseases and look forward to partnering
with them to bring medicines to patients,” said Denali CEO Ryan Watts, Ph.D.
“Takeda has a great track record of partnering with biotech firms in addition to
unique development expertise and a strong global commercial presence.”

Terms of Collaboration

Under the terms of the agreement, Takeda will make an initial payment to Denali
of $150 million through a combination of cash upfront payments and the purchase
of Denali equity. In addition, Denali is eligible to receive development and
commercial milestone payments, including $90 million in preclinical milestones
and opt-in payments.

Denali will be responsible for all development activities and costs prior to IND
filing for each of the three programs. Takeda has the option to co-develop and
co-commercialize each of the three programs. If Takeda exercises the option, the
parties will then jointly conduct clinical development and share all costs
equally. Denali will lead early clinical development activities and Takeda will
lead late stage clinical development activities. Takeda and Denali will jointly
commercialize products in the United States and China, and Takeda will have
exclusive commercialization rights in all other markets. The parties will share
global profits equally. The agreement will become effective when the
requirements of the Hart–Scott–Rodino Antitrust Improvements Act of 1976 have
been satisfied.

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About Takeda Pharmaceutical Company

Takeda Pharmaceutical Company Limited (TSE: 4502) is a global, research and
development-driven pharmaceutical company committed to bringing better health
and a brighter future to patients by translating science into life-changing
medicines. Takeda focuses its R&D efforts on oncology, gastroenterology and
neuroscience therapeutic areas plus vaccines. Takeda conducts R&D both
internally and with partners to stay at the leading edge of innovation. New
innovative products, especially in oncology and gastroenterology, as well as
Takeda’s presence in emerging markets, are currently fueling the growth of
Takeda. Approximately 30,000 Takeda employees are committed to improving quality
of life for patients, working with Takeda’s partners in health care in more than
70 countries. For more information, visit https://www.takeda.com/newsroom/.

Additional information about Takeda is available through its corporate website,
www.takeda.com, and additional information about Takeda Oncology, the brand for
the global oncology business unit of Takeda Pharmaceutical Company Limited, is
available through its website, www.takedaoncology.com.

About Denali Therapeutics

Denali is a biopharmaceutical company developing a broad portfolio of
therapeutic candidates for neurodegenerative diseases. Denali is based in South
San Francisco. For additional information, please visit
www.denalitherapeutics.com.

Cautionary Note Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
expressed or implied in this press release include, but are not limited to, the
potential benefits of the collaboration; plans to conduct clinical development
activities and commercialize products; the expectation as to when the agreement
will become effective; and other information relating to the transaction between
Takeda and Denali. Actual results are subject to risks and uncertainties and may
differ materially from those indicated by these forward-looking statements as a
result of these risks and uncertainties, including but not limited to: the risk
that the agreement may not become effective in a timely manner or at all; risks
related to obtaining the requisite regulatory approvals; the risk of the
occurrence of any event, change or other circumstance that could give rise to
the termination of the agreement (including without limitation the failure to
timely obtain requisite regulatory approvals); risks related to the effect of
the announcement of the transaction on Denali’s business relationships,
operating results and business generally; and other risks, including those
described in Denali’s Prospectus filed with the SEC on December 8, 2017. The
forward-looking statements in this press release are based on information
available to Denali as of the date hereof. Denali and Takeda disclaim any
obligation to update any forward-looking statements, except as required by law.

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# # #

Takeda Contact:

Kelly Schlemm, +1-617-551-8865

kelly.schlemm@takeda.com

Denali Therapeutics Contact:

Morgan Warners, +1-202-295-0124

mwarners@gpg.com

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Confidential    

 

*** Certain information in this agreement has been omitted and filed separately
with the Securities and Exchange Commission. [***] indicates that text has been
omitted and is the subject of a confidential treatment request.