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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R §§ 200.80(B)4, AND 240.24B-2

Exhibit 10.60

Research Collaboration, Option and License Agreement

Between

Isis Pharmaceuticals, Inc.

And

Janssen Biotech Inc.
 

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RESEARCH COLLABORATION, OPTION AND LICENSE AGREEMENT

This RESEARCH COLLABORATION, OPTION AND LICENSE AGREEMENT (the “Agreement”) is
entered into as of the 22nd day of December, 2014 (the “Effective Date”), by and
between Isis Pharmaceuticals, Inc., a Delaware corporation, having its principal
place of business at 2855 Gazelle Court, Carlsbad, CA 92010 (“Isis”), and
Janssen Biotech Inc., a Pennsylvania company, with principal offices located at
800/850 Ridgeview Road, Horsham, PA 19044 (“JBI”) JBI and Isis each may be
referred to herein individually as a “Party” or collectively as the “Parties.”
Capitalized terms used in this Agreement, whether used in the singular or the
plural, have the meaning set forth in Appendix 1. All attached appendices and
schedules are a part of this Agreement.

RECITALS

WHEREAS, Isis possesses certain Patent Rights, Know-How, technology and
expertise with respect to antisense therapeutics, and has novel and valuable
capabilities for the research, discovery, identification, synthesis and
development of antisense therapeutics;

WHEREAS, JBI has expertise in developing and commercializing human therapeutics,
and JBI is interested in developing and commercializing antisense therapeutics
for initially up to three gene targets implicated in Autoimmune Disease (with
the right to add a fourth target by paying an additional fee);

WHEREAS, the Parties desire to enter into a collaborative enterprise pursuant to
which (i) the Parties will conduct activities directed toward researching,
discovering and developing therapeutic antisense oligonucleotides designed to
bind and modulate the RNA of each collaboration target, (ii) Isis will endeavor
to identify a development candidate for each collaboration target, and (iii) for
each collaboration target for which Isis identifies a development candidate, JBI
will have an exclusive option to obtain an exclusive license under this
Agreement to develop, manufacture and commercialize Products in the Field.

NOW, THEREFORE, in consideration of the respective covenants, representations,
warranties and agreements set forth herein, the Parties hereto agree as follows:

ARTICLE 1.
RESEARCH COLLABORATION

1.1 Collaboration Overview. The intent of the Collaboration is: (i) for the
Parties to conduct a Drug Discovery Program, including formulation activities,
for each of the Collaboration Targets and to share their respective expertise to
advance the goals set out in the Drug Discovery Plan for each such Drug
Discovery Program; (ii) for Isis to generate at least one Development Candidate
under each Drug Discovery Program; (iii) for JBI to have an Option to obtain an
exclusive license to Develop and Commercialize Products under each Drug
Discovery Program in the Field; and (iv) if JBI exercises the Option for a Drug
Discovery Program, the Parties will advance the Development Candidate through
IND-Enabling Toxicology Studies, and thereafter JBI will continue to Develop and
Commercialize the applicable Development Candidate. The purpose of this Section
1.1 is to provide a high-level overview of the roles, responsibilities, rights
and obligations of each Party under this Agreement, and therefore this Section
1.1 is qualified in its entirety by the more detailed provisions of this
Agreement set forth below.

 

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1.2 Collaboration Targets.

1.2.1 Maximum Number; Initial Collaboration Target. The maximum number of
Collaboration Targets will be three, subject to Section 1.2.2. The Parties agree
that the first Collaboration Target is [***]. JBI will designate the second
Collaboration Target within [***] of the Effective Date, and designate the third
Collaboration Target within [***] of the Effective Date (each, a “Target
Nomination Period”), in each case in accordance with the mechanism set forth in
Section 1.2.3 below.

1.2.2 Optional Fourth Collaboration Target. JBI will have the right, exercisable
within [***] after the Effective Date, to designate a fourth Collaboration
Target (i.e., to increase the maximum number of Collaboration Targets by one) in
accordance with the mechanism set forth in Section 1.2.3 below upon delivery of
written notice thereof to Isis and payment to Isis of the $[***] fee pursuant to
Section 6.2, provided if JBI exercises such right, JBI must (i) designate such
fourth Collaboration Target within [***] after the Effective Date and (ii) JBI
may extend the Drug Discovery Term, if necessary, for the time required to
execute under a corresponding Drug Discovery Plan for such fourth Collaboration
Target under Section 1.5.2. Any [***] shall only become due if the [***], and
any [***] shall be [***], and such [***] within [***] days of [***] following
the date such Drug Discovery Plan is approved.

1.2.3 Collaboration Target Designation Mechanism. At any time during the
applicable Target Nomination Period, JBI may propose a gene target implicated in
Autoimmune Disease of the gastro-intestinal tract for designation as a
Collaboration Target by providing written notice of such gene target to Isis.
Isis may reject a gene target proposed by JBI if, at the time of such proposal:
(i) Isis believes in good faith that [***] for such target; (ii) Isis does not
have the [***]; (iii) granting a license to such target would [***] to a Third
Party and JBI does not [***]; (iv) [***]; (v) the proposed target is the subject
of [***] for which Isis in good faith expects to [***] (although Isis will
negotiate in good faith terms for JBI to gain access such a program); or (vi)
the target is associated with [***] (each of (i) through (vi), a “Dispositive
Rejection Condition”). If a Dispositive Rejection Condition for the gene target
proposed by JBI for designation as a Collaboration Target exists, Isis may
reject the proposed gene target by providing a written notice to JBI by the
[***] day following Isis’ receipt of JBI’s request to designate such gene target
as a Collaboration Target, in which event JBI may propose a different gene
target for designation as a Collaboration Target using the process described
above in this Section 1.2.3.

1.2.4 Collaboration Target Designation. A gene target proposed by JBI for
designation as a Collaboration Target in accordance with Section 1.2.3 above
will become a “Collaboration Target” if (i) Isis provides JBI a written notice
accepting such gene target as a Collaboration Target or (ii) by the [***] day
following Isis’ receipt of JBI’s request to designate such gene target as a
Collaboration Target, Isis has not delivered a written notice to JBI rejecting
such gene target based on a Dispositive Rejection Condition.

 
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1.2.5 Substitution of Gene Targets. At any time prior to completion of [***]
activities for a Collaboration Target, JBI may propose, in writing, a substitute
gene target to replace such Collaboration Target subject to the following
conditions:

i) JBI may propose up to [***] ([***]) substitute gene targets, unless JBI
designates a Fourth Collaboration Target whereby, in which case JBI may then
propose up to [***] ([***]) substitute gene targets;

ii) JBI shall pay the Substitution Fee for each proposed substitute gene target
within [***] ([***]) days of the date the substitute gene target becomes a
Collaboration Target under Section 1.2.4; and

iii) The designation mechanism of Section 1.2.3 shall apply for proposed
substitute gene targets.

Any gene target substituted out under this Section 1.2.5 will no longer be a
Collaboration Target.

1.3 Drug Discovery and Development Responsibilities.

1.3.1 Drug Discovery Programs. Subject to the terms and conditions of this
Agreement, during the Drug Discovery Term, the Parties will jointly conduct
collaborative research projects directed to the research, discovery and
pre-clinical development of ASOs designed to bind to and modulate the RNA of
each Collaboration Target (subject to the applicable maximum number of
Collaboration Targets under Section 1.2) (each, a “Drug Discovery Program”).

1.3.2 Drug Discovery Plans and Development Plans.

(a) For each Drug Discovery Program, the Parties, via the JRC, will: (i)
promptly (but no later than [***] days) following the designation of such
Collaboration Target, approve a written plan describing the discovery, research,
and optimization activities to be conducted by each Party to achieve [***]
status and to identify a Development Candidate, plus any related research
activities to support such activities; and (ii) from time to time thereafter,
consider and approve appropriate amendments and modifications to such plan (each
such plan, as so amended, a “Drug Discovery Plan”). By separate agreement the
Parties have agreed upon the initial Drug Discovery Plan for the Drug Discovery
Program directed to [***]. Upon JRC approval of the Drug Discovery Plan for any
other Collaboration Target, or upon JRC approval of any amendment or
modification to any Drug Discovery Plan, the JRC will attach such Drug Discovery
Plan, or such amendment or modification (as applicable), to the minutes of the
JRC meeting at which the same is approved.

 
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(b) For each Drug Discovery Program with respect to which JBI exercises the
Option, JBI will share with Isis, via the JRC (or directly with Isis if the JRC
has dissolved) (i) promptly (but no later than [***] days) following such Option
exercise, a written plan describing the proposed Development activities to be
conducted by JBI with respect to the applicable Development Candidate; and (ii)
from time to time thereafter consider and make appropriate amendments and
modifications to such plan (each such plan, as so amended, a “Development
Plan”). The Parties, at their respective expense, shall meet and confer
regarding the activities proposed under the Development Plan and, to the extent
there are activities required of Isis under the Development Plan, shall agree on
such activities within a reasonable amount of time but not to exceed [***] days
following presentation of the Development Plan to the JRC. The JRC will attach
such Development Plan or any subsequent amendments or modifications thereto (as
applicable) to the minutes of the JRC meeting at which the same is agreed and
approved. Each Development Plan will include a description of the pre-clinical
studies, and clinical studies (including study designs) to support the further
Development of such Development Candidate up to completion of PoC, including
[***]. If the Parties agree Isis will conduct any activities to support the
further Development of the Development Candidate, the Development Plan will
include the specific activities to be performed by Isis and [***] and [***] for
completion of such activities. JBI will continue to develop and refine each
Development Plan as needed and will submit it to the JRC (or the Parties if the
JRC has dissolved) for review and comment at least [***]. When updating each
Development Plan, JBI will [***].

1.3.3 Allocation of Drug Discovery and Development Responsibilities. Each Drug
Discovery Plan and Drug Development Plan will specify the Party(ies) responsible
for performing each activity thereunder, and each Party will use Commercially
Reasonable Efforts to complete such activities; provided, however, that unless
otherwise mutually agreed by the Parties in writing each Party will use
Commercially Reasonable Efforts to complete the following at each respective
company’s expense unless otherwise indicated:

(a) Isis will be responsible for [***] under each Drug Discovery Plan;

 
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(b) Except as set forth in Sections (c), (d) and (f) of this Section 1.3.3, Isis
will be responsible for [***] and [***], in each case to the extent stated to be
conducted by Isis in the applicable Drug Discovery Plan;

(c) JBI will be responsible for conducting the (i) [***], and (ii) the [***]
including [***], in each case to achieve [***] status and produce the
Development Candidate Data Package;

(d) JBI will be responsible for conducting the [***], in each case to achieve
[***] status, produce the Development Candidate Data Package, and to support the
further Development and Commercialization of Products. Isis will provide [***]
if requested by JBI and JBI will pay Isis for such support at [***] and shall
invoice JBI in accordance with Section 6.10;

(e) During the Research Term Isis will (i) [***] and (ii) [***], in each case to
the extent stated to be conducted by Isis in the applicable Drug Discovery Plan;

(f) JBI will be responsible for conducting [***], including [***]; and

(g) JBI will be responsible for conducting [***] activities for each Development
Candidate, including conducting [***], except Isis will be responsible for
conducting the [***] of the Development Candidate for the first Drug Discovery
Program with respect to which JBI exercises the Option (the “First Development
Candidate”) as specified in the applicable Development Plan.

1.3.4 Conduct of Drug Discovery and Development Plan Activities. Each Party will
perform the activities for which it is responsible under each Drug Discovery
Plan and each Development Plan in good scientific manner and in compliance with,
as applicable, GLP, GCP and/or GMP, and all Applicable Laws.

1.3.5 Disclosure of Results. At least [***] Business Days prior to each
regularly scheduled meeting of the JRC, each Party will provide to the JRC a
written report (which may take the form of PowerPoint slides) for each Drug
Discovery Program (i) describing the Drug Discovery Program activities performed
by such Party since the date of the preceding written report delivered by such
Party for such Drug Discovery Program and the status of each such activity as of
the date of such report and (ii) summarizing the data and results of the Drug
Discovery Program activities performed by such Party under the applicable Plan.

1.3.6 Development Candidate; Supplemental Information. Isis will notify JBI
promptly after designating a Development Candidate and, together with such
notice, Isis will provide JBI with the applicable Development Candidate Data
Package. During the [***] period beginning on Isis’ delivery of the Development
Candidate Data Package to JBI, JBI may request in writing additional data or
information regarding the Development Candidate of a type that is consistent
with the information JBI examines when selecting JBI’s own development
candidates for similar programs and that JBI in good faith determines is
reasonably necessary to inform JBI’s decision of whether to exercise the Option
for such Drug Discovery Program (the “Supplemental Information”); provided,
however, that: (i) unless Isis possesses and can reasonably provide the
requested data or information, JBI will be solely responsible for conducting or
having conducted by Isis ([***]) the work necessary to generate the requested
Supplemental Information and for all agreed upon fees and costs incurred by it
or for its account in the performance of such work; (ii) Isis will not be
required to conduct any such work unless Isis and JBI agree to a plan for such
work and JBI agrees to pay for such work at [***] and for both (i) and (ii)
shall invoice JBI in accordance with Section 6.10.

 
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1.3.7 Records and Quality. Isis will maintain complete and accurate records of
all work Isis conducts in the performance of a Drug Discovery Plan and
Development Plan and all results, data, inventions and developments made in the
performance of such work. Such records will be in sufficient detail and in good
scientific manner appropriate for patent and regulatory purposes. Upon
reasonable prior written notice, Isis will provide JBI the right to inspect such
records, and will provide copies of all requested records, to the extent
reasonably required for the performance of JBI’s rights and obligations under
this Agreement or for JBI’s reasonable quality control purposes. Isis will
cooperate in good faith with respect to the conduct of any inspections by any
Regulatory Authority of an Isis site or a contractor’s site and facilities if
such inspection concerns work being performed under a Drug Discovery Plan or
Development Plan. [***]. In the event that during an inspection of the Isis
facilities, the facilities are found by a Regulatory Authority to be
non-compliant with one or more GLP, GMP, GCP or current standards for
pharmacovigilance practice compliance standards and such facilities are being
used to conduct work under a Drug Discovery Plan or Development Plan, Isis will
[***]. If requested by JBI, Isis will allow representatives of JBI to accompany
Isis as part of any audit Isis conducts of [***] for which JBI exercises its
Option.

1.3.8 Supply of API for Drug Discovery. On a Drug Discovery Program-by-Drug
Discovery Program basis, Isis will supply (on its own or through a CMO), [***],
(i) the non‑GMP API necessary for Isis to select up to [***] lead Compounds for
each Collaboration Target to advance to [***], plus (ii) up to [***] of non‑GMP
API for each of the lead Compounds selected for each Collaboration Target to
support the formulation work under the Drug Discovery Plan prior to the
designation of a Development Candidate. In addition, during the Drug Discovery
Term, if requested by JBI, Isis will supply [***] up to [***] of ASO non‑GMP API
Isis has in its stock as of the Effective Date to support formulation activities
under the Drug Discovery Plans, the selection of such non‑GMP API to be in Isis’
sole discretion. If additional quantities of non‑GLP, non‑GMP API are necessary
to support such Drug Discovery Program activities, then JBI will purchase such
API from Isis [***] for such non‑GLP, non‑GMP API, where [***] and [***] and
where [***]. All such API provided by Isis will be [***] specific and [***]
specific ASOs. If JBI desires API for ASOs that are specific to [***] then Isis
will use Commercially Reasonable Efforts to design and supply such ASOs and JBI
will pay Isis for such ASOs [***] and shall invoice JBI in accordance with
Section 6.10.

 
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1.3.9 Supply of GLP Development Candidate and Clinical Supplies by Isis. For the
first Development Candidate for which JBI exercises its Option Isis will (on its
own or through a CMO) supply [***] of API, not to exceed [***], to support the
[***] and [***], where Isis will supply the [***] of such [***], and will, [***]
supply the remainder of such [***] in [***] increments (or in [***] if, as a
result of previous [***], the remaining material is [***]) if and when requested
by JBI. For each additional Development Candidate for which JBI exercises its
Option, Isis, [***], will (on its own or through a CMO) supply in [***] a [***]
of API, not to exceed [***], to support the [***] and [***]. Except for the
[***] of API for the first Development Candidate for which JBI has exercised its
Option, JBI will [***] for such API [***], of which [***] within [***] days of
[***]. JBI will take possession of such requested API no later than [***] days
following Isis’ release of such API.

1.4 Program Costs and Expenses. Except as expressly set forth below or elsewhere
in this ARTICLE 1, each Party will be responsible for the costs and expenses
incurred by it or on its behalf in the performance of the Drug Discovery Program
activities for which such Party is responsible under the applicable Drug
Discovery Plan and Development Plan.

1.5 Drug Discovery Term; Extension.

1.5.1 Drug Discovery Term. The term for the conduct of the Drug Discovery
Programs will begin on the Effective Date and, subject to extension in
accordance with Section 1.5.2 and/or earlier termination of this Agreement in
accordance with ARTICLE 10 hereof, will end upon the earlier of (i) such time as
the Options with respect to all Drug Discovery Programs either have been
exercised by JBI or have expired unexercised, and (ii) the [***] anniversary of
the Effective Date (the “Drug Discovery Term”), provided however, that if Isis
has delivered a Development Candidate Data Package to JBI for a Drug Discovery
Program prior to the [***] anniversary of the Effective Date but the Option
Period for such Drug Discovery Program has not expired as of the [***]
anniversary of the Effective Date, the Drug Discovery Term will extend for that
Drug Discovery Program only, until the earlier of (a) JBI’s exercise of such
Option and (b) expiration of such Option Period. Such extension shall not be
subject to the extension fee as defined in Section 1.5.2 below.

1.5.2 Extension of Drug Discovery Term. JBI will have the right, in its
discretion, to extend the Drug Discovery Term (i) for an additional [***] period
if such extension applies to more than just the [***] Collaboration Target (not
to exceed [***]), or (ii) for one additional [***] period if such extension only
applies to the [***] Collaboration Target (not to exceed [***]), in each case by
delivering a written notice of extension to Isis and paying Isis an extension
payment of $[***] per extension no later than [***] days prior to the end of the
then-applicable Drug Discovery Term.

 
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1.5.3 Consequences of End of Drug Discovery Term. From and after the end of the
Drug Discovery Term (including any extensions thereof), (i) Isis will have no
obligation to perform any further activities for any Drug Discovery Program;
(ii) any Drug Discovery Programs that have not reached the Development Candidate
stage will no longer be Drug Discovery Programs and the applicable gene targets
associated therewith will no longer be Collaboration Targets; (iii) Isis’
obligations and JBI’s rights under this Agreement with respect to such gene
target and any ASOs targeting such gene target will then terminate, and Isis
will be free to Develop and Commercialize on its own or with a Third Party such
gene target and any Compounds targeting such gene target; and (iv) Isis will own
any data generated under the Drug Discovery Program for such gene target and any
Compounds targeting such gene target. For clarity, except to the extent
explicitly set forth in the foregoing, the expiration of the Drug Discovery Term
will not affect either Party’s rights or obligations under this Agreement with
respect to any Drug Discovery Program for which JBI exercised its Option before
the end of the Drug Discovery Term, including, but not limited to, the Parties’
respective rights and obligations under ARTICLE 2, ARTICLE 4, ARTICLE 5 and
ARTICLE 6 hereof.

1.5.4 Carryover Development Candidates. If, despite Isis’ Commercially
Reasonable Efforts, by the end of the Drug Discovery Term, Isis has not
designated a Development Candidate for a particular Drug Discovery Program, then
if at any time during the [***] following the end of the Drug Discovery Term
Isis’ RMC designates an ASO discovered by Isis that is designed to bind to the
RNA that encodes the Collaboration Target that was the subject of such Drug
Discovery Program as a development candidate ready to start IND-Enabling
Toxicology Studies (such ASO, a “Carryover Development Candidate”), then, Isis
will notify JBI and will provide JBI with the data package presented to Isis’
RMC to approve such Carryover Development Candidate. JBI will then have [***]
days from its receipt of such package to elect to enter into an agreement (or
amendment to this Agreement) for an option and license under the same terms as
set forth in this Agreement, including the payment of the fee for [***] if not
already paid by JBI (except that no additional option fee under Section 6.1 will
be due). If, within [***] days after JBI’s receipt of such notice from Isis, JBI
provides Isis with written notice that it accepts such offer from Isis for such
Carryover Development Candidate, the Parties will execute an agreement (or
amendment to this Agreement) regarding such Carryover Development Candidate
containing the same terms as those described herein. If JBI either notifies Isis
that it declines the offer for such Carryover Development Candidate, or JBI does
not provide Isis with written notice during such [***]-day period that JBI
accepts such offer from Isis for such Carryover Development Candidate, then Isis
will be free to research, develop, manufacture and commercialize such Carryover
Development Candidate (and/or any other ASO designed to bind to the RNA that
encodes the gene target targeted by such Carryover Development Candidate) by
itself or with or for a Third Party.

 
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1.6 Program Management.

1.6.1 JRC. The Parties will establish a joint research committee (the “JRC”) to
provide advice and make recommendations on the conduct of activities under each
Drug Discovery Program. The JRC will consist of three representatives appointed
by Isis and three representatives appointed by JBI. Each JRC member will be a
senior scientific staff leader or have other experience and expertise
appropriate for the stage of development of the Drug Discovery Programs. Each
Party will designate one of its two representatives who is empowered by such
Party to make decisions related to the performance of such Party’s obligations
under this Agreement to act as the co-chair of the JRC. The co-chairs will be
responsible for overseeing the activities of the JRC consistent with the
responsibilities set forth in Section 1.6.2. Schedule 1.6.1 sets forth certain
JRC governance matters agreed to as of the Effective Date. The JRC will
determine the JRC operating procedures at its first meeting, including the JRC’s
policies for replacement of JRC members, policies for participation by
additional representatives or consultants invited to attend JRC meetings, and
the location of meetings, which will be codified in the written minutes of the
first JRC meeting. Each Party will be responsible for the costs and expenses of
its own employees or consultants attending JRC meetings.

1.6.2 Role of the JRC. Without limiting any of the foregoing, subject to Section
1.6.3, the JRC will perform the following functions, some or all of which may be
addressed directly at any given JRC meeting:

(a) maintain the list of Collaboration Targets, as such list may be updated from
time to time in accordance with this Agreement, and attach such list to the
minutes of the next JRC meeting following the designation of any additional
Collaboration Target;

(b) review and approve the Drug Discovery Plan for each Program;

(c) review the overall progress of the Parties’ efforts to achieve [***] with
respect to each Drug Discovery Program;

(d) review the overall progress of Isis’ efforts to discover, identify, optimize
and select the Development Candidate for each Drug Discovery Program;

(e) review the overall progress of the Parties’ efforts with respect to each the
Drug Discovery Plan;

(f) amend each Drug Discovery Plan for each Drug Discovery Program,

(g) such other review and advisory responsibilities as may be assigned to the
JRC pursuant to this Agreement.

 
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1.6.3 Decision Making. Each Party will give due consideration to, and consider
in good faith, the recommendations and advice of the JRC regarding the conduct
of each Drug Discovery Program. Subject to Section 1.3.1 and Section 1.3.5, (i)
Isis will have the final decision-making authority regarding [***] and whether
to accept and how to implement the JRC’s recommendations, and (ii) JBI will have
the final decision-making authority regarding [***]; provided that, in each
case, such decisions and conduct are in accordance with the applicable Drug
Discovery Plan and do not increase the cost of the other Party. Except as
otherwise permitted by Section 1.3.2, Section 1.3.5 and, the JRC will have no
decision making authority and will act as a forum for sharing information about
the activities conducted by the Parties hereunder and as an advisory body, in
each case only on the matters described in, and to the extent set forth in, this
Agreement.

1.6.4 Term of the JRC. Isis’ obligation to participate in the JRC, or any of its
subcommittees, will terminate upon JBI’s exercise (or expiration) of the Option
for the last Drug Discovery Program.

1.6.5 Alliance Managers. Each Party will appoint a representative to act as its
alliance manager under this Agreement (each, an “Alliance Manager”). Each
Alliance Manager will be responsible for supporting the JRC and performing the
activities listed in Schedule 1.6.5.

1.6.6 Information Sharing Committee. Formation and Purpose: Within [***] days
after the [***], the Parties will establish an Information Sharing Committee
(the “ISC”) to review the Development of Product. The ISC will review and
discuss the Development activities to be undertaken with respect to the Product
being Developed by JBI and will provide a forum for Isis to provide input into
such Development activities. Specific Responsibilities of the ISC: As part of
its overall responsibilities, the ISC will: review the progress of the
Development Plan; review any changes to the Development Plan; actively seek Isis
input and consider all input in good faith; and perform such other functions as
appropriate to further the purposes of this Agreement as determined by the
Parties

1.6.7 ISC Meetings: The ISC will meet at least annually or on an ad hoc basis.
The first meeting of the ISC will be held as soon as reasonably practicable, but
in no event later than [***] days after formation. Meetings will be held at such
place or places as are mutually agreed or by teleconference or videoconference.
The ISC meetings will be chaired by JBI. The chairperson of the ISC will be
responsible for calling meetings, preparing and circulating an agenda in advance
of each meeting of the ISC, and preparing and issuing minutes of each meeting
within [***] days thereafter; provided however, that an ISC chairperson will
call a meeting promptly upon the request by Isis to convene an ISC meeting. The
minutes will not be finalized until both Parties review and approve them. Each
Party will bear its own costs, including travel expenses, incurred by its ISC
members or by any additional non-member participants of a Party in connection
with their attendance at ISC meetings and other activities related to any ISC.
Notwithstanding Section 1.6.6 and the foregoing provisions of this Section
1.6.7, with respect to Isis, the formation of the ISC and participation in the
ISC are rights but not obligations that Isis may cancel for any Product at any
time.

 
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1.6.8 Reduction of ISC Reporting. If JBI declines to pursue any Follow-On
Compounds targeting a particular Collaboration Target and Isis pursues a
Follow-On Compound for such Collaboration Target, the ISC shall cease all ISC
reporting activities relating to Products that modulate such Collaboration
Target.

1.7 Materials Transfer. To facilitate the activities under the Drug Discovery
Programs, either Party may provide certain materials for use by the other Party.
All such materials will be used by the receiving Party in accordance with terms
of this Agreement solely for purposes of exercising its rights and performing
its obligations under this Agreement, and the receiving Party will not transfer
such materials to any Third Party except with the written consent of the
supplying Party. Except as expressly set forth herein, THE MATERIALS ARE
PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT
INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

ARTICLE 2.
EXCLUSIVITY COVENANTS

2.1 Exclusivity; Right of First Negotiation.

2.1.1 Exclusivity Covenants.

(a) The Parties’ Exclusivity Covenants for Collaboration Targets During the
Option Period. On a Collaboration Target-by-Collaboration Target basis, each
Party agrees that, except in the performance of its obligations under this
Agreement and except as set forth in Section 2.1.2, Section 2.1.3, Section
10.3.2 or Section 10.3.4, it will not work independently or for or with any of
its Affiliates or any Third Party (including the grant of any license to any
Third Party) with respect to discovery, research, development, manufacture or
commercialization of an ASO that is designed to bind to the RNA that encodes
such Collaboration Target in the Field from the Effective Date through the
expiration of the applicable Option Period or the earlier termination of the
applicable Option.

(b) Isis’ Exclusivity Covenant After Option Exercise. On a Collaboration
Target-by-Collaboration Target basis, except as set forth in Section 2.1.2,
Section 2.1.3, Section 10.3.2 or Section 10.3.4, if JBI exercises the Option in
accordance with this Agreement, then Isis will not work independently or for or
with any of its Affiliates or any Third Party (including the grant of any
license to any Third Party) with respect to:

 
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(i) discovery, research or development of an ASO that is designed to bind to the
RNA that encodes such Collaboration Target in the Field until [***] for a
Product targeting such Collaboration Target; and

(ii) on a country-by-country basis, commercializing an ASO that is designed to
bind to the RNA that encodes such Collaboration Target in the Field until [***]
with respect to such Collaboration Target.

(c) JBI’s Exclusivity Covenant After Option Exercise. After Option exercise,
JBI’s exclusivity obligations under Section 2.1.1(a) will be extended and will
continue for so long as and to the extent of Isis’ exclusivity obligations under
Section 2.1.1(b), and except as otherwise described in Section 2.1.3.

2.1.2 Right of First Negotiation for Follow-On Compounds. On a Drug Discovery
Program-by-Drug Discovery Program basis, during the period commencing on the
date JBI exercises the applicable Option in accordance with this Agreement and
ending upon [***] (such period, the “ROFN Period”), Isis hereby grants to JBI a
right of first negotiation to develop and commercialize any Follow-On Compound
developed by or on behalf of Isis, which right of first negotiation is granted
on the following terms and conditions:

(a) At any time prior to the [***] following the [***] for the applicable
Product, JBI may provide Isis with a non-binding, good faith written notice
expressing JBI’s desire for Isis to identify a Follow-On Compound (a “Follow-On
Interest Notice”). If (i) JBI does not provide Isis with a Follow-On Interest
Notice before the [***] following the [***] for the applicable Product, or (ii)
JBI does timely provide Isis with a Follow-On Interest Notice but the Parties do
not agree on a [***] related to such Follow-On Compound by 5:00 pm (Eastern
Time) on the [***] following the [***] for the applicable Product, then, Isis
may work independently or with any of its Affiliates or any Third Party with
respect to the discovery, research, development and manufacture of a Follow-On
Compound; provided, however, that during [***], Isis will not grant any license
(or an option to obtain such a license) under any intellectual property owned,
controlled or licensed by Isis to make, use or sell any Follow-On Compound (a
“Follow-On Agreement”) unless and until Isis provides a written notice to JBI (a
“Follow-On Negotiation Notice”), which notice [***]. Isis will not enter into
such a Follow-On Agreement with any Third Party until the earlier to occur of:
(A) [***] (each, a “ROFN Termination Event”).

(b) Following a ROFN Termination Event, subject to JBI’s right under Section
1.6.8 to stop sharing information, Isis will have no further obligation to
negotiate with JBI or its Affiliates with respect to such Follow-On Agreement,
and Isis will be free to negotiate and enter an agreement with a Third Party
with respect to a Follow-On Agreement. Any Follow-On Agreement entered into by
Isis with a Third Party in accordance with this Section 2.1.2(b) will be a
Permitted License to the extent related to the Follow-On Compound.

 
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2.1.3 Limitations and Exceptions to Exclusivity Covenants. Notwithstanding
anything to the contrary in this Agreement, each Party’s practice of the
following will not violate Section 2.1.1 and/or Section 2.1.2:

(a) Any activities conducted pursuant to the Prior Agreements as in effect on
the Effective Date; provided, [***];

(b) The granting by Isis of, or performance of obligations under, Permitted
Licenses;

(c) Up to and including the date of the [one year anniversary following the
Option Period for a designated Collaboration Target, JBI may acquire, by license
or otherwise, any Third Party asset that modulates a Collaboration Target so
long as such Third Party asset has at least entered a Phase II Clinical Trial at
the time of such acquisition; and

(d) After the date of the [***] for a designated Collaboration Target, JBI may
[***], any Third Party [***] so long as such Third Party [***].

2.2 Effect of Exclusivity on Indications. The Compounds are designed to bind to
the RNA that encodes a Collaboration Target in the Field with the intent of
treating Autoimmune Diseases of the gut. Isis and JBI are subject to exclusivity
obligations under Section 2.1; however, the Parties acknowledge and agree that
each Party (on its own or with a Third Party) may continue to discover,
research, develop, manufacture and commercialize products that are designed to
bind to the RNA that encodes any gene that is not a Collaboration Target for any
indication, even if such products are designed to treat Autoimmune Disease.

ARTICLE 3.
EXCLUSIVE OPTION

3.1 Option Grant and Option Deadline. On a Drug Discovery Program-by-Drug
Discovery Program basis, Isis hereby grants to JBI with respect to each Drug
Discovery Program an exclusive option to obtain the license set forth in Section
4.1.1 with respect to such Drug Discovery Program (each an “Option”). JBI (i)
shall provide Isis with written notice of its intent to exercise its Option
within [***] days of receipt of the Development Candidate package for the
application Drug Discovery Program and (ii) JBI shall pay the Option Fee
described in Section 6.4 no later than the [***] day following JBI’s notice of
its intent to exercise its Option (the “Option Deadline”).

3.2 Effect of Option Exercise or Expiration. If, by the Option Deadline, JBI or
its designated Affiliate (i) notifies Isis in writing that it wishes to exercise
the applicable Option, and (ii) pays to Isis the license fee set forth in
Section 6.4, Isis will, and hereby does, grant to JBI or its designated
Affiliate the license set forth in Section 4.1.1. If, by the applicable Option
Deadline, JBI or its designated Affiliate has not both (y) provided Isis a
written notice stating that JBI is exercising its Option, and (z) paid Isis the
license fee in accordance with Section 6.4, then JBI’s Option for the applicable
Drug Discovery Program will expire.

 
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ARTICLE 4.
LICENSE GRANTS

4.1 License Grants to JBI.

4.1.1 Development and Commercialization License. Subject to the terms and
conditions of this Agreement, on a Drug Discovery Program-by-Drug Discovery
Program basis, effective upon JBI’s exercise of the Option for a particular Drug
Discovery Program in accordance with this Agreement, Isis grants to JBI (i) a
worldwide, exclusive, royalty-bearing, sublicensable (in accordance with Section
4.1.2 below) license under the Isis Product Specific Patents to Research,
Develop, Manufacture, have Manufactured (in accordance with Section 4.1.2
below), register, market and Commercialize Products under such Drug Discovery
Program in the Field, and (ii) a worldwide, exclusive, royalty-bearing,
sublicensable (in accordance with Section 4.1.2 below) license under the
Licensed Technology other than the Isis Product Specific Patents to Research,
Develop, Manufacture, have Manufactured (in accordance with Section 4.1.2
below), register, market and Commercialize Products under such Drug Discovery
Program in the Field. The grant described in subsection (ii) in no way limits
Isis’ ability to grant additional licenses to Third Parties under the Licensed
Technology, other than the Isis Product Specific Patents, to Research, Develop,
Manufacture, have Manufactured register, market and Commercialize Third Party
products that are not Product(s).

4.1.2 Sublicense Rights; CMO Licenses.

(a) Subject to the terms and conditions of this Agreement, JBI will have the
right to grant sublicenses under the license granted under Section 4.1.1 above:

(i) under the Isis Core Technology Patents, Isis Product-Specific Patents, Isis
Formulation Patents and Isis Know-How, to an Affiliate of JBI or a Third Party;
and

(ii) under the Isis Manufacturing and Analytical Patents and Isis Manufacturing
and Analytical Know-How, solely to (y) [***] or (z) [***];

provided that each such sublicense will be subject to, and consistent with, the
terms and conditions of this Agreement. If, within 90 days of first learning of
any breach of such sublicense terms, JBI fails to take any action to enforce the
sublicense terms of a sublicense granted pursuant to this Section 4.1.2, which
failure would cause an adverse effect on Isis, JBI hereby grants Isis the right
to enforce such sublicense terms on JBI’s behalf and will cooperate with Isis
(which cooperation will be at JBI’s sole expense and will include, JBI joining
any action before a court or administrative body filed by Isis against such
Sublicensee if and to the extent necessary for Isis to have legal standing
before such court or administrative body) in connection with enforcing such
terms. JBI will provide Isis with a true and complete copy of any sublicense
granted pursuant to this Section 4.1.2 within [***] days after the execution
thereof.
 
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(b) In connection with [***], or supply API and Finished Drug Product for
Commercialization, Isis will, at JBI’s option, either (1) [***], which Isis
agrees it will [***], or, (2) permit JBI to [***]. Each such manufacturing
agreement between JBI and [***] will contain provisions permitting Isis to elect
to have such agreements assigned to Isis to the extent such agreement relates to
the applicable Clinical Supplies or Finished Drug Product in the event of a
termination of this Agreement with respect to a particular Drug Discovery
Program. JBI will provide Isis with a true and complete copy of any
manufacturing agreement entered into with [***] within [***] days after the
execution thereof. Notwithstanding the foregoing, if Isis fails to comply with
the terms of this Section 4.1.2(b) and does not cure such failure within [***]
days after written notice from JBI specifying the details of any such failure,
JBI will have the right to grant a sublicense under the Isis Manufacturing and
Analytical Patents and Isis Manufacturing and Analytical Know-How to [***].

(c) Effect of Termination on Sublicenses. If this Agreement terminates for any
reason, any Sublicensee will, from the effective date of such termination,
automatically become a direct licensee of Isis with respect to the rights
sublicensed to the Sublicensee by JBI; so long as (i) such Sublicensee is not in
breach of its sublicense agreement, (ii) such Sublicensee agrees in writing to
comply with all of the terms of this Agreement to the extent applicable to the
rights originally sublicensed to it by JBI, and (iii) such Sublicensee agrees to
pay directly to Isis such Sublicensee’s payments under this Agreement to the
extent applicable to the rights sublicensed to it by JBI. JBI agrees that it
will confirm clause (i) of the foregoing in writing at the request and for the
benefit of Isis and if requested, the Sublicensee.

4.1.3 No Implied Licenses. All rights in and to Licensed Technology not
expressly licensed to JBI under this Agreement are hereby retained by Isis or
its Affiliates. All rights in and to JBI Technology not expressly licensed or
assigned to Isis under this Agreement, are hereby retained by JBI or its
Affiliates. Except as expressly provided in this Agreement, no Party will be
deemed by estoppel or implication to have granted the other Party any license or
other right with respect to any intellectual property.

 
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4.1.4 License Conditions; Limitations. Subject to Section 6.9, any license
granted under Section 4.1.1 and the sublicense rights under Section 4.1.2 are
subject to and limited by (i) any applicable Third Party Obligations, (ii) the
Prior Agreements, and (iii) the Isis In-License Agreements, in each case to the
extent the provisions of such obligations or agreements are specifically
disclosed to JBI in writing (or via electronic data room) prior to JBI’s
exercise of the applicable Option. Isis will disclose to JBI any Third Party
Obligations Isis believes apply to applicable Products each time [***], and JBI
will have the right to elect to exclude any Third Party Patent Rights and
Know-How to which such Third Party Obligations apply by providing Isis written
notice prior to Option exercise. If, prior to an Option exercise, JBI provides
Isis with such a written notice to exclude certain Third Party Patent Rights and
Know-How, such Third Party Patent Rights and Know-How will not be included in
the Licensed Technology licensed with respect to the applicable Products under
this Agreement. If JBI does not provide Isis with such a written notice to
exclude such Third Party Patent Rights and Know-How prior to an Option exercise,
such Third Party Patent Rights and Know-How (and any Third Party Obligations to
the extent applicable to Products) will be included in the Licensed Technology
licensed with respect to the applicable Products under this Agreement.

4.1.5 Trademarks for Products. JBI or its designated Affiliate will be solely
responsible for developing, selecting, searching, registering and maintaining,
and, subject to Section 10.3, will be the exclusive owner of, all trademarks,
trade dress, logos, slogans, designs, copyrights and domain names used on or in
connection with Products.

4.2 Assignment of Isis Product-Specific Patents; Grant Back to Isis.

4.2.1 After JBI has (a) exercised its Option for a particular Product and
obtained the license under Section 4.1.1, and (b) [***], then following review
and consideration by each Party’s patent representatives, Isis will assign to
JBI or one or more of its designated Affiliates, Isis’ ownership interest in (i)
all Isis Product-Specific Patents related to such Product in the Field that are
owned by Isis (whether solely owned or jointly owned with one or more Third
Parties), and (ii) any Jointly-Owned Program Patents Covering such Product, and
thereafter, subject to Section 7.2.4, Isis will have no further right to control
any aspect of the Prosecution and Maintenance of such Isis Product Specific
Patents and such Jointly-Owned Program Patents. The assignment of Patent Rights
assigned in this Section 4.2.1 will occur within 30 days of JBI paying Isis the
milestone for Completion of a PoC for the applicable Product.

4.2.2 JBI grants to Isis a fully-paid, royalty-free, worldwide, exclusive,
sublicensable license under any Isis Product Specific Patents and Jointly-Owned
Program Patents assigned to JBI under Section 4.2.1, (i) [***], (ii) to [***]
and (iii) to [***] to the extent permitted by this Agreement.

 
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4.3 Subcontracting. Subject to the terms of this Section 4.3, each Party will
have the right to engage Third-Party subcontractors to perform certain of its
obligations under this Agreement. Any subcontractor to be engaged by a Party to
perform a Party’s obligations set forth in the Agreement will meet the
qualifications typically required by such Party for the performance of work
similar in scope and complexity to the subcontracted activity and will enter
into such Party’s standard nondisclosure agreement consistent with such Party’s
standard practices. Any Party engaging a subcontractor hereunder will remain
responsible and obligated for such activities and will not grant rights to such
subcontractor that interfere with the rights of the other Party under this
Agreement.

4.4 Technology Transfer after Option Exercise. On a Drug Discovery
Program-by-Drug Discovery Program basis, Isis will promptly, but no later than
[***] days after JBI exercises its Option for such Drug Discovery Program
hereunder, deliver to JBI or one or more designated Affiliates:

4.4.1 Isis Know-How. All Isis Know-How in Isis’ possession that has not
previously been provided hereunder, for use solely in accordance with the
licenses granted under Section 4.1.1 and Section 10.3.2, including transferring
the IND for the applicable Development Candidate to JBI together with all
regulatory documentation (including drafts) related to the applicable
Development Candidate.

4.4.2 Isis Manufacturing and Analytical Know-How. Solely for use by JBI, its
Affiliates or a Third Party acting on JBI’s behalf to Manufacture API in JBI’s
own or an Affiliate’s manufacturing facility, all Isis Manufacturing and
Analytical Know-How in Isis’ Control relating to applicable Products, which is
necessary for the exercise by JBI, its Affiliates or a Third Party of the
Manufacturing rights granted under Section 4.1.1, in each case solely to
Manufacture API, Clinical Supplies or Finished Drug Product in accordance with
the terms of this Agreement.

4.4.3 Isis Contribution of FTEs for Know-How Transfer. Isis will provide up to
[***] hours of its time [***] to JBI for each Drug Discovery Program to transfer
such Isis Know-How and Manufacturing and Analytical Know-How under Section 4.4.1
and Section 4.4.2. Thereafter, if requested by JBI, Isis will provide JBI with a
reasonable level of assistance in connection with such transfer, which JBI will
reimburse Isis for its time incurred in providing such assistance at [***]
incurred by Isis in providing such assistance and shall invoice JBI in
accordance with Section 6.10.

4.4.4 API and Product. Upon JBI’s written request, Isis will sell to JBI any
bulk API in Isis’ possession at the time of Option exercise, at a price equal to
[***].

4.5 Cross-Licenses Under Program Technology.

4.5.1 Enabling Patent Licenses from JBI to Isis. Subject to the terms and
conditions of this Agreement (including Isis’ exclusivity obligations under
Section 2.1.1), JBI hereby grants Isis a fully-paid, royalty-free, irrevocable,
worldwide, non-exclusive, sublicenseable license under any JBI Program
Technology to research, develop, manufacture, have manufactured and
commercialize [***].

 
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4.5.2 Enabling Patent Licenses from Isis to JBI. Subject to the terms and
conditions of this Agreement (including JBI’s exclusivity obligations under
Section 2.1.1), Isis hereby grants JBI a fully-paid, royalty-free, irrevocable,
worldwide, non-exclusive, sublicenseable license under any Isis Program
Technology to research, develop, manufacture, have manufactured and
commercialize [***].

ARTICLE 5.
DEVELOPMENT, MANUFACTURING AND COMMERCIALIZATION

5.1 JBI Diligence. Following an Option exercise, JBI will be solely responsible
for all Development, Manufacturing and Commercialization activities, and for all
costs and expenses associated therewith, with respect to the Development,
Manufacture and Commercialization of applicable Products; and JBI will use
Commercially Reasonable Efforts to Develop, Manufacture and Commercialize in
each and every Major Market at least one Product from each Drug Discovery
Program for which an Option has been exercised.

5.2 Specific Performance Milestone Events. Without limiting any of the
foregoing, following an Option exercise, JBI will use Commercially Reasonable
Efforts to achieve the specific performance milestone events set forth in
Schedule 5.2 (“Specific Performance Milestone Events”) for a Product on the
timeline set forth in Schedule 5.2; provided, however, if [***].

5.3 Integrated Development Plan. On a Product-by-Product basis, JBI will prepare
a Development and global integrated Development plan outlining key aspects of
the Development of each Product through Approval (each, an “Integrated
Development Plan” or “IDP”). JBI will prepare the IDP no later than [***] after
[***], and the IDP will contain information consistent with JBI’s Development
plans for its similar products at similar stages of development. Once JBI has
prepared such plans, JBI will update the IDP consistent with JBI’s standard
practice and provide such updates to Isis annually via the ISC.

5.4 Regulatory.

5.4.1 Ownership of and Assistance with Regulatory Filings.

(a) For each Product for which JBI has exercised its Option, JBI will be the
sponsor and will be responsible for filing the IND. Once a Development Candidate
is designated under this Agreement, the JRC will work to establish a plan for
IND filing support and activities, which plan will include a timeline and
responsibilities for filing the IND.

(b) [***] begin to prepare a plan, for drafting and reviewing the sections of
the NDA and MAA for the applicable Product (including establishing
responsibilities for drafting and reviewing common technical document (“CTD”)
modules, authorship, plan activity timelines and associated costs and expenses).
The Parties will act in good faith and mutually agree upon each such plan,
provided, however, that, after exercising an Option for the applicable Drug
Discovery Program, JBI will have final decision making authority with respect to
the contents of such plan that do not require Isis’ participation.

 
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(c) [***] regulatory filings for the Product, [***] and JBI, including [***]
plus any reasonable [***] providing such assistance and will specify that JBI
will [***] designated responsibilities in connection with the applicable
regulatory filing [***] in accordance with Section [***]; provided there will be
no additional [***] conducted under a Development Plan where [***].

5.4.2 [***] Meetings with FDA. For each Product, JBI shall [***] meetings with
the FDA to discuss (i) pre-IND filing matters; (ii) end of Phase II matters; or
(iii) pre-NDA filing matters. [***].

5.4.3 [***] Regulatory Meetings. JBI will [***] of any meetings JBI has or plans
to have with a Regulatory Authority regarding pre-approval or Approval matters
for a Product or that directly relate to [***], and may allow [***]. In
addition, JBI will provide Isis with as much advance written notice as
practicable of any [***] Regulatory Authorities, and JBI [***].

5.4.4 Regulatory Communications. [***], JBI [***] provide Isis with copies of
documents and communications submitted to, or received from, Regulatory
Authorities [***] that materially impact the Development or Commercialization of
Products for [***], and JBI will [***] such documents and communications.

5.4.5 Class Generic Claims. To the extent JBI intends to make any claims in a
Product label or regulatory filing that are class generic to ASOs, JBI will
provide such claims and regulatory filings to Isis in advance and will consider
in good faith any proposals and comments made by Isis.

5.4.6 End of Obligations if [***]. JBI’s obligations under Section 5.4.2,
Section 5.4.3, and Section 5.4.4 will cease with respect to a particular Product
if [***].

5.5 Applicable Laws. JBI will use commercially reasonable efforts perform its
activities pursuant to this Agreement in compliance with GLP, GCP and GMP, in
each case as applicable under the laws and regulations of the country and the
state and local government wherein such activities are conducted.

5.6 Isis’ Antisense Safety Database.

(a) JBI will provide Isis with copies of [***] and the [***] within [***] days
following the date such information is [***], as applicable. JBI will [***]. All
such information disclosed by JBI to Isis will be JBI Confidential Information.
JBI will deliver all such information to Isis Pharmaceuticals, Inc., 2855
Gazelle Court, Carlsbad, California 92010, Attention: Chief Medical Officer (or
to such other address/contact designated in writing by Isis). JBI will also
cause its Affiliates and Sublicensees to comply with this Section 5.6(a).

 
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(b) During the term of this Agreement, if requested by JBI, JBI and Isis will
[***].

ARTICLE 6. FINANCIAL PROVISIONS

6.1 Option Fee. In partial consideration for JBI’s Options hereunder, within
five Business Days following the Effective Date, JBI will pay Isis an Option fee
equal to $10,000,000 for each of the three Drug Discovery Programs for an
aggregate payment of $30,000,000.

6.2 Fourth Target Fee. If JBI elects to designate a fourth target, JBI will pay
Isis $[***] within [***] days of JBI’s written notice to Isis designating such
target.

6.3 Milestone Payments for Achievement of Pre-Licensing Milestone Event. As
further consideration for JBI’s Options and Licenses hereunder, on a
Collaboration Target-by-Collaboration Target basis, JBI will pay to Isis a
milestone payment of $[***] for achievement of [***] for such Collaboration
Target (each, a “Pre-Licensing Milestone Event”). Isis shall provide JBI with
written notice of achievement of [***] and JBI shall make such payment within
[***] days of receipt of such notification. With respect to [***], the Parties
agree that [***] is deemed to have been achieved so that Isis may [***], and JBI
will make the associated payment under this Section 6.3 within [***] days of the
Effective Date; provided such payment does not limit the Parties’ obligation to
conduct the activities set forth in the Drug Discovery Plan for [***].

6.4 License Fee. On an Option-by-Option basis, together with JBI’s written
notice to Isis stating that JBI is exercising the Option with respect to the
Drug Discovery Program for a Collaboration Target in accordance with this
Agreement, JBI will pay to Isis the applicable one-time license fee set forth in
Table 1 below (each, a “License Fee”):

Table 1
Option
License Fee
[***]
$[***]
[***]
$[***]

 
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6.5 Milestone Payments for Achievement of Post-Licensing Milestone Events. On a
Drug Discovery Program-by-Drug Discovery Program basis, JBI will pay to Isis the
applicable milestone payment set forth in Table 2 below for the first
achievement of the corresponding milestone event in Table 2 (each, a
“Post-Licensing Milestone Event”) by the first Product against such
Collaboration Target to achieve such Post-Licensing Milestone Event:

Table 2
Post-Licensing Milestone Event
Milestone Event Payment
[***]
$[***]
[***]
$[***]
[***]*
$[***]*
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]
[***]
$[***]

*[***].

6.6 Limitations on Milestone Payments; Exceptions; Notice.

6.6.1 Each milestone payment set forth in Table 2 above will be paid only once
per Drug Discovery Program upon the first achievement of the applicable
Post-Licensing Milestone Event, regardless of how many Products under a Drug
Discovery Program achieve such Milestone Event.

6.6.2 If a particular Post-Licensing Milestone Event is not achieved because
Development activities transpired such that achievement of such earlier
Milestone Event was unnecessary or did not otherwise occur, then upon
achievement of the next Post-Licensing Milestone Event to be achieved, the
Post-Licensing Milestone Event payment applicable to such earlier Post-Licensing
Milestone Event will also be due. For example, if a Party proceeds directly to
[***] without achieving the [***] then upon achieving the [***] Milestone Event,
both the [***] and [***] Milestone Event payments are due.

 
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6.6.3 Each time a Post-Licensing Milestone Event is achieved under this ARTICLE
6, JBI will send Isis, or Isis will send JBI, as the case may be, a written
notice thereof promptly (but no later than [***]) following the date of
achievement of such Milestone Event, and such payment will be due within [***]
of the date such notice was delivered.

6.7 Net Sales Milestone Payments. On a Drug Discovery Program-by-Drug Discovery
Program basis, for the first Calendar Year in which Annual worldwide Net Sales
of the first Product progressed from a Drug Discovery Program that achieves or
exceeds each of the levels of Annual worldwide Net Sales set forth in Table 3
below (each, a “Sales Milestone Event”), JBI will pay Isis the corresponding
one-time Sales Milestone Event payment within [***] days of the end of the
Calendar Quarter during such Calendar Year in which such Sales Milestone Event
occurs. \

Table 3
Annual Worldwide Net Sales
Sales Milestone Event Payment
≥ $[***]
$[***]
≥ $[***]
$[***]
≥ $[***]
$[***]

Each Sales Milestone Event payment set forth in Table 3 above will be due only
one time per Drug Discovery Program, for the first Calendar Year in which the
corresponding Sales Milestone Event occurs. If more than one of the above Sales
Milestone Events is achieved in the same year, JBI will pay all applicable
milestone payments.

6.8 Royalty Payments to Isis.

6.8.1 JBI Royalty. As partial consideration for the rights granted to JBI
hereunder, subject to the provisions of this Section 6.8.1 and Section 6.8.2,
JBI will pay to Isis royalties on a Product-by-Product basis, on Annual
worldwide Net Sales of Products included in the applicable Drug Discovery
Program sold by JBI, its Affiliates or Sublicensees, on a country-by-country
basis, in each case in the amounts as follows in Table 4 below (the “JBI
Royalty”):

Table 4
Royalty
Tier
Annual Worldwide Net Sales of Products
Royalty
Rate
1
For the portion of Annual Worldwide Net Sales
< $[***]
 
[***]%
2
For the portion of Annual Worldwide Net Sales
> $[***] but < $[***]
 
[***]%
3
For the portion of Annual Worldwide Net Sales
> $[***]
 
[***]%

 
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(a) Annual worldwide Net Sales will be calculated by [***].

(b) For purposes of clarification, any Isis Product-Specific Patents and
Jointly-Owned Program Patents assigned to JBI as set forth in Section 4.2.1 will
still be royalty-bearing and considered Isis Product-Specific Patents and
Jointly-Owned Program Patents, respectively, for determining the royalty term
and applicable royalty rates under this ARTICLE 6.

6.8.2 Application of Royalty Rates. All royalties set forth under Section 6.8.1
are subject to the provisions of this Section 6.8.2, and are payable as follows:

(a) Royalty Period. JBI’s obligation to pay Isis the JBI Royalty above with
respect to Products will continue on a country-by-country and Product-by-Product
basis from the date of First Commercial Sale of such Product in a country until
the later of the date of expiration of (i) the last Valid Claim within the
Licensed Patents or Program Patents Covering such Product in the country in
which such Product is made, used or sold, [***] (such royalty period, the
“Royalty Period”).

(b) Royalty Reduction – U.S. Loss of Patent Rights. If (i) there is no longer a
Valid Claim within the Licensed Patents or Program Patents Covering a Product in
the U.S., and [***], then JBI may reduce the royalty payments for sales in the
U.S. described in Table 4 by [***] ([***]) percent. JBI shall make the reduced
royalty payments to Isis for the remainder of the Royalty Period.

(c) Royalty Reduction – Early Generic Product Entry. If after the [***]
anniversary of the First Commercial Sale of a Product, in a given country within
the Territory, entry of a Generic Product has occurred prior to the expiry of
the last Licensed Patent or Program Patent with a Valid Claim covering a
Product, and either (i) subsequently the sales of the Product have declined by
[***] percent ([***]%) or more but less than [***] percent ([***]%) as compared
to the [***] Calendar Quarters [***] prior to such Generic Product entry, then
JBI may reduce the royalty payments for sales in such country described in Table
4 by [***] percent ([***]%), or (ii) subsequently the sales of the Product have
declined by [***] percent ([***]%) or more as compared to the [***] Calendar
Quarters [***] prior to such Generic Product entry, then no further royalty
payments shall be due to Isis for such Product in such country; provided, if JBI
reduced or ceased paying the royalty payments under this Section, and thereafter
a court of competent jurisdiction determines that the Licensed Patent is valid
and infringed by the Generic Product, JBI shall resume making royalty payments
at the full amount as of the date of such court order.

 
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(d) Limitation on Aggregate Reduction for JBI Royalties.

(i) In no event will the aggregate royalty offsets under Section 6.9.3(b) reduce
the royalties payable to Isis on Net Sales of a Product in any given period to
[***]% of the JBI Royalty rates listed in Table 4.

(ii) In addition, in no event will the aggregate royalty offsets and reductions
under Section 6.8.2(c) (as applicable) and Section 6.9.3(b) reduce the royalties
payable to Isis on Net Sales of a Product in any given period to less than
[***].

(e) End of Royalty Obligation. On a country-by-country and Product-by-Product
basis JBI’s obligation to make royalty payments hereunder for such Product in
such country will end on the expiration of the Royalty Period at which time JBI
will have a fully paid up license under the Licensed Patents; provided [***].

6.9 Third Party Payment Obligations.

6.9.1 Existing Isis In-License Agreements.

(a) Certain of the Licensed Technology Controlled by Isis as of the Effective
Date licensed to JBI under Section 4.1.1 was in-licensed or was acquired by Isis
under the agreements with Third Party licensors or sellers listed on Schedule
6.9.1 (all such license or purchase agreements being the “Isis In-License
Agreements”). Certain license fees, maintenance fees, milestone payments,
royalties or similar payments that apply to Products may become payable by Isis
to such Third Parties under the Isis In-License Agreements based on the
Development and Commercialization of a Product by JBI under this Agreement.

(b) Any payment obligations arising under the Isis In-License Agreements as
existing on the Effective Date and up until JBI exercises an Option under this
Agreement, as they apply to the Isis Core Technology used by Products developed
under this Agreement will be paid by [***], and [***], as [***]. In the event
JBI determines that it wishes to obtain a sublicense under the Isis In-License
Agreements, [***].

6.9.2 New In-Licensed Isis Product-Specific Patents. If after the Effective
Date, Isis obtains Third Party Patent Rights necessary or useful to Develop,
Manufacture or Commercialize a Product that would have been considered an Isis
Product-Specific Patent had Isis Controlled such Patent Rights on the Effective
Date, to the extent Controlled by Isis, Isis will include such Third Party
Patent Rights in the license granted to JBI under Section 4.1.1 if JBI agrees in
writing to pay Isis (i) [***] and (ii) [***]. In the event JBI declines to pay
Isis [***], nothing in this Agreement [***].

 
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6.9.3 Additional Core IP In-License Agreements.

(a) JBI will promptly provide Isis written notice of any Additional Core IP JBI
believes it has identified and Isis will have the first right, but not the
obligation, to negotiate with, and obtain a license from the Third Party
Controlling such Additional Core IP. If Isis obtains such a Third Party license,
Isis will include such Additional Core IP in the license granted to JBI under
Section 4.1.1, and any financial obligations under such Third Party agreement
will be [***].

(b) If, however, Isis elects not to obtain such a license to such Third Party
intellectual property, Isis will so notify JBI, and JBI may obtain such a Third
Party license and, subject to Section 6.8.2(d), JBI may offset an amount equal
to [***]% of any [***] paid by JBI under such Third Party license against any
[***] of this Agreement in such country for [***].

(c) If it is unclear whether certain intellectual property identified by JBI
pursuant to Section 6.9.3(a) is Additional Core IP under Section 6.9.3(b), Isis
will send written notice to such effect to JBI, and the Parties will engage a
mutually agreed upon independent Third Party intellectual property lawyer with
expertise in the patenting of ASOs, and appropriate professional credentials in
the relevant jurisdiction, to determine the question of whether or not such
Third Party intellectual property is Additional Core IP. The determination of
the Third Party expert engaged under the preceding sentence will be binding on
the Parties solely for purposes of determining whether JBI is permitted to
[***]. The costs of any Third Party expert engaged under this Section 6.9.3(c)
will be paid by the Party against whose position the Third Party lawyer’s
determination is made.

6.9.4 Other Third Party Payments.

(a) Isis’ Third Party Agreements. Except as otherwise expressly agreed to by JBI
under Section 6.9.2, after Option exercise, JBI will be responsible for paying
[***]% of the [***] arising under any Third Party agreements entered into by
Isis.

(b) JBI’s Third Party Agreements. Without limiting any applicable [***] under
Section 6.9.3(b), JBI will be responsible for paying [***]% of the [***] arising
under any Third Party agreements entered into by JBI as they apply to Products.

6.10 Invoices. Unless otherwise specified hereunder, JBI shall make payments
required hereunder to Isis within [***] ([***]) days from the date an invoice is
received by JBI provided that any invoiced costs are for fees or services that
have been rendered by Isis plus Out of Pocket Expenses incurred by Isis and
further subject to the invoice having been received by JBI. All invoices must
reference a valid Purchase Order (PO) Number which JBI shall provide to Isis
within [***] ([***]) days of any such contracted service after the Effective
Date. Isis’ invoices will include Isis’ good faith estimate of the FTE cost
incurred by Isis in performing the services and the amount of Out-of Pocket
Expenses incurred and charged by Isis. Before Isis commences work, JBI and Isis
will agree to a budget for the work JBI requests Isis to perform that will
include Isis’ good faith estimate of the FTE cost plus Out of Pocket Expenses.
Isis shall provide reasonable support for each invoice. Reasonable support means
[***]. Invoices shall be sent to: Johnson & Johnson Shared Services, P.O. Box
16540, New Brunswick, NJ 08906-6540, United States, with a copy to Immunology TA
Controller, c/o J&J PRD, PO Box 766, Welsh & McKean Road, Spring House 19477, or
via www.ap.jnj.com if Isis is established with a web invoice account. JBI
reserves the right to return to Isis unprocessed and unpaid those invoices that
do not reference a valid P.O. number.

 
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6.11 Payments.

6.11.1 Commencement. Beginning with the Calendar Quarter in which the First
Commercial Sale for a Product is made and for each Calendar Quarter thereafter,
JBI will make royalty payments to Isis under this Agreement within [***] days
following the end of each such Calendar Quarter. Each royalty payment will be
accompanied by a report showing on a Product-by Product and country-by-country
basis the gross sales, the Net Sales, and a calculation of the amount of royalty
due on such Net Sales. This report shall also include the exchange rates and
other methodology used in converting Net Sales into US dollars from the
currencies in which sales were made in order to determine the appropriate
royalty tier and royalty. If no royalties are payable in respect of a given
Calendar Quarter, JBI will submit a written royalty report to Isis so indicating
together with an explanation as to why no such royalties are payable. In
addition, on a Product-by-Product basis, beginning with the Calendar Quarter in
which the First Commercial Sale for such Product is made and for each Calendar
Quarter thereafter for the next [***] ([***]) years, JBI will (based on
information JBI collects, and in a format JBI uses for its own internal planning
and reporting purposes) provide Isis a preliminary non-binding report estimating
the total Net Sales of, and royalties payable to Isis for Products projected for
such Calendar Quarter. JBI will endeavor to provide such preliminary non-binding
report within [***] Business Days following the end of each such Calendar
Quarter; provided JBI will provide such preliminary non-binding report no later
than [***] Business Days following the end of each such Calendar Quarter.

6.11.2 Mode of Payment. All payments under this Agreement will be (i) payable in
full in U.S. dollars, regardless of the country(ies) in which sales are made,
(ii) made by wire transfer of immediately available funds to an account
designated by Isis in writing, and (iii) non-creditable, irrevocable and
non-refundable. With respect to sales of Product invoiced in a currency other
than USD, such amounts and the amounts payable hereunder shall be expressed in
their USD equivalent calculated as follows: For the upcoming Calendar Year, JBI
shall provide: 1) a Currency Hedge Rate(s) to be used for the local currency of
each country of the Territory and 2) the details of such Currency Hedge Rate(s)
in writing to Isis not later than [***] business days after the Currency Hedge
Rate(s) are available from the GTSC or its Affiliates, which is customarily at
the end of October. Such Currency Hedge Rate(s) will remain constant throughout
the upcoming calendar year. JBI shall use the Currency Hedge Rate(s) to convert
Net Sales to USD for the purpose of calculating royalties and Sales Milestones.

 
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6.11.3 Records Retention. Commencing with the First Commercial Sale of a
Product, JBI will keep complete and accurate records pertaining to the sale of
Products for a period of [***] Calendar Years after the year in which such sales
occurred, and in sufficient detail to permit Isis to confirm the accuracy of the
Net Sales or royalties paid by JBI hereunder.

6.12 Audits. After Option exercise, during the Agreement Term and for a period
of [***] Calendar Years thereafter, at the written request and expense of Isis,
JBI will permit an independent certified public accountant of nationally
recognized standing appointed by Isis and reasonably acceptable to JBI, at
reasonable times and upon reasonable notice, but in no case more than [***], to
examine such records at the location where such records are maintained as may be
necessary for the sole purpose of verifying the calculation and reporting of
milestones and Net Sales, and the correctness of any milestone and royalty
payments made under this Agreement for any period within the preceding [***]
Calendar Years. As a condition to examining any records of JBI, such auditor
will sign a nondisclosure agreement reasonably acceptable to JBI in form and
substance. Any and all records of JBI examined by such independent certified
public accountant will be deemed JBI’s Confidential Information. The report of
the independent public accountant shall be shared with JBI prior to distribution
to Isis such that JBI can provide the independent public accountant with
justifying remarks for inclusion in the report prior to sharing the conclusions
of such independent public audit with Isis. Upon completion of the audit, the
accounting firm will provide both JBI and Isis with a written report disclosing
whether the royalty payments made by JBI are correct or incorrect, whether any
milestone payment that became due during the audited period was timely reported
and paid, and the specific details concerning any discrepancies (“Audit
Report”). If, as a result of any inspection of the books and records of JBI, it
is shown that JBI’s royalty payments under this Agreement were less than the
royalty amount which should have been paid, and/or that any milestone payment
was not paid when due or at all, then JBI will make all payments required to be
made by paying Isis the difference between such amounts to eliminate any
discrepancy revealed by said inspection within [***] days of receiving the Audit
Report, with interest calculated in accordance with Section 6.14. If, as a
result of any inspection of the books and records of JBI, it is shown that JBI’s
payments under this Agreement were greater than the royalty amount which should
have been paid, then JBI will receive a credit against future royalty payments
due under Section 6.8 equal to the difference between the amounts paid by JBI
and the royalty amounts which should have been paid. Isis will pay for such
audit, except that if JBI is found to have underpaid Isis by more than [***]% of
the amount that should have been paid, and/or not to have paid any milestone
that should have been paid, JBI will reimburse Isis’ reasonable costs of the
audit.

 
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6.13 Taxes.

6.13.1 Taxes on Income. Each Party will be solely responsible for the payment of
all taxes imposed on its share of income arising directly or indirectly from the
activities of the Parties under this Agreement.

6.13.2 Isis will provide JBI with any and all tax forms in advance of the due
dates that may be reasonably necessary in order for JBI to lawfully not withhold
tax or to withhold tax at a reduced rate under an applicable bilateral income
tax treaty. Following JBI’s timely receipt of such tax forms from Isis, JBI will
not withhold tax or will withhold tax at a reduced rate under an applicable
bilateral income tax treaty, if appropriate under the applicable laws. Each
Party will provide the other with reasonable assistance to enable the recovery,
as permitted by applicable law, of withholding taxes resulting from payments
made under this Agreement, such recovery to be for the benefit of the Party who
would have been entitled to receive the money but for the application of
withholding tax under this Section 6.13.2.

6.13.3 JBI will make all payments to Isis under this Agreement without deduction
or withholding for Taxes except to the extent that any such deduction or
withholding is required by law in effect at the time of payment.

6.13.4 Any Tax required to be withheld on amounts payable under this Agreement
will be paid by JBI on behalf of Isis to the appropriate governmental authority,
and JBI will furnish Isis with proof of payment of such Tax. Any such Tax
required to be withheld will be an expense of and borne by Isis. If any such Tax
is assessed against and paid by JBI, then Isis will indemnify and hold harmless
JBI from and against such Tax unless the assessment and payment of such Tax is a
result of acts or omissions by JBI.

6.13.5 JBI and Isis will cooperate with one another and use reasonable efforts
to lawfully avoid or reduce withholding or similar obligations in respect of
royalties, milestone payments and other payments made by the paying Party to the
receiving party under this agreement, including but not limited to all
documentation required by any taxing authority or reasonably requested by either
Party to secure a reduction in the rate of applicable withholding Taxes or
similar obligations. Within five Business Days of the Effective Date of this
Agreement, Isis will deliver to JBI an accurate and complete Internal Revenue
Service Form W-9.

6.13.6 The provisions of this Section 6.13 Are to be read in conjunction with
the provisions of Section 12.4 below.

6.14 Interest. Any undisputed payments to be made hereunder that are not paid on
or before the date such payments are due under this Agreement will bear interest
at a rate per annum equal to the lesser of (i) the rate announced by Bank of
America (or its successor) as its prime rate in effect on the date that such
payment would have been first due plus 1% or (ii) the maximum rate permissible
under applicable law.

 
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6.15 Paying Agent. Janssen Research & Development, L.L.C., an Affiliate of JBI
acting as a paying agent for JBI, may make certain payments due under this
Agreement.

ARTICLE 7.
INTELLECTUAL PROPERTY

7.1 Ownership.

7.1.1 Isis Technology and JBI Technology. As between the Parties, Isis will own
and retain all of its rights, title and interest in and to the Licensed Know-How
and Licensed Patents and JBI will own and retain all of its rights, title and
interest in and to the JBI Know-How and JBI Patents, subject to any assignments,
rights or licenses expressly granted by one Party to the other Party under this
Agreement.

7.1.2 Agreement Technology. As between the Parties, JBI is the sole owner of any
Know-How discovered, developed, invented or created solely by or on behalf of
JBI or its Affiliates during the Drug Discovery Term (“JBI Program Know-How”)
and any Patent Rights that claim or cover JBI Program Know-How (“JBI Program
Patents” and together with the JBI Program Know-How, the “JBI Program
Technology”), and will retain all of its rights, title and interest thereto,
subject to any rights or licenses expressly granted by JBI to Isis under this
Agreement. As between the Parties, Isis is the sole owner of any Know-How
discovered, developed, invented or created solely by or on behalf of Isis or its
Affiliates during the Drug Discovery Term (“Isis Program Know-How”) and any
Patent Rights that claim or cover such Know-How (“Isis Program Patents” and
together with the Isis Program Know-How, the “Isis Program Technology”), and
will retain all of its rights, title and interest thereto, subject to any
assignment, rights or licenses expressly granted by Isis to JBI under this
Agreement. Any Know-How discovered, developed, invented or created jointly
during the Drug Discovery Term by or on behalf of both Parties or their
respective Affiliates or Third Parties acting on their behalf (“Jointly-Owned
Program Know-How”), and any Patent Rights that claim or cover such Jointly-Owned
Program Know-How (“Jointly-Owned Program Patents”, and together with the
Jointly-Owned Program Know-How, the “Jointly-Owned Program Technology”), are
owned jointly by JBI and Isis on an equal and undivided basis, including all
rights, title and interest thereto, subject to any rights or licenses expressly
granted by one Party to the other Party under this Agreement. Except as
expressly provided in this Agreement, neither Party will have any obligation to
account to the other for profits with respect to, or to obtain any consent of
the other Party to license or exploit, Jointly-Owned Program Technology by
reason of joint ownership thereof, and each Party hereby waives any right it may
have under the laws of any jurisdiction to require any such consent or
accounting. Each Party will promptly disclose to the other Party in writing, and
will cause its Affiliates to so disclose, the discovery, development, invention
or creation of any Jointly-Owned Program Technology. The JBI Program Patents,
Isis Program Patents and Jointly-Owned Program Patents are collectively referred
to herein as the “Program Patents.”

 
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7.1.3 Joint Patent Committee.

(a) The Parties will establish a “Joint Patent Committee” or “JPC.” The JPC will
serve as the primary contact and forum for discussion between the Parties with
respect to intellectual property matters arising under this Agreement, and will
cooperate with respect to the activities set forth in this 7.1.3. Isis’
obligation to participate in the JPC will terminate upon the end of the Drug
Discovery Term. Thereafter, Isis will have the right, but not the obligation, to
participate in JPC meetings. If the JPC dissolves, each Party will designate a
patent attorney who will be responsible for intellectual property matters under
this Agreement. A strategy will be discussed with regard to (i) prosecution and
maintenance, defense and enforcement of Isis Product-Specific Patents that would
be or are licensed to JBI under Section 4.1.1 in connection with a Product and
JBI Product-Specific Patents, (ii) defense against allegations of infringement
of Third Party Patent Rights, (iii) licenses to Third Party Patent Rights or
Know-How, and (iv) the timing and subject matter of any potential publications
regarding a Drug Discovery Program, in each case to the extent such matter would
be reasonably likely to have a material impact on the Agreement or the licenses
granted hereunder, which strategy will be considered in good faith by the Party
entitled to prosecute, enforce and defend such Patent Rights, as applicable,
hereunder, but will not be binding on such Party.

(b) In addition, the Joint Patent Committee will be responsible for the
determination of inventorship of Program Patents in accordance with United
States patent laws. In case of a dispute in the Joint Patent Committee (or
otherwise between Isis and JBI) over inventorship of Program Patents, if the
Joint Patent Committee cannot resolve such dispute, even after seeking the JRC’s
input, such dispute will be resolved by independent patent counsel not engaged
or regularly employed in the past two years by either Party and reasonably
acceptable to both Parties. The decision of such independent patent counsel will
be binding on the Parties. Expenses of such patent counsel will be shared
equally by the Parties.

(c) The JPC will comprise an equal number of members from each Party. The Joint
Patent Committee will meet as often as agreed by them (and at least
semi-Annually), to discuss matters arising out of the activities set forth in
this 7.1.3. The JPC will determine the JPC operating procedures at its first
meeting, including the JPC’s policies for replacement of JPC members, and the
location of meetings, which will be codified in the written minutes of the first
JPC meeting. To the extent reasonably requested by either Party, the Joint
Patent Committee will solicit the involvement of more senior members of their
respective legal departments (up to the most senior intellectual property
attorney, where appropriate) with respect to critical issues, and may escalate
issues to the Executives for input and resolution pursuant to Section 12.1. Each
Party’s representatives on the Joint Patent Committee will consider comments and
suggestions made by the other in good faith. If either Party deems it reasonably
advisable, the Parties will enter into a mutually agreeable common interest
agreement covering the matters contemplated by this Agreement. Each party shall
bear their own cost of participation on the JPC.

 
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7.2 Prosecution and Maintenance of Patents.

7.2.1 Patent Filings. The Party responsible for Prosecution and Maintenance of
any Patent Rights as set forth in Section 7.2.2 and Section 7.2.3 will endeavor
to obtain patent protection for the applicable Product as it Prosecutes and
Maintains its other patents Covering products in development, using counsel of
its own choice but reasonably acceptable to the other Party, in such countries
as the responsible Party sees fit.

7.2.2 Licensed Patents and JBI Patents.

(a) Licensed Patents In General. Prior to exercise of an Option, Isis will
control and be responsible for all aspects of the Prosecution and Maintenance of
all Licensed Patents that are the subject of such Option, subject to Section
7.2.2(b), Section 7.2.3 and Section 7.2.4. During the Agreement Term, Isis will
control and be responsible for all aspects of the Isis Core Technology Patents,
Isis Manufacturing and Analytical Patents, and Isis Formulation Patents.

(b) Licensed Patents After Option Exercise. After JBI exercises its Option for a
particular Drug Discovery Program, JBI will control and be responsible for all
aspects of the Prosecution and Maintenance of all Isis Product-Specific Patents
and Jointly-Owned Program Patents that cover Products under such Research
project to the same extent Isis had the right to control and was responsible for
such Prosecution and Maintenance immediately prior to such Option exercise,
subject to Section 7.2.3 and Section 7.2.4, and will grant Isis the license set
forth in Section 4.2.2.

(c) JBI Patents. JBI will control and be responsible for all aspects of the
Prosecution and Maintenance of all JBI Patents, subject to Section 7.2.3 and
Section 7.2.4.

7.2.3 Jointly-Owned Program Patents. Isis will control and be responsible for
all aspects of the Prosecution and Maintenance of Jointly-Owned Program Patents
that are not Product Specific Patents. Prior to exercise of an Option, Isis will
control and be responsible for all aspects of the Prosecution and Maintenance of
Jointly-Owned Program Patents that are Product Specific Patents and the subject
of such Option. After exercise of an Option, JBI will control and be responsible
for all aspects of the Prosecution and Maintenance of Jointly-Owned Program
Patents that are Product Specific Patents and are the subject of such exercised
Option.

 
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7.2.4 Other Matters Pertaining to Prosecution and Maintenance of Patents.

(a) Each Party will keep the other Party informed through the Joint Patent
Committee as to material developments with respect to the Prosecution and
Maintenance of the Product-Specific Patents or Jointly-Owned Program Patents for
which such Party has responsibility for Prosecution and Maintenance pursuant to
Section 7.2.2, Section 7.2.3 or this Section 7.2.4, including by providing
copies of material data as it arises, any office actions or office action
responses or other correspondence that such Party provides to or receives from
any patent office, including notice of all interferences, reissues,
re-examinations, oppositions or requests for patent term extensions, and all
patent-related filings, and by providing the other Party the timely opportunity
to have reasonable input into the strategic aspects of such Prosecution and
Maintenance.

(b) If JBI elects (a) not to file and prosecute patent applications for the
Jointly-Owned Program Patent Rights or Isis Product-Specific Patents that have
been licensed or assigned to JBI under this Agreement or the JBI
Product-Specific Patents (“JBI-Prosecuted Patents”) in a particular country, (b)
not to continue the prosecution (including any interferences, oppositions,
reissue proceedings, re-examinations, and patent term extensions, adjustments,
and restorations) or maintenance of any JBI-Prosecuted Patent in a particular
country, or (c) not to file and prosecute patent applications for the
JBI-Prosecuted Patent in a particular country following a written request from
Isis to file and prosecute in such country, then JBI will so notify Isis
promptly in writing of its intention (including a reasonably detailed rationale
for doing so) in good time to enable Isis to meet any deadlines by which an
action must be taken to establish or preserve any such Patent Right in such
country; and Isis will have the right, but not the obligation, to file,
prosecute, maintain, enforce, or otherwise pursue such JBI-Prosecuted Patent in
the applicable country at its own expense with counsel of its own choice. In
such case, JBI will cooperate with Isis to file for, or continue to Prosecute
and Maintain or enforce, or otherwise pursue such JBI-Prosecuted Patent in such
country in Isis’ own name, but only to the extent that JBI is not required to
take any position with respect to such abandoned JBI-Prosecuted Patent that
would be reasonably likely to adversely affect the scope, validity or
enforceability of any of the other Patent Rights being prosecuted and maintained
by JBI under this Agreement. Notwithstanding anything to the contrary in this
Agreement, if Isis assumes responsibility for the Prosecution and Maintenance of
any such JBI-Prosecuted Patent under this Section 7.2.4(b), Isis will have no
obligation to notify JBI if Isis intends to abandon such JBI-Prosecuted Patent.

(c) If, during the Agreement Term, Isis intends to abandon any Isis
Product-Specific Patent for which Isis is responsible for Prosecution and
Maintenance without first filing a continuation or substitution, then, if the
applicable Option Deadline has not passed, Isis will notify JBI of such
intention at least 60 days before such Patent Right will become abandoned, and
JBI will have the right, but not the obligation, to assume responsibility for
the Prosecution and Maintenance thereof at its own expense (subject to Section
7.3.1) with counsel of its own choice. Notwithstanding anything to the contrary
in this Agreement, if JBI assumes responsibility for the Prosecution and
Maintenance of any such Isis Product-Specific Patent under this Section
7.2.4(c), JBI will have no obligation to notify Isis if JBI intends to abandon
such Isis Product-Specific Patent.

 
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(d) The Parties, through the Joint Patent Committee, will cooperate in good
faith to determine if and when any divisional or continuation applications will
be filed with respect to any Program Patents or Product-Specific Patents, and
where a divisional or continuation patent application filing would be practical
and reasonable, then such a divisional or continuation filing will be made.

(e) If the Party responsible for Prosecution and Maintenance pursuant to Section
7.2.3 intends to abandon such Jointly-Owned Program Patent without first filing
a continuation or substitution, then such Party will notify the other Party of
such intention at least 60 days before such Jointly-Owned Program Patent will
become abandoned, and such other Party will have the right, but not the
obligation, to assume responsibility for the Prosecution and Maintenance thereof
at its own expense (subject to Section 7.3.1) with counsel of its own choice, in
which case the abandoning Party will, and will cause its Affiliates to, assign
to the other Party (or, if such assignment is not possible, grant a fully-paid
exclusive license in) all of their rights, title and interest in and to such
Jointly-Owned Program Patents. If a Party assumes responsibility for the
Prosecution and Maintenance of any such Jointly-Owned Program Patents under this
Section 7.2.4(e), such Party will have no obligation to notify the other Party
of any intention of such Party to abandon such Jointly-Owned Program Patents.

(f) In addition, the Parties will consult, through the Joint Patent Committee,
and take into consideration the comments of the other Party for all matters
relating to interferences, reissues, re-examinations and oppositions with
respect to those Patent Rights in which such other Party (i) has an ownership
interest, (ii) has received a license thereunder in accordance with this
Agreement, or (iii) may in the future, in accordance with this Agreement, obtain
a license or sublicense thereunder.

7.3 Patent Costs.

7.3.1 Jointly-Owned Program Patents. Unless the Parties agree otherwise, Isis
and JBI will share equally the Patent Costs associated with the Prosecution and
Maintenance of Jointly-Owned Program Patents; provided that, either Party may
decline to pay its share of costs for filing, prosecuting and maintaining any
Jointly-Owned Program Patents in a particular country or particular countries,
in which case the declining Party will, and will cause its Affiliates to, assign
to the other Party (or, if such assignment is not possible, grant a fully-paid
exclusive license in) all of their rights, titles and interests in and to such
Jointly-Owned Program Patents.

 
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7.3.2 Licensed Patents and JBI Patents. Except as set forth in Section 7.2.4 and
Section 7.3.1, each Party will be responsible for all Patent Costs incurred by
such Party prior to and after the Effective Date in all countries in the
Prosecution and Maintenance of Patent Rights for which such Party is responsible
under Section 7.2; provided, however, that after Option exercise, JBI will be
solely responsible for Patent Costs arising from the Prosecution and Maintenance
of the Isis Product-Specific Patents.

7.4 Defense of Claims Brought by Third Parties.

7.4.1 If a Third Party initiates a Proceeding claiming a Patent Right owned by
or licensed to such Third Party is infringed by the Development, Manufacture or
Commercialization of a Product, (a) Isis will have the first right, but not the
obligation, to defend against any such Proceeding initiated prior to Option
exercise at its sole cost and expense and (b) JBI will have the first right, but
not the obligation, to defend against any such Proceeding initiated after Option
exercise at its sole cost and expense. If the Party having the first right to
defend against such Proceeding (the “Lead Party”) elects to defend against such
Proceeding, then the Lead Party will have the sole right to direct the defense
and to elect whether to settle such claim (but only with the prior written
consent of the other Party, not to be unreasonably withheld, conditioned or
delayed). The other Party will reasonably assist the Lead Party in defending
such Proceeding and cooperate in any such litigation at the request and expense
of the Lead Party. The Lead Party will provide the other Party with prompt
written notice of the commencement of any such Proceeding that is of the type
described in this Section 7.4, and the Lead Party will keep the other Party
apprised of the progress of such Proceeding. If the Lead Party elects not to
defend against a Proceeding, then the Lead Party will so notify the other Party
in writing within 60 days after the Lead Party first receives written notice of
the initiation of such Proceeding, and the other Party (the “Step-In Party”)
will have the right, but not the obligation, to defend against such Proceeding
at its sole cost and expense and thereafter the Step-In Party will have the sole
right to direct the defense thereof, including the right to settle such claim.
In any event, the Party not defending such Proceeding will reasonably assist the
other Party and cooperate in any such litigation at the request and expense of
the Party defending such Proceeding. Each Party may at its own expense and with
its own counsel join any defense initiated or directed by the other Party under
this Section 7.4. Each Party will provide the other Party with prompt written
notice of the commencement of any such Proceeding under this Section 7.4, and
such Party will promptly furnish the other Party with a copy of each
communication relating to the alleged infringement that is received by such
Party.

 
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7.4.2 Discontinued Product. If a Third Party initiates a Proceeding claiming
that any Patent Right or Know-How owned by or licensed to such Third Party is
infringed by the Development, Manufacture or Commercialization of a Discontinued
Product, Isis will have the first right, but not the obligation, to defend
against and settle such Proceeding at its sole cost and expense. JBI will
reasonably assist Isis in defending such Proceeding and cooperate in any such
litigation at the request and expense of Isis. Each Party may at its own expense
and with its own counsel join any defense directed by the other Party. Isis will
provide JBI with prompt written notice of the commencement of any such
Proceeding, or of any allegation of infringement of which Isis becomes aware and
that is of the type described in this Section 7.4.2, and Isis will promptly
furnish JBI with a copy of each communication relating to the alleged
infringement received by Isis.

7.4.3 Interplay Between Enforcement of IP and Defense of Third Party Claims.
Notwithstanding the provisions of Section 7.4.1 and Section 7.4.2, to the extent
that a Party’s defense against a Third Party claim of infringement under this
Section 7.4 involves (i) the enforcement of the other Party’s Know-How or Patent
Rights, or (ii) the defense of an invalidity claim with respect to such other
Party’s Know-How or Patent Rights, then, in each case, the general concepts of
Section 7.5 will apply to the enforcement of such other Party’s Know-How or
Patent Rights or the defense of such invalidity claim (i.e., each Party has the
right to enforce its own intellectual property, except that the relevant
Commercializing Party will have the initial right, to the extent provided in
Section 7.5, to enforce such Know-How or Patent Rights or defend such invalidity
claim, and the other Party will have a step-in right, to the extent provided in
Section 7.5, to enforce such Know-How or Patent Rights or defend such invalidity
claim).

7.5 Enforcement of Patents Against Competitive Infringement.

7.5.1 Duty to Notify of Competitive Infringement. If either Party learns of an
infringement, unauthorized use, misappropriation or threatened infringement by a
Third Party to which such Party does not owe any obligation of confidentiality
with respect to any Product-Specific Patents by reason of the development,
manufacture, use or commercialization of a product directed against the RNA that
encodes a Collaboration Target in the Field (“Competitive Infringement”), such
Party will promptly notify the other Party in writing and will provide such
other Party with available evidence of such Competitive Infringement; provided,
however, that for cases of Competitive Infringement under Section 7.5.7 below,
such written notice will be given within 10 days.

7.5.2 Prior to Option Exercise. For any Competitive Infringement with respect to
a Product occurring after the Effective Date but before Option exercise, Isis
will have the first right, but not the obligation, to institute, prosecute, and
control a Proceeding with respect thereto, by counsel of its own choice, and JBI
will have the right to be represented in that action by counsel of its own
choice at its own expense, however, Isis will have the sole right to control
such litigation. Isis will provide JBI with prompt written notice of the
commencement of any such Proceeding, and Isis will keep JBI apprised of the
progress of such Proceeding. If Isis fails to initiate a Proceeding within a
period of 90 days after receipt of written notice of such Competitive
Infringement (subject to a 90 day extension to conclude negotiations, which
extension will apply only in the event that Isis has commenced good faith
negotiations with an alleged infringer for elimination of such Competitive
Infringement within such 90 day period), JBI will have the right to initiate and
control a Proceeding with respect to such Competitive Infringement by counsel of
its own choice; provided that Isis will have the right to be represented in any
such action by counsel of its own choice at its own expense. Notwithstanding the
foregoing, Isis will at all times have the sole right to institute, prosecute,
and control any Proceeding under this Section 7.5.2 to the extent involving any
the Isis Core Technology Patents, Isis Manufacturing and Analytical Patents, or
Isis Formulation Patents.

 
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7.5.3 Following Option Exercise. For any Competitive Infringement with respect
to a particular Product (except for a Discontinued Product) occurring after
Option exercise, so long as part of such Proceeding JBI also enforces any Patent
Rights Controlled by JBI being infringed that Cover the Product, then JBI will
have the first right, but not the obligation, to institute, prosecute, and
control a Proceeding to enforce the Isis Product Specific Patents with respect
thereto by counsel of its own choice at its own expense, and Isis will have the
right, at its own expense, to be represented in that action by counsel of its
own choice, however, JBI will have the right to control such litigation. If JBI
fails to initiate a Proceeding within a period of 90 days after receipt of
written notice of such Competitive Infringement (subject to a 90-day extension
to conclude negotiations, if JBI has commenced good faith negotiations with an
alleged infringer for elimination of such Competitive Infringement within such
90 day period), Isis will have the right to initiate and control a Proceeding
with respect to such Competitive Infringement by counsel of its own choice, and
JBI will have the right to be represented in any such action by counsel of its
own choice at its own expense. Isis will at all times have the sole right to
institute, prosecute, and control any Proceeding under this Section 7.5.3 to the
extent involving any Isis Core Technology Patents, Isis Manufacturing and
Analytical Patents, or Isis Formulation Patents.

7.5.4 Joinder.

(a) If a Party initiates a Proceeding in accordance with this Section 7.5, the
other Party agrees to be joined as a party plaintiff where necessary and to give
the first Party reasonable assistance and authority to file and prosecute the
Proceeding. Subject to Section 7.5.5, the costs and expenses of each Party
incurred pursuant to this Section 7.5.4(a) will be borne by the Party initiating
such Proceeding.

 
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(b) If one Party initiates a Proceeding in accordance with this Section 7.5.4,
the other Party may join such Proceeding as a party plaintiff where necessary
for such other Party to seek lost profits with respect to such infringement.

7.5.5 Share of Recoveries. Any damages or other monetary awards recovered with
respect to a Proceeding brought pursuant to this Section 7.5 will be shared as
follows:

(a) the amount of such recovery will first be applied to the Parties’ reasonable
Out-of-Pocket Costs incurred in connection with such Proceeding (which amounts
will be allocated pro rata if insufficient to cover the totality of such
expenses); then

(b) any remaining proceeds constituting direct or actual damages for acts of
infringement occurring prior to JBI’s exercise of the Option will be (i) [***];
or (ii) [***]; then

(c) any remaining proceeds constituting direct or actual damages for acts of
infringement occurring after JBI’s exercise of the Option [***]; then

(d) any remaining proceeds constituting punitive or treble damages will be
allocated between the Parties as follows: the Party initiating the Proceeding
will receive and retain [***]% of such proceeds and the other Party will receive
and retain [***]% of such proceeds.

7.5.6 Settlement. Notwithstanding anything to the contrary under this Section
7.5.6 neither Party may enter a settlement, consent judgment or other voluntary
final disposition of a suit under this 7.5.6 that disclaims, limits the scope
of, admits the invalidity or unenforceability of, or grants a license, covenant
not to sue or similar immunity under a Patent Right Controlled by the other
Party without first obtaining the written consent of the Party that Controls the
relevant Patent Right.

7.5.7 35 USC 271(e)(2) Infringement. Notwithstanding anything to the contrary in
this Section 7.5, solely with respect to Licensed Patents that have not been
assigned to JBI under this Agreement for a Competitive Infringement under 35 USC
271(e)(2), the time period set forth in Section 7.5.2 during which a Party will
have the initial right to bring a Proceeding will be shortened to a total of 25
days, so that, to the extent the other Party has the right, pursuant to such
Section to initiate a Proceeding if the first Party does not initiate a
Proceeding, such other Party will have such right if the first Party does not
initiate a Proceeding within 25 days after such first Party’s receipt of written
notice of such Competitive Infringement.

7.6 Other Infringement.

7.6.1 Jointly-Owned Program Patents. With respect to the infringement of a
Jointly-Owned Program Patent which is not a Competitive Infringement, the
Parties will cooperate in good faith to bring suit together against such
infringing party or the Parties may decide to permit one Party to solely bring
suit. Any damages or other monetary awards recovered with respect to a
Proceeding brought pursuant to this Section 7.6.1 will be shared as follows: (i)
the amount of such recovery will first be applied to the Parties’ reasonable
Out-of-Pocket costs incurred in connection with such Proceeding (which amounts
will be allocated pro rata if insufficient to cover the totality of such
expenses); (ii) any remaining proceeds constituting direct damages will be
[***], and (iii) any remaining proceeds constituting punitive or treble damages
will be allocated as follows: (A) if the Parties jointly initiate a Proceeding
pursuant to this Section 7.6.1, each Party will receive [***]% of such proceeds;
and (B) if only one Party initiates the Proceeding pursuant to this Section
7.6.1, such Party will receive [***]% of such proceeds and the other Party will
receive [***]% of such proceeds.

 
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7.6.2 Patents Solely Owned by Isis. Isis will retain all rights to pursue an
infringement of any Patent Right solely owned by Isis which is other than a
Competitive Infringement and Isis will retain all recoveries with respect
thereto.

7.6.3 Patents Solely Owned by JBI. JBI will retain all rights to pursue an
infringement of any Patent Right solely owned by JBI which is other than a
Competitive Infringement and JBI will retain all recoveries with respect
thereto.

7.7 Patent Listing. JBI will promptly, accurately and completely list, with the
applicable Regulatory Authorities during the Agreement Term, all applicable
Patent Rights that Cover a Product. Prior to such listings, the Parties will
meet, through the Joint Patent Committee, to evaluate and identify all
applicable Patent Rights, and JBI will have the right to review, where
reasonable, original records relating to any invention for which Patent Rights
are being considered by the Joint Patent Committee for any such listing.
Notwithstanding the preceding sentence, JBI will retain final decision-making
authority as to the listing of all applicable Patent Rights for the Product that
are not Isis Core Technology Patents, Isis Manufacturing and Analytical Patents,
or Isis Formulation Patents, regardless of which Party owns such Patent Rights.

7.8 Joint research agreement under the Leahy-Smith America Invents Act. In the
event that a Party intends to so invoke the Leahy-Smith America Invents Act,
once agreed to by the other Party, it will notify the other Party and the
Parties shall use reasonable efforts to cooperate and coordinate their
activities with such Party with respect to any submissions, filings or other
activities in support thereof. The Parties acknowledge and agree that this
Agreement is a “joint research agreement” as defined in 35 U.S.C. § 100(h)

7.9 Obligations to Third Parties. Notwithstanding any of the foregoing, each
Party’s rights and obligations with respect to Licensed Technology under this
Section 7.9 will be subject to the Third Party rights and obligations under any
(i) New Third Party License the restrictions and obligations of which JBI has
agreed to under Section 6.9.2, (ii) Prior Agreements, and (iii) Isis In-License
Agreements; provided, however, that, to the extent that Isis has a
non-transferable right to prosecute, maintain or enforce any Patent Rights
licensed to JBI hereunder and, this Agreement purports to grant any such rights
to JBI, Isis will act in such regard with respect to such Patent Rights at JBI’s
direction.

 
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7.10 Additional Right and Exceptions. Notwithstanding any provision of this
Section 7.10, Isis retains the sole right to Prosecute and Maintain Isis Core
Technology Patents and Isis Manufacturing and Analytical Patents during the
Agreement Term and to control any enforcement of Isis Core Technology Patents
and Isis Manufacturing and Analytical Patents, and will take the lead on such
enforcement solely to the extent that the scope or validity of any Patent Rights
Controlled by Isis and Covering the Isis Core Technology Patents or Isis
Manufacturing and Analytical Patents is at risk.

7.11 Patent Term Extension. The Parties will cooperate with each other in
gaining patent term extension wherever applicable to the Product. After
exercising an Option, JBI will determine which relevant patents will be
extended.

7.12 Rights in Bankruptcy. All rights and licenses granted under or pursuant to
any section of this Agreement are and will otherwise be deemed to be for
purposes of Section 365(n) of Title 11, United States Code (the "Bankruptcy
Code") licenses of rights to "intellectual property" as defined in Section
101(56) of the Bankruptcy Code. The Parties will retain and may fully exercise
all of their respective rights and elections under the Bankruptcy Code. Upon the
bankruptcy of any Party, the non-bankrupt Party will further be entitled to a
complete duplicate of, or complete access to, any such intellectual property,
and such, if not already in its possession, will be promptly delivered to the
non-bankrupt Party, unless the bankrupt Party elects in writing to continue, and
continues, to perform all of its obligations under this Agreement.

ARTICLE 8.
REPRESENTATIONS AND WARRANTIES

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

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

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

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

8.1.4 the execution, delivery and performance of this Agreement by such Party
will not constitute a default under or conflict with any agreement, instrument
or understanding, oral or written, to which it is a party or by which it is
bound, or violate any law or regulation of any court, governmental body or
administrative or other agency having jurisdiction over such Party;

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

8.1.6 it has not employed (and, to the best of its knowledge, has not used a
contractor or consultant that has employed) and in the future will not employ
(or, to the best of its knowledge, use any contractor or consultant that
employs, provided that such Party may reasonably rely on a representation made
by such contractor or consultant) any Person debarred by the FDA (or subject to
a similar sanction of EMA or foreign equivalent), or any Person which is the
subject of an FDA debarment investigation or proceeding (or similar proceeding
of EMA or foreign equivalent), in the conduct of the Pre-Clinical Studies or
Clinical Studies of the Product and its activities under each Drug Discovery
Program.

8.2 Representations and Warranties of Isis. Isis hereby represents and warrants
to JBI, as of the Effective Date, that:

8.2.1 To the best of its knowledge and belief, there are no additional licenses
(beyond those that would be granted to JBI under Section 4.1.1 upon the exercise
of the Option for a Product arising under the Drug Discovery Programs) under any
intellectual property owned or Controlled by Isis or its Affiliates as of the
Effective Date that would be required in order for JBI to further Develop and
Commercialize a Product.

8.2.2 Schedule 8.2.2(a), Schedule 8.2.2(b), Schedule 8.2.2(c) and Schedule
8.2.2(d) set forth true, correct and complete lists of all Isis Core Technology
Patents, Isis Manufacturing and Analytical Patents, and Isis Formulation Patents
that apply to the Compounds contemplated under the Drug Discovery Programs as of
the Effective Date (the “Isis Platform Technology”), respectively, and indicates
whether each such Patent Right is owned by Isis or licensed by Isis from a Third
Party and if so, identifies the licensor or sublicensor from which the Patent
Right is licensed. Isis Controls such Patent Rights existing as of the Effective
Date and is entitled to grant all rights and licenses (or sublicenses, as the
case may be) under such Patent Rights it purports to grant to JBI under this
Agreement.

8.2.3 There are no claims, judgments or settlements against or owed by Isis or
its Affiliates or pending against Isis or, to the best of Isis’ knowledge,
threatened against Isis, in each case relating to the Isis Platform Technology
or Collaboration Targets that would prevent Isis from performing the activities
under this Agreement or from granting JBI the licenses under Section 4.1. To the
best of Isis’ knowledge, there are no claims, judgments or settlements against
or owed by any Third Party that is party to a Prior Agreement, or pending or
threatened claims or litigation against any Third Party that is party to a Prior
Agreement, in each case relating to the Isis Platform Technology or
Collaboration Targets that would prevent Isis from performing the activities
under this Agreement or from granting JBI the licenses under Section 4.1.

 
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8.2.4 At the Effective Date (a) there is no fact or circumstance known by Isis
that would cause Isis to reasonably conclude that any Isis Core Technology
Patent or Isis Manufacturing and Analytical Patent is invalid or un-enforceable,
(b) there is no fact or circumstance known by Isis that would cause Isis to
reasonably conclude the inventorship of each Isis Core Technology Patent or Isis
Manufacturing and Analytical Patent is not properly identified on each patent,
and (c) all official fees, maintenance fees and annuities for the Isis Core
Technology Patent or Isis Manufacturing and Analytical Patent have been paid.

8.2.5 All Isis In-License Agreements are in full force and effect and have not
been modified or amended. Neither Isis nor, to the best knowledge of Isis, the
Third Party licensor in an Isis In-License Agreement is in default with respect
to a material obligation under such Isis In-License Agreement, and neither such
party has claimed or has grounds upon which to claim that the other party is in
default with respect to a material obligation under, any Isis In-License
Agreement.

8.3 Isis Covenants. Isis hereby covenants to JBI that, except as expressly
permitted under this Agreement:

8.3.1 Isis will promptly amend Schedule 8.2.2(a), Schedule 8.2.2(b) and Schedule
8.2.2(c) and submit such amended Schedules to JBI if Isis becomes aware that any
Isis Core Technology Patents, Isis Manufacturing and Analytical Patents or Isis
Product-Specific Patents are not properly identified on such Schedule.

8.3.2 During the Agreement Term, Isis will maintain and not breach any Isis
In-License Agreements and any agreements with Third Parties entered into after
the Effective Date (“New Third Party Licenses”) that provide a grant of rights
from such Third Party to Isis that are Controlled by Isis and are licensed or
that Isis believes may become subject to a license from Isis to JBI for the
Development Candidate under this Agreement;

8.3.3 Isis will promptly notify JBI of any material breach by Isis or a Third
Party of any New Third Party License, and in the event of a breach by Isis, will
permit JBI to cure such breach on Isis’ behalf upon JBI’s request;

8.3.4 Isis will not amend, modify or terminate any Isis In-License Agreement or
New Third Party License in a manner that would adversely affect JBI’s rights
hereunder without first obtaining JBI’s written consent, which consent may be
withheld in JBI’s sole discretion; and

 
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8.3.5 all of Isis’ employees performing activities hereunder on behalf of Isis
will be obligated to assign all right, title and interest in and to any
inventions developed by them, whether or not patentable, to Isis as the sole
owner thereof.

8.4 DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY NOR ITS AFFILIATES MAKES ANY REPRESENTATION OR EXTENDS ANY
WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. JBI AND ISIS UNDERSTAND
THAT EACH PRODUCT IS THE SUBJECT OF ONGOING RESEARCH AND DEVELOPMENT AND THAT
NEITHER PARTY CAN ASSURE THE SAFETY, USEFULNESS OR COMMERCIAL OR TECHNICAL
VIABILITY OF EACH PRODUCT.

ARTICLE 9.

INDEMNIFICATION; INSURANCE

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

9.1.1 the gross negligence or willful misconduct of JBI, its Affiliates or
Sublicensees and its or their respective directors, officers, employees and
agents, in connection with JBI’s performance of its obligations or exercise of
its rights under this Agreement;

9.1.2 any breach of any representation or warranty or express covenant made by
JBI under ARTICLE 8 or any other provision under this Agreement;

9.1.3 the Development or Manufacturing activities that are conducted by or on
behalf of JBI or its Affiliates or Sublicensees; or

9.1.4 the Commercialization of a Product by or on behalf of JBI or its
Affiliates or Sublicensees;

except, in each case above, to the extent such Claim arose out of or resulted
from or is attributable to any acts or omissions of Isis or its Affiliates,
licensees, Sublicensees or contractors, and its or their respective directors,
officers, employees and agents or other circumstance in each case for which Isis
has an indemnity obligation pursuant to Section 9.2.

9.2 Indemnification by Isis. Isis will indemnify, defend and hold harmless JBI
and its Affiliates, and its or their respective directors, officers, employees
and agents, from and against any and all Losses arising out of or resulting from
any and all Claims based upon:

 
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9.2.1 the gross negligence or willful misconduct of Isis, its Affiliates or
Sublicensees or its or their respective directors, officers, employees and
agents, in connection with Isis’ performance of its obligations or exercise of
its rights under this Agreement;

9.2.2 any breach of any representation or warranty or express covenant made by
Isis under ARTICLE 8 or any other provision under this Agreement; or

9.2.3 any development, manufacturing or commercialization activities that are
conducted by or on behalf of Isis or its Affiliates or Sublicensees with respect
to a Discontinued Product.

except, in each case above, to the extent such Claim arose out of or resulted
from or is attributable to any acts or omissions of JBI or its Affiliates,
licensees, Sublicensees or contractors and its or their respective directors,
officers, employees and agents or other circumstance, in each case for which JBI
has an indemnity obligation pursuant to Section 9.1.

9.3 Procedure. If a Person entitled to indemnification under Section 9.1 or
Section 9.2 (an “Indemnitee”) seeks such indemnification, such Indemnitee will
(i) inform the indemnifying Party in writing of a Claim as soon as reasonably
practicable after such Indemnitee receives notice of such Claim, (ii) permit the
indemnifying Party to assume direction and control of the defense of the Claim
(including the sole right to settle such Claim at the sole discretion of the
indemnifying Party, provided that (A) such settlement or compromise does not
admit any fault or negligence on the part of the Indemnitee, or impose any
obligation on, or otherwise materially adversely affect, the Indemnitee or other
Party and (B) the indemnifying Party first obtain the written consent of the
Indemnitee with respect to such settlement, which consent will not be
unreasonably withheld), (iii) cooperate as reasonably requested (at the expense
of the indemnifying Party) in the defense of the Claim, and (iv) undertake
reasonable steps to mitigate any Losses with respect to the Claim. The
provisions of Section 7.4 will govern the procedures for responding to a Claim
of infringement described therein. Notwithstanding anything in this Agreement to
the contrary, the indemnifying Party will have no liability under Section 9.1 or
Section 9.2, as the case may be, for Claims settled or compromised by the
Indemnitee without the indemnifying Party’s prior written consent.

9.4 Insurance.

9.4.1 Isis’ Insurance Obligations. Isis will maintain, at its cost, reasonable
insurance against liability and other risks associated with its activities
contemplated by this Agreement.

9.4.2 JBI’s Insurance Obligations. JBI will maintain, at its cost, reasonable
insurance against liability and other risks associated with its activities
contemplated by this Agreement, provided, that, at a minimum, JBI will maintain,
in force from [***] days prior to enrollment of the first patient in a Clinical
Study, a clinical trials/product liability insurance policy providing coverage
of at least $[***] per claim and $[***] Annual aggregate and, provided further
that such coverage is increased to at least $[***] at least [***] days before
JBI initiates the First Commercial Sale of a Product hereunder. JBI will furnish
to Isis evidence of such insurance upon request. Notwithstanding the foregoing,
JBI may self-insure to the extent that it self-insures for its other products,
but at a minimum will self-insure at levels that are consistent with levels
customarily maintained against similar risks by similar companies in JBI’s
industry.

 
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9.5 LIMITATION OF CONSEQUENTIAL DAMAGES. EXCEPT FOR (a) CLAIMS OF A THIRD PARTY
THAT ARE SUBJECT TO INDEMNIFICATION UNDER THIS ARTICLE 9, (b) CLAIMS ARISING OUT
OF A PARTY’S WILLFUL MISCONDUCT UNDER THIS AGREEMENT, (c) A PARTY’S BREACH OF
ARTICLE 2, OR A BREACH OF SECTION 10.3.4(a) BY JBI OR ITS AFFILIATES OR (d)
CLAIMS ARISING OUT OF A PARTY’S BREACH OF ITS CONFIDENTIALITY OBLIGATIONS UNDER
THIS AGREEMENT, NEITHER PARTY NOR ANY OF ITS AFFILIATES WILL BE LIABLE TO THE
OTHER PARTY TO THIS AGREEMENT OR ITS AFFILIATES FOR ANY INCIDENTAL,
CONSEQUENTIAL, SPECIAL, PUNITIVE OR OTHER INDIRECT DAMAGES OR LOST OR IMPUTED
PROFITS OR ROYALTIES, LOST DATA OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR
SERVICES, WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING NEGLIGENCE
AND STRICT PRODUCT LIABILITY), INDEMNITY OR CONTRIBUTION, AND IRRESPECTIVE OF
WHETHER THAT PARTY OR ANY REPRESENTATIVE OF THAT PARTY HAS BEEN ADVISED OF, OR
OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE.

ARTICLE 10.
TERM; TERMINATION

10.1 Agreement Term; Expiration. This Agreement is effective as of the Effective
Date and, unless earlier terminated pursuant to the other provisions of this
ARTICLE 10, will continue in full force and effect until the expiration of all
payment obligations under this Agreement with respect to all Products in all
countries; provided, however, that if every Option either (a) has expired as a
result of JBI not providing Isis a written notice stating JBI is exercising such
Option and paying Isis the applicable license fee under Section 6.4 by the
applicable Option Deadline, or (b) has been terminated prior to Option exercise
pursuant to Section 10.2.1 or 10.2.2, then this Agreement will expire on the
expiration or termination, as applicable, of the last Option.

The period from the Effective Date until the date of expiration of this
Agreement pursuant to this Section 10.1 is the “Agreement Term.”

10.2 Termination of the Agreement.

10.2.1 JBI’s Termination for Convenience. At any time following payment by JBI
of the upfront fee under Section 6.1, subject to Section 10.3.1 below, JBI will
be entitled to terminate this Agreement as a whole, or terminate this Agreement
in part with respect to a particular Drug Discovery Program and applicable
Collaboration Target, for convenience by providing 90 days written notice to
Isis of such termination.

 
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10.2.2 Termination for Material Breach.

(a) JBI’s Right to Terminate. If JBI believes that Isis is in material breach of
this Agreement (other than with respect to a failure to use Commercially
Reasonable Efforts under Section 1.2.5, which is governed by Section 10.2.3
below), then JBI may deliver notice of such material breach to Isis. If the
breach is curable, Isis will have 60 days to cure such breach. If Isis fails to
cure such breach within the 60 day period, or if the breach is not subject to
cure, JBI may terminate this Agreement as a whole, or terminate this Agreement
in part with respect to the particular Program affected by such breach, and the
applicable Collaboration Target, by providing written notice to Isis. Without
limiting the foregoing, breach by a Party of ARTICLE 2 of this Agreement
constitutes a material breach of this Agreement with respect to the Program
affected by such breach and the applicable Collaboration Target.

(b) Isis’ Right to Terminate. If Isis believes that JBI is in material breach of
this Agreement (other than with respect to a failure to use Commercially
Reasonable Efforts under Section 1.2.5, Section 5.1 or Section 5.2, which is
governed by Section 10.2.3 below), then Isis may deliver notice of such material
breach to JBI. If the breach is curable, JBI will have 60 days to cure such
breach (except to the extent such breach involves the failure to make a payment
when due, which breach must be cured within 30 days following such notice). If
JBI fails to cure such breach within the 60 day or 30 day period, as applicable,
or if the breach is not subject to cure, Isis in its sole discretion may
terminate this Agreement with respect to the Drug Discovery Program(s) and the
applicable Collaboration Target(s) affected by such breach by providing written
notice thereof to JBI. To the extent such material breach is uncured for one
Drug Discovery Program, the remaining active Drug Discovery Programs for which
there is no uncured material breach shall remain in effect.

10.2.3 Remedies for Failure to Use Commercially Reasonable Efforts.

(a) If Isis, in JBI’s reasonable determination, fails to use Commercially
Reasonable Efforts in the activities contemplated in Section 1.2.5 prior to
Option exercise with respect to a particular Drug Discovery Program or with
respect to other agreed-upon activities to be performed by Isis associated with
the research, Development, or Commercialization of a Product, under this
Agreement, JBI will notify Isis and, within 30 days thereafter, Isis and JBI
will meet and confer to discuss and resolve the matter in good faith, and
attempt to devise a mutually agreeable plan to address any outstanding issues
related to Isis’ use of Commercially Reasonable Efforts in Section 1.2.5 or for
activities otherwise agreed upon by Isis under this Agreement. Following such a
meeting, if Isis fails to use Commercially Reasonable Efforts as contemplated by
Section 1.2.5 with respect to such Drug Discovery Program, then subject to
Section 10.2.4 below, JBI will have the right to terminate this Agreement as it
relates to the applicable Drug Discovery Program.

 
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(b) If JBI, in Isis’ reasonable determination, fails to use Commercially
Reasonable Efforts under Section 1.2.5, Section 5.1 or Section 5.2 with respect
to a Product or Drug Discovery Program above, Isis will notify JBI and, within
30 days thereafter, Isis and JBI will meet and confer to discuss and resolve the
matter in good faith, and attempt to devise a mutually agreeable plan to address
any outstanding issues related to JBI’s use of Commercially Reasonable Efforts
in Section 1.2.5, Section 5.1 or Section 5.2. Following such a meeting, if JBI
fails to use Commercially Reasonable Efforts with respect to the applicable
Product or Drug Discovery Program as contemplated by Section 1.2.5, Section 5.1
or Section 5.2, then subject to Section 10.2.4 below, Isis will have the right,
at its sole discretion, to terminate this Agreement as it relates to such
Product or Drug Discovery Program.

10.2.4 Disputes Regarding Material Breach. Notwithstanding the foregoing, if the
Breaching Party in Section 10.2.2 or Section 10.2.3 disputes in good faith the
existence, materiality, or failure to cure of any such breach which is not a
payment breach, and provides notice to the Non-Breaching Party of such dispute
within such 60 day period, the Non-Breaching Party will not have the right to
terminate this Agreement in accordance with Section 10.2.2 or Section 10.2.3, as
applicable, unless and until it has been determined in accordance with Section
12.1 that this Agreement was materially breached by the Breaching Party and the
Breaching Party fails to cure such breach within 30 days following such
determination. It is understood and acknowledged that during the pendency of
such dispute, all the terms and conditions of this Agreement will remain in
effect and the Parties will continue to perform all of their respective
obligations hereunder, including satisfying any payment obligations.

10.2.5 Termination for Patent Challenge. Isis may terminate this Agreement, if
JBI disputes, [***] validity [***], provided however that, [***] Isis shall not
have the right to terminate if [***]:

(a) JBI asserts invalidity as a defense in any court proceeding bought by Isis
asserting infringement of a granted Patent within the Isis Core Technology
Patents, Isis Manufacturing and Analytical Patents, or [***]; or

(b) JBI (i) acquires a Third Party that has an existing challenge, whether in a
court or administrative proceeding, against a granted Patent within the Isis
Core Technology Patents, Isis Manufacturing and Analytical Patents, or Isis
Formulation Patents or (ii) licenses a product for which Isis has an existing
challenge, whether in a court or administrative proceeding, against [***].
 
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10.2.6 Termination for Insolvency. Either Party may terminate this Agreement if,
at any time, 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 of the Party or of substantially all of its assets; or if
the other Party proposes a written agreement of composition or extension of
substantially all of its debts; or if the other Party will be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition will not be dismissed within 90 days after the filing thereof; or if
the other Party will propose or be a party to any dissolution or liquidation; or
if the other Party will make an assignment of substantially all of its assets
for the benefit of creditors.

10.3 Consequences of Expiration or Termination of the Agreement.

10.3.1 In General. If this Agreement expires or is terminated by a Party in
accordance with this ARTICLE 10 at any time and for any reason, the following
terms will apply to any Drug Discovery Program that is the subject of such
expiration or termination:

(a) Return of Information and Materials. The Parties will return (or destroy, as
directed by the other Party) all data, files, records and other materials
containing or comprising the other Party’s Confidential Information, except to
the extent such Confidential Information is necessary or useful to conduct
activities under a surviving Drug Discovery Program. Notwithstanding the
foregoing, the Parties will be permitted to retain one copy of such data, files,
records, and other materials for archival and legal compliance purposes.

(b) Accrued Rights. Termination or expiration of this Agreement for any reason
will be without prejudice to any rights or financial compensation that will have
accrued to the benefit of a Party prior to such termination or expiration. Such
termination or expiration will not relieve a Party from obligations that are
expressly indicated to survive the termination or expiration of this Agreement.
For purposes of clarification, milestone payments under ARTICLE 6 accrue as of
the date the applicable Milestone Event is achieved even if the payment is not
due at that time.

(c) Survival. The following provisions of this Agreement will survive the
expiration or termination of this Agreement: Section 4.1.2(c) (Effect of
Termination on Sublicenses), Section 4.2.2, Section 6.11.3 (Records Retention),
Section 6.12 (Audits), Section 7.1.1 (Isis Technology and JBI Technology),
Section 7.1.2 (Agreement Technology), Section 8.4 (Disclaimer), ARTICLE 9
(Indemnification; Insurance), Section 10.2.5 (Termination for Insolvency),
Section 10.3 (Consequences of Expiration or Termination of the Agreement),
ARTICLE 11 (Confidentiality), ARTICLE 12 (Miscellaneous) and Appendix 1
(Definitions) (to the extent definitions are embodied in the foregoing listed
Articles and Sections).

 
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10.3.2 Perpetual, Royalty-Free Non-Exclusive License. If JBI has exercised its
Option for a particular Drug Discovery Program, then upon expiration of the
Royalty Period in all countries in which the applicable Products are being or
have been sold, Isis will and hereby does grant to JBI a perpetual,
nonexclusive, worldwide, royalty-free, fully paid-up, sublicensable license
under the Isis Know-How to Manufacture, Develop and Commercialize any Product
under such Drug Discovery Program.

10.3.3 Termination Before Option Exercise. If this Agreement expires or is
terminated by a Party in accordance with this ARTICLE 10 before Option exercise,
then, in addition to the terms set forth in Section 10.3.1, the following terms
will apply to each Drug Discovery Program that is the subject of such expiration
or termination:

(a) JBI’s Option under Section 3.1 will expire and Isis will be free to Develop
and Commercialize Compounds included in such Drug Discovery Program on its own
or with a Third Party.

(b) Neither Party will have any further obligations under Section 2.1 of this
Agreement with respect to the terminated Drug Discovery Program(s).

(c) To the extent requested by Isis, JBI will promptly transfer to Isis all
data, results and information (including JBI’s Confidential Information and any
regulatory documentation (including drafts)) related to the terminated Drug
Discovery Program(s) in the possession of JBI and its contractors to the extent
such data, results and information were generated by or on behalf of JBI under
this Agreement.

(d) Except as explicitly set forth in Section 10.3.1(a), Section 10.3.1(b) or
Section 10.3.1(c), JBI will have no further rights and Isis will have no further
obligations with respect to each terminated Drug Discovery Program.

10.3.4 Termination After Option Exercise. If this Agreement is terminated by a
Party in accordance with this ARTICLE 10 after Option exercise, then, in
addition to the terms set forth in Section 10.3.1, the following terms will
apply to any Pre-Clinical Development Program that is the subject of such
termination:

(a) The applicable licenses granted by Isis to JBI under this Agreement will
terminate and JBI, its Affiliates and Sublicensees will cease selling the
applicable Products.

(b) Neither Party will have any further obligations under Section 2.1 of this
Agreement with respect to the terminated Pre-Clinical Development Program(s).

 
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(c) Except as explicitly set forth in Section 10.3.1(a), JBI will have no
further rights and Isis will have no further obligations with respect to the
terminated Pre-Clinical Development Program.

(d) If (y) JBI terminates the Agreement under Section 10.2.1 (JBI’s Termination
for Convenience) or (z) Isis terminates this Agreement under Section 10.2.2(b)
(Isis’ Right to Terminate) or Section 10.2.3 (Remedies for Failure to Use
Commercially Reasonable Efforts), then the following additional terms will also
apply solely with respect to the terminated Pre-Clinical Development Program(s):

(i) JBI will grant to Isis a sublicensable, worldwide, royalty bearing exclusive
license or sublicense, as the case may be, to all JBI Technology Controlled by
JBI as of the date of such reversion that Covers the applicable Discontinued
Product(s) solely as necessary to Develop, make, have made, use, sell, offer for
sale, have sold, import and otherwise Commercialize the applicable Discontinued
Product(s) in the Field (such license will be sublicensable by Isis in
accordance with Section 4.1.2, mutatis mutandis);

(ii) For each Discontinued Product for which JBI, its Affiliate or Sublicensee
has [***], Isis or any sublicensee or collaborator shall pay to JBI a royalty on
net sales made by Isis or its Affiliates or sublicensee of such Discontinued
Product according to the following: (a) if neither [***] prior to termination:
[***]% of Net Sales, (b) if JBI, its Affiliate or Sublicensee [***] for such
Discontinued Product prior to termination: [***]% of Net Sales, (c) if JBI, its
Affiliate or Sublicensee [***] for such Discontinued Product prior to
termination: [***]% of Net Sales, and (d) if JBI, its Affiliate or Sublicensee
[***] for such Discontinued Product prior to termination: [***]% of Net Sales;
provided (A) if (i) Isis enters an arms-length license agreement with a Third
Party with respect to a Discontinued Product and (ii) the definition of Net
Sales is different in such license agreement than as described above, then, the
Parties will use the definition described in the Third Party license for the
calculation of royalties under this Section 10.3.4(d)(ii); and (B) Sections
6.8.2, 6.10, 6.12 and 6.14 will govern the payment of royalties from Isis to JBI
under this Section 10.3.4(d)(ii), mutatis mutandis.

(iii) JBI will assign to Isis any Product-Specific Patent Rights and Isis’
interest in any Jointly-Owned Program Patents that, in each case relate to the
applicable Discontinued Product(s) previously assigned by Isis to JBI under this
Agreement;

(iv) JBI will transfer to Isis for use with respect to the Development and
Commercialization of the applicable Discontinued Product(s), any Know-How data,
results, regulatory information, filings, and files in the possession of JBI as
of the date of such reversion to the extent related to such Discontinued
Product(s), and any other information or material specified in Section 4.4;

 
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(v) JBI will license to Isis any trademarks that are specific to a Discontinued
Product(s) solely for use with such Discontinued Product(s), in accordance with
Section 4.1.5, mutatis mutandis; provided, however, that in no event will JBI
have any obligation to license to Isis any trademarks used by JBI both in
connection with the Product and in connection with the sale of any other product
or service, including any JBI- or JBI-formative marks; and

(vi) Isis will control and be responsible for all aspects of the Prosecution and
Maintenance of all Jointly-Owned Program Patents arising from the terminated
Pre-Clinical Development Program (or the corresponding Drug Discovery Program),
and JBI will provide Isis with (and will instruct its counsel to provide Isis
with) all of the information and records in JBI’s and its counsel’s possession
related to the Prosecution and Maintenance of such Jointly-Owned Program
Patents; provided, however, if Isis intends to abandon any such Jointly-Owned
Program Patents without first filing a continuation or substitution, then Isis
will notify JBI of such intention at least 60 days before such Patent Right will
become abandoned, and JBI will have the right, but not the obligation, to assume
responsibility for the Prosecution and Maintenance thereof at its own expense
with counsel of its own choice.

(e) If Isis terminates this Agreement due to JBI’s material breach or JBI
terminates this Agreement for convenience, upon Isis’ written request pursuant
to a mutually agreed supply agreement, JBI will sell to Isis any bulk API,
Clinical Supplies and Finished Drug Product in JBI’s possession at the time of
such termination, at a price equal to JBI’s cost at the time of manufacture.

(f) To the extent requested by Isis, JBI will promptly assign to Isis any
manufacturing agreements identified by Isis solely to the extent related to the
applicable Discontinued Products to which JBI is a party.

ARTICLE 11.
CONFIDENTIALITY

11.1 Confidentiality; Exceptions. Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, during
the Agreement Term and for five years thereafter, the receiving Party (the
“Receiving Party”) and its Affiliates will keep confidential and will not
publish or otherwise disclose or use for any purpose other than as provided for
in this Agreement any confidential or proprietary information or materials,
patentable or otherwise, in any form (written, oral, photographic, electronic,
magnetic, or otherwise) which is disclosed to it by the other Party (the
“Disclosing Party”) or its Affiliates or otherwise received or accessed by a
Receiving Party in the course of performing its obligations or exercising its
rights under this Agreement, including trade secrets, Know-How, inventions or
discoveries, proprietary information, formulae, processes, techniques and
information relating to the past, present and future marketing, financial, and
research and development activities of any product or potential product or
useful technology of the Disclosing Party or its Affiliates and the pricing
thereof (collectively, “Confidential Information”).

 
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11.2 Prior Confidentiality Agreement Superseded. As of the Effective Date, this
Agreement supersedes the Confidential Disclosure Agreement executed by Isis and
JBI on July 30, 2014 (including any and all amendments thereto). All information
exchanged between the Parties under such Confidential Disclosure Agreement will
be deemed Confidential Information hereunder and will be subject to the terms of
this ARTICLE 11.

11.3 Authorized Disclosure. Except as expressly provided otherwise in this
Agreement, a Receiving Party or its Affiliates may use and disclose to Third
Parties Confidential Information of the Disclosing Party as follows: (i) solely
in connection with the performance of its obligations or exercise of rights
granted or reserved in this Agreement under confidentiality provisions no less
restrictive than those in this Agreement, provided, that Confidential
Information may be disclosed by a Receiving Party to a governmental entity or
agency without requiring such entity or agency to enter into a confidentiality
agreement; (ii) to the extent reasonably necessary to file or prosecute patent,
copyright and trademark applications (subject to Section 11.4 below), complying
with applicable governmental regulations, obtaining Approvals, conducting
Pre-Clinical Studies or Clinical Studies, marketing the Product, or as otherwise
required by applicable law, regulation, rule or legal process (including the
rules of the SEC and any stock exchange); provided, however, that if a Receiving
Party or any of its Affiliates is required by law or regulation to make any such
disclosure of a Disclosing Party’s Confidential Information it will, except
where impracticable for necessary disclosures, give reasonable advance notice to
the Disclosing Party of such disclosure requirement and will use its reasonable
efforts to secure confidential treatment of such Confidential Information
required to be disclosed; (iii) in communication with actual or potential
lenders, investors, merger partners, acquirers, consultants, or professional
advisors on a need-to-know basis, in each case under confidentiality provisions
no less restrictive than those of this Agreement; (iv) to the extent such
disclosure is required to comply with existing expressly stated contractual
obligations owed to such Party’s or its Affiliates’ licensor with respect to any
intellectual property licensed to the other Party under this Agreement; or (v)
as mutually agreed to in writing by the Parties.

11.4 Press Release; Publications; Disclosure of Agreement.

11.4.1 Announcement of Transaction. On or promptly after the Effective Date, the
Parties will issue a public announcement of the execution of this Agreement in
form and substance mutually agreed by the Parties and included in Schedule 11.4.

 
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11.4.2 Other Disclosures. Except to the extent required to comply with
applicable law, regulation, rule or legal process or as otherwise permitted in
accordance with this Section 11.4, neither Party nor such Party’s Affiliates
will make any public announcements, press releases or other public disclosures
concerning a Drug Discovery Program, a Product, this Agreement or the terms or
the subject matter hereof without the prior written consent of the other, which
will not be unreasonably withheld, conditioned or delayed.

11.4.3 Use of Name. Except as set forth in Section 11.4.8, neither Party will
use the other Party’s name in a press release or other publication without first
obtaining the prior consent of the Party to be named.

11.4.4 Notice of Significant Events. Each party will immediately notify (and
provide as much advance notice as possible, but at a minimum two Business Days
advance notice to) the other Party of any event materially related to a Product
(including in such notice any disclosure of starting/stopping of a Clinical
Study, clinical data or results, material regulatory discussions, filings,
Approval or JBI’s sales projections) so the Parties may analyze the need for or
desirability of publicly disclosing or reporting such event.

11.4.5 JBI Disclosures After Option Exercise. After Option if JBI intends to
make a press release or similar public communication disclosing regulatory
discussions, the efficacy or safety data or results related to such Product or
JBI’s sales projections, (i) JBI will submit such proposed communication to Isis
for review at least two Business Days in advance of such proposed public
disclosure, (ii) Isis will have the right to review and recommend changes to
such communication, and (iii) JBI will in good faith consider any changes that
are timely recommended by Isis.

11.4.6 Scientific or Clinical Presentations. The Parties agree to use
Commercially Reasonable Efforts to control public scientific disclosures of
results of the Development activities under this Agreement to prevent any
potential adverse effect of any premature public disclosure of such results. The
Parties will establish a procedure for publication review and each Party will
first submit to the other Party through the Joint Patent Committee an early
draft of all such publications or presentations, whether they are to be
presented orally or in written form, at least 45 days prior to submission for
publication including to facilitate the publication of any summaries of Clinical
Studies data and results as required on the clinical trial registry of each
respective Party. Each Party will review such proposed publication in order to
avoid the unauthorized disclosure of a Party’s Confidential Information and to
preserve the patentability of inventions arising from the Drug Discovery
Programs. If, during such 45-day period, the other Party informs such Party that
its proposed publication contains Confidential Information of the other Party,
then such Party will delete such Confidential Information from its proposed
publication. In addition, if at any time during such 45-day period, the other
Party informs such Party that its proposed publication discloses inventions made
by either Party in the course of the Development under this Agreement that have
not yet been protected through the filing of a patent application, or the public
disclosure of such proposed publication could be expected to have a material
adverse effect on any Patent Rights or Know-How solely owned or Controlled by
such other Party, then such Party will either (i) delay such proposed
publication for up to 60 days from the date the other Party informed such Party
of its objection to the proposed publication, to permit the timely preparation
and first filing of patent application(s) on the information involved or (ii)
remove the identified disclosures prior to publication.

 
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11.4.7 Subsequent Disclosure. Notwithstanding the foregoing, to the extent
information regarding this Agreement or the Product has already been publicly
disclosed, either Party (or its Affiliates) may subsequently disclose the same
information to the public without the consent of the other Party.

11.4.8 Acknowledgment. JBI will acknowledge in any press release, public
presentation or publication regarding the collaboration or a Product, Isis’ role
in discovering and developing the Product, that the Product is under license
from Isis and otherwise acknowledge Isis’ contributions, and Isis’ stock ticker
symbol (Nasdaq: ISIS). Isis may include the Product (and identify JBI as its
partner for the Product) in Isis’ drug pipeline.

ARTICLE 12.
MISCELLANEOUS

12.1 Dispute Resolution.

12.1.1 General. The Parties recognize that a dispute may arise relating to this
Agreement ("Dispute"). Except as set forth in Section 12.1.5 any Dispute,
including Disputes that may involve the parent company, subsidiaries, or
affiliates under common control of any Party, shall be resolved in accordance
with this Section 12.

12.1.2 Continuance of Rights and Obligations During Pendency of Dispute
Resolution. If there are any Disputes in connection with this Agreement,
including Disputes related to termination of this Agreement under Section 10,
all rights and obligations of the Parties shall continue until such time as any
Dispute has been resolved in accordance with the provisions of this Section 12.

12.1.3 Escalation. Subject to Section 12.1.5, any claim, Dispute, or controversy
as to the breach, enforcement, interpretation or validity of this Agreement will
be referred to the Global Therapeutic Area Head, Immunology of JBI and the Chief
Operating Officer of Isis (the “Executives”) for attempted resolution. In the
event the Executives are unable to resolve such Dispute within 30 days of such
Dispute being referred to them, then, upon the written request of either Party
to the other Party, the Dispute shall be subject to arbitration in accordance
with Section 12.1.4, except as expressly set forth in Section 12.1.5 or Section
12.3.

 
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12.1.4 Arbitration.

(a) If the Parties fail to resolve the Dispute through Escalation, and a Party
desires to pursue resolution of the Dispute, the Dispute shall be submitted by
either Party for resolution in arbitration pursuant to the then current CPR
Non-Administered Arbitration Rules ("CPR Rules") (www.cpradr.org), except where
they conflict with these provisions, in which case these provisions control. The
arbitration will be held in Chicago, Illinois. All aspects of the arbitration
shall be treated as confidential.

(b) The arbitrators will be chosen from the CPR Panel of Distinguished Neutrals,
unless a candidate not on such panel is approved by both Parties. Each
arbitrator shall be a lawyer with at least 15 years of experience with a law
firm or corporate law department of over 25 lawyers or who was a judge of a
court of general jurisdiction. To the extent that the Dispute requires special
expertise, the Parties will so inform CPR prior to the beginning of the
selection process.

(c) The arbitration tribunal shall consist of three arbitrators, of whom each
Party shall designate one in accordance with the "screened" appointment
procedure provided in CPR Rule 5.4. The chair will be chosen in accordance with
CPR Rule 6.4.

(d) If, however, the aggregate award sought by the Parties is less than $5
million and equitable relief is not sought, a single arbitrator shall be chosen
in accordance with the CPR Rules.

(e) Candidates for the arbitrator position(s) may be interviewed by
representatives of the Parties in advance of their selection, provided that all
Parties are represented.

(f) The Parties agree to select the arbitrator(s) within 45 days of initiation
of the arbitration. The hearing will be concluded within nine (9) months after
selection of the arbitrator(s) and the award will be rendered within 60 days of
the conclusion of the hearing, or of any post hearing briefing, which briefing
will be completed by both sides within 45 days after the conclusion of the
hearing. In the event the Parties cannot agree upon a schedule, then the
arbitrator(s) shall set the schedule following the time limits set forth above
as closely as practical.

(g) The hearing will be concluded in ten hearing days or less. Multiple hearing
days will be scheduled consecutively to the greatest extent possible. A
transcript of the testimony adduced at the hearing shall be made and shall be
made available to each Party.

(h) The arbitrator(s) shall be guided, but not bound, by the CPR Protocol on
Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration
(www.cpradr.org) ("Protocol"). The Parties will attempt to agree on modes of
document disclosure, electronic discovery, witness presentation, etc. within the
parameters of the Protocol. If the Parties cannot agree on discovery and
presentation issues, the arbitrator(s) shall decide on presentation modes and
provide for discovery within the Protocol, understanding that the Parties
contemplate reasonable discovery.

 
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(i) The arbitrator(s) shall decide the merits of any Dispute in accordance with
the law governing this Agreement, without application of any principle of
conflict of laws that would result in reference to a different law. The
arbitrator(s) may not apply principles such as "amiable compositeur" or "natural
justice and equity."

(j) The arbitrator(s) are expressly empowered to decide dispositive motions in
advance of any hearing and shall endeavor to decide such motions as would a
United States District Court Judge sitting in the jurisdiction whose substantive
law governs.

(k) The arbitrator(s) shall render a written opinion stating the reasons upon
which the award is based. The Parties consent to the jurisdiction of the United
States District Court for the district in which the arbitration is held for the
enforcement of these provisions and the entry of judgment on any award rendered
hereunder. Should such court for any reason lack jurisdiction, any court with
jurisdiction may act in the same fashion.

(l) Each Party has the right to seek from the appropriate court provisional
remedies such as attachment, preliminary injunction, replevin, etc. to avoid
irreparable harm, maintain the status quo, or preserve the subject matter of the
Dispute. Rule 14 of the CPR Rules does not apply to this Agreement.

(m) EXCEPT IN THE CASE OF COURT ACTIONS PERMITTED BY SECTION 12.1.5 AND FOR
CLAIMS NOT SUBJECT TO ARBITRATION PURSUANT TO SECTION 12.1.4 AS SET FORTH IN
SECTION 12.1.5, EACH PARTY HERETO WAIVES: (1) ITS RIGHT TO TRIAL OF ANY ISSUE BY
JURY, (2) WITH THE EXCEPTION OF RELIEF MANDATED BY STATUTE, ANY CLAIM TO
PUNITIVE, EXEMPLARY, MULTIPLIED, INDIRECT, CONSEQUENTIAL OR LOST
PROFITS/REVENUES DAMAGES, AND (3) ANY CLAIM FOR ATTORNEY FEES, COSTS AND
PREJUDGMENT INTEREST.

(n) Each Party will bear its own attorney’s fees, costs, and disbursements
arising out of the arbitration, and will pay an equal share of the fees and
costs of the arbitrator; provided, however, the arbitrator will be authorized to
determine whether a Party is the prevailing party, and if so, to award to that
prevailing party reimbursement for any or all of its reasonable attorneys’ fees,
costs and disbursements (including, for example, expert witness fees and
expenses, photocopy charges, travel expenses, etc.), and/or the fees and costs
of the Administrator and the arbitrator.

 
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12.1.5 Injunctive Relief; Court Actions. Notwithstanding anything to the
contrary in this Agreement, each Party will be entitled to seek from any court
of competent jurisdiction, in addition to any other remedy it may have at law or
in equity, injunctive or other equitable relief in the event of an actual or
threatened breach of this Agreement by the other Party, without the posting of
any bond or other security, and such an action may be filed and maintained
notwithstanding any ongoing discussions between the Parties or any ongoing
arbitration proceeding. The Parties agree that in the event of a threatened or
actual material breach of this Agreement injunctive or equitable relief would be
appropriate remedy. In addition, either Party may bring an action in any court
of competent jurisdiction to resolve disputes pertaining to the validity,
construction, scope, enforceability, infringement or other violations of Patent
Rights or other intellectual property rights, and no such claim will be subject
to arbitration pursuant to Section 12.1.4.

12.2 Governing Law; Jurisdiction; Venue; Service of Process. This Agreement and
any Dispute will be governed by and construed and enforced in accordance with
the laws of the State of New York, U.S.A., without reference to conflicts of
laws principles.

12.3 Recovery of Losses. Neither Party will be entitled to recover any Losses
relating to any matter arising under one provision of this Agreement to the
extent that such Party has already recovered Losses with respect to such matter
pursuant to other provisions of this Agreement (including recoveries under
Section 9.1 or Section 9.2, and the offsets under Section 6.9.3(c)). Except for
the offsets and credits explicitly set forth in Section 6.12, and Section
6.9.3(b) neither Party will have the right to set off any amount it is owed or
believes it is owed against payments due or payable to the other Party under
this Agreement.

12.4 Assignment and Successors. Neither this Agreement nor any obligation of a
Party hereunder may be assigned by either Party without the prior written
consent of the other, which will not be unreasonably withheld, delayed or
conditioned, except that (i) Isis may assign or transfer its rights to receive
payments under this Agreement (but no liabilities), without JBI’s consent, to an
Affiliate or to a Third Party in connection with a payment factoring
transaction, and (ii) each Party may assign this Agreement and the rights,
obligations and interests of such Party hereunder, without the other Party’s
consent to any Third Party purchaser of all or substantially all of its assets
or all or substantially all of its assets to which this Agreement relates or to
any successor corporation resulting from any merger, consolidation, share
exchange or other similar transaction with a Third Party, provided that in the
event of any such transaction (whether this Agreement is actually assigned or is
assumed by the acquiring Third Party or the successor corporation (as
applicable) by operation of law (e.g., in the context of a reverse triangular
merger)), intellectual property rights of the acquiring Third Party that existed
prior to such transaction shall not be included in the technology licensed
hereunder or otherwise subject to this Agreement; provided that if JBI transfers
or assigns this Agreement to [***] described in this Agreement, then JBI (or
such Affiliate), will [***] due Isis under ARTICLE 6 for the [***] (defined
below) such that Isis receives [***].

The [***].
 
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To the extent Isis utilizes [***] in any year, Isis will [***] to JBI [***]. To
assist JBI in determining when [***] pursuant to the foregoing sentence,
beginning with the first Annual tax return for the year in which JBI [***]
payment under this Section 12.4, and each year thereafter (including, for
clarity, all years in which Isis [***], Isis will provide JBI with Isis’ Annual
tax returns (federal and state) and, in years in which Isis utilizes [***],
supporting documentation for such [***]. Notwithstanding the foregoing, if the
[***].

12.4.1            Termination of Reporting Obligations Upon Isis Change of
Control. If there is a change in control of Isis, JBI, at its discretion, may
terminate all reporting obligations regarding the Development and/or
Commercialization of any Products including reporting under the Information
Sharing Committee, except in all cases JBI will continue to provide the reports,
audit rights and other information required under Sections 6.10, 6.11, 6.12 and
6.13.

12.5 Force Majeure. No Party will be held responsible to the other Party nor be
deemed to be in default under, or in breach of any provision of, this Agreement
for failure or delay in performing any obligation of this Agreement when such
failure or delay is due to force majeure, and without the fault or negligence of
the Party so failing or delaying. For purposes of this Agreement, force majeure
means a cause beyond the reasonable control of a Party, which may include acts
of God; acts, regulations, or laws of any government; war; terrorism; civil
commotion; fire, flood, earthquake, tornado, tsunami, explosion or storm;
pandemic; epidemic and failure of public utilities or common carriers. In such
event the Party so failing or delaying will immediately notify the other Party
of such inability and of the period for which such inability is expected to
continue. The Party giving such notice will be excused from such of its
obligations under this Agreement as it is thereby disabled from performing for
so long as it is so disabled for up to a maximum of 90 days, after which time
the Parties will negotiate in good faith any modifications of the terms of this
Agreement that may be necessary to arrive at an equitable solution, unless the
Party giving such notice has set out a reasonable timeframe and plan to resolve
the effects of such force majeure and executes such plan within such timeframe.
To the extent possible, each Party will use reasonable efforts to minimize the
duration of any force majeure.

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

If to Isis, addressed to: Isis Pharmaceuticals, Inc.

2855 Gazelle Court
Carlsbad, CA 92010
Attention: Chief Operating Officer
Fax: 760-918-3592
 
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with a copy to: Isis Pharmaceuticals, Inc.

2855 Gazelle Court
Carlsbad, CA 92010
Attention: General Counsel
Fax: 760-268-4922

If to JBI, addressed to: Janssen Research & Development, LLC

Murray McKinnon, PhD1400 McKean Road
Spring House, PA 19477
Mmckinno2@its.jnj.com

with a copy to:

Chief Patent Counsel
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933
Attn: Brian Carey
Bcarey2@its.jnj.com

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

12.7 ISIS Reporting of This Agreement. Isis shall provide JBI with at least
[***] ([***]) days written notice of any disclosure of this document to a Third
Party or to a governmental authority. The Parties agree to promptly convene to
discuss such disclosure and discuss, inter alia, the subject matter that may be
redacted prior to such submission. Notwithstanding the foregoing, Isis may (i)
disclose this Agreement to Isis’ legal counsel, auditors, and other professional
advisors on a need-to-know basis, in each case where such advisors have agreed
to confidentiality provisions no less restrictive than those of this Agreement,
and (ii) may disclose the publicly available redacted version of this Agreement
once such redacted version has been filed publicly with the SEC.

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

12.9 Waiver. Neither Party may waive or release any of its rights or interests
in this Agreement except in writing. The failure of either Party to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement will not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition. No waiver by either
Party of any condition or term in any one or more instances will be construed as
a continuing waiver or subsequent waiver of such condition or term or of another
condition or term.

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

12.11 Entire Agreement. This Agreement, together with the Schedules and
Appendices hereto, sets forth all the covenants, promises, agreements,
warranties, representations, conditions and understandings between the Parties
and supersedes and terminates all prior agreements and understanding between the
Parties. There are no covenants, promises, agreements, warranties,
representations, conditions or understandings, either oral or written, between
the Parties other than as set forth herein and therein. No subsequent
alteration, amendment, change or addition to this Agreement will be binding upon
the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.

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

12.13 Interpretation. Except as otherwise explicitly specified to the contrary,
(a) references to a section, exhibit or schedule means a section of, or schedule
or exhibit to this Agreement, unless another agreement is specified, (b) the
word “including” (in its various forms) means “including without limitation,”
(c) the words “shall” and “will” have the same meaning, (d) references to a
particular statute or regulation include all rules and regulations thereunder
and any predecessor or successor statute, rules or regulation, in each case as
amended or otherwise modified from time to time, (e) words in the singular or
plural form include the plural and singular form, respectively, (f) references
to a particular Person include such Person’s successors and assigns to the
extent not prohibited by this Agreement, (g) unless otherwise specified, “$” is
in reference to United States dollars, and (h) the headings contained in this
Agreement, in any exhibit or schedule to this Agreement and in the table of
contents to this Agreement are for convenience only and will not in any way
affect the construction of or be taken into consideration in interpreting this
Agreement.

12.14 Books and Records. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or Sublicensees will be maintained in
accordance with U.S. Generally Accepted Accounting Principles (or any successor
standard), consistently applied.

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

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

12.17 Supremacy. In the event of any express conflict or inconsistency between
this Agreement and any Schedule or Appendix hereto, the terms of this Agreement
will apply. The Parties understand and agree that the Schedules identifying the
Licensed Technology are not intended to be the final and complete embodiment of
any terms or provisions of this Agreement, and are to be updated from time to
time during the Agreement Term, as appropriate and in accordance with the
provisions of this Agreement.

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

12.19 Compliance with Laws. Each Party will, and will ensure that its Affiliates
and Sublicensees will, comply with all relevant laws and regulations in
exercising its rights and fulfilling its obligations under this Agreement.

[SIGNATURE PAGE FOLLOWS]

* - * - * - *
 
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their representatives thereunto duly authorized as of the Effective Date.

ISIS PHARMACEUTICALS, INC.

By:
/s/ B. Lynne Parshall
 

Name: B. Lynne Parshall

Title: Chief Operating Officer

Signature Page to Research Collaboration, Option and License Agreement
 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their representatives thereunto duly authorized as of the Effective Date.

JANSSEN BIOTECH INC.
 

By:
/s/ John Wilson
 

Name: John Wilson

Title: Vice President, Janssen Biotech Inc.

 
Signature Page to Research Collaboration, Option and License Agreement
 

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List of Appendices and Schedules

Appendix 1 – Definitions

Appendix 2 – Development Candidate Checklist

Appendix 3 – J&J Universal Calendar

Schedule 1.6.1 – JRC Governance

Schedule 1.6.5 – Alliance Management Activities

Schedule 4.4.4 – Isis’ Fully Absorbed Cost of Goods Methodology

Schedule 5.2 – Specific Performance Milestone Events

Schedule 6.9.1 – Certain Isis In-License Agreements

Schedule 8.2.2(a) – Isis Core Technology Patents

Schedule 8.2.2(b) – Isis Manufacturing and Analytical Patents

Schedule 8.2.2(c) – Isis Product-Specific Patents

Schedule 8.2.2(d) – Isis Formulation Patents

Schedule 11.4 – Press Release

Schedule 8.2.2(e) – Prior Agreements
 

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Appendix 1

DEFINITIONS

For purposes of this Agreement, the following capitalized terms will have the
following meanings:

“Acceptance” means, with respect to an NDA, MAA or JNDA filed for a Product, (a)
in the United States, the receipt of written notice from the FDA in accordance
with 21 C.F.R. §314.101(a)(2) that such NDA is officially “filed,” (b) in the
European Union, receipt by JBI of written notice of acceptance by the EMA of
such MAA for filing under the centralized European procedure in accordance with
any feedback received from European Regulatory Authorities; provided that if the
centralized filing procedure is not used, then Acceptance will be determined
upon the acceptance of such MAA by the applicable Regulatory Authority in a
Major Country in the EU, and (c) in Japan, receipt by JBI of written notice of
acceptance of filing of such JNDA from the Koseisho (i.e., the Japanese Ministry
of Health and Welfare, or any successor agency thereto).

“Additional Core IP” means Third Party intellectual property that is necessary
to [***]; provided Additional Core IP does not include any Patent Rights
claiming (or intellectual property related to) [***].

“Affiliate” of an entity means any corporation, firm, partnership or other
entity which directly or indirectly through one or more intermediaries controls,
is controlled by or is under common control with a Party to this Agreement. An
entity will be deemed to control another entity if it (i) owns, directly or
indirectly, at least 50% of the outstanding voting securities or capital stock
(or such lesser percentage which is the maximum allowed to be owned by a foreign
corporation in a particular jurisdiction) of such other entity, or has other
comparable ownership interest with respect to any entity other than a
corporation; or (ii) has the power, whether pursuant to contract, ownership of
securities or otherwise, to direct the management and policies of the entity.
For clarity, Regulus Therapeutics Inc. will not be deemed an “Affiliate” of Isis
for the purposes of this Agreement under any circumstances.

“Agreement” has the meaning set forth in the Preamble of this Agreement.

“Agreement Term” has the meaning set forth in Section 10.1.

“Alliance Manager” has the meaning set forth in Section 1.6.5.

“Annual” means the period covering a Calendar Year or occurring once per
Calendar Year, as the context requires.

“API” means the bulk active pharmaceutical ingredient manufactured in accordance
with GMP (unless expressly stated otherwise) for a Product.

“Applicable Law” or “Law” means all applicable laws, statutes, rules,
regulations and other pronouncements having the effect of law of any federal,
national, multinational, state, provincial, county, city or other political
subdivision, agency or other body, domestic or foreign, including any applicable
rules, regulations, guidelines, or other requirements of the Regulatory
Authorities that may be in effect from time to time.
 
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 “Approval” means, with respect to a Product in any regulatory jurisdiction,
approval from the applicable Regulatory Authority sufficient for the
manufacture, distribution, use, marketing and sale of such Product in such
jurisdiction in accordance with Applicable Laws. In jurisdictions where the
applicable Regulatory Authority sets the pricing or reimbursement authorizations
necessary for the general marketing and sale of such Product in the marketplace,
Approval will not be deemed to have occurred if the final approval to market and
sell such Product is being withheld because JBI (or its Affiliate or
Sublicensee) and the Regulatory Authority have not yet determined pricing or
reimbursement even if all other approvals, licenses, registrations or
authorizations necessary for marketing, sale or use of such Product in such
jurisdiction have been obtained. “Approval” does not include authorization by a
Regulatory Authority to conduct named patient, compassionate use or other
similar activities.

“ASO” means a single-stranded or double-stranded oligonucleotide compound, or
analog, variant, mimic, or mimetic thereof, having a sequence that is at least
six bases long and is designed to hybridize to a nucleic acid transcript via the
binding, partially or wholly, of such compound to the nucleic acid transcript.

“Audit Report” has the meaning set forth in Section 6.12.

“Autoimmune Diseases” is any of a number of diseases characterized by abnormal
functioning of the immune system which causes the immune system to attack the
body's own tissues. Crohn's disease and ulcerative Colitis which are
inflammatory bowel diseases are included as autoimmune diseases for purposes of
this Agreement.

“Bankruptcy Code” has the meaning set forth in Section 7.12.

“Breaching Party” means the Party that is believed by the Non-Breaching Party to
be in material breach of this Agreement.

“Business Day” means any day other than a Saturday or Sunday on which banking
institutions in New York, New York are open for business.

“Calendar Quarter” means a financial quarter based on the J&J Universal Calendar
for that year (a copy of which is attached hereto as Appendix 3) and is used for
JBI’s internal and external reporting purposes; provided, however, that the
first Calendar Quarter for the first Calendar Year extends from the Effective
Date to the end of the then current Calendar Quarter and the last Calendar
Quarter extends from the first day of such Calendar Quarter until the effective
date of the termination or expiration of the Agreement.

“Calendar Year” means a year based on the J&J Universal Calendar for that year.
The Last Calendar Year of the Term begins on the first day of the J&J Universal
Calendar Year for the year during which termination or expiration of the
Agreement will occur, and the last day of such Calendar Year will be the
effective date of such termination or expiration.

“Claims” has the meaning set forth in Section 9.1.
 
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 “Clinical Study” or “Clinical Studies” means a Phase I Clinical Trial, Phase II
Clinical Trial, Phase III Clinical Trial or Phase IV Clinical Trial, or such
other study in humans that is conducted in accordance with good clinical
practices and is designed to generate data in support or maintenance of an NDA,
MAA or other similar marketing application.

“Clinical Supplies” means API and finished drug Product for use in a Clinical
Study.

“CMO” means a Third Party contract manufacturer Manufacturing API, Clinical
Supplies or Finished Drug Product for any purpose under this Agreement.

“Collaboration Target” means a gene target designated as a Collaboration Target
pursuant to Section 1.2.

“Commercialize,” “Commercialization” or “Commercializing” means any and all
activities directed to marketing, promoting, detailing, distributing, importing,
having imported, exporting, having exported, selling or offering to sell a
Product following receipt of Approval for such Product in the applicable
country, including conducting pre-and post-Approval activities, including
studies reasonably required to increase the market potential of the Product and
studies to provide improved formulation and Product delivery, and launching and
promoting such Product in each country.

“Commercializing Party” means (a) JBI, with respect to a Product that is being
Developed and Commercialized by or on behalf of JBI, its Affiliates or
Sublicensees hereunder, and (b) Isis, with respect to a Discontinued Product
that is being Developed and Commercialized by or on behalf of Isis, its
Affiliates or Sublicensees hereunder.

“Commercially Reasonable Efforts” means the carrying out of discovery, research,
development or commercialization activities using good-faith commercially
reasonable and diligent efforts that the applicable Party would reasonably
devote to a compound or product of similar market potential or profit potential
at a similar stage in development or product life resulting from its own
research efforts, based on conditions then prevailing and taking into account,
without limitation, issues of safety and efficacy, regulatory authority-approved
labeling, product profile, the competitiveness of alternative products in the
marketplace, the likely timing of the product’s entry into the market, the
patent and other proprietary position, the likelihood of Approval and other
relevant scientific, technical and commercial factors. Without limiting any of
the foregoing, Commercially Reasonable Efforts as it applies to JBI’s
Development or Commercialization of a Product hereunder includes the use of
Commercially Reasonable Efforts to perform the “General Activities” described in
Schedule 5.2, and Commercially Reasonable Efforts as it applies to Isis’
Development of a Product hereunder includes use of Commercially Reasonable
Efforts to adhere to the activities and timelines set forth in each Drug
Discovery Plan and Development Plan.

“Competitive Infringement” has the meaning set forth in Section 7.5.1.

“Completion of PoC” means, on a Product-by-Product basis, when JBI receives the
primary end-point data generated under the statistical analysis plan of the
first PoC Study.
 
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 “Compound” means on a Drug Discovery Program-by-Drug Discovery Program basis,
any ASO that is designed to bind to the RNA that encodes the applicable
Collaboration Target, where such ASO is discovered by Isis prior to or in the
performance of the Drug Discovery Plan, including each Development Candidate
under such Drug Discovery Program.

“Confidential Information” has the meaning set forth in Section 11.1.
“Confidential Information” does not include information that:

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

(b) was generally available to the public or otherwise part of the public domain
at the time of its disclosure to the Receiving Party or its Affiliates;

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

(d) was disclosed to the Receiving Party or its Affiliates, other than under an
obligation of confidentiality, by a Third Party who had no obligation to the
Disclosing Party or its Affiliates not to disclose such information to others.

“Control” or “Controlled” means possession of the ability to grant a license or
sublicense hereunder without violating the terms of any agreement with any Third
Party; provided, however, that if a Party has a right to grant a license or
sublicense, with respect to an item of intellectual property to the other Party
only upon payment of compensation (including milestones or royalties) to a Third
Party (“Third Party Compensation”) (other than Isis Supported Pass-Through Costs
in the case of Isis, and other than JBI Supported Pass-Through Costs in the case
of JBI), then the first Party will be deemed to have “Control” of the relevant
item of intellectual property only if the other Party agrees to bear the cost of
such Third Party Compensation. Notwithstanding anything to the contrary under
this Agreement, with respect to any Third Party that becomes an Affiliate of a
Party after the Effective Date (including a Third Party acquirer), no
intellectual property of such Third Party will be included in the licenses
granted hereunder by virtue of such Third Party becoming an Affiliate of such
Party.

“Cover,” “Covered” or “Covering” means, with respect to a patent, that, but for
a license under such patent, the act of making, using or selling would infringe
a Valid Claim included in such patent, or in the case of a patent that is a
patent application, would infringe a Valid Claim in such patent application if
it were to issue as a patent.

“CREATE Act” means the Cooperative Research and Technology Enhancement Act of
2004, 35 U.S.C. § 103(c)(2)-(c)(3).

“CTD” has the meaning set forth in Section 5.4.1.
 
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 “Currency Hedge Rate(s)” is calculated as a weighted average hedge rate of the
outstanding external foreign currency forward hedge contract(s) of Johnson &
Johnson’s Global Treasury Services Center (GTSC) and its Affiliates with third
party banks. The hedge contract(s) is entered into to protect the transactional
foreign exchange risk exposures of JBI by reducing the impact of foreign
currency volatility through a systematic buildup of a yearly Currency Hedge
Rate(s).

“Develop,” “Developing” or “Development” means with respect to a Product, any
and all discovery, characterization, or preclinical (including IND-Enabling
Toxicology Studies), clinical, or regulatory activity with respect to the
Product to seek Approval (including the submission of all necessary filings with
applicable Regulatory Authorities to support such preclinical and clinical
activities and Approval), including human clinical trials conducted after
Approval of the Product to seek Approval for additional indications for the
Product.

“Development Candidate” means a Compound that is reasonably determined by Isis’
Research Management Committee in accordance with Isis’ standard procedures for
designating development candidates (and giving good faith consideration to the
input of JBI’s representatives on the JRC) as ready to start IND-Enabling
Toxicology Studies. The checklist Isis uses as of the Effective Date when
reviewing potential development candidates for approval is attached hereto as
Appendix 2.

“Development Candidate Data Package” means, with respect to a Development
Candidate: [***].

“Development Plan” has the meaning set forth in Section 1.3.2(b).

“Disclosing Party” has the meaning set forth in Section 11.1.

“Discontinued Product” means a Product that is the subject of a termination
under this Agreement.

“Dispositive Rejection Condition” has the meaning set forth in Section 1.2.3.

“Dispute” means any dispute arising between the Parties relating to, arising out
of or in any way connected with this Agreement or any term or condition hereof,
or the performance by either Party of its obligations hereunder, whether before
or after termination of this Agreement that cannot be resolved by the Parties.

“Drug Discovery Plan” has the meaning set forth in Section 1.3.2(b).

“Drug Discovery Program” has the meaning set forth in Section 1.2.

“Drug Discovery Term” has the meaning set forth in Section 1.5.1.

“Effective Date” has the meaning set forth in the Preamble of this Agreement.

“EMA” means the European Medicines Agency and any successor entity thereto.
 
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 “European Union” or “EU” means each and every country or territory that is
officially part of the European Union.

“Executives” has the meaning set forth in Section 12.1.1.

“FDA” means the United States Food and Drug Administration and any successor
entity thereto.

“Field” means, except as may be limited under Section 4.1.4, the prophylactic or
therapeutic use or form of administration of a Product for any indication.

“Finished Drug Product” means any drug product containing API as an active
ingredient in finished bulk form for the Development or Commercialization by a
Party under this Agreement.

“First Commercial Sale” means with respect to a Product, the first sale of such
Product by JBI, its Affiliate or its Sublicensee to a Third Party in a
particular country after Approval of the Product has been obtained in such
country.

“Follow-On Agreement” has the meaning set forth in Section 2.1.2.

“Follow-On Compound” means, with respect to a given Compound for a given
Collaboration Target, any ASO (other than the Development Candidate for such
Collaboration Target) that is designed to bind to the RNA that encodes such
Collaboration Target discovered by or on behalf of Isis following exercise of
the applicable Option by JBI.

“FTE” means a total of 47 weeks or 1880 hours per year of work on the
Development, Manufacturing or Commercialization of a Product carried out by
employees of a Party having the appropriate relevant expertise to conduct such
activities.

“FTE Rate” Means for a given Calendar Year the rate that Isis charges for a full
time equivalent [***].

“Fully Absorbed Cost of Goods” means the reasonable and necessary internal and
third party costs with no mark-up incurred by Isis in making or acquiring of
product as determined using the methodology set forth in Schedule 4.4.4 fairly
applied and as employed on a consistent basis throughout Isis’ operations and
shall not include inter-company profits among Isis and its Affiliates. .

“GCP” means the then current standards for clinical trials for pharmaceuticals,
as set forth in the United States Code of Federal Regulations, ICH guidelines
and applicable regulations, laws or rules as promulgated thereunder.

“Generic Product” means, with respect to a particular Product in a country, a
generic or biosimilar pharmaceutical product, that is not produced, licensed or
owned by JBI or any of its Affiliates, that:(a) contains the same, or a
bioequivalent of the, active ingredient as a Product; and (b) is approved for
use in such country by a regulatory authority through a regulatory pathway by
referencing clinical data first submitted for obtaining regulatory approval for
such Product. Generic Product includes any pharmaceutical products obtained via
a bioequivalence or bioavailability showing such as those covered by section
505(b)(2) or under 505(j) of the U.S. Federal Food, Drug, and Cosmetic Act or an
equivalent outside the United States.
 
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 “GLP” means the then-current good laboratory practice standards promulgated or
endorsed by the FDA as defined in 21 C.F.R. Part 58, and comparable foreign
regulatory standards.

“GMP” means current Good Manufacturing Practices as specified in the United
States Code of Federal Regulations, ICH Guideline Q7A, or equivalent laws,
rules, or regulations of an applicable Regulatory Authority at the time of
manufacture.

 “[***].

“IND” means an Investigational New Drug Application (as defined in the Food,
Drug and Cosmetic Act, as amended) filed with the FDA or its foreign
counterparts.

“IND-Enabling Toxicology Studies” means the pharmacokinetic and toxicology
studies required to meet the requirements for filing an IND. IND-Enabling
Toxicology Studies do not include chronic toxicology studies or reproductive
toxicology studies.

“Indemnitee” has the meaning set forth in Section 9.3.

“Indication” means distinct, well-categorized disease or condition in humans for
which a separate marketing authorization (or amendment to a marketing
authorization) is required.

“Initiation” or “Initiate” means, with respect to any IND-Enabling Toxicology
Study, dosing of the first animal subject in such IND-Enabling Toxicology Study
and, with respect to any Clinical Study, dosing of the first human subject in
such Clinical Study.

“Integrated Development Plan” or “IDP” has the meaning set forth in Section 5.3.

“Isis” has the meaning set forth in the Preamble of this Agreement.

“Isis Core Technology Patents” means all Patent Rights owned, used, developed
by, or licensed to Isis or its Affiliates, in each case to the extent Controlled
by Isis or its Affiliates on the Effective Date or at any time during the
Agreement Term, claiming subject matter generally applicable to ASOs, other than
Isis Product-Specific Patents or Isis Manufacturing and Analytical Patents. A
list of Isis Core Technology Patents as of the Effective Date is set forth on
Schedule 8.2.2(a) attached hereto.

“Isis Formulation Patents” means the Patent Rights listed on Schedule 8.2.2(d)
attached hereto.

“Isis In-License Agreements” has the meaning set forth in Section 6.9.1(a).

“Isis Internal ASO Safety Database” has the meaning set forth in Section 5.6.

“Isis Know-How” means any Know-How, including any Jointly-Owned Program Know-How
and Isis Program Know-How, owned, used, developed by, or licensed to Isis or its
Affiliates, in each case to the extent Controlled by Isis or its Affiliates on
the Effective Date or at any time during the Agreement Term. Isis Know-How does
not include the Isis Manufacturing and Analytical Know-How.
 
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 “Isis Manufacturing and Analytical Know-How” means Know-How, including
Jointly-Owned Program Know-How, that relates to the synthesis or analysis of a
Product regardless of sequence or chemical modification, owned, used, developed
by, or licensed to Isis or its Affiliates, in each case to the extent Controlled
by Isis or its Affiliates on the Effective Date or at any time during the
Agreement Term. Isis Manufacturing and Analytical Know-How does not include the
Isis Know-How.

“Isis Manufacturing and Analytical Patents” means Patent Rights, including
Jointly-Owned Program Patents, that claim methods and materials used in the
synthesis or analysis of a Product regardless of sequence or chemical
modification, owned, used, developed by, or licensed to Isis or its Affiliates,
in each case to the extent Controlled by Isis or its Affiliates on the Effective
Date or at any time during the Agreement Term. A list of Isis Manufacturing and
Analytical Patents as of the Effective Date is set forth on Schedule 8.2.2(b)
attached hereto. Isis Manufacturing and Analytical Patents do not include the
Isis Product-Specific Patents or the Isis Core Technology Patents.

“Isis Platform Technology” has the meaning set forth in Section 8.2.2.

“Isis Product-Specific Patents” means all Product-Specific Patents, in each case
to the extent Controlled by Isis or its Affiliates on the Effective Date or at
any time during the Agreement Term. A list of Isis Product-Specific Patents as
of the Effective Date is set forth on Schedule 8.2.2(c) attached hereto.

“Isis Program Know-How” has the meaning set forth in Section 7.1.2.

“Isis Program Patents” has the meaning set forth in Section 7.1.2.

“Isis Supported Pass-Through Costs” means [***].

“JBI” has the meaning set forth in the Preamble of this Agreement.

“JBI Royalty” has the meaning set forth in Section 6.8.1.

“JBI Know-How” means any Know-How owned, used, developed by, or licensed to JBI
or its Affiliates, in each case to the extent Controlled by JBI or its
Affiliates on the Effective Date or at any time during the Agreement Term, but
specifically excluding the JBI Program Know-How.

“JBI Patents” means any Patent Rights included in the JBI Technology.

“JBI Product-Specific Patents” means all Product-Specific Patents owned, used,
developed by, or licensed to JBI or its Affiliates, in each case to the extent
Controlled by JBI or its Affiliates on the Effective Date or at any time during
the Agreement Term.

“JBI Program Know-How” has the meaning set forth in Section 7.1.2.
 
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 “JBI Program Patents” has the meaning set forth in Section 7.1.2.

“JBI Program Technology” has the meaning set forth in Section 7.1.2.

“JBI-Prosecuted Patents” has the meaning set forth in Section 7.2.4.

“JBI Supported Pass-Through Costs” means [***].

“JBI Technology” means the JBI Program Technology, Jointly-Owned Program
Technology, JBI Product-Specific Patents and any trademarks described in Section
4.1.5, owned, used, developed by, or licensed to JBI or its Affiliates that is
necessary or useful to Develop, register, Manufacture or Commercialize a
Product.

“Japan NDA” or “JNDA” means the Japanese equivalent of an NDA filed with the
Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor
agency thereto).

“JNDA Approval” means the Approval of a JNDA by the Koseisho (i.e., the Japanese
Ministry of Health and Welfare, or any successor agency thereto) for the
applicable Product in Japan including pricing.

“Joint Patent Committee” or “JPC” has the meaning set forth in Section 7.1.3(a).

“Jointly-Owned Program Know-How” has the meaning set forth in Section 7.1.2.

“Jointly-Owned Program Patents” has the meaning set forth in Section 7.1.2.

“Jointly-Owned Program Technology” has the meaning set forth in Section 7.1.2.

“JRC” has the meaning set forth in Section 1.6.1.

“Know-How” means inventions, technical information, know-how and materials,
including technology, data, compositions, formulas, biological materials,
assays, reagents, constructs, compounds, discoveries, procedures, processes,
practices, protocols, methods, techniques, results of experimentation or
testing, knowledge, trade secrets, skill and experience, in each case whether or
not patentable or copyrightable, and in each case that are unpatented.

“Lead Party” has the meaning set forth in Section 7.4.1.

“Licensed Know-How” means Isis Manufacturing and Analytical Know-How, and Isis
Know-How. For clarity, Licensed Know-How does not include any Know-How covering
delivery devices.

“Licensed Patents” means the Isis Product-Specific Patents, Isis Core Technology
Patents, Isis Manufacturing and Analytical Patents, Isis Formulation Patents and
Isis’ interest in Jointly-Owned Program Patents. For clarity, Licensed Patents
do not include any Patent Rights claiming formulation technology or delivery
devices unless such Patent Rights are included in the Jointly-Owned Program
Patents.
 
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 “Licensed Technology” means, on a Product-by-Product basis, any and all
Licensed Patents, Licensed Know-How, and any trademarks described in Section
4.1.5, to the extent necessary or useful to Develop, register, Manufacture or
Commercialize such Product.

“Losses” has the meaning set forth in Section 9.1.

“MAA” means, with respect to a particular Product, a marketing authorization
application filed with the EMA after completion of Clinical Studies (excluding
Phase IV Clinical Trials) to obtain Approval for such Product under the
centralized European filing procedure or, if the centralized EMA filing
procedure is not used, filed using the applicable procedures in any European
Union country.

“MAA Approval” means, with respect to a particular Product, the Approval of an
MAA by the EMA for such Product in any country in the EU including pricing.

“Major Market” means any of the following countries: the United States, Japan,
the United Kingdom, Germany, France, Italy and Spain.

“Manufacture” or “Manufactured” or “Manufacturing” means any activity involved
in or relating to the manufacturing, quality control testing (including
in-process, release and stability testing), releasing or packaging, for
pre-clinical and clinical purposes, of API or a Product in finished form.

“Milestone Event” means a Pre-Licensing Milestone Event or a Post-Licensing
Milestone Event, as the case may be.

“Minimum Third Party Payments” means [***].

“NDA” means a New Drug Application filed with the FDA after completion of
Clinical Studies to obtain Approval for a Product in the United States.

“NDA Approval” means the Approval of an NDA by the FDA for a Product in the U.S.

“Negotiation Period” has the meaning set forth in Section 2.1.2.

“Net Sales” means the gross amounts invoiced on sales of a Product by JBI or any
of its Affiliates or sublicensees to a Third Party purchaser in an arms-length
transaction, less the following customary deductions, determined in accordance
with US generally accepted accounting principles and standard internal policies
and procedures and accounting standards consistently applied throughout Johnson
& Johnson, to the extent specifically and solely allocated to such Product and
actually taken, paid, accrued, allowed, included or allocated based on good
faith estimates in the gross sales prices with respect to such sales (and
consistently applied as set forth below):

a) normal and customary trade, cash and/or quantity discounts, allowances, and
credits allowed or paid, in the form of deductions actually allowed or fees
actually paid with respect to sales of such Product (to the extent not already
reflected in the amount invoiced) excluding commissions for commercialization;

 
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b) excise taxes, use taxes, tariffs, sales taxes and customs duties, and/or
other government charges imposed on the sale of Product to the extent included
in the price and separately itemized on the invoice price (but specifically
excluding, for clarity, any income taxes assessed against the income arising
from such sale) (including VAT, but only to the extent that such VAT taxes are
not reimbursable or refundable);

c) outbound freight, shipment and insurance costs to the extent included in the
price and separately itemized on the invoice price;

d) compulsory payments and cash rebates related to the sales of such Product
paid to a Governmental Authority (or agent thereof) pursuant to governmental
regulations by reason of any national or local health insurance program or
similar program, to the extent allowed and taken; including Government levied
fees as a result of Healthcare Reform policies

e) retroactive price reductions, credits or allowances actually granted upon
rejections or returns of Product, including for recalls or damaged good and
billing errors; and

f) rebates, chargebacks, and discounts (or equivalent thereof) actually granted
to managed health care organizations, pharmacy benefit managers (or equivalent
thereof), federal, state/provincial, local or other governments, or their
agencies or purchasers, reimbursers, or trade customers.

The sales of Products arising from named patient, compassionate use, or other
similar programs will not be considered a First Commercial Sale for purposes of
calculating the Royalty Period.

All aforementioned deductions shall only be allowable to the extent they are
commercially reasonable and shall be determined, on a country-by-country basis,
as incurred in the ordinary course of business in type and amount consistent
with the Party’s, the Affiliate’s, or Third Party sublicensee’s (as the case may
be) business practices consistently applied across its product lines and
accounting standards and verifiable based on the Johnson & Johnson sales
reporting system. All such discounts, allowances, credits, rebates, and other
deductions shall be fairly and equitably allocated to Product and other products
of the Party and its Affiliates and sublicensees such that Product does not bear
a disproportionate portion of such deductions.

The following shall be excluded for the purposes of calculating royalties or
sales milestones:

a) Sales of Product by and between JBI and its Affiliates and sublicenses so
long as such Product is subsequently resold to a Third-party end user where such
resale to such Third-party end user is included in Net Sales

b) Sales of Product for the use in conducting clinical trials, pre-clinical
studies or other research or development activities in a country in order to
obtain Regulatory Approval of Product in such country

c) Product provided free of charge for a bona fide charitable purpose

 
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d) Product used for commercially reasonable free sampling programs.

e) Sales of Product free of charge for Compassionate

f) Sales of Product for Named Patient Sales where such Product is sold at a
significant discount to the proposed price for the Product following Approval.

In the event Product(s) are sold in combination with other products or services
from JBI, its Affiliates or sublicensees and the customer receives a specific
discount for such “bundling” of products (for clarity, this situation describes
bundling of two or more separate products, each in finished dosage form, and not
a fixed combination of two active pharmaceutical ingredients), the Net Sales of
the said Product(s), for the purposes of determining royalty payments, shall be
determined by multiplying the relevant Net Sales by the fraction, A/(A+B) where
A is the weighted (by sales volume) average sale price in a particular country
of the Product(s) in the previous Calendar Year when sold separately and B is
the weighted average sale price in that country in the previous Calendar Year of
the other product sold separately. In the event that such average sale price
cannot be determined for either of the Product(s) or the other product(s) it has
been sold with, in combination, then for purposes of determining the royalty
payments, JBI will propose a reasonable good faith estimate of the fair market
value of each component (and JBI will provide Isis a justification and support
for such estimates) which will be substituted for the weighted average sales
price for each such product in the formula above. If JBI, its Affiliate or a
Sublicensee receives non-monetary consideration for a Product, Net Sales are
calculated based on the fair market value of that consideration.

“New Third Party Licenses” has the meaning set forth in Section 8.3.2.

“Non-Breaching Party” means the Party that believes the Breaching Party is in
material breach of this Agreement.

“Option” has the meaning set forth in Section 3.1.

“Option Deadline” has the meaning set forth in Section 3.1.

“Option Period” means, with respect to a Drug Discovery Program, the period
beginning on the date when the applicable Collaboration Target was designated
and ending on the expiration or earlier termination of the Option with respect
to such Drug Discovery Program.

“Out-of-Pocket Expenses” means the amounts paid to Third Party vendors or
contractors, for services or materials provided by them directly in the
performance of activities to the extent such services or materials apply
directly to the activities under this agreement.

“Party” or “Parties” means JBI and Isis individually or collectively.

“Patent Costs” means the reasonable fees and expenses paid to outside legal
counsel, and filing, maintenance and other reasonable Out-of-Pocket expenses
paid to Third Parties, incurred in connection with the Prosecution and
Maintenance of Patent Rights.
 
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 “Patent Rights” means (a) patents, patent applications and similar
government-issued rights protecting inventions in any country or jurisdiction
however denominated, (b) all priority applications, divisionals, continuations,
substitutions, continuations-in-part of and similar applications claiming
priority to any of the foregoing, and (c) all patents and similar
government-issued rights protecting inventions issuing on any of the foregoing
applications, together with all registrations, reissues, renewals,
re-examinations, confirmations, supplementary protection certificates, and
extensions of any of (a), (b) or (c).

“Permitted Licenses” means (1) licenses granted by Isis before or after the
Effective Date to any Third Party under the Isis Core Technology Patents, the
Isis Manufacturing and Analytical Patents, or the Isis Manufacturing and
Analytical Know-How (but not under the Isis Product-Specific Patents) to (a) use
oligonucleotides (or supply oligonucleotides to end users) solely to conduct
pre-clinical research, or (b) enable such Third Party to manufacture or
formulate oligonucleotides, where (i) such Third Party is primarily engaged in
providing contract manufacturing or services and is not primarily engaged in
drug discovery, development or commercialization of therapeutics; and (ii) Isis
does not assist such Third Party to identify, discover or make a Compound or
Product; and (2) material transfer, collaboration or sponsored research
agreements with academic collaborators or non-profit institutions solely to
conduct noncommercial research.

“Person” will mean any corporation, limited or general partnership, limited
liability company, joint venture, trust, unincorporated association,
governmental body, authority, bureau or agency, any other entity or body, or an
individual.

“Phase I Clinical Trial” means a human clinical trial that is intended to
initially evaluate the safety, metabolism and pharmacokinetics of a therapeutic
agent that would otherwise satisfy the requirements of 21 C.F.R. 312.21(a) or an
equivalent clinical trial in a country in the Territory other than the United
States.

“Phase II Clinical Trial” means a human clinical trial, for which the primary
endpoints include a determination of safety, dose ranges or an indication of
efficacy of a therapeutic in patients being studied as described in 21 C.F.R.
§312.21(b), or an equivalent clinical trial in a country in the Territory other
than the United States, and that is prospectively designed to generate
sufficient data (if successful) to commence pivotal clinical trials.

“Phase III Clinical Trial” means a human clinical trial (regardless of whether
actually designated as “Phase III”) that is prospectively designed, along with
other Phase III Clinical Trials, to demonstrate statistically whether a
therapeutic is safe and effective for use in humans in the indication being
investigated as described in 21 C.F.R. §312.21(c), or an equivalent clinical
trial in a country in the Territory other than the United States.

“Phase IV Clinical Trial” means, with respect to a Product, (a) any Clinical
Study conducted to satisfy a requirement of a Regulatory Authority in order to
maintain a Regulatory Approval for such Product or (b) any Clinical Study
conducted after the first Regulatory Approval in the same disease state for
which such Product received Regulatory Approval other than for purposes of
obtaining Regulatory Approval.
 
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 “Plan” means a Drug Discovery Plan and/or Development Plan, as applicable.

“PoC Study” means a study conducted during a Phase II Clinical Trial designed to
give preliminary evidence of efficacy and safety for a Product.

“Post-Licensing Milestone Event” has the meaning set forth in Section 6.4.

“Pre-Clinical Studies” means in vitro and in vivo studies of a Product, not in
humans, including those studies conducted in whole animals and other test
systems, designed to determine the toxicity, bioavailability, and
pharmacokinetics of such Product and whether such Product has a desired effect.

“Pre-Licensing Milestone Event” has the meaning set forth in Section 6.2.

“Prior Agreements” means the Agreements listed on Schedule 8.2.2(e) attached
hereto.

“Proceeding” means an action, suit or proceeding.

“Product” means, on a Drug Discovery Program-by-Drug Discovery Program basis, a
finished drug product containing a unique and specific Compound as an active
pharmaceutical ingredient. Each Product shall contain a different specific
Compound (s).

“Product-Specific Patents” means Patent Rights Controlled by a Party or any of
its Affiliates on or after the Effective Date, including any Program Patents,
claiming (i) the specific composition of matter of a Product, or (ii) methods of
using a Product as a prophylactic or therapeutic; provided however, Patent
Rights Controlled by Isis or any of its Affiliates that (y) include claims that
are directed to subject matter applicable to ASOs in general, or (z) include an
ASO, the sequence of which targets the RNA that encodes a Collaboration Target
and the RNA of a gene that does not encode a Collaboration Target, will not be
considered Product-Specific Patents, and in the case of (y) and (z), such Patent
Rights will be considered Isis Core Technology Patents.

“Program Patents” has the meaning set forth in Section 7.1.2.

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

“Receiving Party” has the meaning set forth in Section 11.1.

“Regulatory Approval” means the approval necessary for the commercial
manufacture, distribution, marketing, promotion, offer for sale, use, import,
export, and sale of a pharmaceutical product in a jurisdiction regulated by a
Regulatory Authority.
 
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 “Regulatory Authority” means any governmental authority, including the FDA, EMA
or Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any successor
agency thereto), that has responsibility for granting any licenses or approvals
or granting pricing or reimbursement approvals necessary for the marketing and
sale of a Product in any country.

“Research” means conducting the research activities with Compounds as set forth
in each Drug Discovery Plan, including pre-clinical research and lead
optimization, but specifically excluding Development and Commercialization. When
used as a verb, “Researching” means to engage in Research.

“RMC” means Isis’ Research Management Committee, or any successor committee.

“ROFN Period” has the meaning set forth in Section 2.1.2.

“ROFN Termination Event” has the meaning set forth in Section 2.1.2.

“Royalty Period” has the meaning set forth in Section 6.8.2(a).

“Sales Milestone Event” has the meaning provided in Section 6.7.

“[***].

“Specific Performance Milestone Event” has the meaning set forth in Section 5.2.

“Step-In Party” has the meaning set forth in Section 7.4.1.

“Sublicensee” means a Third Party to whom a Party or its Affiliates or
Sublicensees has granted a sublicense or license under any Licensed Technology
or JBI Technology, as the case may be, licensed to such Party in accordance with
the terms of this Agreement.

“Substitution Fee” means $[***] per substituted target to be paid by JBI
following Isis’ acceptance of JBI’s proposed substitute gene target under
Section 1.2.5 .

“Supplemental Information” has the meaning provided in Section 1.3.5.

“Target Nomination Period” has the meaning set forth in Section 1.2.1.

[***]

“Third Party” means a Person or entity other than the Parties or their
respective Affiliates.

“Third Party Obligations” means any financial and non-financial encumbrances,
obligations, restrictions, or limitations imposed by an agreement between Isis
and a Third Party (including the Isis In-License Agreements) that relate to a
Product, a Collaboration Target, including field or territory restrictions,
covenants, milestone payments, diligence obligations, sublicense revenue,
royalties, or other payments.

“United States” or “U.S.” means the fifty states of the United States of America
and all of its territories and possessions and the District of Columbia.
 
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 “Valid Claim” means a claim (i) of any issued, unexpired United States or
foreign Patent Right, which will not, in the country of issuance, have been
donated to the public, disclaimed, nor held invalid or unenforceable by a court
of competent jurisdiction in an unappealed or unappealable decision, or (ii) of
any United States or foreign patent application within a Patent Right, which
will not, in the country in question, have been cancelled, withdrawn, abandoned
nor been pending for more than six years, not including in calculating such
six-year period time in which such application is in interference or opposition
or similar proceedings or time in which a decision of an examiner is being
appealed. Notwithstanding the foregoing, on a country-by-country basis, a patent
application pending for more than six years will not be considered to have any
Valid Claim for purposes of this Agreement unless and until a patent meeting the
criteria set forth in clause (i) above with respect to such application issues.
 
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Appendix 2
 
Development Candidate
Checklist
 
[***]
 
 

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Appendix 3
 
J&J Universal Calendar
 
[image02.jpg]
 
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Schedule 1.6.1

JRC Governance
 

(a) The JRC will determine the JRC operating procedures, including frequency of
meetings (at least quarterly), location of meetings, and responsibilities for
agendas and minutes. The JRC will codify these operating procedures in the
written minutes of the first meeting.

 

(b) The JRC may hold meetings in person or by audio or video conference as
determined by the JRC; but at least two meetings per year will be in person (one
held at Isis’ facilities, and the other held at JBI’s facilities in the U.S.).
Alliance Managers will attend JRC meetings as participating non-members. In
addition, upon prior approval of the other Party, each Party may invite its
employees or consultants to attend JRC meetings, including any subject matter
expert(s) with valuable knowledge of Collaboration Targets or the diseases
associated with such Collaboration Targets.

 

(c) The co-chairs will be responsible for ensuring that activities occur as set
forth in this Agreement, including ensuring that JRC meetings occur, JRC
recommendations are properly reflected in the minutes, and any dispute is given
prompt attention and resolved in accordance with Section 1.6.3, Section 7.1.3
and Section 12.1, as applicable.

 

(d) The JRC members from the same Party will collectively have one vote. The JRC
will strive to make recommendations with approval of both Isis members and JBI
members, and record such recommendations in the minutes of the applicable JRC
meeting.

 

(e) The JRC may form subcommittees and working groups as it determines in order
to carry out its activities under this Agreement, all of which will dissolve
when the JRC dissolves.

 
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Schedule 1.6.5
 
Alliance Management Activities
 
Each Alliance Manager is responsible for:
 

(a) Promoting the overall health of the relationship between the Parties;

 

(b) Developing a mutually agreed alliance launch plan covering any activities
and systems that the Parties need to implement within the first 100 days after
the Effective Date to support the Drug Discovery Programs;

 

(c) Organizing JRC meetings, including agendas, drafting minutes, and publishing
final minutes;

 

(d) Supporting the co-chairs of the JRC with organization of meetings,
information exchange, meeting minutes, and facilitating dispute resolution as
necessary;

 

(e) Preparing status and progress reports on the above as determined necessary
by the JRC;

 

(f) Ensuring compliance in maintaining the Isis Internal ASO Safety Database as
outlined in Section 5.6;

 

(g) Ensuring proper approval of publications prior to submission as required in
Section 11.4; and

 

(h) Understanding and communicating the components contained in the
relationship-management document provided by Isis to JBI, to assist JBI in
understanding and complying with the contractual obligations under the Isis
In-License Agreements after Option exercise.

 
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Schedule 4.4.4
 
Isis’ Fully Absorbed Cost of Goods Methodology
 
[***]
 

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Schedule 5.2
 
JBI’s Development and Commercialization Activities
 
[***]
 

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Schedule 6.9.1
 
Certain Isis In-License Agreements
 
(Relevant to the Drug Discovery Programs as of the Effective Date)
 
[***]
 
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Schedule 8.2.2(a)
 
Isis Core Technology Patents
 
[***]
 

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Schedule 8.2.2(b)
 
Isis Manufacturing and Analytical Patents
 
[***]
 
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Schedule 8.2.2(c)
 
Isis Product-Specific Patents
 
[***]
 

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Schedule 8.2.2(d)
 
Isis Formulation Patents
 
[***]
 

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Schedule 8.2.2(e)
 
Prior Agreements
 
[***]
 

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Schedule 11.4 – Press Release
 
ISIS PHARMACEUTICALS ANNOUNCES COLLABORATION WITH JANSSEN TO DISCOVER AND
DEVELOP RNA-TARGETED THERAPEUTICS FOR AUTOIMMUNE DISEASES IN THE GI TRACT
 
-- Collaboration Combines Isis’ RNA-Targeted Technology with Expertise of
Janssen in Autoimmune Disorders and Therapeutic Formulation --

Carlsbad, Calif., Jan. [5], 2015 –Isis Pharmaceuticals, Inc. (NASDAQ: ISIS)
today announced that the company has entered into a global collaboration with
Janssen Biotech, Inc. (Janssen) to discover and develop antisense drugs to treat
autoimmune disorders of the gastrointestinal (GI) tract. The collaboration
brings together Isis’ RNA-targeted technology platform and the expertise of
Janssen in autoimmune disorders and therapeutic formulation to discover and
develop antisense drugs that can be locally administered, including oral
delivery, to treat autoimmune disorders in the GI tract.

"We are excited to be working with Janssen to apply our drug discovery and
development efforts in this therapeutic area. This collaboration broadens the
utility of our drug discovery technology to new targets in the GI tract and
expands the administration of antisense drugs to local delivery, including oral
delivery, to the gut," said B. Lynne Parshall, chief operating officer at Isis
Pharmaceuticals. "We are the leader in RNA-targeted therapeutics and our
innovation and the successes of our pipeline drugs enable us to form
collaborations, like this one, with leaders in specific therapeutic areas. This
partnering strategy ensures that we have access to resources that support and
enhance our drug discovery efforts and also provides us with collaborators, like
Janssen, who are uniquely capable of conducting development, marketing and
commercial efforts for these drugs. ."

Under the terms of the agreement, which covers three programs, Isis will receive
$35 million in upfront payments, including a payment to initiate human lead
optimization on the first collaboration target. Isis is eligible to receive
nearly $800 million in development, regulatory and sales milestone payments and
license fees for these programs. In addition, Isis will receive tiered royalties
that on average are double-digits on sales from any product that is successfully
commercialized. Janssen has the option to license a drug from each of the
programs once a development candidate is identified. If Janssen exercises its
option, it will assume global development, regulatory and commercialization
responsibilities.

ABOUT ISIS PHARMACEUTICALS, INC.
Isis is exploiting its leadership position in RNA-targeted technology to
discover and develop novel drugs for its product pipeline and for its partners.
Isis’ broad pipeline consists of 34 drugs to treat a wide variety of diseases
with an emphasis on cardiovascular, metabolic, severe and rare diseases,
including neurological disorders, and cancer. Isis’ partner, Genzyme, is
commercializing Isis’ lead product, KYNAMRO®, in the United States and other
countries for the treatment of patients with homozygous FH. Isis has numerous
drugs in Phase 3 development in severe and rare and cardiovascular diseases.
These include a ISIS-APOCIIIRx, a drug Isis is developing to treat patients with
severely high triglycerides, such as patients with familial chylomicronemia
syndrome; ISIS-TTRRx, a drug Isis is developing with GSK to treat patients with
the polyneuropathy form of TTR amyloidosis; and, ISIS-SMNRx, a drug Isis is
developing with Biogen Idec to treat infants and children with spinal muscular
atrophy, a severe and rare neuromuscular disease. Isis’ patents provide strong
and extensive protection for its drugs and technology. Additional information
about Isis is available at www.isispharm.com.
 

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Confidential

 
ISIS PHARMACEUTICALS’ FORWARD-LOOKING STATEMENT
This press release includes forward-looking statements regarding Isis’ alliance
with Janssen, Isis’ research, development and commercial opportunities in
developing antisense drugs to treat inflammatory bowel disease. Any statement
describing Isis’ goals, expectations, financial or other projections, intentions
or beliefs is a forward-looking statement and should be considered an at-risk
statement. Such statements are subject to certain risks and uncertainties,
particularly those inherent in the process of discovering, developing and
commercializing drugs that are safe and effective for use as human therapeutics,
and in the endeavor of building a business around such drugs. Isis’
forward-looking statements also involve assumptions that, if they never
materialize or prove correct, could cause its results to differ materially from
those expressed or implied by such forward-looking statements. Although Isis’
forward-looking statements reflect the good faith judgment of its management,
these statements are based only on facts and factors currently known by Isis. As
a result, you are cautioned not to rely on these forward-looking statements.
These and other risks concerning Isis’ programs are described in additional
detail in Isis’ annual report on Form 10-K for the year ended December 31, 2013,
and its most recent quarterly report on Form 10-Q, which are on file with the
SEC. Copies of these and other documents are available from the Company.

In this press release, unless the context requires otherwise, “Isis,” “Company,”
“we,” “our,” and “us” refers to Isis Pharmaceuticals and its subsidiaries.

Isis Pharmaceuticals® is a registered trademark of Isis Pharmaceuticals, Inc.
KYNAMRO® is a registered trademark of Genzyme Corporation.

Isis Pharmaceuticals’ Contacts:
D. Wade Walke, Ph.D.
Amy Blackley, Ph.D.
Vice President, Corporate Communications and Investor Relations
Associate Director, Corporate Communications
760-603-2741
760-603-2772

 
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