Exhibit 10.5

PAYING AGENT AGREEMENT

This Paying Agent Agreement is dated as of November 14, 2011 (this “Agreement”)
by and among Titan Pharmaceuticals, Inc., a Delaware corporation (“Titan”),
Deerfield Management Company, L.P., a Delaware limited partnership (“Deerfield”)
and U.S. Bank National Association, as paying agent (the “Paying Agent”).

WHEREAS, Titan and Deerfield wish to implement the provisions of a Cash
Management Agreement dated the date hereof,

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

ARTICLE 1

ACCOUNT

Section 1.01 Appointment of Paying Agent. Titan and Deerfield each hereby
appoint the Paying Agent to serve as paying agent in connection with
disbursements of funds from the Account (as defined below). The Paying Agent
hereby accepts such appointment pursuant to the terms and conditions set forth
in this Agreement.

Section 1.02 Establishment of Account; Deposits.

The Paying Agent shall establish a custodial deposit account on behalf of Titan
to receive, hold and distribute the amounts contained therein to be disbursed
pursuant to the provisions of this Agreement (the “Account”). Funds will be
deposited by or on behalf of Novartis Pharma A.G. in the Account from time to
time.

Section 1.03 Investments.

(a) The Paying Agent is hereby directed to hold any funds delivered to the
Paying Agent for deposit in the Account pursuant to this Agreement un-invested,
unless the Paying Agent receives joint written instructions signed by an
authorized agent on behalf of Deerfield and Titan directing that the Paying
Agent invest and reinvest funds in the Account.

(b) Deerfield and Titan recognize and agree that the Paying Agent will not
provide supervision, recommendations or advice relating to either the investment
of moneys held in the Account or the purchase, sale, retention or other
disposition of any permitted investment.

(c) Any interest on amounts on deposit in the Account and other earnings on
permitted investments shall be added to the Account. Any loss or expense
incurred as a result of an investment will be borne by the Account.

(d) The Paying Agent shall send statements to Titan and Deerfield on a monthly
basis reflecting activity in the Account for the preceding month. Although
Deerfield

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and Titan each recognize that it may obtain a broker confirmation or written
statement containing comparable information at no additional cost, Deerfield and
Titan each hereby agree that confirmations of permitted investments are not
required to be issued by the Paying Agent for each month in which a monthly
statement is rendered. A statement for the Account will be provided to Titan and
Deerfield each month regardless of whether there is any activity in the Account
for such month.

(e) The Paying Agent shall have the right to liquidate any investments held in
the Account in order to provide funds necessary to make required payments under
this Agreement. The Paying Agent shall have no liability for any loss sustained
as a result of any investment made in accordance with this Agreement or as a
result of any liquidation of any investment prior to its maturity.

ARTICLE 2

DISBURSEMENTS, TERMINATION AND RESIGNATION AND REMOVAL

Section 2.01 Disbursements of Funds in the Account.

(a) The Paying Agent shall only comply with written payment instructions
received from Titan (the “Titan Remittance Instructions”) with respect to the
remittance of funds in the Account to either of Sanofi and/or Deerfield (each, a
“Specified Payee”). As soon as practicable following the Paying Agent’s receipt
of the Titan Remittance Instructions, the Paying Agent shall remit funds in the
Account by wire transfer to the Specified Payee in accordance with such Titan
Remittance Instructions.

(b) The Paying Agent shall only comply with the joint written instructions
received from Titan and Deerfield (the “Joint Remittance Instructions”) with
respect to the remittance of funds in the Account to any person or entity other
than a Specified Payee. As soon as practicable following the Paying Agent’s
receipt of the Joint Remittance Instructions, Paying Agent shall remit funds in
the Account by wire transfer to the person or entity identified in and in
accordance with such Joint Remittance Instructions.

Section 2.02 Tax Reporting. (a) For tax reporting purposes, any interest or
other income earned on amounts on deposit in the Account and any investment of
the Account shall, as of the end of each calendar year and to the extent
required by the Internal Revenue Service (the “IRS”), be reported as having been
earned by Titan.

(b) Titan represents that its correct Taxpayer Identification number (“TIN”) as
assigned by the IRS or any other taxing authority is set forth in Exhibit C.
Upon execution of this Agreement, Titan shall provide the Paying Agent with
fully executed W-8 or W-9 IRS forms that includes Titan’s TIN. In the event that
any earnings remain undistributed at the end of any calendar year, the Paying
Agent shall report to the IRS or other applicable taxing authority such earnings
as it deems appropriate or as required by any applicable law or regulation. In
addition, the Paying Agent shall withhold any taxes it deems appropriate and
shall remit such taxes to the appropriate authorities. Prior to completing a
disbursement to any given wire recipient, the Paying Agent shall receive a fully
executed W-9 or W-8 IRS form from that recipient, as appropriate.

 

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Section 2.03 Termination of Agreement. This Agreement may only be terminated by
the written agreement of the parties hereto.

Section 2.04 Resignation and Removal of Paying Agent. The Paying Agent may
resign from the performance of its duties hereunder at any time by giving thirty
(30) days’ prior written notice to Titan and Deerfield or may be removed, with
or without cause, by Titan and Deerfield at any time by giving thirty (30) days’
prior joint written notice to the Paying Agent. Such resignation or removal
shall take effect upon the appointment of a successor paying agent by Titan and
Deerfield acting jointly. Upon the acceptance in writing of any appointment as
paying agent hereunder by a successor paying agent, such successor paying agent
shall thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Paying Agent, and the retiring Paying
Agent shall be discharged from its duties and obligations under this Agreement,
but shall not be discharged from any liability for actions taken as Paying Agent
under this Agreement, prior to such succession. After any retiring Paying
Agent’s resignation or removal, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Paying Agent under this Agreement. The Paying Agent shall have the right to
withhold an amount equal to any amount due and owing to the Paying Agent as of
the date its resignation or removal becomes effective plus any costs and
expenses the Paying Agent reasonably believes it will incur in connection with
its resignation or removal hereunder.

ARTICLE 3

RESPONSIBILITIES OF PAYING AGENT

Section 3.01 Paying Agent Responsibilities. The Paying Agent’s acceptance of its
duties under this Agreement is subject to the following terms and conditions,
which the parties hereto agree shall govern and control with respect to its
rights, duties, liabilities and immunities:

(a) Except as to its due execution and delivery of this Agreement, it makes no
representation and has no responsibility as to the validity of this Agreement or
of any other instrument referred to herein, or as to the correctness of any
statement contained herein, and it shall not be required to inquire as to the
performance of any obligation under any other agreement;

(b) The Paying Agent shall be protected in acting upon any written notice,
request, waiver, consent, receipt or other paper or document, not only as to its
due execution and the validity and effectiveness of its provisions, but also as
to the truth of any information therein contained, which it in good faith
believes to be genuine and what it purports to be. Concurrently with the
execution of this Agreement, each of Titan and Deerfield shall deliver to the
Paying Agent an authorized signers form attached hereto as Exhibit A;

 

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(c) The Paying Agent may consult with competent and responsible legal counsel
selected by it and it shall not be liable for any action taken or omitted by it
in good faith in accordance with the advice of such counsel;

(d) Titan shall reimburse the Paying Agent for all reasonable expenses incurred
by it in connection with its duties hereunder (other than taxes imposed in
respect of the receipt of fees by the Paying Agent). Titan agrees to indemnify,
defend and hold the Paying Agent and its directors, employees, officers, agents,
successors and assigns (collectively, the “Indemnified Parties”) harmless from
and against any and all losses, claims, damages, liabilities and expenses
including, without limitation, reasonable costs of attorney’s fees and expenses
(collectively, “Damages”), incurred by the Paying Agent without gross negligence
or willful misconduct on its part and arising out of or in connection with the
performance by the Paying Agent of its duties under this Agreement. Such
indemnity includes, without limitation, damages incurred in connection with any
litigation arising from this Agreement or involving the subject matter hereof.
The indemnification provisions contained in this section are in addition to any
other rights any of the Indemnified Parties may have by law or otherwise and
shall survive the termination of this Agreement or the resignation or removal of
the Paying Agent;

(e) The Paying Agent shall have no duties or responsibilities except those
expressly set forth herein, and it shall not be bound by any modification of
this Agreement unless in writing and signed by all parties hereto or their
respective successors in interest;

(f) The Paying Agent shall have no responsibility in respect of the validity or
sufficiency of this Agreement or of the terms hereof. The recitals of facts in
this Agreement shall be taken as the statements of Titan and Deerfield, and the
Paying Agent assumes no responsibility for the correctness of the same;

(g) Titan and Deerfield may from time to time request that the Paying Agent
render a detailed accounting of the funds in the Account, which request shall be
complied by the Paying Agent as soon as practicable following such request;

(h) The Paying Agent shall be protected in acting upon any notice, resolution,
request, consent, order, certificate, report, opinion, bond or other paper or
document reasonably believed by it to be genuine and to have been signed and
presented by the proper party or parties. Whenever the Paying Agent shall deem
it necessary or desirable that a matter be proved or established prior to taking
or suffering any action under this Agreement, such matter may be deemed
conclusively proved and established by a certificate signed by Titan and
Deerfield, and such certificate shall be full warranty for any action taken or
suffered in good faith under the provisions of this Agreement;

(i) The Paying Agent does not have any interest in the Account, but is serving
as Paying Agent only and having only possession thereof. This Section shall
survive notwithstanding any termination of this Agreement or the resignation of
the Paying Agent;

 

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(j) THE PAYING AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY, FOR ANY
(I) DAMAGES, LOSSES OR EXPENSES ARISING OUT OF THE SERVICES PROVIDED HEREUNDER,
OTHER THAN DAMAGES, LOSSES OR EXPENSES WHICH HAVE BEEN FINALLY ADJUDICATED TO
HAVE DIRECTLY RESULTED FROM THE PAYING AGENT’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, OR (II) SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES OR LOSSES OF ANY
KIND WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE PAYING
AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND
REGARDLESS OF THE FORM OF ACTION;

(k) No provision of this Agreement shall require the Paying Agent to risk or
advance its own funds or otherwise incur any financial liability or potential
financial liability in the performance of its duties or the exercise of its
rights under this Agreement;

(l) If any conflict, disagreement or dispute arises between Titan and Deerfield
concerning the meaning or validity of any provision hereunder or concerning any
other matter relating to this Agreement, or the Paying Agent is in doubt as to
the action to be taken hereunder, the Paying Agent is authorized to retain any
portion of the funds in the Account determined by the Paying Agent in its
reasonable discretion (any such portion of the funds in the Account so retained,
the “Retained Portion”) until the Paying Agent (i) receives a final
non-appealable order of a court of competent jurisdiction or a final
non-appealable arbitration decision directing delivery of the Retained Portion,
(ii) receives a written agreement executed by Titan and Deerfield directing
delivery of the Retained Portion, in which event the Paying Agent shall be
authorized to disburse the Retained Portion in accordance with such final court
order, arbitration decision, or agreement, or (iii) files an interpleader action
in any court of competent jurisdiction, and upon the filing thereof, the Paying
Agent shall be relieved of all liability as to the Retained Portion and shall be
entitled to recover reasonable attorneys’ fees, expenses and other costs
incurred in commencing and maintaining any such interpleader action. The Paying
Agent shall be entitled to act on any such agreement, court order, or
arbitration decision without further question, inquiry, or consent. The Paying
Agent shall not be obligated to take any legal action or commence any proceeding
in connection with the funds specified herein, any account in which they are
deposited, this Agreement, or to appear in, prosecute or defend any such legal
action or proceeding; and

(m) If any portion of the funds in the Account shall be attached, garnished or
levied upon by any court order, or the delivery thereof shall be stayed or
enjoined by an order of a court, or any order, judgment or decree shall be made
or entered by any court order affecting funds in the Account, the Paying Agent
is hereby expressly authorized, in its sole discretion, to respond as it deems
appropriate or to comply with all writs, orders or decrees so entered or issued,
or which it is advised by legal counsel of its own choosing is binding upon it,
whether with or without jurisdiction. If the Paying Agent obeys or complies with
any such writ, order or decree it shall not be liable to Titan, Deerfield or to
any other person, firm or corporation, should, by reason of such compliance
notwithstanding, such writ, order or decree be subsequently reversed, modified,
annulled, set aside or vacated.

 

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ARTICLE 4

REPRESENTATION AND WARRANTIES

Section 4.01 Representation and Warranties. Each of Titan and Deerfield
represents and warrants that (a) it is duly organized, validly existing and, to
the extent applicable under the laws of the jurisdiction of its organization, in
good standing under the laws of its jurisdiction of its organization, (b) it has
all requisite corporate and partnership power and authority, as the case may be,
to execute and deliver this Agreement and perform its obligations hereunder,
(c) the execution and delivery of this Agreement and the consummation of all
transactions contemplated thereby have been duly authorized by all necessary
corporate and partnership action, as the case may be, and will not result in any
violation of any applicable law or regulation, and (d) this Agreement has been
duly executed and delivered by, and constitutes a legal, valid, binding and
enforceable obligation of each.

ARTICLE 5

PAYING AGENT FEES AND EXPENSES

Section 5.01 Fees and Expenses of Paying Agent. Titan shall compensate the
Paying Agent for its services hereunder in accordance with Exhibit B attached
hereto and, in addition, shall reimburse the Paying Agent for all costs and
expenses, including reasonable attorneys’ fees, occasioned by any delay,
controversy, litigation or event arising out of the transactions contemplated by
this Agreement. All of the compensation and reimbursement obligations set forth
in this Section shall be payable as soon as practicable after submission by the
Paying Agent to Titan of an invoice detailing such expenses. The obligations of
Titan under this Section shall survive any termination of this Agreement and the
resignation or removal of the Paying Agent.

ARTICLE 6

MISCELLANEOUS

Section 6.01 Notices. All notices, requests, demands, letters, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if (a) delivered
personally, (b) mailed, certified or registered mail with postage prepaid,
(c) sent by next-day or overnight mail or delivery or (d) sent by fax, as
follows:

If to Titan:

Titan Pharmaceuticals, Inc.

400 Oyster Point Blvd., Suite 505

South San Francisco, CA 04080

Attention: President

Facsimile: 650-244-4956

 

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If to Deerfield:

Deerfield Management

780 Third Avenue, 37th Floor

New York, New York 10017

Attention: Structured Products

Facsimile: (212) 599-3075

If to the Paying Agent:

U.S. Bank National Association

1021 East Cary Street, Suite 1850

Richmond, Virginia 23219

Attn: Global Corporate Trust Services

Facsimile: (804) 343-1572

or to such other person or address as any party shall specify by notice in
writing to the party entitled to notice. All such notices, requests, demands,
letters, waivers and other communications shall be deemed to have been received
(i) if by personal delivery on the day after such delivery, (ii) if by certified
or registered mail, on the fifth business day after the mailing thereof,
(iii) if by next-day or overnight mail or delivery, on the day delivered or
(iv) if by fax, on written confirmation of receipt, provided that a copy is also
sent by certified or registered mail.

Section 6.02 Governing Law. This Agreement shall be construed, performed and
enforced in accordance with the laws of the State of New York applicable to
contracts made and to be performed in such State.

Section 6.02A Additional Information. To help the government fight the funding
of terrorism and money laundering activities, Federal law requires all financial
institutions to obtain, verify and record information that identifies each
person who opens an account. For a non-individual person such as a business
entity, a charity, a trust or other legal entity the Paying Agent will ask for
documentation to verify its formation and existence as a legal entity. The
Paying Agent may also ask to see financial statements, licenses, identification,
and authorization documents from individuals claiming authority to represent the
entity or other relevant documentation.

Section 6.03 Other.

(a) This Agreement shall be binding upon and inure to the benefit of the parties
and their successors. Neither this Agreement nor any right or interest hereunder
may be assigned in whole or in part by any party, except as provided in
Section 2.04, without the prior consent of the other parties.

 

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(b) The headings in this Agreement are for convenience of reference only and
shall not define or limit the provisions thereof.

(c) This Agreement may be executed in several counterparts, each of which is an
original but all of which together shall constitute one instrument.

(d) The parties agree that if any provision of this Agreement shall under any
circumstances be deemed invalid or inoperative, this Agreement shall be
construed and enforced accordingly, and the invalidity of any portion of this
Agreement shall not affect the validity of the remainder hereof.

(e) This Agreement may be amended, or any provision of this Agreement may be
waived; provided, however, that (i) any such amendment or waiver will be binding
on Titan and Deerfield only if such amendment or waiver is set forth in a
writing jointly executed by each and (ii) any such amendment or waiver will be
binding upon the Paying Agent only if such amendment or waiver is set forth in a
writing executed by the Paying Agent. The waiver by any party hereto of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any other breach.

(f) This Agreement embodies the entire agreement between the parties with
respect to the establishment and disbursement of the Account by the Paying
Agent, and there are no restrictions, provisions, representations, warranties,
covenants or undertakings relating to such subject matter, other than those set
forth or provided for herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter. The
actions of the Paying Agent shall be governed solely by this Agreement. The
Paying Agent shall neither be responsible for, nor chargeable with, knowledge of
the terms and conditions of any other agreement, instrument or document other
than this Agreement and the Paying Agent shall have no duty to know or inquire
as to the performance or nonperformance of any provision of any such agreement,
instrument or document.

(g) To perfect the security interest provided for in Section 2(a) of the
(i) Royalty Purchase Agreement, dated the date hereof, made by and between
Deerfield Private Design Fund II, LP, Deerfield Special Situations Fund, L.P.,
Horizon Santé TTNP SARL (collectively, the “Deerfield Parties”) and Titan, and
(ii) Amended and Restated Royalty Agreement, dated the date hereof, by and
between the Deerfield Parties and Titan, the Paying Agent shall comply with
instructions originated by Deerfield and received in writing by the Paying Agent
directing the disposition of funds in the Account at any time without further
consent of Titan or any other person. Deerfield acknowledges that it has agreed
to originate such instructions only in the circumstances provided in Section 4
of the Agreement dated the date hereof by and among Titan, Deerfield Private
Design Fund II, L.P., Deerfield Private Design Fund International II, L.P. et
al., as amended, modified and supplemented from time to time. However, if the
Paying Agent receives such instructions, the terms of this Section 6.03(g) will
prevail. Solely for purposes of this Section 6.03(g) and the UCC, the State of
New York shall be deemed to be the “bank’s jurisdiction” (within the meaning of
Section 9-304 of the UCC) of the Paying Agent.

 

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(h) Titan shall deliver to the Paying Agent on the date hereof a completed
Exhibit C. The Paying Agent agrees to keep the information set forth on Exhibit
C confidential and use such information only for the purposes set forth herein
and for no other purpose. Titan acknowledges that a portion of the identifying
information required to be set forth on Exhibit C is being requested by the
Paying Agent in connection with the USA Patriot Act, Pub.L.107-56 (the “Act”)
and Titan agrees to provide any additional information requested by the Paying
Agent in connection with the Act or any similar legislation or regulation to
which the Paying Agent is subject, in a timely manner. Titan represents that all
identifying information set forth on Exhibit C including without limitation, its
TIN, is true and complete on the date hereof and will be true and complete at
the time of any disbursement of the funds in the Account. Titan shall notify the
Paying Agent immediately upon any changes to the Identifying Information of
Titan as is set forth in Exhibit C.

(i) No party to this Agreement is liable to any other party for losses due to,
or if it is unable to perform its obligations under the terms of this Agreement
because of, acts of God, fire, floods, earthquake, strikes, equipment or
transmission failure, war, riot, nuclear accident, terror attack, computer
piracy, cyber-terrorism, or other causes reasonably beyond its control.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Paying Agent Agreement
to be executed as of the date first above written.

 

U.S. BANK NATIONAL ASSOCIATION, as

Paying Agent

By:

 

/s/ Stephanie E. Haysley

Name:

 

Stephanie E. Haysley

Its:

 

Vice President

TITAN PHARMACEUTICALS, INC.

By:

 

/s/ Sunil Bhonsle

Name:

 

Sunil Bhonsle

Its:

 

President

DEERFIELD MANAGEMENT COMPANY, L.P.

By:

 

Flynn Management LLC, its General Partner

By:

 

/s/ James E. Flynn

 

James E. Flynn, President

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EXHIBIT A

Certificate as to Authorized Signatures

The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as Authorized Representatives of Titan
Pharmaceuticals, Inc. and are authorized to initiate and approve transactions of
all types for the Account established by the Agreement to which this Exhibit A
is attached on behalf of Titan.

 

Name/Title

  

Specimen Signature

Sunil Bhonsle

  

/s/ Sunil Bhonsle

Name   

President

   Title   

 

  

 

Name   

 

   Title   

 

  

 

Name   

 

   Title   

 

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The specimen signatures shown below are the specimen signatures of the
individuals who have been designated as Authorized Representatives of Deerfield
Management Company, L.P. and are authorized, acting simply, to initiate and
approve transactions of all types for the Account established by the Agreement
to which this Exhibit A is attached on behalf of Deerfield.

 

Name/Title

     

Specimen Signature

            James E. Flynn

   

/s/ James E. Flynn

Name    

            General Partner

    Title    

            Darren Levine

   

/s/ Darren Levine

Name    

            Chief Financial Officer

    Title    

            David J. Clark

   

/s/ David J. Clark

Name    

            General Counsel

    Title    

 

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EXHIBIT B

Schedule of Fees for Paying Agent Services

 

ACCEPTANCE FEE    $2,000.00

Covers review, consideration, establishment and acceptance of the Paying Agent
account and relevant governing documents.

 

ANNUAL PAYING AGENT FEE    9,000.00

For the normal administration of the Paying Agent account, including the
maintenance of proper records and performance of the duties and functions
required under the terms and provisions of the Paying Agent Agreement.

OTHER FEES

 

Transactional & Processing Costs:

    

Checks/Wires

  

Waived

Tax Reporting (if applicable)

  

Included in annual fee

 

OUT-OF-POCKET & LEGAL EXPENSES (if applicable)   Billed at Cost

Reimbursement of direct expenses associated with the performance of our duties
including, but not limited to, publications, mailings, legal and travel
expenses.

ARTICLE 7 EXTRAORDINARY SERVICES

Extraordinary fees are payable to the Paying Agent for duties or
responsibilities not expected to be incurred at the outset of the transaction,
not routine or customary, and not incurred in the ordinary course of business.
Payment of extraordinary fees is appropriate where particular inquiries, events
or developments are unexpected, even if the possibility of such things could
have been identified at the inception of the transaction.

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EXHIBIT C

 

1. Titan’s Taxpayer Identification Number: 94-3171940

 

2. Address:

Titan Pharmaceuticals, Inc.

400 Oyster Point Blvd., Suite 505

South San Francisco, CA 04080

Attention: Sunil Bhonsle

Facsimile: 650-244-4956

Email: sbhonsle@titanpharm.com

 

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