CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED AND REPLACED WITH
“[**]”. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE
SECRETARY OF THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO AN APPLICATION
REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 24B-2 OF THE SECURITIES EXCHANGE
ACT OF 1934

 

EXECUTION VERSION

 

LICENSE AGREEMENT

This License Agreement (“Agreement”), made as of the date of execution by the
last Party to sign below (the “Execution Date”) and effective as of the
Effective Date as defined below, is by and between Arrowhead Pharmaceuticals,
Inc., a Delaware corporation with a place of business at 225 South Lake Avenue,
Suite 1050, Pasadena, California 91101, USA (“Arrowhead”), and Janssen
Pharmaceuticals, Inc., a Pennsylvania corporation with a place of business at
1125 Trenton-Harbourton Road, Titusville, New Jersey 08560,
USA  (“Janssen”).  Arrowhead and Janssen are at times referred to herein
individually as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, Arrowhead possesses certain information, materials, and intellectual
property rights relating to oligonucleotides and oligonucleotide constructs,
including the Licensed Construct in clinical development known as ARO-HBV, which
inhibits expression of the hepatitis B virus (“HBV”);

WHEREAS, Janssen, directly and through certain of its Affiliates, has extensive
experience and expertise in the development and commercialization of
pharmaceutical and biologic products, and owns or otherwise controls
information, materials and intellectual property rights useful to Develop and
Commercialize pharmaceutical and biologic products in the Field; and

WHEREAS, Janssen desires to acquire from Arrowhead and Arrowhead desires to
grant to Janssen, an exclusive license under Arrowhead Intellectual Property to
Develop and Commercialize Licensed Products; and

WHEREAS Arrowhead and Janssen are entering into a Research Collaboration and
Option Agreement in relation to the development and licensing of additional
constructs and products having activity in other assays concurrently with this
Agreement (the “Research Collaboration and Option Agreement”).  

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
below and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Parties agree as follows:

ARTICLE I:  DEFINITIONS

Unless the context otherwise requires, the terms in this Agreement with initial
letters capitalized shall have the meanings described below or the meaning as
designated in the indicated places throughout this Agreement.

1.1“Access Territory” means those countries set forth in Exhibit A.

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

1.2“Accounting Standards” means GAAP or International Financial Reporting
Standards (IFRS), as appropriate, as generally and consistently applied in
compliance with Applicable Laws throughout the relevant company’s organization
at the relevant time.

1.3“Acquired General Arrowhead Patent Rights” has the meaning as set forth in
Section 12.5.3.

1.4“Acquired Specific Arrowhead Patent Rights” has the meaning as set forth in
Section 12.5.3.

1.5“Action” means any claim, action, cause of action or suit (whether in
contract or tort or otherwise), litigation (whether at law or in equity, whether
civil or criminal), controversy, assessment, arbitration, investigation,
hearing, charge, complaint, demand, notice or proceeding of, to, from, by or
before any Governmental Authority.

1.6“Active Ingredient” means clinically-active material that provides a
pharmacological activity in a pharmaceutical or biologic product (excluding
formulation components, such as coatings, stabilizers, excipients or solvents,
adjuvants or controlled release technologies).

1.7“Affiliate” means, with respect to a designated Party or entity, any entity
controlling, controlled by, or under common control with such Party or
entity.  For purposes of this definition only, “control” means:  (a) where the
entity is a corporate entity, direct or indirect ownership of 50% or more of the
stock or shares having the right to vote for the election of directors of such
entity; and (b) where the entity is other than a corporate entity, the
possession, directly or indirectly, of the power to direct, or cause the
direction of, the management or policies of such entity, whether through the
ownership of voting securities, by contract or otherwise.

1.8 “Agreement” has the meaning set forth in the preamble above.

1.9“Alliance Manager” has the meaning set forth in Section 3.9.

1.10“Ancillary Agreements” means, collectively, the Pharmacovigilance Agreement
and any supply agreement and quality agreement entered into between the Parties
in accordance with Section 7.1 or Section 7.2.

1.11“Anti-Corruption Laws” means the FCPA and related regulations in the United
States, and equivalent anti-bribery laws and regulations under Applicable Laws
in other jurisdictions.

1.12“Applicable Laws” means the applicable provisions of any national,
supranational, regional, state and local laws, treaties, statutes, rules,
regulations, administrative codes, guidance, ordinances, judgments, decrees,
directives, injunctions, orders, permits, of or from any court, arbitrator,
Regulatory Authority, or Governmental Authority having jurisdiction over or
related to the subject item.

1.13 “ARO-HBV” means the particular Construct for which Arrowhead initiated the
Ongoing Phase 1/2 Study.

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

1.14“ARO-HBV Product” means any Licensed Product comprising ARO-HBV.

1.15“Arrowhead Intellectual Property” means Arrowhead Patent Rights and
Arrowhead Know-How, collectively.

1.16“Arrowhead Invention” has the meaning set forth in Section 10.1.

1.17“Arrowhead Know-How” means Know-How Controlled by, or on behalf of,
Arrowhead or its Affiliates at any time that is necessary or reasonably useful
to Exploit Licensed Constructs or Licensed Products including CMC Know-How.  

1.18“Arrowhead Patent Rights” means Patent Rights Controlled by, or on behalf
of, Arrowhead or its Affiliates at any time that are necessary or reasonably
useful to Exploit Licensed Constructs or Licensed Products, provided that such
Patent Rights Covering inventions that are Arrowhead Platform Technology shall
be limited to Patent Rights Covering inventions made as of the Effective Date
and thereafter for the longer of the three-year period following the Effective
Date or the end of the Option Right Development Term. A list of certain
Arrowhead Patents Rights that, as of the Effective Date, Cover the Exploitation
of ARO-HBV, is attached hereto as Exhibit B. Arrowhead Patent Rights includes
General Arrowhead Patent Rights and Specific Arrowhead Patent Rights as
indicated in Exhibit B.

1.19“Arrowhead Platform Technology” means targeted RNAi molecule technology
Controlled by Arrowhead utilizing targeting ligand-mediated delivery of RNAi
designated by Arrowhead as its TRiM™ platform.

1.20“Assay” means [**].

1.21“Audited Party” has the meaning set forth in Section 9.6.2.

1.22“Audited Site” means any site or facility of a Party or any of its
Affiliates, Third Party sublicensees, or Third Party contractors or
subcontractors hereunder, as the case may be, on which any clinical study or
Manufacturing of Licensed Products for human use is conducted, and which is
undergoing an inspection or audit by a Regulatory Authority or a Party as
provided hereunder.

1.23“Auditing Party” has the meaning set forth in Section 9.6.2.

1.24 “Bankruptcy” means, with respect to a Party, that:  (a) the Party has been
declared insolvent or bankrupt by a court of competent jurisdiction; or (b) a
voluntary or involuntary petition in bankruptcy is filed in any court of
competent jurisdiction against the Party and such petition has not dismissed
within ninety (90) days after filing; or (c) the Party has made or executed an
assignment of substantially all of its assets for the benefit of creditors.

1.25“Bankruptcy Code” means Title 11 of the United States Code, as may be
amended or superseded from time to time.

1.26“Breaching Party” has the meaning set forth in Section 15.2.1.

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

1.27 “Business Day” means a weekday on which banking institutions in the City of
New York, New York are open for business.

1.28“CAPA” means a written recovery plan or proposal of corrective and
preventative actions.

1.29“Change of Control” means, with respect to a specified Party: (a) the
acquisition, directly or indirectly, by a Person or group (whether in a single
transaction or multiple transactions) of more than 50% of the voting power of
such Party or of beneficial ownership of (or the right to acquire such
beneficial ownership of) more than 50% of the outstanding equity or convertible
securities of such Party (including by tender offer or exchange offer); (b) any
merger, consolidation, share exchange, business combination, recapitalization,
sale of a majority of assets of (i.e., having a fair market value (as determined
by the board of directors of such Party in good faith) in excess of 50% of the
fair market value of all the assets of such Party and its subsidiaries
immediately prior to such sale), or similar corporate transaction involving such
Party (whether or not including one or more wholly owned subsidiaries of such
Party), other than: (i) transactions involving solely such Party and/or one or
more Affiliates, on the one hand, and one or more of such Party ’s Affiliates,
on the other hand, and/or (ii) transactions in which the stockholders of such
Party immediately prior to such transaction hold at least 50% of the voting
power of the surviving company or ultimate parent company of the surviving
company; or (c) as a result of a single or multiple transaction(s) by a Person
or group, the occupation of a majority of the seats (other than vacant seats) on
the board of directors (or similar governing body of such Party) by any
directors or Persons who were not (i) members of such body on the Execution Date
of this Agreement, (ii) appointed by members of such body on the Execution Date
of this Agreement or by members of such body so appointed, or (iii) nominated
for election to such body by any Persons described in preceding clauses (i) or
(ii); or (d) the adoption of a plan relating to the liquidation or dissolution
of such Party.  For purposes of this definition, the terms “group” and
“beneficial ownership” shall have the meaning accorded in the U.S. Securities
Exchange Act of 1934 and the rules of the U.S. SEC thereunder in effect as of
the Execution Date hereof.

1.30“Claim” has the meaning set forth in Section 13.1.

1.31“Clinical Investigation Laws” means Applicable Laws relating to human
clinical investigations, such as 21 C.F.R. Parts 50, 54, 56 and 312 and
then-current Good Clinical Practice, each as in effect and as amended from time
to time.

1.32“Clinical Plan” means the plan governing the Ongoing Phase 1/2 Study, an
initial version of which is attached hereto as Exhibit C and as amended from
time to time as provided in Section 5.1.

1.33“CMC Know-How” means the Arrowhead Know-How relating to the chemistry,
Manufacture, and controls of ARO-HBV, any Licensed Construct or any Licensed
Product, including data, procedures, techniques, and information resulting from
any test method development and stability testing, process development, process
validation, process scale-up, formulation development, delivery system
development, quality assurance and quality control development, and other
related activities.

4

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

1.34“Collaboration Activities” means the Parties’ activities (performed directly
and/or, as may be permitted hereunder, on their behalf through their Affiliates,
Third Party sublicensees and/or Third Party subcontractors) performed under this
Agreement, including the Clinical Plan and Development Plan.

1.35“Combination Product” means: (a) a single pharmaceutical formulation
containing as its Active Ingredients (i) one or more Licensed Constructs, and
(ii) one or more Active Ingredients other than a Licensed Construct; or (b) a
bundle of products comprised of (i) one or more single pharmaceutical
formulations comprising at least one Licensed Construct, and (ii) one or more
other therapeutically effective or Prophylactically Active Products, priced and
sold in a single package containing such multiple products or packaged
separately but sold together for a single price; in each of the foregoing (a) or
(b), in all dosage forms, formulations, presentations, line extensions and
package configurations thereof.

1.36“Commercialization” or “Commercialize” means activities directed to
marketing, promoting, offering for sale, or selling a product, including
commercial manufacturing, launching product, conducting any Post-Marketing
Studies, market access activities, price setting and price negotiation
activities, managed care contract sales, medical affairs activities, and
distribution and importation activities in support thereof.  

1.37Commercially Reasonable Efforts” means, with respect to the efforts to be
expended by any Party with respect to any objective, those reasonable, diligent,
good faith efforts to accomplish such objective that a similarly situated
pharmaceutical or biotechnology company in the exercise of its reasonable
business discretion would normally use to accomplish a similar objective under
similar circumstances. With respect to any objective relating to the research,
Development or Commercialization of a Licensed Product by any Party,
“Commercially Reasonable Efforts” shall mean those efforts and resources
normally used by a similarly situated pharmaceutical or biotechnology company in
the exercise of its reasonable business discretion with respect to a product
owned or controlled by such Party, or to which such Party has similar rights,
which product has similar product characteristics, is of similar market
potential and is at a similar stage in its development or life as is such
Licensed Product, taking into account all Relevant Factors.

1.38“Confidential Information” has the meaning set forth in Section 11.1.1.

1.39“Construct” means [**].

1.40“Control” means, with respect to any designated intellectual property or
right pertaining thereto, possession by a Party (whether directly by ownership
(either sole or joint) or license from a Third Party, or indirectly through an
Affiliate having ownership or license from a Third Party) of the ability to
grant to the other Party a license, sublicense, right of access, or other right
to or under such intellectual property or intellectual property right as
provided herein, without violating the terms of any agreement with any Third
Party, such agreement existing (a) as of the Effective Date or (b) subsequent to
the Effective Date if (in the case of this clause (b)) such Party first acquired
rights to such intellectual property pursuant to such agreement or other
arrangement.  

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

1.41“Cover” means, in reference to a claim of a Patent Right in a particular
country or other jurisdiction with respect to particular subject matter (such as
a composition of matter, product, manufacturing or other process, or method of
use), that the claim (as interpreted under principles of patent law in such
jurisdiction) reads on or encompasses such subject matter.

1.42“CPR Mediation Procedure” has the meaning set forth in Section 16.2.

1.43“CPR Rules” has the meaning set forth in Section 16.3.

1.44“Cure Period” has the meaning set forth in Section 15.2.1.

1.45“Currency Hedge Rate” means the weighted average hedge rate to be used for
local currency of each country, other than the United States, of the Territory
as calculated by Janssen’s Affiliate Johnson & Johnson based on the outstanding
external foreign currency forward hedge contract(s) of Johnson & Johnson’s
Global Treasury Services Center (GTJRC) and its Affiliates with Third Party
banks.

1.46“Current Manufacturing Agreements” means any and all material agreements by
and between Arrowhead and any Third Party relating to the Manufacturing of
ARO-HBV, any Licensed Construct or any Licensed Product, in effect (including as
to any material provisions surviving any termination) as of the Execution Date.
    

1.47“Develop” means any and all pre-clinical, clinical, and other activities to
study a drug candidate or product and develop it toward Regulatory Approval
(including any such activities conducted after such Regulatory Approval other
than Post-Marketing Studies) for Commercialization, including toxicology and
ADME tests, analytical method development, stability testing, process
development and improvement, process validation, process scale-up prior to first
Regulatory Approval, formulation development, delivery system development,
quality assurance and quality control development, statistical analysis, pre-
and post-approval clinical studies or trials, regulatory affairs, regulatory
activities and manufacturing activities in support thereof. For clarity, the
definition of “Development” shall include all activities under the Clinical Plan
and Development Plan but exclude all Commercialization activities. “Developing”,
“Development” and “Development activities” shall each have a correlative
meaning.

1.48 “Development Plan” means the plan governing the Development of any Licensed
Product, and initially ARO-HBV, with the exception of the Ongoing Phase 1/2
Study and, if applicable, the research and Development of a Non-ARO-HBV Product
under Article IV, an initial version of which is attached hereto as Exhibit D
and as amended from time to time as provided in Section 5.2.

1.49“Dispute” means any dispute, claim, or controversy arising from or regarding
this Agreement, including the interpretation, application, breach, termination,
or validity of any provision hereof.  For the avoidance of doubt, any matter
within the decision-making authority of the JSC shall not be deemed a Dispute
merely if a unanimous decision cannot be reached if one of the Parties has the
final decision making authority on such matter; however, if a controversy
between the Parties arises regarding the interpretation of any provisions
hereunder pertaining to

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

any JSC decision that cannot be made due to such controversy, such controversy
shall be deemed a Dispute to the extent of such controversy.

1.50“Drug Application” means an NDA, MAA, or equivalent application, submitted
to a Regulatory Authority in a particular jurisdiction, for marketing approval
of a pharmaceutical or drug product.

1.51“Drug Regulation Laws” means Applicable Laws regulating drugs and
pharmaceutical products, such as the Federal Food, Drug, and Cosmetic Act, 21
U.S.C. § 301 et. seq., the Prescription Drug Marketing Act of 1987, the
Controlled Substances Act, 21 U.S.C. § 801 et. seq., and policies issued by the
FDA, each as in effect and as amended from time to time.

1.52“Effective Date” means the effective date of this Agreement, which shall be
the date (following the Execution Date) that is the first Business Day
immediately following the date on which the Parties have actual knowledge that
all applicable waiting periods under the HSR Act with respect to the
transactions contemplated hereunder have expired or have been terminated.

1.53 “EMA” means the European Medicines Agency or any successor agency for the
EU.

1.54 “European Union” or “EU” means the countries of the European Economic Area,
as it is constituted on the Effective Date and as it may be modified from time
to time after the Effective Date.

1.55“Execution Date” has the meaning set forth in the preamble above.

1.56“Executive Officers” means (a) for Arrowhead, the Chief Executive Officer of
Arrowhead or any executive officer of Arrowhead delegated authority by the Chief
Executive Officer with respect to any particular matter and (b) for Janssen, (i)
if a matter pertains to the Development of a Licensed Product, the Global Head
of Janssen R&D or the Global Therapeutic Area R&D Head for Janssen Infectious
Disease; (ii) if a matter pertains to the Commercialization of a Licensed
Product, the Worldwide Chairman, Pharmaceuticals of Johnson & Johnson, the Head
of the Global Commercial Strategic Organization or the Global Commercial
Strategic Leader for Infectious Disease of Janssen; or (iii) if a matter
pertains to the Manufacture of a Licensed Product, the Vice President of Janssen
Supply Chain.  In the event that the position of any of the Executive Officers
identified in this Section no longer exists due to a corporate reorganization,
corporate restructuring or the like that results in the elimination or
modification of the identified position, the applicable Executive Officer shall
be replaced with another senior officer with responsibilities and seniority
comparable to the eliminated or modified position.

1.57“Exploit” means to make, have made, import, use, sell or offer for sale,
including to research, develop, commercialize, register, manufacture, have
manufactured, hold or keep (whether for disposal or otherwise), have used,
export, transport, distribute or have distributed by others, promote, market or
have sold or otherwise dispose of, or have offered for sale, and convey or grant
end-users use rights. “Exploiting” and “Exploitation” shall each have a
correlative meaning.

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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1.58 “FCPA” means the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1 et.
seq.), as may be amended at the relevant time.

1.59“FDA” means the United States Food and Drug Administration or any successor
agency thereto for the United States.

1.60“Field” means all therapeutic, prophylactic and diagnostic uses in humans or
animals.  

1.61“First Commercial Sale” means, with respect to a given Licensed Product in a
country, the first commercial sale for monetary value in an arms-length
transaction of such Licensed Product to a Third Party purchaser by or on behalf
of a Party, its Affiliate or its Third Party sublicensee in such country
following receipt of applicable Regulatory Approval of such Licensed Product in
such country; provided, however, that First Commercial Sale shall not include
any transfer of a Licensed Product (a) between or among a Party and its
Affiliates or Third Party sublicensees (such as contract manufacturers,
suppliers, or distributors for consignment, where such transfer is not a
transfer to a wholesaler or retailer) or (b) for purposes of patient assistance
or for use in a clinical trial.

1.62“FTE” means the equivalent of the work of one qualified employee or agent
for the applicable activities, full time, for one year (constituting [**]
working hours).  For clarity, no more than [**] hours per year (or equivalent
pro-rata portion thereof for a period less than 12 months) may be charged for an
individual contributing work factoring into any reimbursable FTE Costs
hereunder, regardless of how much additional work time is contributed by such
individual during such period.  An individual contributing work for less than
[**] hours per year shall be deemed a fraction of an FTE on a pro-rata basis.

1.63“FTE Costs” means the FTE Rate times the number of FTEs expended during the
applicable financial period.  The FTE Costs shall be determined based on time
(as calculated in pro-rated FTEs) actually spent performing the applicable
Development activities, unless another basis is expressly specified herein or
otherwise agreed in advance by the Parties in writing.

1.64“FTE Rate” means the monetary rate at which FTEs expended by a Party during
the applicable financial reporting period will accrue toward such Party’s FTE
Costs hereunder.  The Parties agree that the FTE Rate for research and
Development work shall be [**] US dollars ($[**]) per allocable FTE.  Each such
FTE Rate shall be adjusted annually, based on changes in the Consumer Price
Index (as quoted by the U.S. Department of Labor, Bureau of Labor Statistics)
plus [**], with the first adjustment taking effect in the 2019 Janssen Calendar
Year.  Each Party acknowledges that the foregoing FTE Rate for research and
Development work has been set to include all compensation, salary, employee
benefits, routine supplies, and other expenses, including support staff and
overhead for or directly allocable to an FTE.

1.65 “G5 Countries” means France, Germany, Italy, Spain and the United Kingdom.

1.66“GAAP” means United States generally accepted accounting principles applied
on a consistent basis.  

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treatment request. An unredacted version of this exhibit has been filed
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EXECUTION VERSION

 

1.67“General Arrowhead Patent Rights” has the meaning as set forth in Section
10.3.3(b).

1.68“Generic Version” means, with respect to a Licensed Product, a generic or
follow-on version of such Licensed Product that has been approved in the
relevant jurisdiction by the applicable Regulatory Authority under 21 USC §
505(j), 21 U.S.C. § 505(b)(2), 21 U.S.C. § 351(k) or any possible future
abbreviated approval pathway in the US or a foreign equivalent thereof by
referencing any NDA, supplemental NDA, MAA, supplemental MAA or foreign
equivalent thereof for such Licensed Product.

1.69“Good Clinical Practice” or “GCP” means the current standards for clinical
studies for pharmaceutical and biologic products, as set forth in the ICH
guidelines and applicable regulations promulgated thereunder, as amended from
time to time, and such standards of good clinical practice as are required by
the European Union and other Governmental Authorities in countries in which a
Licensed Product is intended to be sold to the extent such standards are not
less stringent than United States Good Clinical Practice.

1.70“Good Laboratory Practice” or “GLP” means the current standards for
laboratory activities for pharmaceutical and biologic products, as set forth in
the FDA’s Good Laboratory Practice regulations or the Good Laboratory Practice
principles of the Organization for Economic Co-Operation and Development, as
amended from time to time, and such standards of good laboratory practice as are
required by the European Union and other Governmental Authorities in countries
in which a Licensed Product is intended to be sold, to the extent such standards
are not less stringent than United States Good Laboratory Practice.

1.71“Good Manufacturing Practice” or “GMP” means the current quality assurance
standards that ensure that pharmaceutical and biologic products are consistently
produced and controlled in accordance with the quality standards appropriate to
their intended use as defined in 21 C.F.R. § 210 and 211, European Directive
2003/94/EC, Eudralex Volume 4 and applicable United States, European Union,
Canadian and ICH guidance or equivalent laws in other jurisdictions to the
extent no less stringent.

1.72“Government Health Care Programs” means the US Medicare program (Title XVIII
of the Social Security Act), the US Medicaid program (Title XIX of the Social
Security Act), the TRICARE program, the US Federal employee health benefits
program, and other foreign, federal, state and local governmental health care
plans and programs.

1.73“Government Order” means any order, writ, judgment, injunction, decree,
stipulation, ruling, determination or award entered by or with any Governmental
Authority.

1.74“Governmental Authority” means any United States federal, state or local
government or any government other than the United States government, or
political subdivision thereof, or any multinational organization or authority to
the extent empowered to act on behalf of or in the stead of a government, or any
authority, agency, or commission entitled to exercise any administrative,
executive, judicial, legislative, police, regulatory, pricing or taxing
authority or power, any court or tribunal (or any department, bureau or division
thereof), or any governmental arbitrator or government empowered arbitral body.

9

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1.75“HBV” has the meaning set forth in the recitals above.

1.76“HDV” means the hepatitis D virus.

1.77 “Health Care Laws” means Applicable Laws relating to Government Health Care
Programs, Private Health Care Plans, privacy and confidentiality of patient
health information and human biological materials, including, in the United
States, federal and state Applicable Laws pertaining to the federal Medicare and
Medicaid programs (including the Medicaid rebate program); federal Applicable
Laws pertaining to the Federal employees health benefit program and the TRICARE
program; federal and state Applicable Laws applicable to health care fraud and
abuse, kickbacks, physician self-referral and false claims (including 42 U.S.C.
§ 1320a-7a, 42 U.S.C. § 1320a-7b, 42 U.S.C. § 1395nn and the federal Civil False
Claims Act, 31 U.S.C. § 3729 et. seq.); the Health Insurance Portability and
Accountability Act of 1996; and 45 C.F.R. Part 46, as well as similar Applicable
Laws in the Territory, each as in effect and as amended from time to time.

1.78“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder, or foreign
equivalent thereof under Applicable Law.

1.79“HSR Clearance” means, as pertaining to this Agreement, the expiration or
termination of all applicable waiting periods and requests for information (and
any extensions thereof) under the HSR Act.

1.80“HSR Filing” means (a) filings by Janssen or Arrowhead with the United
States Federal Trade Commission and the Antitrust Division of the United States
Department of Justice of a Notification and Report Form for Certain Mergers and
Acquisitions (as that term is defined in the HSR Act) with respect to the
matters set forth in this Agreement, together with all required documentary
attachments thereto, or (b) equivalent filings with applicable Governmental
Authorities having jurisdiction over requests for HSR Clearance.  

1.81“Hybridizing Strand” means [**]. 

1.82“ICH” means the International Conference on Harmonization of Technical
Requirements for Registration of Pharmaceuticals for Human Use.

1.83“IND” means an Investigational New Drug Application filed with the FDA, or a
similar application filed with a Regulatory Authority outside of the United
States for authorization to commence a clinical study, such as a clinical trial
application or a clinical trial exemption, or any related regulatory submission,
license or authorization.

1.84“IND Ready” has the meaning set forth in Section 4.1.

1.85“Indemnified Party” has the meaning set forth in Section 13.1.

1.86“Indemnified Persons” shall mean, with respect to a Party, such Party and
its Affiliates, and their respective officers, directors, employees, and agents.

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1.87“Indemnifying Party” has the meaning set forth in Section 13.1.

1.88 “Indication” shall mean (a) the treatment of any disease, condition or
symptom associated with or induced by HBV infection or HDV infection in humans
or animals, (b) the prevention of HBV infection or HDV infection in humans or
animals, or (c) the diagnosis of HBV infection or HDV infection in humans or
animals.

1.89“In-Licensed Arrowhead Patent Rights” has the meaning set forth in Section
12.5.3.

1.90“Invention” has the meaning set forth in Section 10.2.1.

1.91“Janssen Calendar Quarter” means a financial quarter based on a Janssen
Calendar Year; provided, however, that the first Janssen Calendar Quarter and
the last Janssen Calendar Quarter may be partial quarters as applicable under
the relevant Janssen Calendar Year.

1.92“Janssen Calendar Year” means a year based on Janssen’s universal calendar
for that year used by Janssen for internal and external reporting purposes (a
copy of which for the year 2018 is attached hereto as Exhibit F); provided,
however, that the first Janssen Calendar Year and the last Janssen Calendar Year
of the applicable period (such as the Royalty Term) may be a partial year as the
case may be.

1.93 “Joint Patent Rights” shall mean Patent Rights owned jointly by the Parties
and in which each Party has an equal and undivided interest.

1.94“Joint Steering Committee” or “JSC” means a joint steering committee formed
by representatives of each Party that is responsible for providing high-level
oversight and decision-making regarding the Parties’ activities under this
Agreement, as further provided in Article III.

1.95 “Know-How” means any and all technical, scientific, and other know-how
(whether or not patentable), data, and other information, as well as materials
not generally known to the public, including  inventions, trade secrets,
research and development data, plans, procedures, experimental techniques,
material specifications, and assay or test protocols; biological, chemical,
pharmacological, toxicological, pharmaceutical, pre-clinical, clinical, safety,
and quality control data and information; manufacturing methods and formulas;
and molecules, chemical entities, reagents, starting materials, reaction
intermediates, building blocks, synthetic products, delivery systems,
excipients, ingredients, formulations, and compositions of matter.

1.96 “Licensed Construct” means [**].

1.97 “Licensed Product” means (a) any pharmaceutical formulation for
administration to a subject comprising a Licensed Construct or (b) any Licensed
Construct for formulation into such a pharmaceutical formulation.

1.98 “Losses” means damages, losses, liabilities, costs (including costs of
investigation and defense), fines, penalties, Government Orders, taxes, expenses
or amounts paid in settlement (in each case, including reasonable attorneys’ and
experts fees and expenses), resulting from a

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claim in an Action of a Third Party, and incurred by a Party (or other
Indemnified Person as provided in Article XIII) as a result of such Action.

1.99“MAA” means (a) a marketing authorization application filed with (i) the EMA
under the centralized EMA filing procedure or (ii) a Regulatory Authority in any
country in the European Union if the centralized EMA filing procedure is not
used; or (b) any other equivalent or related regulatory submission, in either
case to gain approval to market a pharmaceutical or biologic product in any
country in the European Union, in each case including, for the avoidance of
doubt, amendments thereto and supplemental applications.

1.100“Manufacturing” means activities performed to manufacture a product into
final form for end use, including producing and manufacturing starting materials
and intermediates used to manufacture such product, filling, finishing,
packaging, labeling, performing quality assurance testing and release, and
shipping and storing the product.

1.101“MHLW” means the Ministry of Health, Labour and Welfare of Japan and any
successor agency thereto.

1.102“NDA” means a new drug application or biologics license application
submitted to the FDA for purposes of obtaining Regulatory Approval for a new
drug in the United States, for a particular indication, including, for the
avoidance of doubt, amendments thereto and supplemental applications.

1.103“Net Sales” means, with respect to a Licensed Product commencing with its
First Commercial Sale, the gross sales value of the Licensed Product by or on
behalf of Janssen (directly or through any of its Affiliates or Third Party
sublicensees) to a Third Party purchaser in an arms-length transaction, less the
following customary deductions, determined in accordance with Accounting
Standards and standard internal policies and procedures consistently applied
throughout Janssen’s organization to calculate revenue for financial reporting
purposes, to the extent specifically and solely allocated to the sale of such
Licensed Product to such purchaser and actually taken, paid, accrued, allowed,
included, or allocated based on good faith estimate, 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,
wholesaler and pharmacy fees, and credits allowed or paid, in the form of
deductions actually allowed or actually paid with respect to sales of such
Licensed Product (to the extent not already reflected in the amount invoiced)
excluding commissions for commercialization;

(b)excise taxes, use taxes, tariffs, sales taxes and customs duties, and/or
other government charges imposed on the sale of such Licensed 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;

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(d)compulsory payments and cash rebates imposed on sales of such Licensed
Product paid to a Governmental Authority (or agent thereof) pursuant to
Applicable Law by reason of any national or local health insurance program or
similar program, to the extent allowed and taken, including fees levied by a
Governmental Authority as a result of Applicable Law;

(e)retroactive price reductions, credits or allowances actually granted upon
rejections or returns of such Licensed Product, including for recalls or damaged
goods and billing errors, and write-offs for bad debts;

(f)rebates, charge backs and discounts (or equivalents thereof) actually granted
to managed health care organizations, pharmacy benefit managers (or equivalents
thereof), federal, state/provincial, local or other Government Authorities, or
their agencies or purchasers, reimbursers, or trade customers; and

(g)coupons, or discount/rebates associated with co-pay cards.  

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 Janssen’s, its Affiliate’s, or sublicensee’s (as the case may be) business
practices consistently applied across its product lines and in compliance with
Accounting Standards and verifiable.  All such discounts, allowances, credits,
rebates and other deductions shall be fairly and equitably allocated to such
Licensed Product and other products of the Party and its Affiliates and
sublicensees such that such Licensed Product does not bear a disproportionate
portion of such deductions.  For clarity, sales of a Licensed Product by and
between a Party and its Affiliates and sublicensees (including those that are
distributors), or between the Parties (or their respective Affiliates or
sublicensees), shall be excluded from Net Sales calculations for all purposes so
long as such Licensed Product is subsequently resold to a Third Party.  For the
avoidance of doubt, sales of a Licensed Product for use in conducting clinical
trials of such Licensed Product in a country in order to obtain the first
Regulatory Approval of such Licensed Product in such country shall be excluded
from Net Sales calculations for all purposes.  Also, notwithstanding anything to
the contrary above, sales of a Licensed Product for any compassionate use or
named patient sales shall be excluded from Net Sales calculations to the extent
such sales are not reported as revenue by Janssen and its Affiliates.
Additionally, for clarity, only a single sales transaction with respect to a
particular unit of Licensed Product, made at the time Janssen or any of its
Affiliates or sublicensees sells such Licensed Product to a Third Party
purchaser in an arms-length transaction, will qualify as the basis for
determining the Net Sales amount for such unit.  The calculation of Net Sales
for any Combination Product shall be adjusted pursuant to Section 8.4.6(c).

1.104“Non-ARO-HBV Product” means any Licensed Product other than an ARO-HBV
Product, including analogously Licensed Constructs that are not ARO-HBV.

1.105“Non-Breaching Party” has the meaning set forth in Section 15.2.1.

1.106“Notice of Claim” has the meaning set forth in Section 13.2.1.

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1.107 “Ongoing Phase 1/2 Study” means the phase 1/2 clinical study entitled
“Study of ARO-HBV in Normal Adult Volunteers and Patients With Hepatitis B Virus
(HBV)” and designated as NCT03365947, as such study may be amended from time to
time.

1.108“Option Right” has the meaning set forth in Section 4.1.

1.109 “Option Right Development Plan” has the meaning set forth in Section 4.2.

1.110“Option Right Development Term” has the meaning set forth in Section 4.2.

1.111 “Option Right Payment” has the meaning set forth in Section 8.2.3.

1.112 “Out-of-Pocket Costs” means, with respect to a Party, costs and expenses
paid by such Party to any Third Party for services or materials provided by such
Third Party to directly support the applicable Collaboration activities. For
clarity, Out-of-Pocket Costs do not include payments for a Parties’ or its
Affiliates’ internal salaries or benefits, facilities, utilities, general office
or facility supplies, insurance or information technology, capital expenditures
or the like.  

1.113“Owned General Arrowhead Patent Rights” has the meaning set forth in
Section 12.5.3

1.114“Owned Specific Arrowhead Patent Rights” has the meaning set forth in
Section 12.5.3.

1.115“Party” and “Parties” have the meaning set forth in the preamble above.

1.116“Patent Controversy” means any Dispute between the Parties to the extent
that it involves an issue relating to the inventorship, claim scope or
interpretation, infringement, enforceability, patentability, or validity of any
Patent Right hereunder, and including any such issues relevant to any
Prosecution activities hereunder.  

1.117“Patent Costs” means all Out-of-Pocket Costs reasonably incurred by or on
behalf of a Party (such as by a designated Affiliate) in Prosecuting applicable
Patent Rights.

1.118“Patent Office” means the United States Patent and Trademark Office,
European Patent Office, or other Governmental Authority responsible for the
examination of patent applications or granting of patents in a country, region,
or supra-national jurisdiction.

1.119“Patent Representative” means the patent attorney or agent representing a
Party as described in Section 10.7.

1.120“Patent Rights” means, in reference to a designated invention, all original
(priority establishing) patent applications claiming such invention filed
anywhere in the world, including provisionals and nonprovisionals, and all
related applications thereafter filed, including any continuations,
continuations-in-part, divisionals, or substitute applications, any patents
issued or granted from any such patent applications, and any reissues,
reexaminations, renewals or extensions (including by virtue of any supplementary
protection certificates) of any such patents,

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and any confirmation patents or registration patents or patents of addition
based on any such patents, and all foreign counterparts or equivalents of any of
the foregoing.

1.121“Patent Term Extension” means an extension of the term of any issued
patent, or a right of protection equivalent to such an extension, granted under
law or regulation such as the U.S. Drug Price Competition and Patent Term
Restoration Act of 1984 in the United States, the Supplementary Protection
Certificate of the member states of the EU, or any other similar law or
regulation in any other country or jurisdiction.  For example, a pediatric
extension obtained by application to or through approval of a Patent Office
extending the term of any patent shall be deemed a Patent Term Extension.

1.122“Patent Working Group” means the representatives of both Parties involved
in handling certain patent matters as more fully set forth in Section 10.7.

1.123“Person” means any individual, entity or Governmental Authority.

1.124 “Pharmacovigilance Agreement” means a written pharmacovigilance agreement
between the Parties executed hereunder pursuant to Section 5.6.4.

1.125“Phase 1” means, in reference to a clinical study (or trial) of a Licensed
Product, that as described in US federal regulation 21 C.F.R. § 312.21(a).    

1.126 “Phase 2” means, in reference to a clinical study (or trial) of a Licensed
Product, that as described in US federal regulation 21 C.F.R. § 312.21(b).
Notwithstanding anything in this Agreement to the contrary, neither the Ongoing
Phase 1/2 Study, nor any part thereof, shall be considered a Phase 2 clinical
study for the purpose of this Agreement.   

1.127“Phase 3” means, in reference to a clinical study (or trial) of a Licensed
Product, that as described in US federal regulation 21 C.F.R. § 312.21(c).    

1.128“Post-Marketing Studies” means any clinical trials or studies conducted
with a Licensed Product after receipt of Regulatory Approval of the Licensed
Product, which are conducted voluntarily in order to enhance marketing or
scientific knowledge of the Licensed Product and are not required by Regulatory
Authorities or are not intended to support Regulatory Approval of a Licensed
Product for a new indication or other material change to the product label.

1.129“Pre-Existing Acquired Rights from Third Parties” means any and all
agreements by and between Arrowhead and any Third Party, in effect as of the
Execution Date, and pursuant to which the Third Party assigns (by express terms,
whether or not using the word “assign”) Arrowhead any Third Party’s Patent
Rights or Know-How that, in whole or in part, are necessary or useful for
Developing, Manufacturing, or Commercializing any Licensed Product.  

1.130 “Pre-Existing Licenses from Third Parties” means any and all agreements by
and between Arrowhead and any Third Party, in effect as of the Execution Date,
and pursuant to which the Third Party grants (by express terms, whether or not
using the word “license”) Arrowhead any license or sublicense (or use or other
Exploitation) rights to or under any Third

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Party’s Patent Rights or Know-How that, in whole or in part, are necessary or
useful for Developing, Manufacturing, or Commercializing any Licensed Product.

1.131“Pre-Existing Licenses to Third Parties” means any and all agreements by
and between Arrowhead and any Third Party, in effect as of the Execution Date,
and pursuant to which Arrowhead or its Affiliates grants (by express terms,
whether or not using the word “license”) such Third Party any license or
sublicense (or use or other Exploitation) rights to or under any Arrowhead
Intellectual Property.

1.132 “Pre-Existing Third Party Agreements” means (a) Pre-Existing Licenses to
Third Parties; (b) Pre-Existing Licenses from Third Parties; (c) Pre-Existing
Acquired Rights from Third Parties; and (d) any other agreements between
Arrowhead or its Affiliates and a Third Party in effect as of the Execution Date
that contain any terms relating to the Development, Manufacture, or
Commercialization of a Licensed Product, ARO-HBV or any Licensed Construct,
including Current Manufacturing Agreements (collectively, the “Additional
Pre-Existing Third Party Agreements”).  

1.133“Primary RNAi Trigger” means [**].

1.134 “Prior CDA” means the Confidential Disclosure Agreement entered into on
January 25, 2017 between Arrowhead and Alios Biopharma, Inc., an Affiliate of
Janssen.

1.135“Private Health Care Plans” means non-governmental Third Party health care
payors and plans, including insurance companies, health maintenance
organizations and other managed care organizations, Blue Cross and Blue Shield
plans, and self-funded employers.  

1.136 “Product Infringement” has the meaning set forth in Section 10.4.2.  

1.137“Product Trademark Rights” means any Trademark Rights pertaining
specifically to any Licensed Product and Controlled by a Party hereunder.  

1.138“Prophylactically Active Product” means a product that prevents any
disease, condition or symptom associated with or induced by HBV infection or HDV
infection in humans or animals.

1.139“Prosecuting” means, in reference to a designated Patent Right, preparing a
Patent Right in application form for filing in any Patent Office, or performing
activities associated with filing, prosecuting, maintaining, defending, or
correcting the Patent Right in any Patent Office proceeding or with appeal of a
Patent Office decision therefrom, including with respect to any post-grant
proceeding, supplemental examination, post-grant review, inter partes review,
reexamination, reissue, interference, or opposition proceeding in any Patent
Office.  For the avoidance of doubt, Prosecuting excludes any infringement suit
or other legal Action to enforce a Patent Right or declaratory judgment suit or
other legal Action initiated by a Third Party to challenge in court the validity
or enforceability of a Patent Right. “Prosecute” and “Prosecution” shall each
have a correlative meaning.

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1.140“Prosecuting Party” means the Party with the current right to Prosecute the
applicable Patent Right as set forth in Section 10.3.

1.141“Prosecution Contact” means a Party’s designated patent attorney or agent
identified in a notice to the other Party (as may be updated from time to time)
as its contact for communications between the Parties regarding the Prosecuting
of any Arrowhead Patent Rights.

1.142“Regulatory Approval” means the approval (including supplements,
amendments, pre- and post-approvals), license, registration or authorization of
the applicable Regulatory Authority necessary for the marketing and sale of drug
product in a country or jurisdiction, including any and all pricing and
reimbursement approvals that are reasonably necessary or desirable to obtain in
such country or jurisdiction to launch a drug product (even if such approvals
are not legally required to launch such drug product in such country or
jurisdiction).  For purposes of illustration, in addition to approval of a Drug
Application: Regulatory Approval in France includes approval of a Drug
Application and publication of the reimbursed price level in the official
journal and registration on a reimbursement list by or on behalf of Comité
Economique des Produits de Santé or Haute Autorité de Santé (or a successor
agency); Regulatory Approval in Italy includes publication of reimbursement in
the Government’s Offical Gazette (by Agenzia Italiana del Farmaco or a successor
agency); Regulatory Approval in Germany includes execution of contract with the
head association of sick funds (GKV-Spitzenverband, Gesetzlichen
Krankenversicherung, or a successor agency); Regulatory Approval in Spain
includes authorization by La Comisión Interministerial de Precios de los
Medicamentos or La Comisión Nacional para el Uso Racional de los Medicamentos,
or a successor agency) for national patient access to reimbursement by or on
behalf of a Governmental Authority; and Regulatory Approval in the United
Kingdom includes approval by the National Institute for Health and Care
Excellence (or a successor agency) to obtain mandatory funding to enable broad
market access.

1.143 “Regulatory Authority” means any federal, national, multinational, state,
provincial or local regulatory agency, department, bureau or other governmental
entity with authority over the registration or authorization or marketing and
sale of a medicinal product in a country, such as the FDA in the United States,
EMA in the EU, and MHLW in Japan.

1.144“Regulatory Exclusivity Right” means a right or protection, granted by a
Regulatory Authority in a jurisdiction, providing with respect to a product in
such jurisdiction:  (a) marketing exclusivity that prevents the Regulatory
Authority from accepting or approving a Drug Application (whether new or
abbreviated), submitted by a Person other than Janssen (or any of its Affiliates
or Third Party sublicensees), such as through new molecular entity or orphan
drug exclusivity granted by the FDA, or an exclusive right to sell pursuant to
the data exclusivity provisions under EC Directives 2004/27/EC and 2001/83/EC
and Regulation 726/2004/EC, or marketing exclusivity granted in respect of
pediatric studies under Regulation 1901/2006, or Section 505A(a) of the FD&C
Act; or (b) data protection for regulatory data submitted by or on behalf of a
Party or its Affiliates relating to a product against unfair commercial use or
public release consistent with, or no less stringent than, TRIPs Article 39.3.

1.145“Regulatory Filing” means any documentation comprising or relating to or
supporting any filing or application with any Regulatory Authority with respect
to a Licensed Product, or its use or potential or investigative use in humans,
including any documents submitted

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to any Regulatory Authority and all supporting data, including INDs, supportive
documents enabling a clinical program, Drug Applications, safety and adverse
event reports and all correspondence with any Regulatory Authority with respect
to any Licensed Product (including minutes of any meetings, telephone
conferences or discussions with any Regulatory Authority).

1.146“Relevant Factors” means all relevant factors that may affect the
Development, Regulatory Approval, Manufacturing or Commercialization of a
Licensed Product, including (as applicable): actual and potential issues of
safety, tolerability, efficacy or stability; expected and actual product profile
(including product modality, category and mechanism of action), as such or in
comparison with the profile of other products and regimens; stage of development
or life cycle status; actual and projected Development, Regulatory Approval,
Manufacturing, and Commercialization costs, timelines and budgets; any issues
regarding the Manufacturing of the Licensed Product; the likelihood of obtaining
Regulatory Approvals for such Licensed Product; the timing of such Regulatory
Approvals; the current guidance and requirements for Regulatory Approval for
such Licensed Product and similar products and the current and projected
regulatory status; labeling or anticipated labeling for such Licensed Product;
the then current competitive environment and the likely competitive environment
at the time of projected entry into the market; past performance of such
Licensed Product or similar products; present and future market potential, as
such or taking into account the relevant portfolio or pipeline; present and
future relevant patient population; existing or projected pricing, sales,
reimbursement, return on investment and profitability; pricing or reimbursement
changes in relevant countries; proprietary position, strength and duration of
patent protection, anticipated exclusivity and freedom to operate hurdles; legal
issues; and other relevant scientific, technical, operational, commercial or
economic factors.

1.147“Research Collaboration and Option Agreement” has the meaning set forth in
the recitals above.

1.148“Right of Reference” has the meaning set forth for such term in 21 C.F.R. §
314.3(b) or an equivalent right of access or reference under any Applicable Law
in any other jurisdiction outside the United States.

1.149“RNAi Trigger” means [**].  

1.150[***].

1.151 “Royalty Term”, as applicable to Net Sales of each particular Licensed
Product in a given country, means the period from the date of the First
Commercial Sale of such particular Licensed Product by or on behalf of Janssen
in the given country, until the later of (a) the expiration of the last Valid
Claim of the Arrowhead Patent Rights which Covers the composition of matter of
the Licensed Construct or its Primary RNAi Trigger or its Targeting Ligand of
such Licensed Product in such country; or (b) the termination or expiration of
Regulatory Exclusivity Rights protecting the Licensed Product in such country;
or (c) [**] from the date of First Commercial Sale in the Territory.

1.152“Specific Arrowhead Patent Rights” has the meaning as set forth in Section
10.3.3(a).

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1.153 “Targeting Ligand” means [**].

1.154“Taxes” means any present or future taxes, levies, imposts, duties,
charges, assessments or fees of any nature (including any interest thereon).

1.155 “Term” means the term of this Agreement as set forth in Section 15.1.

1.156“Territory” means the entire world, including all of its countries and
their possessions and territories.

1.157“Third Party” or “Third-Party” means any person, entity, or other party
other than a Party to this Agreement or any of its Affiliates.

1.158 “Third-Party Product Liability Action” has the meaning set forth in
Section 13.4.1.

1.159 “Threshold Active Construct” means [**].

1.160 “Threshold Activity” means [**].

1.161“Trademark Rights” means all registered and unregistered trademarks
(including all common law rights thereto), service marks, trade names, brand
names, logos, taglines, slogans, certification marks, internet domain names,
trade dress, corporate names, business names and other indicia of origin,
together with the goodwill associated with any of the foregoing, and all
applications, registrations, extensions, and renewals thereof throughout the
world, and all rights therein provided by international treaties and
conventions.

1.162“United States”, “US” or “U.S.” means the United States of America,
including its territories and possessions.

1.163“Upfront Fee” has the meaning set forth in Section 8.2.1.  

1.164“Valid Claim” means a claim (a) of any unexpired patent issued or granted
by a Patent Office that has not been revoked or held unenforceable or invalid by
a decision of a court or Governmental Authority of competent jurisdiction from
which no appeal can be taken, or with respect to which an appeal is not taken
within the time allowed for appeal, and that has not been disclaimed or admitted
to be invalid or unenforceable through reissue, disclaimer, or otherwise, or (b)
of any Patent Right that is being prosecuted in good faith and has not been
abandoned or finally disallowed without the possibility of appeal or re-filing
of the application and has been pending for less than [**].

1.165“Variant” means [**].

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ARTICLE II:  LICENSE GRANTS

2.1Grants.

2.1.1Development License.  Subject to the terms and conditions of this
Agreement, Arrowhead hereby grants to Janssen an exclusive (even as to
Arrowhead, except to the extent Arrowhead expressly retains or is expressly
granted back rights under this Agreement), worldwide license, with the right to
sublicense in accordance with Section 2.1.4, under Arrowhead Intellectual
Property, to research and have researched and to Develop and have Developed
Licensed Constructs and Licensed Products, including ARO-HBV, in the Field in
the Territory, and to make and Manufacture, have made and Manufactured, use,
have used, and import and have imported Licensed Constructs and Licensed
Products, including ARO-HBV, for such purposes.  The license rights granted
under this Section 2.1.1 shall commence on the Effective Date and run throughout
the Term hereof, subject to the termination provisions under Article XV.  

2.1.2Commercialization License.  Subject to the terms and conditions of this
Agreement, Arrowhead hereby grants to Janssen an exclusive (even as to
Arrowhead, except to the extent Arrowhead expressly retains or is expressly
granted back rights under this Agreement), worldwide license, with the right to
sublicense in accordance with Section 2.1.4, under the Arrowhead Intellectual
Property, to Commercialize and have Commercialized, offer for sale and sell, and
have offered for sale and sold, Licensed Constructs and Licensed Products,
including ARO-HBV, for use in the Field in the Territory, and to Manufacture,
have Manufactured, use, have used, and import and have imported Licensed
Constructs and Licensed Products, including ARO-HBV for such purposes.  The
license rights granted under this Section 2.1.2 shall commence on the Effective
Date and continue, on a product-by-product and country-by-country basis,
throughout the Term hereof, subject to the termination provisions under Article
XV.  

2.1.3Know-How Cross-License.  Subject to the terms and conditions of this
Agreement:

(a)Arrowhead hereby grants to Janssen a royalty-free, perpetual, non-exclusive
license to use any Confidential Information that is Arrowhead Know-How and
disclosed by Arrowhead to Janssen under this Agreement for any purpose other
than the Exploitation of a Licensed Construct or Licensed Product, except such
Confidential Information comprising Know-How related solely to the Arrowhead
Platform Technology.

(b)Janssen hereby grants to Arrowhead a royalty-free, perpetual, non-exclusive
license to use any Confidential Information that is Janssen Know-How disclosed
by Janssen to Arrowhead under this Agreement for any purpose other than the
Exploitation of a Licensed Construct or Licensed Product, except such
Confidential Information comprising (a) Know-How related to Active Ingredients,
other than Licensed Constructs or (b) financial and sales data and pricing
information relating to Licensed Constructs or Licensed Products.

2.1.4Sublicensing.  In the event that Janssen grants any sublicense of the
license rights granted to Janssen under this Section 2.1 to any Affiliates or
any Third Parties, Janssen shall remain responsible for its obligations under
this Agreement and shall be responsible for the performance of the relevant
sublicensee and the compliance by such sublicensee with the terms

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and conditions of this Agreement.  Any sublicense granted by Janssen under this
Section 2.1 to any Third Party not working under Janssen’s or its Affiliates’
control and direction shall refer to this Agreement and shall not conflict with
Janssen’s obligations under this Agreement, and Janssen will, within a
reasonable time period after granting such sublicense, provide a copy of the
sublicensing agreement to Arrowhead, which agreement may be redacted to omit any
terms not relevant to determining Janssen’s and the Third Party sublicensee’s
obligations under this Agreement.

2.2Licenses Constitute IP under Bankruptcy Code.  All rights and licenses
granted under or pursuant to any section of this Agreement by one Party to the
other, including Section 2.1 hereof, are, and shall otherwise be deemed to be,
for the purpose of Section 365(n) of the Bankruptcy Code (or comparable
provisions of laws of other jurisdictions) rights to “intellectual property” as
defined in Section 101(35A) of the Bankruptcy Code (or comparable provisions of
laws of other jurisdictions).  Each Party hereby acknowledges, on behalf of
itself and its Affiliates, “embodiments” of intellectual property pursuant to
the Bankruptcy Code include the following:  (a) data from the research and
Development of Licensed Products, (b) Licensed Constructs and Licensed Product
samples and inventory, (c) Licensed Product formulations, (d) laboratory
notebooks and records from either Party’s research relating to any Licensed
Constructs or Licensed Product, including from the Clinical Plan or Development
Plan, (e) results from clinical studies of Licensed Products and the Licensed
Constructs therein, (f) Regulatory Filings and Regulatory Approvals relating to
Licensed Products, and (g) marketing, advertising and promotional materials
relating to Licensed Products.

2.3Rights in Combination Products. Notwithstanding the terms of any license
grant or covenant under this Agreement, no rights will be conveyed or granted by
one Party to another hereunder to (a) an Active Ingredient of any Combination
Product, whether in Development or Commercialized, where the Active Ingredient
is not a Licensed Construct, (b) a product of such Combination Product that is
not a Licensed Product, or (c) an Active Ingredient, other than a Licensed
Construct, that is otherwise used in combination with a Licensed Product in
pre-clinical research, clinical studies or in accordance with an approved
product label.

2.4No Other Rights.  No rights other than those expressly set forth in this
Agreement are granted by one Party to the other Party hereunder, and no
additional rights shall be deemed granted to either Party by implication,
estoppel, or otherwise, with respect to any Patent Rights, Know-How, or other
intellectual property rights.  

ARTICLE III: GOVERNANCE

3.1Establishment of JSC.  Promptly after the Effective Date, the Parties shall
establish a Joint Steering Committee (JSC) composed of [**] representatives from
Arrowhead and [**] representatives from Janssen (which, for clarity, may include
any employees or agents of its Affiliates). The members of the JSC shall be
appropriately qualified and experienced in order to make a meaningful
contribution to meetings and render decisions within its scope of authority
hereunder.  Each Party may replace its representatives on the JSC by written
notice to the other Party.

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3.2JSC Responsibilities.  The JSC shall, subject to Section 3.7, have authority
to:  

3.2.1serve as a forum to discuss and monitor the activities under the Clinical
Plan and approve changes to the Clinical Plan as provided for in Section 5.1;

3.2.2serve as a forum to discuss strategic and material issues in relation to
the Development Plan and to disclose amendments to and progress of the
performance of the Development Plan. For clarity, a Party executing activities
shall not be required to seek JSC review of operational decisions involving such
activities;

3.2.3take decisions, by mutual agreement, in relation to the meaning of
“Threshold Active Construct” pursuant to Section 1.159;

3.2.4under the advice of the Patent Working Group, recommend to the Parties
certain actions involving Prosecution of the Arrowhead Patent Rights;

3.2.5serve as a forum to disclose progress of the actions undertaken to
remediate possible non-compliance with the terms of this Agreement or with
Applicable Laws as provided for in Section 5.8.1; and

3.2.6in the event that Janssen exercises the Option Right, oversee and monitor
Arrowhead’s research and Development activities in relation to the Non-ARO-HBV
Product and to disclose progress of the performance of such Development
activities in accordance with Sections 4.2 and 4.4.

3.3Patent Matters.  The JSC shall not discuss any issue relating to any Patent
Rights relevant to the Development, Manufacture, or Commercialization of any
Licensed Products (including with respect to any of their scope, patentability,
validity, Prosecution, or infringement), unless the Patent Representative of
each Party is present at the meeting.  The Patent Representatives of each Party
shall be solely responsible for documenting at their discretion any issues
discussed by the JSC relating to any Patent Rights, and the content of such
discussions shall be held in strict confidence by the Parties to protect their
common interests and preserve the privileged status of any attorney-client
communication, advice, or legal opinion reflected therein.  

3.4JSC Meetings.  The JSC shall meet quarterly until [**], and at such other
times as the Parties may agree.  The first meeting of the JSC shall be held as
soon as reasonably practicable, but in no event later than sixty (60) days after
the Effective Date.  Meetings shall be held at such place or places as are
mutually agreed or by teleconference or videoconference, provided that at least
the quorum members of each Party are present at any JSC meeting.  Each Party may
from time to time invite a reasonable number of participants in addition to its
representatives on the JSC (such as Patent Working Group members) to attend any
JSC meeting, which additional participants shall not be members and shall attend
the JSC meeting on an ad hoc basis in a non-voting capacity.  The JSC meetings
shall be chaired by Janssen.  The chairperson shall set and circulate to all JSC
members agendas for JSC meetings in advance. The agendas shall include any
matter within the authority of the JSC hereunder reasonably requested by
Arrowhead to be addressed.  The Parties shall rotate the responsibility for
recording, preparing and, within a reasonable time, issuing draft minutes of
each JSC meeting to each Party’s members for review, and the chairperson shall
issue

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to the Parties final minutes signed or otherwise approved in writing (such as
via an electronic signature) by a Janssen JSC representative and an Arrowhead
JSC representative.  

3.5Meeting Expenses.  Each Party shall bear its own costs, including travel
expenses, incurred by its JSC members, any additional non-member JSC
participants of such Party and Patent Working Group members in connection with
their attendance at JSC meetings or Patent Working Group meetings and other
activities related to the JSC or Patent Working Group.

3.6Decision-making.  Decisions of the JSC within its scope of authority
hereunder shall be made by unanimous vote, with Janssen's representatives to the
JSC collectively having one (1) vote and Arrowhead's representatives to the JSC
collectively having one (1) vote.  Decisions of the JSC shall be memorialized in
its meeting minutes.  If the JSC fails to reach unanimous decision on a matter
within its authority that has been pending in excess of [**] (or such other
period as the Parties may agree in writing), the matter shall be referred to
applicable Executive Officers of the Parties, who shall attempt to reach a
mutual decision.  In the event that the Executive Officers cannot reach a mutual
decision with regard to such matter, then Janssen shall have the deciding vote,
subject to Section 3.7.

3.7Certain Limitations on Decision-Making.

3.7.1Modifications to Option Right Development Plan. Any proposed amendment to
the Option Right Development Plan shall be subject to the approval of the JSC
and the decision-making authority set forth in Section 3.6, provided, however,
that Janssen shall not have the deciding vote thereon, and further that
Arrowhead shall not unreasonably withhold its consent to any amendment
reasonably proposed by Janssen in good faith to the Option Right Development
Plan.

3.7.2Modifications to Clinical Plan and Definition under Section 1.159. Any
proposed amendment to the Clinical Plan and the definition under Section 1.159
shall be subject to the approval of the JSC and the decision-making authority
set forth in Section 3.6, provided, however, that Janssen shall not have the
deciding vote thereon, and further that Arrowhead shall not unreasonably
withhold its consent to any amendment reasonably proposed by Janssen in good
faith to the Clinical Plan or the definition under Section 1.159.

3.7.3Prosecution of Patent Rights Governed by Article X. For clarity and
notwithstanding any other provision of this Agreement to the contrary, decisions
regarding the Prosecution of any Patent Rights shall not be within the JSC’s
authority, and the provisions of Article X of this Agreement shall govern
Prosecution of certain Patent Rights.

3.8No Authority to Modify Agreement.  For clarity and notwithstanding anything
to the contrary herein, neither the JSC nor the Patent Working Group shall have
any authority to: (a) modify any provision set forth in the body of this
Agreement, including any payment conditions or terms or obligations of the
Parties, which provisions may be modified only by written agreement of the
Parties; or (b) resolve any Disputes.  

3.9Alliance Managers.  Each Party shall designate a single alliance manager for
coordinating interactions between the Parties regarding any activities
contemplated under this

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Agreement (“Alliance Manager”).  The Alliance Managers will be responsible for
the day-to-day worldwide coordination of the Parties’ activities under this
Agreement and will serve to facilitate routine communication between the
Parties.  The Alliance Managers shall have experience and knowledge appropriate
for managers with such project management responsibilities. Each Party may
change its designated Alliance Manager from time to time upon written notice to
the other Party.

ARTICLE IV:  NON-ARO-HBV PRODUCT RESEARCH

4.1Janssen has the right in its sole discretion to require Arrowhead to use
Commercially Reasonable Efforts to conduct activities to research and Develop a
Non-ARO-HBV Product to a point in Development for one such Licensed Product that
there is adequate and sufficient data to file an IND thereon (“IND Ready”),
subject to the terms and conditions of Article IV hereof (the “Option Right”).
Janssen may exercise the Option Right by giving written notice to Arrowhead at
any time prior to [**].  

4.2Upon Janssen’s exercise of the Option Right, Arrowhead shall promptly provide
Janssen with a proposed plan, timelines and corresponding budget, including
details of those activities that are known and can be specified and an outline
of those activities requiring additional information, for the research and
pre-clinical Development of a Non-ARO-HBV Product to IND Ready. The JSC shall
discuss this proposed plan in good faith, make modifications based on such
discussions and approve a plan by mutual approval of the JSC (the “Option Right
Development Plan”). The initial Option Right Development Plan approved by the
JSC shall be signed by the Parties and upon signing the Option Right Payment
shall be due to Arrowhead in accordance with Section 8.2.3. The Parties may
thereafter amend the Option Right Development Plan by mutual approval of the JSC
as required by the circumstances and consistent with Arrowhead’s obligation of
Commercially Reasonable Efforts under Section 4.3. The term of the Option Right
Development Plan will be the currently specified term of anticipated activities
under the plan and will be amended as the timeline of activities is amended (the
“Option Right Development Term”).  

4.3Upon Janssen’s exercise of the Option Right, Arrowhead shall use Commercially
Reasonable Efforts for a period of up to [**] of research and Development
activities to (a) research and Develop one Non-ARO-HBV Product to IND Ready; and
(b) generate and provide Janssen with sufficient pre-clinical Development data
in relation to such Non-ARO-HBV Product for Janssen [**].

4.4Arrowhead shall keep Janssen informed of its research and Development
activities under the Option Right Development Plan by (a) informing Janssen in
writing of each material development in relation to such research and
Development activities, including the identification and characterization of
Primary RNAi Triggers, Licensed Constructs and Licensed Products; and (b)
disclosing its progress of the performance of the Option Right Development Plan
at each JSC meeting.

4.5Upon completion of the research and Development activities under the Option
Right Development Plan, Arrowhead shall promptly deliver to Janssen, at the
request of Janssen and at no cost for Janssen, all of Arrowhead’s remaining
inventory of any Non-ARO-HBV Product. If applicable, the Parties shall enter
into an appropriate supply agreement for such supply.

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4.6Arrowhead shall perform the Development activities under the Option Right
Development Plan, and Janssen shall reimburse [**] on a quarterly basis, to the
extent they are in accordance with the proposed plan and the budget included in
the Option Right Development Plan.

4.7Janssen shall have the right to request Arrowhead at any time by written
notice to immediately cease its research and Development activities under the
Option Right Development Plan and such plan will be terminated. In the event of
such termination, Janssen shall reimburse [**] actually incurred in the
performance of its research and Development activities under the Option Right
Development Plan in accordance with the budget.

ARTICLE V: DEVELOPMENT

5.1Clinical Plan.  Arrowhead shall, at its sole cost and expense, be responsible
for the conduct and completion of the Ongoing Phase 1/2 Study. The conduct by or
on behalf of Arrowhead of the Ongoing Phase 1/2 Study after the Effective Date
shall be governed by the Clinical Plan. To the extent permitted by Arrowhead’s
legal and regulatory obligations, the Parties, through the JSC, may amend the
Clinical Plan in due course. Arrowhead shall remain responsible in all cases for
all liabilities arising in connection with its performance of, or failure to
perform, any activities or obligations with respect to the Ongoing Phase 1/2
Study, prior to the Effective Date and thereafter.  For clarity, Section 11.5
shall apply to the Ongoing Phase 1/2 Study.

5.2Development Plan.  Subject to Article IV and Section 5.1 and except as
expressly provided otherwise hereunder, Janssen, at its sole cost and expense,
shall be solely responsible for the Development of the Licensed Product after
the Effective Date. The Development of the Licensed Product by or on behalf of
Janssen after the Effective Date shall be conducted pursuant to the Development
Plan.  The Parties acknowledge that the initial Development Plan, attached to
this Agreement as Exhibit D, is preliminary and provides high-level plans for
Development activities only. Subject to Section 3.2.2, Janssen shall have the
sole right to make all decisions with respect to the amendment and
implementation of the Development Plan, provided that, in the event Janssen
conducts Phase 2 clinical studies for ARO-HBV [**] which shall be based on
discussions with Regulatory Authorities. Janssen shall, through the JSC, notify
Arrowhead of any amendment of the Development Plan.

5.3Development Diligence.  

5.3.1Janssen Development Diligence. Janssen shall use Commercially Reasonable
Efforts to conduct Development activities required to obtain Regulatory Approval
for a first indication [**] for a ARO-HBV Product and, in the event Janssen
elects to Develop a Non-ARO-HBV Licensed Product whether by exercising the
Option Right or otherwise, Janssen shall use Commercially Reasonable Efforts to
conduct Development activities required to obtain Regulatory Approval for a
first indication [**] for such Non-ARO-HBV Product. In the event that such
Development activities are successful and based on the available data from such
Development activities, Janssen shall use Commercially Reasonable Efforts to
seek Regulatory Approval for a first indication for such Licensed Product(s) in
the Territory. Arrowhead acknowledges that the foregoing diligence obligation
does not necessarily require Janssen (a) to seek Regulatory Approval in all
countries in the Territory; and (b) to initiate or continue Development
activities for a Licensed Product in a country where, taking into account the
Relevant Factors, the

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Commercialization will not be or is likely not to be profitable.  It is
anticipated by the Parties that Development in the United States and European
Union will precede Development in other countries.

5.3.2Arrowhead Development Diligence. Arrowhead shall use Commercially
Reasonable Efforts to conduct and complete the Ongoing Phase 1/2 Study in
accordance with the Clinical Plan and to assist Janssen, at no additional cost
for Janssen, in finalizing a Development Plan to the extent requested by
Janssen.

5.3.3Development Compliance. Without limiting Sections 5.3.1 and 5.3.2, each
Party shall use Commercially Reasonable Efforts to perform its respective
Development activities under the Clinical Plan and Development Plan
respectively.  Each Party (and its Affiliates, sublicensees and Third-Party
subcontractors) shall conduct its Development activities in good scientific
manner and in compliance with Applicable Law, including laws and regulations
regarding environmental, safety, and industrial hygiene, Clinical Investigation
Laws, Good Laboratory Practice, Good Clinical Practice and pharmacovigilance
requirements.  Notwithstanding anything to the contrary herein, a Party shall
not be obligated to undertake or continue any Development activities with
respect to a Licensed Product if such Party reasonably determines that
performance of such Development activity would violate Applicable Law or pose an
unacceptable safety risk to clinical study subjects.  

5.3.4Timelines. For clarity, each Party acknowledges that any timelines
reflected in the Clinical Plan or Development Plan are good-faith approximations
only and shall not be construed as imposing an obligation to strictly adhere to
any such timelines, subject to the foregoing in this Section 5.3.

5.4Transfer of Know-How. Promptly following the Effective Date, Arrowhead shall
provide a summary of all Arrowhead Know-How and shall make available such
Arrowhead Know-How at the request of Janssen. Arrowhead shall permit Janssen to
make copies at Janssen’s expense of such requested Arrowhead Know-How, recorded
in any form (including laboratory notebook entries, database entries,
monographs, reports, and slide presentations), that exists on the Effective
Date. Arrowhead shall promptly make available to Janssen and shall permit
Janssen to make copies at Janssen’s expense of all Arrowhead Know-How, including
all clinical data resulting from the Ongoing Phase 1/2 Study, which becomes
available following the Effective Date. Notwithstanding any term of this
Agreement to the contrary, Arrowhead shall not be obliged to disclose to Janssen
[**].

5.5Regulatory Approvals and Filings.

5.5.1Arrowhead-Held INDs and other Regulatory Filings. Arrowhead shall own all
Regulatory Filings, including any IND, filed by or on behalf of Arrowhead for
any Licensed Product and all regulatory approvals and authorizations resulting
from such Filings, until completion or termination of the Ongoing Phase 1/2
Study. Arrowhead shall have primary responsibility for interactions with any
Regulatory Authority with respect to such INDs and other Regulatory Filings, but
shall, to the extent permitted by Applicable Law, including its obligations as
owner of the IND, comply with the decisions of the JSC and its obligations under
this Agreement. Upon completion or termination of the Ongoing Phase 1/2 Study,
Arrowhead will

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assign ownership of all Regulatory Filings, including any IND, for any License
Product and all regulatory approvals and authorizations resulting from such
Filings to Janssen.  

5.5.2INDs for New Clinical Studies and other Regulatory Filings. Janssen shall
have overall responsibility for developing a registration strategy for any
Licensed Product. Janssen (directly and through its Affiliates and any Third
Party sublicensees or subcontractors) shall be solely responsible for filing (if
applicable) and maintaining and shall hold and own (a) all INDs and other
Regulatory Filings for any clinical studies of any Licensed Product initiated
after the Effective Date, (b) all other Regulatory Filings for any Licensed
Product following the Effective Date, (c) all regulatory approvals and
authorizations resulting from the filings described in the preceding clauses (a)
and (b) and all Regulatory Approvals for a Licensed Product, and (d) all
Regulatory Filings and regulatory approvals and authorizations assigned by
Arrowhead to Janssen in accordance with Section 5.5.1. Subject to the second
sentence of Section 5.5.1, Janssen shall be solely responsible (directly and
through its Affiliates and any sublicensees and, where strictly necessary,
through Arrowhead) for all interactions with Regulatory Authorities in
connection with any Regulatory Filing or the Licensed Product.

5.6Regulatory Reporting.  

5.6.1Responsibility.  Except as expressly provided otherwise herein and subject
to Sections 5.1 and 5.5.1, any reports (including adverse event reports) made to
any Regulatory Authority in connection with any Development activities for any
Licensed Product, shall be made exclusively by Janssen and in accordance with
the terms and conditions of the Pharmacovigilance Agreement.  In the event that
information from Arrowhead is reasonably required for any such report, Arrowhead
shall provide such information to Janssen at no cost for Janssen.

5.6.2Adverse Event Reporting.  Promptly after a Party becomes informed of any
serious adverse event in any clinical study involving a Licensed Product, it
shall notify the other Party and such notifying Party shall thereafter continue
to provide additional information to the other Party relevant to such serious
adverse event, including to the extent necessary for such other Party to comply
with all Applicable Laws (including securities laws or regulations and the
applicable rules of any public stock exchange). Arrowhead acknowledges and
agrees that Janssen, as the Party having the right to hold any Drug Application
for any Licensed Product hereunder, may be required to submit information and
file reports to various Regulatory Authorities on a Licensed Product.  Arrowhead
shall:  (a) provide Janssen with all adverse event information and
safety-related data available to Arrowhead from any pre-clinical laboratory,
animal toxicology or pharmacology studies, or clinical studies, as reasonably
may be necessary or expected to be necessary for Janssen to comply with all
Applicable Laws pertaining to the Licensed Product; and (b) report and provide
such information to Janssen in such a manner and time so as to enable Janssen to
comply with all Applicable Laws. Each Party shall handle all serious adverse
events information and other safety data that comes into its possession during
Development and Commercialization of any Licensed Product hereunder in
accordance with all Applicable Laws.  

5.6.3Global Safety Database.  Janssen shall establish a global safety database
for each Licensed Product Developed hereunder and shall, in relation to such
Licensed Product, maintain in the global safety database information relating to
adverse events, pregnancy reports, special situation reports, and any other
information relating to other adverse events Janssen decides

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to include at its reasonable discretion, including possible safety data within
the Arrowhead Know-How. Janssen will use this database for regulatory reporting
and for responding to safety queries from Regulatory Authorities. Promptly after
the Effective Date and during the Term, Arrowhead shall, and shall cause its
Affiliates and Third-Party contractors to, disclose all information relating to
adverse events and pregnancy reports from clinical use of Licensed Product in
its or their possession to Janssen for storage into its global safety database.
Upon Arrowhead’s good-faith request, Janssen shall promptly make available to
Arrowhead such information from Janssen’s global safety database for the
Licensed Product as Arrowhead deems necessary in good faith to fulfill its
pharmacovigilance reporting and other compliance obligations under Applicable
Law to the applicable Regulatory Authority(ies) in connection with its
regulatory sponsorship of the Ongoing Phase 1/2 Study.

5.6.4Pharmacovigilance Agreement.  Within [**] of the Effective Date, each Party
shall identify its safety representative to the other Party to lead negotiations
between the Parties regarding the processes and procedures for sharing adverse
event information, which processes and procedures shall be documented in a
written pharmacovigilance agreement signed by the Parties (the
“Pharmacovigilance Agreement”) within [**] of the Parties' identification of
their respective safety representatives or such other time as the Parties may
otherwise agree in writing. The Pharmacovigilance Agreement shall define safety
data exchange procedures concerning adverse events, including adverse drug
reactions, with respect to any Licensed Products, sufficient to permit each
Party and its Affiliates and subcontractors or sublicensees, as the case may be,
to comply with requirements of Applicable Laws pertaining to drug safety and
pharmacovigilance, including, to the extent applicable, those obligations
contained in Health Care Laws imposed by Regulatory Authorities.  The
Pharmacovigilance Agreement shall reflect that Janssen shall own and maintain a
comprehensive (global) safety database of adverse events, pregnancy reports, and
other safety data reported anywhere in the world from human use of any Licensed
Products anywhere in the Licensed Territory.    

5.7Progress Reporting. At each meeting of the JSC, each Party will report on the
Development activities such Party and its Affiliates have performed or caused to
be performed under the Clinical Plan or the Development Plan since the last
meeting of the JSC, including periodic reviews of preliminary, interim and final
data, results and analyses from studies.  In addition, each Party shall provide
the JSC with such other information as may be reasonably requested by the JSC or
the other Party with respect to such Development activities.  If a Party fails
to adequately report at a meeting of the JSC, the other Party may request, and
such Party will provide to such other Party, a written progress report that
includes the reasonably requested information.  

5.8Auditing.

5.8.1Compliance Inspections.  With respect to any facility or site at which
Arrowhead, any of its Affiliates or its Third Party (sub)contractors conducts
any Manufacturing, clinical or regulated (e.g., under GLP, GCP, or GMP)
Development activities, including Manufacturing clinical supply for use in
humans, pursuant to this Agreement, Janssen shall have the right, as permitted
by and subject to the terms and conditions of any possible applicable agreement
with a Third Party (sub)contractor or as otherwise expressly permitted by the
applicable Third Party (sub)contractor, at its expense, upon reasonable written
notice to Arrowhead (and if

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applicable, such Affiliate or Third Party (sub)contractor), and during normal
business hours, to inspect such facility or site and any records relating
thereto, once per year or more often with cause, to verify Arrowhead’s
compliance with the terms of this Agreement and with all Applicable Laws,
including GLP, GCP, and GMP, and current standards for pharmacovigilance
practice.  Such inspection shall be subject to the confidentiality provisions
set forth in Article XI.  In the event that such inspection would result in the
disclosure of confidential information which is not protected by the
confidentiality provisions set forth in Article XI, an appropriate
confidentiality agreement shall be entered into. After any such inspection,
Janssen shall provide written observations to Arrowhead. In the event that
non-compliance with the terms of this Agreement or with Applicable Laws were
observed, Arrowhead shall promptly take or, as the case may be, use Commercially
Reasonable Efforts to cause the applicable Third Party to promptly take the
necessary actions to remediate such non-compliance and shall keep Janssen
informed of such actions through the JSC. Arrowhead agrees to use Commercially
Reasonable Efforts to include in any contract or other written arrangement with
its Third Party (sub)contractors, a clause permitting Janssen to exercise its
rights under this Section 5.8.1.

5.8.2Regulatory Audits.  Arrowhead shall cooperate in good faith in the event
any Regulatory Authority inspects any site where clinical studies or
Manufacturing of clinical supplies of Licensed Products are conducted by or on
behalf of Arrowhead pursuant to this Agreement, whether such Audited Site is
Arrowhead’s or its Affiliate's or contractor’s or subcontractor's hereunder, as
permitted by and subject to the terms and conditions of any applicable agreement
with a Third Party or as otherwise expressly permitted by the applicable Third
Party.  Arrowhead shall notify Janssen within [**] after receiving notification
of any Regulatory Authority inspection, which relates to or reasonably could
relate to the Licensed Product or clinical studies for the Licensed Product, at
any site where clinical studies or Manufacturing of clinical supplies of
Licensed Products are conducted. Taking into account the timing and notice
provided by the applicable Regulatory Authority, and the terms of any applicable
agreements with Third Parties and Applicable Law, Janssen shall be given a
reasonable opportunity to assist in the preparation of the Audited Site for
inspection, where appropriate, and to attend any inspection by any Regulatory
Authority of the Audited Site, and the summary, or wrap-up, meeting with a
Regulatory Authority at the conclusion of such inspection.  If such attendance
would result in the disclosure of Arrowhead’s, its Affiliate’s or a Third
Party’s confidential information unrelated to the subject matter of this
Agreement, an appropriate confidentiality agreement covering such unrelated
subject matter shall be entered into.  In the event that any Audited Site is
found to be non-compliant with one or more Applicable Laws, Good Laboratory
Practice, Good Clinical Practice, Good Manufacturing Practice, or current
standards for pharmacovigilance practice, Arrowhead shall, promptly and in any
event within [**] after receiving notification of such non-compliance, submit to
Janssen a CAPA plan and shall use Commercially Reasonable Efforts to cause such
non-compliant Audited Site to implement such CAPA plan promptly after
submission.  Arrowhead agrees to use Commercially Reasonable Efforts to include
in any agreement or other written arrangement entered into after the Effective
Date with its applicable Third Party contractors or subcontractors (as the case
may be), a clause permitting Janssen to exercise its rights under this Section
5.8.2.  

5.9Rights of Reference and Access to Data.  Arrowhead hereby grants to Janssen,
and Janssen shall have (directly and through its Affiliates), a Right of
Reference with respect to

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INDs, drug master files, if any, and any other Regulatory Filings (whether made
before or during the Term hereof) Controlled by Arrowhead related to any
Licensed Products, for use by Janssen in Exploitation of its Development and
Commercialization rights pursuant to this Agreement. Accordingly, Regulatory
Authorities considering any Regulatory Filing relating to a Licensed Product
being Developed hereunder shall be permitted to rely on and otherwise use the
applicable information in such INDs or other Regulatory Filings. Arrowhead or
its Affiliate shall provide a signed statement to this effect, if requested by
Janssen, in accordance with 21 C.F.R. § 314.50(g)(3) or the equivalent as
required in any other country or region of the world, or otherwise provide
appropriate notification of such right of Janssen to the applicable Regulatory
Authority.    Janssen shall also have a right to review, access and request
copies of such Regulatory Filings and any Know-How (including data) therein and
use such Know-How in connection with the performance of Janssen’s obligations
and exercise of its rights under this Agreement, including inclusion of such
Know-How in its own Regulatory Filings for Licensed Products.  

5.10Suspension of Clinical Study for Safety Reason.  Notwithstanding anything to
the contrary herein, if an independent safety board determines that any clinical
study of a Licensed Product under the Clinical Plan or Development Plan would
pose an unacceptable safety risk for any subjects or patients participating in
such study, neither Party shall be obligated to continue such clinical
study.  Either Party may delay or suspend any Development activities with
respect to an ongoing clinical study of a Licensed Product if such Party
reasonably believes that such clinical study would pose an unacceptable safety
risk.  

5.11Records.

5.11.1Maintenance of Research Records.  Each of the Parties shall maintain, or
cause to be maintained, records of its respective Collaboration Activities in
material compliance with Applicable Law (including the requirements of GCP, GLP
and GMP, in each case to the extent applicable), and the requirements of its
corporate records retention policies consistent therewith.  Such records shall
be complete and accurate and shall fully and properly reflect all work done and
results achieved in the performance of the Collaboration Activities in a manner
appropriate for any regulatory purpose and, when applicable and permitted under
this Agreement, for use in connection with the Prosecution of Patent
Rights.  Such records shall be retained for the longer of either: (a) such
period as is required by such retaining Party’s corporate record retention
policies; (b) such period as may be required by Applicable Law; or (c) the Term
of this Agreement, unless a Party first offers to deliver such records to the
other Party for its keeping, and delivers to such Party any records it may
reasonably request, before destroying or disposing of such records.  

5.11.2Access to Records.  Each Party shall have the right, at mutually agreed
times during normal business hours on Business Days and upon reasonable notice,
to obtain from the other Party access to and copies (at its own cost) of the
records maintained by the other Party pursuant to Section 5.11.1 solely to the
extent relating to any Licensed Product or any Development, Manufacturing, or
Commercialization activities hereunder or any intellectual property or
associated rights licensed or obtained hereunder, to the extent useful or
required to (a) enable the requesting Party to conduct reasonable diligence on
matters potentially giving rise to liability on the part of the requesting Party
according to Applicable Law or the requirements of this Agreement, or to conduct
a defense of itself with respect to any such liability, if and to the extent
that a fact, circumstance or event has arisen that gives the requesting Party a
reasonable

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basis to believe that it has or may incur such liability; (b) to meet its
obligations to Regulatory Authorities or to comply with Applicable Laws with
respect to a Licensed Product; (c) to Prosecute or enforce any Patent Rights
hereunder; or (d) to otherwise Exploit any rights hereunder.

5.12Conditional Subcontracting.  A Party may subcontract any of its research and
Development activities hereunder to any Third Party, provided that: (a) such
Party executes a written agreement with such Third Party subcontractor that
contains, in all material respects, the applicable obligations and covenants
hereunder; and (b) Arrowhead may not subcontract to a Third Party for its
sponsorship of the Ongoing Phase 1/2 Study without the JSC’s prior written
approval.  A Party engaging any subcontractor shall be responsible for the
performance of the subcontractor, and hereby warrants its compliance with the
material terms hereof.

ARTICLE VI:  COMMERCIALIZATION

6.1Commercial Diligence.  Commencing upon Janssen obtaining first Regulatory
Approval for a Licensed Product in a country or jurisdiction, Janssen shall use
Commercially Reasonable Efforts to Commercialize a Licensed Product in the
country or jurisdiction where Regulatory Approval has been obtained.   

6.2Commercialization Responsibilities.  Janssen shall be solely responsible
(directly and through its Affiliates and any sublicensees) for all
Commercialization activities in the Territory with respect to any Licensed
Products in Exploitation of its license rights granted under Section 2.1 as well
as all business decisions in connection therewith, subject to the terms of this
Agreement.  Subject to Section 6.1, each decision whether and when to
commercially launch any particular Licensed Product in any particular country or
jurisdiction of the Licensed Territory shall be within the discretion of Janssen
(acting directly or through its Affiliates and sublicensees).  Janssen, directly
and through its Affiliates and Third Party sublicensees, will book all sales of
Licensed Products made hereunder.  Arrowhead acknowledges that nothing herein
prohibits Janssen from donating reasonable and customary supplies of Licensed
Products for access programs or humanitarian or charitable purposes.

6.3Trademarks and International Nonproprietary Names.  Janssen (directly or
through its Affiliates and sublicensees) shall select its own trademarks under
which it will Commercialize Licensed Products hereunder and will own the
Trademark Rights associated therewith. Janssen (directly or through its
Affiliates and sublicensees) shall be solely responsible for the application for
an international nonproprietary name in relation to any Licensed Product and for
the resulting communication with the World Health Organization.  

6.4Marketing Plans.  Following Regulatory Approval of a Licensed Product for any
country, Janssen shall, to the extent permitted by Applicable Law, provide to
Arrowhead a report on an annual basis summarizing on a high level its marketing
plans for the Licensed Product in such country, including medical affairs and
marketing activities.  

6.5Conditional Subcontracting. Janssen may subcontract any of its
Commercialization activities hereunder to any Third Party, provided that Janssen
executes a written agreement with such Third-Party subcontractor that contains,
in all material respects, the

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applicable obligations and covenants hereunder. Janssen shall be responsible for
the performance of the subcontractor, and hereby warrants its compliance with
the material terms hereof.

ARTICLE VII:  PRODUCT MANUFACTURE AND SUPPLY

7.1Responsibility for Manufacture.  Subject to section 7.2, Janssen shall be
solely responsible (directly and through its Affiliates and any sublicensees),
at its sole cost and expense, for overseeing and managing all Licensed Product
Manufacturing activities hereunder, including Manufacturing and having
Manufactured of clinical supplies of ARO-HBV and Licensed Products for clinical
studies under the Development Plan and Manufacturing and having Manufactured its
supply of ARO-HBV and Licensed Products otherwise for the Development and/or
Commercialization hereunder, but excluding (a) the Manufacturing of Non-ARO-HBV
Products useful or required for Arrowhead’s research and Development activities
under Article IV, if any, and (b) the Manufacturing activities useful or
required for the Ongoing Phase 1/2 Study. Subject to Section 5.1, Arrowhead
shall be solely responsible (directly and through its Affiliates or any Third
Party contractors), at its sole cost and expense, for the latter Manufacturing
activities. For clarity, Arrowhead shall not Manufacture ARO-HBV or any ARO-HBV
Product for its research and Development activities under Article IV. Janssen
shall supply Arrowhead with ARO-HBV or any ARO-HBV Product if and to the extent
required for Arrowhead’s research and Development activities under Article IV
and the Parties shall, if applicable, enter into an appropriate supply agreement
for such supply.

7.2Supply of ARO-HBV. Arrowhead shall supply Janssen, at Janssen’s cost, with
(a) [**] of ARO-HBV drug substance, promptly following the Effective Date, (b)
all remaining supplies of ARO-HBV Product on hand at the completion of dosing in
the Ongoing Phase 1/2  Study, promptly following the completion of dosing in the
Ongoing Phase 1/2 Study, and (c) at least [**] of ARO-HBV drug substance
manufactured, starting in [**], through Arrowhead’s Current Manufacturing
Agreements, promptly following such supplies becoming available. Thereafter,
Arrowhead shall, upon Janssen’s request, supply Janssen, at Janssen’s cost, with
ARO-HBV to the extent reasonably possible under Arrowhead’s Current
Manufacturing Agreements to the extent permissible under such agreements. For
the supply under this Section, cost shall be Arrowhead’s Out-Of-Pocket Costs
and, for the supply under clause (c), additionally Arrowhead’s FTE Costs,
without any mark-up being added by Arrowhead. The Parties shall timely enter
into the appropriate supply agreement(s) and quality agreement(s) for such
supply.

7.3Existing Manufacturing Contractors. Upon Janssen’s request, Arrowhead shall
reasonably cooperate with Janssen to secure the cooperation of Arrowhead’s
Third-Party contractors under any Current Manufacturing Agreements to assist
Janssen in its Licensed Product Manufacturing activities hereunder and to enter
into a manufacturing and supply agreement in this respect.  [**].  

7.4Technical Transfer.  Promptly after the Effective Date or promptly after such
Know-How becomes available during the Term, Arrowhead shall transfer, and shall
use Commercially Reasonable Efforts to cause its Third Party contractors under
applicable Pre-Existing Third Party Agreements (including the Current
Manufacturing Agreements) to transfer (as permitted by and subject to the terms
and conditions of any applicable Pre-Existing Third Party Agreement or as
otherwise expressly permitted by the applicable Third Party), to Janssen and its

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designated Affiliate and Third Party sublicensees and subcontractors records or
copies of all CMC Know-How. Arrowhead shall bear the expenses incurred by
Arrowhead in transferring any such CMC Know-How (including any payments due to
its counterparties under any Current Manufacturing Agreements or Pre-Existing
Licenses from Third Parties).

7.5Quality Assurance and Compliance with Laws.  Supplies of Licensed Products,
ARO-HBV and any Licensed Construct for human use in any Development or
Commercialization activities hereunder shall be Manufactured in compliance with
(a) all Applicable Laws relating to GMP; and (b) all Applicable Laws relating to
the safety, preservation or protection of human health and the environment
(including workplace safety, ambient air, surface water, groundwater, land, or
subsurface strata) or relating to the handling, treatment, transportation or
disposal of waste. For clarity, Janssen shall be authorized to verify
Arrowhead’s compliance with this Section by conducting an inspection in
accordance with Section 5.8.1.

ARTICLE VIII:  FINANCIAL PROVISIONS

8.1US Dollars.  For clarity, all references to “dollars”, “$” or “USD” mean
United States dollars.

8.2Upfront and Option Fees.

8.2.1Upfront Fee. Janssen shall pay Arrowhead a one-time non-refundable payment
of one hundred seventy-five million US dollars ($175,000,000) within ten (10)
Business Days following the Effective Date (the “Upfront Fee”).

8.2.2Payment under Research Collaboration and Option Agreement. The payment of
[**].

8.2.3Option Right Payment. Janssen shall pay Arrowhead a one-time non-refundable
payment of [**] upon Janssen’s exercise of the Option Right and the Parties’
signing of the Option Right Development Plan (the “Option Right Payment”).

8.3Milestone Payments.  

8.3.1One-Time-Only Development and Approval Milestone Payments.  The below
ARO-HBV Product milestone amounts shall be payable by Janssen to Arrowhead one
time only upon the first achievement of the corresponding milestone event for
any ARO-HBV Product. The below Non-ARO-HBV Product milestone amounts shall be
payable by Janssen to Arrowhead one time only upon the first achievement of the
corresponding milestone event for any Non-ARO-HBV Product, except that such
Non-ARO-HBV Product milestone amount shall not be payable in the event that (a)
ARO-HBV is no longer in Development or is no longer being Commercialized at the
time such milestone event is first achieved for a Non-ARO-HBV Product; and (b)
the ARO-HBV Product milestone amount has already been paid for achievement of
that milestone event for a ARO-HBV Product.

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Milestone Event

ARO-HBV Product Milestone Amount (USD)

Non-ARO-HBV Product Milestone Amount (USD)

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

[**]

 

8.3.2ARO-HBV Product One-Time-Only Sales Milestones.  Solely upon the first
occurrence (if any) of aggregate annual (total in a single Janssen Calendar
Year) reported Net Sales of any ARO-HBV Product sold worldwide by or on behalf
of Janssen (directly and through its Affiliates and Third Party sublicensees)
hereunder in any Janssen Calendar Year during the Term first attaining the sales
threshold as specified in a below sales milestone event, Janssen shall pay the
corresponding ARO-HBV Product milestone amount to Arrowhead within [**]
following the end of the Janssen Calendar Quarter in which such sales milestone
event was attained. In the event multiple sales milestone events are first
achieved in a single Janssen Calendar Quarter, the amounts specified below for
each such sales milestone event shall be payable at the same time.

ARO-HBV Product

Sales Milestone Event

ARO-HBV Product

Milestone Amount

(USD)

Net Sales greater than $[**]

$[**]

Net Sales greater than $[**]

$[**]

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Net Sales greater than $[**]

$[**]

Net Sales greater than $[**]

$[**]

8.3.3Non-ARO-HBV Product One-Time-Only Sales Milestones.  Solely upon the first
occurrence (if any) of aggregate annual (total in a single Janssen Calendar
Year) reported Net Sales of a Non-ARO-HBV Product sold worldwide by or on behalf
of Janssen (directly and through its Affiliates and Third Party sublicensees)
hereunder in any Janssen Calendar Year during the Term first attaining the sales
threshold as specified in the sales milestone event set forth below, Janssen
shall pay the corresponding Non-ARO-HBV milestone amount to Arrowhead within
[**] following the end of the Janssen Calendar Quarter in which such sales
milestone event was attained.  In the event multiple sales milestone events are
first achieved in a single Janssen Calendar Quarter, the amounts specified below
for each such sales milestone event shall be payable at the same time.  

 

Non-ARO-HBV Product

Sales Milestone Event

Non-ARO-HBV Product Milestone Amount

(USD)

Net Sales greater than $[**]

$[**]

Net Sales greater than $[**]

$[**]

Net Sales greater than $[**]

$[**]

Net Sales greater than $[**]

$[**]

 

 

8.3.4Each Milestone Amount Paid Once.  In the event a milestone set forth in
this Section 8.3 is achieved, Janssen shall pay to Arrowhead the milestone
amount corresponding to each such milestone only once regardless of whether
other Licensed Products achieve such milestone.

8.3.5Notice and Invoice for Milestone Events.  Janssen shall inform Arrowhead in
writing, within [**] after the achievement of any milestone hereunder, and, upon
such notice, Arrowhead may submit to Janssen an invoice for the applicable
milestone amount due.  

8.4Royalty Payments.

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8.4.1Royalty Term.  The royalties for Licensed Products set forth in this
Section 8.4 shall, unless the Agreement has been terminated earlier, be paid on
a Licensed-Product-by-Licensed-Product basis and country-by-country basis for
the Royalty Term for that Licensed Product in that country-of-sale. Upon
expiration of the Royalty Term in respect of a Licensed Product in a particular
country-of-sale of the Territory, Janssen shall have a fully paid up
non-revocable non-exclusive license in such country to Commercialize such
Licensed Product.

8.4.2ARO-HBV Product Royalty Rate.  Subject to Section 8.4.4 and subject to any
adjustments expressly permitted under Section 8.4.6 below, Janssen shall pay to
Arrowhead royalties at the incremental royalty rates on the incremental tiers of
aggregate reported Net Sales of ARO-HBV Products in the Territory, during a
particular Janssen Calendar Year during the Royalty Term as set forth in the
below table.

Net Sales

ARO-HBV Product Royalty Rate (percentage)

Net Sales up to and including $[**]

[**]%

Net Sales greater than $[**] up to and including $[**]

[**]%

Net Sales greater than $[**] up to and including $[**]

[**]%

Net Sales greater than $[**]

[**]%

 

8.4.3Non-ARO-HBV Product Royalty Rate. Subject to Section 8.4.4 and subject to
any adjustments expressly permitted under Section 8.4.6 below, Janssen shall pay
to Arrowhead royalties at the  incremental royalty rates on the incremental
tiers of aggregate reported Net Sales of Non-ARO-HBV Products in the Territory,
during a particular Janssen Calendar Year during the Royalty Term as set forth
in the below table. For clarity, in the event that multiple Non-ARO-HBV Products
are Commercialized, the incremental royalty rates set forth in the below table
shall be applied to the aggregate reported Net Sales for each Non-ARO-HBV
Product individually and not to the aggregate reported Net Sales for all
Non-ARO-HBV Products.

Net Sales

Non-ARO-HBV Product

Royalty Rate (percentage)

Net Sales up to and including $[**]

[**]%

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Net Sales greater than $[**] up to and including $[**]

[**]%

Net Sales greater than $[**] up to and including $[**]

[**]%

Net Sales greater than $[**]

[**]%

 

8.4.4Royalty Rate in Access Territory. In the event that Janssen intends to
Commercialize a Licensed Product in one or more countries in the Access
Territory, the Parties shall timely enter into good faith negotiations to agree
upon an equitable reduction in the royalty rate applicable to the aggregate
reported Net Sales of such Licensed Product in such country or countries.
Accordingly, and subject to any adjustments expressly permitted under Section
8.4.6, Janssen shall have the right to use the agreed upon royalty rate for the
applicable aggregate reported Net Sales of Licensed Products in the Access
Territory on a country-by-country basis.

8.4.5Royalties Due Only Once. The obligation to pay royalties under this
Agreement is imposed only once with respect to the same unit of a Licensed
Product.

8.4.6Adjustments to Royalties.  

(a)Compulsory License.  If at any time in any country a Third Party shall, under
a Government Order by a competent Governmental Authority granting or compelling
the granting of a license under a Valid Claim of any Arrowhead Patent Rights
Covering any Licensed Product sold by or on behalf of Janssen in such country,
offer for sale or sell any product in competition with the Licensed Product
marketed by or on behalf of Janssen with respect to which royalties become
payable by Janssen pursuant to Sections 8.4.2 to 8.4.4, the Parties will confer
and in good faith negotiate an equitable reduction in the royalty rate for
calculating royalties payable to Arrowhead based on Janssen’s and its
Affiliates’ and Third Party sublicensees’ Net Sales of Licensed Product in such
country under Sections 8.4.2 to 8.4.4 taking into account the royalty rate
payable by the Third Party to Arrowhead under the compulsory license granting
the Third Party the right to market the competing product.

(b)Generic Competition. In the event that, in a country, a Generic Version of
the Licensed Product has been approved for commercialization in such country,
Janssen may reduce the royalty rate for calculating royalties payable to
Arrowhead based on Janssen’s and its Affiliates’ and Third Party sublicensees’
Net Sales of such Licensed Product in such country under Sections  8.4.2 to
8.4.4 by [**].

(c)Combination Products. In the event that a Licensed Product is a Combination
Product, Net Sales for the purposes of determining royalties to be paid for the
Net Sales of such Combination Products pursuant to Sections 8.4.2 to 8.4.4 shall
be calculated by multiplying the actual Net Sales of such Combination Product by
the fraction [**]; and (b) for which no payment is owed to a Third Party.

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(d)Off-Set for Third-Party Patents.  In the event that, at Janssen’s discretion,
a license under a Third Party’s Patent Rights or an agreement is required to
resolve or prevent possible allegations that the Development or
Commercialization of a Licensed Product infringes such Patent Rights, Janssen
shall have the right to deduct from the royalties payable to Arrowhead under
this Agreement for the Licensed Product concerned [**] of any royalties,
milestone payments, license fees or other payments payable by Janssen for such
license or such agreement to such Third Party. In no event shall the royalty
adjustment under this Section 8.4.6(d) reduce the applicable royalty rates by
more than [**] as compared to the rates set forth in or determined in accordance
with Sections 8.4.2 to 8.4.4.

8.5Third Party Obligations.  

8.5.1Subcontractors.  A Party or its designated Affiliate, in entering into any
subcontract with a Third Party for the performance of any subcontracted
Collaboration Activities hereunder (including in any jurisdiction in which
employees or agents of such Third Party have rights to compensation,
remuneration or payments for their inventions under Applicable Laws), shall use
Commercially Reasonable Efforts to obligate the Third Party subcontractor in a
written subcontract agreement to be solely responsible for any compensation,
remuneration or payments due to any of the Third Party’s employees or agents on
account of their performance of any such activities under the subcontract
agreement, including any payment obligations that may arise by operation of
Applicable Law in a particular country on account of either Party’s exercise of
any rights hereunder with respect to any Licensed Products that were invented,
in whole or in part, by any such Third Party employees or agents in the
performance of such activities.  If a Party fails to include such an obligation
in any of its subcontract agreements with any Third Parties, such Party shall be
bear any expense incurred in connection with any such payment obligations that
may so arise.

8.5.2  [**]

ARTICLE IX:  GENERAL PAYMENT TERMS

9.1Invoices.  Any payment for an amount due to Arrowhead under this Agreement
shall be payable, except as otherwise expressly provided herein, within [**]
after Janssen’s receipt of an invoice from Arrowhead for such amount due. Each
invoice shall specifically refer to (a) this Agreement, (b) Janssen’s purchase
order number if Janssen has provided a purchase order number to Arrowhead in
advance of the invoice, and (c) Janssen’s tax ID.  Invoices shall be dated and
printed on official Arrowhead letterhead. No invoice from Arrowhead shall be
required for payment of royalties under Section 8.4 or sales milestones under
Sections 8.3.2 and 8.3.3.

9.2Royalty Reporting and Payments. Royalty payments due shall be payable in
United States dollars [**] after the end of each Janssen Calendar Quarter during
the Term.  Each payment of royalties due under this Agreement will be
accompanied with a royalty report setting forth, on a Licensed
Product-by-Licensed Product and country-by-country basis: (a) the amount of Net
Sales of Licensed Product by Janssen, its Affiliates and sublicensees; (b) the
conversion of such Net Sales from the currency of sale into US dollars in
accordance with Section 9.4, as applicable; and (c) a calculation of the
aggregate amount of royalties owed based on such Net

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Sales, including the application of the reductions or credits, if any, made in
accordance with the terms of Section 8.4.6.

9.3Remittance.  All payments due to Arrowhead hereunder shall be made in
immediately available funds by electronic transfer, by Janssen (or an Affiliate
on its behalf) to the bank account identified below or such other bank account
as Arrowhead may designate in writing to Janssen.  Any payments due and payable
under this Agreement on a date that is not a Business Day may be made on the
next Business Day.  If, at any time, legal restrictions prevent the prompt
remittance of part of or all of the royalties due hereunder with respect to any
country where Licensed Products are sold, Janssen shall have the right and
option to make such payments by depositing the amount thereof in local currency
to Arrowhead’s accounts in a bank or depository in such country as directed by
Arrowhead or by using such lawful means or methods for remitting payment as
Janssen may reasonably determine.

[**]

 

9.4Currency.  All payments under this Agreement shall be payable in United
States dollars.  With respect to sales of a Licensed Product invoiced in a
currency other than US dollars, such amounts and the amounts payable hereunder
shall be expressed in their United States dollars equivalent calculated using
the method described in the remainder of this Section 9.4.  For each Janssen
Calendar Year during which royalties become due hereunder, Janssen shall
provide: (a) the Currency Hedge Rate to be used for the local currency of each
country of the Territory and (b) the detail of each such Currency Hedge Rate in
writing to Arrowhead not later than ten (10) Business Days after the Currency
Hedge Rates (for countries other than the U.S. where any royalty-bearing sales
of Licensed Products hereunder occur) are available from Janssen or its
applicable Affiliates, which is customarily at the beginning of December. Each
Currency Hedge Rate for a given country will remain constant throughout the
entire Janssen Calendar Year.  Janssen shall use the Currency Hedge Rates to
convert Net Sales to United States dollars for the purpose of calculating
royalties.

9.5Taxes.  

9.5.1Each Party shall be solely responsible for the payment of all Taxes imposed
on its share of income arising directly or indirectly from the collaborative
efforts of the Parties under this Agreement.

9.5.2Each Party shall make all payments due to the other Party under this
Agreement without deduction or withholding for Taxes except to the extent that
any such deduction or withholding is required by Applicable Law in effect at the
time of payment.  The Parties agree to use Commercially Reasonable Efforts to
minimize any withholding or similar Tax imposed upon payments payable under this
Agreement and to consult in good faith before taking any action that is
reasonably expected to result in the application of a withholding or similar Tax
imposed upon payments payable under this Agreement.

9.5.3Any Tax required to be withheld on amounts payable by the payor Party under
this Agreement will be paid by the payor on behalf of the payee Party to the
appropriate Governmental Authority, and the payor will furnish the payee with
proof of payment of such Tax.

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Any such Tax required to be withheld will be an expense of and borne by the
payee.  If any such Tax is assessed against and paid by the payor, then the
payee shall indemnify and hold harmless the payor from such Tax.

9.5.4The Parties will cooperate with respect to all documentation required by
any taxing Governmental Authority or reasonably requested by either Party to
secure a reduction in the rate of applicable withholding Taxes.  Within five (5)
Business Days following the Execution Date of this Agreement, Arrowhead will
deliver to Janssen an accurate and complete Internal Revenue Service Form W-9
and such form shall be updated and renewed as required by Applicable Law.

9.6Records and Audit Rights.

9.6.1Maintenance of Records.  Arrowhead shall keep (and shall cause its
Affiliates and applicable Third Party (sub)contractors to keep) complete, true
and accurate books and records in accordance with Accounting Standards in
sufficient detail for Janssen to determine the payments due and costs incurred
under this Agreement. Janssen shall keep (and shall cause its Affiliates and
applicable Third Party subcontractors and sublicensees to keep) complete, true
and accurate books and records in accordance with Accounting Standards in
sufficient detail to permit Arrowhead to confirm the accuracy of Janssen’s
financial records related to the royalty calculations and calculations of Net
Sales hereunder. Each Party will keep such books and records in accordance with
Applicable Law and for at least [**] following the date of the payment to which
they pertain. In the event that Janssen is requested to reimburse Out-of-Pocket
Costs or other costs to Arrowhead, Arrowhead shall provide Janssen with proof of
such costs upon Janssen’s request.

9.6.2Audit Right.  Upon the written request of a Party (as applicable, the
“Auditing Party”), not more than once every [**], the other Party (the “Audited
Party”) shall permit an independent certified public accounting firm of
internationally recognized standing selected by the Auditing Party and
reasonably acceptable to the Audited Party to have confidential access during
normal business hours to such of the records of the Audited Party and its
applicable Affiliates or Third Party sublicensees or subcontractors as may be
reasonably necessary for the sole purpose of verifying the accuracy of any
payments made under this Agreement for any period ending not more than [**]
prior to the date of such request. For clarity, in the event that Janssen is the
Audited Party, access shall be limited to records reasonably necessary for the
sole purpose of verifying the royalty and Net Sales calculations hereunder. An
audit of the records relating to a particular calendar year may be conducted not
more than once. The accounting firm shall provide the Audited Party a copy of
its report prior to sharing it with the Auditing Party in order to allow the
Audited Party to provide the accounting firm with justifying remarks for
inclusion, at the accounting firm’s sole discretion, in the report prior to
sharing the report with the Auditing Party. The accounting firm shall provide
each Party, at the same time, a correct and complete copy of the final report
summarizing the final results of such audit, which shall be treated as the
Audited Party’s Confidential Information. The Auditing Party shall obligate its
accounting firm to keep the Audited Party’s information confidential and shall,
at the request of the Audited Party, cause the Auditing Party’s accounting firm
to execute a reasonable confidentiality agreement prior to commencing any such
audit.

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9.6.3Audit Fees.  The fees charged by an accounting firm engaged by a Party in
accordance with Section 9.6.2 shall be paid by the Auditing Party, provided,
however, that if the audit uncovers an underpayment or overpayment in favor of
the Audited Party exceeding [**] of the total amount due in accordance with this
Agreement for the audited period, then the fees of such accounting firm shall be
paid by the Audited Party.  Any underpayments or overpayments discovered by such
audit or otherwise will be paid or refunded promptly by the applicable Party
within [**] of the date the Auditing Party delivers to the Audited Party such
accounting firm’s written report, or as otherwise agreed upon by the Parties,
plus interest calculated in accordance with Section 9.8.

9.7Party Making Payment.  Arrowhead acknowledges and agrees that, as may be
delegated by Janssen from time to time, an Affiliate of Janssen acting as a
paying agent for Janssen may make certain payments due to Arrowhead under this
Agreement on behalf of Janssen, provided that Janssen shall remain primarily
responsible for any such payments due to Arrowhead under this Agreement.

9.8Interest on Late Payments.  Interest may be assessed by a payee Party on any
amounts payable to it under this Agreement which are not paid by the payor Party
on or before the due date for payment hereunder.  Such interest shall accrue and
be calculated on a daily basis at the rate of [**] per annum above the
then-current prime rate quoted by Citibank in New York City (but in no event in
excess of the maximum rate permissible under Applicable Laws), for the period
from the due date for payment until the date of actual payment.  The payment of
such interest shall not limit the payee Party from exercising any other rights
it may have as a consequence of the lateness of any payment from the payor
Party.

ARTICLE X: INTELLECTUAL PROPERTY MATTERS

10.1Reporting of Invention. Arrowhead shall promptly report to the JSC, as well
as Janssen’s Patent Representative, any material invention made by any of its
employees or agents or its Affiliates’ or Third-Party subcontractors' employees
or agents that Covers the composition of matter of a Licensed Product or any
component thereof (“Arrowhead Invention”).  

10.2Ownership of Inventions.  

10.2.1Inventions.  Ownership of any invention arising from any activities
hereunder (each an “Invention”) and any patent rights therein shall follow
inventorship as determined pursuant to principles of United States patent law.
Accordingly, (a) all Inventions invented solely by one or more employees or
agents of a Party (or its Affiliates or Third Party subcontractors or
sublicensees) shall be owned solely by such Party, and (b) all Inventions
invented jointly by one or more employees or agents of one Party (or its
Affiliates or Third Party subcontractors or sublicensees) and by one or more
employees or agents of the other Party (or its Affiliates or Third Party
subcontractors or sublicensees) shall be owned jointly by the Parties.  

10.2.2Assignment of [**] Invention.  In the event an Invention solely made in
the course of developing a Licensed Product by one or more employees or agents
of Janssen (or its

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Affiliates or Third-Party subcontractors or sublicensees) is [**], Janssen
hereby assigns to Arrowhead all right, title and interest in that Invention.

10.2.3Inventor Compensation. Each Party (directly or through its applicable
Affiliate or Third Party subcontractor or sublicensees) shall be solely
responsible for any compensation due to it and its Affiliates’ and Third Party
subcontractors' or sublicensees’ employees and agents in connection with the
assignment of their respective rights to any Inventions and associated Patent
Rights pursuant to this Agreement or the Exploitation of any Party or its
Affiliates or Third Party sublicensees hereunder of any such Inventions or
associated Patent Rights, including any required by operation of Applicable Law
on account of any Commercialization of any such Arrowhead Inventions by or on
behalf of Janssen hereunder.

10.3Prosecution of Patent Rights.

10.3.1Communications.  Each Party shall use reasonable efforts to handle all
communications between the Parties under this Section 10.3 through their
Prosecution Contacts and keep such communications in strict confidence to
protect their attorney-client privileged status.

10.3.2Reporting of Filings.  A Party planning on filing any
priority-establishing or original (in each case, with respect to any claims or
new matter described in the patent specification) patent application within the
Arrowhead Patent Rights hereunder shall use reasonable efforts to provide to the
other Party, with reasonable advance time such as at least thirty (30) days
prior to proposed Prosecution filing in a Patent Office (such as a draft
application or response to an official action), and provide the other Party an
opportunity to comment thereon through its Prosecution Contact.  Each Party
shall provide to the other, promptly after filing, a copy of each
priority-establishing or original (whether provisional or nonprovisional) patent
application within the Arrowhead Patent Rights as filed in the Patent Office and
each other substantive Prosecution filing (including any other patent
application filed within the Arrowhead Patent Rights).

10.3.3Prosecution Responsibility and Coordination.  

(a)Arrowhead Patent Rights Covering Licensed Product.  With respect to the
Arrowhead Patent Rights Covering (a) features of a Licensed Product in
Development or Commercialization but excluding Arrowhead Patent Rights Covering
Arrowhead Platform Technology, or (b) Arrowhead Platform Technology as applied
specifically to a Licensed Product in Development or Commercialization
(“Specific Arrowhead Patent Rights”), Janssen shall be primarily responsible for
Prosecuting Specific Arrowhead Patent Rights, provided that for so long as the
Agreement remains in effect, Janssen shall follow any reasonable directions by
Arrowhead as provided by its designated Prosecution Contact in Prosecuting such
Specific Arrowhead Patent Rights, including with respect to the filing of any
continuation, divisional, or other continuing applications. The Specific
Arrowhead Patent Rights as of the Execution Date are identified in Exhibits B-1,
B-3 and B-5 hereto.  During the Term, Arrowhead shall provide Janssen prompt
written notice of any changes to the Specific Arrowhead Patent Rights.

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(b)Arrowhead Patent Rights Covering Arrowhead Platform Technology. With respect
to Arrowhead Patent Rights Covering Arrowhead Platform Technology that is
incorporated in a Licensed Product but is not applied specifically to a Licensed
Product in Development or Commercialization (“General Arrowhead Patent Rights”),
Arrowhead shall be primarily responsible, which may include the use of outside
patent counsel mutually acceptable to the Parties and engaged by Arrowhead, to
Prosecute (or, if a Third Party has the right to control Prosecution of any
General Arrowhead Patent Right under any Pre-Existing Third Party Agreements, to
be represented by such Third Party in the Prosecution of) the General Arrowhead
Patent Rights, provided that for so long as the Agreement remains in effect,
Arrowhead shall, and shall cause the applicable Third Party, if any, and subject
to any restrictions or obligations in any Pre-Existing Third Party Agreements,
to, follow any reasonable directions by Janssen as provided by its designated
Prosecution Contact in Prosecuting such General Arrowhead Patent Rights,
including with respect to the filing of any continuation, divisional, or other
continuing applications.  Notwithstanding the foregoing, Arrowhead shall, upon
reasonable request by, and in consultation with, Janssen, use Commercially
Reasonable Efforts to file patent applications directed to Licensed Products
with the objective of optimizing overall patent protection for Licensed
Products. For clarity, the General Arrowhead Patent Rights as of the Effective
Date are identified in Exhibits B-2, B-4 and B-5 hereto. During the Term,
Arrowhead shall provide Janssen prompt written notice of any changes to the
General Arrowhead Patent Rights.

(c)Joint Patent Rights.  For any Joint Patent Rights, both Parties shall share
primary responsibility, through outside patent counsel mutually selected and
engaged by the Parties for Prosecuting such Joint Patent Rights.

(d)Coordination with JSC and Patent Working Group.  In Prosecuting Arrowhead
Patent Rights, each Party shall:  (a) subject to any restrictions or obligations
in any Pre-Existing Third Party Agreements, follow the reasonable direction of
the JSC (under advice of the Patent Working Group) as to selection of country
Patent Offices in the Territory for filing or validating applications to form a
family of related Arrowhead Patent Rights; and (b) in the case of Joint Patent
Rights, escalate any Prosecution decision on which the Parties cannot agree to
the JSC for its decision, under advice of the Patent Working Group in
consultation with the Prosecution Contacts, as to how to direct outside counsel
with respect to such Prosecution matter involving the Joint Patent Rights.

(e)Prosecution Cooperation. Each Party shall provide all reasonable assistance
requested by the other Party for Prosecuting any Arrowhead Patent Rights
consistent with the terms hereof, including with respect to the timely
completion of Prosecution papers to be filed in any Patent Office (including
draft responses to office actions), compliance with Applicable Laws, and
recording of assignments to reflect ownership consistent with the terms
hereof.  A Party Prosecuting any Patent Rights hereunder shall use reasonable
efforts to provide the other Party with copies of all material Prosecution
papers as filed in or received from any Patent Offices.  The Party Prosecuting
any Patent Rights hereunder shall, on an annual basis during the Term, provide
the other Party with a report identifying the status of any Arrowhead Patent
Rights for which it is primarily responsible for Prosecution, provided, however,
that for Joint Patent Rights, the Parties shall cooperate to jointly prepare
such status report.

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(f)Prosecution Costs for Arrowhead Patent Rights.  Each Party responsible to
Prosecute Arrowhead Patent Rights shall be solely responsible for all Patent
Costs incurred in Prosecuting such Arrowhead Patent Rights (including those
payable to any Third Parties under the Pre-Existing Licenses from Third
Parties).  Each Party shall bear fifty percent (50%) of the Patent Costs
incurred in Prosecuting any Joint Patent Rights.  Notwithstanding the foregoing,
if either Party intends to permit any particular Arrowhead Patent Right that is
pending in any Patent Office to lapse or become abandoned (including by failure
to validate an allowed multi-jurisdictional patent application, such as may be
pending in the European Patent Office, in any possible country), such Party
shall notify the other Party of such intention at least sixty (60) days in
advance, or within such other practicable time before the date upon which such
Patent Right will lapse or become abandoned, and to the extent not prohibited in
any Pre-Existing Third Party Agreements, such other Party shall thereupon have
the right, but not the obligation, to assume responsibility for the further
Prosecution of such Patent Right (and any continuing application based thereon)
and all Patent Costs associated therewith, and in such event: (a) the
transferring Party shall reasonably cooperate to promptly effect transfer of
Prosecution of such Patent Right to the other Party and assign all of its
interest in such Arrowhead Patent Right to the other Party; and (b) if such
Patent Right is transferred to Janssen, such transferred Patent Right shall no
longer be deemed to be an Arrowhead Patent Right for the purpose of determining
the duration of Royalty Term and any royalty obligation of Janssen hereunder.  

10.4Patent Enforcement.  

10.4.1Notice.

(a)Each Party shall provide prompt notice to the other Party of any apparent,
threatened, or actual infringement by a Third Party of any Arrowhead Patent
Rights, or misappropriation of any Arrowhead Know-How, of which the Party
becomes aware.  The notifying Party shall promptly furnish the other Party with
all known details or evidence of such infringement or misappropriation.

(b)Each Party shall provide prompt notice to the other Party of any Third Party
communications pertaining to any Arrowhead Patent Rights that the Party receives
pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984,
including notices pursuant to §§ 101 and 103 of such act from Persons who have
filed an abbreviated NDA (ANDA) or a paper NDA, or pursuant to similar such laws
in the Territory.

10.4.2Enforcement Actions.  For as long as Janssen has license rights to
Commercialize Licensed Products, Janssen shall have the initial right, at its
expense and in its own name (or in the name of Arrowhead as may be required
under Applicable Law), for bringing any infringement suit or other enforcement
Action on account of any Third Party infringement of any Specific Arrowhead
Patent Rights based on any alleged making, using, selling, offering for sale,
importing, or other Exploitation of any such Licensed Product in infringement of
any such Patent Rights, or misappropriation of any Arrowhead Know-How providing
any Regulatory Exclusivity Rights for any such Licensed Product, (each a
“Product Infringement”), by counsel of its own choice, and Arrowhead will
cooperate with Janssen as Janssen may reasonably request in connection with any
such Action, including by becoming a party to such action at Janssen's cost,
provided that Janssen shall reimburse Arrowhead for its Out-of-Pocket Costs
reasonably incurred

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in connection with rendering such assistance.  If Janssen declines to initiate
such an enforcement Action against any unabated Product Infringement it shall
notify Arrowhead, who shall thereafter have the right (but not the obligation)
at Arrowhead's expense and in its own name, to initiate such Action by counsel
of its choice, and Janssen shall cooperate with Arrowhead as Arrowhead may
reasonably request, including by becoming a party to such action at Arrowhead's
cost, and Arrowhead shall reimburse Janssen for its Out-of-Pocket Costs
reasonably incurred in connection with rendering such assistance. A settlement
or consent judgment or other voluntary final disposition of an Action brought by
a Party under this Section may be entered into without the consent of the other
Party, provided that such settlement, consent judgment, or other disposition
does not admit the invalidity or unenforceability of any Patent Rights owned or
Controlled by the other Party, and provided further that any rights granted to a
Third Party to continue any activity upon which such Action was based in such
settlement, consent judgment, or other disposition shall be limited to the Third
Party’s product or activity that was the subject of the Action.  Damages
recovered and any other amounts awarded in any Actions for Product Infringement
under this Section shall be allocated to the Party who brought the Action, after
reimbursement of each Party's actual expenses incurred in such Actions as
provided hereunder, provided that in the event damage amounts are recovered by
Janssen due to the Product Infringement (such as in the form of lost profits or
reasonable royalties assessed on account of the Third Party’s sales of
infringing product), Janssen shall owe Arrowhead royalties as determined in
accordance with Section 8.4 as if such damage amounts were Net Sales, after
reimbursement of costs incurred in such Action.

10.4.3Arrowhead shall have the initial right, at its expense and in its own
name, for bringing any infringement suit or other enforcement Action on account
of any Third Party infringement of any General Arrowhead Patent Rights by
counsel of its own choice, and Janssen will cooperate with Arrowhead as
Arrowhead may reasonably request in connection with any such Action, including
by becoming a party to such action at Arrowhead's cost, provided that Arrowhead
shall reimburse Janssen for its Out-of-Pocket Costs reasonably incurred in
connection with rendering such assistance.  If Arrowhead declines to initiate
such an enforcement Action against any unabated Product Infringement and Janssen
has license rights to Commercialize Licensed Products, Arrowhead shall notify
Janssen, who shall thereafter have the right (but not the obligation) at
Janssen's expense and in its own name, to initiate such Action by counsel of its
choice, and Arrowhead shall cooperate with Janssen as Janssen may reasonably
request, including by becoming a party to such action at Janssen's cost, and
Janssen shall reimburse Arrowhead for its Out-of-Pocket Costs reasonably
incurred in connection with rendering such assistance.  A settlement or consent
judgment or other voluntary final disposition of an Action brought by a Party
under this Section may be entered into without the consent of the other Party,
provided that such settlement, consent judgment, or other disposition does not
admit the invalidity or unenforceability of any Patent Rights owned or
Controlled by the other Party, and provided further that any rights granted to a
Third Party to continue any activity upon which such Action was based in such
settlement, consent judgment, or other disposition shall be limited to the Third
Party’s product or activity that was the subject of the Action.  Damages
recovered and any other amounts awarded in any Actions for Product Infringement
under this Section shall be allocated to the Party who brought the Action, after
reimbursement of each Party's actual expenses incurred in such Actions as
provided hereunder, provided that in the event damage amounts are recovered by
Arrowhead due to the Product Infringement (such as in the form of lost profits
or reasonable royalties assessed on account of the Third Party’s sales of
infringing product), Arrowhead shall deduct royalties as

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determined in accordance with Section 8.4 as if such damage amounts were Net
Sales and shall pay Janssen any remaining damage amounts, after reimbursement of
costs incurred in such Action.

10.4.4Other Enforcement Actions.  Arrowhead acknowledges that the outcome of any
infringement suit or other enforcement Action on account of any Third-Party
infringement, other than a Product Infringement, of any Arrowhead Patent Right
licensed to Janssen under Section 2.1 may detrimentally impact the scope,
validity, or enforceability of such Patent Right with respect to potential
Product Infringements. Accordingly, the Parties shall reasonably cooperate with
each other with respect to any infringement suit or other enforcement Action on
account of any Third-Party infringement of any Arrowhead Patent Right other than
the Product Infringements.  For clarity, Arrowhead will not be required to
enforce any Arrowhead Patent Right against any Third Party infringement other
than a Product Infringement, provided that if Arrowhead declines to initiate an
enforcement Action reasonably requested by Janssen to abate any Third Party’s
infringing activities (other than Product Infringement) within the scope of
Janssen’s exclusive rights under any Arrowhead Patent Rights granted hereunder,
then (to the extent permitted by any Pre-Existing Third Party Agreements
concerning such Arrowhead Patent Rights, if applicable) upon Janssen’s request
Arrowhead shall reasonably cooperate with Janssen so that Janssen may initiate
at its own expense such an enforcement Action in the same manner described under
Section 10.4.2 above (with respect to Product Infringements).

10.5Maintenance of Freedom to Operate.  The Parties shall use Commercially
Reasonable Efforts to avoid infringing any Third Party’s Patent Rights in
conducting any Development activities under the Clinical Plan, Development Plan
or, if applicable, Option Right Development Plan.  Each Party shall promptly
notify the JSC, through the Patent Representatives, in the event such Party
becomes aware of any Third Party’s Patent Rights that may pertain to any
Development activities of the Parties.

10.6Patent Term Extensions.  As long as Janssen retains Commercialization rights
for any Licensed Product, upon Janssen’s written request (which shall be by a
notice identifying the date of the applicable Regulatory Approval of a Licensed
Product and the deadline for filing a Patent Term Extension), the Prosecuting
Party shall use reasonable efforts, in each country or jurisdiction where
Regulatory Approval for any such Licensed Product has been obtained, and if the
Applicable Law of such country or jurisdiction permits application for a Patent
Term Extension, to apply, at the reasonable direction of Janssen’s designated
patent counsel, for a Patent Term Extension for a patent within the Arrowhead
Patent Rights including a Valid Claim Covering such Licensed Product, which
patent (if any) shall be selected at Janssen’s reasonable judgment after
considering the opinion of Janssen’s patent counsel regarding its eligibility
for a Patent Term Extension.  Janssen shall have the right to:  (a) identify in
any list of patents in a Drug Application the applicable Arrowhead Patent
Right(s) as Janssen reasonably believes is appropriate; (b) commence suit for
any Product Infringement of any such Arrowhead Patent Right(s) under Applicable
Law as permitted under Section 10.4.2 and 10.4.3; and (c) exercise any rights
that may be exercisable by a patent owner, including applying for a Patent Term
Extension, of any Arrowhead Patent Right(s) pertaining to an approved Licensed
Product Commercialized by Janssen hereunder.  Arrowhead agrees to cooperate with
Janssen and its Affiliate and Third Party sublicensees of Licensed Products, as
applicable, upon Janssen’s reasonable request in the exercise of the
authorizations granted under this Section, and Arrowhead shall execute such

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documents and take such additional action as Janssen may reasonably request in
connection therewith, including, if requested by Janssen, permitting Arrowhead
to be joined as a party in any suit for Product Infringement brought by Janssen
hereunder on the terms and conditions set forth in Section 10.4.2 and 10.4.3,
provided that Janssen shall reimburse Arrowhead all reasonable Out-of-Pocket
Costs incurred by Arrowhead in taking such action.

10.7 Patent Working Group.  The Parties shall establish a patent working group
comprising an equal number of up to three representatives of each Party (“Patent
Working Group”), including a patent attorney or agent designated by such Party
as its lead contact (“Patent Representative”), for the sole purposes of
alignment of activities under this Article X governing responsibilities for
Prosecuting and enforcing Arrowhead Patent Rights or any other patent matters
pertaining to the Development, Manufacture, or Commercialization of any Licensed
Products hereunder.  The Patent Working Group may hold meetings separate from,
or in connection with, the meetings of the JSC as appropriate to discuss such
patent matters.  The Patent Working Group shall advise as appropriate the JSC on
such patent matters.

10.8Product Trademarks. Arrowhead represents and warrants that, as of the
Effective Date, it does not own or otherwise control any Product Trademark
Rights relating to Primary RNAi Triggers or Licensed Constructs, including any
trademark applications or registrations or domain names.  Janssen shall have
(directly and through its Affiliates and Third Party sublicensees
Commercializing Licensed Products) the right to brand, at its discretion, the
Licensed Products using trademarks and trade names selected at its discretion
and to file for, obtain, and maintain at its discretion and cost Product
Trademark Rights in its own name.  

ARTICLE XI:  CONFIDENTIALITY AND PUBLICITY

11.1Confidential Information.  

11.1.1To facilitate any activities hereunder, a Party (a “disclosing Party”) may
provide to the other Party (a “receiving Party”), or a Party (in this case a
“receiving Party”) may otherwise through activities contemplated by this
Agreement come into possession of, Know-How Controlled, licensed, developed, or
possessed by the other Party (in this case, a “disclosing Party”), any such
items of Know-How, individually or collectively, constituting “Confidential
Information”. Information identified as being confidential that was disclosed by
one Party to the other under the Prior CDA shall be considered the disclosing
Party’s Confidential Information under this Agreement and may be used for the
purposes permitted hereunder. The receiving Party shall keep all such
Confidential Information of the disclosing Party confidential, and other than as
expressly permitted herein, shall not use or disclose, directly or indirectly,
any such Confidential Information, whether in tangible or intangible form for
any purpose, except pursuant to, and in order to carry out, the terms and
objectives of this Agreement, including the exercise of such Party’s rights and
the performance of such Party’s obligations under this Agreement. A disclosing
Party shall take reasonable measures, consistent with its ordinary practices, to
identify confidential information and material provided by it to the other Party
with a “CONFIDENTIAL” or “TRADE SECRET” marking or similar notation. A receiving
Party shall use similar efforts to that which it uses to protect its own
confidential information, but in no event less than reasonable efforts, to keep
the disclosing Party’s Confidential Information confidential.  

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11.1.2A receiving Party’s obligation of confidentiality and restriction on use
as to a disclosing Party’s Confidential Information shall last during the Term
and for a period of [**] thereafter.  

11.1.3The restrictions on a receiving Party’s disclosure and use of the
disclosing Party’s Confidential Information set forth above in this Section 11.1
shall not apply to any particular Confidential Information to the extent that
such Confidential Information:

(a)was known by the receiving Party or its Affiliate prior to disclosure by the
disclosing Party or its Affiliate hereunder (as evidenced by the receiving
Party’s or such Affiliate’s written records or other competent evidence);

(b)is or becomes part of the public domain through no fault of the receiving
Party or its Affiliates in violation of this Agreement;

(c)is disclosed without restriction to the receiving Party or its Affiliate by a
Third Party having a legal right to make such disclosure without violating any
confidentiality or non-use obligation that such Third Party has to the
disclosing Party or an Affiliate thereof; or

(d)is independently developed by personnel of the receiving Party or its
Affiliate without reliance on or access to the Confidential Information (as
evidenced by the receiving Party’s or such Affiliate’s written records or other
competent evidence).

11.1.4For the avoidance of doubt, each receiving Party may use and disclose the
other Party’s Confidential Information under appropriate confidentiality and
non-use obligations substantially equivalent to those in this Agreement, to the
receiving Party’s Affiliates and, as set forth in written subcontracts as
otherwise provided herein, to its Third Party licensees, sublicensees,
subcontractors and any other Third Parties to the extent such use and/or
disclosure is reasonably necessary to perform its obligations or to exercise the
rights granted to it, or reserved by it, under this Agreement.  Regardless of
the foregoing, the Parties agree that in case of a Third-Party licensee that is
a CRO engaged by a Party to conduct clinical studies, the obligations of
confidentiality and non-use set forth in such subcontracts may be those
customarily entered into with such Third Party licensee by such Party.  

11.2Permitted Use and Disclosures.  

11.2.1A receiving Party may disclose the disclosing Party's Confidential
Information as reasonably necessary for purposes expressly provided hereunder,
including for:  performing its obligations and Clinical Plan or Development Plan
work hereunder; Prosecuting and defending any Patent Rights Covering Licensed
Product or a component thereof; and making submissions and other disclosures to
Regulatory Authorities (and health technology assessment bodies), including in
connection with the performance of its obligations or exercise of rights granted
hereunder.  

11.2.2A receiving Party may disclose Confidential Information of the disclosing
Party to the extent required to be disclosed by the receiving Party to comply
with Applicable Laws or to defend or prosecute litigation or comply with an
order of a court or

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Government Authority, provided that the receiving Party notifies the disclosing
Party of such court order insofar as possible to enable the disclosing Party to
take reasonable actions to avoid or minimize the degree of such disclosure and
seek protective treatment.  

11.2.3Each Party acknowledges that certain state or federal laws require
pharmaceutical companies to disclose information on compensation, gifts, or
other remuneration provided to Persons who are health care professionals or
providers.  Accordingly, a Party may report as it reasonably determines is
required by Applicable Law or may voluntarily disclose or make public as it
reasonably determines is in accordance with its internal policies or guidelines
relating to open payments, Confidential Information about remuneration provided
to any such Persons under this Agreement.

11.3Confidentiality of Agreement Terms.  Each Party agrees not to, and to cause
its Affiliates not to, disclose to any Third Party any terms of this Agreement
without the prior written consent of the other Party hereto, except each Party
and its Affiliates may disclose the terms of this Agreement:  (a) to advisors
(including financial advisors, attorneys and accountants), actual or potential
acquisition partners or private investors, and others on a need to know basis,
in each case under appropriate confidentiality provisions substantially
equivalent to those in this Agreement; (b) to the extent necessary to comply
with Applicable Laws and court orders (including securities laws or regulations
and the applicable rules of any public stock exchange); or (c) as otherwise
expressly permitted hereunder.

11.4Publicity.  

11.4.1Initial Press Releases.  Each Party may issue its respective press release
announcing this Agreement (including certain terms thereof) attached in Exhibit
G hereto following the Execution Date. Upon issuance of such initial press
release, either Party shall thereafter be free to disclose, without the other
Party’s prior written consent, the existence of this Agreement, the identity of
the other Party and those terms of the Agreement which have already been
publicly disclosed in accordance herewith.

11.4.2Further Publicity. Neither Party shall originate any publicity, news
release or public announcements, written or oral, whether to the public or
press, stockholders or otherwise, relating to this Agreement, including its
existence, the subject matter to which it relates, performance under it, or any
of its terms, or to any amendment hereto, without the prior written consent of
the other Party, save only such announcements or filings that are required by
Applicable Laws (including under the rules of any relevant stock exchange or
government agency regulating trading in securities of a Party or its parent
Affiliate), to be made or that are otherwise agreed by the Parties, which
announcements shall be brief and factual. If a Party desires to make any such
public announcement not required by Applicable Law, either directly or
indirectly (such as through an Affiliate), such Party shall provide the other
Party with a draft of the proposed announcement and provide the other Party a
reasonable opportunity to comment on the nature, text, and timing of such
announcement, which shall be brief and factual.

11.5Publications.  Arrowhead acknowledges and agrees that nothing herein shall
prohibit Janssen and its Affiliates from publishing the results of a study
involving a Licensed Product, including any Confidential Information as
reasonably required for Janssen’s compliance

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with its then-current policy on the registration and reporting of results of
pharmaceutical company-sponsored clinical studies including disclosures made by
Janssen on clinicaltrials.gov, and Arrowhead further agrees to provide, and to
cause its applicable subcontractors to provide, to Janssen such assistance as
reasonably requested in connection with fulfilling the requirements of such
policy.  In the event Janssen desires to publish any results of the Ongoing
Phase 1/2 Study, Janssen shall provide Arrowhead at least [**] to review and
comment on such publication prior to submission of such publication, and Janssen
shall reasonably consider any such comments provided in a timely manner.  In the
event Arrowhead desires to publish the results of the Ongoing Phase 1/2 Study,
Arrowhead shall provide Janssen at least [**] to review and approve such
publication prior to submission of such publication. At the request of Janssen,
Arrowhead shall reasonably delay such submission to allow for filing for patent
protection of the subject matter of the publication.  

ARTICLE XII:  REPRESENTATIONS AND WARRANTIES

12.1Representations of Authority.  Arrowhead and Janssen each represents and
warrants to the other Party that, as of the Execution Date it has, and through
the Effective Date shall retain, full right, power and authority to enter into
this Agreement and to perform its respective obligations under this Agreement
and that it has the right to grant to the other the licenses and sublicenses
granted pursuant to this Agreement.

12.2Consents.  Each Party represents and warrants to the other Party that,
except as provided in Section 17.11 (regarding HSR Clearance) and except for any
approvals from Regulatory Authorities (including pricing or reimbursement
approvals, Manufacturing approvals or similar approvals necessary for the
Development, Manufacture or Commercialization of the Licensed Products therein),
all necessary consents, approvals and authorizations of all Government
Authorities and other Persons required to be obtained by it as of the Effective
Date in connection with the execution, delivery and performance of this
Agreement have been obtained by the Effective Date.  

12.3No Conflict.  Each Party represents and warrants to the other Party that,
notwithstanding anything to the contrary in this Agreement, the execution and
delivery of this Agreement by such warranting Party, the performance of such
Party’s obligations hereunder (as contemplated as of the Effective Date), and
the licenses and sublicenses to be granted by such Party pursuant to this
Agreement (a) do not conflict with or violate any requirement of Applicable Laws
existing as of the Effective Date and applicable to such Party, and (b) do not
conflict with, violate, breach or constitute a default under any contractual
obligations of such Party or any of its Affiliates existing as of the Effective
Date.  Each Party shall, and shall cause its Affiliates to, comply with all
Applicable Laws pertaining to the Development, Manufacture and Commercialization
of the Licensed Products, including applicable Drug Regulation Laws, Clinical
Investigation Laws and Health Care Laws.

12.4Enforceability.  Each Party represents and warrants to the other Party that,
as of the Effective Date, this Agreement is a legal and valid obligation binding
upon the warranting Party and is enforceable against it in accordance with its
terms.

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12.5Additional Representations and Warranties of Arrowhead.  Arrowhead
represents and warrants to Janssen that, as of the Execution Date:

12.5.1Arrowhead is not aware of any claim made against it (a) asserting the
invalidity, misuse, unregisterability, unenforceability or non-infringement of
any of the Arrowhead Patent Rights or (b) challenging Arrowhead’s ownership of,
or license rights in, any of the Arrowhead Patent Rights.

12.5.2The Arrowhead Patent Rights are (and through the Effective Date shall
remain) free and clear of any liens, charges and encumbrances (other than
non-exclusive licenses under General Arrowhead Patent Rights granted by
Arrowhead to Third Parties, which grants do not preclude Janssen from Exploiting
the full scope of the licenses granted to Janssen as contemplated
hereunder).  Neither Arrowhead nor any of its Affiliates or their respective
current or former employees, to the best of Arrowhead’s knowledge, has
misappropriated any of the Arrowhead Know-How from any Third Party, and
Arrowhead is not aware of any claim by a Third Party that such misappropriation
has occurred.

12.5.3To the best of Arrowhead's knowledge, Exhibit B-1 and any updates provided
thereto, lists all Specific Arrowhead Patent Rights owned solely or jointly by
Arrowhead as of the Execution Date (collectively, the “Owned Specific Arrowhead
Patent Rights”). To the best of Arrowhead’s knowledge, Exhibit B-2 and any
updates provided thereto, lists all General Arrowhead Patent Rights owned solely
or jointly by Arrowhead as of the Execution Date (collectively, the “Owned
General Arrowhead Patent Rights”).  To the best of Arrowhead’s knowledge,
Exhibit B-3 and any updates provided thereto, lists all Specific Arrowhead
Patent Rights acquired by Arrowhead from Third Parties, as of the Execution Date
(collectively, the “Acquired Specific Arrowhead Patent Rights”). No Third Party
has an equal, undivided interest in the Acquired Specific Arrowhead Patent
Rights. To the best of Arrowhead’s knowledge, Exhibit B-4 and any updates
provided thereto, lists all General Arrowhead Patent Rights acquired by
Arrowhead from Third Parties, as of the Execution Date (collectively, the
“Acquired General Arrowhead Patent Rights”).  No Third Party has an equal,
undivided interest in the Acquired General Arrowhead Patent Rights. To the best
of Arrowhead’s knowledge, Exhibit B-5 and any updates provided thereto, lists
all Specific and General Arrowhead Patent Rights licensed by Arrowhead from
Third Parties (collectively, the “In-Licensed Arrowhead Patent Rights”). To the
best of Arrowhead’s knowledge (based on all records that Arrowhead possessed
and/or were reasonably available to Arrowhead at any time on or before the
Execution Date), the inventorship named as of the Execution Date in each issued
Arrowhead Patent Right is correct.

12.5.4To the best of Arrowhead’s knowledge, no written claim of infringement of
the Patent Rights of any Third Party has been made nor threatened in writing,
(directly or indirectly) against Arrowhead or any of its Affiliates or, to the
best of Arrowhead’s knowledge, Third Party contractors under any Pre-Existing
Third Party Agreements, with respect to the Development, Manufacture or
Commercialization of any Licensed Construct, Primary RNAi Triggers or Licensed
Product.  

12.5.5To the best of Arrowhead’s knowledge, Arrowhead has disclosed to Janssen
all Patent Rights of Third Parties that Cover or are related to ARO-HBV.

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12.5.6There are no judgments or settlements against or owed by Arrowhead or its
Affiliates or to which Arrowhead or its Affiliate is a party or, to the best of
Arrowhead’s knowledge, pending litigation or litigation threatened in writing,
in each case relating to any Licensed Construct, Primary RNAi Triggers or
Licensed Product.

12.5.7Neither Arrowhead nor, to Arrowhead’s knowledge, any of its Third Party
licensors or assignors of any Arrowhead Intellectual Property, is or has been a
party to any agreement with the U.S. federal government or an agency thereof
pursuant to which the U.S. federal government or such agency provided funding
(such as under a grant or contract) for any research or Development work
relating to any Licensed Construct, Primary RNAi Triggers or Licensed Product.

12.5.8Arrowhead has made available to Janssen for review all material
information in Arrowhead’s possession and control as of the Execution Date that,
to the best of Arrowhead’s knowledge, pertains to any Licensed Constructs,
Primary RNAi Triggers (alone or in any combination) or Licensed Product, or the
Development, Manufacture or Commercialization thereof, including complete and
correct copies of the following (to the extent there are any) in Arrowhead’s
possession and control as of the Execution Date: (a) adverse event data and
reports; (b) clinical study reports and study data, including all de-identified
data, observations, analyses, conclusions, summaries, and reports resulting from
the clinical study of any Licensed Constructs or Primary RNAi Triggers initiated
before the Execution Date; and (c) Regulatory Authority inspection reports,
notices of adverse findings, warning letters, Regulatory Filings and letters and
other correspondence with any Regulatory Authorities relating to any Licensed
Construct or Primary RNAi Triggers (alone or in any combination) or Licensed
Product.

12.5.9To Arrowhead’s knowledge, all of the studies, tests and pre-clinical and
clinical studies of any Licensed Construct or Primary RNAi Triggers (alone or in
any combination) or Licensed Product conducted prior to, or being conducted on,
the Execution Date have been and on the Execution Date are being conducted in
material compliance with Applicable Laws.   

12.6Further Representations and Warranties of Arrowhead Regarding Pre-Existing
Third Party Agreements. Arrowhead represents and warrants to Janssen that:

12.6.1Arrowhead has provided Janssen, prior to the Execution Date, with
complete, correct and true, reasonably redacted copies of all Pre-Existing
Third-Party Agreements (including any amendments thereof) set forth in Exhibit
E.

12.6.2As of the Execution Date, Exhibit E lists all of the Pre-Existing
Third-Party Agreements, including any amendments thereto.  In particular,
Section 1 of Exhibit E is a list of all Pre-Existing Licenses to Third Parties,
Section 2 of Exhibit E is a list of all Pre-Existing Licenses from Third
Parties, Section 3 of Exhibit E is a list of all Pre-Existing Acquired Rights
from Third Parties, and Section 4 of Exhibit E is a list of all Additional
Pre-Existing Third Party Agreements.  

12.6.3To the best of Arrowhead’s knowledge, none of the terms of any
Pre-Existing Third Party Agreement would have a material adverse effect on the
Development or Commercialization of any Licensed Product or any other product
containing a Primary RNAi

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Trigger as contemplated hereunder. All Pre-Existing Third Party Agreements
listed in Exhibit E remain in full force and effect as of the Execution Date,
except where noted otherwise in Exhibit E, and to its knowledge, Arrowhead and
each Third-Party counterparty has been, and is, in compliance in all material
respects with the terms thereof.  Arrowhead covenants that it shall use
Commercially Reasonable Efforts not to take or omit to take any actions that
would constitute a breach of any Pre-Existing Third Party Agreement through the
Effective Date and during the Term hereof, and Arrowhead agrees not to enter
into any amendment to any Pre-Existing Third Party Agreement through the
Effective Date or during the Term hereof, in each case which breach or amendment
would have a material adverse effect on the Development or Commercialization of
any Licensed Product as contemplated hereunder.  During the Term Arrowhead shall
provide Janssen with prompt notice of the occurrence of any such breach (or
receipt of notice of an allegation of any such breach).

12.6.4The licenses and rights granted by Arrowhead to Janssen under Sections
2.1.1 and 2.1.2 of this Agreement are not subject to the terms of any
Pre-Existing Third Party Agreements.  The terms of such agreements listed in
Exhibit E do not preclude or prevent Janssen from Exploiting the full scope of
the licenses and rights granted to Janssen under Sections 2.1.1 and 2.1.2 of
this Agreement.

12.6.5To the best of Arrowhead’s knowledge, Arrowhead has not entered into, and
Arrowhead agrees that, through the Effective Date and during the Term, it shall
not enter into, any agreements with any Third Party by virtue of which any
royalty or milestone payment or other payment would be owed by Janssen to such
Third Party as a result of Commercialization of any Licensed Product by or on
behalf of Janssen as contemplated hereunder.

12.6.6Arrowhead is under no obligation to any Third Party concerning a Licensed
Construct or a Licensed Product including ARO-HBV and, to the extent such
obligation ever existed, conditions triggering such obligation have not been met
or have been fully satisfied, as the case may be, to enable Arrowhead to
exclusively license ARO-HBV to Janssen.

12.6.7ARO-HBV was not developed using Patent Rights or Know-How of a Third Party
[**].

12.6.8Arrowhead has not granted any licenses or rights to Third Parties under
any Arrowhead Patent Rights or Arrowhead Know-How (a) that conflict with any of
the licenses or rights granted by Arrowhead to Janssen under Sections 2.1.1 and
2.1.2 of this Agreement, or (b) to offer for sale, sell, or otherwise
Commercialize any Licensed Constructs, Primary RNAi Triggers or Licensed
Products in any field, which license has not expired or been terminated prior to
the Execution Date.

12.7No Warranties. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT,
NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND,
EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY, AND EACH PARTY HEREBY DISCLAIMS
ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE.  EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE
DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION OF LICENSED

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PRODUCTS PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL OR THAT ANY PARTICULAR
SALES LEVEL WITH RESPECT TO LICENSED PRODUCTS WILL BE ACHIEVED.

12.8No Debarment.  Each Party represents and warrants that, as of the Effective
Date, neither it nor any of its Affiliates has been debarred or is subject to
debarment, and neither Party nor any of its Affiliates will use in any capacity,
in connection with the Development, Manufacture or Commercialization of any
products, any person who has been debarred pursuant to Section 306 of the United
States Federal Food, Drug, and Cosmetic Act, or who is the subject of a
conviction described in such section.  Each Party agrees to inform the other
Party in writing immediately if it or any person who is performing activities
hereunder is debarred or is the subject of a conviction described in Section 306
of the United States Federal Food, Drug, and Cosmetic Act, or if any action,
suit, claim, investigation or legal or administrative proceeding is pending or,
to the best of such Party’s knowledge, is threatened, relating to the debarment
or conviction of such Party or any person used in any capacity by such Party or
any of its Affiliates in connection with the Development, Manufacture or
Commercialization of any Licensed Construct or Licensed Products.

12.9Compliance with Anti-Corruption Applicable Laws.  Each Party shall, and
shall cause each of its Affiliates and Third Party subcontractors and
sublicensees conducting activities hereunder to, comply with Anti-Corruption
Laws.

ARTICLE XIII:  INDEMNIFICATION AND INSURANCE

13.1Indemnification Obligation. Each Party (the “Indemnifying Party”) shall
indemnify and hold harmless the other Party and its Indemnified Persons
(collectively, the “Indemnified Party”) from and against any and all Losses
resulting from any Action brought by a Third Party against any Indemnified
Party, to the extent such Losses arise from or are based on a claim (“Claim”)
of:  (a) the negligence or wilful misconduct of the Indemnifying Party or any of
its Indemnified Persons or Third Party sublicensees or subcontractors, in each
case in connection with the exercise of such Indemnifying Party’s rights, or
performance of such Party’s obligations, under this Agreement; (b) the
Indemnifying Party’s or any of its Indemnified Persons’ or Third Party
sublicensees’ or subcontractors’ failure to comply with or perform one or more
of such Party’s or its Indemnified Persons’, as applicable, obligations in this
Agreement, or the breach or inaccuracy of one or more of such Indemnifying
Party’s or its Indemnified Persons’, as applicable, warranties in this
Agreement; (c) the violation of Applicable Law by the Indemnifying Party or any
of its Indemnified Persons or Third Party sublicensees or subcontractors in
connection with the exercise of such Indemnifying Party’s rights, or performance
of such Party’s obligations, under this Agreement; (d) the performance of any
Development or Manufacturing activities by the Indemnifying Party or any of its
Indemnified Persons or Third Party sublicensees or subcontractors hereunder; or
(e) in the case of Janssen as the Indemnifying Party, its Commercialization,
sales, and distribution of any Licensed Products by any of its Indemnified
Persons or any of its Third Party sublicensees hereunder; except in each case
(with respect to any such Claims) to the extent such Losses arise directly from
the negligence, illegal conduct or wilful misconduct of the Indemnified Party or
any of its Indemnified Persons, Third Party subcontractors or Third Party
sublicensees.

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13.2Claims for Indemnification.  

13.2.1Notice.  In the case of any Action for which an Indemnifying Party may be
liable to an Indemnified Person under Section 13.1, the Indemnified Party shall
as soon as practicable notify the Indemnifying Party in writing of such Action
(a “Notice of Claim”).  Failure or delay in notifying the Indemnifying Party
shall not relieve the Indemnifying Party of any liability it may have to the
Indemnified Party, except and only to the extent that such failure or delay
causes actual harm to the Indemnifying Party with respect to such Action.  The
Notice of Claim shall specify in reasonable detail the Action with respect to
which such Indemnified Party or any of its Indemnified Persons intends to base a
request for indemnification or reimbursement under Section 13.1.  Failure to
provide such reasonable detail will not relieve the Indemnifying Party of any
liability it may have to the Indemnified Party, except and only to the extent
that such failure causes actual harm to the Indemnifying Party with respect to
such Action. The Indemnified Party shall enclose with the Notice of Claim a copy
of all papers served with respect to such Action, if any.  The Indemnified Party
shall assume the defense, settlement or other disposal of such Action, unless it
provides notice within thirty (30) days from the date on which the Indemnifying
Party received the Notice of Claim that it waives it right to assume the defense
of such Action and any litigation resulting therefrom with counsel of its
choice.  Provided that the Indemnified Party has waived its right to assume the
defense of an Action pursuant to this Section, then, subject to Section 13.2.3,
the Indemnifying Party shall have the obligation to defend, settle and otherwise
dispose of such Action.  

13.2.2Cooperation.  The Parties shall act in good faith in responding to,
defending against, settling or otherwise dealing with such Action pursuant to
the terms hereof; provided that (a) an Indemnified Party shall not be obligated
to enter into or consent to the entry of any judgment or settlement in relation
to any Action as provided in Section 13.2.3, and (b) in any event, an
Indemnifying Party shall not be relieved of its obligations under this Section
13.2.2 as a result of any failure of the Indemnified Party to cooperate as
provided in this Section 13.2.2, except to the extent that the Indemnifying
Party is actually prejudiced by such breach.  The Parties shall also cooperate
in any such defense by giving each other reasonable access to all non-privileged
information relevant thereto to the extent permitted by Applicable Law.  

13.2.3Control by the Indemnifying Party.  If the Indemnifying Party assumes
control of an Action in accordance with Section 13.2.1, (a) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Action, but the Indemnifying Party shall
continue to control the investigation, defense and settlement thereof, and (b)
the Indemnifying Party will not, without the prior written consent of the
Indemnified Party, which shall not be unreasonably withheld, conditioned or
delayed, consent to the entry of any judgment or enter into any settlement with
respect to the Action to the extent such judgment or settlement (i) provides for
equitable relief (or any other relief other than solely for money damages)
against the Indemnified Party or any of its Indemnified Persons, or liability or
obligation that cannot be assumed and performed by the Indemnifying Party in
full (without any recourse to the Indemnified Party and its Indemnified
Persons), (ii) provides for any monetary relief that will not be fully
discharged by the Indemnifying Party (without any recourse to the Indemnified
Party and its Indemnified Persons) concurrently with the effectiveness of such
judgment or settlement, (iii) does not effect a full and unconditional release
of the Indemnified Party and its Indemnified

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Persons with respect to all claims in such Action (or the portion thereof to
which the judgment or settlement relates), or (iv) that contains an admission of
wrongdoing on the part of the Indemnified Party or its Indemnified Persons.  

13.2.4Interim Control.  Unless and until the Indemnifying Party (if any) is
determined with respect to any particular Action, the Party subject to such
Action shall have the right to defend and control such Action, but shall not
have the right to consent to the entry of any judgment or enter into any
settlement with respect to the Action for which it would be seeking
indemnification or reimbursement hereunder without the prior written consent of
the other Party (which consent shall not be unreasonably withheld, conditioned
or delayed).

13.2.5Unauthorized Settlements.  The Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to any Action
for which it is seeking indemnification hereunder without the prior written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld, conditioned or delayed), and such Indemnifying Party shall not be
obligated to indemnify or reimburse the Indemnified Party hereunder for any
settlement entered into, or any judgment that was consented to, by the
Indemnified Party without the Indemnifying Party’s prior written consent.

13.2.6Allocation. If, in any Action under this Article XIII, the Indemnified
Party incurs an amount consisting of both Losses for which the Indemnifying
Party is obliged to indemnify the Indemnified Party and Losses not covered by
such indemnification, then, to the extent not otherwise determined in a court of
competent jurisdiction, the Parties agree to act in good faith and use their
reasonable endeavours to determine a fair and reasonable allocation of such
Losses.  The allocation between the Parties of any such Losses, if not otherwise
determined in a court of competent jurisdiction, shall, if the Parties do not
reach agreement in writing on such allocation, be determined by arbitration
pursuant to Section 16.3.  The Parties or the arbitrator, as the case may be,
shall make such allocation based on the indemnification and reimbursement
principles set forth in this Article XIII. Notwithstanding the foregoing, the
Parties shall not be entitled to refer any Dispute with respect to Losses
arising under an Action pursuant to this Section 13.2.6 to arbitration to the
extent that the liability of either Party for such Losses is being contested in
such Action (or any other Action that would be binding with respect to such
first Action).

13.3Mitigation.  The Indemnified Party shall, and shall procure that its
Indemnified Persons shall, in each instance, take reasonable steps to mitigate
any Losses they suffer arising in connection with any Action in respect of which
they seek an indemnity from the other Party under this Agreement.

13.4Conduct of Product Liability Claims. The provisions of this Section 13.4
shall govern with respect to any Third-Party Product Liability Action for which
a Party seeks indemnification pursuant to Section 13.1, and the provisions of
this Section 13.4 shall control in the event of any conflict between such
provisions and those of Section 13.2 above.

13.4.1Product Liability Actions.  A Party becoming aware of any Third Party
asserting or filing any product liability Claim or Action based thereon relating
to the human use (whether in clinical studies or through Commercialization by
Janssen hereunder) of a Licensed Product with alleged defects (whether design
defects, manufacturing defects, or defects in sales or

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promoting) (“Third-Party Product Liability Action”) against a Party, shall
promptly notify the other Party.  In the event a Third-Party Product Liability
Action is initiated against a single Party for which it seeks or shall seek
indemnification from the other as an Indemnifying Party under Section 13.1, the
Indemnifying Party shall have control over such Action. In such case, the
Indemnifying Party shall have the right to control the defense of such Action,
but shall notify and keep the Indemnified Party apprised in writing of such
Action and shall consider and take into account the Indemnified Party’s
reasonable interests and requests and suggestions regarding the defense of such
Action.  In the event that a Third-Party Product Liability Action is initiated
against both Parties, Janssen shall have control over the response to such
Third-Party Product Liability Action.

13.4.2Cooperation.  The non-controlling Party of a Third-Party Product Liability
Action shall reasonably cooperate with the controlling Party in the preparation
and formulation of a defense to such Third-Party Product Liability Action, and
in taking other steps reasonably necessary to respond to such Third-Party
Product Liability Action.  The controlling Party shall have the sole and
exclusive right to select its counsel for the defense of such Third-Party
Product Liability Action.  If required under Applicable Law in order for the
controlling Party to maintain a suit in response to such Third-Party Product
Liability Action, the non-controlling Party shall join as a party to the
suit.  The controlling Party shall assume and pay all of its own Out-of-Pocket
Costs incurred in connection with any litigation or proceedings related to such
Third-Party Product Liability Action, including the fees and expenses of the
counsel selected by it, as well as the reasonable Out-of-Pocket Costs of the
non-controlling Party associated with providing assistance requested by the
controlling Party or joining the suit if requested by the controlling Party or
required to maintain the suit.  Subject to the foregoing, (a) each Party shall
be responsible for its legal expenses incurred in such Action, and (b) the
non-controlling Party shall have the right, in its discretion and at its
expense, to participate and be represented in any such suit by legal counsel
selected by the non-controlling Party and reasonably acceptable to the
controlling Party. The controlling Party shall not settle or compromise any
Third-Party Product Liability Action without the consent of the other Party,
which consent shall not be unreasonably withheld.

13.5Insurance.  

13.5.1Each Party shall procure and maintain in full force and effect insurance
(or self-insure sufficiently to provide materially the same level and type of
protection) adequate to cover its obligations and liabilities hereunder during
the Term and for a period of [**] thereafter, consistent with normal business
practices of companies similarly situated.  It is understood that such insurance
shall not be construed to create a limit of either Party’s liability with
respect to its indemnification obligations under this Agreement.    

13.5.2Prior to the initiation of any clinical study or related Development
activities under this Agreement, the Party responsible for the applicable
activity shall secure and maintain in full force and effect clinical study
insurance (including any self-insured arrangements) in compliance with
Applicable Law in those territories where clinical studies are conducted.  

13.5.3The Parties have the right to elect to self-insure all or part of the
limits described above. Upon written request, each Party shall provide the other
with a certificate of insurance evidencing the required coverage
hereunder.  Notwithstanding the foregoing, either

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Party’s failure to maintain adequate insurance shall not relieve that Party of
its obligations set forth in this Agreement.

13.6Limitation of Liability.  NOTWITHSTANDING THE PROVISIONS OF SECTION 16.3.12,
NOTHING HEREIN IS INTENDED TO OR SHALL LIMIT OR RESTRICT THE INDEMNIFICATION
RIGHTS OR OBLIGATIONS OF ANY PARTY UNDER THIS ARTICLE XIII.

ARTICLE XIV: SCOPE OF RELATIONSHIP  

14.1Until the longer of the [**] anniversary of the Effective Date or the [**]
anniversary of the end of the Option Right Development Term, Arrowhead and its
Affiliates shall not conduct or participate in, or advise, assist or enable any
Third Party to conduct or participate in, or fund any work with respect to (a)
any treatment of any disease, condition or symptom associated with or induced by
HBV infection or HDV infection in humans or animals; (b) prevention of HBV
infection or HDV infection in humans or animals; or (c) the diagnosis of HBV
infection or HDV infection in humans or animals; or grant any Third Party any
license or other rights to any such treatment, prevention or diagnosis.

14.2Until the longer of the [**] anniversary of the Effective Date or the [**]
anniversary of the end of the Option Right Development Term, Janssen and its
Affiliates shall not (a) conduct or participate in, or advise, assist or enable
any Third Party to conduct or participate in, the Development or
Commercialization of any double-stranded RNAi oligonucleotide intended to
inhibit the expression of HBV other than the Licensed Product(s), or (b) Develop
or Commercialize any Licensed Product outside the Indication without Arrowhead’s
explicit written consent, which consent shall not be unreasonably withheld by
Arrowhead.

14.3During the Term, neither Party or its Affiliates shall conduct or
participate in, or advise, assist or enable any Third Party to conduct or
participate in, or fund any work with respect to any Primary RNAi Trigger for
any purpose other than the Exploitation of Licensed Constructs or Licensed
Products in accordance with the terms of this Agreement.  

14.4Except for the restrictions expressly set forth in this Agreement, nothing
in this Agreement shall be construed to restrict the right of either Party or
any of its Affiliates to engage in any business activity, investment or other
opportunity anywhere in the world, including the right of Janssen or Arrowhead
or any of their Affiliates to Develop and Commercialize any product that
directly or indirectly competes with a Licensed Product in any field.

ARTICLE XV: TERM AND TERMINATION

15.1Agreement Term.  Unless terminated earlier in accordance with this Article
XV, the term of this Agreement (the “Term”) shall commence on the Effective Date
and shall expire upon the expiration of the Royalty Term for any Licensed
Product sold hereunder.   

15.2Early Termination for Breach.

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15.2.1Notice of Default and Cure Period.  Upon any material breach of this
Agreement by a Party (the “Breaching Party”), the other Party (the
“Non-Breaching Party”) shall have the right to give the Breaching Party notice
specifying the nature of such material breach.  If the breach of this Agreement
is curable, then the Breaching Party shall have a period of [**] from the date
of receipt of the notice (the “Cure Period”) to cure such material breach in a
manner that effectively remedies the harm to the Non-Breaching Party caused by
the material breach.  Notwithstanding the foregoing, if such breach, by its
nature, is curable, but is not reasonably curable within the Cure Period, then
provided that such breach is not of a payment obligation hereunder, such Cure
Period shall be extended if the Breaching Party provides a written plan for
curing such breach to the Non-Breaching Party and uses Commercially Reasonable
Efforts to cure such breach in accordance with such written plan, provided that
no such extension shall exceed [**] (for an extended Cure Period totaling [**])
without the consent of the Non-Breaching Party. For clarity, this provision
shall not restrict in any way either Party’s right to notify the other Party of
any other breach or to demand the cure of any other breach.

15.2.2Termination Right for Default.  The Non-Breaching Party shall have the
right to terminate this Agreement with immediate effect by written notice to the
Breaching Party:  (a) in the event the Breaching Party does not notify the
Non-Breaching Party within [**] of its notice under Section 15.2.1 that the
Breaching Party disputes that it has committed a material breach or that it
intends to cure such breach in accordance with Section 15.2.1; (b) in the event
that the Breaching Party has not cured the material breach within the Cure
Period; and (c) in the event that the material breach is not
curable.  Notwithstanding the foregoing, if a Party in good faith raises a
Dispute regarding any such termination (including with respect to the existence
or materiality of a breach or the sufficiency of a cure) pursuant to the Dispute
resolution procedures under Sections 16.1 to 16.3, such termination shall be
effective only upon a conclusion of the Dispute resolution procedures in
Sections 16.1 to 16.3 resulting in a determination that there has been an
uncured material breach (or, if earlier, abandonment of the Dispute by the
Breaching Party).  For the avoidance of doubt, the exercise of a termination
right under this Section 15.2 by a Non-Breaching Party shall be without
prejudice to its right to seek damages or any other remedy on account of the
Breaching Party’s material breach that may be available at law or in equity,
subject to the terms hereof.

15.3Early Termination for Bankruptcy.  

15.3.1In the event of the Bankruptcy of a Party (or its successor in interest in
the event this Agreement is assigned as permitted hereunder), the other Party
may terminate this Agreement with immediate effect by written notice to the
bankrupt Party.  

15.3.2All licenses and other rights granted pursuant to this Agreement by one
Party to the other are, and will otherwise be deemed to be, for purposes of
Section 365(n) of the U.S. Bankruptcy Code (or comparable provisions of laws of
other jurisdictions), licenses of right to "intellectual property" as defined
under Section 101 of the U.S. Bankruptcy Code (or comparable provisions of
Applicable Laws of other jurisdictions).  Notwithstanding anything to the
contrary herein, the Parties agree that, in lieu of a Party who is licensed (or
sublicensed) any rights from a Party in Bankruptcy terminating this Agreement in
its entirety as provided in Section 15.3.1 above:  (a) the Party who is a
licensee of such rights from the other Party under this Agreement shall, upon
such other Party’s Bankruptcy, retain and may fully exercise all of the

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rights and elections under the U.S. Bankruptcy Code (or comparable Applicable
Laws of other jurisdictions); and (b) in the event of the commencement of a
bankruptcy proceeding by or against a Party under the U.S. Bankruptcy Code (or
comparable provisions of Applicable Laws of other jurisdictions), the Party that
is not a party to such Bankruptcy proceeding shall be entitled to a complete
duplicate of (or complete access to, as appropriate) any such intellectual
property and all embodiments of such intellectual property to which it is
granted license or other rights hereunder, and the same, if not already in its
possession, will be promptly delivered to it (i) upon any such commencement of a
bankruptcy proceeding upon its written request therefor, unless the Party
subject to such proceeding elects to continue to perform all of its obligations
under this Agreement, or (ii) if not delivered under subsection (i) above,
following the rejection of this Agreement by or on behalf of the Party subject
to such proceeding upon written request therefor by the non-subject Party.  All
rights, powers and remedies granted hereunder to a Party as a licensee of any
intellectual property rights as provided in this Section are in addition to and
not in substitution for any and all other rights, powers and remedies now or
hereafter existing at law or in equity, in the event of the commencement of a
bankruptcy proceeding by or against the granting Party under Applicable Law, and
the licensee Party, in addition to the rights, powers and remedies expressly
provided herein, shall be entitled to exercise all other such rights and powers
and resort to all other such remedies as may now or hereafter exist at law or in
equity in such event.

15.4Termination by Janssen for Safety Concern.  Janssen may terminate this
Agreement with immediate effect by written notice to Arrowhead in the event that
Janssen determines, in its good-faith judgment, that continued Development or
Commercialization of a Licensed Product would be unethical or unreasonable due
to a safety-related reason, such as if Janssen believes, based on its good-faith
assessment of relevant data, that continuation of human use of a Licensed
Product has resulted in, or has a significant risk of resulting in, the
occurrence of a safety or tolerability finding that would raise material
concerns regarding the clinical benefit of the Licensed Product for its target
population (for example, harm significantly in excess of an acceptable
side-effect profile).  Such termination shall be effective immediately upon
Janssen’s written notice to Arrowhead.

15.5Discretionary Termination by Janssen.  Janssen shall have the right to
terminate this Agreement for convenience at any time by written notice, which
termination shall be effective (a) [**] from the date of such notice in the
event that notice is given prior to the First Commercial Sale of any Licensed
Product; and (b) [**] from the date of such notice in the event that notice is
given following the First Commercial Sale of any Licensed Product.  

15.6Consequences of Early Termination.   Upon the effective date of early
termination of this Agreement, the following shall apply:  

15.6.1Licenses.

(a)With the exception of the licenses granted in Section 2.1.3, the licenses and
other rights granted by one Party to the other in Article II shall terminate and
revert to the granting Party, except to the extent necessary to enable the
grantee Party (or its Affiliates) to perform any obligations or exercise any
rights that survive such termination of this Agreement as may be expressly
provided in this Agreement or in any written agreement of the Parties;

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(b)In the event of an early termination of this Agreement by Janssen pursuant to
Sections 15.4 or 15.5, Janssen shall, subject to Section 2.3, grant Arrowhead,
upon Arrowhead’s request, a worldwide, royalty-free, perpetual, exclusive (even
as to Janssen, except to the extent Janssen expressly retains rights under this
Agreement) license under Patent Rights and Know-How Controlled by Janssen to
Develop or Commercialize Licensed Products which are actively in clinical
Development or Commercialized at the time of termination. Such Patent Rights and
Know-How shall be limited to those reasonably necessary or useful to continue
the Development or Commercialization of such Licensed Products. In the event of
such license grant, Janssen and its Affiliates shall retain a non-exclusive
license to such licensed rights for research purposes.     

15.6.2Patent Matters. Arrowhead shall assume from Janssen the sole
responsibility for the Prosecution, defense and enforcement of any Arrowhead
Patent Rights for which Janssen was the Party responsible for Prosecution. Upon
Arrowhead’s request, Janssen shall reasonably cooperate in transferring to
Arrowhead responsibility for the Prosecution, defense and enforcement of such
Arrowhead Patent Rights, and shall provide Arrowhead with copies, at Arrowhead’s
expense, of any requested documents in its possession relating thereto.

15.6.3Transfer of Know-How. In the event of an early termination of this
Agreement by Janssen pursuant to Sections 15.4 or 15.5, Janssen shall provide to
Arrowhead all Know-How generated by Janssen under this Agreement that is
reasonably necessary or useful to continue the Development or Commercialization
of Licensed Products which are actively in clinical Development or
Commercialized at the time of termination, except that Janssen shall not provide
to Arrowhead Know-How in relation to (a) an Active Ingredient of any Combination
Product, whether in Development or Commercialized, where the Active Ingredient
is not a Licensed Construct, (b) a product of such Combination Product that is
not a Licensed Product, or (c) an Active Ingredient, other than a Licensed
Construct, that is otherwise used in combination with a Licensed Product in
pre-clinical research, clinical studies or in accordance with an approved
product label.

15.6.3Remaining Inventory.   Janssen (and its Affiliates and sublicensees), with
Arrowhead’s consent, which will not be unreasonably withheld, shall have the
right to sell or have sold any remaining inventory of Licensed Products
following the effective date of termination of the Agreement.

15.6.4Clinical Studies. Where any clinical study of any Licensed Product is
ongoing upon termination, each Party shall continue, at its cost, the clinical
study for which it, its Affiliate, (sub)contractor or sublicensee is the
regulatory sponsor, solely as deemed necessary by such Party based on reasonable
medical judgment to protect the safety, health or welfare of subjects
participating in the relevant clinical study, until such point as the study is
completed or, if earlier, such Party determines that it is ethical to terminate
such study or otherwise cease supporting it.  

15.6.5Orderly Wind-Down. Upon early termination, the Parties shall coordinate in
good faith to wind down Development, Manufacturing, and Commercialization
activities under this Agreement relating to any Licensed Products ongoing at the
effective date of such termination, including the withdrawal of any Licensed
Products from the market, the withdrawal of any Regulatory Approvals pertaining
to any Licensed Products and a final reconciliation of all

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payments due under this Agreement.  For clarity, following any early termination
neither Party may submit or resubmit any Drug Application for a Licensed
Product, following such termination, except if, and to the extent, this
Agreement or any other written agreement between the Parties expressly provides
that a Party may otherwise do so.  

15.6.6No Waiver for Termination Due to Breach. For the avoidance of doubt, an
aggrieved Party that terminates this Agreement for material breach may also seek
damages and other relief for such material breach and (for the avoidance of
doubt) for any other breach of this Agreement.

15.7Return of Confidential Information.   Upon expiration or early termination
of this Agreement, a receiving Party shall, at the other Party's request (and to
the extent and when permitted by Applicable Law), destroy, redact, or return,
and cause its Affiliates and Third Party subcontractors and sublicensees to
destroy, redact, or return all records to the extent containing, and all
materials constituting, the other Party's Confidential Information in its
possession and control, and, upon request, provide written certification of such
destruction, redaction, or return, except that:  (a) the receiving Party may
retain in strict confidence one copy of the other Party's Confidential
Information for the receiving Party’s legal archival purposes; and (b) the
foregoing requirement to destroy, redact, or return the other Party’s
Confidential Information shall not apply with respect to any such Confidential
Information of the disclosing Party to the extent that this Agreement or any
other written agreement between the Parties (or their respective Affiliates)
expressly provides that a Party retains the right to use such Confidential
Information (such as by virtue of being a joint owner, or by survival of
Janssen’s license rights on a paid-up basis following expiration (without early
termination) of this Agreement).  

15.8Survival.  In the event of expiration or termination of this Agreement for
any reason, the provisions of Articles I, IX (with respect to accrued payment
obligations), XI, XII, XIII, XV, XVI, and XVII and Sections 2.1.3, 2.3, 2.4, 5.9
(provided that this Section shall survive only in the event of expiration of
this Agreement), 5.11, 10.2, 10.3.3(c) and 14.4 shall survive, as well as any
other provisions that, as apparent from their nature and context are intended to
continue or to remain (such as for interpretation purposes).  For clarity,
Article XIV shall not survive the termination of this Agreement. Further for the
avoidance of doubt, upon expiration or termination of this Agreement for any
reason, neither Party shall be released from any obligation that accrued prior
to the end of the Term hereof.  Accordingly, termination or expiration of the
Agreement, in whole or in part (including relinquishment of any license right
granted hereunder) for any reason, shall be without prejudice to any obligations
that accrued prior to such termination or expiration, including any payments due
hereunder (regardless of when payable) and any and all damages arising from any
breach.  In addition, any payments accrued prior to such termination or
expiration shall become payable upon the effective date of such termination or
expiration or at such earlier time as otherwise provided hereunder.

ARTICLE XVI:  DISPUTE RESOLUTION

16.1Referral to Executive Officers.  In the event of a Dispute, except for a
Patent Controversy, either Party may refer the matter to the Parties’ Executive
Officers for attempted resolution.  The Executive Officers, in the presence of
their legal advisors, shall attempt in good faith to resolve any Dispute through
negotiations.  If the Executive Officers are unable to resolve

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a Dispute referred to them within ten (10) Business Days (or such other period
as may be agreed by the Parties in writing) after such referral, and subject to
any other provisions of this Agreement, such Dispute shall be resolved as
provided below in this Article.

16.2Mediation.  If the Executive Officers are unable to resolve a Dispute
referred to them pursuant to Section 16.1 within ten (10) Business Days (or such
other period as may be agreed by the Parties in writing) after such referral,
the Parties shall first attempt in good faith to resolve any Dispute by
confidential mediation in accordance with the then-current Mediation Procedure
of the International Institute for Conflict Prevention and Resolution ("CPR
Mediation Procedure") (www.cpradr.org) before initiating arbitration.  The CPR
Mediation Procedure shall control, except where it conflicts with these
provisions, in which case these provisions control.  The mediator shall be
chosen pursuant to CPR Mediation Procedure.  The mediation shall be held in New
York, New York.  Either Party may initiate mediation by written notice to the
other Party.  The Parties agree to select a mediator within twenty (20) days of
the notice and the mediation will begin promptly after the selection.  The
mediation will continue until the mediator, or either Party, declares in
writing, no sooner than after the conclusion of one full day of a substantive
mediation conference attended on behalf of each Party by a senior business
person with authority to resolve the Dispute, that the Dispute cannot be
resolved by mediation.  In no event, however, shall mediation continue more than
sixty (60) days from the initial notice by a Party to initiate meditation unless
the Parties agree in writing to extend that period.  Any period of limitations
that would otherwise expire between the initiation of mediation and its
conclusion shall be extended until twenty (20) days after the conclusion of the
mediation.  No discussions between the Parties attempting to resolve a Dispute
under Section 16.1 or this Section 16.2 shall be admissible in arbitration of
the Dispute.

16.3Arbitration.  If the Parties fail to reach resolution pursuant to mediation
in accordance with Section 16.2 above, and a Party desires to pursue resolution
of a Dispute, then 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.  

16.3.1The arbitration will be held in New York, New York. All aspects of the
arbitration shall be treated as confidential.

16.3.2The 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’ 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.  

16.3.3The 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.  If, however, the aggregate award sought by the Parties is less
than $[**] and equitable relief is not sought, a single arbitrator shall be
chosen in accordance with the CPR Rules.

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16.3.4Candidates for the arbitrator position(s) may be interviewed by
representatives of the Parties in advance of their selection, provided that all
Parties are represented.

16.3.5The 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 sixty (60)
days of the conclusion of the hearing, or of any post hearing briefing, which
briefing will be completed by both sides within forty-five (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.  

16.3.6The Parties shall have the right to conduct and enforce pre-hearing
discovery in accordance with the then current Federal Rules of Civil Procedure,
unless otherwise agreed by the Parties in writing. All discovery conducted
pursuant to the arbitration proceedings will be subject to the then current
Federal Rules of Civil Procedure, unless otherwise agreed by the Parties in
writing.

16.3.7The hearing will be concluded in ten (10) 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.  

16.3.8The 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."

16.3.9The 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.

16.3.10The 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.

16.3.11Each 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.

16.3.12EACH PARTY HERETO WAIVES: ITS RIGHT TO TRIAL BY JURY OF ANY ISSUE
UNDERLYING A DISPUTE WITHIN THE SCOPE OF THE SECTIONS 16.2 or 16.3; AND, WITH
THE EXCEPTION OF RELIEF MANDATED BY STATUTE, ANY CLAIM FOR PUNITIVE, EXEMPLARY,
MULTIPLIED, INDIRECT, OR CONSEQUENTIAL DAMAGES OR ATTORNEY FEES.

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16.4Interim or Provisional Relief.  Nothing in this Agreement, including Section
16.5, shall preclude either Party from seeking interim or provisional relief in
any court of competent jurisdiction, including a temporary restraining order,
preliminary injunction or other interim equitable relief concerning a Dispute
with the other Party, either prior to or during the dispute resolution
procedures set forth in this Article XVI, to protect the interests of such
Party.

16.5Consent to Jurisdiction.  Each Party, for the purpose of enforcing an award
under Section 16.3 or for seeking interim or provisional relief as contemplated
in Section 16.4 with respect to any Disputed breach of this Agreement, agrees
not to raise any objection at any time to the laying or maintaining of the venue
of any action, suit or proceeding for such purpose in any state or federal Court
sitting in New York, irrevocably waives any claim that such action, suit or
other proceeding has been brought in an inconvenient forum, and further
irrevocably waives the right to object, with respect to such action, suit or
other proceeding, that such Court does not have any jurisdiction over such
Party.  Each Party further agrees that service of any process, summons, notice
or document by registered mail to such Party’s notice address provided for in
this Agreement shall be effective service of process for any action, suit or
proceeding in the Court with respect to any matters to which it has submitted to
jurisdiction in this Section 16.5.

16.6No Claims against Employees.  Each Party undertakes to make no claim and
bring no proceedings in connection with this Agreement or its subject matter
against any director, officer, employee or agent of the other Party (apart from
claims based on fraud or willful misconduct). This undertaking is intended to
give protection to individuals: it does not prejudice any right which a Party
might have to claim against another Party.

ARTICLE XVII:  MISCELLANEOUS

17.1Assignment; Successors.  

17.1.1Assignment; Successors. The terms and provisions hereof shall inure to the
benefit of, and be binding upon, the Parties and their respective successors and
permitted assigns.  Except as expressly permitted in this Agreement, neither
Party may, without the prior written consent of the other Party, assign or
otherwise transfer this Agreement.  Notwithstanding the foregoing, (a) either
Party, without such consent, may assign or otherwise transfer this Agreement and
its rights and obligations hereunder in whole or in part to an Affiliate;
provided, that, except as set forth in clause (b) below, such assignment or
transfer to an Affiliate shall terminate automatically at such time, if any, as
such Affiliate ceases to be wholly-owned, directly or indirectly, by Arrowhead
or Johnson & Johnson (the New Jersey corporation), as the case may be, unless
such Affiliate owns (i) more than fifty percent (50%) of the voting equity of
Arrowhead or Janssen, or (ii) substantially all the assets of Arrowhead and its
Affiliates or Janssen and its Affiliates, as the case may be, relating to the
Licensed Product, and (b) either Party, without such consent, may assign its
rights under this Agreement, whether by contract or operation of law, to any
Third Party that acquires all or substantially all of the business or assets of
such Party (whether by merger, reorganization, acquisition, sale or otherwise)
relating to the Licensed Product.  No assignment of this Agreement to a Third
Party shall be valid and effective unless and until the assignee agrees in
writing to be bound by all of the terms and conditions of this Agreement and all
Ancillary Agreements surviving such assignment.  Any assignment of this
Agreement not in accordance with this Section 17.1 shall be null and void.

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17.1.2Rights Not Diminished.  Subject to the terms and conditions hereof, no
right of a Party shall be diminished and no obligation of a Party increased
during the Term as a result of a permitted assignment by the other Party to a
Third Party hereunder, including as a result of a Change of Control of the other
Party.  

17.2Waiver.  The failure of any Party to assert a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other Party.  No waiver shall be
effective unless it has been given in writing and signed by the Party giving
such waiver.  The exercise of any right hereunder by a Party in the event of the
other’s default does not constitute an election of remedies or prevent the
exercise of any or all other rights (all rights and remedies being cumulative).

17.3Choice of Law.  This Agreement, its interpretation, construction and
performance and the rights granted and obligations arising hereunder, shall be
governed by, and construed in accordance with, the laws of the State of New York
of the United States of America, exclusive of its conflicts of law rules.  

17.4Notices.  All notices given under this Agreement by either Party to the
other Party shall be in the English language, in writing (which shall exclude
e-mail),and shall refer specifically to this Agreement and shall be delivered
personally, sent by nationally-recognized overnight courier or sent by
registered or certified mail, postage prepaid, return receipt requested, to the
following respective addresses (or to such other address as may be specified by
notice from time to time by the relevant Party):

If to Arrowhead:

Arrowhead Pharmaceuticals, Inc.

225 S. Lake Ave, Suite 1050

Pasadena, CA 91101

Attention: General Counsel

 

With a copy to:

 

Gibson Dunn & Crutcher

555 Mission Street, Suite 3000

San Francisco, CA 94105

Attention: Ryan Murr

 

 

If to Janssen:

Janssen Pharmaceuticals, Inc.

1125 Trenton-Harbourton Road

Titusville, NJ 08560

 

With a copy to:

Office of the General Counsel

Johnson & Johnson

One Johnson & Johnson Plaza

New Brunswick, NJ 08933

Attention:  General Counsel, Pharmaceuticals

 

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17.4.1Without prejudice to any earlier time at which a notice may be actually
given and received, a properly addressed notice shall in any event be deemed to
have been received: (a) when delivered, if personally delivered during the
recipient’s normal business hours; (b) on the Business Day after dispatch, if
sent by nationally-recognized overnight courier and proof of delivery is
obtained; and (c) on the third (3rd) Business Day following the date of mailing,
if sent by mail.  

17.4.2Where proceedings have been commenced in any arbitration hereunder or
court of competent jurisdiction, any documents issued in the course of those
proceedings will be served in accordance with the procedural rules governing the
service of documents in those proceedings.

17.4.3This Section 17.4 shall apply to notices required to be given by one Party
to the other under this Agreement.  Other communications between the Parties
that are routine in nature, such as communications between Alliance Managers or
the Parties’ members of the JSC regarding their ongoing activities performed in
the ordinary course of their work under this Agreement, may be made via
e-mail.  All notices and communications between the Parties hereunder shall be
in the English language.  

17.5Severability.  If the whole or any provision of this Agreement is held to be
invalid, illegal or unenforceable in any jurisdiction for any reason, then, to
the fullest extent permitted by Applicable Law, (a) in the case of the
illegality, invalidity or unenforceability of the whole of this Agreement, it
shall terminate in relation to the jurisdiction in question; and (b) in the case
of illegality, invalidity or unenforceability of any provision of this
Agreement, that part shall be severed from this Agreement in the jurisdiction in
question (but shall remain in full force and effect in all other jurisdictions)
and (i) all other provisions hereof shall remain in full force and effect in the
relevant jurisdiction and shall be liberally construed in order to carry out the
intent of the Parties as nearly as may be possible, and (ii) the Parties agree
to use reasonable efforts to negotiate a provision, in replacement of the
provision held invalid, illegal or unenforceable, that is consistent with
Applicable Law in the relevant jurisdiction and accomplishes, as nearly as
possible, the original intention of the Parties with respect thereto.  

17.6Integration.  This Agreement constitutes the entire agreement between the
Parties hereto with respect to the subject matter of this Agreement and
supersedes all previous agreements (executed before the Execution Date hereof),
whether written or oral.  The terms of this Agreement may be amended only in
writing signed by duly authorized representatives of each of the Parties.  In
the event of a conflict between any terms of any exhibit or other appendix to
this Agreement and the body of this Agreement, the body of this Agreement shall
control.

17.7Independent Contractors; No Agency.  Neither Party shall have any
responsibility for the hiring, firing or compensating the other Party’s
employees or agents for any employee benefits.  No employee or representative of
a Party, including any of its (or its Affiliates’) JSC members, shall have any
authority to bind or obligate the other Party to this Agreement to pay any sum
or in any manner whatsoever, or to create or impose any contractual or other
liability on the other Party.  For all purposes and notwithstanding any other
provision of this Agreement to the contrary, nothing in this Agreement shall be
construed as establishing a partnership or joint venture relationship between
the Parties.

67

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

17.8Performance by Affiliates.  Except as expressly prohibited hereunder, either
Party may use one or more of its Affiliates to perform its obligations and
duties hereunder, provided that such Party shall remain liable hereunder for the
timely payment and performance of all of its obligations and duties hereunder.

17.9Force Majeure.  No Party shall be deemed to have defaulted under or breached
this Agreement for failure or delay in fulfilling or performing any term of this
Agreement, except for the payment of any amounts under this Agreement, when such
failure or delay is caused by or results from causes beyond the reasonable
control of the non-performing Party, including fires, floods, embargoes,
shortages, epidemics, quarantines, war, acts of war (whether war be declared or
not), terrorism, insurrections, riots, civil commotion, acts of God or acts,
omissions or delays in acting by any Governmental Authority.  The non-performing
Party shall notify the other Party of such force majeure within five (5)
Business Days after such occurrence by giving written notice to the other Party
stating the nature of the event, its anticipated duration, and any action being
taken to avoid or minimize its effect.  The suspension of performance shall be
of no greater scope and no longer duration than is necessary and the
non-performing Party shall use, throughout the period of suspension of
performance, Commercially Reasonable Efforts to remedy its inability to perform;
provided, however, that in the event the suspension of performance continues for
ninety (90) days after the date such force majeure commences, the Parties shall
meet to discuss in good faith how to proceed in order to accomplish the
objectives of this Agreement; and provided, further, however, that if the
suspension of performance continues for more than one (1) year after the date
such force majeure commences, either (a) Janssen in the event that Arrowhead is
the non-performing Party, or (b) Arrowhead in the event that Janssen is the
non-performing Party, shall have the right to terminate this Agreement upon
notice to non-performing Party.  For purposes of this Agreement a force majeure
shall not include a failure to commit sufficient resources, financial or
otherwise, to the activities to be conducted pursuant to this Agreement or
general market or economic conditions.

17.10Construction.  The headings used herein are for reference and convenience
only, and will not enter into the interpretation of this Agreement.  References
to Sections include subsections, which are part of the related Section.  Except
as otherwise explicitly specified to the contrary, (a) references to a Section,
Article, or Exhibit means a Section or Article of, or Exhibit to, this Agreement
and all subsections thereof, unless another agreement is specified; (b)
references to a particular statute or regulation include all rules and
regulations thereunder and any successor statute, rules or regulations then in
effect, in each case, including any then-current amendments thereto; (c) words
in the singular or plural form include the plural and singular form,
respectively; (d) capitalized terms not expressly defined herein that are
corollaries (such as pluralizations and changes in tense) to capitalized terms
defined herein shall have the corresponding meanings (e) unless the context
requires a different interpretation, the word “or” has the inclusive meaning
that is typically associated with the phrase “and/or”; (f) terms “including,”
“include(s),” “such as,” and “for example” as used in this Agreement mean
including the generality of any description preceding such term and will be
deemed to be followed by “without limitation”; (g) whenever this Agreement
refers to a number of days, such number will refer to calendar days unless
Business Days are specified; (h) “herein”, “hereunder”, “hereof”, and the like
shall be understood to refer to this Agreement in its entirety, and not the
particular provision or Section in which they appear; (i) references to a
particular Party include such Party's successors and assigns to the extent not

68

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

prohibited by this Agreement; (j) all words used in this Agreement will be
construed to be of such gender or number as the circumstances require; (k)
references to "persons" includes individuals, bodies corporate (wherever
incorporated), unincorporated associations and partnerships; (l) the words
"comprise", "comprising", "contain", "containing", "include" and "including" are
used in their open, non-limiting form, and shall be understood to include the
words "without limitation" even if not expressly stated; (m) all references to
"dollars" or "$" shall mean United States dollars.

17.11HSR Clearance; Termination Upon HSR Denial.  If either or each of the
Parties reasonably determines that an HSR Filing is required by Applicable Law
to consummate the transactions contemplated hereunder, each Party shall, within
ten (10) Business Days of the Execution Date (or such later time as may be
agreed to in writing by the Parties), file with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice, and/or with any equivalent Governmental Authority in any other country,
as the case may be, any HSR Filing under the HSR Act with respect to the
transactions contemplated hereunder.  Each Party shall use reasonable efforts to
do, or cause to be done, all things necessary, proper and advisable to, as
promptly as practicable, take all actions necessary to make the HSR Filings
required of any of the Parties or their respective Affiliates under the HSR Act.
The Parties shall cooperate with one another to the extent reasonably necessary
in the preparation of any such HSR Filing.  Each Party shall be responsible for
its own Out-of-Pocket Costs and expenses, including filing fees, associated with
any HSR Filing.  If the Parties make an HSR Filing hereunder, then this
Agreement shall terminate (a) at the election of either Party, immediately upon
notice to the other Party, if the U.S. Federal Trade Commission or the U.S.
Department of Justice, or an equivalent Governmental Authority outside of the
United States, seeks a preliminary injunction under the antitrust or competition
laws against any Party to enjoin the transactions contemplated by this Agreement
or takes a final decision by which it refuses to provide its approval to the
transactions contemplated by this Agreement where such approval is required by
Applicable Law; (b) at the election of either Party, immediately upon notice to
the other Party, in the event that the United States Federal Trade Commission or
the United States Department of Justice, or an equivalent Governmental Authority
outside of the United States, obtains a preliminary injunction under the
antitrust or competition laws against any Party to enjoin the transactions
contemplated by this Agreement; or (c) at the election of either Party,
immediately upon notice to the other Party, in the event that the date of HSR
Clearance shall not have occurred on or prior to ninety (90) days after the
effective date of the HSR Filing.

17.12Execution in Counterparts; Facsimile Signatures.  This Agreement may be
executed in counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original, and all of which counterparts,
taken together, shall constitute one and the same instrument even if both
Parties have not executed the same counterpart.  Facsimile or portable document
format (i.e., .pdf), execution and delivery of this Agreement by a Party
constitutes a legal, valid and binding execution and delivery of this Agreement
by such Party.

[Remainder of this page intentionally blank.]

69

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

IN WITNESS WHEREOF, each Party has caused this Agreement to be duly executed by
its authorized representative on the respective date written herein below.

 

Arrowhead Pharmaceuticals, Inc.

 

By:/s/ Christopher Anzalone

Name:   Christopher Anzalone,
Ph.D.                                                                                Title:    
President and CEO

Date:    October 3, 2018

 

 

Janssen Pharmaceuticals, Inc.

 

By:/s/ Flavia Pearse

Name:  Flavia Pearse      
Title:    Treasurer

Date:    October 3, 2018

 

 

 

70

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit A

Access Territory

 

[**]

71

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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Exhibit B

Arrowhead Patent Rights

 

Exhibit B-1

Owned Specific Arrowhead Patent Rights

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

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72

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separately with the Commission.

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EXECUTION VERSION

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

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73

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treatment request. An unredacted version of this exhibit has been filed
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Exhibit B-2

Owned General Arrowhead Patent Rights

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

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74

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

[**]

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75

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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Exhibit B-3

Acquired Specific Arrowhead Patent Rights

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

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76

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

ARWR Docket ID

Country

Application Number

Earliest Non-Provisional Filing Date

Earliest Referenced Provisional Date

Actual Application Filing Date

Status

Patent Number

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77

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit B-4

Acquired General Arrowhead Patent Rights

 

Not applicable

Exhibit B-5

In-Licensed Arrowhead Patent Rights

 

Specific

General

Not applicable

Not applicable

 

78

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit C

Initial version of Clinical Plan

 

[**]

 

79

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit D

Initial version of Development Plan

[**]

80

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit E

Pre-Existing Third Party Agreements

 

Section 1. Pre-Existing Licenses to Third Parties

 

•

First Collaboration and License Agreement, entered into as of September 28,
2016, by and between Amgen Inc. and Arrowhead Pharmaceuticals, Inc.

 

 

•

Second Collaboration and License Agreement, entered into as of September 28,
2016, by and between Amgen Inc. and Arrowhead Pharmaceuticals, Inc.

Section 2. Pre-Existing Licenses from Third Parties

 

•

Asset Purchase and Exclusive License Agreement by and between Arrowhead
Pharmaceuticals, Inc. (f/k/a Arrowhead Research Corporation) and Novartis
Institutes for BioMedical Research, Inc., effective as of March 3, 2015.

Section 3. Pre-Existing Acquired Rights from Third Parties

 

•

[**]

[**]

81

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit F

Janssen Universal Calendar for 2018

 

[gwuk5gzp1pns000001.jpg]

82

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

Exhibit G

Initial Press Releases

 

 

Arrowhead’s press release

 

[gwuk5gzp1pns000002.jpg]

PRESS RELEASE

Oct. 4, 2018

 

 

 

Arrowhead Enters $3.7 Billion License and Collaboration Agreements with Janssen

 

-

Upon closing, Arrowhead to receive $250 million, consisting of $175 million
upfront payment from Janssen and $75 million equity investment from Johnson &
Johnson Innovation – JJDC, Inc.

 

-

Arrowhead eligible to receive additional $3.5 billion in potential milestone
payments, and potential further royalties on commercial sales

 

-

Janssen to receive a worldwide exclusive license for ARO-HBV and an option to
collaborate on up to three new targets

 

-

Arrowhead will hold a conference call and webcast today, Oct. 4, at 8:30 a.m. ET

PASADENA, Calif., Oct. 4, 2018 — Arrowhead Pharmaceuticals Inc. (NASDAQ: ARWR)
today announced that it entered into a license and collaboration agreement with
Janssen Pharmaceuticals, Inc., part of the Janssen Pharmaceutical Companies of
Johnson & Johnson, to develop and commercialize ARO-HBV. In addition, Arrowhead
entered into a research collaboration and option agreement with Janssen to
potentially collaborate for up to three additional RNA interference (RNAi)
therapeutics against new targets to be selected by Janssen. The transactions
have a combined potential value of over $3.7 billion for Arrowhead.

Under the terms of the agreement, Arrowhead will receive $175 million as an
upfront payment. Separately, Johnson & Johnson Innovation – JJDC, Inc. (JJDC)
will make a $75 million equity investment in Arrowhead at a price of $23.00 per
share of Arrowhead common stock.

Arrowhead is eligible to receive up to approximately $1.6 billion in milestone
payments for the HBV license agreement, including a $50 million milestone
payment linked to a Phase 2 study. Arrowhead is also eligible to receive
approximately $1.9 billion in option and milestone payments

83

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treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

for the collaboration agreement related to up to three additional targets.
Arrowhead is further eligible to receive tiered royalties up to mid teens on
product sales.

“This agreement represents an important next step for ARO-HBV. Arrowhead has
established a leadership position in the field over the past several years, and
Janssen’s proven development capabilities, global commercial reach, and
commitment to HBV make it the ideal partner to potentially accelerate our goal
of bringing a functional cure to patients with chronic HBV,” said Christopher
Anzalone, Ph.D., Arrowhead’s president and CEO. “The collaboration also
represents further validation of the TRiMTM platform and provides an important
opportunity to create up to three additional novel medicines by leveraging
Arrowhead’s speed and expertise in RNAi drug discovery and Janssen’s clinical
development and commercial capabilities.”  

Under the agreement, Janssen receives a worldwide exclusive license to the
ARO-HBV program, Arrowhead’s third-generation subcutaneously administered RNAi
therapeutic candidate being developed as a potentially curative therapy for
patients with chronic hepatitis B virus infection. Beyond AROHBV1001,
Arrowhead’s ongoing Phase 1/2 study of ARO-HBV, Janssen will be wholly
responsible for clinical development and commercialization.

Janssen can also select up to three new targets, against which Arrowhead will
develop clinical candidates. These potential new candidates will leverage
Arrowhead’s proprietary TRiM™ platform, and do not include Arrowhead’s current
pipeline. Arrowhead will perform discovery, optimization, and preclinical
development, entirely funded by Janssen, sufficient to allow the filing of a
U.S. Investigational New Drug application or equivalent, at which time Janssen
will have the option to take an exclusive license. If the option is exercised,
Janssen will be wholly responsible for clinical development and
commercialization

The closing of the transactions is subject to clearance under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and is
expected to close during the fourth quarter of 2018.

Conference Call and Webcast Details

Investors may access a live audio webcast on the Company's website at
http://ir.arrowheadpharma.com/events.cfm. For analysts that wish to participate
in the conference call, please dial 855-215-6159 or 315-625-6887 and provide
Conference ID 2649806.

84

[**]  =   Portions of this exhibit have been omitted pursuant to a confidential
treatment request. An unredacted version of this exhibit has been filed
separately with the Commission.

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EXECUTION VERSION

 

A replay of the webcast will be available on the company’s website approximately
two hours after the conclusion of the call and will remain available for 90
days. An audio replay will also be available approximately two hours after the
conclusion of the call and will be available for 3 days. To access the audio
replay, dial 855-859-2056 or 404-537-3406 and provide Conference ID 2649806.

About AROHBV1001

AROHBV1001 (NCT03365947) is evaluating the safety, tolerability, and
pharmacokinetic effects of single-ascending doses (SAD) of ARO-HBV in healthy
adult volunteers, as well as the safety, tolerability, and pharmacodynamic
effects of multiple-ascending doses (MAD) of ARO-HBV in patients with chronic
HBV. Dosing in the SAD portion of the study is complete and included five
cohorts at dose levels of 35, 100, 200, 300, and 400 mg. Dosing in the MAD
portion of the study is ongoing and includes cohorts receiving three doses of
ARO-HBV either weekly, bi-weekly, or monthly. Arrowhead submitted a
late-breaking abstract with clinical data to the Liver Meeting®, the Annual
Meeting of the American Association for the Study of Liver Disease (AASLD),
being held in November 2018.

About Arrowhead Pharmaceuticals

Arrowhead Pharmaceuticals develops medicines that treat intractable diseases by
silencing the genes that cause them. Using a broad portfolio of RNA chemistries
and efficient modes of delivery, Arrowhead therapies trigger the RNA
interference mechanism to induce rapid, deep, and durable knockdown of target
genes. RNA interference, or RNAi, is a mechanism present in living cells that
inhibits the expression of a specific gene, thereby affecting the production of
a specific protein. Arrowhead’s RNAi-based therapeutics leverage this natural
pathway of gene silencing.

For more information, please visit www.arrowheadpharma.com, or follow us on
Twitter @ArrowheadPharma. To be added to the Company's email list and receive
news directly, please visit http://ir.arrowheadpharma.com/email-alerts.

Safe Harbor Statement under the Private Securities Litigation Reform Act:

This news release contains forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These statements are based upon our current expectations and speak only as
of the date hereof. Our actual results may differ materially and adversely from
those expressed in any forward-looking statements as a result of various factors
and uncertainties, including the safety and efficacy of our product candidates,
the duration and impact of regulatory delays in

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our clinical programs, our ability to finance our operations, the future success
of our scientific studies, our ability to successfully develop drug candidates,
the timing for starting and completing clinical trials, rapid technological
change in our markets, and the enforcement of our intellectual property rights.
Our most recent Annual Report on Form 10-K and subsequent Quarterly Reports on
Form 10-Q discuss some of the important risk factors that may affect our
business, results of operations and financial condition. We assume no obligation
to update or revise forward-looking statements to reflect new events or
circumstances.

Contacts:

Arrowhead Pharmaceuticals, Inc.

Vince Anzalone, CFA

626-304-3400

ir@arrowheadpharma.com

 

Investors and Media:

LifeSci Advisors, LLC

Brian Ritchie
212-915-2578

britchie@lifesciadvisors.com

www.lifesciadvisors.com

 

Source: Arrowhead Pharmaceuticals, Inc.

 

# # #

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Janssen’s press release

 

Janssen Announces Exclusive, Worldwide License Agreement with Arrowhead
Pharmaceuticals to Develop and Commercialize a New Treatment for Chronic
Hepatitis B Viral Infection

 

Agreement expands breadth of Janssen’s hepatitis B virus development portfolio

 

 

TITUSVILLE, N.J., October 4, 2018 – The Janssen Pharmaceutical Companies of
Johnson & Johnson today announced that Janssen Pharmaceuticals, Inc., (Janssen)
has entered into an agreement with Arrowhead Pharmaceuticals, Inc., (Arrowhead)
for an exclusive, worldwide license to develop and commercialize ARO-HBV, a
Phase 1/2 subcutaneous, ribonucleic acid interference (RNAi) therapy candidate
being investigated for the treatment of chronic hepatitis B viral infection.

 

Under the agreement, Arrowhead will complete the ongoing Phase 1/2 clinical
trial for ARO-HBV, a next-generation RNAi therapy candidate which is designed to
silence HBV gene products by specifically targeting two regions of the HBV
genome.  Janssen will lead the clinical development from Phase 2b onwards.
Arrowhead will receive an initial upfront payment, potential development and
commercial milestone payments and potential future royalties. Separately,
Johnson & Johnson Innovation – JJDC, Inc., will make an equity
investment in Arrowhead.

 

Janssen and Arrowhead also agreed to a research collaboration to develop RNAi
therapeutics directed against additional targets using Arrowhead’s proprietary
Targeted RNAi Molecule (TRiM™) platform. If Janssen exercises its option for
such RNAi therapeutics, Arrowhead will be eligible to receive additional
payments.

 

Hepatitis B viral infection presents a major global health concern and places a
significant burden on the 257 million people living with the disease
worldwide.1,2 While a prophylactic vaccine for hepatitis B exists, many people
living with chronic hepatitis B remain uncured by current treatments and endure
lifelong therapy.1 RNAi therapy candidates such as ARO-HBV have been shown to
have an effect on hepatitis B viral infection replication pathways and on the
production of viral proteins, providing another avenue for investigation into
treatments in this area.3

“An important objective within Janssen is to develop highly effective
combination products that cure people living with chronic hepatitis B
infections,” said Mathai Mammen, M.D., Ph.D., Global Head, Janssen Research &
Development, LLC.  “Working with the talented Arrowhead team and their RNAi
therapy candidate adds to the strength of our hepatitis B portfolio and
substantially increases our confidence that we can achieve our objective.”

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The transactions are subject to clearance under the Hart-Scott-Rodino Antitrust
Improvements Act and expected to close in Q4 2018.

 

About the Janssen Pharmaceutical Companies of Johnson & Johnson

At the Janssen Pharmaceutical Companies of Johnson & Johnson, we are working to
create a world without disease. Transforming lives by finding new and better
ways to prevent, intercept, treat and cure disease inspires us. We bring
together the best minds and pursue the most promising science. We are Janssen.
We collaborate with the world for the health of everyone in it. Learn more at
www.janssen.com and follow us at @JanssenGlobal. Janssen Pharmaceuticals, Inc.
and Janssen Research & Development, LLC are part of the Janssen Pharmaceutical
Companies of Johnson & Johnson.

 

About Johnson & Johnson Innovation – JJDC, Inc.

Johnson & Johnson Innovation – JJDC, Inc. (JJDC) is the strategic venture
capital arm of Johnson & Johnson and a long-term investment partner to global
healthcare entrepreneurs. Founded in 1973, JJDC continues a legacy of
customizing deals for data-driven companies across the continuum of healthcare,
with the goal of turning great ideas into transformative new pharmaceutical,
medical device and consumer healthcare products. Visit our website
at www.jjdc.com.

 

Cautions Concerning Forward-Looking Statements

 

This press release contains "forward-looking statements" as defined in the
Private Securities Litigation Reform Act of 1995 regarding a new license and
collaboration agreement and the continued development of potential treatment
regimens for hepatitis B. The reader is cautioned not to rely on these
forward-looking statements. These statements are based on current expectations
of future events. If underlying assumptions prove inaccurate or known or unknown
risks or uncertainties materialize, actual results could vary materially from
the expectations and projections of Janssen Pharmaceuticals, Inc., Johnson &
Johnson Innovation – JJDC, Inc., any of the other Janssen Pharmaceutical
Companies and/or Johnson & Johnson. Risks and uncertainties include, but are not
limited to: the potential that the expected benefits and opportunities related
to the collaboration may not be realized or may take longer to realize than
expected; challenges and uncertainties inherent in product development,
including uncertainty of clinical success and obtaining regulatory approvals;
uncertainty of commercial success for new indications and therapeutic
combinations; competition, including technological advances, new products and
patents attained by competitors; challenges to patents; product efficacy or
safety concerns resulting in product recalls or regulatory action; changes in
behaviour and spending patterns or financial distress of purchasers of health
care products and services; changes to applicable laws and regulations,
including global health care reforms and trends toward health care cost
containment. A further list and description of these risks, uncertainties and
other factors can be found in Johnson & Johnson's Annual Report on Form 10-K for
the year ended December 31, 2017, including in the sections captioned
“Cautionary Note Regarding Forward-Looking Statements” and “Item 1A Risk
Factors,” in the company’s most recently filed Quarterly Report on Form 10-Q and
the company's subsequent filings with the Securities and Exchange Commission.
Copies of these filings are available online at www.sec.gov, www.jnj.com or on
request from Johnson & Johnson. None of the Janssen Pharmaceutical Companies or
Johnson & Johnson undertakes to update any forward-looking statement as a result
of new information or future events or developments.

 

References

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1.

World Health Organization (WHO). Hepatitis B. July 2017. Available at:
http://www.who.int/mediacentre/factsheets/fs204/en/ Last accessed September
2018.

2.

World Health Organization (WHO). Draft global health sector strategy on viral
hepatitis, 2016-2021 Sixty-ninth World Health Assembly provisional agenda item
15.1. Document A69/32. April 2016. Available at:
http://apps.who.int/gb/ebwha/pdf_files/WHA69/A69_32-en.pdf?ua=1 Last accessed
September 2018.

3.

Yuen MF et. al., RNA interference therapy with ARC-520 Injection results in long
term off-therapy antigen reductions in treatment naïve, HBeAg positive and
negative patients with chronic HBV. Poster FRI-362 presented at EASL 2018, April
13, 2018 [LINK].  

 

 

 

 

 

 

 

 

 

 

 

 

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