Exhibit 10.2


 


	
  CONFIDENTIAL

  	
   

  	
  EXECUTION
  VERSION

  



 


CONFIDENTIAL
TREATMENT REQUESTED


UNDER
17 C.F.R §§ 200.80(b)4, AND 240.24b-2


 


PRODUCT
DEVELOPMENT AND

COMMERCIALIZATION AGREEMENT


 


BETWEEN


 


GLAXO GROUP
LIMITED


 


AND


 


REGULUS
THERAPEUTICS LLC


 

















 


This
PRODUCT DEVELOPMENT AND COMMERCIALIZATION
AGREEMENT (this “Agreement”) is
entered into and made effective as of the 17th day of April, 2008
(the “Effective Date”) by and between Regulus
Therapeutics LLC, a Delaware limited liability company having its principal place
of business at 1896 Rutherford Road, Carlsbad, CA 92008 (“Regulus”),
and Glaxo Group Limited, a company existing under the laws of England and
Wales, having its registered office at Glaxo Wellcome House, Berkeley Avenue,
Greenford, Middlesex, UB6 0NN, England (“GSK”).  Regulus and GSK are each referred to herein
by name or as a “Party” or, collectively, as “Parties.”


 


RECITALS


 


WHEREAS, Regulus is a limited liability company that was
formed in 2007 by Isis Pharmaceuticals, Inc. (“Isis”)
and Alnylam Pharmaceuticals, Inc. (“Alnylam” and
together with Isis, Regulus’ “Parent Companies”)
as a joint venture pursuant to a Limited Liability Company Agreement dated September 6,
2007 between Alnylam and Isis (the “Regulus LLC Agreement”),
the License and Collaboration Agreement dated September 6, 2007 entered
into between Alnylam, Isis and Regulus (the “Regulus
License Agreement”) and the Services Agreement dated September 6,
2007 entered into between Alnylam, Isis and Regulus (the “Services
Agreement” and together with the Regulus LLC Agreement and Regulus
License Agreement, the “JV Agreements”);


 


WHEREAS, Regulus possesses proprietary technology and
know-how related to the research, discovery, identification, synthesis and
development of single-stranded oligonucleotide miRNA Antagonists (as defined
below);


 


WHEREAS, GSK possesses expertise in the pharmaceutical
research, development, manufacturing and commercialization of human
pharmaceuticals, and GSK is interested in developing miRNA Antagonists as drug
products;


 


WHEREAS, GSK desires to engage in a collaborative effort
with Regulus, wherein (i) Regulus will conduct [***] different Programs
(as defined below) each directed against a particular Target (as defined below)
to be identified in accordance with the procedures described herein, in order
to discover, research and develop miRNA Antagonists, through to certain
agreed-upon stages, and (ii) GSK shall have exclusive options, exercisable
at GSK’s sole discretion, at either the [***] (as defined below) or at [***]
(as defined below), to further develop and commercialize Collaboration
Compounds (as defined below) resulting from each of the [***] Programs on an
exclusive basis for any and


 


1

















 


all uses in the Field (as defined below) and in the Territory (as
defined below), all on the terms and conditions set forth herein;


 


WHEREAS, upon GSK’s exercise of any of its options to such
Collaboration Compounds, Regulus desires to grant and will grant to GSK, and
GSK desires to obtain and will obtain, an exclusive license in the Territory
and in the Field under this Agreement to make, have made, use, sell, offer for
sale, and import [***] Licensed Products (as defined herein) throughout the
Territory, all on the terms and conditions set forth herein; and


 


WHEREAS, contemporaneously with the execution of this
Agreement, the Parties have executed a separate Side Agreement with the Parent
Companies (“Side Agreement”) regarding certain
matters pertaining to the relationship between the JV Agreements and this
Agreement, and on or about the Effective Date, Regulus shall deliver to GSK a
Convertible Promissory Note pursuant to which GSK shall lend Regulus the amount
specified therein (“Convertible Promissory
Note”).


 


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


 


ARTICLE
1


 


DEFINITIONS


 


As
used in this Agreement, the following terms shall have the meanings set forth
in this Article 1 unless context dictates otherwise.  All references to “Dollars” mean U.S.
Dollars.  The use of the singular form of
a defined term also includes the plural form and vice versa, except where
expressly noted. The use of the word “including” shall mean “including without
limitation”.  The use of the words “herein,”
“hereof” or “hereunder,” and words of similar import, refer to this Agreement in
its entirety and not to any particular provision hereof.


 


1.1  “Acceptance” means,  with respect
to an NDA filed for a Licensed Product, (a) in the United States, the
receipt of written notice from the FDA in accordance with 21 CFR 314.101(a)(2) that
such NDA is officially “filed”, (b) in the European Union, receipt by GSK
of written notice of acceptance by the EMEA of such NDA for filing under the
centralized European procedure in accordance with any feedback received from
European Regulatory Authorities; provided, that if the centralized filing
procedure is not used, then Acceptance shall be determined upon the acceptance
of such NDA by the applicable Regulatory Authority in a 


 


2

















 


Major
Country in the EU, and (c) in Japan, receipt by GSK of written notice of
acceptance of filing of such NDA from the Japanese Ministry of Health, Labour
and Welfare (“MHLW”).


 


1.2  “Affiliate” shall mean any Person, whether de jure or de facto, which
directly or indirectly through one (1) or more intermediaries controls, is
controlled by or is under common control with another Person.  A Person shall be deemed to “control” another
Person if it (a) owns, directly or indirectly, beneficially or legally, at
least fifty percent (50%) of the outstanding voting securities or capital stock
(or such lesser percentage which is the maximum allowed to be owned by a Person
in a particular jurisdiction) of such other Person, or has other comparable
ownership interest with respect to any Person other than a corporation; or (b) has
the power, whether pursuant to contract, ownership of securities or otherwise,
to direct the management and policies of the Person. Notwithstanding the above,
neither of the Parent Companies of Regulus shall be deemed an Affiliate of
Regulus for the purposes of this Agreement under any circumstances.


 


1.3  “Agreement” shall have the meaning assigned to such term in
the Recitals.


 


1.4  “Agreement Term” shall have the meaning assigned to such term
in Section 12.1.4.


 


1.5  “Alliance Manager” shall have the meaning assigned to such
term in Section 2.3.


 


1.6  “Alnylam” shall have the meaning assigned to such term in the
Recitals.


 


1.7  “ANDA” shall mean an Abbreviated New Drug Application and all
amendments and supplements thereto filed with the FDA, or the equivalent
application filed with any equivalent agency or governmental authority outside
the U.S. (including any supra-national agency such as the EMEA in the EU).


 


1.8  “Annual” or “Annually” shall
mean Calendar Year.


 


1.9  “Back-up Compound” shall mean, with respect to a given
Leading Compound for a given Program, any other Collaboration Compound
Developed under such Program that is designed to inhibit (i.e. directed to or
directed against) the same Collaboration Target as the Leading Compound and
[***] the Leading Compound.


 


1.10  “Bankruptcy Code” shall have the meaning assigned to such
term in Section 12.6.2.


 


1.11  “Blocked Target” shall mean a miRNA from [***] that Regulus
elects, by written notice to GSK, [***] and that GSK does not, in accordance
with [***].


 


1.12  “Breaching Party” shall have the meaning assigned to such
term in Section 12.2.1 or Section 12.2.2, as the case may be.


 


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1.13  “Business Day” shall mean any day other than a Saturday or
Sunday on which banking institutions in both New York, New York and London,
England are open for business.


 


1.14  “Calendar Quarter” shall mean a period of three (3) consecutive
months ending on the last day of March, June, September, or December,
respectively and will also include the period beginning on the Effective Date
and ending on the last day of the calendar quarter in which the Effective Date
falls.


 


1.15  “Calendar Year” shall mean a year of 365 days (or 366 days in
a leap year) beginning on January 1st (or, with respect to
2008, the Effective Date) and ending December 31st, and so on
year-by-year.


 


1.16  “Candidate Selection Criteria” shall mean the criteria for
advancement of a Collaboration Compound [***], which provisional criteria are
included in the Initial Research Plan with respect to Programs directed against
the Initial Collaboration Targets (as such provisional criteria may be [***] in
accordance with Section 2.1.6) and, with respect to Programs directed against
the Subsequent Collaboration Targets, as confirmed by the JSC with respect to
each such Program in accordance with Section 2.1.6.  By way of guideline only, the Candidate
Selection Criteria will typically include (a) data regarding the [***] of
the Collaboration Compound and other [***] of the Collaboration Compound in
[***] as well as a preliminary assessment of the [***], as well as evaluation
of [***] models.  An assessment of [***]
should be typically included with preliminary [***], [***]; (b) the
properties of the Collaboration Compound regarding [***]; (c) assessment
of the [***]; and (d) a preliminary assessment of [***],  (provided, however, that nothing herein shall require
Regulus to resolve any such issues if they are identified).


 


1.17  “[***]” shall have the meaning assigned to such term in Section 4.1.1.


 


1.18  “[***]” shall have the meaning assigned to such term in Section 6.4.


 


1.19  “[***]” shall have the meaning assigned to such term in Section 4.2.1.


 


1.20  “[***]” shall have the meaning assigned to such term in Section 4.2.1.


 


1.21  “[***]” shall have the meaning assigned to such term in Section 4.2.1.


 


1.22  “Candidate Selection Stage” shall mean, as applicable, that
stage of progression of a Research Program, or a Collaboration Compound within
a Research Program, which is defined by the demonstration by Regulus (as
confirmed by the JSC) that a Collaboration Compound within such Research
Program has met the Candidate Selection Criteria and is ready for advancement
into a [***]. For purposes of clarity, notwithstanding the foregoing, the
Candidate 


 


4

















 


Selection
Stage shall be deemed to have been achieved if, at any time during the Research
Collaboration Term for a Research Program, GSK or the JSC requests that Regulus
begin a [***] of a Collaboration Compound under such Research Program prior to
Regulus’ demonstration (and the JSC’s confirmation) that a Collaboration
Compound meets the Candidate Selection Criteria.


 


1.23  “cGMP” shall mean all applicable standards relating to
manufacturing practices for fine chemicals, intermediates, bulk products or
finished pharmaceutical products. For purposes of this Agreement, cGMPs shall
mean the principles (a) detailed in the U.S. Current Good Manufacturing
Practices, 21 CFR Parts 210, and The Rules Governing Medicinal Products in
the European Community, Volume IV Good Manufacturing Practice for Medicinal
Products, as each may be amended from time to time or (b) promulgated by
any governmental body having jurisdiction over the manufacture of a
Collaboration Compound, in the form of laws or regulations.


 


1.24  “Chairperson” shall have the meaning assigned to such term in
Section 2.1.3.


 


1.25  “Claims” shall have the meaning assigned to such term in Section 11.1


 


1.26  “Clinical Studies” shall mean human studies designed to
measure the safety, efficacy, tolerability and/or appropriate dosage of a
Collaboration Compound or Licensed Product, as the context requires, including
without limitation Phase 1 Clinical Trials, Phase 2 Clinical Trials (including
any PoC Trial), Phase 3 Clinical Trials and any post-Regulatory Approval
studies (such as Phase 4 Clinical Trials).


 


1.27  “Collaboration Compound” shall mean any miRNA Compound [***]
to [***] a Collaboration Target, which compound was either identified or
discovered by Regulus or any of its Affiliates or any of its Parent Companies
prior to the Effective Date or is discovered or identified by or on behalf of
Regulus or any of its Affiliates during the Research Collaboration Term, and
[***] of such miRNA Compound which is identified or discovered by or on behalf
of Regulus or GSK pursuant to the Agreement.


 


1.28  “Collaboration Know-How” shall mean any Know-How pertaining
to a Collaboration Compound or Licensed Product that is discovered, developed,
invented or created solely by a Party and/or its Affiliates (or on behalf of
such Party and/or its Affiliates by such Party’s or its Affiliates’ agents or
contractors in accordance with Section 3.10), or jointly by or on behalf
of the Parties and/or a Party’s Affiliates (or on behalf of such Party and/or
its Affiliates by such Party’s or its Affiliates’ agents or contractors in
accordance with Section 3.10), in each case pursuant to activities
conducted with respect to a Program during the relevant Program 


 


5

















 


Term
in accordance with the Initial Research Plan, the relevant Research Plan or, if
applicable, the relevant Early Development Plan.


 


1.29  “Collaboration Patent” shall mean any Patent Rights that
claim or cover Collaboration Know-How.


 


1.30  “Collaboration Target(s)” shall have the meaning assigned to
such term in Section 3.2.1 below.


 


1.31  “Collaboration Technology” shall mean the Collaboration
Know-How and the Collaboration Patents.


 


1.32  “Collaboration Term” shall mean the period from the Effective
Date until the end of the [***] with respect to all Programs hereunder.


 


1.33  “Combination Product” shall have the meaning assigned to such
term in the definition of “Net Sales” below.


 


1.34  “Commercialize” or “Commercialization”
shall mean any and all activities directed to marketing, promoting, detailing,
distributing, importing, having imported, exporting, having exported, selling
or offering to sell a miRNA Therapeutic following receipt of Regulatory
Approval for such miRNA Therapeutic.


 


1.35  “Commercializing Party” shall mean (a) GSK, with respect
to any Collaboration Compounds other than Refused Candidates, and any Licensed
Products other than Refused Candidate Products and Returned Licensed Products,
in each case which are being Developed and Commercialized by or on behalf of
GSK, its Affiliates or Sublicensees hereunder, and (b) Regulus, with
respect to any Refused Candidates, Refused Candidate Products and/or Returned
Licensed Products, in each case which are being Developed and Commercialized by
or on behalf of Regulus, its Affiliates or Sublicensees hereunder.


 


1.36  “Competitive Infringement” shall have the meaning assigned to
such term in Section 8.5.1.


 


1.37  “[***]” shall mean the [***] by Regulus of a [***] for such
PoC Trial.


 


1.38  “Confidential Information” shall have the meaning assigned to
such term in Section 9.1.


 


1.39   “Control,”
“Controls,” “Controlled”
or “Controlling” shall mean the possession
of the right (whether by ownership, license or otherwise) to assign, or grant a
license, sublicense or other right, as provided for herein without violating
the terms of any agreement or other arrangement with any Third Party or with
any Parent Company of Regulus.


 


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1.40  “Convertible Promissory Note” shall have the meaning assigned
to such term in the Recitals.


 


1.41  “CREATE Act” shall have the meaning assigned to such term in Section 8.8.


 


1.42  “[***]” shall mean, with respect to any Collaboration
Compound, a compound that is [***] from such Collaboration Compound or that is
an [***] based thereupon, and that has, or is intended at the time of its
synthesis to have, [***] the properties of the Collaboration Compound from
which it was [***] and that is designed to [***] the same Collaboration Target
as such Collaboration Compound.


 


1.43  “Develop” or “Development”
shall mean, with respect to a miRNA Compound or miRNA Therapeutic, any and all
discovery, characterization, preclinical or clinical activity with respect to
such miRNA Compound or miRNA Therapeutic, including human clinical trials
conducted after Regulatory Approval of such miRNA Therapeutic to seek
Regulatory Approval for additional Indications for such miRNA Therapeutic.


 


1.44  “Development Candidate” shall mean a Collaboration Compound
that has been confirmed by the JSC to have satisfied the [***].  For purposes of clarity, (a) a
Collaboration Compound shall be deemed a Development Candidate if, at any time
during the Research Collaboration Term for a Research Program, GSK or the JSC
by mutual agreement requests that Regulus begin [***] of such Collaboration
Compound under such Research Program prior to confirmation by the JSC that such
Collaboration Compound has met the [***] and (b) if Regulus has [***] a
Collaboration Compound as a Development Candidate on or before [***] with
respect to such Research Program, in which case, upon such expiration, Regulus
shall provide a [***] with respect to the Leading Compound under such Research
Program.


 


1.45  “Diligent Efforts” shall mean, with respect to the efforts to
be expended by a Party with respect to any objective or obligation under this
Agreement, such commercially reasonable, diligent and good faith efforts as
such Party would normally use to accomplish a similar objective or perform a
similar obligation under similar circumstances, acting reasonably promptly and
in a sustained manner, and taking into account scientific, medical and commercially
relevant factors such as (as applicable) stage of development, product life,
patent position, strategic value, [***] market potential, medical, safety and
regulatory issues, in accordance with the following:


 


1.45.1     For
Regulus:  Regulus shall apply its
commercially reasonable Diligent Efforts in the conduct of all activities and
obligations for which Regulus is responsible under this Agreement, in
accordance with (a) the Initial Research Plan, (b) each Research Plan
for each 


 


7

















 


Research
Program, and (c) if GSK has not exercised its [***] with respect to a
Program, the Early Development Plan for the relevant Early Development Program,
in each case as established hereunder. Such efforts will be consistent at all
times with the efforts and resources normally used by Regulus or, where one of
its Parent Companies has already conducted or is actively conducting activities
similar to those described in the Initial Research Plan, the relevant Research
Plan or the relevant Early Development Plan, as applicable, but Regulus has not
previously conducted such activities, the efforts and resources normally used
by Regulus’ Parent Company, in the exercise of Regulus’ or its Parent Company’s
(as applicable) reasonable business discretion relating to the research and
development progression of a compound in its own pipeline at a [***] as
compared to the Collaboration Compound or Licensed Product in question.


 


1.45.2     For GSK:  GSK shall apply commercially reasonable
Diligent Efforts in the conduct of all activities and obligations for which GSK
is responsible under this Agreement, including with respect to the further
Development and Commercialization of a Leading Compound Developed under each
Program for which GSK has exercised its Program Option hereunder.  Such efforts will be consistent at all times
with the manner and degree in which GSK in its reasonable business discretion
would apply efforts and resources for a compound in its own pipeline, at a
[***] as compared to the Collaboration Compound or Licensed Product in
question.


 


1.45.3     A Party that is
required to use Diligent Efforts with respect to an obligation shall,
consistent with the standard described above: (a) promptly assign
responsibility for such obligation to specific employee(s) or permitted
contractors who are held accountable for progress and monitor such progress on
an on-going basis, (b) establish and consistently seek to achieve
specific, meaningful and measurable objectives for carrying out such obligation,
and (c) consistently make and implement decisions and allocate reasonably
sufficient personnel and financial resources designed to advance progress with
respect to such objective.


 


1.46  “Disclosing Party” shall have the meaning assigned to such
term in Section 9.1.


 


1.47  “Discovery Milestone” shall mean, on a Program-by-Program
basis, the milestone event that is achieved hereunder upon the later of (i) demonstration
of [***] confirmed by the JSC (subject to the dispute resolution provisions in Section 2.1.7,
if necessary) or (ii) [***] for a given Program.


 


1.48  “Early Development Plan” shall mean an overall Development
plan (including all subsequent amendments or updates thereto) for the
Development of a Development Candidate through to Completion of the PoC Trial.


 


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1.49  “Early Development Program” shall have the meaning set forth
in Section 3.5.1.


 


1.50  “Early Development Program Term” shall define the duration of
each Early Development Program hereunder and shall be determined on an Early
Development Program-by-Early Development Program basis as follows:  the period commencing upon the earlier of (a) the
expiration of the [***] Exercise Period without GSK’s exercise of the [***] for
such Program, or (b) GSK’s notice to Regulus of its decision not to
exercise such [***], and ending upon [***]; provided, however, that
such period shall terminate when GSK exercises the relevant [***] unless such
Program is terminated earlier.


 


1.51  “Effective Date” shall have the meaning assigned to such term
in the Recitals.


 


1.52  “EMEA” shall mean the European Medicines Evaluation Agency,
and any successor entity thereto.


 


1.53  “Enabling Studies” shall have the meaning assigned to such
term in Section 3.8.


 


1.54  “European Union” or “EU” shall
include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland,
Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden, United Kingdom,
Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,
Slovakia, Slovenia, and any such other country or territory that may officially
become part of the European Union after the Effective Date.


 


1.55  “Executive Officers” shall mean the Chief Executive Officer
of Regulus (or a senior executive officer designated by such Person) and either
the Chief Executive Officer or the Chairman of R&D at GSK (or another
senior executive officer designated by such Persons).


 


1.56  “Existing In-License Agreements” shall have the meaning
assigned to such term in Section 10.3.3.


 


1.57  “Expert Panel” shall have the meaning assigned to such term
in Section 2.4.


 


1.58  “FDA” shall mean the U.S. Food and Drug Administration, and
any successor entity thereto.


 


1.59  “Field”  shall mean (a) the
[***] of any or all Indications and (b) also, to the extent that Regulus
or GSK, whichever is the licensing Party hereunder, Controls [***] any or all
Indications, to the extent such [***] are [***] to Commercialize a Licensed
Product or where the absence of Control by the Commercializing Party, of [***]
could reasonably be considered to materially adversely affect the sales of the
Licensed Product.


 


1.60  “Final Target Selection Date” shall have the meaning assigned
to such term in Section 3.2.1.


 


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1.61  “First Commercial Sale” means, with respect to a  Royalty-Bearing Product in a country in the Territory, the
first sale, transfer or disposition for value to an end user of such
Royalty-Bearing Product in such country; provided, that, the following shall
not constitute a First Commercial Sale: (a) any sale to an Affiliate,
Parent Company or Sublicensee unless the Affiliate, Parent Company or
Sublicensee is the last entity in the distribution chain of the Royalty-Bearing
Product, (b) any  use of such Royalty-Bearing
Product in Clinical Studies, pre-clinical studies or other research or
development activities, or disposal or transfer of Products for a bona fide
charitable purpose, (c) compassionate use, (d) so called “treatment
IND sales” and “named patient sales,” and (e) use under the ATU system in
France and/or the International Pharmi system in Europe.


 


1.62  “Former Target” shall have the meaning assigned to such term
in Section 3.2.1.


 


1.63  “FTC” shall have the meaning assigned to such term in Section 4.2.6.


 


1.64  “Fully Absorbed Costs of Goods” shall mean, with respect to
the Manufacture of units or components of Collaboration Compounds or Licensed
Products (including bulk drug substance), the fully-absorbed actual cost of
supplying the Collaboration Compounds or Licensed Products to Regulus, GSK or a
designee of either such Party as calculated under US GAAP or IFRS, as
applicable, and consistent with such Party’s or, with respect to Regulus, the
applicable Parent Company’s, methodology  for
other products.  Specifically this shall
include:


 


(a)               if Manufactured
by Regulus (or its Parent Company) or GSK, the Fully Absorbed Manufacturing
Cost (“FAMC”) as described in Schedule 1.64, including without limitation
incremental and/or reasonably allocable overhead costs incurred including:
[***] provided, however, that with respect to Manufacture by Regulus or one of
its Parent Companies and if [***], the Parties shall agree in good faith to the
costs with respect to the Manufacture of Collaboration Compounds or Licensed
Products, based, at least in part, on such definition; or


 


(b)               if Manufactured
by a Third Party contract manufacturer, the actual costs of procuring such
Collaboration Compounds or Licensed Products from such Third Party contract
manufacturer, including any [***] payable to such Third Party contract
manufacturer.


 


1.65  “Fundamental IP” shall have the meaning assigned to such term
in Section 6.8.1.


 


1.66  “Generic Product” shall mean a Third Party’s product(s) or
Third Parties’ product(s) having the same or substantially the same active
pharmaceutical ingredient as a Royalty-Bearing Product and for which in the US
an ANDA has been filed naming the Royalty-Bearing Product as the reference
listed drug or ex-US, an equivalent process where bioequivalence to the
Royalty-Bearing Product has been asserted.


 


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1.67  “GLP” shall mean the then-current good laboratory practice
standards promulgated or endorsed by the FDA as defined in 21 C.F.R. Part 58,
and comparable foreign regulatory standards.


 


1.68  “[***]” shall mean a [***] study that is conducted in [***]
that is conducted in compliance with GLP and is required to meet the
requirements for filing an IND.


 


1.69  “GSK” shall have the meaning assigned to such term in the
Recitals.


 


1.70  “GSK Collaboration Know-How” shall have the meaning assigned
to such term in Section 8.1.2.


 


1.71  “GSK Collaboration Patents” shall have the meaning assigned
to such term in Section 8.1.2.


 


1.72  “GSK Collaboration Technology” shall have the meaning
assigned to such term in Section 8.1.2.


 


1.73  “GSK Diligence Failure Event” shall have the meaning assigned
to such term in Section 12.2.4.


 


1.74  “GSK Enabling Studies Know-How” shall mean any Know-How
conceived or reduced to practice by or on behalf of GSK or its Affiliates
during the course of conducting Enabling Studies.


 


1.75   “GSK Enabling Studies
Patents” shall mean all Patent Rights which claim or cover GSK
Enabling Studies Know-How.


 


1.76  “GSK Know-How” shall mean any Know-How to the extent
pertaining specifically and primarily to a Collaboration Compound or Licensed
Product that (a) is Controlled by GSK and/or its Affiliates on the
Effective Date or during the Agreement Term; and (b) is [***] for Regulus (i) to
conduct activities for which Regulus is responsible under the Initial Research
Plan, Research Plan and/or Early Development Plan during the Collaboration
Term; or (ii) to  Develop, Manufacture or
Commercialize Refused Candidates, Refused Candidate Products and Returned
Licensed Products.  GSK Know-How shall
exclude Collaboration Know-How, but shall include GSK Enabling Studies
Know-How.


 


1.77  “GSK Patents” shall mean all Patent Rights in the Territory
Controlled by GSK and/or its Affiliates as of the Effective Date or during the
Agreement Term, to the extent containing a claim which [***] to a Collaboration
Compound and which is [***] for Regulus (a) to conduct activities for
which Regulus is responsible under the Initial Research Plan, Research Plan
and/or Early Development Plan during the Collaboration Term; or (b) to
Develop, 


 


11

















 


Manufacture
or Commercialize Refused Candidates, Refused Candidate Products and Returned
Licensed Products.  GSK Patents shall exclude
Collaboration Patents, but shall include GSK Enabling Studies Patents.


 


1.78  “GSK Patent Royalty” shall have the meaning assigned to such
term in Section 6.6.1.


 


1.79  “GSK Technology” shall mean any GSK Patents and GSK Know-How,
excluding any Collaboration Technology owned by GSK either jointly or solely.


 


1.80  “HSR” shall have the meaning assigned to such term in Section 4.2.6.


 


1.81  “IND” shall mean any investigational new drug application
filed with the FDA pursuant to Part 312 of Title 21 of the U.S. Code of
Federal Regulations, including any amendments thereto. References herein to IND
shall include, to the extent applicable, any comparable filing(s) outside
the U.S. (such as a Clinical Trial Application in the European Union).


 


1.82  “Indemnitee” shall have the meaning assigned to such term in Section 11.3.


 


1.83  “Indication”  shall mean any
[***] (to the extent that Regulus or GSK, whichever is the licensing Party
hereunder, Controls [***]) [***], or [***], or [***].


 


1.84  “Initial Collaboration Target” shall have the meaning
assigned to such term in Section 3.2.1.


 


1.85  “Initial Research Plan” shall mean the preliminary research
plan attached hereto as Exhibit A, which plan sets forth (a) the
activities of the Parties commencing on the Effective Date until the Final
Target Selection Date, including the Collaboration Target selection process,
Screening Assays to be conducted, and contemplated time periods associated with
such activities, and (b) a general description of the types of activities
to be conducted by the Parties during the remainder of the Collaboration
Term.  For purposes of clarity, upon
final JSC approval of the Research Plan with respect to any Program, the terms
of such Research Plan shall supersede the terms of the Initial Research Plan
with respect to such Program.


 


1.86  “Initiation” shall mean, with respect to any human Clinical
Studies set forth in Section 6.4, the first dosing of the first patient or
subject in such study.


 


1.87  “Isis” shall have the meaning assigned to such term in the
Recitals.


 


1.88  “Joint Patent Subcommittee” shall have the meaning assigned
to such term in Section 2.2.2.


 


12

















 


1.89  “Joint Program Subcommittee” or “JPS”
shall have the meaning assigned to such term in Section 2.2.1.


 


1.90  “Joint Steering Committee” or “JSC”
shall have the meaning assigned to such term in Section 2.1.


 


1.91  “Jointly-Owned Collaboration Know-How” shall have the meaning
assigned to such term in Section 8.1.2.


 


1.92  “Jointly-Owned Collaboration Patents” shall have the meaning
assigned to such term in Section 8.1.2.


 


1.93  “Jointly-Owned Collaboration Technology” shall have the
meaning assigned to such term in Section 8.1.2.


 


1.94  “JV Agreements” shall have the meaning assigned to such term
in the Recitals.


 


1.95  “Know-How” shall mean any information, inventions, trade
secrets or technology (excluding Patent Rights), whether or not proprietary or
patentable and whether stored or transmitted in oral, documentary, electronic or
other form.  Know-How includes ideas,
concepts, formulas, methods, procedures, designs, compositions, plans,
documents, data, discoveries, developments, techniques, protocols,
specifications, works of authorship, biological materials, and any information
relating to research and development plans, experiments, results, compounds,
therapeutic leads, candidates and products, clinical and preclinical data,
clinical trial results, and Manufacturing information and plans.


 


1.96   “Leading Compound”
shall mean the furthest advanced Collaboration Compound under a given Program.


 


1.97  “Licensed Product(s)” shall mean any miRNA Therapeutic having
one or more Collaboration Compounds as an active ingredient(s).  For purposes of clarity, Licensed Products
include Combination Products.


 


1.98  “Losses” shall have the meaning assigned to such term in Section 11.1.


 


1.99  “Major Country” shall mean any of the following
countries:  the [***]


 


1.100  “Manufacture” or “Manufacturing”
shall mean any activity involved in or relating to the manufacturing, quality
control testing (including in-process, release and stability testing),
releasing or packaging, for pre-clinical, clinical or commercial purposes, of a
miRNA Compound or a miRNA Therapeutic.


 


13

















 


1.101  “Manufacturing Patents” shall have the meaning assigned to
such term in Section 6.6.2.


 


1.102  “Milestone Event” shall have the meaning assigned to such
term in Section 6.4.


 


1.103  “miRNA” shall mean a structurally defined functional RNA
molecule usually between [***] and [***] nucleotides in length, which is
derived from genetically-encoded non-coding RNA which is predicted to be  processed into a hairpin RNA structure that
is a substrate for the double-stranded RNA-specific ribonuclease Drosha and
subsequently is predicted to serve as a substrate for the enzyme Dicer, a
member of the RNase III enzyme family; including, without limitation, those
miRNAs exemplified in miRBase (http://microrna.sanger.ac.uk/).  To the extent [***] for purposes of this
Agreement; provided, however, that nothing contained
herein shall require any Party hereto to [***]. 
The miRNAs exemplified in miRBase (http://microrna.sanger.ac.uk/) as of
the Effective Date are specified in Schedule 1.103, however, the Parties
understand that the content of such database may change after the Effective
Date.


 


1.104  “miRNA Antagonist” shall mean a single-stranded
oligonucleotide (or a single stranded analog thereof) that [***] interfere with
or inhibit a particular miRNA.  For
purposes of clarity, the definition of “miRNA Antagonist” is not intended to
include oligonucleotides that function predominantly through [***].


 


1.105  “miRNA Compound” shall mean a compound consisting of a miRNA
Antagonist.  For purposes of clarity,
miRNA Compound [***].


 


1.106  “miRNA Library” shall mean a library of oligonucleotides
[***] modulate the activity of miRNAs [***], from which library Regulus shall
identify the miRNA Pool through the conduct of Screening Assays in accordance
with the Initial Research Plan.   The
library of oligonucleotides [***] however, the Parties understand that the
content of such [***] may change after the Effective Date.


 


1.107  “miRNA Mimic” shall mean a double-stranded or single-stranded
oligonucleotide or analog thereof with a substantially similar base composition
as a particular miRNA and which [***] mimic the activity of such miRNA.


 


1.108  “miRNA Pool” shall mean a prioritized list of [***] miRNAs to
be identified in accordance with the procedures set forth in the Initial
Research Plan and from which list GSK shall select up to [***] Collaboration
Targets in accordance with the terms hereof, which list shall exclude (a) any
Collaboration Target once selected by GSK, including any Former Targets, 


 


14

















 


Initial
Collaboration Targets and Subsequent Collaboration Targets, and (b) any
Blocked Targets.


 


1.109  “miRNA Precursor” shall mean a transcript that originates
from a genomic DNA and that contains, but not necessarily exclusively, a
non-coding, structured RNA comprising one or more mature miRNA sequences,
including, without limitation, (a) polycistronic transcripts comprising
more than one miRNA sequence, (b) miRNA clusters comprising more than one
miRNA sequence, (c) pri-miRNAs, and/or (d) pre-miRNAs.


 


1.110  “miRNA Precursor Antagonist” shall mean a single-stranded
oligonucleotide (or a single stranded analog thereof) that [***] bind to a
miRNA Precursor to prevent the production of one or more miRNAs. For purposes
of clarity, the definition of “miRNA Precursor Antagonist” is not intended to
include oligonucleotides that function predominantly through the RNAi mechanism
of action or the RNase H mechanism of action.


 


1.111  “miRNA Therapeutic” shall mean a therapeutic product having
one or more miRNA Compounds as an active ingredient(s).


 


1.112  “NDA” shall mean a New Drug Application (as more fully
defined in 21 C.F.R. 314.5 et seq. or its
successor regulation) and all amendments and supplements thereto filed with the
FDA, or the equivalent application filed with any equivalent agency or
governmental authority outside the U.S. (including any supra-national agency
such as the EMEA in the EU).


 


1.113  “Net Sales”
shall mean,
with respect to any Royalty-Bearing Product, the gross invoiced sales of such
Royalty-Bearing Product sold by either (i) GSK, its Affiliates or
Sublicensees or (ii), as the case requires, Regulus, its Affiliates or
Sublicensees (in each case, the “Selling Party”), in finished product form, packaged and
labelled for sale, under this Agreement in arm’s length sales to Third Parties,
less the following deductions which are actually incurred, allowed, paid,
accrued or specifically allocated to the Third Party customer by the Selling
Party, to the extent actually taken by such Third Party customer, on such sales
for:  (a) [***]trade, quantity, and
cash discounts; (b) [***]credits, rebates and chargebacks (including those
to [***]including [***], and allowances or credits to customers on account of [***]
or on account of [***] affecting such Royalty-Bearing Product; (c) [***]
charges relating to such Royalty-Bearing Product, including [***] thereto; (d) [***]
directly linked to the sales of such Royalty-Bearing Product to the extent
included in the gross amount invoiced; (e) the lesser or [***] of Net
Sales or [***]; (f) [***]allowed or paid to [***] employed by the Selling
Party; and (g) any other items actually deducted from gross invoiced sales
amounts as reported by such Party in its financial statements in accordance
with, in the case of GSK’s Net Sales, the International 


 


15

















 


Financial
Reporting Standards, applied on a consistent basis, and, in the case of Regulus’
Net Sales, the U.S. generally accepted accounting principles applied on a
consistent basis.


 


Net
Sales will not include any transfer or sale between or among a Party and any of
its Affiliates or Parent Companies or direct Sublicensees.


 


Licensed Product
provided to patients for [***] will not be included in Net Sales.


 


In
the event a Royalty-Bearing Product is sold as part of a Combination Product
(as defined below), the Net Sales from the Royalty-Bearing Product, for the
purposes of determining royalty payments, will be determined by multiplying the
Net Sales (as determined without reference to this paragraph) of the
Combination Product, by the fraction, A/A+B, where A is the [***] price
(determined substantially in accordance with the above) of the Royalty-Bearing
Product when sold separately in finished form and B is the [***] price
(determined substantially in accordance with the above) [***] in the
Combination Product when sold separately in finished form, each during the
applicable royalty period or, if sales of all compounds did not occur in such
period, then in the most recent royalty reporting period in which sales of all
occurred.  In the event that such [***] price
cannot be determined for both the Royalty-Bearing Product and all other
therapeutically active pharmaceutical compounds included in the Combination
Product, Net Sales for the purposes of determining royalty payments will be
calculated as above, but the [***] price in the above equation will be replaced
by a good faith estimate of the [***] for which no such price exists.  As used above, the term “Combination
Product” shall mean any pharmaceutical product which consists of a
Royalty-Bearing Product and other therapeutically active pharmaceutical
compound(s).


 


1.114  “Non-breaching Party” shall have the meaning assigned to such
term in Section 12.2.1 or Section 12.2.2, as the case may be.


 


1.115  “Option Compound” shall mean (a) a Collaboration
Compound which has qualified as a Development Candidate under a Program, with
respect to which Program GSK has notified Regulus that it plans to exercise its
[***] Option, (b) if GSK has not exercised its [***] Option for a Program,
a Collaboration Compound for which Regulus has Completed a PoC Trial conducted
with such Collaboration Compound under such Program, with respect to which Program
GSK has notified Regulus that it plans to exercise its [***], and (c) all
other Collaboration Compounds Developed under, or that is otherwise [***] to
interfere with or inhibit (i.e. is directed to or directed against) the
Collaboration Target that is the subject of, the same Program as the
Collaboration Compound set forth in the foregoing clauses (a) or (b),
including any Back-up Compounds and Derivatives of any of the foregoing.  For purposes of clarity, “Option Compounds”
shall include all Collaboration Compounds Developed under a Program 


 


16

















 


with
respect to which GSK has exercised a Program Option or where pursuant to the
termination of a Program, GSK acquired exclusive rights to the Collaboration Compounds
of such Program in accordance with Article 12, regardless of whether or
not any such Collaboration Compound has qualified as a Development Candidate or
has satisfied the PoC Criteria.


 


1.116  “Option Period” shall mean any option exercise period applicable
with respect to a Program Option hereunder.


 


1.117  “Option Period Extension” shall have the meaning assigned to
such term in Section 4.2.6.


 


1.118  “Parent Company” shall have the meaning assigned to such term in the
Recitals.


 


1.119  “Parent Company Know-How” shall mean, with respect to each
Parent Company, all Know-How Controlled by such Parent Company on the Effective
Date or during the term of the Regulus License Agreement (except as otherwise
expressly provided therein) that
relates to:


 


(a)               miRNA Compounds
or miRNA Therapeutics in general,


 


(b)               specific miRNA
Compounds or miRNA Therapeutics,


 


(c)               [***] of miRNA
Compounds or miRNA Therapeutics,


 


(d)               [***] by which a
miRNA Antagonist directly prevents the production of a specific miRNA, or


 


(e)               [***], by
modulating one or more miRNAs;


 


provided, however,
that in each case (i) for any such Know-How that include [***] (as
defined in the Regulus License Agreement), the provisions of Section 2.4
of the Regulus License Agreement will govern whether, with respect to Know-How
licensed under an Optional In-License (as defined in the Regulus License
Agreement) or as an Additional Right (as defined in the Regulus License
Agreement), such Know-How will be included as Parent Company Know-How and (ii) Parent
Company Know-How does not include [***]).[***]


 


1.120  “Parent Company Patents” shall mean, with respect to each
Parent Company,


 


(a)               all Patent
Rights Controlled by such Parent Company on the Effective Date and listed on Exhibit B
hereto, and


 


(b)               all Patent
Rights Controlled by such Parent Company during the term of the Regulus License
Agreement (except as otherwise expressly provided therein) that claim


 


17

















 


(i)            miRNA Compounds or
miRNA Therapeutics in general,


 


(ii)           specific miRNA
Compounds or miRNA Therapeutics,


 


(iii)          [***] of miRNA Compounds or miRNA
Therapeutics,


 


(iv)          [***] by which a
miRNA Antagonist directly prevents the production of the specific miRNA, or


 


(v)           [***], by modulating
one or more miRNAs;


 


 provided, however, that
in each case of (a) and (b), (x) for any such Patent Rights that
include [***] (as defined in the Regulus License Agreement), the provisions of Section 2.4
of the Regulus License Agreement will govern whether, with respect to a Patent
Right licensed under an Optional In-License (as defined in the Regulus License
Agreement) or as an Additional Right (as defined in the Regulus License
Agreement), such Patent Right will be included as a Parent Company Patents, and
(y) Parent Company Patents do not include [***]).


 


1.121  “Party” or “Parties” shall
have the meaning assigned to
such term in the Recitals.


 


1.122  “Patent Costs” shall mean the reasonable fees and expenses paid to
[***] and [***] and other reasonable [***]expenses paid to[***] incurred in
connection with the Prosecution and Maintenance of Patent Rights.


 


1.123  “Patent Rights” shall mean (a) patent applications
(including provisional applications and for certificates of invention), (b) any
patents issuing from such patent applications (including certificates of
invention), (c) all patents and patent applications based on,
corresponding to, or claiming the priority date(s) of any of the
foregoing, and (c) any substitutions, extensions (including supplemental
protection certificates), registrations, confirmations, reissues, divisionals,
continuations, continuations-in-part, re-examinations, renewals and foreign
counterparts thereof.


 


1.124  “Payee” shall mean the Party to whom milestone payments or
royalties are payable hereunder.


 


1.125  “Payor” shall mean the Commercializing Party and, with respect to
milestone payments, GSK.


 


1.126  “Pending Claim” shall have the meaning assigned to such term in Section 6.6.2.


 


1.127  “Permitted Licenses” shall mean a license granted by a Parent
Company to a Third Party to enable such Third Party to [***]  but not to engage in any [***], where such Third Party is
primarily engaged in [***] and is not engaged in any [***] activities with
respect to any 


 


18

















 


Collaboration
Targets.  As used in this definition, the
term “drug” includes, in addition to [***] and other [***].


 


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


 


1.129  “Phase 1 Clinical Trial” means a Clinical Study in any
country, the principal purpose of which is a preliminary determination of safety in healthy individuals or
patients that would satisfy the requirements of 21 CFR 312.21(a), or an
equivalent clinical study required by a Regulatory Authority in a jurisdiction
outside of the United States.


 


1.130  “Phase 2 Clinical Trial” means a Clinical Study conducted in
any country that is intended to explore a variety of doses, dose response and
duration of effect to generate initial evidence of clinical safety and activity
in a target patient population, that
would satisfy the requirements of 21 CFR 312.21(b), or an equivalent clinical study required by a
Regulatory Authority in a jurisdiction outside of the United States.


 


1.131   “Phase 3 Clinical Trial”
means a Clinical Study in any country performed after preliminary evidence of
efficacy has been obtained, which if successful, would
provide sufficient evidence of the safety and efficacy of a product to support
a Regulatory Approval, and that would satisfy the requirements of 21 CFR 312.21(c), or an equivalent
clinical study required by Regulatory Authority in a jurisdiction outside of
the United States.


 


1.132  “Phase 4 Clinical Trial” means a Clinical Study in any
country which is conducted after Regulatory Approval of a product has been
obtained from an appropriate Regulatory Authority, consisting of trials
conducted voluntarily for enhancing marketing or scientific knowledge of an
approved indication and trials conducted due to request or requirement of a
Regulatory Authority.


 


1.133  “PoC” shall mean the confirmation by the JSC or by GSK in
accordance with the applicable PoC Criteria that a Collaboration Compound has
met (i) the primary, and, if relevant, secondary endpoints regarding
clinical efficacy and safety after Completion of the PoC Trial and (ii) any
other PoC Criteria.


 


1.134  “PoC Costs” shall have the meaning assigned to such term in Section 1.136.


 


1.135  “PoC Criteria” shall mean the clinical and non-clinical
criteria to be established by the Joint Program Subcommittee, subject to the
agreement of the JSC and the final approval of GSK, to establish proof of
concept for a given Development Candidate through the PoC Trial in a
Program.  The PoC Criteria shall set
forth: (a) the [***] and relevant [***] for the PoC Trial 


 


19

















 


in
such a manner that, following the PoC Trial, a determination can reasonably be
made that such [***]; (b) where reasonable and appropriate, a [***]; (c) appropriate
and validated [***] (d) [***] (i) which is appropriate [***] as to
which there is no[***]which would prevent the compound from being developed
into a [***] (i.e., there is no known
impediment which would render [***] the [***]) and (ii) that show
[***]safety and tolerability profile in view of relevant clinical and
regulatory considerations; (e) a [***] which is in a [***] that is
suitable for [***] (i.e., there is
no known impediment which would render [***]); (f) a [***] taking into
account suitable [***] who could run such [***], any such contractors to be
agreed by the JSC are understood and controlled [***] is reasonable for such
indication; and (g) a [***] that is consistent with the applicable Target
Product Profile.


 


1.136  “PoC Financial Cap” shall mean the limitation on the total
[***] costs and expenditures, including [***], all of which are specifically
attributable to the PoC Trial for each Program (such costs and expenditures,
the “PoC Costs”), which shall not exceed
[***], except as provided in Section 3.5.5.


 


1.137  “[***]” shall have the meaning assigned to such term in Section 4.1.1.


 


1.138  “[***] Exercise Fee” shall have the meaning assigned to such
term in Section 6.4.


 


1.139  “[***] Exercise Period” shall have the meaning assigned to
such term in Section 4.2.2.


 


1.140  “PoC Report Date” shall have the meaning assigned to such
term in Section 4.2.2.


 


1.141  “PoC Trial” shall mean, with respect to a Program, the first
human in-patient study designed to provide evidence of efficacy, safety and
tolerability of a Collaboration Compound within such Program, which if
conducted by Regulus, shall be consistent with the [***]agreed upon by the
Parties and the PoC Financial Cap, subject to Section 3.5.5.  For purposes of clarity, the PoC Trial is
intended only to demonstrate the [***] of a particular Development Candidate,
and is not intended to be a [***], or intended to otherwise provide data [***].


 


1.142  “PoC Trial Report” shall have the meaning assigned to such
term in Section 4.2.2.


 


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


 


20


















 


1.144  “Preliminary PoC Plan” shall have the meaning assigned to
such term in Section 3.4.4.


 


1.145  “Proceeding” shall mean an action, suit or proceeding.


 


1.146  “Program” shall mean, with respect to a Collaboration Target,
the Research Program and, if GSK has not exercised its [***] Option, the Early
Development Program, taken together.  For
purposes of clarity, except as stated to the contrary in this
Agreement, all references to rights and obligations in connection with a
Program which has been terminated  under the Agreement or with
respect to which GSK has exercised a Program Option, shall refer to
the  continuing or surviving rights and obligations of the
Parties  as applicable in accordance with the relevant
provisions of the Agreement with respect to Collaboration Compounds
Developed under such Program, and any Derivatives of such Collaboration
Compounds Developed thereafter by the Commercializing Party.


 


1.147  “Program Data” shall have the meaning assigned to such term
in Section 3.7.1.


 


1.148  “Program Option” shall have the meaning assigned to such term
in Section 4.1.1.


 


1.149  “Program Option Exercise Fee” shall mean either the [***]
Option Exercise Fee or the [***] Exercise Fee.


 


1.150  “Program-Specific Technology” shall have the meaning assigned
to such term in Section 6.8.


 


1.151  “Program Term” shall define the duration of each Program
hereunder and shall be determined on a Program-by-Program basis.  For each Program, the Program Term shall
consist of: (a) the Research Collaboration Term and (b), if GSK has not
exercised its [***] Option for such Program, the Early Development Program
Term; provided, however, that the Program Term shall
terminate when GSK exercises a Program Option with respect to such Program, or
GSK’s right to exercise the [***] with respect to such Program has expired
without GSK’s exercise of such Program Option, or such Program is otherwise
earlier terminated.


 


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


 


21

















 


1.153  “Receiving Party” shall have the meaning assigned to such
term in Section 9.1.


 


1.154  “Refused Candidate” shall have the meaning assigned to such
term in Section 4.2.7.


 


1.155  “Refused Candidate Product” shall have the meaning assigned
to such term in Section 4.2.7.


 


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


 


1.157  “Regulatory Authority” or “Regulatory
Authorities” shall mean the FDA in the U.S., and any health
regulatory authority(ies) in any country in the Territory that is a counterpart
to the FDA and holds responsibility for granting Regulatory Approval for a
Licensed Product in such country, and any successor(s) thereto.


 


1.158  “Regulus” shall have the meaning assigned to such term in the
Recitals.


 


1.159  “Regulus Collaboration Know-How” shall have the meaning
assigned to such term in Section 8.1.2.


 


1.160  “Regulus Collaboration Patents” shall have the meaning
assigned to such term in Section 8.1.2.


 


1.161  “Regulus Collaboration Technology” shall have the meaning
assigned to such in Section 8.1.2.


 


1.162  “Regulus Diligence Failure Event” or “Regulus
Exclusivity Breach” shall have the respective meanings set forth in Section 12.2.3.


 


1.163 
“Regulus Know-How” shall mean:


 


(a)               all Parent Company Know-How
Controlled by Regulus or any of its Affiliates as of the Effective Date or
during the Agreement Term,


 


(b)               all Know-How, other than
Parent Company Know-How, Controlled by Regulus or any of its Affiliates as of
the Effective Date or during the Agreement Term (except as otherwise expressly
provided herein) that relates to:


 


(i)            miRNA Compounds or miRNA
Therapeutics in general,


 


22

















 


(ii)           specific miRNA Compounds or
miRNA Therapeutics,


 


(iii)          [***] of miRNA Compounds or
miRNA Therapeutics,


 


(iv)          [***] by which a miRNA
Antagonist directly prevents the production of a specific miRNA,


 


(v)           [***], by modulating one or
more miRNAs, and


 


(vi)          [***] relating to miRNA
Compounds or miRNA Therapeutics (including but not limited to [***]);


 


 provided, however, that
in each case of (a) and (b),  (x) for
any such Know-How other than Parent Company Know-How that includes [***] and
which is not [***] as defined in Section [***] the provisions of Section 6.8.2
will govern whether such Know-How will be included as Regulus Know-How, and (y) Regulus
Know-How shall exclude Collaboration Know-How.


 


1.164  “Regulus License Agreement” shall have the meaning assigned
to such term in the Recitals.


 


1.165  “Regulus LLC Agreement” shall have the meaning assigned to
such term in the Recitals.


 


1.166  “Regulus Patents” shall mean:


 


(a)               all Parent
Company Patents Controlled by Regulus or any of its Affiliates as of the
Effective Date or during the Agreement Term, including all Parent Company
Patents licensed to Regulus or any of its Affiliates under the Regulus License
Agreement and listed on Exhibit B,


 


(b)               all Patent
Rights, other than Parent Company Patents, owned by Regulus or any of its
Affiliates as of the Effective Date and listed on Exhibit C or
otherwise Controlled by Regulus or any of its Affiliates as of the Effective
Date and listed on Exhibit D, and


 


(c)               all Patent
Rights, other than Parent Company Patents, Controlled by Regulus or any of its
Affiliates during the Agreement Term (except as otherwise expressly provided
herein) that claim:


 


(i)            miRNA Compounds
or miRNA Therapeutics in general,


 


(ii)           specific miRNA
Compounds or miRNA Therapeutics,


 


(iii)          [***] of miRNA
Compounds or miRNA Therapeutics,


 


23

















 


(iv)          [***] by which
a miRNA Antagonist [***] of the specific miRNA,


 


(v)           [***], by
modulating one or more miRNAs, or


 


(vi)          [***] relating
to miRNA Compounds or miRNA Therapeutics (including but not limited to [***]);


 


1.167   provided, however, that
in each case of (a) through (c),  (x) for
any such Patent Rights other than Parent Company Patents and which is not [***]
as defined in Section [***] that include [***], the provisions of Section 6.8.2
will govern whether such Patent Right will be included as a Regulus Patent
hereunder, and (y) Regulus Patents shall exclude Collaboration Patent
Rights.  “Regulus
Technology” shall mean the Regulus Patents and Regulus Know-How,
excluding any Collaboration Technology owned by Regulus either solely or
jointly (including by assignment from any permitted subcontractor of Regulus
pursuant to Section 3.10).


 


1.168  “Replaceable Target” shall have the meaning assigned to such
term in Section 3.2.1.


 


1.169  “Reports” shall have the meaning assigned to such term in Section 4.2.2.


 


1.170  “Research Collaboration Term” shall define the duration of
each Research Program hereunder and shall be determined on a Research
Program-by-Research Program basis as follows: the period ending upon the later
of (a) [***] years following the Final Target Selection Date, or (b) the
date on which the activities set forth under the Research Plan for a given
Research Program are all completed; provided, however, that
such period shall terminate when (i) GSK exercises the relevant [***]
Option, (ii) the JSC ([***] as applicable) terminates such Program, (iii) the
Collaboration Compound which is the subject of such Research Program is
confirmed by the JSC as a Development Candidate,  or
(iv) the date on which such Program is terminated earlier in accordance
with the applicable provisions of this Agreement.


 


1.171  “Research Plan” shall mean a
research plan (including any subsequent updates or amendments thereto) for each
given Research Program that sets forth the outline of activities to be
conducted by Regulus comprising such Research Program. Such Research Plan shall
be based on the activities outlined in the Initial Research Plan.


 


1.172  “Research Program” shall mean, with respect to a
Collaboration Target,  the Development
activities performed or to be performed by Regulus in accordance with the
Research Plan during the Research Collaboration Term directed to identifying a
Development Candidate for such Collaboration Target, including research,
identification, characterization, optimization and pre-clinical testing of
Collaboration Compounds up until initiation of a [***]


 


24

















 


1.173  “Returned Licensed Product” shall have the meaning assigned
to such term in Section 4.3.2.


 


1.174  “Reverse Royalty” shall have the meaning set forth in Section 6.7.


 


1.175  “Royalty-Bearing Product” shall mean (a) any Licensed
Product Commercialized by or on behalf of GSK, its Affiliates or Sublicensees
hereunder, upon the sale of which GSK would owe Regulus a royalty pursuant to Section 6.6;
and (b) any Refused Candidate Product or Returned Licensed Product
Commercialized by or on behalf of Regulus, its Affiliates or Sublicensees
hereunder, upon the sale of which Regulus would owe a royalty to GSK pursuant
to Section 6.7.  For purposes of
clarity, Royalty-Bearing Product includes the relevant Combination Products.


 


1.176   [***].


 


1.177  “Screening Assays” shall mean the screening assays as defined
in the Initial Research Plan.


 


1.178  “SEC” shall mean the U.S. Securities and Exchange Commission.


 


1.179  “Selling Party” shall have the meaning assigned to such term
in Section 1.113.


 


1.180  “Services Agreement” shall have the meaning assigned to such
term in the Recitals.


 


1.181  “Side Agreement” shall have the meaning assigned to such term
in the Recitals.


 


1.182  “Subcommittee” shall have the meaning assigned to such term
in Section 2.2.


 


1.183  “Sublicensee” shall mean a Third Party or Parent Company to
whom a Party or its Affiliates or Sublicensees has granted a sublicense or
license under any Collaboration Technology and/or Regulus Technology or GSK
Technology, as the case may be, licensed to such Party in accordance with the
terms of this Agreement.


 


1.184  “Subsequent Collaboration Target” shall have the meaning
assigned to such term in Section 3.2.1.


 


1.185  “Target” shall mean a miRNA.


 


1.186  “Target Product Profile” or “TPP”
shall mean, with respect to a given Development Candidate or class of
compounds, and a given Indication, the targeted attributes for an aspirational
drug product for the treatment and/or prophylaxis of such Indication. These
attributes will be determined through an understanding of current and future
unmet medical and market needs, and of the product performance necessary for
Regulatory Approval and 


 


25

















 


competitive
differentiation at the time of anticipated launch.  By way of guideline only, a TPP typically
contains information on at least the following parameters: [***].


 


1.187  “Target Selection Period” shall have the meaning assigned to
such term in Section 3.2.1.


 


1.188  “Terminated Program Option” shall have the meaning assigned
to such term in Section 4.1.1.


 


1.189  “Territory” shall mean all of the countries and territories
of the world.


 


1.190  “Third Party” shall mean any Person other than Regulus or GSK
or an Affiliate of Regulus or GSK or a Parent Company of Regulus.


 


1.191  “Third Party License Pass-Through Costs” shall mean, (a) with
respect to Regulus, the licensing costs and payments that Regulus owes to Third
Parties, but excluding any costs and payments of any kind owed by Regulus to
[***], or (b) with respect to GSK, the licensing costs and payments that
GSK owes to Third Parties, in each case as a result of the practice of
intellectual property licensed from such Third Parties in the Development,
Manufacture and/or Commercialization of Collaboration Compounds and/or Licensed
Products hereunder, including, without limitation, [***] payments.  For clarity, any such costs and payments owed
to Third Parties by a Party (x) shall only include the share of such costs
and payments which is [***], and not by any of its Affiliates or by [***], as
applicable (although, for clarity, if such costs and payments are paid by
[***], as applicable, solely in order for such [***] to the relevant Third
Party in those situations in which (i) GSK is a sublicensee of such Third
Party, through its Affiliate, then such costs and payments shall be [***], or (ii) Regulus
is a sublicensee of such Third Party through its Affiliate or Parent Company,
then such costs and payments shall be [***], in each case subject to the
following clause (y)), and (y) shall only include any such costs and
payments to the [***].


 


1.192  “Third Party and Parent-Originated Rights and Obligations”
shall mean the rights of, and any limitations, restrictions or obligations
imposed by, (a) Parent Companies pursuant to the Regulus License Agreement
and (b) Third Parties pursuant to (i) the contracts assigned to
Regulus pursuant to Section 2.1 of the Regulus License Agreement, [***](as
defined in the Regulus License Agreement)[***](as defined in the Regulus
License Agreement)[***](as defined in the Regulus License Agreement)[***](each
as defined in the Regulus License Agreement)[***].


 


1.193  “Total License Pass-Through Costs” shall mean the licensing
costs and payments that [***] as a result of the practice of intellectual
property licensed from any such 


 


26

















 


[***]
in the Development, Manufacture and/or Commercialization of Collaboration
Compounds and/or Licensed Products hereunder, including, without limitation,
all upfront fees, annual payments, milestone payments and royalty
payments.  For clarity, any such costs
and payments (a) shall only include the share of such costs and payments
which is [***], and not by any [***] (although, for clarity, if such costs and
payments are [***] solely in order for [***] to the relevant Third Party in
those situations in which [***], of such Third Party, then such costs and
payments shall be [***], subject to clause (b)), and (b) shall only
include any such costs and payments to the [***].


 


1.194 
“United States” or “U.S.”
shall mean the fifty states of the United States of America and all of its territories and possessions and the
District of Columbia.


 


1.195  “Upfront Payment” shall have the meaning assigned to such
term in Section 6.1.


 


1.196  “Valid Claim” shall mean a claim (a) of any issued,
unexpired patent that has not been revoked or held unenforceable or invalid by
a decision of a court or governmental agency 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;
[***].


 


1.197  [***] shall
have the meaning assigned to such term in Section 12.7.7(a).


 


ARTICLE
2


 


GOVERNANCE
OF THE COLLABORATION


 


2.1  The Joint Steering Committee.


 


2.1.1       Generally.  Promptly, and in any event within [***] days,
after the Effective Date, the Parties shall establish and convene a committee
(the “Joint Steering Committee” or “JSC”) as more fully described in this Section 2.1.  The JSC shall have review and oversight
responsibilities, including the responsibilities set forth in Section 2.1.6
below, for all Development activities performed by the Parties under the
Initial Research Plan, the Research Plans and, if applicable, the Early
Development Plans during the Collaboration Term.  After the exercise by GSK of a Program Option
for a Program, the JSC shall remain in place solely to serve as a vehicle to
facilitate the communication of information between the Parties with respect to
any subsequent Development activities by GSK with respect to the Option
Compounds and related Licensed Products Developed under such Program and, once
Commercialization is underway with respect to such Program (as measured by the
Regulatory Approval, in any country of the world, of a Licensed Product with
respect to such Program), GSK will keep 


 


27

















 


Regulus
informed of activities through an annual progress report and the JSC shall no
longer be required to meet with respect to such Program.  Each Party agrees to keep the JSC informed of
the progress of the Development and/or Commercialization activities for which
such Party is responsible hereunder with respect to each Program.


 


2.1.2       Regulus’
Right to Discontinue Participation.  Notwithstanding anything in this Agreement to
the contrary, at any time following the end of the Program Term with respect to
a Program hereunder, Regulus shall have the right, upon written notice to GSK,
to discontinue its participation in the Joint Steering Committee or any
Subcommittee thereof with respect to such Program, and such discontinuation by
Regulus shall not constitute a breach of Regulus’ obligations hereunder.  For the avoidance of doubt, the exercise by
Regulus of its right to discontinue its participation in the JSC pursuant to
this Section 2.1.2 will not relieve Regulus of the obligation to perform
any of its activities under any Program hereunder, and GSK shall have the right
in such event to make decisions on matters where the JSC would have had such
right and authority with respect to such Program, as necessary in order to
continue such Programs.  For clarity, in
the event that Regulus obtains rights to Refused Candidates, Refused Candidate
Products or Returned Licensed Products hereunder, Regulus shall have the right
in such event to make decisions on all matters related to the Development,
Manufacture and/or Commercialization of such Refused Candidates, Refused
Candidate Products or Returned Licensed Products.


 


2.1.3       Membership.  The JSC shall be comprised of [***]
representatives (or such other number of representatives as the Parties may
agree) from each of GSK and Regulus. 
Each Party shall provide the other with a list of its initial members of
the JSC on the Effective Date.  Each
Party may replace any or all of its representatives on the JSC at any time upon
written notice to the other Party in accordance with Section 13.6 of this
Agreement.  Each representative of each
Party shall be of the seniority and have expertise (either individually or
collectively) in business and pharmaceutical drug discovery and development appropriate
for service on the JSC in light of the functions, responsibilities and
authority of the JSC and the status of Development of the Collaboration
Compounds and related Licensed Products. 
Any member of the JSC may designate a substitute to attend and perform
the functions of that member at any meeting of the JSC.  Each member of the JSC, and any such
substitute, shall be subject to the confidentiality obligations of Article 9.  Each Party may, in its reasonable discretion,
invite non-member representatives of such Party to attend meetings of the JSC
as a non-voting participant, subject to the confidentiality obligations of Article 9.  The Parties shall designate a chairperson
(each, a “Chairperson”) to oversee the operation
of the JSC, each such 


 


28

















 


Chairperson
to serve a twelve (12) month term. The right to name the Chairperson shall
alternate between the Parties, with [***] designating the first such
Chairperson.


 


2.1.4       Meetings.  During the Collaboration Term (subject to Section 2.1.2),
the JSC shall meet in person or otherwise once each Calendar Quarter, and less
or more frequently as the Parties mutually deem appropriate, on such dates, and
at such places and times, as provided herein or as the Parties shall
agree.  Upon the conclusion of the
Collaboration Term (subject to Section 2.1.2), the JSC shall meet, in
person or otherwise, once every two (2) Calendar Quarters or more or less
frequently as mutually agreed between the Parties, to provide Regulus an update
regarding GSK’s efforts after exercise of its Program Option(s) and
otherwise to perform the responsibilities assigned to it under this Agreement
while a Collaboration Compound is in Development; provided, however,
that the Parties agree to periodically discuss in good faith the
frequency and scope of such ongoing meetings and such JSC meetings will not
occur once all Programs are in Commercialization (as measured by the Regulatory
Approval, in any country of the world, of a Licensed Product with respect to
each such Program).  Meetings of the JSC
that are held in person shall alternate between the offices of the Parties, or
such other place as the Parties may agree. 
The members of the JSC also may convene or be polled or consulted from
time to time by means of telecommunications, video conferences, electronic mail
or correspondence, as deemed necessary or appropriate.


 


2.1.5       Minutes.  During the Collaboration Term (subject to Section 2.1.2),
the Chairperson shall designate to the Alliance Manager of the other Party,
responsibility for preparing and circulating minutes within [***] days after
such meeting setting forth, a brief summary of the discussions at the meeting
and a list of any actions, decisions or determinations approved by the JSC and
a list of any issues to be resolved by the Executive Officers pursuant to Section 2.1.7.  Such minutes shall be effective only after
written approval of such minutes by both Parties.  With the sole exception of specific items of
the meeting minutes to which the members cannot agree and which are escalated
to the Executive Officers as provided in Section 2.1.7 below, definitive
minutes of all JSC meetings shall be finalized no later than [***] days after
the meeting to which the minutes pertain. If at any time during the preparation
and finalization of the JSC minutes, the Parties do not agree on any issue with
respect to the minutes, such issue shall be resolved by the escalation process
as provided in Section 2.1.7.  The
decision resulting from the escalation process shall be recorded by the
designated Alliance Manager in amended finalized minutes for said meeting.  Notwithstanding any of the foregoing, in no
event shall such minutes be deemed to amend, or be incorporated into, the terms
of this Agreement.


 


29


















 


2.1.6       Specific
Responsibilities of the JSC. Without limiting any of
the foregoing, subject to Sections 2.1.7 and 2.2.2, the JSC shall perform the
following functions for any given Program, some or all of which may be
addressed directly at any given meeting of the JSC:


 


(a)               Review [***]
each Research Plan and any amendments thereto as it relates to either an
Initial Collaboration Target or a Subsequent Collaboration Target;


 


(b)               Confirm that the Discovery Milestone has been achieved for a Program,
[***];


 


(c)               review, update
[***] (upon unanimous agreement of the Parties) the Candidate Selection
Criteria within [***] days of recommendation by the JPS, including any
amendments thereto proposed by either Party (through the JPS, JSC or
otherwise);


 


(d)               amend ([***] of
the Parties) the Candidate Selection Criteria from time to time;


 


(e)               confirm ([***]
of the Parties) whether a Collaboration Compound meets the Candidate Selection
Criteria;


 


(f)                review, update
[***] (upon unanimous agreement of the Parties) the (i) design and content
of the PoC Criteria, (ii) Target Product Profile upon which such PoC
Criteria was based, and (iii) design, content and endpoints of the PoC
Trial, in each case within [***] days of recommendation by the JPS, including
any amendments to the PoC Criteria design and content, Target Profit Profile or
PoC Trial design, content and endpoints which may be proposed by either Party
(through the JPS, JSC or otherwise), each of (i), (ii) and (iii) shall
be subject to GSK final decision-making authority as described in Section 2.1.7(b);


 


(g)               review the
overall progress of Regulus’ efforts to discover, identify, optimize and
otherwise Develop Collaboration Compounds under each Program, including review
and [***] of any proposal for termination of a Program;


 


(h)               review [***]
the Development of any Collaboration Compound for the treatment of any
potential additional Indications;


 


(i)                review, update
[***] (upon unanimous agreement of the Parties) the Initial Research Plan, the
Research Plans and, if applicable, the Early Development Plans, including any
technical changes or amendments thereto which may be proposed by either Party
(through the JPS, JSC or otherwise) to reflect [***], with the aim of achieving
the [***] Criteria and [***] Criteria;


 


30

















 


(j)                discuss and
attempt to resolve (by unanimous agreement of the Parties) any deadlock issues
submitted to it by any Subcommittee, including the resolution of any disputes
regarding [***]; and


 


(k)               such other
responsibilities as may be assigned to the JSC pursuant to this Agreement or as
may be mutually agreed upon by the Parties from time to time;


 


provided, however,
that in no event shall the JSC have any authority to (x) resolve
any disputes involving the breach or alleged breach of this Agreement,  (y) amend any budget or allocation of costs between
the Parties, or require either Party to expend additional resources, whether
internal or external, except as stated under this Agreement pursuant to the
exercise of discretionary authority expressly granted to the JSC or (z) otherwise
amend or modify this Agreement or the Parties’ respective rights and
obligations hereunder.


 


2.1.7       Decision-Making
Authority and Escalation Process.


 


(a)               Generally,
except as otherwise expressly provided herein, all decisions of the JSC shall
be made by consensus, with each Party having collectively [***] in all
decisions.


 


(b)               Prior to the
exercise by GSK of its Program Option for a given Program, unless such Program
is earlier terminated, if the JSC cannot agree on a matter within its purview,
the matter will be escalated to the Parties’ Executive Officers, who shall have
a period of [***] days (unless extended by mutual agreement of the Executive
Officers) to resolve such dispute by cooperating in good faith.  Except as otherwise stated below in this Section 2.1.7,
if the Parties still cannot agree on a matter after such escalation to the
Executive Officers, the Parties will submit such matter to binding arbitration
in accordance with Section 13.1; provided, however, that,
in lieu of binding arbitration, (i) if the dispute relates primarily to
[***], the dispute will instead be resolved by [***] in accordance with [***]
and (ii) for each Program, GSK will have final decision-making authority
with respect to any disputes between the Parties concerning (A) the [***],
(B) the [***], and/or (C) the [***], and none of such disputes listed
in [***] above will be subject to arbitration under Section 13.1 or any
other form of review, provided, that, in the case of any dispute
regarding (ii) above GSK asserts such final decision-making right in good
faith, based upon [***] or upon some other rational basis in light of [***],
and subject to Section 3.5.5 with respect to the [***].


 


(c)               After the
exercise by GSK of its Program Option for a given Program, GSK will have sole
decision-making authority on all decisions relating to the Development and
Commercialization of any Option Compounds and related Licensed Products 


 


31

















 


under
such Program.  If Regulus disagrees with
any such decisions taken by GSK, such disagreement will not be escalated to the
Executive Officers nor shall any such disagreement be submitted to arbitration
under Section 13.1 or any other form of review; provided, however,
that GSK will comply with its diligence obligations (as described below
in Article 4) and other relevant obligations as expressly stated hereunder
(including payment obligations) and any dispute with respect to whether there
has been a material breach by GSK of such obligation may be escalated to the
Executive Officers and, if the Executive Officers are unable to resolve such
dispute within thirty (30) days thereof, to binding arbitration under Section 13.1.


 


(d)               Regulus shall
not have the right to progress any [***] without the express prior unanimous
approval of the JSC, and shall not have the right to research or pursue any
[***] for any Collaboration Compound (other than [***] applicable to such
Collaboration Compound) without the express prior unanimous approval of the
JSC, except with respect to Refused Candidates, Refused Candidate Products and
Returned Licensed Products.


 


(e)               Notwithstanding
anything in this Agreement to the contrary, if the JSC is unable to unanimously
agree on any matter before it (including the resolution of any dispute arising
at any Subcommittee level), such matter shall be subject to escalation to the
Executive Officers and resolution as described in this Section 2.1.7,
except in the case of matters which pertain to Prosecution and Maintenance
which shall be resolved in accordance with Article 8.


 


2.2  Subcommittee(s).  From time to time, the JSC may establish
subcommittees to oversee particular projects or activities, as it deems
necessary or advisable (each, a “Subcommittee”).  Each Subcommittee shall consist of such
number of members as the JSC determines is appropriate from time to time.  Such members shall be individuals with
expertise and responsibilities in the areas relevant to the function and
purpose of the proposed Subcommittee. 
Generally, except as otherwise expressly provided herein (including Section 2.2.2),
all decisions of any Subcommittee shall be made by consensus, with each Party
having collectively one (1) vote in all decisions.


 


2.2.1       Joint
Program Subcommittee.


 


(a)               Promptly after
the establishment of the JSC pursuant to Section 2.1, the JSC shall
establish the Joint Program Subcommittee (the “JPS”).  The JPS shall be comprised of [***]
representatives (or such other number of representatives as the Parties may
agree) from each of GSK and Regulus and shall meet once every Calendar Quarter
or more or less frequently as the Parties mutually agree (subject to Section 2.1.2).  The JPS will report to the JSC and will be
responsible for the recommendation to the JSC with respect to each Program of 


 


32

















 


(i) the
Candidate Selection Criteria for such Program, which shall be recommended to
the JSC no more than [***] days following the selection of the relevant
Collaboration Target, (ii) the design and content of all PoC Criteria and
Target Product Profiles for such Program as set forth below, which shall be
recommended to the JSC no more than [***] days following the nomination of a Development
Candidate, and (iii) the design, content and endpoints of all PoC Trials,
which shall be recommended to the JSC no more than [***] days following the
nomination of a Development Candidate. 
In the event of a dispute within the JPS on any matter, such matter
shall be submitted to the JSC for resolution in accordance with the provisions
of Section 2.1.7(b).


 


(b)               For each
Program, a Target Product Profile shall be prepared by GSK, in consultation
with Regulus and through the JPS, for adoption by the Joint Steering Committee;
provided, that each TPP shall (i) be consistent with and no
broader than the Indication and Collaboration Targets for its corresponding
Program, and (ii) set as the objective for the Program competitiveness in
the applicable market, but not necessarily superiority in all aspects relevant
to pharmaceutical commercialization. 
Upon nomination of a Development Candidate, each such aspirational TPP
shall be updated, amended or modified to specifically address the particular
qualities and features of such Development Candidate.  In the event of a disagreement at the JSC
level, GSK shall have the final decision-making authority on the content of the
Target Product Profile or any amended TPP as set forth in Section 2.1.7(b).  It is understood and agreed that the Target
Product Profile is aspirational in nature, and that any given Development
Candidate may not meet all targeted features and requirements of a given TPP,
and that certain features of the TPP may only apply to later stages of Development
of a given Development Candidate (such as development of a sustained release
formulation, etc.).


 


2.2.2       Joint
Patent Subcommittee.  Promptly
after the establishment of the JSC pursuant to Section 2.1, the JSC shall
establish a Joint Patent Subcommittee (the “Joint Patent
Subcommittee”).  The Joint
Patent Subcommittee shall be comprised of an equal number of representatives
from each of GSK and Regulus.  The Joint
Patent Subcommittee will report to the JSC and will be responsible for the
coordination of the Parties’ efforts in accordance with the provisions set
forth in Article 8 of this Agreement (subject to Section 2.1.2).  In the event of a dispute within the Joint
Patent Subcommittee, such matter shall be submitted to the JSC for resolution; provided,
however, that the provisions of Article 8 shall determine
which Party shall have control and the final decision-making authority with
respect to matters related to Prosecution and Maintenance, enforcement of
Patent Rights, the determination of inventorship, and patent listing
obligations.


 


33

















 


2.3  Alliance Managers.  Promptly after the Effective Date, each Party
shall appoint an individual (other than an existing member of the JSC) to act
as the project leader for such Party (each, an “Alliance
Manager”).  Each Alliance
Manager shall thereafter be permitted to attend meetings of the JSC and any
other Subcommittee as a nonvoting observer, subject to the confidentiality
provisions of Article 9.  The Alliance
Managers shall be the primary point of contact for the Parties regarding the
activities of the Parties contemplated by this Agreement during the Agreement
Term and shall facilitate all such activities hereunder, including, but not
limited to, communications between the Parties following any decisions made by
the JSC, and the exchange of information between the Parties as described in Section 3.9.2.  The Alliance Managers shall also be
responsible for assisting the JSC and the Joint Program Subcommittee in
performing their respective responsibilities. 
The name and contact information for such Alliance Manager, as well as
any replacement(s) chosen by Regulus or GSK, in each such Party’s sole
discretion, from time to time, shall be promptly provided to the other Party in
accordance with Section 13.6 of this Agreement.


 


2.4  Certain Matters Subject to
Expert Panel.  If, at any
time during the relevant Program Term, the JSC is unable to agree whether to
[***], the Parties shall submit such matter to a panel of three (3) experts
who are experienced in the field of biopharmaceuticals (an “Expert Panel”).  All
members of the Expert Panel must be mutually agreed by the Parties in good
faith and as promptly as possible and must be free of any conflicts of interest
with respect to either or both Parties. 
The Expert Panel shall promptly hold a hearing to review the matter, at
which they will consider briefs submitted by each Party at least [***] days
before the hearing, as well as reasonable presentations that each Party may
present.  The Parties may elect to use
separate Expert Panels for different Programs in order to align the expertise
of the members of the Expert Panels with the subject matter of the respective
Programs.  The Expert Panel will only
[***] if the Expert Panel unanimously agrees that [***] is [***]. The Expert
Panel shall not be permitted to take into account [***].  The determination of the relevant Expert
Panel as to such dispute shall be binding on both Parties.  The Parties shall share equally in the costs
of the Expert Panel, and each Party shall bear its own costs associated with
preparing for and presenting to the Expert Panel.  The Parties may also elect by mutual
agreement to use an Expert Panel (or other panels of key opinion leaders) for guidance
on other issues that may arise during the Collaboration Term.


 


34

















 


ARTICLE
3


 


THE
CONDUCT OF THE COLLABORATION; REGULUS DILIGENCE


 


3.1  Overview.  Subject to and in accordance with the terms
of this Agreement, Regulus will be responsible for conducting [***] Programs,
each to be directed at a different Collaboration Target to be selected as set
forth in Section 3.2 below, with the goal of researching, identifying and
otherwise Developing [***] Collaboration Compounds under each Program through
to [***], subject to earlier termination of such Program or the exercise of the
[***] Option as described in this Agreement.


 


3.2  Selection of Targets.


 


3.2.1       Initial
Collaboration Targets; Subsequent Collaboration Targets.  As of the Effective Date, GSK has selected
[***] Targets to be the subject of Programs to be progressed by Regulus under Section 3.3
(each such Target, an “Initial Collaboration
Target”), which [***] Initial Collaboration Targets are listed on Exhibit E
hereto.  GSK shall have the right to
identify an additional [***] Targets (each, a “Subsequent
Collaboration Target”, and together with the Initial Collaboration
Targets, the “Collaboration Targets”) from the
miRNA Pool within [***] months of identification of such miRNA Pool from within
the miRNA Library in accordance with the Initial Research Plan (such [***]
period, the “Target Selection Period” and the
end of such [***] period being the “Final Target Selection
Date”); provided, further, that GSK may, at any
time during the Target Selection Period, replace up to [***]
previously-identified Collaboration Targets which have not reached [***] (each,
a “Replaceable Target”) with a different
Target from the miRNA Pool, in which case, such different Target shall become a
Collaboration Target and such previously-identified Collaboration Target (as
such, a “Former Target”) shall no longer be a
Collaboration Target.  For purposes of
clarity, notwithstanding anything in this Agreement to the contrary, in no
event shall GSK have the ability to replace more than [***]
previously-identified Collaboration Targets under this Agreement, nor shall
there be more than a total of [***] Collaboration Targets as of the Final
Target Selection Date. Any Target which is not a Collaboration Target as of the
Final Target Selection Date shall thereafter be a Former Target.


 


3.2.2       Selection
to be Completed by Final Target Selection Date.  After the selection of the Subsequent
Collaboration Targets by GSK from the miRNA Pool, to be completed by the Final
Target Selection Date, Regulus will progress Programs against such Subsequent
Collaboration Targets in accordance with the Research Plan for each Program as
set forth in Section 3.3.  If any
Subsequent Collaboration Target is not selected within the Target 


 


35

















 


Selection
Period, GSK’s rights and Regulus’ obligations under the Agreement with respect
to such Subsequent Collaboration Target and related Program shall terminate.


 


3.2.3       Blocked
Targets.  Additionally, if during the
Target Selection Period, Regulus intends to work outside of the Research
Program, along with or for the benefit of an Affiliate, Parent Company or a
Third Party, to identify, research, optimize, otherwise Develop or
Commercialize any [***] prior to the selection by GSK of all [***] final
Collaboration Targets, then Regulus shall first offer in writing to GSK the
right to select such miRNA as one of the remaining Collaboration Targets
hereunder, including as a replacement for any Replaceable Target, in each case
solely to the extent that GSK has the right to do so under Section 3.2.1
above (including the [***] limitation set forth therein), such right to expire
[***] days after GSK’s receipt of such written offer.  If GSK does not select such miRNA as a
Collaboration Target hereunder, such miRNA shall thereafter be excluded from
the miRNA Pool and deemed a Blocked Target; provided, however, that
no more than [***] of the number of miRNAs in the miRNA Pool may be deemed to
be a Blocked Target under the Agreement.


 


3.2.4       Expansion
of Agreement.  The Parties
hereby agree that, on or about the date that is [***] years after the Effective
Date as may be mutually agreed by the Parties, the Parties shall meet to
discuss and consider in good faith the possible expansion of the Agreement to
include additional Targets, on [***], but without any obligation on either
Party to enter into any such expanded Agreement.


 


3.3  Commencement of the
Programs; Research Program; Research Plan.


 


3.3.1       Commencement
of Program.  Commencing
on the Effective Date, Regulus will progress Programs directed against the
Initial Collaboration Targets in accordance with the Research Plan for each
such Program.  The Programs directed
against the Subsequent Collaboration Targets shall each commence as soon as
practicable after the selection of such Subsequent Collaboration Targets and
the final JSC approval of the Research Plan with respect to such Program.


 


3.3.2       Research
Program.  Subject to the oversight of
the JSC and except as may be mutually agreed by the Parties, Regulus shall be
solely responsible for conducting all Development activities set forth in the
Research Plan with respect to Collaboration Compounds under each Research
Program, and for all costs and expenses associated therewith, during the
relevant Research Collaboration Term.


 


3.3.3       Research
Plan.  Each Research Program will be
carried out by Regulus pursuant to a Research Plan, which will outline (subject
to JSC [***] and/or amendment as set 


 


36

















 


forth
in Section 2.1.6), for each Collaboration Target, as appropriate:  discovery, research and optimization
activities in connection with the identification and progression of
Collaboration Compound to Candidate Selection Stage; and estimated timelines
for completion of the studies and activities to be undertaken by Regulus
thereunder.  The Research Plan shall be
updated by Regulus as needed, but at least once Annually and submitted to the
JSC for its review and comment and may be further amended, at any time and from
time to time, by Regulus, to reflect material events or changes under the
then-current Research Plan.  It is
expected that the level of detail required for activities with respect to each
Collaboration Target will vary depending on the state of progression of Regulus’
efforts with regard to such Collaboration Target.


 


3.4  Development Candidate Selection; Preliminary
PoC Plan.


 


3.4.1       Selection
of Development Candidate. 
During the relevant Research Collaboration Term, using the Candidate
Selection Criteria and Target Product Profile as a guide, Regulus shall use
Diligent Efforts to conduct studies under each Research Program that it
determines appropriate to Develop a Development Candidate, and to select [***]
Collaboration Compound that it determines has met the Candidate Selection
Criteria.  Upon such determination,
Regulus shall seek confirmation by the JSC that such Collaboration Compound
meets the Candidate Selection Criteria. 
The JSC shall review all relevant information and study results
concerning each such proposed Development Candidate, and, if the JSC
unanimously confirms such selection, then (x) such Collaboration Compound
shall be designated a Development Candidate, (y) the Parties shall agree
upon an Early Development Plan for such Development Candidate, and (z) following
JSC approval of such Early Development Plan, the Early Development Program for
such Development Candidate shall commence in accordance with Section 3.5.  If the JSC does not confirm that such
Collaboration Compound meets the Candidate Selection Criteria, then the
procedures set forth in Section 3.4.3 shall apply.


 


3.4.2       Identification
of Back-Up Compounds.  Upon JSC
confirmation of a Development Candidate, Regulus may also identify
Collaboration Compounds as preliminary Back-up Compounds to such Development
Candidate.  With respect to any Back-up
Compound for such Program, if such Back-up Compound has not yet reached the
[***] Stage as of the expiration of the [***] Option Exercise Period with
respect to such Program, Regulus shall have the right, but not the obligation,
to conduct Development activities to advance such Back-up Compound to the [***]
Stage [***].


 


3.4.3       If No
[***] is Selected.  For
clarity, if no Collaboration Compound under a Program meets the [***] Criteria,
or the JSC does not confirm Regulus’ nomination of a Collaboration Compound as
a [***] after completion of the activities outlined in the applicable 


 


37

















 


Research
Plan or otherwise decides to terminate the Program by the end of the Research
Collaboration Term, the Program shall be deemed terminated by the JSC, Regulus
shall not be required to conduct any activities under any Early Development
Program with respect to such Collaboration Target, and the Collaboration
Compounds directed against such Collaboration Target shall be deemed Refused
Candidates and revert to Regulus, subject to Section 4.2.7; provided,
however, that GSK shall have the right to exercise its Terminated
Program Option for any Program in accordance with Section 4.2.3.


 


3.4.4       Preliminary
PoC Plan.  At the time
of, and as part of the process of selection of the Development Candidate as
provided in Section 3.4.1, the Parties, through the JSC and/or JPS, shall
discuss and agree upon the appropriate preliminary development strategy and a
preliminary plan for establishing PoC for such Development Candidate, including
the possible trial design and protocol for the PoC Trial, and estimated
associated costs and timelines, it being understood that such trial design and
timelines are merely provisional and preliminary, and are subject to
modification (the “Preliminary PoC Plan”).  Regulus shall have the right, but not the
obligation, to reasonably rely on such Preliminary PoC Plan in undertaking any
Phase 1 Clinical Trials of such Development Candidate under any Early
Development Program for such Development Candidate.  Notwithstanding the foregoing, and Regulus’
discretion in the overall conduct of the Research Program and Early Development
Programs, the final PoC Criteria and the final PoC Trial for such Development
Candidate shall be subject to the further design of the JPS and the review and
unanimous approval of the JSC as set forth in Section 2.1.6, and any
disputes related thereto shall be resolved in accordance with Section 2.1.7.


 


3.5  Early Development Program;
Early Development Plan.


 


3.5.1       Early
Development Program.  Unless GSK
exercises its [***] Option for a given Research Program within the [***] Option
Exercise Period, Regulus shall proceed with conducting Development activities
directed toward progressing the Development Candidate for such Research Program
through Completion of the PoC Trial, including the conduct of a Phase 1
Clinical Trial and such PoC Trial, in accordance with the Early Development
Plan (“Early Development Program”).  In such case, subject to the oversight of the
JSC and except as may be mutually agreed by the Parties, Regulus shall be
solely responsible for conducting all Development activities set forth in the
Early Development Plan with respect to Collaboration Compounds under each Early
Development Program, and for all costs and expenses associated therewith,
during the Early Development Program Term.  GSK, through the JSC, shall have the right to
provide consultation and advice with respect to such activities, which shall be
considered in good faith by Regulus.


 


38


















 


3.5.2       Early
Development Plan.  Each Early
Development Program will be carried out by Regulus pursuant to an Early
Development Plan, subject to JSC approval and/or amendment as set forth in Section 2.1.6.  The Early Development Plan shall be updated
by Regulus as needed, but at least once Annually and submitted to the JSC for
its review and comment and may be further amended, at any time and from time to
time, by Regulus, to reflect material events or changes under the current Early
Development Plan, subject to JSC approval and GSK final decision-making
authority on the PoC Criteria and the PoC Trial design.  It is expected that the level of detail
required for activities with respect to each Development Candidate will vary
depending on the state of progression of Regulus’ efforts with regard to such
Development Candidate.


 


3.5.3       Substitution
of Development Candidate with Back-Up Compound.  If, at any time during the Early Development
Program prior to initiation of the [***], the Parties mutually agree through
the JSC to substitute for the Development Candidate any Back-up Compound for
further Development, including without limitation mutual agreement in good
faith with respect to the [***] and GSK’s ability to [***], then Regulus shall
undertake such substitution and Development of the Back-up Compound upon such
mutually-agreed terms.


 


3.5.4       Completion
of PoC Trial.  Following
the conduct of the PoC Trial by Regulus for any Development Candidate, Regulus
shall promptly notify GSK in writing thereof and provide to the JSC and GSK the
PoC Trial Report which will initiate the [***] Exercise Period.  Regulus shall endeavor in good faith to
provide GSK with a reasonably accurate estimate of the time that the PoC Trial
Report will be available at least [***] months in advance.  In the event that such estimate of delivery
date is found to be more than [***] months past the estimated date, GSK shall
have a [***] extension for the time allowed hereunder to exercise the PoC
Option.


 


3.5.5       Conduct
of PoC Trial within PoC Financial Cap.  In the event that (a) GSK, in accordance
with Section 2.1.7, exercises its final decision-making authority with
respect to the PoC Criteria or the design, content and end points of any PoC
Trial, and the JSC agrees  (such agreement not to be
unreasonably withheld) that the [***] of such PoC Trial would [***] or  (b) the [***] of such PoC Trial actually [***] except
to the extent due to [***], then, in each case,  (i) Regulus
shall use its Diligent Efforts to conduct such PoC Trial and [***], the amount
of such [***] to be agreed prior to the initiation of the PoC Trial (to the
extent possible), and in such event any [***] on account of such PoC Trial
[***] shall be [***] of GSK arising under the relevant Program hereunder, or (ii) if
Regulus does not have [***] to conduct such PoC Trial which has been [***],
then GSK shall either, such choice to be made at GSK’s sole discretion, 


 


39

















 


(A) agree
to [***] such agreement not subject to [***] in making such decision, the PoC
Trial,  and then [***] as would have been
required of Regulus hereunder, and Regulus shall be required to [***]
attributable to the PoC Trial which would have been equivalent to [***] for
conducting the PoC Trial if a good-faith estimate of such [***] based on the
PoC Trial design, content and end points, plus, the first [***] in PoC Costs of
such PoC Trial, and [***] on account of such PoC Trial above [***] shall be
[***] of GSK arising under the relevant Program hereunder or (B) revise
the PoC Criteria or the design, content and end points of any PoC Trial to
[***].


 


3.6  Regulus Diligence. The common
objective of the Parties is to identify and Develop [***] Collaboration
Compound for each Program for Development and Commercialization as Licensed
Products containing such Collaboration Compound(s) in the Field in the
Territory under the terms of this Agreement. 
Regulus shall use its Diligent Efforts to conduct the identification,
screening, characterization, optimization and other discovery and research
activities in accordance with the Initial Research Plan during the Target
Selection Period, and to carry out and conduct each Research Program and
Development in accordance with the Research Plan, and, if GSK has not exercised
its [***] Option for such Program, each Early Development Program in accordance
with the relevant Early Development Plan during the Program Term.  To that end, Regulus shall dedicate to the
conduct of the initial discovery and research activities under the Initial
Research Plan, and the Development activities under each Program, appropriate
resources and allocate personnel with an appropriate level of education,
experience and training in order to achieve the objectives of this Agreement
efficiently and expeditiously, which resources and personnel shall be
consistent with the applicable requirements of the Initial Research Plan, the
Research Plan and any Early Development Plan and shall be consistent always
with the standard under this Agreement applicable to Regulus for its Diligent
Efforts.  For purposes of clarity,
Regulus shall be deemed to have met its diligence obligation hereunder with
respect to each Program (a) upon achievement of the [***] Stage if GSK
exercises the relevant Program Option at the [***] Stage or (b) if GSK
does not exercise the relevant Program Option before [***], upon Completion of
the PoC Trial and completion of all other activities set forth in the Early
Development Program; provided, however, that the Parties
acknowledge that such clauses (a) and (b) may not be the only proof
that Regulus has met its diligence obligations.


 


3.7  Specific Regulus
Responsibilities.   During the 
Program Term with respect to each Program, and consistent with and
subject to the applicable Research Plan and Early Development Plan (as each
such plan may be updated or amended from time to time hereunder), Regulus shall
be responsible for the following activities.


 


3.7.1       General.  Regulus shall use its Diligent Efforts to:


 


40

















 


(a)              conduct
Development activities to identify, research, optimize, and otherwise Develop
Collaboration Compounds under such Program, including, without limitation,
screening for new Collaboration Compounds against the relevant Collaboration Target
as necessary and conducting medicinal chemistry with respect to a potential
Development Candidate under the Program with the aim of achieving Candidate
Selection Criteria and PoC Criteria;


 


(b)              if GSK has not
exercised the Candidate Selection Option, conduct Pre-Clinical Studies and
Clinical Studies through and including the Completion of the PoC Trial for a
Development Candidate and conduct formulation development of such Development
Candidate for each Program;


 


(c)              provide to the
JSC reasonable progress updates at each Calendar Quarter meeting of the JSC on
the status of each Program, summaries of data associated with Regulus’
Development activities (“Program  Data”), and the likelihood of and general timetable for
completion of such Development activities and advancement of Collaboration
Compounds to the next phase of Development, as applicable;


 


(d)              consider in
good faith all reasonable suggestions received from GSK regarding the Initial
Research Plan and any Research Plan, Research Program, Early Development Plan
and/or Early Development Program; and


 


(e)              perform such
other obligations with respect to each Research Program and each Early
Development Program as the JSC may assign to Regulus from time to time under
the Initial Research Plan and any Research Plan, Research Program, Early
Development Plan and/or Early Development Program.


 


3.7.2       Data
Integrity.


 


(a)              Regulus
acknowledges the importance to GSK of ensuring that the activities under the
Initial Research Plan, Research Programs and any Early Development Programs are
undertaken in accordance with the following good data management practices (“Good Data Management Practices”):


 


(i)            Data are being
generated using sound scientific techniques and processes;


 


(ii)           Data are being
accurately recorded in accordance with good scientific practices by persons
conducting research hereunder;


 


41

















 


(iii)          Data are being
analyzed appropriately without bias in accordance with good scientific
practices;


 


(iv)          Data and
results are being stored securely and can be easily retrieved, and


 


(v)           where, pursuant
to then-existing policies and procedures, Regulus’ senior management documents
in writing its key decisions, it will follow its internal procedures and
policy, so as to demonstrate and/or reconstruct key decisions made by such
senior management during the conduct of the research and development activities
under this Agreement.


 


(b)              Regulus agrees
that it shall carry out the Research Programs, Initial Research Plan, and the
Early Development Programs and collect and record any data generated therefrom
in a manner consistent with the above requirements as set forth in (a) above,
and shall, upon reasonable request by GSK, permit review of relevant notebooks
and records as needed as a result of GSK responsibilities under Article 8
in relation to Prosecution and Maintenance.


 


3.7.3       Regulatory Matters.  During the Collaboration Term, with respect
to any Program for which the Program Options have not yet been exercised or
expired and which Program has not otherwise been terminated, and the
Collaboration Compounds therein, Regulus shall use its Diligent Efforts to:


 


(a)              own and
maintain all regulatory filings filed by or on behalf of Regulus for
Collaboration Compounds Developed pursuant to this Agreement, including all
INDs filed by Regulus.  Upon exercise by
GSK of its Program Option with respect to a Program, Regulus shall transfer to
GSK ownership of such regulatory filings for all Option Compounds Developed
under such Program, as further described in Section 5.3;


 


(b)              report all
adverse drug reaction experiences related to Collaboration Compounds in
connection with the activities of Regulus under this Agreement to the
appropriate Regulatory Authorities in the countries in the Territory in which
such Collaboration Compounds are being Developed, in accordance with the
applicable laws and regulations of the relevant countries and Regulatory
Authorities, and to provide GSK notice of such event and provide copies of all
reports to GSK as promptly as practicable, which GSK shall use solely for
purposes of facilitating GSK’s decision-making with respect to its exercise of
any relevant Program Option hereunder, and for no other purpose unless and
until GSK exercises such Program Option.  Through the JSC, GSK shall have the right,
upon reasonable request, to review from time to time Regulus’ pharmacovigilance
policies and procedures.  GSK and 


 


42

















 


Regulus
agree to cooperate and use good faith efforts to ensure that Regulus’ adverse
event database is organized in a format that is reasonably compatible with GSK’s
adverse event databases.  The Parties
will consider in good faith from time to time whether a safety data exchange
agreement is required.


 


3.7.4       Manufacturing
Obligations.  Regulus
shall [***] use its Diligent Efforts to manufacture pre-clinical supplies and
clinical supplies of Collaboration Compounds, including all bulk drug
substance, for all Pre-Clinical Studies and Clinical Studies, including process
development and scale-up, conducted by Regulus under such Program during the
Program Term for such Program.  At GSK’s request, Regulus shall
also supply to GSK reasonable (as determined by the Joint Steering Committee)
quantities of bulk drug substance for Collaboration Compounds as reasonably
required by GSK for certain supplemental Enabling Studies which GSK may from
time to time undertake pursuant to Section 3.8, unless Regulus is unable
to do so due to [***], provided, that the determination of whether [***] shall
not take into account [***].  Regulus
shall carry out its manufacturing obligations consistent with Regulus’
reasonable internal practices, industry standards, cGMP requirements, and all
applicable laws and regulations.  For
purposes of clarity, upon GSK’s exercise of its Program Option for a Program,
GSK will thereafter be responsible for manufacturing, [***] all pre-clinical,
clinical and commercial supplies of the Option Compounds and related Licensed
Products under such Program, as set forth in Section 4.4.2.  The Parties shall discuss in good faith at
the JSC the manufacturing process as then being used or planned to be used by
Regulus for Collaboration Compounds under each Program well in advance of the
Program reaching the Candidate Selection Stage, in order that, wherever
practical, (a) the Parties can plan together to minimize [***], and (b) the
Parties can [***] for Commercialization by GSK in the event that GSK exercises
its Program Option.


 


3.8  GSK Enabling Studies. GSK shall
have the right at all times during the Research Collaboration Term and during
any relevant Early Development Program Term, to conduct, at its sole cost and
expense, certain reasonable supplemental enabling activities such as additional
formulation development, additional pre-clinical animal studies and/or compound
scale-up (“Enabling Studies”) which GSK
reasonably deems as useful for supplementing pre-clinical and/or clinical
activities conducted by Regulus pursuant to the Research Program and the Early
Development Program and relating to one or more of the Collaboration
Compounds.  At GSK’s request, Regulus
shall offer GSK reasonable cooperation in relation to such Enabling Studies,
including, subject to availability and Section 3.7.4, the transfer of
reasonable quantities of Collaboration Compounds, if necessary.  It is understood and agreed by the Parties
that any such supplemental Enabling Studies are to be conducted by GSK in its
reasonable discretion and not 


 


43

















 


as
part of any Program, Pre-Clinical Study, PoC Trial or other Clinical Study
conducted by Regulus and that Regulus shall not be permitted or required to
delay the progress of any Research Program or Early Development Program to
await the results of any such supplemental Enabling Studies or to transfer any
responsibility to GSK for the conduct of any activities under the Research Plan
or Early Development Plan and that GSK shall not be permitted (without Regulus’
consent) to transfer any responsibility to Regulus for the conduct of any
Enabling Studies.


 


3.9  Cooperation; Exchange of Information.


 


3.9.1       Cooperation. The Parties
agree to cooperate in good faith during the Collaboration Term in identifying
and implementing opportunities to reduce the costs incurred in the conduct of
the Programs, including costs of equipment, consumables such as laboratory
supplies, and Third Party services such as toxicology, clinical studies, drug
substance and drug product process development, or manufacturing services, provided,
that such cooperation does not delay or hamper Regulus in the
performance of its activities thereunder and in no event shall Regulus be
obligated to incur additional costs or expenses as a result of such new
opportunities.  These attempts may
include exploration of [***].


 


3.9.2       Exchange
of Information.  During the
Research Collaboration Term and the Early Development Term, Regulus shall
provide to the JSC reasonable progress updates at each Calendar Quarter meeting
of the JSC on the status of the Research Program for each Collaboration Target
and of the Early Development Programs, summaries of data associated with
Regulus’ research and development efforts and the likelihood of and timetable
for completion of the respective Programs or Development activities and
advancement of Collaboration Compounds to the next phase of research or
Development, as applicable.  Any such
written summaries shall be provided to JSC members at least [***] Business Days
in advance of the upcoming JSC meeting. 
Regulus will use Diligent Efforts to share any data or information, as
well as any correspondence received from or submitted to any Regulatory
Authority, directly relating to Collaboration Compounds that is generated in
the course of Regulus’ activities hereunder, with the JSC, on an ongoing basis,
regardless of whether such data or information would have a positive, neutral
or negative impact on the potential commercial, scientific or strategic value
of such Collaboration Compounds, in order to facilitate GSK’s decision-making
in connection with the exercise of an applicable Program Option and to monitor
Regulus’ obligations during the applicable Program Term.  The provision of all such data or information
shall be performed in a timely matter to accommodate all regulatory deadlines
and ensure compliance with the timelines set forth in any agreed plan.


 


44

















 


3.9.3       Publication
of Clinical Trials Results.  Each of GSK and Regulus shall have the right
to publish summaries of results from any human clinical trials conducted by
such Party under this Agreement, without requiring the consent of the other
Party; provided however that GSK shall have no right, without the consent of
Regulus, to so publish data generated by Regulus prior to GSK’s exercise of its
Program Option with respect to the relevant Collaboration Compounds, and, after
the exercise of its Program Option, GSK shall have the right to so publish any
such existing and future data generated by Regulus or GSK with respect to the
relevant Collaboration Compound(s) without obtaining the consent of
Regulus except with respect to any Refused Candidates, Refused Candidate
Products or Returned Licensed Products. 
In addition, after the exercise of its Program Option by GSK, Regulus
shall not have the right to publish any of such data, without the prior consent
of GSK, for any data pertaining to the relevant Collaboration Compounds, except
(a) with respect to any Refused Candidates, Refused Candidate Products or
Returned Licensed Products and (b) as described in Section 9.2(ii).  The Parties shall discuss and reasonably
cooperate in order to facilitate the process to be employed in order to ensure
the publication of any such summaries of human clinical trials data and results
as required on the clinical trial registry of each respective Party, and shall
provide the other Party via submission to the Joint Patent Subcommittee
established under Section 2.2.2, at least [***] days prior notice to
review the clinical trials results to be published for the purposes of
preparing any necessary Patent Right filings.


 


3.10  Subcontracting.  Each Party shall have the right to engage
Third Party subcontractors and, in the case of Regulus, its Parent Companies,
to perform certain of its obligations under this Agreement; provided that
Regulus shall not have the right to subcontract, in whole or in part, the
discovery, research or optimization of miRNA Antagonists against Collaboration
Targets except to its Parent Companies pursuant to the Services Agreement.  Any subcontractor to be engaged by a Party to
perform a Party’s obligations set forth in the Agreement shall meet the
qualifications typically required by such Party for the performance of work
similar in scope and complexity to the subcontracted activity.  Notwithstanding the preceding, any Party
engaging a subcontractor hereunder (including, without limitation, for the
performance of clinical trials) shall remain responsible and obligated for such
activities and shall in all cases retain or obtain exclusive [***], at the sole
cost and expense of the Party engaging such subcontractor, and any such costs
and expenses [***], unless the JSC agrees, in advance as documented in the
relevant meeting minutes, to engage such subcontractor and to assume the
proposed financial obligations that would result under any agreement with such
subcontractor, in which case the allocation of such costs and expenses between
the Parties shall be governed by [***]. 
To the extent that such exclusive [***] cannot be obtained by Regulus
with respect to 


 


45

















 


[***]
of Regulus, prior to entering into any such arrangement with any such
subcontractor, Regulus shall bring such matter to GSK in writing in a timely
fashion in order to seek the prior written consent from GSK to enter into such
an arrangement, such consent not to be unreasonably withheld.  For clarity, this Section 3.10 shall not
apply to restrict or otherwise limit the rights of GSK to use a subcontractor
after the exercise of its Program Option or the acquisition of exclusive rights
to the Collaboration Compounds of a Program pursuant to the express provisions
of Article 12 for the relevant Program beyond the restrictions and
limitations expressly stated in Section 5.2.2.


 


ARTICLE
4


 


GSK’S
PROGRAM OPTION RIGHTS; EXERCISE OF PROGRAM OPTIONS; 

GSK DILIGENCE


 


4.1  Program Options.


 


4.1.1       Program
Options.  For each Program, Regulus
hereby grants to GSK the exclusive right, exercisable in accordance with this Article 4,
to assume the Development, Manufacture and Commercialization of Collaboration
Compounds Developed under such Program and to obtain the licenses described in Section 5.2
under the terms and conditions set forth in this Agreement (each, a “Program Option”), which right is exercisable, at GSK’s sole
discretion in accordance with the procedures set forth below, (a) at the
[***] Stage (“[***] Option”), (b) if GSK
does not exercise its Candidate Selection Option for a Program, upon Completion
of the PoC Trial (the “[***] Option”)
which may include GSK’s immediate termination of the Leading Compound in
accordance with Section 4.2.4, (c) upon termination of such Program
by the JSC [***],  or otherwise for a termination
of such Program pursuant to Section 3.4.3 on or before the Completion of
the PoC Trial (the “Terminated Program Option”),
or (d) as provided in Section 4.2.5.  For the sake of clarity, the
Program Option may be exercised once per Program, and, upon such exercise, all
Collaboration Compounds under such Program are licensed to GSK under the terms
and conditions set forth in this Agreement. GSK may exercise a Program Option
as permitted herein by providing written notice thereof to Regulus.


 


4.1.2       Upon
Exercise of Program Option.  Upon exercise of a Program Option for a
Program and payment of the Program Option Exercise Fee as set forth in Article 6
(as applicable), GSK shall receive the license grant described in Section 5.2
for all Collaboration Compounds which were Developed pursuant to such Program
and GSK shall be responsible for 


 


46

















 


the
milestone and royalty payments described in Article 6 with respect to such
Collaboration Compounds and related Licensed Products and for diligence obligations
with respect thereto as set forth in Section 4.4.


 


4.1.3       During the
relevant Program Term, Regulus will not grant to any Third Party or to any of
its Parent Companies rights to any Regulus Technology which are inconsistent
with or which would interfere with the grant of the licenses resulting from the
exercise of the Program Options to GSK hereunder.  For the avoidance of doubt, the Parties
understand and agree that GSK’s Program Option rights, as described herein,
shall be exclusive options over the Collaboration Compounds that are the
subject of a given Research Program and/or Early Development Program, and
unless and until such time (if any) as GSK declines to exercise or permits to
lapse all of its pending or outstanding Program Option rights with respect to
any such Research Program or Early Development Programs or the relevant Program
is otherwise terminated, Regulus shall not have the right to offer or negotiate
with any Third Party or any of its Parent Companies with respect to the grant
to such Third Party or Parent Company of any right or license or other
encumbrance of any kind in or to any of such Collaboration Compounds.


 


4.2  Exercise of Program Options.


 


4.2.1       [***] Option.


 


(a)              On a
Program-by-Program basis, Regulus will notify GSK, through the JSC, when it has
Developed a Collaboration Compound that meets the [***] Criteria for nomination
as a Development Candidate, and shall provide to GSK, through the JSC, within
[***] days of such occurrence (to be reasonably extended if impractical depending
on the nature of the Pre-Clinical Studies and the data generated thereunder), a
complete data package containing all material analysis, results and preclinical
data or any related material correspondence or information received from or
sent to any Regulatory Authority relating to the Collaboration Compounds at
issue (the “Candidate Selection Report”), in
each case as would be reasonably expected to be material to assist and enable
GSK to make its decision on whether to elect to exercise its [***] Option with
respect to the Program under which such Development Candidate is
Developed.  In addition, GSK shall have
the right to review, to the extent practical and reasonable, the original
records and documentation containing such material data, results and
information. The JSC shall confirm whether the [***] Criteria have been met.


 


(b)              GSK may
exercise its [***] Option with respect to a Program by delivering to Regulus a
written notice of exercise not later than [***] days (unless extended by the
mutual written agreement of the Parties or as permitted herein pending HSR
clearance by the FTC as set forth in Section 4.2.6) after the date of
receipt by GSK from Regulus of the 


 


47

















 


completed
[***] Report (such [***]-day period, as it may be extended, the “[***] Option Exercise Period”), with respect to the
Collaboration Compound at issue (such date of receipt by GSK, the “[***] Report Date”), specifying the Program for which the
Program Option is being exercised.  After
providing to Regulus such written notice of its election to exercise the [***]
Option, GSK shall, within [***] days of receipt of an invoice therefore from
Regulus, pay the [***] Option Exercise Fee. 
Notwithstanding the foregoing, in GSK’s sole discretion, it shall have
the right to exercise a Program Option prior to the [***] Report Date but
during the [***] Option Exercise Period by providing Regulus written notice
thereof, in which case the Table 1 Rates will still apply to the milestone
payments and royalties owed by GSK to Regulus hereunder.


 


(c)              Notwithstanding
any of the foregoing, if, at any time during the Research Collaboration Term
for a Research Program, the JSC (by mutual agreement) or GSK requests that
Regulus begin a [***] of a Collaboration Compound under such Research Program
prior to Regulus’ notification to GSK of a Collaboration Compound that meets
the [***] Criteria, the [***] Criteria shall be deemed to have been met and,
upon such request, the [***] Option Exercise Period shall begin.


 


4.2.2       PoC Option.


 


(a)              If GSK does not
exercise the [***] Option within the [***] Option Exercise Period, then, on a
Program-by-Program basis, Regulus will continue to use Diligent Efforts to
progress the Program through to the [***]. 
On a Program-by-Program basis, Regulus will notify GSK when it has
completed a PoC Trial with respect to a Development Candidate, and shall
provide to GSK, within [***] days of such occurrence (to be reasonably extended
if impractical depending on the nature of the Clinical Studies, Pre-Clinical
Studies and the other data generated thereunder), a reasonably complete data
package containing all material analysis, results and clinical data or any
related material correspondence or information received from or sent to any
Regulatory Authority relating to the Development Candidate at issue (which data
package need not include any information or data generated in the course of GSK’s
conduct of the PoC Trial, or portion thereof, under Section 3.5.5) (the “[***] Report”, and referred to collectively with the [***]
Report as the “Reports”), in each case as would
be reasonably expected to be material to assist and enable GSK to make its
decision on whether to elect to exercise its [***] with respect to the Program
under which such Development Candidate is Developed. In addition, GSK shall
have the right to review, to the extent practical and reasonable, the original
records and documentation containing such material data, results and
information.


 


48


















 


(b)               GSK may
exercise its [***] with respect to a Program by delivering to Regulus a written
notice of exercise, not later than [***] days (unless extended by the mutual
written agreement of the Parties or as permitted herein pending HSR clearance
by the FTC as set forth in Section 4.2.6) after the date of receipt by GSK
from Regulus of the PoC Trial Report (such [***]-day period, as it may be
extended, the “[***] Exercise Period”), with
respect to the applicable Development Candidate at issue (such date of receipt
by GSK, the “[***] Date”), specifying the
Program for which the Program Option is being exercised, subject to the tolling
of such payment obligation pursuant to Section 4.2.6.  After providing to Regulus such written
notice of its election to exercise the [***], GSK shall, within [***] days of
receipt of an invoice therefore from Regulus, pay the [***] Exercise Fee as
described in Section 6.4. 
Notwithstanding the foregoing, in GSK’s sole discretion, it shall have
the right to exercise a Program Option prior to the [***] Date by providing
Regulus written notice thereof.


 


4.2.3       Terminated
Program Option. Subject to GSK’s obligation to pay milestones and
royalties pursuant to Section 6.4, subject to Section 6.5.3, Section 6.6.1(d) and
Section 6.6.2, GSK shall have the right to exercise its Terminated Program
Option for a Program by providing Regulus written notice within an exercise
period of [***] days (extendable to [***] days at GSK’s request if made within
such initial [***] day period) after the provision of a data package to GSK by
Regulus (comparable to the [***] Report) for a terminated Program in accordance
with GSK’s Terminated Program Options as described under Section 4.1.1
(the “Terminated Program Option Report”); provided,
that GSK’s obligation to pay Regulus milestones and royalties shall
vary, as set forth in Section 6.4, subject to Section 6.5.3, Section 6.6.1(d) and
Section 6.6.2, depending on the stage of Development at which the
termination occurred.


 


4.2.4       Program
Option Upon Completion of the [***] where the Leading Compound is immediately
terminated. If GSK exercises its
Program Option in accordance with Section 4.2.2 after Completion of the
[***] for a Leading Compound under a Program but immediately terminates the
Leading Compound in order to progress a Back-up Compound under the same Program
(provided that GSK provides written notice to Regulus of such decision along
with or within [***] Business Days of notice of GSK’s exercise of its Program
Option), then GSK shall
pay Regulus the royalties and milestones in accordance with the applicable
[***] provided, however, that, if GSK later undertakes the Development or
Commercialization of such terminated Leading Compound, then GSK shall thereafter pay Regulus the applicable
royalties and milestones in accordance with the [***] with respect to all
Licensed Products under the relevant Program, except that, with respect to any
Milestone Event which had already been achieved by a Back-up Compound under
such Program for which GSK had already paid Regulus 


 


49

















 


the relevant milestone payment in accordance with
the [***], then, as such terminated Leading Compound (or another Option
Compound) achieves such Milestone Event, GSK shall pay to Regulus the
difference between the [***] and the [***] with respect to such Milestone
Event.


 


4.2.5       Early
Program Option Exercise.  For
purposes of clarity, upon exercise of any Program Option by GSK hereunder, GSK
shall pay Regulus the Program Option Exercise Fee applicable to the exercise of
such Program Option (as applicable), in addition to any other milestones and
royalties which may be due in the future as a result of the Development and/or
Commercialization of the Option Compounds and related Licensed Products by GSK
and/or its Affiliates and Sublicensees.  Notwithstanding any of the foregoing, regardless
of whether or not the Development activities or stages necessary to trigger a
particular Program Option for a Program have been completed or achieved (e.g., regardless of whether a Collaboration Compound
Developed under a Program has qualified as a Development Candidate or has
satisfied the [***] Criteria, or [***] has occurred for such Collaboration
Compound), GSK shall have the right, at any time prior to the completion of
such Development activities which might otherwise trigger a particular Program
Option (but in no event after the end of the Option Period that would otherwise
apply with respect to such Program Option), to exercise its Program Option early
for such Program by paying Regulus (or its successors or assigns) the Program
Option Exercise Fee in accordance with the provisions of  Section 6.5.5
depending upon the time at which GSK exercises its Program Option and the
remaining milestone and royalty obligations shall be payable in accordance with
Section 6.5.5, Section 6.6.1(f) and Section 6.6.2,
depending on the time that GSK exercises its Program Option.


 


4.2.6       HSR;
Option Period Extension.  In
the event that GSK reasonably determines in good faith that the exercise of any
Program Option by GSK under this Agreement requires a filing with the Federal
Trade Commission and the Department of Justice, as applicable, (collectively,
the “FTC”) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (15 U.S.C. §18a) (“HSR”),
or any successor thereto or under any similar premerger notification provision
in the EU or other jurisdiction, GSK shall make such filing [***], and the
Option Period applicable to such Program Option shall be extended automatically
for [***] from the expiration of the original Option Period (the “Option Period Extension”) in the event that: (a) the
HSR initial waiting period is still pending upon expiration of the original
Option Period; or (b) a “Second Request” that GSK intends to respond to is
received from the FTC in connection with such filing and final clearance has
not been granted upon expiration of the Option Period; provided, that if the
HSR initial waiting period ends during the original Option Period, such Option
Period shall be extended for no more than an additional [***] following the end
of such HSR initial waiting period. 
During such Option Period Extension, all rights and 


 


50

















 


obligations
of the respective Parties related to the exercise of such Program Option or to
make any otherwise required Program Option Exercise Fee payment shall be
tolled.  In the event that HSR clearance
has still not been granted upon expiration of the Option Period Extension,
Regulus and GSK shall promptly meet to discuss in good faith whether an
additional extension of the Option Period is reasonable, with the presumption
being that the Option Period shall be extended for no more than an additional
[***] period, unless there is no [***], in which case no such extension shall
be granted.


 


4.2.7       Refused
Candidates.  If GSK does not
exercise its Program Option for a Program when triggered within the applicable
Option Period, as may be extended by Section 4.2.6 or by the mutual
written agreement of the Parties, and GSK has not exercised its Program Option
early pursuant to Section 4.2.5, and does not exercise any of its
Terminated Program Options under Section 4.2.3, then such Program Option
shall expire with respect to such Program and except if the expired Program
Option is a [***] Option (in which event Section 4.2.2(a) shall
apply), and then, except if GSK acquires exclusive license rights to the
relevant Collaboration Compounds under the applicable termination provisions of
Article 12, any Collaboration Compounds resulting from such Program shall
be referred to as “Refused Candidates”
and any Licensed Products having any such Refused Candidate(s) as an
active pharmaceutical ingredient(s) as “Refused
Candidate Products” and GSK shall no longer have any rights with
respect to such Refused Candidates and Refused Candidate Products.  Regulus will thereafter have all rights as
set forth in Section 12.1.5(c), itself or with a Third Party or through a
Sublicensee and without regard to Article 7 (except to the extent set
forth in Section 12.1.5(c)), to Develop, Manufacture and Commercialize the
Refused Candidates and any Refused Candidate Products at Regulus’ sole expense,
and Regulus shall no longer have any obligations with respect to such Refused Candidates
and any Refused Candidate Products other than the Reverse Royalty payment
obligation to GSK as set forth in Section 6.7 and Section 12.1.5(c).  In addition, Regulus will take responsibility
for all licensing costs and payments incurred by GSK after the date that such
Collaboration Compounds became Refused Candidates or Refused Candidate Products
and that are owed by GSK to Third Parties (excluding any costs that were
already due as payable by GSK as of the date that such Collaboration Compounds became
Refused Candidates or Refused Candidate Products) as a result of the practice
of intellectual property licensed from any such Third Parties in the
Development, Manufacture and/or Commercialization of Refused Candidates and
Refused Candidate Products hereunder, including, without limitation, all
upfront fees, annual payments, milestone payments and royalty payments to the
extent allocable to such Refused Candidates and Refused Candidate Products. For
clarity, any such costs and payments shall only include the share of such costs
and payments 


 


51

















 


attributable
to such Refused Candidates and Refused Candidate Products and not to any other
compounds licensed by GSK.  For purposes
of clarity, upon reversion of such rights to Regulus with respect to any
Refused Candidates or Refused Candidate Products hereunder, such Refused
Candidates shall no longer be deemed Option Compounds and/or Collaboration
Compounds and such Refused Candidate Products shall no longer be deemed
Licensed Products, in each case to which GSK has any rights under this
Agreement, except that, upon the exercise by GSK of any Terminated Program
Option under Section 4.2.3 or early exercise of a Program Option under Section 4.2.5,
this Section 4.2.7 shall not apply.


 


4.2.8       Right
to Exercise Program Options for Development Candidates after Expiration of the
Research Collaboration Term. For clarity, it is understood and agreed by the Parties
that, with respect to each Collaboration Target, GSK’s rights to
exercise its Program Option with respect to any Collaboration Compounds that
are at the [***] Stage or later but have not yet completed or entered an Early
Development Program at the time of expiration of the Research Collaboration
Term, shall remain exercisable in accordance with this Article 4 until
termination of the last to expire Option Period with respect to such Program,
unless such Program is earlier terminated as provided hereunder.


 


4.3  Activities Post-Option
Exercise by GSK.


 


4.3.1       Commencement
of Activities. As soon as practicable after the exercise by GSK
of a Program Option for a Program and receipt from Regulus of the information
and materials set forth in Sections 5.3.1 and 5.3.2, GSK shall promptly
commence and pursue a program of ongoing Development and Commercialization for
the Option Compounds under such Program, in accordance with GSK’s diligence
obligations set forth below.  GSK shall
be solely responsible for all Development and Commercialization activities, and
for all [***] associated therewith, with respect to the Development,
Manufacture and Commercialization of Option Compounds and related Licensed
Products of a Program, following exercise of its Program Option for such
Program.


 


4.3.2       Returned
Licensed Products. In the event that GSK exercises its Program Option
for a Program and thereafter determines in good faith, for any reason, to cease
the Development and Commercialization of all Option Compounds and related
Licensed Products, on a Collaboration Target-by-Collaboration Target basis, or
GSK’s rights to such Option Compounds and related Licensed Products terminates
for any reason other than as a result of the termination of this Agreement by
GSK for Regulus’ uncured material breach under Section 12.2 or for Regulus’
insolvency under Section 12.6, or a termination by the JSC [***] for
scientific or safety concerns pursuant to Section 12.5, then each Option
Compound and related Licensed 


 


52

















 


Product
resulting from such Program shall thereafter be referred to as a “Returned Licensed Product”, and GSK shall no longer have any
rights with respect to such Returned Licensed Product, except for the right to
receive Reverse Royalties under Section 6.7 (except to the extent
otherwise expressly set forth in Article 12).  Regulus will thereafter have all rights as
set forth in Section 12.7.1, 12.7.2 or 12.7.4, as applicable, itself or
with a Third Party or through a Sublicensee and without regard to Article 7,
to Develop, Manufacture and Commercialize the Returned Licensed Products at
Regulus’ sole expense, and Regulus shall have no obligations with respect to
such Returned Licensed Products other than the Reverse Royalty payment
obligation to GSK as set forth in Section 6.7 (except to the extent
otherwise expressly set forth in Article 12). In addition, Regulus will
take responsibility for all licensing costs and payments incurred by GSK after
the date that such Collaboration Compounds became Returned Licensed Products
and that are owed by GSK to Third Parties (excluding any costs that were
already due as payable by GSK as of the date that such Collaboration Compounds
became Returned Licensed Products) as a result of the practice of intellectual
property licensed from any such Third Party in the Development, Manufacture
and/or Commercialization of Returned Licensed Products hereunder, including,
without limitation, all upfront fees, annual payments, milestone payments and
royalty payments to the extent allocable to such Returned Licensed Product.  For clarity, any such costs and payments
shall only include the share of such costs and payments which is attributable
directly to such Returned Licensed Products and not to any other compounds
licensed by GSK.  For purposes of
clarity, upon reversion of such rights to Regulus with respect to any Returned
Licensed Products hereunder, such Returned Licensed Products shall no longer be
deemed Option Compounds and/or Licensed Product to which GSK has any rights
under this Agreement.  For purposes of
clarity, upon the exercise by GSK of any Terminated Program Option under Section 4.2.3,
or the termination of a Program otherwise under Section 3.4.3 or the early
exercise of a Program Option under Section 4.2.5, this Section 4.3.2
shall not apply.


 


4.4  GSK Diligence;
Responsibilities.


 


4.4.1       GSK
Diligence.  GSK shall
exercise its Diligent Efforts in Developing and Commercializing at least one
Licensed Product in the Field [***] for each Program for which GSK exercises
the Program Option.  For purposes of
clarity, (a) GSK shall not be required to Develop and Commercialize, with
respect to a Program, more than one Option Compound  resulting from a Program, provided, that
GSK exerts its Diligent Efforts to Develop and Commercialize at least one
Option Compound resulting from such Program, and (b) following GSK’s
exercise of its Program Option for a Program, GSK may, in its sole discretion,
substitute the Leading Compound with another Option Compound Developed in the
same Program or Develop and Commercialize other Option Compounds resulting from
such Program, provided, 


 


53

















 


that GSK exerts
Diligent Efforts to Develop and Commercialize such Back-up Compound or other
Option Compound as the new Leading Compound in a manner that is consistent
always with the standard under this Agreement applicable to GSK for its
Diligent Efforts.  Notwithstanding the
above or any provision or interpretation of this Agreement to the contrary, GSK
shall have no obligation to exercise its Diligent Efforts with respect to any
Program for which GSK has exercised a Terminated Program Option or which has
otherwise been terminated and to which GSK acquires exclusive rights to Develop
and Commercialize the Collaboration Compounds resulting from such Program under
Article 12.


 


4.4.2       Specific
GSK Responsibilities.  Without
limiting any of the foregoing, following the exercise of a Program Option for a
Program hereunder, GSK shall use its Diligent Efforts to:


 


(a)              conduct all
Pre-Clinical Studies and Clinical Studies on the Option Compounds, as deemed
necessary or desirable by GSK, in accordance with this Section 4.4.2;


 


(b)              conduct
additional formulation Development of the Option Compounds as and if deemed
necessary or appropriate by GSK;


 


(c)              provide to the
JSC reasonable progress updates at each regular meeting of the JSC on the
status of GSK’s Development efforts with respect to the Option Compounds and
related Licensed Products;


 


(d)              prepare and
file all regulatory filings for the Option Compounds or related Licensed
Products, including all NDAs;


 


(e)              Manufacture or
have Manufactured (including process development and scale up) all bulk drug
substance or drug product material with respect to the Option Compounds and
related Licensed Products for ongoing Development and Commercialization
requirements, consistent with GSK’s reasonable internal practices, industry
standards and all applicable laws and regulations;


 


(f)               own and
maintain all NDAs, Regulatory Approvals and other regulatory filings and approvals,
and all brands and trademarks for any resulting Licensed Products in the Field
in the Territory;


 


(g)              maintain a
safety database with respect to all Option Compounds and related Licensed
Products Developed and Commercialized by GSK, and report all adverse drug
reaction experiences related to such Option Compounds and Licensed Products in
connection with the activities of GSK under this Agreement to the appropriate
Regulatory Authorities in the countries in the Territory in which the Option
Compounds and Licensed 


 


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Products
are being Developed and Commercialized, in accordance with applicable laws and
regulations of the relevant countries and Regulatory Authorities and in
accordance with GSK’s internal policies; and


 


(h)              conduct, at
[***] all Commercialization activities in connection with the sales of Licensed
Products.


 


ARTICLE
5


 


GRANT
OF LICENSE RIGHTS; TECHNOLOGY TRANSFER


 


5.1  License Grants to Regulus.


 


5.1.1       Development
License.  GSK hereby grants to Regulus a
[***] license, which shall not be sublicenseable without the prior written
consent of GSK (except such consent shall not be required for a sublicense to
the Parent Companies solely to the extent necessary for Regulus to perform its
obligations for a Program hereunder), under the GSK Technology and GSK’s rights
to the Collaboration Technology, solely to the extent necessary for Regulus to
perform its obligations hereunder during the Collaboration Term.


 


5.1.2       License
to Refused Candidates and Refused Candidate Products.  GSK hereby grants to Regulus, (a) subject
to obtaining HSR clearance (if Regulus reasonably determines in good faith that
such grant of license requires an HSR filing), (b) conditional upon (i) the
expiration of all applicable Program Options without GSK’s exercise thereof as
set forth in Section 4.2.7, and subject to the payment by Regulus of the
Reverse Royalty to GSK as set forth in Section 12.1.5(c), or (ii) the
termination of the Agreement with respect to any Program(s) without GSK’s
exercise of any Program Options for such Program(s) on or before the end
of the applicable [***] Option Exercise Period, by GSK pursuant to Section 12.3
or by Regulus pursuant to Section 12.2, 12.4 or 12.6, and subject to the
payment by Regulus of the Reverse Royalty to GSK as set forth in Section 12.7.1,
12.7.2, 12.7.4 or 12.7.7, as applicable, and (c) subject to Section 12.7.4(b),
an exclusive license in the relevant country(ies) of the Territory, as
applicable, under the GSK Technology which was used in connection with the
Program, if any (unless the Parties have mutually agreed to exclude it), and
any GSK Technology covering a [***] with respect to a specific Collaboration
Target that is the subject of such Program, and GSK’s rights to the Collaboration
Technology, solely to the extent necessary to Develop, Manufacture and
Commercialize all Refused Candidates and Refused Candidate Products in the
Field in the Territory.  The license
granted under this Section 5.1.2 shall [***] by Regulus (in accordance
with Section [***], its Affiliates and Sublicensees in connection with the



 


55

















 


further
Development, Manufacture or Commercialization of such Refused Candidates and
Refused Candidate Products.


 


5.1.3       License
to Returned Licensed Products. GSK hereby grants to
Regulus, (a) subject to obtaining HSR clearance (if Regulus reasonably
determines in good faith that such grant of license requires an HSR filing), (b) conditional
upon the termination of the Agreement with respect to any Program(s) after
the exercise by GSK of its Program Option with respect to such Program on or
before the end of the applicable PoC Program Option Exercise Period, by GSK
pursuant to Section 12.3 or by Regulus pursuant to Section 12.2, 12.4
or 12.6, and subject to the payment by Regulus of the Reverse Royalty to GSK as
set forth in Section 12.7.1, 12.7.2, 12.7.4 or 12.7.7, as applicable, and (c) subject
to Section 12.7.4(b), an exclusive license in the relevant country(ies) of
the Territory, as applicable, under the GSK Technology which was used in
connection with the Program or in connection with the Option Compounds or
Licensed Products resulting from the Program, if any (unless the Parties have
mutually agreed to exclude it), and any GSK Technology covering a [***] with
respect to a specific Collaboration Target that is the subject of such Program,
and GSK’s rights to the Collaboration Technology, solely to the extent
necessary to Develop, Manufacture and Commercialize all Returned Licensed
Products in the Field in the Territory. 
The license granted under this Section 5.1.3 shall be [***] by
Regulus (in accordance with Section [***]), its Affiliates and
Sublicensees in connection with the further Development, Manufacture or Commercialization
of such Returned Licensed Products.  For
clarity, this provision shall not apply to any scenario wherein, as the result
of termination of a Program under the applicable provisions of Article 12,
GSK obtains exclusive license rights to the relevant Collaboration Compounds of
a Program.


 


5.1.4       Sublicense
Rights.  As set forth in Sections 5[***]
subject to Section 12.7.4(b), Regulus shall have the right to grant
certain sublicenses; provided, that, each such sublicense shall
be subject and subordinate to, and consistent with, the applicable terms and
conditions of this Agreement.  Regulus
shall provide GSK with a copy of any sublicense granted pursuant to Sections
5.1.2 or 5.1.3 within thirty (30) days after the execution thereof.  Such copy may be redacted to exclude
confidential scientific information and other information required by a
Sublicensee to be kept confidential; provided, that for
Agreements entered into by Regulus after the Effective Date, [***],  Regulus will [***] obtain the consent to
disclose relevant material financial terms and material non-technical
information to the extent required by GSK. 
GSK may share such copy or information with its Affiliates and relevant
Third Party licensors under obligations of confidentiality which are no less
strict than the confidentiality obligations imposed upon GSK hereunder.  Regulus will remain responsible for the
performance of its 


 


56

















 


Affiliates
and Sublicensees, and will ensure that all such Affiliates and Sublicensees
comply with the relevant provisions of this Agreement.


 


5.1.5       Retained
Rights.  All rights in and to GSK
Technology and GSK’s rights in Collaboration Technology not expressly licensed
to Regulus hereunder, and any other Patent Rights or Know-How of GSK or its
Affiliates, are hereby retained by GSK or such Affiliate.


 


5.2  License Grants to GSK.


 


5.2.1       Development
and Commercialization License. On a Program-by-Program
basis, subject to the terms and conditions of this Agreement (including without
limitation Section 12.7.3(d)) and the Third Party and Parent-Originated
Rights and Obligations, solely upon GSK’s exercise of any of its Program
Options in accordance with the provisions of Article 4 or by operation of
the applicable termination provisions of Article 12 wherein the effect of
such termination is the grant of an exclusive license to GSK under this Section 5.2,
and solely with respect to the Collaboration Compounds, Option Compounds and
Licensed Products under the Program for which GSK exercises its Program Option
or to which such Program termination under Article 12 applies, Regulus
hereby grants to GSK, effective as of the date of such exercise of the relevant
Program Option (except to the extent set forth in Section 12.7.3(d)) or
the date of operation of such provision under Article 12, a worldwide,
exclusive, royalty-bearing (only in accordance with Section 6.6.1 and Section 6.6.2
and subject to Sections 12.7.3(a), 12.7.3(b), 12.7.3(c), 12.7.5 and 12.7.7(d)),
sublicenseable (in accordance with Section 5.2.2 below) license in the
Field, under the Regulus Technology and Regulus’ rights under any Collaboration
Technology,


 


(a)              to Develop
miRNA Compounds and miRNA Therapeutics,


 


(b)              to Manufacture
miRNA Compounds and miRNA Therapeutics, and


 


(c)              to
Commercialize miRNA Compounds and miRNA Therapeutics.


 


5.2.2       Sublicense
Rights.  Subject to Third Party and
Parent-Originated Rights  and
Obligations and to the terms and conditions of this Agreement (including
without limitation Section 12.7.3(d)), GSK shall have the right to grant
to its Affiliates and/or Third Parties sublicenses under the licenses granted
under Section 5.2.1 above; provided, that, each such
sublicense shall be subject and subordinate to, and consistent with, the applicable
terms and conditions of this Agreement. 
[***]; provided, that for Agreements that are entered into
by GSK or its Affiliates after the Effective Date, where GSK has or can readily
[***] under obligations of confidentiality which are no less strict than the
confidentiality obligations imposed upon Regulus 


 


57

















 


hereunder.  GSK will remain responsible for the
performance of its Affiliates and Sublicensees, and will ensure that all such
Affiliates and Sublicensees comply with the relevant provisions of this
Agreement.


 


5.2.3       Trademarks
for Licensed Products.  If
GSK has exercised its Program Option with respect to a Program hereunder, to
the extent that Regulus owns any trademark(s) which were used prior to the
exercise of the Program Option by GSK that are specific to any Option Compound
Developed under such Program and GSK reasonably believes such trademark(s) would
be reasonably necessary or useful for the marketing and sale in the Field in
the Territory of such Option Compound or related Licensed Products, Regulus
shall, upon GSK’s request [***], assign its rights and title to such trademark(s) to
GSK reasonably in advance of the First Commercial Sale of such Licensed
Products.  Other than the trademarks described
above which are owned by Regulus prior to the exercise of a Program Option by
GSK, the Commercializing Party shall be solely responsible for developing,
selecting, searching, registration and maintenance of, and shall be the
exclusive owner of all trademark(s), trade dress, logos, slogans, designs,
copyrights and domain names used on and/or in connection with any of the Option
Compounds and Licensed Products resulting from a Program.


 


5.2.4       Retained
Rights.  The exclusive license granted
to Regulus by Alnylam pursuant to Section 2.2(a) of the Regulus
License Agreement is subject to Alnylam’s retained right to [***] in the
Alnylam Field (each as defined in the Regulus License Agreement).  The exclusive license granted to Regulus by
Isis pursuant to Section 2.2(a) of the Regulus License Agreement is
subject to Isis’ retained right to [***] in the Isis Field (each as defined in
the Regulus License Agreement).  All
rights in and to Regulus Technology and Regulus’ rights in Collaboration
Technology not expressly licensed to GSK hereunder or pursuant to the operation
of the relevant applicable express provisions of this Agreement, and any other
Patent Rights or Know-How of Regulus or its Parent Companies or Affiliates, are
hereby retained by Regulus or such Parent Company or Affiliate.


 


5.3  Technology Transfer after Exercise by GSK of
a Program Option.


 


5.3.1       Generally.  After GSK exercises its Program Option for a
Program hereunder, and during a period not to exceed [***] thereafter, Regulus
shall promptly deliver to GSK, at no cost to GSK (except as set forth in Section 5.3.2
below), all Regulus Technology and Regulus Collaboration Technology in Regulus’
possession or Control relating to the Option Compounds Developed under such
Program, including, but not limited to (a) information regarding the bulk
drug substance and methods of manufacturing the same, including bulk and final
product manufacturing processes, manufacturing data, batch records, vendor
information 


 


58

















 


and
validation documentation, which is necessary or useful for the exercise by GSK
of the Manufacturing rights granted under Section 5.2.1, (b) pre-clinical
and clinical data and results (including pharmacology, toxicology, emulation
and stability studies), adverse event data, protocol results, analytical
methodologies, (c) copies of patent applications and patents included
within Regulus Patents and Regulus Collaboration Patents and other relevant
patent information, (d) regulatory filings (including all relevant INDs
and Regulatory Approvals), regulatory documentation, regulatory correspondence,
and applicable reference standards; and (e) bulk drug substance or other
materials, including drug substance, drug product and intermediate stocks,
reference standards and analytical specification and testing methods used to
Manufacture the applicable Option Compounds, as further described in and
subject to Section 5.3.2 below.  All
information should be supplied to GSK in electronic format to the extent possible.  Without limiting the foregoing, Regulus shall
use Diligent Efforts to perform the transfer of such information and materials
to GSK in an orderly manner and without undue interruption of GSK’s Development
of Option Compounds and related Licensed Products hereunder, and, upon delivery
of such information and materials to GSK, GSK shall use Diligent Efforts to
promptly implement such information and materials into its Development and
Commercialization activities with respect to such Option Compounds and related
Licensed Products hereunder.  For the
avoidance of doubt, the obligation on Regulus to deliver to GSK all Regulus
Technology and other Know-How and information in accordance with this Section 5.3.1
shall include (i) the procurement of any Regulus Technology in the
possession of any Regulus Affiliate or Parent Company engaged by Regulus as a
subcontractor in accordance with Section 3.10 and (ii) the use of
Diligent Efforts to procure any Regulus Technology in the possession of any
Third Party subcontractor engaged by Regulus as a subcontractor in accordance
with Section 3.10.


 


5.3.2       Certain
Regulus Responsibilities. 
After exercise by GSK of a Program Option, within the [***] month period
set forth in Section 5.3.1, Regulus shall use its Diligent Efforts to:


 


(a)              transfer to
GSK, at no cost to GSK, ownership of all relevant  regulatory filings relating to the applicable
Option Compounds, including all INDs, to the extent permitted under applicable
law; provided, that, at GSK’s reasonable discretion if no such
transfer is reasonably practical, then Regulus shall grant to GSK a right of
reference to such regulatory filings; and


 


(b)              at GSK’s
request, transfer to GSK or its designee, subject to the payment [***] then
existing supplies, which are deemed suitable by GSK, of such Option Compounds,
including Back-up Compounds and other Collaboration Compounds under such 


 


59

















 


Program,
and the Parties will use good faith efforts to work together to have any Third
Party manufacturing arrangements solely covering the Manufacture of such Option
Compounds assigned to GSK (it being understood that no such assignment shall be
required if such assignment is conditional upon [***]).  If such bulk drug substance or other
materials are not in Regulus’ possession and Control or are not reasonably
transferable, Regulus shall provide notice to GSK and, upon reasonable request
by GSK, use good faith efforts to assist GSK in obtaining access to such
materials.


 


5.3.3       Continuing
Cooperation. For a [***] month period and thereafter for such
time as is reasonably requested by GSK acting in good faith to transfer and
reproduce the Manufacturing process for the Option Compounds after the transfer
described in Section 5.3.1 and 5.3.2 above, Regulus shall use reasonable
efforts, which shall not exceed the equivalent of [***] (unless mutually agreed
by the Parties where reasonably necessary), to cooperate fully with GSK to
conduct any additional transfer of the Manufacturing process for the Option
Compounds to GSK or to a Third Party as nominated by GSK and to provide GSK
with any other Regulus Technology or Regulus Collaboration Technology, as it
may be developed or identified to which GSK has a right or license under this
Agreement that is necessary or useful for GSK to further Develop, Manufacture,
Commercialize or otherwise exploit the progression of Collaboration Compounds
into Licensed Product(s) as permitted under this Agreement.


 


5.3.4       Additional
Services.  In the
event that GSK reasonably requests Regulus to provide GSK with any materials or
services beyond those set forth in Sections 5.3.1, 5.3.2, and 5.3.3, such
materials and/or services may be scheduled and provided by Regulus to GSK on
such terms and conditions as may be mutually agreed between the Parties at the
time of any such request, if the Parties mutually desire to engage in the
transfer or provision of such additional materials or services.


 


ARTICLE
6



MILESTONES AND ROYALTIES; PAYMENTS


 


6.1  Upfront Payment to Regulus.  In partial consideration for GSK’s Program
Options hereunder, GSK shall pay to Regulus, by wire transfer of immediately
available funds to an account designated by Regulus in writing, a one-time-only
initial non-refundable, non-creditable fee of Fifteen Million U.S. Dollars
($15,000,000) no later than [***] Business Days after receipt by GSK of an
invoice sent from Regulus on or after the Effective Date of this Agreement (the
“Upfront Payment”).


 


6.2  Purchase of Regulus
Promissory Note.  GSK agrees
to lend Regulus Five Million Dollars ($5,000,000).  The loan shall be evidenced by a convertible
promissory note, in the form 


 


60

















 


of
the Convertible Promissory Note, attached hereto as Exhibit H.  Within [***] Business Days of the date on or
after the Effective Date that GSK receives an invoice from Regulus therefor, (a) GSK
shall pay Regulus Five Million Dollars ($5,000,000) by wire transfer of
immediately available funds to an account designated by Regulus in writing and (b) Regulus
shall deliver to GSK the Convertible Promissory Note in the amount of Five
Million Dollars ($5,000,000).


 


6.3  Program Option Exercise Fees.  Upon the exercise by GSK of its Program
Option for a given Program in accordance with the provisions of Section 4.2,
GSK shall pay to Regulus the applicable Program Option Exercise Fee as shown in
the table in Section 6.4 within [***] days of receipt by GSK of an invoice
sent from Regulus on or after the date that Regulus receives written notice
from GSK of GSK’s decision to exercise its Program Option.


 


6.4  Milestone Payments for
Achievement of Milestone Events.  GSK shall pay to Regulus the applicable
milestone payments as set forth in the table below in this Section 6.4
after written notice of the achievement by or on behalf of Regulus or GSK (as
applicable) is provided to the other Party of each of the listed events (each,
a “Milestone Event”) and within [***] days
of receipt by GSK of an invoice sent from Regulus on or after the date of achievement
of such Milestone Event. GSK shall send Regulus a written notice thereof
promptly following the date of achievement of each Milestone Event by or on
behalf of GSK.


 


	
   

  	
   

  	
  GSK exercises its

  Program Option at

  [***] Stage

  (“Table 1 Rates”)

  	
   

  	
  

  (“Table 2 Rates”)

  	
   

  	
  GSK exercises its

  Program Option at

  [***]

  (“Table 3 Rates”)

  	
   

  
	
  Milestone Event

  	
   

  	
  US$Million (“m”)

  	
   

  	
  US$Million (“m”)

  	
   

  	
  US$Million (“m”)

  	
   

  
	
  Development Milestone Events:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]*

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reaching [***]*

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]**

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]**

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]***

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***] Milestone Events:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL Potential Milestones

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 


61


















 


*These
milestones are payable upon achievement of the event, regardless of whether
[***] or not.


 


The [***] Milestone Event shall occur upon [***]
that the Discovery Milestone has been met.


 


**For
each of these milestones, GSK pays the Table 1 Rate or Table 2 Rate, as
applicable, if GSK achieves the Milestone Event (i.e., if GSK had exercised its
Program Option at [***] Stage or otherwise prior to [***]) or the Table 3 Rate
if Regulus achieves the Milestone Event (i.e., if GSK had not so exercised its
Program Option but Regulus continued developing the Collaboration Compound).


 


***This
milestone is only payable where GSK exercises the Program Option prior to
[***].  This Milestone Event will be met
as determined by GSK; provided, however, that the Milestone Event will be
deemed to have been met if, after conducting a [***], GSK moves the relevant
Program forward through clinical development by Initiating either a [***] with
respect to such Program.  In addition, if
GSK has not [***] but has not terminated the Program and returned the
Collaboration Compounds under such Program to Regulus as Returned Licensed
Products, then this Milestone Event will be deemed to have been met.


 


6.5  Limitations on Milestone
Payments


 


6.5.1       No milestone
payments are owed for any Milestone Event that is not achieved and in the case
where one Option Compound or Licensed Product is substituted for another, then
the milestones payable with respect to the new Option Compound or Licensed
Product are only for future Milestone Events.


 


6.5.2       Each milestone
will be paid only once per Program upon the first achievement of the Milestone
Event, regardless of the number of Option Compounds or Licensed Products
resulting under the Program, and regardless of whether any such Option Compound
or Licensed Product constitutes a [***] product or any combination of the
foregoing.  The Discovery Milestone will
be paid a maximum of [***] times, once for each of the [***] Programs, upon the
first achievement of such Milestone Event for each Program, and will not be
paid again for the Initial Collaboration Targets in the event that either or
both such Initial Collaboration Targets are substituted with other Targets
pursuant to Section 3.2.


 


6.5.3       Notwithstanding
any of the foregoing, upon GSK’s exercise of a Terminated Program Option
pursuant to Section 4.2.3:


 


62

















 


(a)               before the
achievement of the [***], GSK shall pay Regulus milestones at [***] of the
[***] set forth above;


 


(b)               after the
achievement of the [***] but prior to the [***] for such Program, then GSK
shall pay Regulus milestones at [***] set forth above; and


 


(c)               after [***] for
such Program, but prior to the [***], then GSK shall pay Regulus milestones at
[***] set forth above.


 


6.5.4       If GSK exercises
its Program Option after [***] by the Leading Compound under the Program but
GSK immediately substitutes such Leading Compound by a Back-up Compound under
such Program in accordance with Section 4.2.4, then GSK shall pay Regulus
milestones at the [***] set forth above, except as set forth in Section 4.2.4.


 


6.5.5       Upon GSK’s
exercise of a Program Option pursuant to Section 4.2.5:


 


(a)               before the
achievement of [***], GSK shall pay Regulus milestones at the [***] set forth
above;


 


(b)               after the achievement
of [***] but prior to the [***] for such Program, then GSK shall pay Regulus
milestones at the [***] Rates set forth above; and


 


(c)               after [***] for
such Program, but prior to the [***], then GSK shall pay Regulus milestones at
the [***] set forth above.


 


6.5.6       For purposes of
clarity, milestones shall be payable by GSK to Regulus under Section 6.4,
subject to Section 6.5 and Article 12, with respect to the
achievement of any Milestone Event set forth in Section 6.4 by a
Collaboration Compound for [***] in the Field, to the same extent as would be
payable with respect to the achievement of such Milestone Event by a
Collaboration Compound or Licensed Product for [***] Indication hereunder.  With respect to any Collaboration Compound or
Licensed Product for use as an [***] product in the Field, the Parties shall
negotiate in good faith the [***] upon achievement of which milestone payments
would be payable with respect to such [***] product.


 


6.6  Royalty Payments to Regulus.


 


6.6.1       GSK
Patent Royalty. As partial consideration for the rights granted to
GSK hereunder, GSK will pay to Regulus royalties on Annual Net Sales of the
Royalty-Bearing Products sold by GSK, its Affiliates or Sublicensees during a
calendar year, on a country-by-country basis and Royalty-Bearing
Product-by-Royalty-Bearing Product basis, in the countries of the Territory in
which there is a Valid Claim within the Regulus Technology or Collaboration
Technology (excluding GSK Collaboration Technology [***] of the Licensed
Product being 


 


63

















 


sold,
in the amounts as follow (the “GSK Patent Royalty”).  For purposes of clarity, royalties shall be
payable by GSK to Regulus under this Section 6.6.1, subject to Section 6.6.2,
6.8 and Article 12, with respect to sales of a Collaboration Compound or
Licensed Product that has obtained Regulatory Approval as [***] to the same
extent as would be payable with respect to Net Sales of a Licensed Product that
has obtained Regulatory Approval for the treatment of [***] Indication
hereunder, provided, that, in no event shall GSK be obligated to pay royalties
more than once with respect to the same unit of such Collaboration Compound or
Licensed Product, as applicable.


 


(a)              Subject to the
provisions of Sections 6.6.1, 6.6.2 and 6.8, GSK shall pay to Regulus the
royalties at the percentages as described in the table below:


 


	
  Annual Net Sales 

  (U.S. $ Million) of 

  Licensed Products
  per Program per 

  calendar year

  US$Million (“m”)

  	
   

  	
  GSK exercises its

  Program Option

  at [***] Stage

  “Table 1 Rates”

  	
   

  	
  
  “Table 2 Rates”

  	
   

  	
  GSK exercises its 

  Program Option at 

  [***]

  “Table 3 Rates”

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Up to $[***]m

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  >[***] up to [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  >[***] up to [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  > [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 


(b)      In the event any Combination
Product(s) are sold, royalties on such Combination Products will be
determined pursuant to Section 1.113.


 


(c)              The royalty
rates in the table above are incremental rates, which apply only for the
respective increment of Annual Net Sales described in the Annual Net Sales
column.  Thus, once a total Annual Net
Sales figure is achieved for the year, the royalties owed on any lower tier
portion of Annual Net Sales are not adjusted up to the higher tier rate.


 


(d)              Notwithstanding
any of the foregoing, upon GSK’s exercise of a Terminated Program Option
pursuant to Section 4.2.3:


 


(i)            before the
achievement of [***], GSK shall pay Regulus royalties at [***] of the [***] set
forth above;


 


64

















 


(ii)           after the
achievement of [***], but prior to the [***] for such Program, then GSK shall
pay Regulus royalties at the [***] set forth above; and


 


(iii)          after [***] for
such Program, but prior to the [***], then GSK shall pay Regulus royalties at
the Table 2 Rates set forth above.


 


(e)              If GSK
exercises its Program Option after [***] by the Leading Compound under the
Program but GSK immediately substitutes such Leading Compound by a Back-up
Compound under such Program in accordance with Section 4.2.4, then GSK
shall pay Regulus royalties at the [***] set forth above, except as set forth
in Section 4.2.4.


 


(f)               Upon GSK’s
exercise of a Program Option pursuant to Section 4.2.5:


 


(i)            before the
achievement of the [***], GSK shall pay Regulus royalties at the [***] set
forth above;


 


(ii)           after the
achievement of the [***] but prior to the [***] for such Program, then GSK
shall pay Regulus royalties at the [***] set forth above; and


 


(iii)          after [***] for
such Program, but prior to the [***], then GSK shall pay Regulus royalties at
the [***] set forth above.


 


6.6.2       Application
of Royalty Rates.  All royalties
set forth under Section 6.6 shall always be subject to the provisions of
this Section 6.6.2, and shall only be payable as follows, on a Licensed
Product-by-Licensed Product and country-by-country basis:


 


(a)      Patent
Royalty Term:  GSK’s
obligation to pay the GSK Patent Royalty above with respect to a Licensed
Product and/or Combination Product will continue on a country-by-country and
Licensed Product-by-Licensed Product basis from the date of First Commercial
Sale of the Licensed Product or Combination Product until the date of [***] within the [***] of the Licensed Product; provided,
however, that with respect to those cases where (i) the only
Valid Claim is [***], or (ii) the only Valid Claim within the [***] of the Licensed Product or (B) a claim that covers the [***] of a
miRNA Compound or a miRNA Therapeutic) (such claim in clauses (i) or (ii) [***] of a Licensed Product or Combination Product, the
rates with respect to such Licensed Product or Combination Product shall be
reduced by [***] of the applicable rates specified in Section 6.6.1.


 


(b)      Pending
Patents: If, on a country-by-country and Licensed Product-by-Licensed
Product basis, there is, at any time during the period within [***] years after
the date of First Commercial Sale of such Licensed Product in such country, no
Valid 


 


65

















 


Claim
as described in paragraph (a) within the [***]
in each case which covers the Licensed Product, but there is a
pending patent application within the [***]in
each case with a claim which covers
the[***] of the Licensed Product which has been pending for more
[***] years but for less than [***] years from the filing date of such patent
application (a “Pending Claim”), then, during such
time, not to extend beyond [***] years from the date of [***] of such Licensed
Product in the relevant country, GSK will pay [***] of the otherwise applicable
GSK Patent Royalty rates set forth in Section 6.6.1.  In addition, where the only Pending Claim
covering the Licensed Product would, if issued, be a [***], then the rates
shall be reduced to be [***] of the otherwise applicable GSK Patent Royalty
rates set forth in Section 6.6.1. 
Notwithstanding any of the foregoing, if the Pending Claim [***], then
the applicable royalty rate will be, going forward from the time that such
[***] and not retroactively, and GSK shall pay Regulus, [***] Royalty rates as
set forth in the table in Section 6.6.1 above (subject to the [***]
reduction if such Valid Claim qualifying under Section 1.196(a) resulting
from the Pending Claim is a [***]) and for the duration stated under the “Patent
Royalty Term” paragraph (a) above, but if the Pending Claim does not issue
within [***] years of the date of filing of such patent application, then
thereafter, GSK will no longer pay any royalty to Regulus with respect to such
Pending Claim under this paragraph (b).


 


(c)      Know-How
Royalty:  If, on a country-by-country
and Licensed Product-by-Licensed Product basis, (i) at any time during the
period within [***] years after the date of First Commercial Sale of such
Licensed Product in such country, the only Valid Claims or Pending Claims
within the [***]in each case which cover the [***] of the Licensed Product, are
claims that cover [***] a miRNA Compound or a miRNA Therapeutic, or (ii) there
[***], at any time during the period within [***] years after the date of First
Commercial Sale of such Licensed Product in such country, Valid Claims or
Pending Claims within the [***]in
each case which covered the[***]
of the Licensed Product, but such Valid Claims and Pending Claims [***], then,
during such time described in clauses (i) or (ii), not to extend beyond
[***] years from the date of First Commercial Sale of such Licensed Product in
such country, GSK will pay Regulus a royalty at the rate of [***] of the GSK
Patent Royalty rates as described in  Section 6.6.1
above.  For example, but not limitation,
if at the time of First Commercial Sale of a Licensed Product in a given
country Regulus has a Valid Claim described in paragraph (a) above that
has been pending for [***] years, then for the first [***] years after such
First Commercial Sale the royalty rate shall be determined under paragraph (a) above
and, if such claim does not issue within such [***] year period, then for a
period of [***] years the royalty rate shall be determined under paragraph (b) above,
and for the remaining [***] years after such First Commercial Sale, the royalty
rate shall be determined under this paragraph (c).  In no event shall 


 


66

















 


the
royalty described in this paragraph (c) be paid for more than [***] years
after First Commercial Sale of such Licensed Product in the relevant country,
and in all cases the royalty shall be subject to paragraphs (d), (e) and (f) below.  For the sake of clarity, the [***] year
period described in this paragraph (c) shall not reduce the period during
which royalties are payable pursuant to paragraphs (a) or (b) above,
as applicable.


 


(d)      Reduction
of Royalty for Competition from Generic Products:  If at any time during the Agreement Term any
Generic Products enter the market for a Royalty-Bearing Product and during the
applicable Calendar Quarter, on a country-by-country and Licensed
Product-by-Licensed Product basis, such Generic Products taken in the aggregate
have a market share (measured in scripts with the numerator of such fractional
share being the Generic Products taken in the aggregate, and the denominator
being the total of the Generic Products taken in the aggregate plus the
Licensed Products taken in the aggregate, as provided by IMS) in such country
of (a) at least [***], up to and including [***], GSK’s obligation to pay
royalties to Regulus on sales of the relevant Royalty-Bearing Products in such
market will be reduced on a country-by-country basis to the amount which is
[***] of the otherwise applicable royalty rate under clauses (a) through (c) of
this Section 6.6.2, and (b) greater than [***] GSK’s obligation to
pay royalties to Regulus on sales of the relevant Products in such market will
be reduced on a country-by-country basis to the amount which is [***] of the
otherwise applicable royalty rate under clauses (a) through (c) of
this Section 6.6.2.


 


(e)      For purposes of clarity, no
royalty is payable by GSK, its Affiliates or Sublicensees to Regulus, its
Affiliates, Sublicensees, successors, assigns or Parent Companies at all under
this Section 6.6 with respect to a Royalty-Bearing Product in a country,
in the event that neither subsection (a), (b) nor (c) above applies
at the time of sale and in the country of sale for such Royalty-Bearing
Product.


 


(f)       Limitation
on Aggregate Reduction for GSK Royalties. Notwithstanding anything in
this Agreement to the contrary, on a Program-by-Program basis, in no event will
Regulus receive royalties for Annual Net Sales of Licensed Products by GSK or
its Affiliate or Sublicensee, with respect to any Calendar Quarter, less than
the sum of [***], except where there has been an uncured material breach of the
Agreement by Regulus, in which case, the royalty that Regulus will receive
shall not be less than the sum of [***], and in any case under this subsection
(f), the period for which payment of such [***] is required shall end when the
royalty payment term would have ended under subsection (a), (b) or (c) above,
as applicable.


 


67

















 


6.7  Refused Candidate Products,
Returned Licensed Products and Reverse Royalty Payments to GSK.


 


6.7.1       Reverse
Royalty.  In the event that Regulus or
any of its Parent Companies or any of its or their Affiliates or Third Party
licensees or Sublicensees Develops and Commercializes any Refused Candidate as
a Refused Candidate Product, or any Returned Licensed Product, it shall pay the
following royalty payments to GSK, following the First Commercial Sale by
Regulus, its Affiliates or Sublicensees, on a country-by-country basis, for
Annual Net Sales of all such products within the relevant Program (“Reverse Royalties”) as follows:


 


	
  (I) Upon Termination [***]
  of a Program due to [***]

  	
   

  	
  Reverse Royalty Rate (paid to GSK)

  US$Million (“m”)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (A) For Refused Candidate Products with respect to such Program,
  if [***] occurs prior to [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (B) For Returned Licensed Products with respect to such Program,
  if [***] occurs after [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (II) Upon [***]
  Termination [***] of a Program [***]

  	
   

  	
  Reverse Royalty Rate (paid to GSK)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (A) For Refused Candidate Products with respect to such Program,
  if [***] occurs [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (B) For Refused Candidate Products with respect to such Program,
  if [***] occurs [***]

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (C) For Returned Licensed Products with respect to such Program,
  if [***] occurs after [***], but before [***].

  	
   

  	
  [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (D) For Returned Licensed Products with respect to such Program,
  if [***] occurs after [***] and after [***].

  	
   

  	
  [***]

  	
   

  



 


68

















 


6.7.2       Commercialization
by Regulus’ Affiliates and Sublicensees. Regulus’ obligation to pay
the Reverse Royalty to GSK above on Net Sales of Refused Candidate Products or
Returned Licensed Products will apply regardless of whether such sales are made
by Regulus or by any of its Affiliates, Parent Companies (to the extent that
they are  selling such Refused Candidate Product
or Returned Licensed Product) or Sublicensees, and will continue on a
country-by-country and product-by-product basis for the Agreement Term.  For purposes of clarity, royalties shall be
payable by Regulus to GSK under this Section 6.7, subject to the remainder
of this Section 6.7 and Article 12, with respect to sales of any
Refused Candidate, Refused Candidate Product or Returned Licensed Product that
has obtained Regulatory Approval [***] or for the treatment [***] Indication to
the same extent as would be payable with respect to Net Sales of a Refused
Candidate Product or Returned Licensed Product that has obtained Regulatory
Approval for the treatment [***] Indication hereunder, provided, that, in no
event shall Regulus be obligated to pay royalties more than once with respect
to the same unit of such Refused Candidate, Refused Candidate Product or
Returned Licensed Product, as applicable.


 


6.7.3       Limitation
on Reverse Royalties.  The Reverse
Royalties payable under Section 6.7.1(I)(B), (II)(B) and (II)(C) above
with respect to any Refused Candidate Product or Returned Licensed Product
shall be payable by Regulus to GSK up to, and in no event in excess of, an
amount equal to [***] which such Refused Candidate Product or Returned Licensed
Product was subject [***], (b) any [***] activities conducted by Regulus
under such Program, (c) any [***] with respect to Licensed Products
arising from such Program and Commercialized by GSK [***], plus (d) any
[***] attributable to such Program. 
Within [***] days after the date on which Regulus obtains rights to the
Refused Candidate Product or Returned Licensed Product with respect to a
Program pursuant to this Agreement, GSK shall provide to Regulus a written
notice [***].  For purposes of clarity,
the Reverse Royalties payable under Section 6.7.1(II)(D) above shall
not be subject to the foregoing limitation.


 


6.8  Fundamental and Program
Specific  Intellectual Property.


 


6.8.1       Fundamental
IP. Regulus will be solely responsible for paying its Total License
Pass-Through Costs for any Regulus Technology (a) owned by Regulus or its
Affiliates or any of the Parent Companies as of the Effective Date, (b) invented
by any of the Parent Companies during the Agreement Term, or (c) [***] as
of the Effective Date or during the Agreement Term as [***] for the use or
exploitation of miRNA Antagonist technology generally as contemplated under the
Program(s) during the Collaboration Term, and which is not [***] hereunder
(the foregoing clauses (a), (b) and (c), collectively, the “Fundamental IP”).


 


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6.8.2       Program-Specific
Technology.  The Parties
shall [***] all [***] incurred after the Effective Date and included within
[***] for any [***] as of the Effective Date or during the Agreement Term to
the extent such [***] (a) pertains [***], or (b) relates to [***]
(clauses (a) and (b), collectively, the “Program-Specific
Technology”; provided, however, that any of the same under clauses (a) or  (b) would instead be Fundamental IP if
the terms and conditions of Section 6.8.1 are met for any such intellectual
property), which GSK agrees (such agreement not to be unreasonably withheld,
conditioned or delayed) is [***] under a Program hereunder.  By way of illustration but not limitation,
the Parties agree that the [***] Controlled by Regulus as of the Effective Date
(which Patent Rights are set forth on [***]) will be deemed Program-Specific
Technology.  Any [***] described herein
which apply to a Program(s) as well as other activities shall be
reasonably allocated to the relevant Program. 
Notwithstanding the foregoing, Regulus will be [***] for paying all
[***] owed to the relevant Third Party licensors pursuant to the [***].  GSK [***] of such amounts within [***] days
after GSK’s [***] from Regulus therefor.


 


6.8.3       Reduction
by GSK for Third Party Licenses. If GSK reasonably
determines that it needs to obtain one or more licenses from one or more Third
Parties (other than any license described in the paragraphs in this Section 6.8
above) to Develop, Manufacture or Commercialize any Option Compound or related
Licensed Product, GSK may obtain such license [***] (a) [***] of such
license reasonably in advance of entering into such license, to enable [***] on
such license terms, and (b) considering in good faith [***] with respect
thereto.  GSK may then obtain such
license, which shall be deemed included in GSK Technology hereunder, and may
offset [***] of GSK’s Third Party License Pass-Through Costs associated with
acquiring such Third Party license(s) against any [***] due to Regulus; provided,
that  in no event will Regulus receive, with
respect to any Calendar Quarter, less than [***].  GSK shall have the right to carry forward and
apply in future Calendar Quarters or years any such unused offset to which GSK
is entitled in the event that such [***] would be exceeded, until [***] of
offset or deduction to which GSK is entitled is fully satisfied.  Notwithstanding any of the foregoing, GSK
may, without having to comply with clause (a) or (b) above,
unilaterally decide to include as GSK Technology any Third Party license(s) for
[***], provided, however, that GSK shall not have the right to offset against
any [***] due to Regulus hereunder any Third Party License Pass-Through Costs
associated with acquiring any such Third Party license(s) (it being
understood that if Regulus agrees in advance, as set forth in the first
sentence of this Section 6.8.3, that GSK should obtain such Third Party
license(s) for [***] and implement such intellectual property rights into
GSK’s Development, Manufacture and/or Commercialization activities with respect
to Option Compounds or related Licensed Products hereunder, then GSK 


 


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shall
have the right to offset against [***] due to Regulus any such Third Party
License Pass-Through Costs).


 


6.9  Payments.


 


6.9.1       Commencement.  Beginning with the Calendar Quarter in which
the First Commercial Sale for an applicable Licensed Product is made and for
each Calendar Quarter thereafter, royalty payments shall be made by the
Commercializing Party to the other Party under this Agreement within [***] days
following the end of each such Calendar Quarter.  Each royalty payment shall be accompanied by
a report, summarizing Net Sales for the applicable Licensed Product during the
relevant Calendar Quarter and the calculation of royalties, if any, due
thereon.  Notwithstanding the foregoing,
in the event that no royalties are payable in respect of a given Calendar
Quarter, the Payor shall submit a royalty report so indicating.


 


6.9.2       Mode of
Payment.  All payments under this
Agreement shall be payable, in full, in U.S. dollars, regardless of the
country(ies) in which sales are made. 
For the purposes of computing Net Sales of Licensed Products sold in a
currency other than U.S. dollars, such currency shall be converted into U.S.
dollars as calculated at the [***] for the pertinent quarter or year to date,
as the case may be, as used by the Payor in producing its quarterly and annual
accounts.  Such payments shall be without
deduction of exchange, collection or other charges.


 


6.9.3       Records
Retention.  Commencing
with the First Commercial Sale of a Licensed Product, the Payor shall keep
complete and accurate records pertaining to the sale of such Licensed Products,
for a period of [***] calendar years after the year in which such sales
occurred, and in sufficient detail to permit the Payee to confirm the accuracy
of the Net Sales or royalties paid by the Payor hereunder.


 


6.10  Audits.  During the term of this Agreement and for a
period of [***] years thereafter, at the request and expense of the Payee, the
Payor shall permit an independent, certified public accountant of nationally
recognized standing appointed by the Payee, and reasonably acceptable to the
Payor, at reasonable times and upon reasonable notice, but in no case more than
once per calendar year thereafter, to examine such records as may be necessary
for the sole purpose of verifying the calculation and reporting of Net Sales
and the correctness of any royalty payment and [***] made under this Agreement
for any period within the preceding [***] years.  The independent, certified public accountant
shall disclose to the Payee only the royalty and, if applicable, [***] amounts
which the independent auditor believes to be due and payable hereunder to the
Payee and shall disclose no other information revealed in such audit.  Regulus shall also have the right to have
audited, in accordance with this Section 6.10, the relevant books and
records of GSK as may be necessary for the sole purpose of verifying the 


 


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amount
of (a) [***]  GSK shall also have
the right to have audited, in accordance with this Section 6.10, the
relevant books and records of [***]  Any
and all records of the audited Party examined by such independent accountant
shall be deemed such audited Party’s Confidential Information which may not be
disclosed by said independent, certified public accountant to any [***] or
(except for the information expressly sought to be confirmed by the auditing
Party as set forth in this Section 6.10) to the auditing Party.  If, as a result of any inspection of the
books and records of the audited Party, it is shown that (x) the audited
Party’s payments under this Agreement were less than the royalty or, if
applicable, milestone amount which should have been paid, then such audited
Party shall make all payments required to be made, or (y) the amount paid
to [***] by the audited Party as pass-through costs is less than the amount for
which reimbursement was requested from the auditing Party to cover such
pass-through costs, then the audited Party shall pay the auditing Party the
difference between such amounts, to eliminate any discrepancy revealed by said
inspection within [***] days and shall be entitled to a credit with respect to
any overpayment made by such audited Party. 
The auditing Party shall pay for such audits, except that in the event
that the royalty and, if applicable, [***] made by the audited Party were less
than [***] of the undisputed amounts (or the amount requested to be reimbursed
by the auditing Party, with respect to pass-through costs) that should have
been paid during the period in question, the audited Party shall pay the
reasonable costs of the audit.


 


6.11   Taxes.


 


6.11.1     Sales
or Other Transfers.  The
recipient of any transfer under this Agreement of Regulus Technology, GSK
Technology, Confidential Information, Collaboration Compounds, Licensed
Products (including Returned Licensed Products), as the case may be, shall be
solely responsible for any sales, use, value added, excise or other taxes
applicable to such transfer.


 


6.11.2     Withholding
Tax.  The Parties acknowledge and
agree that, under applicable laws in effect as of the Effective Date, [***]
from [***] under this Agreement.  Consequently,
GSK agrees [***].  Any tax paid or
required to be withheld by GSK for the benefit of Regulus on account of any
royalties or other payments (other than the upfront payment) payable to Regulus
under this Agreement shall be deducted from the amount of royalties or other
payments otherwise due.  GSK shall secure
and send to Regulus proof of any such taxes withheld and paid by GSK for the
benefit of Regulus, and shall, at Regulus’ request, provide reasonable
assistance to Regulus in recovering such taxes. Regulus warrants that Regulus
is limited liability company as of the Effective Date and, prior to the payment
of royalties by GSK hereunder, shall be a resident for tax purposes in the US
and that, as of such 


 


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time,
Regulus shall be [***].  Regulus shall
notify GSK immediately in writing in the event that Regulus ceases to be [***].
Pending receipt of formal certification from the UK Inland Revenue, GSK may pay
royalty income and any other payments (other than the upfront payment) under
this Agreement to Regulus by deducting tax at the applicable rate specified in
the double tax treaty between the UK and US. 
Regulus agrees to indemnify and hold harmless GSK against any loss,
damage, expense or liability arising in any way from a breach of the above
warranties [***] or other similar body alleging that GSK was [***], except that
Regulus’ indemnification obligation under this Section 6.11.2 shall not
apply to GSK’s payment of the [***].  GSK
shall indemnify and hold harmless Regulus and its Parent Companies against any
loss, damage, expense or liability arising in any way from a claim [***].


 


ARTICLE
7



EXCLUSIVITY


 


7.1  Exclusivity Binding on Both Parties.  Except as set forth in Section 7.3 below
or in Article 12, during the Agreement Term, neither Party nor its
Affiliates, nor any of Regulus’ Parent Companies, will work with (or for the
benefit of or grant any license to) any Third Party or independently outside
this Agreement to [***] that is [***] any Collaboration Target hereunder.


 


7.2  Additional Regulus
Exclusivity Obligations.  Except as set
forth in Section 7.3 below or in Article 12, during the Research
Collaboration Term for each Program, neither Regulus nor its Affiliates will
work with (or for the benefit of or grant any license to) any Third Party or
independently outside of this Agreement to [***] any [***] any Collaboration
Target hereunder.


 


7.3  Exclusions.


 


7.3.1       [***] For purposes
of clarity, the foregoing covenants in Sections 7.1 and 7.2 shall not apply to
either Party, each Party’s Affiliates or Regulus’ Parent Companies with respect
to any [***] in accordance with the provisions of Section [***].


 


7.3.2       Refused
Candidates; Refused Candidate Products; Returned Licensed Products.  In addition, in no event shall the covenants
in Sections 7.1 and 7.2 apply to bind or restrict Regulus, its Affiliates or
Parent Companies with respect to any Blocked Target, Refused Candidate, Refused
Candidate Product or Returned Licensed Product.


 


7.3.3       Permitted
Uses by Parent Companies. 
Notwithstanding any of the foregoing, (a) each Parent Company shall
have the right to grant Permitted Licenses as contemplated under the Regulus
License Agreement and as defined herein (it being understood 


 


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that
the exception set forth in this clause (a) to the Parent Company’s
exclusivity obligations under Section 7.1 shall not apply with respect to
a right granted to a Third Party if such right does not satisfy the definition
of “Permitted License” under this Agreement at the time in question), (b) Alnylam
shall have the right to perform its own internal Research in the Alnylam Field
(each as defined in the Regulus License Agreement), and (c) Isis shall
have the right to perform its own internal Research in the Isis Field (as
defined in the Regulus License Agreement).


 


ARTICLE
8


 


OWNERSHIP
OF INTELLECTUAL PROPERTY AND PATENT PROSECUTION


 


8.1  Ownership.


 


8.1.1       Regulus
Technology and GSK Technology.  As between the Parties,  Regulus shall own and retain all of its
rights, title and interest in and to the Regulus Know-How and Regulus Patents
and GSK shall own and retain all of its rights, title and interest in and to
the GSK Know-How and GSK Patents, subject to any rights or licenses expressly
granted by one Party to the other Party under this Agreement.


 


8.1.2       Collaboration
Technology.  As between
the Parties, GSK shall be the sole owner of any Collaboration Know-How
discovered, developed, invented or created solely by or on behalf of GSK and/or
its Affiliates (“GSK Collaboration Know-How”) and
any Patent Rights that claim or cover GSK Collaboration Know-How (“GSK Collaboration Patents” and, together with the GSK
Collaboration Know-How, the “GSK Collaboration
Technology”), and shall retain all of its rights, title and interest
thereto, subject to any rights or licenses expressly granted by GSK to Regulus
under this Agreement.  As between the
Parties, Regulus shall be the sole owner of any Collaboration Know-How
discovered, developed, invented or created solely by or on behalf of Regulus
and/or its Affiliates (“Regulus Collaboration
Know-How”) and any Patent Rights that claim or cover Regulus
Collaboration Know-How (“Regulus Collaboration
Patents” and, together with the Regulus Collaboration Know-How, the “Regulus Collaboration Technology”), and shall retain all of
its rights, title and interest thereto, subject to any rights or licenses
expressly granted by Regulus to GSK under this Agreement.  Any Collaboration Know-How that is
discovered, developed, invented or created jointly by or on behalf of a Party
or its Affiliates, on the one hand, and the other Party or such other Party’s
Affiliates, on the other hand (“Jointly-Owned
Collaboration Know-How”), and any Patent Rights that claim or cover
such Jointly-Owned Collaboration Know-How (“Jointly-Owned
Collaboration Patents” and together with the Jointly-Owned
Collaboration Know-How, the “Jointly-Owned
Collaboration Technology”), shall be owned jointly by GSK and
Regulus on an equal and undivided basis, 


 


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including
all rights, title and interest thereto, subject to any rights or licenses
expressly granted by one Party to the other Party under this Agreement.  Except as expressly provided in this
Agreement, neither Party shall have any obligation to account to the other for
profits with respect to, or to obtain any consent of the other Party to license
or exploit, Jointly-Owned Collaboration Technology, by reason of joint ownership
thereof, and each Party hereby waives any right it may have under the laws of
any jurisdiction to require any such consent or accounting.  Each Party shall promptly disclose to the
other Party in writing, and shall cause its Affiliates to so disclose, the
discovery, development, invention or creation of any Jointly-Owned
Collaboration Technology.


 


8.1.3       Determining
Inventorship.  The
determination of inventorship shall be made in accordance with United States
patent laws.  The Joint Patent
Subcommittee shall discuss all matters pertaining to the determination of
inventorship and, in case of a dispute in the Joint Patent Subcommittee (or
otherwise between Regulus and GSK) over inventorship and, as a result, whether (i) any
particular Collaboration Technology is solely owned by one Party or the other
or jointly owned by both Parties or (ii) whether any particular Know-How
is Regulus Know-How, GSK Know-How or Collaboration Know-How, such dispute shall
be resolved by independent patent counsel not regularly employed in the past
two (2) years by either Party and reasonably acceptable to both Parties to
resolve such dispute.  The decision of
such independent patent counsel shall be binding on the Parties with respect to
the issue of inventorship.  Expenses of
such patent counsel shall be shared equally by the Parties.


 


8.2  Prosecution and Maintenance
of Patents.


 


8.2.1       Patent
Filings.  The Party responsible for
Prosecution and Maintenance of any Collaboration Patents as set forth in
Sections 8.2.2 and 8.2.3 shall use Diligent Efforts to obtain patent protection
for Collaboration Compounds and Licensed Products, if and as applicable, using
counsel of its own choice but reasonably acceptable to the other Party (provided,
that GSK acknowledges and agrees that it has been advised of Regulus’
patent counsel as of the Effective Date and that such patent counsel is
reasonably acceptable to GSK), in the Major Countries and such other countries
as the responsible Party shall see fit. 
If subsequent to the Effective Date, GSK determines that such patent
counsel is not satisfactory, GSK will raise such concerns with the Joint Patent
Subcommittee and GSK may request that such patent counsel be changed, such
request shall not be unreasonably refused by Regulus.


 


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8.2.2       Regulus Patents and GSK Patents.


 


(a)              Regulus shall
control and be responsible for all aspects of the Prosecution and Maintenance
of all Regulus Patents and all Regulus Collaboration Patents, subject to Section 8.2.4.


 


(b)              GSK shall
control and be responsible for all aspects of the Prosecution and Maintenance
of all GSK Patents and all GSK Collaboration Patents, subject to Section 8.2.4.


 


8.2.3       Jointly-Owned
Collaboration Patents.  The
strategy for Prosecution and Maintenance of all Jointly-Owned Collaboration
Patents shall be discussed by GSK and Regulus through the Joint Patent
Subcommittee.  Subject to Section 8.2.4,
GSK shall have the first right to control and be responsible for the
Prosecution and Maintenance of all Jointly-Owned Collaboration Patents, unless
Regulus has obtained the licenses under Sections 5.1.2 or 5.1.3 with respect to
the Program to which such Jointly-Owned Collaboration Patent primarily relates,
in which event Regulus shall have the first right to control and be responsible
for the Prosecution and Maintenance of such Jointly-Owned Collaboration
Patents.


 


8.2.4       Other Matters Pertaining to
Prosecution and Maintenance of Patents.


 


(a)              Subject to
Third Party and Parent-Originated Rights and Obligations, each Party shall keep
the other Party informed through the Joint Patent Subcommittee as to material
developments with respect to the Prosecution and Maintenance of such
Collaboration Patents, Regulus Patents or GSK Patents for which such Party has responsibility
for Prosecution and Maintenance pursuant to Sections 8.2.2, 8.2.3 or this Section 8.2.4,
including without limitation, by providing copies of material data as it
arises, any office actions or office action response or other correspondence
that such Party provides to or receives from any patent office, including
notice of all interferences, reissues, re-examinations, oppositions or requests
for patent term extensions, and all patent related filings, and by providing
the other Party the timely opportunity to have reasonable input into the
strategic aspects of such Prosecution and Maintenance.


 


(b)              If, during the
Agreement Term, GSK intends to allow any GSK Patent or any Collaboration Patent
with respect to which GSK is responsible for Prosecution and Maintenance to
lapse or become abandoned without having first filed a continuation or
substitution and such GSK Patent or Collaboration Patent primarily relates to
any Refused Candidate, Refused Candidate Product or Returned Licensed Product,
GSK shall notify Regulus of such intention at least [***] days prior to the
date upon which such Patent Right shall lapse or 


 


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become
abandoned, and Regulus shall thereupon have the right, but not the obligation, to
assume responsibility for the Prosecution and Maintenance thereof at its own
expense  (subject to Section 8.3.1) with
counsel of its own choice.


 


(c)              If, during the
Agreement Term, Regulus intends to allow any Regulus Patent or any
Collaboration Patent with respect to which Regulus is responsible for
Prosecution and Maintenance to lapse or become abandoned without having first
filed a continuation or substitution, then, if GSK has exercised, or has not
yet exercised but retains the right to exercise, its Program Option with
respect to the Program to which such Regulus Patent or Collaboration Patent
primarily relates (other than any Refused Candidate, Refused Candidate Product
or Returned Licensed Product), Regulus shall notify GSK of such intention at least
[***] days prior to the date upon which such Patent Right shall lapse or become
abandoned, and GSK shall thereupon have the right, but not the obligation, to
assume responsibility for the Prosecution and Maintenance thereof [***]
(subject to Section 8.3.1) with counsel of its own choice.


 


(d)              The Parties,
through the Joint Patent Subcommittee, will cooperate in good faith to
determine if and when any divisional applications shall be filed with respect
to any Collaboration Patents or Regulus Patents, and where a divisional patent
application filing would be practical and reasonable, then such a divisional
filing shall be made and (i) GSK shall have the first right to control the
Prosecution and Maintenance of such claims within Collaboration Patents or Regulus
Patents which solely cover Collaboration Compounds with respect to a Program
after exercise of a Program Option by GSK, or (ii) Regulus shall have the
first right to control the Prosecution and Maintenance of such claims within
Collaboration Patents or Regulus Patents which solely cover Refused Candidates,
Refused Candidate Products or Returned Licensed Products. If the Party
responsible for Prosecution and Maintenance pursuant to this Section 8.2.4(d) is
an owner or co-owner of such Collaboration Patent or Regulus Patent, the other
Party shall have the step-in right described in clauses 8.2.4(b) or (c),
as applicable. If the Party responsible for Prosecution and Maintenance
pursuant to this Section 8.2.4(d) is neither an owner nor co-owner of
such Collaboration Patent or Regulus Patent and if such Party intends to allow
such Collaboration Patent to lapse or become abandoned without having first
filed a continuation or substitution, then such Party shall notify the other
Party of such intention at least [***] days prior to the date upon which such
Patent Right shall lapse or become abandoned, and such other Party shall
thereupon have the right, but not the obligation, to assume responsibility for
the Prosecution and Maintenance thereof [***] (subject to Section 8.3.1)
with counsel of its own choice.


 


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


 


8.3  Patent Costs.


 


8.3.1       Jointly-Owned
Collaboration Patents. Regulus and GSK shall [***] the Patent
Costs associated with the Prosecution and Maintenance of Jointly-Owned
Collaboration Patents, unless the Parties otherwise agree; provided, that
either Party may decline to pay its [***] for filing, prosecuting and
maintaining any Jointly-Owned Collaboration Patents in a particular country or
particular countries, in which case the declining Party shall, and shall cause
its Affiliates to, assign to the other Party (or, if such assignment is not
possible, grant a fully-paid exclusive license in) all of their rights, titles
and interests in and to such Jointly-Owned Collaboration Patents.


 


8.3.2       Regulus
Patents and GSK Patents. 
Except as set forth in Sections 8.2.4 and 8.3.1, each Party shall be
responsible [***] incurred by such Party prior to and after the Effective Date
in all countries in the Territory in the Prosecution and Maintenance of Patent
Rights for which such Party is responsible under Section 8.2.


 


8.4  Defense of Claims Brought by
Third Parties.


 


8.4.1       Prior
to Exercise of Program Option.  If a Third Party initiates a Proceeding
claiming that any Patent Right or Know-How owned by or licensed to such Third
Party is infringed by the Development, Manufacture or Commercialization of any
Collaboration Compound (and related Licensed Products) being Developed under a
Program with respect to which GSK has not yet exercised its Program Option
(except for any Refused Candidate, Refused Candidate Product or Returned
Licensed Product, which shall be subject to Section 8.4.3), Regulus shall
have the first right, but not the obligation, to defend against such Proceeding
at its sole cost and expense.  In the
event Regulus elects to defend against such Proceeding, Regulus shall have the
sole right to direct the defense and to elect whether to settle such claim (but
only with the prior written consent of GSK, not to be unreasonably
withheld).  In the event that Regulus
elects not to defend against such Proceeding within [***] days after it first
received written notice of the actual initiation of such Proceeding, GSK shall
have the right, but not the obligation, to defend against such Proceeding at
its sole cost and expense, which right GSK may exercise by providing Regulus
with a written notice thereof within [***] days after 


 


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GSK’s
receipt of Regulus’ notice of its election not to defend such Proceeding.  After such exercise, GSK shall have the right
to direct the defense of such Proceeding, including, without limitation the
right to settle such claim (but only with the prior written consent of Regulus,
not to be unreasonably withheld).  In any
event, the Party not defending such Proceeding shall reasonably assist the
Party defending such Proceeding and cooperate in any such litigation at the
request and expense of the Party defending such Proceeding.  Each Party may at its own expense and with
its own counsel join any defense directed by the other Party.  Each Party shall provide the other Party with
prompt written notice of the commencement of any such Proceeding, or of any
allegation of infringement of which such Party becomes aware, and shall
promptly furnish the other Party with a copy of each communication relating to
the alleged infringement that is received by such Party.  Notwithstanding any of the above, in the
event that one of the Parent Companies brings a claim against GSK, GSK shall
have the sole right to control the defense of any such claim at its sole cost.


 


8.4.2       Following
Exercise of Program Option.  If a Third Party initiates a Proceeding
claiming that any Patent Right or Know-How owned by  or
licensed to such Third Party is infringed by the Development, Manufacture or
Commercialization of any Collaboration Compound (and related Licensed Products)
being Developed or Commercialized under a Program with respect to which GSK has
exercised its Program Option (except for a Refused Candidate, Refused Candidate
Product or Returned Licensed Product, which shall be subject to Section 8.4.3),
GSK shall have the first right, but not the obligation, to defend against any
such Proceeding at its sole cost and expense. 
In the event GSK elects to defend against such Proceeding, GSK shall
have the sole right to direct the defense and to elect whether to settle such
claim (but only with the prior written consent of Regulus, not to be
unreasonably withheld).  In the event
that GSK elects not to defend against a particular proceeding, then it shall so
notify Regulus in writing within [***] days after it first received written
notice of the actual initiation of such Proceeding and, during such sixty-day
period, shall take such reasonable measures as may be necessary to preserve
Regulus’ legal right to defend against such Proceeding.  In such event, Regulus shall have the right,
but not the obligation, to defend against such Proceeding at its sole cost and
expense and thereafter shall have the sole right to direct the defense thereof,
including, without limitation the right to settle such claim (but only with the
prior written consent of GSK, not to be unreasonably withheld).  In any event, the Party not defending such
Proceeding shall reasonably assist the Party defending such Proceeding and
cooperate in any such litigation at the request and expense of the Party
defending such Proceeding.  Each Party
may at its own expense and with its own counsel join any defense directed by
the other Party.  Each Party shall
provide the other Party with prompt written notice of the commencement of any 


 


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such
Proceeding, or of any allegation of infringement of which such Party becomes
aware, and shall promptly furnish the other Party with a copy of each
communication relating to the alleged infringement that is received by such
Party.


 


8.4.3       Refused
Candidates, Refused Candidate Products and Returned Licensed Products.  If a Third Party initiates a Proceeding
claiming that any Patent Right or Know-How owned by or licensed to such Third
Party is infringed by the Development, Manufacture or Commercialization of any
Refused Candidate, Refused Candidate Product or Returned Licensed Product,
Regulus shall have the sole and exclusive right, but not the obligation, to
defend against and settle such Proceeding at its sole cost and expense. In any
event, GSK shall reasonably assist Regulus in defending such Proceeding and
cooperate in any such litigation at the request and expense of Regulus.  Each Party may at its own expense and with
its own counsel join any defense directed by the other Party.  GSK shall provide Regulus with prompt written
notice of the commencement of any such Proceeding, or of any allegation of
infringement of which GSK becomes aware, and shall promptly furnish Regulus
with a copy of each communication relating to the alleged infringement that is
received by GSK.


 


8.4.4       Interplay
between Enforcement of IP and Defense of Third Party Claims.   Notwithstanding the provisions of Section 8.4.1
through 8.4.3, to the extent that any action would involve the enforcement of
the other Party’s Know-How or Patent Rights, or the defense of an invalidity
claim with respect to such other Party’s Know-How or Patent Rights, the general
concepts of Section 8.5 will apply to the enforcement of such other Party’s
Know-How or Patent Rights or the defense of such invalidity claim (i.e., each
Party has the right to enforce its own intellectual property, except that the
relevant Commercializing Party will have the initial right, to the extent
provided in Section 8.5, to enforce such Know-How or Patent Rights or
defend such invalidity claim, and the other Party will have a step-in right, to
the extent provided in Section 8.5, to enforce such Know-How or Patent
Rights or defend such invalidity claim).


 


8.5  Enforcement of Patents
against Competitive Infringement.


 


8.5.1       Duty to
Notify of Competitive Infringement.  If either Party learns of an infringement,
unauthorized use, misappropriation or threatened infringement by a Third Party
with respect to any Regulus Collaboration Technology, Jointly-Owned
Collaboration Technology, Regulus Technology or, solely for purposes of Section 8.5.4,
GSK Technology or GSK Collaboration Technology, by reason of the Development,
Manufacture, use or Commercialization of a product that contains or consists of
a miRNA Compound as an active ingredient that is substantially identical in
structure, sequence or composition to a miRNA Compound in any Collaboration
Compound or Licensed Product (including Refused Candidates, 


 


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Refused
Candidate Products or Returned Licensed Products, which are subject to Section 8.5.4)
in the Field within the Territory (“Competitive Infringement”),
such Party shall promptly notify the other Party and shall provide such other
Party with available evidence of such Competitive Infringement.


 


8.5.2       Prior
to Exercise of Program Option.  For any Competitive Infringement with respect
to a Collaboration Compound (and any related Licensed Product) (except for any
Refused Candidate, Refused Candidate Product or Returned Licensed Product,
which shall be subject to Section 8.5.4) that occurs after the Effective
Date but prior to Program Option exercise in reference to the Program under
which such Collaboration Compound is being Developed, Regulus shall have the
first right, but not the obligation, to institute, prosecute, and control a
Proceeding (including, without limitation, with respect to any defense or
counterclaim brought in connection therewith that the Regulus Patents or
Regulus Collaboration Patents are invalid or unenforceable), by counsel of its
own choice, and GSK shall have the right to be represented in that action by
counsel of its own choice at its own expense, however, Regulus shall have the
right to control such litigation, irrespective of whether GSK is represented by
counsel of its own choice. 
Notwithstanding the foregoing, GSK shall have the first right, but not
the obligation, to institute, prosecute, and control a Proceeding (including,
without limitation, with respect to any defense or counterclaim brought in
connection therewith) in which the only claims are that Jointly-Owned
Collaboration Patents are invalid or unenforceable, by counsel of its own
choice, and Regulus shall have the right to be represented in that action by
counsel of its own choice at its own expense, however, GSK shall have the right
to control such litigation, irrespective of whether Regulus is represented by
counsel of its own choice.  If Regulus
fails to initiate a Proceeding (other than a Proceeding described in the second
(2nd) sentence of this Section 8.5.2) within a period of [***]
days after receipt of written notice from GSK or within a period of [***] days
after the date Regulus first becomes aware of such Competitive Infringement
(subject to a [***] day extension to conclude negotiations, if Regulus has
commenced good faith negotiations with an alleged infringer for elimination of
such Competitive Infringement within such [***] day period) and, within such
[***] day or extended period, GSK has exercised its Program Option with respect
to the relevant Program, then GSK shall have the right, but not the obligation,
to initiate and control a Proceeding with respect to such Competitive
Infringement by counsel of its own choice, and Regulus shall have the right to
be represented in any such action by counsel of its own choice at its own
expense.   If GSK fails to initiate a
Proceeding for Jointly-Owned Collaboration Patents, as provided in the second
(2nd) sentence of this Section 8.5.2, within a period of [***]
days after receipt of written notice from Regulus or within a period of [***]
days after the date GSK first becomes aware of such Competitive Infringement
(subject to a [***] day 


 


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extension
to conclude negotiations, if GSK has commenced good faith negotiations with an
alleged infringer for elimination of such Competitive Infringement within such
[***] day period), then Regulus shall have the right, but not the obligation,
to initiate and control a Proceeding with respect to such Competitive
Infringement by counsel of its own choice, and GSK shall have the right to be
represented in any such action by counsel of its own choice at its own expense.


 


8.5.3       Following
Exercise of Program Option.  For any Competitive Infringement with respect
to any Option Compound (and any related Licensed Product) (except for any
Refused Candidate, Refused Candidate Product or Returned Licensed Product,
which shall be subject to Section 8.5.4) that occurs after GSK’s exercise
of a Program Option in reference to the Program under which such Option
Compounds were Developed, GSK shall have the first right, but not the
obligation, to institute, prosecute, and control a Proceeding with respect
thereto (including, without limitation, with respect to any defense or
counterclaim brought in connection therewith that the Regulus Patents, Regulus
Collaboration Patents or Jointly-Owned Collaboration Patents are invalid or
unenforceable) by counsel of its own choice at its own expense, and Regulus
shall have the right, at its own expense, to be represented in that action by
counsel of its own choice, however, GSK shall have the right to control such
litigation, irrespective of whether Regulus is represented by counsel of its
own choice.  If GSK fails to initiate a
Proceeding within a period of [***] days after receipt of written notice of
such Competitive Infringement (subject to a [***] day extension to conclude
negotiations, if GSK has commenced good faith negotiations with an alleged
infringer for elimination of such Competitive Infringement within such [***]
day period), Regulus shall have the right to initiate and control a Proceeding
with respect to such Competitive Infringement by counsel of its own choice, and
GSK shall have the right to be represented in any such action by counsel of its
own choice at its own expense.


 


8.5.4       Refused Candidates, Refused Candidate Products and
Returned Licensed Products.


 


(a)              For any
Competitive Infringement of any Regulus Technology, Regulus Collaboration
Technology or Jointly-Owned Collaboration Technology with respect to a Refused
Candidate, Refused Candidate Product or Returned Licensed Product, Regulus
shall have the sole and exclusive right, but not the obligation, to institute,
prosecute, and control a Proceeding with respect thereto (including, without
limitation, with respect to any defense or counterclaim brought in connection
therewith the Regulus Patents, Regulus Collaboration 


 


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Patents
or Jointly-Owned Collaboration Patents are invalid or unenforceable), by
counsel of its own choice at its own expense.


 


(b)              For any
Competitive Infringement of any GSK Technology or GSK Collaboration Technology
with respect to a Refused Candidate, Refused Candidate Product or Returned
Licensed Product, GSK shall have the first right, but not the obligation, to
institute, prosecute, and control a Proceeding with respect thereto (including,
without limitation, with respect to any defense or counterclaim brought in
connection therewith the GSK Technology or GSK Collaboration Technology are
invalid or unenforceable), by counsel of its own choice at its own expense, and
Regulus shall have the right to be represented in that action by counsel of its
own choice at its own expense.  If GSK fails
to initiate a Proceeding within a period of [***] days after receipt of written
notice of such Competitive Infringement (subject to a [***] day extension to
conclude negotiations, if GSK has commenced good faith negotiations with an
alleged infringer for elimination of such Competitive Infringement within such
[***] day period) Regulus shall have the right, but not the obligation, to
initiate and control a Proceeding by counsel of its own choice, and GSK shall
have the right to be represented in any such action by counsel of its own
choice at its own expense.


 


8.5.5       Joinder.


 


(a)               If one Party
initiates a Proceeding in accordance with this Section 8.5, the other
Party agrees to be joined as a party plaintiff where necessary and to give the
first Party reasonable assistance and authority to file and prosecute the
Proceeding.  Subject to Section 8.5.6,
the costs and expenses of the Party initiating the Proceeding under this Section 8.5(a),
and the costs and expenses of the other Party incurred pursuant to this Section 8.5.5(a),
shall be borne by the Party initiating such Proceeding.


 


(b)               If one Party
initiates a Proceeding in accordance with this Section 8.5, the other
Party may join such Proceeding as a party plaintiff where necessary for such
other Party to seek lost profits with respect to such infringement.


 


8.5.6       Share
of Recoveries.  Any damages
or other monetary awards recovered with respect to a Proceeding brought
pursuant to this Section 8.5 shall be shared as follows: (i) the
amount of such recovery shall first be applied to the Parties’ reasonable
out-of-pocket costs incurred in connection with such Proceeding (which amounts
shall be allocated pro rata if insufficient to cover the totality of such
expenses); and then (ii) any remaining proceeds shall be allocated between
the Parties as follows:  (A) if
Regulus initiates the Proceeding pursuant to Sections 8.5.2, 8.5.3 or 8.5.4(a),
[***]; (B) if GSK initiates the Proceeding pursuant to Sections 8.5.2
(except as described in the second (2nd) sentence thereof) or
8.5.4(b), [***]; (C) if GSK 


 


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initiates
the Proceeding pursuant to Sections 8.5.2 (as described in the second (2nd)
sentence thereof) or 8.5.3, [***], and [***] on such amount in accordance with
[***]; and (D) if Regulus initiates the Proceeding pursuant to Section 8.5.4(b),
such remaining proceeds [***], with [***] on such amount in accordance with
[***]7 and [***] receiving the remainder.


 


8.5.7       Settlement.  A settlement, consent judgment or other
voluntary final disposition of a suit under this Section 8.5 may not be
entered into without the consent of the Party not bringing the suit if such
suit relates to those Patent Rights in which such Party not bringing the suit
has an ownership interest, is licensed or sublicensed thereunder or may in the
future, in accordance with this Agreement, obtain a license or sublicense
thereunder.


 


8.5.8       35 USC
271(e)(2) Infringement.  Notwithstanding anything to the contrary in
this Section 8.5, for a Competitive Infringement under 35 USC 271(e)(2) the
time periods set forth in Sections 8.5.2, 8.5.3 and 8.5.4(b) during which
a Party shall have the initial right to bring a Proceeding shall be shortened
to a total of twenty-five (25) days, so that, to the extent the other Party has
the right, pursuant to such Sections, to initiate a Proceeding if the first
Party does not initiate a Proceeding, such other Party shall have such right if
the first Party does not initiate a Proceeding within twenty-five (25) days after
such first Party’s receipt of written notice of such Competitive Infringement.


 


8.6  Other  Infringement.


 


8.6.1       Jointly-Owned
Collaboration Patents.  With
respect to the infringement of a Jointly-Owned Collaboration Patent which is
not a Competitive Infringement, the Parties shall cooperate in good faith to
bring suit together against such infringing party or the Parties may decide to
permit one Party to bring suit solely. 
Any damages or other monetary awards recovered with respect to a
Proceeding brought pursuant to this Section 8.6.1 shall be shared as
follows:  (i) the amount of such
recovery shall first be applied to the Parties’ reasonable out-of-pocket costs
incurred in connection with such Proceeding (which amounts shall be allocated
pro rata if insufficient to cover the totality of such expenses); and then (ii) (A) if
the Parties jointly initiated a Proceeding pursuant to this Section 8.6.1,
each Party shall retain or receive [***]; and (B) if only one Party
initiates the Proceeding pursuant to Section 8.6.1, such Party shall
[***].


 


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


 


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


 


8.7  Patent Listing.


 


8.7.1       GSK’s
Obligations.  To the
extent required or permitted by law, GSK will use Diligent Efforts to promptly,
accurately and completely list, with the applicable Regulatory Authorities
during the Agreement Term, all applicable Patent Rights for any Licensed
Product being Developed by GSK hereunder that GSK intends to, or has begun to
Commercialize, and that have become the subject of an NDA submitted to any
applicable Regulatory Authority, such listings to include all so-called “Orange
Book” listings required under the Hatch-Waxman Act and all so called “Patent
Register” listings as required in Canada. 
Prior to such listings, the Parties will meet, through the Joint Patent
Subcommittee, to evaluate and identify all applicable Patent Rights, and GSK
shall have the right to review, where reasonable, original records relating to
any invention for which Patent Rights are being considered by the Joint Patent
Subcommittee for any such listing. 
Notwithstanding the preceding sentence, GSK will retain final decision
making authority as to the listing of all applicable Patent Rights for such
Licensed Product, regardless of which Party owns such Patent Right, and any
such final decision made in good-faith on the matter shall not be subject to
any further review under Section 13.1 or otherwise under this Agreement.


 


8.7.2       Regulus’
Obligations.  To the
extent required or permitted by law, Regulus will use Diligent Efforts to
promptly, accurately and completely list, with the applicable Regulatory
Authorities during the Agreement Term, all applicable Patent Rights for any
Refused Candidate Products and Returned Licensed Products being Developed by
Regulus hereunder that Regulus intends to, or has begun to Commercialize, and
that have become the subject of an NDA submitted to any applicable Regulatory
Authority, such listings to include all so-called “Orange Book” listings
required under the Hatch-Waxman Act and all so called “Patent Register”
listings as required in Canada.  Prior to
such listings, the Parties will meet, through the Joint Patent Subcommittee, to
evaluate and identify all applicable Patent Rights, and Regulus shall have the
right to review, where reasonable, original records relating to any invention
for which Patent Rights are being considered by the Joint Patent Subcommittee
for any such listing.  Notwithstanding
the preceding sentence, Regulus will retain final decision making authority as
to the listing of all applicable Patent Rights for such Refused Candidate
Product or Returned Licensed Product, as applicable, regardless of which Party
owns such Patent Right, and any such 


 


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final
decision made in good-faith on the matter shall not be subject to any further
review under Section 13.1 or otherwise under this Agreement.


 


8.8  CREATE Act.  Notwithstanding anything to the contrary in
this Article 8, neither Party shall have the right to make an election
under the Cooperative Research and Technology Enhancement Act of 2004, 35
U.S.C. 103(c)(2)-(c)(3) (the “CREATE Act”)
when exercising its rights under this Article 8 without the prior written
consent of the other Party, which shall not be unreasonably withheld,
conditioned or delayed.  With respect to
any such permitted election, the Parties shall use reasonable efforts to
cooperate and coordinate their activities with respect to any submissions,
filings or other activities in support thereof. 
The Parties acknowledge and agree that this Agreement is a “joint
research agreement” as defined in the CREATE Act.


 


8.9  Obligations to Third Parties.  Notwithstanding any of the foregoing, each
Party’s rights and obligations with respect to Regulus Technology under this Article 8
shall be subject to Third Party and Parent-Originated Rights and Obligations.


 


8.10  Additional Right.  Notwithstanding any provision of this Article 8,
Isis will actively participate in the planning and conduct of any enforcement
of Regulus Technology and will take the lead of such enforcement solely to the
extent that the scope or validity of any Parent Company Patent Controlled by
Isis and covering a [***] chemical modification is at risk.  Such Parent Company Patents Controlled by
Isis as of the Effective Date are set forth on Schedule 8.10.


 


ARTICLE
9


 


CONFIDENTIALITY


 


9.1  Confidentiality; Exceptions.  Except to the extent expressly authorized by
this Agreement or otherwise agreed in writing, the Parties agree that, during
the Agreement Term and for [***] years thereafter, the receiving Party (the “Receiving Party”), its Affiliates and, with respect to
Regulus, its Parent Companies, shall keep confidential and shall not publish or
otherwise disclose or use for any purpose other than as provided for in this Agreement
any Know-How or other confidential and proprietary information and materials,
patentable or otherwise, in any form (written, oral, photographic, electronic,
magnetic, or otherwise) which is disclosed to it by the other Party (the “Disclosing Party”), its Affiliates or, with respect to
Regulus, its Parent Companies or otherwise received or accessed by a Receiving
Party in the course of performing its obligations or exercising its rights
under this Agreement, including, but not limited to trade secrets, know-how,
inventions or discoveries, proprietary information, 


 


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formulae,
processes, techniques and information relating to the past, present and future
marketing, financial, and research and development activities of any product or
potential product or useful technology of the Disclosing Party, its Affiliates
or Parent Companies and the pricing thereof (collectively, “Confidential Information”), except to the extent that it can
be established by the Receiving Party that such Confidential Information:


 


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


 


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


 


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


 


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


 


9.2  Authorized Disclosure.  Except as expressly provided otherwise in
this Agreement, a Receiving Party or its Affiliates may use and disclose, to
Third Parties or the Parent Companies, Confidential Information of the
Disclosing Party as follows: (i)  with respect to any such disclosure of
Confidential Information, under confidentiality provisions no less restrictive
than those in this Agreement, and solely in connection with the performance of
its obligations or exercise of rights granted or reserved in this Agreement
(including, without limitation, the rights to Develop and Commercialize
Collaboration Compounds, Licensed Products, Refused Candidates, Refused
Candidate Products and/or Returned Licensed Products, and to grant licenses and
sublicenses hereunder), provided, that Confidential Information may be
disclosed by a Receiving Party to a governmental entity or agency without
requiring such entity or agency to enter into a confidentiality agreement with
such Receiving Party if such Receiving Party has used reasonable efforts to
impose such requirement without success and disclosure to such governmental
entity or agency is necessary for the performance of the Receiving Party’s
obligations hereunder; (ii) to the extent such disclosure is reasonably
necessary in filing or prosecuting patent, copyright and trademark applications
(subject to Section 9.6 below), 


 


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complying
with applicable governmental regulations, obtaining Regulatory Approvals,
conducting Pre-Clinical Studies or Clinical Studies, marketing Licensed
Products, or as otherwise required by applicable law, regulation, rule or
legal process (including the rules of the SEC and any stock exchange); provided,
however, that if a Receiving Party or any of its Affiliates or
Parent Companies is required by law or regulation to make any such disclosure
of a Disclosing Party’s Confidential Information it will, except where
impracticable for necessary disclosures, for example, but without limitation,
in the event of medical emergency, give reasonable advance notice to the
Disclosing Party of such disclosure requirement and will use its reasonable
efforts to secure confidential treatment of such Confidential Information
required to be disclosed; (iii) in communication with actual or potential
investors, merger partners, acquirers, consultants, or professional advisors on
a need to know basis, in each case under confidentiality provisions no less
restrictive than those of this Agreement; (iv) to the extent and only to
the extent that such disclosure is required to comply with existing expressly
stated contractual obligations owed to such Party’s, its Affiliate’s or Parent
Company’s licensor with respect to any intellectual property licensed under
this Agreement; or (v) to the extent mutually agreed to in writing by the
Parties.  If
a Parent Company receives GSK’s Confidential Information as permitted pursuant
to this Section 9.2, such Parent Company may only use and disclose GSK’s
Confidential Information solely in accordance with this Section 9.2 under
confidentiality provisions no less restrictive than those in this Agreement and
solely as and to the extent required (x) by law, court order or an
existing expressly stated contractual requirement, (y) for such Parent
Company to perform its obligations in connection with this Agreement (including
without limitation the provision of services to Regulus under the Services
Agreement) or the Side Agreement, or (z) for such Parent Company to make a
determination to exercise, and to exercise, any of its rights with respect to
Refused Candidates, Refused Candidate Products or Returned Licensed Products
under the JV Agreements.


 


9.3  Press Release; Disclosure of
Agreement.  On or
promptly after the Effective Date, the Parties shall individually or jointly
issue a public announcement of the execution of this Agreement in form and
substance substantially as set forth on Exhibit G.  Except to the extent required to comply with
applicable law, regulation, rule or legal process or as otherwise
permitted in accordance with this Section 9.3, neither Party nor such
Party’s Affiliates or Parent Companies shall make any public announcements,
press releases or other public disclosures concerning this Agreement, the Side
Agreement or the Convertible Promissory Note, or the terms or the subject
matter hereof or thereof, without the prior written consent of the other, which
shall not be unreasonably withheld. 
Notwithstanding the foregoing, (a) each Commercializing Party, its
Affiliates and Parent Companies may, without the other Party’s 


 


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approval,
make disclosures pertaining solely to its Royalty-Bearing Products, provided,
however, that the Commercializing Party will immediately notify (and provide as
much advance notice as possible to) the other Party of any event materially
related to such other Party’s Royalty-Bearing Products (including any
Regulatory Approval) so that the Parties may analyze the need for or
desirability of publicly disclosing or reporting such event, any press release
or other similar public communication by any Party related to efficacy or
safety data and/or results of a Royalty-Bearing Product will be submitted to
the other Party for review at least [***] Business Days (to the extent
permitted by law) in advance of such proposed public disclosure, the other
Party shall have the right to expeditiously review and recommend changes to
such communication and the Party whose communication has been reviewed shall in
good faith consider any changes that are timely recommended by the reviewing
Parties and (b) to the extent information regarding this Agreement has
already been publicly disclosed, either Party (or its Affiliates or the Parent
Companies) may subsequently disclose the same information to the public without
the consent of the other Party.  In
addition, GSK understands that Regulus is a private company, and that Regulus
may disclose the financial terms of this Agreement, the Side Agreement or the
Convertible Promissory Note to potential, bona fide investors and investment
bankers, in each case, where practicable, under confidentiality provisions
similar to and no less restrictive than those of this Agreement.  Each Party shall give the other Party a
reasonable opportunity (to the extent consistent with law) to review all
material filings with the SEC describing the terms of this Agreement, the Side
Agreement or the Convertible Promissory Note prior to submission of such
filings, and shall give due consideration to any reasonable comments by the
non-filing Party relating to such filing, including without limitation the
provisions of this Agreement, the Side Agreement or the Convertible Promissory
Note for which confidential treatment should be sought.


 


9.4  Prior Confidentiality
Agreement Superseded.  This
Agreement supersedes the Confidential Disclosure Agreement executed by Regulus,
its Parent Companies and GSK on [***] (including any and all amendments
thereto).  All information exchanged
between the Parties under that agreement shall be deemed Confidential Information
hereunder and shall be subject to the terms of this Article 9.


 


9.5  Remedies.  Notwithstanding Section 13.1, each Party
shall be entitled to seek, in addition to any other right or remedy it may
have, at law or in equity, a temporary injunction, without the posting of any
bond or other security, enjoining or restraining the other Party from any
violation or threatened violation of this Article 9.


 


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9.6  Publications.  The Parties acknowledge that scientific lead
time is a key element of the value of  the
collaboration under this Agreement and further agree to use Diligent Efforts to
control public scientific disclosures of the results of the Development
activities under this Agreement to prevent any potential adverse effect of any
premature public disclosure of such results. 
The Parties shall establish a procedure for publication review and each
Party shall first submit to the other Party through the Joint Patent
Subcommittee an early draft of all such publications, whether they are to be
presented orally or in written form, at least [***] days prior to submission
for publication.  Each Party shall review
such proposed publication in order to avoid the unauthorized disclosure of a
Party’s Confidential Information and to preserve the patentability of
inventions arising from the collaboration. 
If, as soon as reasonably possible, but no longer than [***] days
following receipt of an advance copy of a Party’s proposed publication, the
other Party informs such Party that its proposed publication contains
Confidential Information of the other Party, then such Party shall delete such
Confidential Information from its proposed publication.  In addition, if at any time during such [***]
day period, the other Party informs such Party that its proposed publication
discloses inventions made by either Party in the course of the collaboration
under this Agreement that have not yet been protected through the filing of
patent application, or the public disclosure of such proposed publication could
be expected to have a material adverse effect on any Patent Rights or Know-How
solely owned or Controlled by such other Party, then such Party shall either (a) delay
such proposed publication, for up to [***] days from the date the other Party
informed such party of its objection to the proposed publication, to permit the
timely preparation and first filing of patent application(s) on the
information involved or (b) remove the identified disclosures prior to
publication.  The Parties agree that all
publications of results of the Development activities by either Party shall
acknowledge the contribution of the other Party, its Affiliates, Parent
Companies and Third Party collaborators, as applicable, to such results.


 


ARTICLE
10



REPRESENTATIONS AND WARRANTIES


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


10.2  Representations and
Warranties of Regulus. 
Regulus hereby represents and warrants to GSK, as of the Effective Date,
that:


 


10.2.1     To the best of
its knowledge and belief, without having conducted any special inquiry, Regulus
is the owner of, or otherwise has the right to grant all rights and licenses it
purports to grant to GSK with respect to the Regulus Technology under this
Agreement for all Programs hereunder;


 


10.2.2     To the best of
its knowledge and belief, without having conducted any special inquiry, Regulus
does not require any additional licenses or other intellectual property 


 


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rights
owned by any of its Parent Companies in order for Regulus to conduct the
identification, research, optimization and other Development activities
contemplated to be conducted by Regulus with respect to human therapeutics
pursuant to the Programs hereunder;


 


10.2.3     To the best of
its knowledge and belief, without having conducted any special inquiry, no
written claims have been made against Regulus or its Parent Companies alleging
that any of the Regulus Patents are invalid or unenforceable or infringe any
intellectual property rights of a Third Party; and


 


10.2.4     Regulus has not
withheld from GSK any material data or any material correspondence, including
to or from any Regulatory Authority, in Regulus’ possession as of the Effective
Date that would be material and relevant to a reasonable assessment of the
scientific, commercial, safety, regulatory and commercial liabilities and
commercial value of the collaboration between the Parties and any Collaboration
Compound hereunder.


 


10.3  Regulus Covenants.  Regulus hereby covenants to GSK that:


 


10.3.1     all employees
of Regulus and all employees of Regulus’ Parent Companies or Affiliates
performing Development activities hereunder on behalf of Regulus shall be
obligated to assign all right, title and interest in and to any inventions
developed by them, whether or not patentable, to Regulus or such Parent Company
or Affiliate, respectively, as the sole owner thereof, and each Parent Company
shall be obligated under the Services Agreement to assign all right, title and
interest in and to any such inventions developed by its employees, whether or
not patentable, to Regulus thereunder;


 


10.3.2     Regulus shall,
as appropriate, hire and maintain sufficient staff and management to meet its
Diligent Efforts in order to support and conduct all the Programs hereunder in
a timely fashion, or use its Diligent Efforts to support and conduct certain
activities under the Programs hereunder through the Services Agreement;


 


10.3.3     if reasonably
requested by GSK in writing, Regulus will take reasonable, good faith measures
and cooperate with GSK to help to facilitate a good faith negotiation between
GSK and any Parent Company or Third Party licensor of Regulus under the
agreements listed on Exhibit F hereto (collectively, the “Existing In-License Agreements”) in the event that GSK
desires to pursue the Development or Commercialization of any Collaboration
Compound or Licensed Product and would require a license directly from any such
Third Party, unless the Parent Companies have achieved the results described in
Section 6 of the Side Agreement with respect to the applicable Existing
In-License Agreement;


 


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10.3.4     it will not
withhold from GSK any material information or correspondence, including to or
from any Regulatory Authority, that would be material and relevant to a
reasonable assessment of the scientific, commercial, safety, and regulatory
liabilities or commercial value of the Collaboration Compounds and Option Compounds
included in a Program for which GSK is considering whether to exercise its
Program Option with respect to each Option Compound and the related
Collaboration Compounds; and


 


10.3.5     Regulus shall
perform its activities pursuant to this Agreement in compliance with good
laboratory and clinical practices and cGMP, in each case as applicable under
the laws and regulations of the country and the state and local government
wherein such activities are conducted, and with respect to the care, handling
and use in Development activities hereunder of any non-human animals by or on
behalf of Regulus, shall at all times comply (and shall ensure compliance by
any of its subcontractors or its Parent Companies under the Services Agreement)
with all applicable federal, state and local laws, regulations and ordinances
and the guiding principles of the “3R’s”, namely, wherever reasonably possible,
reducing the number of animals used, replacing animals with non-animal methods
and refining the research techniques used for the proper care, handling and use
of animals in pharmaceutical research and development activities, subject to
GSK’s reasonable right to conduct reasonable inspections (but not to audit)
with advance notice, and Regulus shall promptly and in good faith undertake
reasonable corrective steps and measures to remedy the situation to the extent
that any significant deficiencies in complying with the “3R’s” or applicable
law or regulation are identified as the result of any such inspection.


 


10.4  GSK Covenants.  GSK hereby covenants to Regulus that:


 


10.4.1     GSK shall
perform its activities pursuant to this Agreement in compliance with good
laboratory and clinical practices and cGMP, in each case as applicable under
the laws and regulations of the country and the state and local government
wherein such activities are conducted, and with respect to the care, handling
and use in Development activities hereunder of any non-human animals by or on
behalf of GSK, shall at all times comply (and shall ensure compliance by any of
its subcontractors or Affiliates) with all applicable federal, state and local
laws, regulations and ordinances and the guiding principles of the “3R’s”,
namely, wherever reasonably possible, reducing the number of animals used,
replacing animals with non-animal methods and refining the research techniques
used for the proper care, handling and use of animals in pharmaceutical
research and development activities, subject to Regulus’ reasonable right to
conduct reasonable inspections (but not to audit) with advance notice, and GSK
shall promptly and in good faith undertake reasonable corrective steps and
measures to remedy the 


 


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situation
to the extent that any significant deficiencies in complying with the “3R’s” or
applicable law or regulation are identified as the result of any such
inspection; and


 


10.4.2     GSK shall
notify Regulus in writing within [***] Business Days of the date that GSK or
its Affiliate [***].  The Parties
acknowledge and agree that [***] Compounds shall not trigger the obligation
under this covenant.


 


10.5  DISCLAIMER. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN THE SIDE AGREEMENT,
NEITHER PARTY NOR ITS AFFILIATES OR PARENT COMPANIES MAKES ANY REPRESENTATION
OR EXTENDS ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT
NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR ANY WARRANTY THAT ANY PATENTS RIGHTS LICENSED TO THE OTHER PARTY
HEREUNDER ARE VALID OR ENFORCEABLE OR THAT THEIR EXERCISE DOES NOT INFRINGE OR
MISAPPROPRIATE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD
PARTIES.  GSK UNDERSTANDS THAT THE
COLLABORATION COMPOUNDS ARE THE SUBJECT OF ONGOING CLINICAL RESEARCH AND
DEVELOPMENT AND THAT REGULUS CANNOT ASSURE THE SAFETY, USEFULNESS OR COMMERCIAL
OR TECHNICAL VIABILITY OF RESULTING DEVELOPMENT CANDIDATES, OPTION COMPOUNDS,
AND/OR LICENSED PRODUCTS.


 


ARTICLE
11


 


INDEMNIFICATION;
INSURANCE


 


11.1  Indemnification by GSK.  GSK shall indemnify, defend and hold harmless
Regulus, and its Affiliates and Parent Companies, and its or their respective
directors, officers, employees and agents, from and against any and all
liabilities, damages, losses, costs and expenses including, but not limited to,
the reasonable fees of attorneys and other professionals (collectively “Losses”), arising out of or resulting from any and all Third
Party suits, claims, actions, proceedings or demands (“Claims”)
based upon:


 


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


 


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


 


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11.1.3     the Development
or Manufacturing activities that are conducted by and/or on behalf of GSK or
its Affiliates or Sublicensees (which shall exclude any Development or
Manufacturing activities that are conducted by and/or on behalf of Regulus
hereunder), including handling and storage and manufacture by and/or on behalf of
GSK or its Affiliates or Sublicensees of any Collaboration Compounds for the
purpose of conducting Development or Commercialization by or on behalf of GSK
or its Affiliates or Sublicensees; or


 


11.1.4     the
Commercialization by or on behalf of GSK, its Affiliates or Sublicensees of any
Collaboration Compound or Licensed Product pursuant to the exercise by GSK of
the relevant Program Option;


 


except, in each case above,
to the extent such Claim arose out of or resulted from or is attributable to
the negligence, recklessness or wrongful intentional acts or omissions of
Regulus and/or its Affiliate, Parent Company, licensee, Sublicensee or
contractor, and its or their respective directors, officers, employees and
agents, or breach of any representation or warranty or express covenant made by
Regulus or any of its Parent Companies hereunder, or under the Side Agreement.


 


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


 


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


 


11.2.2     any breach of
any representation or warranty or express covenant made by Regulus under Article 10
or any other provision under this Agreement or made by any of its Parent
Companies under the Side Agreement;


 


11.2.3     the Development
or Manufacturing activities actually conducted by or on behalf of Regulus
(which shall exclude any Development or Manufacturing activities conducted by
or on behalf of GSK hereunder), including the storage and handling and
manufacture by and/or on behalf of Regulus and/or its Affiliates, Parent
Companies and/or its Sublicensees or subcontractors of any Collaboration
Compounds for the purpose of Development or Commercialization by or on behalf
of Regulus; or


 


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11.2.4     the
Commercialization of any Refused Candidates, Refused Candidate Products or
Returned Licensed Products by or on behalf of Regulus and/or its Affiliates, or
any of its Parent Companies or its Sublicensees;


 


except, in each case above,
to the extent such Claim arose out of or resulted from or is attributable to
the negligence, recklessness or wrongful intentional acts or omissions of GSK
and/or its Affiliate, licensee, Sublicensee or contractor and its or their
respective directors, officers, employees and agents or breach of any
representation or warranty or express covenant made by GSK hereunder.


 


11.3  Procedure.  In the event that any Person entitled to
indemnification under Section 11.1 or Section 11.2 (an “Indemnitee”) is seeking such indemnification, such
Indemnitee shall (i) inform, in writing, the indemnifying Party of a Claim
as soon as reasonably practicable after such Indemnitee receives notice of such
Claim, (ii) permit the indemnifying Party to assume direction and control
of the defense of the Claim (including the sole right to settle it at the sole
discretion of the indemnifying Party, provided, that such
settlement or compromise does not admit any fault or negligence on the part of
the Indemnitee, nor impose any obligation on, or otherwise  materially adversely affect, the
Indemnitee or other Party), (iii) cooperate as reasonably requested (at
the expense of the indemnifying Party) in the defense of the Claim, and (iv) undertake
reasonable steps to mitigate any loss, damage or expense with respect to the
Claim(s).  The provisions of Section 8.4
shall govern the procedures for responding to a Claim of infringement described
therein.  Notwithstanding anything in
this Agreement to the contrary, the indemnifying Party shall have no liability
under Section 11.1 or 11.2, as the case may be, with respect to Claims
settled or compromised by the Indemnitee without the indemnifying Party’s prior
written consent.


 


11.4  Insurance.


 


11.4.1     Regulus’
Insurance Obligations.   Regulus shall maintain, at its cost,
reasonable insurance against liability and other risks associated with its
activities contemplated by this Agreement, including but not limited to its
clinical trials and its indemnification obligations herein, in such amounts and
on such terms as are customary for prudent practices for biotech companies of
similar size and with similar resources in the pharmaceutical industry for the
activities to be conducted by it under this Agreement taking into account the
scope of development of products, provided, that, at a minimum, Regulus shall maintain, in force
from thirty (30) days prior to enrollment of the first patient in a Clinical
Study, at its sole cost, a general liability insurance policy providing
coverage of at least [***] per claim and annual aggregate, provided that such coverage is increased to
at least [***] at least thirty (30) days 


 


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before Regulus initiates the First
Commercial Sale of any Refused Candidate, Refused Candidate Product or Returned
Licensed Product hereunder.  Regulus shall
furnish to GSK evidence of such insurance, upon request.


 


11.4.2     GSK’s
Insurance Obligations.  GSK
hereby represents and warrants to Regulus that it is self-insured against
liability and other risks associated with its activities and obligations under
this Agreement in such amounts and on such terms as are customary for prudent
practices for large companies in the pharmaceutical industry for the activities
to be conducted by GSK under this Agreement. 
GSK shall furnish to Regulus evidence of such self-insurance, upon
request.


 


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


 


ARTICLE
12



TERM AND TERMINATION


 


12.1  Agreement Term; Expiration. This
Agreement shall be effective as of the Effective Date and shall continue in
force and effect during the Collaboration Term and shall continue thereafter
until expiration as described in this Section 12.1, unless earlier
terminated pursuant to the other provisions of this Article 12, and shall
expire as follows:


 


12.1.1     on a Licensed
Product-by-Licensed Product and country-by-country basis, on the date of
expiration of all payment obligations by the Commercializing Party under this
Agreement with respect to such Licensed Product (including Refused Candidate
Products and Returned Licensed Products) in such country;


 


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12.1.2     in its entirety
upon the expiration of all payment obligations under this Agreement with
respect to the last Licensed Product (including Refused Candidate Products and
Returned Licensed Products) in all countries in the Territory pursuant to Section 12.1.1;
and


 


12.1.3     where GSK
declines to exercise all of its Program Options on or before the end of the
applicable PoC Option Exercise Period for a given Program, on a
Program-by-Program basis, the rights and obligations of each Party with respect
to such Program shall terminate (except, in each case, subject to Section 12.1.5(c))
upon expiration of the PoC Option Exercise Period with respect to the relevant
Program.


 


12.1.4     The period from
the Effective Date until the date of expiration of the entire Agreement or as the
case may be, until the date of expiration of the Agreement in part with respect
to a given Licensed Product, pursuant to this Section 12.1 shall be the “Agreement  Term” of the
Agreement in its entirety or with respect to a given Licensed Product, respectively.


 


12.1.5     Effect
of Expiration of the Term.


 


(a)              Following the
expiration of the Agreement Term with respect to a Licensed Product (including
any Refused Candidate Product or Returned Licensed Product) in a country
pursuant to Section 12.1.1, (i) if GSK is the Commercializing Party,
the license granted to GSK pursuant to Section 5.2.1 with respect to such
Licensed Product  shall convert to an
exclusive (subject to clause (iii) and subparagraph (b) below),
fully-paid and royalty-free, right and license, with the right to grant
sublicenses (as set forth in Section 5.2.2), under all of Regulus’ rights
in and to the Regulus Technology and the Collaboration Technology, to continue
to Develop, Manufacture and Commercialize such Licensed Product in the Field in
such country, for so long as it continues to do so; (ii) if Regulus is the
Commercializing Party, the license granted to Regulus pursuant to Section 5.1.2
or 5.1.3, as applicable, with respect to such Refused Candidate Product or
Returned Licensed Product, respectively, shall convert to an exclusive (subject
to clause (iii) and subparagraph (b) below), fully-paid and
royalty-free, right and license, with the right to grant sublicenses (as set
forth in Section 5.1.4), under all of GSK’s rights in and to the GSK
Technology and the Collaboration Technology, solely as necessary to continue to
Develop, Manufacture and Commercialize such Refused Candidate Product or
Returned Licensed Product in the Field in such country, for so long as it
continues to do so; and (iii) any remaining exclusivity obligation under
Sections 7.1 and 7.2 (it being understood that such exclusivity obligations may
have terminated earlier pursuant to Section 12.7 below) shall no longer
apply to bind or restrict either Party or its Affiliates, or Regulus’ Parent
Companies, with respect to the Collaboration Target against which such Licensed
Product, or Refused Candidate Product or Returned Licensed Product, as the case
may be, is directed, provided, however, that if 


 


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there
are other Licensed Products being Developed, Manufactured and/or Commercialized
by the Commercializing Party that are directed to such Collaboration Target,
and the Agreement Term remains in effect with respect to such Licensed
Products, then, subject to the remainder of this Article 12, this clause (iii) shall
not apply unless and until the Agreement Term has expired with respect to all
such Licensed Products.


 


(b)              [Intentionally
Left Blank]


 


(c)              Where GSK
declines to exercise all of its Program Options for a given Program, on a
Program-by-Program basis, on or before the end of the applicable PoC Option
Exercise Period, then, following the lapse of such Program Options with respect
to such Program pursuant to Section 12.1.3, subject to the applicable
terms and conditions of this Agreement, (i) such Program(s) shall be
deemed terminated hereunder, (ii) the exclusive license granted to Regulus
pursuant to Section 5.1.2 shall apply with respect to any Refused
Candidates and Refused Candidate Products resulting from such terminated
Program(s), (iii) Regulus shall be obligated to make Reverse Royalty
payments to GSK in accordance with Section 6.7 with respect to any Refused
Candidate Products resulting from such terminated Program(s), (iv) GSK
shall have no further rights in, or options to, any Collaboration Compounds
Developed under (or Licensed Products resulting from) such terminated
Program(s), (v) Regulus shall have no further obligation to GSK to perform
any Development activities hereunder with respect to such Program(s), (vi) Regulus
shall not be required to comply with any diligence obligations with respect to
any Refused Candidates or Refused Candidate Products resulting from such
terminated Program(s), (vii) all licenses granted hereunder to GSK with
respect to such Program(s), or any Collaboration Compounds Developed under (or
Licensed Products resulting from) such terminated Program(s), shall terminate
and be of no further force and effect, (viii) any remaining exclusivity
obligation set forth in Section 7.1 or 7.2 shall terminate with respect to
the Collaboration Target to which such terminated Program(s) was directed,
and (ix) during a period not to exceed [***] months thereafter, GSK will
promptly deliver or disclose, as appropriate, to Regulus, at no cost to
Regulus, (A) all the pre-clinical and clinical data and results (including
pharmacology, toxicology, emulation and stability studies), adverse event data,
protocol results, analytical methodologies, arising from the Enabling Studies, (B) copies
of patent applications and patents included within GSK Enabling Studies
Patents, and (C) regulatory filings (including all relevant INDs and
Regulatory Approvals), regulatory documentation, regulatory correspondence, and
applicable reference standards with respect to the Enabling Studies, ownership
of which regulatory filings shall be transferred to Regulus or, if such
transfer is not reasonably practical, a right of reference shall be granted to
Regulus.


 


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12.2  Termination for Cause.


 


12.2.1     During
the Collaboration Term and Prior to any GSK Exercise of Program Options.  Except as set forth in Section 12.2.3 or
Section 12.2.4, either Party (in such capacity, the “Non-breaching
Party”) may, without prejudice to any other remedies available to it
at law or in equity, terminate this Agreement during the Collaboration Term
prior to GSK’s exercise of a Program Option, on a Collaboration
Target-by-Collaboration Target  basis, or
in its entirety in the case of a material breach that pertains to the Agreement
as a whole or with respect to [***] or more Collaboration Targets to protect
the interest of the Non-Breaching Party arising from such alleged breach, in
the event the other Party (in such capacity, the “Breaching
Party”) shall have materially breached or defaulted in the
performance of any of its material obligations hereunder either with respect to
such Collaboration Target, or the Agreement as a whole or with respect to [***]
or more Collaboration Targets, as the case may be, and such default shall have
continued for ninety (90) days after written notice thereof was provided to the
Breaching Party by the Non-breaching Party, such notice describing with
particularity and in detail the alleged material breach.


 


12.2.2     Following
GSK Exercise of a Program Option.  Except as set
forth in Section 12.2.3 or 12.2.4 below, either Party (in such capacity,
the “Non-breaching Party”) may, without
prejudice to any other remedies available to it at law or in equity, terminate
this Agreement in its entirety, or in part on a Collaboration
Target-by-Collaboration Target basis, following GSK’s exercise of a Program
Option with respect to the relevant Program, in the event the other Party (in
such capacity, the “Breaching Party”)
shall have materially breached or defaulted in the performance of any of its
material obligations hereunder either with respect to such Collaboration
Target, or, for a termination of the entire Agreement, for a material breach
which relates either to [***] Collaboration Targets or which pertains to the
Agreement as a whole, and such default shall have continued for ninety (90)
days after written notice thereof was provided to the Breaching Party by the
Non-breaching Party, such notice describing with particularity and in detail
the alleged material breach.


 


12.2.3     Termination
by GSK due to a Regulus Diligence Failure Event or Regulus Exclusivity Breach.  In the event that Regulus materially breaches
its diligence obligations under Section 3.6 (a “Regulus Diligence
Failure Event”) or its exclusivity obligations under Section 7.1
or 7.2 (a “Regulus Exclusivity Breach”), and
Regulus fails to cure such material breach in accordance with the provisions
for notice and cure as set forth under Section 12.2.1 or Section 12.2.2,
as applicable, and the provisions for dispute resolution as set forth under Section 12.2.5,
GSK shall have the right, at its sole discretion, to terminate the Agreement in
part on a Program-


 


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by-Program
basis or in its entirety (in the case of an uncured Regulus Diligence Failure
Event [***] or a Regulus Exclusivity Breach for any Program).  The rights and obligations of the respective
Parties in the event of termination by GSK for an uncured Regulus Diligence
Failure Event or a Regulus Exclusivity Breach shall be as specifically set
forth in Section 12.7.3(c) below and/or in the Side Agreement.  Notwithstanding anything in this Agreement to
the contrary, such termination by GSK, and the consequences set forth in Section 12.7.3(c) below
and/or in the Side Agreement, shall be [***] with respect to any Regulus
Diligence Failure Event.


 


12.2.4     Termination
by Regulus due to a GSK Diligence Failure Event.  In the event that, after the exercise by GSK
of its Program Option for a Program, GSK materially breaches its diligence
obligation under Section 4.4.1 (a “GSK Diligence Failure
Event”), and GSK fails to cure such material breach in accordance
with the provisions for notice and cure as set forth under Section 12.2.1
or Section 12.2.2, as applicable, and the provisions for dispute
resolution as set forth under Section 12.2.5, then Regulus shall have the
right, at its sole discretion, to terminate this Agreement in part on a
Collaboration Target-by-Collaboration Target basis or in its entirety (in the
case of an uncured GSK Diligence Failure Event [***]).  The rights and obligations of the respective
Parties in the event of termination by Regulus for an uncured GSK Diligence
Failure Event shall be as specifically set forth in Section 12.7.4
below.  Notwithstanding anything in this
Agreement to the contrary, such termination by Regulus, and the consequences
set forth in Section 12.7.4 below, shall be [***] with respect to any GSK
Diligence Failure Event.


 


12.2.5     Disagreement.  Notwithstanding any of the
foregoing, if the Parties reasonably and in good faith disagree as to whether
there has been a material breach under Section 12.2.1, Section 12.2.2,
Section 12.2.3 or Section 12.2.4 above, the Party which seeks to
dispute that there has been a material breach may contest the allegation in
accordance with Section 13.1. 
Notwithstanding the above sentence, the cure period for any allegation
made in good faith as to a material breach under this Agreement will run from
the date that written notice was first provided to the Breaching Party by the
Non-breaching Party, except that such cure period shall be tolled (as more
specifically set forth in Section 12.7.3(d) or Section 12.7.4(b),
as applicable) during the pendency of any arbitration with respect to a dispute
concerning any Regulus Diligence Failure Event or a Regulus Exclusivity Breach
under Section 12.2.3, or a GSK Diligence Failure Event under Section 12.2.4.  Subject to Section 12.7.3(d) and
12.7.4(b), any termination of the Agreement under this Section 12.2 shall
become effective at the end of such ninety (90) day period, unless the
Breaching Party has cured any such breach or default prior to the expiration of
such ninety (90) day period.  The right
of either Party to terminate this 


 


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Agreement,
or a Collaboration Target(s) under this Agreement, as provided in this Section 12.2
shall not be affected in any way by such Party’s waiver or failure to take action
with respect to any previous default.


 


12.3  GSK
Unilateral Termination Rights.  GSK shall have the right, at its sole
discretion, exercisable at any time during the Agreement Term, to terminate
this Agreement in its entirety or in part on a Collaboration
Target-by-Collaboration Target basis, for any reason or for no reason at all,
upon [***] days written notice to Regulus, subject to the rights and
obligations of the Parties set forth in Sections 12.7.1, 12.7.6, 12.7.7 and
12.8.  Except as set forth in Section 12.7.1,
12.7.6, 12.7.7 or 12.8, GSK shall not
have any additional cost, liability, expense, or obligation of any kind
whatsoever on account of any termination under this Section 12.3.  Notwithstanding the above, in the event of a
disagreement between the Parties regarding safety concerns where GSK believes
in good faith that such concerns merit the immediate termination of a Program,
GSK shall have the right pursuant to this Section 12.3 to terminate such
Program immediately upon written notice to Regulus and without the [***] day
notice period for termination.  For
purposes of clarity, in no event shall GSK have the right to exercise its right
to terminate the Agreement under this Section 12.3 following Regulus’
notice of termination under Section 12.2, 12.4 or 12.6.


 


12.4  Regulus’ Limited [***]
Termination Rights.  Regulus shall
have the right, exercisable upon written notice to GSK and at Regulus’ sole
discretion, to immediately terminate one or more Collaboration Targets or the
entire Agreement (in which event Section 12.7.2 shall apply), but only in
the event that GSK or one of its Affiliates [***]; provided, however,
that such termination right shall not apply in the event that
[***].  Regulus shall only be permitted
to exercise such termination right until the date that is [***] months from the
date that GSK or its Affiliate [***] or within [***] months of the date that
GSK notifies Regulus that GSK or its Affiliate has [***] accordance with Section 10.4.2,
whichever is latest.  The Parties acknowledge
and agree [***] shall not trigger Regulus’ termination right under this Section 12.4.  For purposes of this Section 12.4, an
[***].


 


12.5  Termination Pursuant to JSC
or [***] or Otherwise under Section 3.4.3.  In the event that the JSC [***] decides to
terminate a Program, on a Program-by-Program basis, due to [***], or in the
event that a Program otherwise terminates under Section 3.4.3, the
Agreement shall terminate with respect to such Program as set forth in Section 12.7.5,
subject to the exercise by GSK of its Terminated Program Option under Section 4.2.3
and its rights and obligations pursuant thereto.


 


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12.6  Termination for Insolvency.


 


12.6.1     Either Party
may terminate this Agreement, if, at any time, the other Party shall file in
any court or agency pursuant to any statute or regulation of any state or
country, a petition in bankruptcy or insolvency or for reorganization or for an
arrangement or for the appointment of a receiver or trustee of the Party or of
substantially all of its assets, or if the other Party proposes a written
agreement of composition or extension of substantially all of its debts, or if
the other Party shall be served with an involuntary petition against it, filed in
any insolvency proceeding, and such petition shall not be dismissed within
ninety (90) days after the filing thereof, or if the other Party shall propose
or be a party to any dissolution or liquidation, or if the other Party shall
make an assignment of substantially all of its assets for the benefit of
creditors.


 


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


 


12.6.3     If GSK
terminates this Agreement pursuant to Section 12.6.1, the provisions of Section 12.7.3
shall apply.


 


12.6.4     If Regulus
terminates this Agreement pursuant to Section 12.6.1, the provisions of Section 12.7.4
shall apply.


 


12.7  Effects of Termination.


 


12.7.1     Upon
Unilateral Termination by GSK under Section 12.3.  In the event of a unilateral termination of
this Agreement by GSK in its entirety or with respect to any Collaboration
Target(s) pursuant to Section 12.3:


 


(a)              Notwithstanding
anything contained herein to the contrary, all licenses granted to GSK with
respect to Collaboration Compounds and Licensed Products directed to such
terminated Collaboration Target(s) shall terminate, and all such
Collaboration Compounds and Licensed Products shall be deemed Refused
Candidates, Refused Candidate Products or (if GSK has previously exercised its
Program Option as of the effective date of such termination) Returned Licensed
Products, and the exclusive licenses granted to Regulus under 


 


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Section 5.1.2
and Section 5.1.3 shall apply with respect to such Refused Candidates and
Refused Candidate Products, and Returned Licensed Products, respectively;


 


(b)              the Reverse
Royalty payment obligations of Regulus under Section 6.7 with respect to
any Refused Candidate Products or Returned Licensed Products shall apply,
subject to Section 12.7.7;


 


(c)               Regulus shall
have no further obligation to GSK to perform any Development or Manufacturing
activities hereunder with respect to the terminated Collaboration Target(s);


 


(d)               GSK shall have
no further obligation to Regulus to perform any Development, Manufacturing or
Commercialization activities hereunder with respect to the terminated
Collaboration Target(s), except as set forth in Section 12.7.6;


 


(e)               Regulus shall
not be required to comply with any diligence obligations with respect to any
Refused Candidates, Refused Candidate Products or Returned Licensed Products
directed to such terminated Collaboration Target(s);


 


(f)                All Program
Options that are not exercised by GSK under Section 4.2 with respect to
any Program(s) terminated under this Section 12.7.1 before the date
of GSK’s notice of termination shall be cancelled and of no force and effect;


 


(g)               All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
the Collaboration Target(s) being terminated (including all Collaboration
Compounds and Licensed Products directed to such terminated Collaboration
Target(s)); and


 


(h)               Section 12.7.6
shall apply.


 


12.7.2     Upon
Unilateral Termination by Regulus under Section 12.4; Termination by
Regulus for [***]  In the event
of any unilateral termination by Regulus of this Agreement in its entirety or
with respect to any Collaboration Target(s) in accordance with Section 12.4,
or a termination by Regulus of this Agreement in its entirety or with respect
to any Collaboration Target(s) in accordance with Section 12.2 for an
uncured material breach by GSK of [***], then and in such event:


 


(a)               Notwithstanding
anything contained herein to the contrary, all licenses granted to GSK with
respect to Collaboration Compounds and Licensed Products directed to such
terminated Collaboration Target(s) shall terminate and all such
Collaboration 


 


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Compounds
and Licensed Products shall be deemed Refused Candidates, Refused Candidate
Products or (if GSK has previously exercised its Program Option as of the
effective date of such termination) Returned Licensed Products, as applicable,
and the exclusive licenses granted to Regulus under Section 5.1.2 and Section 5.1.3
shall apply with respect to such Refused Candidates and Refused Candidate
Products, and Returned Licensed Products, respectively;


 


(b)               Such termination
shall be without any right of GSK to receive from Regulus, or any obligation of
Regulus to pay to GSK, any Reverse Royalties which would otherwise be
applicable under Section 6.7 with respect to such Refused Candidates and
Refused Candidate Products, and Returned Licensed Products;


 


(c)               Regulus shall
have no further obligation to GSK to perform any Development or Manufacturing
activities hereunder with respect to the terminated Collaboration Target(s);


 


(d)               GSK shall have
no further obligation to Regulus to perform any 
Development, Manufacturing or Commercialization activities hereunder
with respect to the terminated Collaboration Target(s), except as set forth in Section 12.7.6;


 


(e)               Regulus shall
not be required to comply with any diligence obligations with respect to any
Refused Candidates, Refused Candidate Products or Returned Licensed Products
directed to such terminated Collaboration Target(s);


 


(f)                All Program
Options that are not exercised by GSK under Section 4.2 with respect to
any Program(s) terminated under this Section 12.7.2 before the date
of Regulus’ notice of termination shall be cancelled and of no force and
effect;


 


(g)               All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
the Collaboration Target(s) being terminated (including all Collaboration
Compounds and Licensed Products directed to such terminated Collaboration
Target(s)); and


 


(h)               Section 12.7.6
shall apply.


 


12.7.3     Upon Termination by GSK for Cause
under Section 12.2; Termination by GSK for Regulus Insolvency under Section 12.6.  In the event of a
termination of this Agreement either in its entirety or on a Program-by-Program
basis by GSK pursuant to Section 12.2 or 12.6, then for each Program,
subparagraph (a) shall apply for all such Programs for which GSK has not
exercised its Program Option, and subparagraph (b) shall apply for all such
Programs for which GSK has exercised its Program Option, except that for all
Programs for which (i) a  


 


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Regulus Diligence Failure Event has occurred or (ii) a Regulus
Exclusivity Breach has occurred, subsection 12.7.3(c) shall apply.


 


(a)               For each
Program which is terminated by GSK under Section 12.2.1, or under Section 12.6
if GSK has not exercised its Program Option with respect to such Program, then:


 


(i)            The
Collaboration Term shall terminate with respect to such terminated
Collaboration Target(s) with no additional amounts owed to Regulus (except
as set forth in clause (v) below or in Section 12.8);


 


(ii)           Notwithstanding
anything contained herein to the contrary, GSK shall have and Regulus hereby grants,
conditional upon such event, with respect to each Program terminated under this
subparagraph (a), the exclusive licenses granted to GSK under Section 5.2.1
with respect to the Collaboration Target, Collaboration Compounds, Option
Compounds, and Licensed Products resulting from such Program, and, depending
upon the progress of such Program as of the date of such termination, the scope
of such license shall be modified as necessary in accordance with the
clarifications stated in Section 12.7.7(d), which exclusive license shall
become effective immediately upon the termination of such terminated
Program(s);


 


(iii)          If the Regulus
uncured material breach or Regulus insolvency occurs with respect to such
Program prior to the final selection of the [***] Collaboration Targets in
accordance with Section 3.2, GSK shall have the right to select, within
the [***] period following any such termination, the remaining [***] final
Collaboration Targets (from the miRNA Pool or, if the miRNA Pool has not been
finalized as of the effective date of termination, the miRNA Library, but in
each case excluding any Blocked Targets), upon the final selection of which GSK
shall have and Regulus hereby grants, conditional upon such event, the
exclusive, worldwide and sublicenseable license described in Section 5.2.1,
with respect to the Collaboration Target and any Collaboration Compounds,
Option Compounds, and Licensed Products resulting from such Program, and the
scope of such license shall be modified as necessary in accordance with the
clarifications stated in Section 12.7.7(d).  Such exclusive license shall become effective
with respect to such final Collaboration Targets and any miRNA Antagonists,
miRNA Compounds and miRNA Therapeutics directed to any such final Collaboration
Target in the Field;


 


(iv)          in no event
shall any Collaboration Compounds Developed under such terminated Program(s) be
deemed Refused Candidates, nor shall any Licensed Products containing any such
Collaboration Compound(s) as an active ingredient(s) be deemed 


 


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Refused
Candidate Products, to which Regulus would otherwise have rights under Section 4.2.7
of this Agreement;


 


(v)           GSK shall (A) be
obligated to pay Regulus [***] of any [***] that would otherwise be payable
under [***] upon the acquisition by GSK of an exclusive license to the
Collaboration Compounds resulting from the terminated Program(s) in
accordance with the applicable provisions of this Article 12 for the
terminated Program(s) under clause (ii), (iii) of this Section 12.7.3(a),
and (B) be obligated to pay Regulus [***] subject to Section [***];
such that, in the case of each of clause (A) or (B) above, if the
Leading Compound has not yet reached [***] shall apply, but reduced by [***],
and if the Leading Compound has entered a [***] but has not [***], then [***]
shall apply, but reduced by [***], and if a [***] has been Initiated, then
[***] shall apply, but reduced by [***] in each case (1) with respect to
the Collaboration Compounds and Licensed Products resulting from the terminated
Program(s) for which GSK acquires such exclusive license under clause (ii) or
clause (iii) hereof, including any miRNA Antagonists, miRNA Compounds and
miRNA Therapeutics directed to the final [***] Collaboration Targets selected
under clause (iii) of this Section 12.7.3(a) (which miRNA
Antagonists, miRNA Compounds and miRNA Therapeutics shall be deemed
Collaboration Compounds and Licensed Products for purposes of determining the
royalties payable to Regulus hereunder), and (2) in no event shall the
[***] hereunder be less than [***] of [***] [***] with respect to Licensed
Products resulting from the terminated Program(s) for which GSK acquires
an exclusive license pursuant to the provisions of this Section 12.7.3(a).  Notwithstanding any other provision under
this Agreement or the Side Agreement, or any of the JV Agreements, or any
interpretation of any one or any combination of the above to the contrary, no
[***] shall be owed to Regulus, its Affiliates or to any of Regulus’ Parent
Companies, successors or assigns on account of the exclusive license acquired
by GSK as described in this Section 12.7.3(a) as clarified in section
12.7.7(d), and the provisions of Article 6 regarding milestone and royalty
payments shall not apply, except as expressly set forth in this Section 12.7.3(a);


 


(vi)          Regulus shall
have no further obligation to GSK to perform any  Development or Manufacturing activities
hereunder with respect to such terminated Collaboration Targets (including any
of the [***] final Collaboration Targets selected by GSK under clause (iii) above),
except in the event that GSK exercises its Program Option under clause (ii) or
(iii) above, in which case Section 5.3 shall apply;


 


(vii)         GSK shall not
be required to comply with any diligence obligations with respect to the
terminated Collaboration Target(s) (including any of the [***] final
Collaboration Targets selected by GSK under clause (iii) above); and


 


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(viii)        All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
the Collaboration Target(s) (including any of the final [***]
Collaboration Targets selected by GSK under clause (iii) above) being
terminated (including all  Collaboration
Compounds and Licensed Products directed to such terminated Collaboration
Target(s)).


 


(b)               For each
Program which is terminated by GSK pursuant to Section 12.2.2 or under Section 12.6
if GSK has exercised its Program Option with respect to such Program, then:


 


(i)            The Agreement
shall terminate with respect to such terminated Collaboration Target(s) with
no additional amounts owed to Regulus (except as set forth in clause (iii) below
or in Section 12.8);


 


(ii)           Notwithstanding
anything contained herein to the contrary, GSK shall have or retain and, if not
earlier granted, Regulus hereby grants, conditional upon such event, with
respect to any Program(s) terminated under subparagraph (b) above,
the exclusive licenses granted to GSK under Section 5.2.1 with respect to
the Collaboration Target, Collaboration Compounds, Option Compounds, and
Licensed Products resulting from such Program;


 


(iii)          in no event
shall any Collaboration Compounds Developed under such terminated Program(s) be
deemed Refused Candidates, nor shall any Licensed Products containing any such
Collaboration Compound(s) as an active ingredient(s) be deemed
Refused Candidate Products, to which Regulus would otherwise have rights under Section 4.2.7
of this Agreement;


 


(iv)          GSK shall (A) be
obligated to pay Regulus [***] of any [***] under the Agreement that would
otherwise be payable under Section [***], subject to Section [***],
with respect to the terminated Program(s) under this Section 12.7.3(b),
and (B) be obligated to pay Regulus [***] of the [***], as applicable,
under the relevant Program Option in accordance with Section 4.2, in each
case (1) with respect to the Collaboration Compounds and Licensed Products
resulting from the terminated Program(s) for which GSK retains or acquires
such exclusive license under clause (ii) hereof, and (2) in no event
shall the [***] of [***] with respect to Licensed Products resulting from the
terminated Program(s) for which GSK acquires an exclusive license pursuant
to the provisions of this Section 12.7.3(b).  Notwithstanding any other provision under
this Agreement or the Side Agreement, or any of the JV Agreements, or any
interpretation of any one or any combination of the above to the contrary,
[***] shall be 


 


108

















 


owed
to Regulus, its Affiliates or to any of Regulus’ Parent Companies, successors
or assigns on account of the exclusive license acquired by GSK as described in
this Section 12.7.3(b) as clarified in section 12.7.7(d), and the
provisions of Article 6 regarding [***] shall not apply, except as
expressly set forth in this Section 12.7.3(b);


 


(v)           Regulus shall
have no further obligation to GSK to perform any Development or Manufacturing
activities hereunder with respect to such terminated Collaboration Target(s),
except pursuant to Section 5.3;


 


(vi)          GSK shall not
be required to comply with any diligence obligations with respect to  the terminated Collaboration Target(s) or
any Collaboration Compounds, Option Compounds or Licensed Products directed
thereto;


 


(vii)         All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
the Collaboration Target(s) being terminated (including all Collaboration
Compounds and Licensed Products directed to such terminated Collaboration
Target(s)); and


 


(viii)        Notwithstanding
anything contained herein to the contrary, all licenses granted to GSK under Article 5
with respect to Collaboration Compounds, Option Compounds or Licensed Products
directed to the Collaboration Target that is the subject of any Program(s) for
which GSK has previously exercised its Program Option as of the effective date
of such termination, and which were not directed to the same Collaboration
Target as the Program to which the Regulus uncured material breach relates,
shall continue in full force, in accordance with the terms and conditions of
this Agreement, including without limitation, GSK’s payment obligations under Article 6
with respect to any Collaboration Compounds, Option Compounds or Licensed
Products resulting from such Program(s).


 


(c)               In the case of
a termination by GSK of any Program(s) or the entire Agreement under Section 12.2
as a result of (i) an [***] then the effects set forth in Section 12.7.3(a) or
12.7.3(b) above shall apply, as applicable depending upon whether GSK had
exercised its Program Option for such Program, except that GSK shall be
obligated to pay Regulus, in lieu of the royalties set forth in Section 12.7.3(a) or
Section 12.7.3(b), a [***] with respect to Licensed Products resulting
from the terminated Program(s) for which GSK acquires an exclusive license
pursuant to the provisions of this Section 12.7.3.  Notwithstanding any other provision under
this Agreement or the Side Agreement, or any of the JV Agreements, or any
interpretation of any one or any combination of the above to the contrary, no
milestone payments or other fees, costs, other royalties or payments of any
kind shall be owed to Regulus, its 


 


109

















 


Affiliates
or to any of Regulus’ Parent Companies, successors or assigns on account of the
exclusive license acquired by GSK as described in this Section 12.7.3 as
clarified in section 12.7.7(d), and the provisions of Article 6 regarding
milestone and royalty payments shall not apply, except as expressly set forth
in this Section 12.7.3(c).


 


(d)               Dispute.
Notwithstanding anything in this Agreement to the contrary, in the
event that Regulus disputes the allegation of a Regulus Diligence Failure Event
in good faith and pursues such dispute in accordance with Section 13.1,
upon initiation of the arbitration process as described in Section 13.1, (i) the
cure period set forth in Section 12.2.1 or 12.2.2, as applicable, shall be
tolled until the conclusion of the arbitration process and, if such conclusion
is in GSK’s favor, such cure period shall be extended as set forth in clause (A) below,
and (ii) GSK shall be granted the licenses set forth in Section 5.2.1
solely for [***]; provided, however, that (A) upon
the conclusion of the arbitration process in GSK’s favor, if Regulus fails to
comply with the arbitrator’s final award on or before the end of the sixty (60)
day period following the end of the initial cure period (as tolled as set forth
in clause (i) above), termination shall become effective under Section 12.2.3
and the [***] license granted under clause (ii) above shall automatically
convert to an exclusive license, with the right to grant sublicenses as set
forth in Section 5.2.2, and (B) upon the conclusion of the
arbitration process in Regulus’ favor, or Regulus’ compliance with the
arbitrator’s final award within the cure period set forth in clause (A) above
if the conclusion is in GSK’s favor, the [***] license granted under clause (ii) above
shall terminate and revert to Regulus. 
During the entire time pending the final resolution of any such dispute,
Regulus shall not grant any license to any Third Party under the Regulus
Technology or Collaboration Technology with respect to the same subject matter,
which would materially conflict or otherwise materially interfere with the
potential exclusive license to GSK under this Section 12.7.3(d).


 


(e)               The Parties
understand and agree that, due to the nature of the collaboration under this Agreement,
damages to GSK resulting from [***] Event under this Agreement would be
difficult to calculate accurately, and thus the remedy set forth in Sections
[***] represents a rational relationship between the damages from [***] on the
one hand, and the cumulative loss to GSK of its expectation interest and its
lost investment and lost potential return on investment.


 


12.7.4     Upon
Termination by Regulus for Cause (other than [***] under Section 12.2;
Termination by Regulus for GSK Insolvency under Section 12.6.


 


(a)               In the event of
a termination of this Agreement by Regulus pursuant to Section 12.2.1 or
12.2.2, as applicable, with respect to any Collaboration Target(s), 


 


110

















 


or
in its entirety, upon the uncured material breach of GSK [***], in which event Section 12.7.2
shall apply) where such material breach pertains to [***] or more Collaboration
Targets, or to the Agreement as a whole, or in the event of a termination of
this Agreement in its entirety by Regulus pursuant to Section 12.6 upon
the insolvency of GSK:


 


(i)            Notwithstanding
anything contained herein to the contrary, all licenses granted to GSK with
respect to Collaboration Compounds and Licensed Products directed to such
terminated Collaboration Target(s) shall terminate and all such
Collaboration Compounds and Licensed Products shall be deemed Refused
Candidates, Refused Candidate Products or (if GSK has previously exercised its
Program Option as of the effective date of such termination) Returned Licensed
Products, and the exclusive licenses granted to Regulus under Section 5.1.2
and Section 5.1.3 shall apply with respect to such Refused Candidates and
Refused Candidate Products, and Returned Licensed Products, respectively;


 


(ii)           Regulus shall be
obligated to pay GSK any applicable Reverse Royalties under Section [***]
with respect to any such Refused Candidate Products, and under Section [***]
with respect to any such Returned Licensed Products;


 


(iii)          Regulus shall
have no further obligation to GSK to perform any Development or Manufacturing
activities hereunder with respect to the terminated Collaboration Target(s);


 


(iv)          GSK shall have
no further obligation to Regulus to perform any Development, Manufacturing or
Commercialization activities hereunder with respect to the terminated
Collaboration Target(s), except as set forth in Section 12.7.6;


 


(v)           Regulus shall
not be required to comply with any diligence obligations with respect to any
Refused Candidates, Refused Candidate Products or Returned Licensed Products
directed to such terminated Collaboration Target(s);


 


(vi)          All Program
Options that are not exercised by GSK under Section 4.2 with respect to
any Program(s) terminated pursuant to this Section 12.7.4(a) before
the date of Regulus’ notice of termination shall be cancelled and of no force
and effect;


 


(vii)         All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
the Collaboration Target(s) being terminated (including all Collaboration
Compounds and Licensed Products directed to such terminated Collaboration
Target(s)); and


 


(viii)        Section 12.7.6
shall apply.


 


111


















 


(b)               Notwithstanding
anything in this Agreement to the contrary, in the event that GSK disputes the
allegation of any GSK Diligence Failure Event in good faith and pursues such
dispute in accordance with Section 13.1, upon initiation of the
arbitration process as described in Section 13.1, (i) the cure period
set forth in Section 12.2.1 or 12.2.2, as applicable, shall be tolled
until the conclusion of the arbitration process and, if such conclusion is in
Regulus’ favor, such cure period shall be extended as set forth in clause (A) below,
and (ii) Regulus shall be granted the licenses set forth in Section 5.1.2
or 5.1.3, as the case may be, solely [***]; provided, however, that
(A) upon the conclusion of the arbitration process in Regulus’ favor, if
GSK fails to comply with the arbitrator’s final award on or before the end of
the sixty (60) day period following the end of the initial cure period (as
tolled as set forth in clause (i) above), termination shall become
effective under Section 12.2.4 and the [***] license granted under clause (ii) above
shall automatically convert to an exclusive license, with the right to grant
sublicenses as set forth in Section 5.1.4, and (B) upon the
conclusion of the arbitration process in GSK’s favor, or GSK’s compliance with the
arbitrator’s final award within the cure period set forth in clause (A) above
if the conclusion is in Regulus’ favor, the [***] license granted under clause (ii) above
shall terminate and revert to GSK. 
During the entire time pending the final resolution of any such dispute,
GSK shall not grant any license to any Third Party under the GSK Technology or
Collaboration Technology with respect to the same subject matter, which would
materially conflict or otherwise materially interfere with the potential exclusive
license to Regulus under this Section 12.7.4(b).


 


(c)              The Parties understand and
agree that, due to the nature of the relationship of the Parties under this
Agreement, damages to Regulus resulting from a [***] under this Agreement would
be difficult to calculate accurately, and thus the remedy set forth in this Section 12.7.4
represents a rational relationship between the damages from the [***] on the
one hand, and the cumulative loss to Regulus of its expectation interest and
its lost investment and lost potential return on investment.


 


12.7.5     Upon
Termination by JSC [***] for [***] Otherwise under Section 3.4.3;
Terminated Program Options.  In the event that this Agreement is
terminated with respect to any Program(s) as a result of a decision of the
JSC [***] for [***] concerns, or a Program is otherwise terminated under Section 3.4.3:


 


(a)               Notwithstanding
anything contained herein to the contrary, GSK shall have the right, in its
sole discretion, to exercise its Terminated Program Option with respect to such
terminated Program(s) as set forth in Section 4.2.3, upon which
exercise the exclusive licenses granted to GSK under Section 5.2.1 shall
become effective with respect to Collaboration 


 


112

















 


Compounds,
Option Compounds and Licensed Products resulting from such terminated
Program(s), and the scope of such license shall be as modified and clarified
under Section 12.7.7(d);


 


(b)               with respect to
any such terminated Program(s) in no event shall any Collaboration
Compounds Developed under such terminated Program(s) be deemed Refused
Candidates, nor shall any Licensed Products containing any such Collaboration
Compound(s) as an active ingredient(s) be deemed Refused Candidate
Products, to which Regulus would otherwise have rights under Section 4.2.7
of this Agreement;


 


(c)               GSK shall be
obligated to pay Regulus milestones as set forth in Section 6.5.3 and
royalties as set forth in Section 6.6.1(d) (subject to Section 6.6.2),
in each case depending on the stage of Development at which the termination
occurred;


 


(d)               Regulus shall
have no further obligation to GSK to perform any Development or Manufacturing
activities hereunder with respect to such terminated Program(s) (including
any Collaboration Compounds or Licensed Products resulting from such terminated
Program(s)), except in the event that GSK exercises its Terminated Program
Option under clause (a) above, in which case Section 5.3 shall apply;


 


(e)               GSK shall not
be required to comply with any diligence obligations with respect to any Option
Compounds or Licensed Products resulting from such terminated Program(s); and


 


(f)                All of Regulus’
and GSK’s exclusivity obligations (including those of each Party’s Affiliates
and, with respect to Regulus, Parent Companies) under Article 7 shall
immediately terminate and no longer be of any force or effect with respect to
such terminated Program(s) (including any Collaboration Compounds and
Licensed Products resulting from such terminated Program(s)).


 


12.7.6     Technology
Transfer. Upon termination of this Agreement, or any
Collaboration Target(s) hereunder, by Regulus pursuant to Section 12.2,
12.4 or 12.6, or by GSK pursuant to Section 12.3, then paragraph (a) below
shall apply, and for any termination by GSK pursuant to Section 12.2, 12.5
or 12.6, then Section 5.3 shall apply for all terminated Programs:


 


(a)               If such
termination occurs prior to First Commercial Sale of the Licensed Product(s) directed
to the terminated Collaboration Target(s), during a period not to exceed [***]
months thereafter, GSK will promptly deliver or disclose, as appropriate, to
Regulus, [***] to Regulus ([***]), the GSK Technology and Collaboration
Technology in GSK’s possession or Control to the extent (A) relating
specifically and primarily to Refused 


 


113

















 


Candidates,
Refused Candidate Products and/or Returned Licensed Products if such GSK
Technology and Collaboration Technology was used in connection with the Program
(unless the Parties have mutually agreed to exclude it) or (B) [***] with
respect to a specific Collaboration Target that is the subject of such Program,
including but not limited to:  (i) information
regarding the [***], which is necessary for the exercise by Regulus of the Manufacturing
rights granted under Section 5.1.2 or 5.1.3, as applicable, (ii) pre-clinical
and clinical data and results (including pharmacology, toxicology, emulation
and stability studies), adverse event data, protocol results, analytical
methodologies, (iii) copies of patent applications and patents included
within GSK Patents and GSK Collaboration Patents and other relevant patent
information to the extent of any claims directed to subject matter which was
used in connection with the Program (unless the Parties have mutually agreed to
exclude it) or covering a method of treatment or use with respect to a specific
Collaboration Target that is the subject of such Program, (iv) regulatory
filings (including all relevant INDs and Regulatory Approvals), regulatory
documentation, regulatory correspondence, and applicable reference standards,
ownership of which regulatory filings shall be transferred to Regulus or, if
such transfer is not reasonably practical, a right of reference shall be
granted to Regulus, and (v) at Regulus’ request, any then existing
supplies as shall be deemed suitable by Regulus of bulk drug substance or other
materials, including drug substance, drug product and intermediate stocks,
reference standards and analytical specification and testing methods used to
Manufacture the applicable Refused Candidates, Refused Candidate Products or
Returned Licensed Products, at GSK’s Fully Absorbed Cost of Goods; in each case
above to the extent pertaining specifically to any Refused Candidates, Refused Candidate
Products and Returned Licensed Products and which are necessary to enable
Regulus to Develop, Manufacture and Commercialize such Refused Candidates,
Refused Candidate Products and/or Returned Licensed Products in the Field in
the Territory.  In addition, the Parties
will consider in good faith from time to time whether a safety data exchange
agreement is required.  Without limiting
any of the foregoing, GSK shall use Diligent Efforts to perform the transfer of
such information and materials to Regulus in an orderly manner, and, upon
delivery or disclosure, as appropriate, of such information and materials to
Regulus, Regulus shall use Diligent Efforts to promptly implement such
information and materials into its Development and Commercialization activities
with respect to such Refused Candidates, Refused Candidate Products and/or
Returned Licensed Products hereunder. 
For the avoidance of doubt, the obligation on GSK to deliver or
disclose, as appropriate, to Regulus the GSK Technology and other Know-How and
information to the extent relating specifically and primarily to Refused
Candidates, Refused Candidate Products and/or Returned Licensed Products if
such GSK Technology and Collaboration Technology was used in connection with
the Program (unless the 


 


114

















 


Parties
have mutually agreed to exclude it), or covering a method of treatment or use
with respect to a specific Collaboration Target that is the subject of such
Program, in accordance with this Section 12.7.6 shall include (x) the
transfer or license of any GSK Technology in the possession of any GSK
Affiliate engaged by GSK as a subcontractor in accordance with Section 3.10,
and (ii) the use of Diligent Efforts to transfer or license  any GSK Technology in the possession of any
Third Party subcontractor engaged by GSK as a subcontractor in accordance with Section 3.10.


 


(b)               If termination
occurs following First Commercial Sale of the Licensed Product(s) directed
to such terminated Collaboration Target(s), with respect to all affected
countries, in addition to the items listed in clause (a) above, to the
extent that GSK owns any trademark(s) that are specific to any Licensed
Product(s), if GSK has used any such 
trademark extensively, publicly and exclusively in connection with the
Licensed Product(s) and not any other products of GSK which are not
Licensed Product(s), then GSK agrees to assign such trademark to Regulus, in
each country where the Agreement is terminated with respect to such Licensed Product
and where GSK has rights in the trademark. 
In such event, Regulus shall be responsible for recording the assignment
in a timely manner and for any and all costs associated with the assignment and
recordation in such country.


 


(c)               In addition to
clause (a) or (b), GSK shall provide for reasonable transitional support,
at [***], up to a maximum of [***], as is reasonably required by Regulus, for
up to an additional [***] months with respect to Returned Licensed Products,
and any additional support as reasonably required by Regulus shall be charged
to Regulus at rates to be agreed between the Parties.


 


12.7.7     Special
Consequences for Certain Scenarios and Clarifications


 


(a)               Notwithstanding
anything in this Agreement to the contrary, if GSK unilaterally terminates this
Agreement under Section 12.3 in its entirety or with respect to any
Collaboration Target(s) and in the absence of an uncured material breach
of the Agreement by Regulus with respect to such Collaboration Target(s), and
GSK or its Affiliates or sublicensees [***], then Regulus shall no longer be
obligated to [***] with respect to any Refused Candidate Products or Returned
Licensed Products to which Regulus obtains rights under Section 12.7.1
arising from such termination of this Agreement by GSK pursuant to Section 12.3.


 


(b)               In addition,
if, at any time prior to any termination of this Agreement with respect to any
Collaboration Target(s) and in the absence of an uncured material breach
of the Agreement by Regulus with respect to such Collaboration Target(s), GSK
or its 


 


115

















 


Affiliates
or sublicensees [***] and then GSK unilaterally terminates this Agreement under
Section 12.3 in its entirety or with respect to any Collaboration
Target(s), then the consequences of termination set forth in clause (a) above
shall apply.


 


(c)               For clarity,
upon termination of any Collaboration Target or Program under Article 12
or Section 3.4.3 or 4.2.3, or where GSK declines to exercise all of its
Program Options on or before the end of the applicable PoC Option Exercise
Period for a given Program, the exclusivity obligations under Section 7.1
or Section 7.2 shall no longer apply to bind or restrict GSK or its
Affiliates, or Regulus or its Affiliates or Parent Companies, with respect to
the terminated Collaboration Target or Program.


 


(d)               For the sake of
clarity, the Parties understand and agree that, in the event that pursuant to
the provisions of Sections 12.7.3(a), 12.7.3(c) or 12.7.5, GSK acquires an
exclusive license from Regulus under Section 5.2.1 with respect to a
terminated Program and the Collaboration Target and Collaboration Compounds
relating to such Program, then, if such Program as of the date of such
termination has not yet progressed to the point where any Collaboration
Compounds at all or any Development Candidates or any Option Compounds or
Licensed Products have been identified, then, notwithstanding any
interpretation of Section 5.2.1 or any other provision of this Agreement
or the Side Agreement or any of the JV Agreements or any combination of any of
those to the contrary, GSK shall have the exclusive, sublicenseable right and
license in the Field and in the Territory, under the exclusive license granted
in Section 5.2.1, to use the Regulus Technology and Regulus’ rights in the
Collaboration Technology, to identify and discover new (as well as any
then-existing) Collaboration Compounds directed to such Collaboration Target,
and to Develop, Manufacture and Commercialize any new and existing Collaboration
Compounds as and into Licensed Products, and the license granted to GSK under Section 5.2.1
shall not be construed as limiting GSK only to use Regulus Technology and
Collaboration Technology pertaining to Collaboration Compounds which are
existing as of the date of such Program termination under Article 12.


 


12.8  Accrued Rights; Surviving
Provisions of the Agreement; Certain Clarifications.


 


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


 


116

















 


(b)               For purposes of
clarity, the Parties understand and agree that, (i) unless the exclusivity
obligations under Article 7 are expressly stated as binding upon a Party
beyond the termination or expiration of this Agreement with respect to a
Program or Collaboration Target, no such obligation(s) shall survive such
termination or expiration; (ii) all Program Options for any Program(s) that
is not terminated under Section 12.2 shall remain in effect in accordance
with the terms of Article 4; and (iii) unless otherwise expressly
stated, references in this Article 12 to “on a Collaboration
Target-by-Collaboration Target basis” (and related references to “Collaboration
Target” in such context) shall mean with respect to a Program that is directed
to a particular Collaboration Target if such Program actually exists at the
point that the relevant determination is made under Article 12, or with
respect to all Collaboration Compounds and Licensed Products directed against a
particular Collaboration Target, if the Program for such Collaboration Target
has not yet commenced or if GSK has already exercised its Program Option for
such Program at the point that the relevant determination is made under Article 12.


 


(c)               The provisions
of Sections 4.2.3, 4.2.7 and 4.3.2 (solely with respect to the effects of termination
set forth therein in connection with Article 12), Articles 5 and 6 (in
each case in accordance with the provisions of Article 12 or to the extent
any payment payable hereunder is owed to a Party but unpaid as of the effective
date of termination), Sections 6.9.3 and 6.10, Article 8 (with respect to (i) Jointly-Owned
Collaboration Technology and (ii) any Know-How or Patent Rights Controlled
by one Party but for which licenses granted to the other Party survive
termination or expiration of this Agreement), and Articles 9, 11, 12, and 13
shall survive the termination or expiration of this Agreement for any reason,
in accordance with their respective terms and conditions, and for the duration
stated, and where no duration is stated, shall survive indefinitely.


 


ARTICLE
13


 


MISCELLANEOUS


 


13.1  Dispute Resolution by
Binding Arbitration.  Any
controversy or claim arising out of or under this Agreement, or the breach
thereof, which is not settled under the procedures set forth in the appropriate
provisions of Article 2 or Article 3 and which is not subject to the
final decision-making authority of a Party under the provisions of Article 2
or Article 3, shall be finally resolved by binding arbitration, held in
New York City, New York, and administered by the American Arbitration
Association under its Commercial Arbitration Rules.  Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.  The
Parties shall make reasonable efforts to appoint three (3) arbitrators,
who are each mutually 


 


117

















 


acceptable
to GSK and Regulus, within [***] days of the initiation of the arbitration; in
the event they are unsuccessful and do not agree to extend the time period,
then the arbitrators shall be appointed in accordance with the rules.  The Parties shall share the expenses for the
arbitrators, but shall otherwise be responsible for their own fees in relation
to such arbitration.  Until such time as
arbitrators are appointed, the Parties may seek judicial relief for interim
measures, such as injunctive relief, in any court having competent
jurisdiction.  For clarity, the Parties
understand and agree that binding arbitration pursuant to this Section 13.1
shall not apply to alter or modify the indemnity obligations of the respective
Parties under Article 11, but arbitration may be sought to interpret such
obligations.  For clarity, the
Arbitrators shall not have authority or discretion to decide any matter other
than the matter for decision before them, and any such decision shall not
include any award or determination which would amend the applicable terms of
the Agreement.


 


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


 


13.3  Assignment.  This Agreement shall not be assignable by
either Party to any Third Party or Parent Company, in the case of Regulus,
(except as expressly stated below) without the prior written consent of the
other Party hereto, such consent not to be unreasonably withheld.  Notwithstanding the foregoing, (a) either
Party may assign this Agreement, without any consent of the other Party, to an
Affiliate, to a Third Party, or to the Parent Company of such Party, in the
case of Regulus, that acquires all or substantially all of the business or
assets of such Party to which the subject matter of this Agreement pertains (whether by merger,
reorganization, acquisition, sale or otherwise), and (b) either Party may
assign or transfer its rights to receive royalties and milestones under this
Agreement (but no liabilities), without any consent of the other Party, to an
Affiliate, to its Parent Company, or to a Third Party in connection with a
payment factoring transaction. 
Notwithstanding the foregoing, each Party shall have the right to assign
this Agreement, in whole or in part, to its Affiliate or Parent Company without
the prior written consent of the other Party; provided, that, such assignee is
able to exercise Diligent Efforts equivalent to those required to be exercised
by such assigning Party and otherwise perform all of the obligations of the
assigning Party hereunder and assumes in writing all of the relevant
liabilities and obligations of the assigning Party hereunder.  No assignment and transfer shall be valid and
effective unless and until the assignee/transferee shall agree in writing to be
bound by the provisions of this Agreement. 
The terms and conditions of this Agreement shall be binding upon and
shall inure to the benefit of the successors, heirs, administrators and
permitted assigns of the Parties.  Any
assignment not in accordance with the foregoing shall be void.


 


118

















 


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


 


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


 


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


 


	
  If
  to Regulus, addressed to:

  	
  Regulus
  Therapeutics, LLC

  	
   

  
	
   

  	
  1896
  Rutherford Road

  	
   

  
	
   

  	
  Carlsbad,
  California 92008

  	
   

  
	
   

  	
  Attention:
  President

  	
   

  
	
   

  	
  Fax:
  760-268-6868

  	
   

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
  Isis
  Pharmaceuticals, Inc.

  	
   

  
	
   

  	
  1896
  Rutherford Road

  	
   

  
	
   

  	
  Carlsbad,
  California 92008

  	
   

  
	
   

  	
  Attention:
  General Counsel

  
	
   

  	
  Fax:
  760-268-4922

  
				



 


119

















 


	
   

  	
  Alnylam
  Pharmaceuticals, Inc.

  
	
   

  	
  300
  Third Street, 3rd Floor

  
	
   

  	
  Cambridge, MA 02142

  
	
   

  	
  Attention: Vice President, Legal

  
	
   

  	
  Fax:
  617-551-8109

  
	
   

  	
   

  
	
   

  	
  WilmerHale

  
	
   

  	
  60
  State Street

  
	
   

  	
  Boston,
  MA 02109

  
	
   

  	
  Attention:
  Steven D. Singer, Esq.

  
	
   

  	
  Fax:
  617-526-5000

  
	
   

  	
   

  
	
  If
  to GSK, addressed to:

  	
  [***]

  
	
   

  	
   

  
	
  with
  a copy to:

  	
  [***]

  



 


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


 


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


 


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


 


120


















 


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


 


13.10  Entire Agreement.  This Agreement, together with the Schedules
and Exhibits hereto, the Side Agreement, the Convertible Promissory Note and
the relevant applicable cited provisions of the JV Agreements, set forth all
the covenants, promises, agreements, warranties, representations, conditions and understandings between
the Parties and supersede and terminate all prior agreements and understanding between the
Parties.  There are no covenants,
promises, agreements, warranties, representations, conditions or
understandings, either oral or written, between the Parties other than as set
forth herein and therein.  No subsequent
alteration, amendment, change or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.


 


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


 


13.12  Headings.  Headings used herein are for convenience only
and shall not in any way affect the construction of or be taken into consideration in interpreting this
Agreement.


 


13.13  Books and Records.  Any books and records to be maintained under
this Agreement by a Party or its Affiliates or Sublicensees shall be maintained
in accordance with U.S. generally accepted accounting principles in the case of Regulus, and shall be
maintained in accordance with International Financial Reporting Standards
(IFRS) in the case of GSK, consistently applied, except that the same need not
be audited.


 


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


 


13.15  Construction of Agreement.  The terms and provisions of this Agreement
represent the results of negotiations between the Parties and their
representatives, each of which 


 


121

















 


has
been represented by counsel of its own choosing, and neither of which has acted under duress or compulsion, whether
legal, economic or otherwise. 
Accordingly, the terms and provisions of this Agreement shall be
interpreted and construed in accordance with their usual and customary meanings,
and each of the Parties hereto hereby waives the application in connection with
the interpretation and construction of this Agreement of any rule of law
to the effect that ambiguous or conflicting terms or provisions contained in
this Agreement shall be interpreted or construed against the Party whose
attorney prepared the executed draft or any earlier draft of this
Agreement.  For clarity, the relevant
applicable provisions of the JV Agreements shall not be construed under this
paragraph.


 


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


 


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


 


13.18  Compliance with Laws: Each Party
shall and shall ensure that its Affiliates, Parent Companies and Sublicensees
will, comply with all relevant laws and regulations in exercising their rights
and fulfilling their obligations under this Agreement.


 


* - * - * - *


 


122

















 


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


 


 


Regulus Therapeutics LLC


 


	
  By:

  	
  /s/ Kleanthis G.
  Xanthopoulos, Ph.D.

  	
   

  
	
  Name:

  	
  Kleanthis G. Xanthopoulos,
  Ph.D.

  	
   

  
	
  Title:

  	
  President & CEO

  	
   

  
	
  Date:

  	
  April 17, 2008

  	
   

  
						



 


 


Glaxo Group Limited


 


	
  By:

  	
  /s/ Paul Williamson

  	
   

  
	
  Name:

  	
  Paul Wiliamson

  	
   

  
	
  Title:

  	
  For and on behalf of

  	
   

  
	
   

  	
  Edinburgh Pharmaceutical
  Industries Limited

  	
   

  
	
   

  	
  Corporate Director

  	
   

  
	
  Date:

  	
  April 17, 2008

  	
   

  
						



 

















 


 


LIST OF SCHEDULES
AND EXHIBITS


 


SCHEDULE 1.64 — Proposed
Definition of Fully Absorbed Manufacturing Cost


 


SCHEDULE 1.103 – The miRNAs
[***] as of the Effective Date


 


SCHEDULE 1.106 - The library
of oligonucleotides [***] as of the Effective Date


 


SCHEDULE 6.8.2 – [***]
Patent Rights Controlled by Regulus as of the Effective Date


 


SCHEDULE 8.10 – Parent
Company Patents Controlled by Isis as of the Effective Date and covering [***]
chemical modification


 


EXHIBIT A – Initial Research
Plan


 


EXHIBIT B - Listing of
Patent Rights Licensed to Regulus from its Parent Companies as of the Effective
Date


 


EXHIBIT C - Listing of
Patent Rights Assigned to Regulus from its Parent Companies or otherwise owned
by Regulus as of the Effective Date


 


EXHIBIT D – Listing of
Patent Rights Licensed to Regulus


 


EXHIBIT E – Initial
Collaboration Targets


 


EXHIBIT F - Listing of
Existing In-License Agreements


 


EXHIBIT G – Press Release


 


EXHIBIT H – Convertible
Promissory Note


 

















 


SCHEDULE 1.64


 


[***]


 


1





















 


SCHEDULE 1.103


 


The miRNAs [***] as of the Effective Date (Release 10.1, December 2007)


 


[***]


 


1





















 


SCHEDULE 1.106


 


The library of oligonucleotides [***] as of the Effective Date

(Release 10.1, December 2007)


 


[***]


 


1

















 


SCHEDULE
6.8.2


 


[***]
Patent Rights as of the Effective Date


 


[***]


 


1

















 


SCHEDULE
8.10


 


Parent
Company Patents Controlled by Isis as of the Effective Date


and
covering [***] chemical modification


 


[***]


 


1

















 


EXHIBIT A


 


Initial Research Plan


 


[***]


 


A-1





















 


EXHIBIT B


 


Listing of Patent Rights Licensed to Regulus from its
Parent Companies as of the Effective Date


 


[***]


 


B-1





















 


EXHIBIT C


 


Listing of Patent Rights Assigned to Regulus from its
Parent Companies or otherwise owned by Regulus as of the Effective Date


 


[***]


 


C-1

















 


EXHIBIT D


 


Listing of Patent Rights Licensed to Regulus


 


[***]


 


D-1





















 


EXHIBIT E


 


Initial Collaboration Targets


 


[***]


 


E-1





















 


EXHIBIT F


 


Listing of Existing In-License Agreements


 


[***]


 


F-1






















 


EXHIBIT G


 


Press Release


 


GlaxoSmithKline and Regulus
Therapeutics Form Strategic Alliance To Develop MicroRNA Targeted
Therapeutics to Treat Inflammatory Diseases


 


Companies Announce Significant
microRNA Therapeutics Collaboration


 


LONDON &
PHILADELPHIA & CARLSBAD, Calif., Apr 17, 2008 (BUSINESS WIRE) — GlaxoSmithKline
(GSK) and Regulus Therapeutics LLC (Regulus) today announced a worldwide
strategic alliance to discover, develop and market novel microRNA-targeted
therapeutics to treat inflammatory diseases such as rheumatoid arthritis and
inflammatory bowel disease. Regulus is a joint venture between Alnylam
Pharmaceuticals, Inc. (Nasdaq: ALNY) and Isis Pharmaceuticals, Inc.
(Nasdaq: ISIS).


 


The alliance leverages
Regulus’ unique expertise and intellectual property position in the discovery
and development of microRNA-targeted therapeutics and provides GSK with an
option to license product candidates directed at four different microRNA
targets with relevance in inflammatory disease. Regulus will be responsible for
the discovery and development of the microRNA antagonists through completion of
clinical proof of concept, unless GSK chooses to exercise its option earlier.
After exercise of the option, GSK will have an exclusive license to drugs
developed under each program by Regulus for the relevant microRNA target for
further development and commercialization on a worldwide basis. Regulus will
have the right to further develop and commercialize any microRNA therapeutics
which GSK chooses not to develop or commercialize.


 


Regulus will receive $20
million in upfront payments from GSK, including a $15 million option fee and a
$5 million note (guaranteed by Isis and Alnylam) that will convert into Regulus
common stock in the future under certain specified circumstances. Regulus could
also be eligible to receive up to $144.5 million in development, regulatory and
sales milestone payments for each of the four microRNA-targeted therapeutics
discovered and developed as part of the alliance. In addition to the potential
of nearly $600 million Regulus could receive in option, license and milestone
payments, Regulus would also receive tiered royalties up to double digits on
worldwide sales of products resulting from the alliance.


 


“We are focused on finding
innovative medicines through both internal efforts and by ‘virtualizing’ a
portion of the inflammatory diseases pipeline. We are very excited to be
working 


 


G-1

















 


with Regulus and exploring
the therapeutic opportunities in inflammation offered by targeting microRNAs,
an exciting new area of biology,” said Jose Carlos Gutierrez-Ramos, Ph.D.,
Senior Vice President and head of the Immuno-Inflammation Center of Excellence
for Drug Discovery of GSK. “When associated with an aberrant inflammatory
response, microRNAs represent disease targets whose therapeutic modulation
could revolutionize the way we treat immune diseases and provide benefits not
readily achievable with today’s medicines.”


 


“GSK is an outstanding
partner for Regulus, and we look forward to expanding our efforts in
inflammation where a new class of therapeutics could offer novel options to
treat disease,” said Kleanthis G. Xanthopoulos, Ph.D., President and Chief
Executive Officer of Regulus. “microRNA therapeutics represent an exciting new
frontier for pharmaceutical research, opening many opportunities including
those present in inflammation and immune diseases. As a leading microRNA
therapeutics company, Regulus has the expertise and access to proprietary antisense
technologies, which provide the tools and potential to quickly move therapeutic
programs toward the clinic. Through its relationship with Alnylam and Isis,
Regulus also has a vast patent estate in microRNAs.”


 


About microRNAs


 


microRNAs are a recently discovered
class of genetically encoded small RNAs, approximately 20 nucleotides in
length, and are believed to regulate the expression of a large number of human
genes. microRNA therapeutics represent a new approach for the treatment of a
wide range of human diseases. The inappropriate absence or presence of specific
microRNAs in various cells has been shown to be associated with specific human
diseases including cancer, viral infection, and metabolic disorders. Targeting
microRNAs with novel therapeutic agents could result in high-impact and broadly
acting treatments for human diseases.


 


About Regulus Therapeutics
LLC


 


Regulus is a
biopharmaceutical company formed to discover, develop and commercialize
microRNA therapeutics. Regulus was founded in late 2007 as a joint venture
between Alnylam Pharmaceuticals, a leader in RNAi therapeutics, and Isis
Pharmaceuticals, a leader in antisense technologies and therapeutics. Isis and
Alnylam scientists and collaborators were the first to discover microRNA
antagonist strategies that work in vivo in animal studies (Krutzfeldt et al.
Nature 438, 685-689 (2005); Esau et al. Cell Metab., 3, 87-98 (2006)). Isis and
Alnylam have also created and consolidated key intellectual property for the
development and commercialization of microRNA therapeutics. Regulus maintains
facilities in Carlsbad, California. For more information, visit
www.regulusrx.com.


 


G-2

















 


About Alnylam
Pharmaceuticals, Inc.


 


Alnylam is a
biopharmaceutical company developing novel therapeutics based on RNA
interference, or RNAi. The company is applying its therapeutic expertise in
RNAi to address significant medical needs, many of which cannot effectively be
addressed with small molecules or antibodies, the current major classes of
drugs. Alnylam is leading the translation of RNAi as a new class of innovative
medicines with peer-reviewed research efforts published in the world’s top
scientific journals including Nature, Nature Medicine, and Cell. The company is
leveraging these capabilities to build a broad pipeline of RNAi therapeutics;
its most advanced program is in Phase II human clinical trials for the
treatment of respiratory syncytial virus (RSV) infection. In addition, the
company is developing RNAi therapeutics for the treatment of influenza,
hypercholesterolemia, and liver cancers, among other diseases. The company’s
leadership position in fundamental patents, technology, and know-how relating
to RNAi has enabled it to form major alliances with leading companies including
Medtronic, Novartis, Biogen Idec, and Roche. The company, founded in 2002,
maintains headquarters in Cambridge, Massachusetts. For more information, visit
www.alnylam.com.


 


About Isis Pharmaceuticals, Inc.


 


Isis is exploiting its
expertise in RNA to discover and develop novel drugs for its product pipeline
and for its partners. The Company has successfully commercialized the world’s
first antisense drug and has 19 drugs in development. Isis’ drug development
programs are focused on treating cardiovascular and metabolic diseases. Isis’
partners are developing antisense drugs invented by Isis to treat a wide
variety of diseases. Ibis Biosciences, Inc., Isis’ majority-owned
subsidiary, is developing and commercializing the Ibis T5000(TM) Biosensor
System, a revolutionary system to identify infectious organisms. Isis is a
joint owner of Regulus Therapeutics LLC, a joint venture focused on the
discovery, development and commercialization of microRNA therapeutics. As an
innovator in RNA-based drug discovery and development, Isis is the owner or
exclusive licensee of over 1,500 issued patents worldwide. Additional
information about Isis is available at www.isispharm.com.


 


Alnylam/Isis Forward Looking
Statements


 


This press release includes
forward-looking statements regarding the future therapeutic and commercial
potential of Isis’, Alnylam’s and Regulus’ business plans, technologies and
intellectual property related to microRNA therapeutics being discovered and
developed by Regulus, including statements regarding expectations around the
newly formed relationship between Regulus and GSK. Any statement describing
Isis’, Alnylam’s or Regulus’ goals, 


 


G-3

















 


expectations, financial or
other projections, intentions or beliefs is a forward-looking statement and
should be considered an at-risk statement, including those statements that are
described as such parties’ goals. Such statements are subject to certain risks
and uncertainties, particularly those inherent in the process of discovering,
developing and commercializing drugs that are safe and effective for use as
human therapeutics, and in the endeavor of building a business around such
products. Such parties’ forward-looking statements also involve assumptions
that, if they never materialize or prove correct, could cause its results to
differ materially from those expressed or implied by such forward-looking
statements. Although these forward-looking statements reflect the good faith
judgment of the management of each such party, these statements are based only
on facts and factors currently known by Isis, Alnylam or Regulus, as the case
may be. As a result, you are cautioned not to rely on these forward-looking
statements. These and other risks concerning Isis’, Alnylam’s and Regulus’
programs are described in additional detail in Isis’ annual report on Form 10-K
for the year ended December 31, 2007 and in Alnylam’s annual report on Form 10-K
for the year ended December 31, 2007, which are on file with the SEC.
Copies of this and other documents are available from Isis, Alnylam or Regulus.


 


About GlaxoSmithKline


 


GlaxoSmithKline - one of the
world’s leading research-based pharmaceutical and healthcare companies - is
committed to improving the quality of human life by enabling people to do more,
feel better and live longer.


 


About the II CEDD


 


The Immuno-Inflammation
Centre of Excellence for Drug Discovery is dedicated to discovering therapies
for inflammatory diseases such as rheumatoid arthritis, inflammatory bowel
disease and psoriasis. It is designed to integrate and better coordinate the
progression of inflammatory disease medicines from therapeutic hypothesis to
clinical proof of concept. It focuses on building an innovative pipeline
through both internal efforts and external alliances with other companies and
research institutions and will focus on ‘virtualizing’ a portion of the
inflammatory diseases pipeline by forming multiple risk-sharing/reward-sharing
alliances.


 


G-4

















 


EXHIBIT
H


 


Convertible
Promissory Note


 


THIS NOTE AND ANY SHARES
ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FILED UNDER SUCH ACT OR PURSUANT TO AN OPINION OF
COUNSEL SATISFACTORY TO REGULUS THERAPEUTICS, ALNYLAM OR ISIS, AS APPLICABLE,
THAT SUCH REGISTRATION IS NOT REQUIRED. 


 


CONVERTIBLE PROMISSORY NOTE


 


	
  $5,000,000

  	
  [TBD], 2008

  
	
   

  	
  No.

  



 


FOR VALUE RECEIVED, Regulus
Therapeutics LLC, a Delaware limited liability company (the “Maker”), promises
to pay to Glaxo Group Limited or its assigns (the “Holder”) the principal sum
of $5,000,000, together with interest on the unpaid principal balance of this
Note from time to time outstanding at the rate per annum equal to [***] (as
defined below) until paid in full. Subject to the conversion provisions set
forth herein, all principal and accrued interest shall be due and payable on
the earlier to occur of (i) [***] (the “Anniversary Date”) or (ii) a
Change in Control (as defined below).


 


Interest on this Note shall
be computed on the basis of a year of 365 days for the actual number of days
elapsed and shall accrue, [***] on the last day of each [***] and as of the
Anniversary Date (or any payment date prior thereto).  All payments by the Maker under this Note
shall be in immediately available funds.


 


1.             Definitions.  For purposes of this Note:


 


(a)           “Change in Control” shall
mean (i) any merger or consolidation to which the Maker is a party (except
any merger or consolidation in which the holders of voting securities of the
Maker immediately prior to such merger or consolidation continue to hold,
immediately following such merger or consolidation and in approximately the
same relative proportions as they held voting securities of the Maker, at least
51% of the voting power of the securities of (A) the surviving or
resulting corporation, or (B) the parent corporation of the surviving or
resulting corporation if the surviving or resulting corporation is a
wholly-owned subsidiary of such parent corporation immediately following such
merger or consolidation), (ii) the reduction below 50% in the aggregate
beneficial ownership by the Guarantors (as defined below) of the outstanding
voting power of the Maker or (iii) the sale of all or substantially all of
the assets of the Maker. Notwithstanding the foregoing, a Qualified Financing
will not be considered a Change in Control.


 


(b)           “Collaboration Agreement”
shall mean the Product Development and Commercialization Agreement by and
between the Maker and Holder dated as of [             ].


 


(c)           “Guarantors” shall mean
Alnylam Pharmaceuticals, Inc., a Delaware corporation (“Alnylam”) and Isis
Pharmaceuticals, Inc., a Delaware corporation (“Isis”).


 


H-1

















 


(d)           “Qualified Financing” shall
mean the first issuance of [***] by the Maker to bona fide institutional
investors, after the [***], with immediately available gross proceeds to the
Maker of at least [***] (excluding any amount of this Note or other
indebtedness of the Maker that convert into equity as part of such financing).


 


(e)           “Prime Rate” shall mean for
any [***] the prime rate of interest as of the first day of each such [***] as
published from time to time by The Wall Street Journal, National Edition.


 


2.             Conversion.


 


(a)           Automatic Conversion Upon
Qualified Financing.  Effective upon the
closing of a Qualified Financing, all of the outstanding principal and accrued
interest under this Note (the “Outstanding Amount”) will automatically be
converted into shares of the same class and series of capital stock of the
Maker issued to other investors on the same basis as the investment by such
investors in the Qualified Financing (the “Qualified Financing Securities”) and
at a conversion price equal to the price per share of Qualified Financing
Securities paid by the other investors in the Qualified Financing (the “Qualified
Financing Price”), with any resulting fraction of a share rounded down to the
nearest whole share.  Notwithstanding the
foregoing, if the conversion of this Note pursuant to this Section 2(a) would
otherwise result in the Holder, together with its affiliates, owning more than
[***]% of the outstanding capital stock of the Maker, calculated on an
as-converted fully-diluted basis (including as outstanding shares of capital
stock issuable upon exercise or conversion of all outstanding stock options,
warrants or other convertible securities of the Maker), immediately following
the conversion of the Note [***] the Outstanding Amount shall be converted
either pursuant to the first sentence of this Section 2(a) or, [***]
into (i) that number of shares of Qualified Financing Securities that
would result in the Maker reaching, but not exceeding, [***], and (ii) an
amount in cash equal to the difference between (A) the product of (1) the
number of [***] Shares issued upon conversion, multiplied by (2) the
Qualified Financing Price and (B) the Outstanding Amount.  The Maker shall notify the Holder in writing
of the anticipated occurrence of a Qualified Financing at least [***] days
prior to the closing date of the Qualified Financing.


 


(b)           Optional Conversion.  In the event the Maker has been converted
into, and remains, a [***], but has not closed a Qualified Financing within
[***] of becoming a [***], the Holder may, with the consent of the Maker,
convert some or all of the Outstanding Amount into shares of common stock of
the Maker at a conversion price equal to then fair market value of the Maker’s
common stock, as agreed to by the Maker, Holder and each Guarantor. For
purposes of clarity, in the event the Maker, Holder and each Guarantor do not
agree on the fair market value of the Maker’s common stock, this Note will not
be convertible pursuant to this Section 2(b).


 


3.             Repayment.


 


(a)           If no Qualified Financing or
Change of Control has occurred prior to the Anniversary Date, the Outstanding
Amount, if any, will be [***] or, at the election of Regulus and with the
consent of Alnylam and/or Isis, as the case may be, registered and unrestricted
shares of Alnylam common stock and/or Isis common stock, with a value equal to
[***]% of the then Outstanding Amount, provided that shares of Alnylam and/or
Isis common stock, as the case may be, are then traded on a national securities
exchange and provided further that the average daily trading volume for such
shares, as the case may be, is greater than [***]% of the shares proposed to be
issued to the Holder.  For purposes of
this Section 3(a), the value of one share of common stock 


 


H-2

















 


shall be equal to the
average closing price per share of such common stock, as reported on the
national securities exchange on which the stock is then traded, during the
[***] trading day period ending on (and including) the day that is two days
prior to the Anniversary Date.


 


(b)           In the event the Holder
terminates the Collaboration Agreement without cause or the Maker terminates
the Collaboration Agreement as a result of a material breach by the Holder,
this Note may be prepaid in cash, in whole but not in part and without any
pre-payment penalty, prior to the Anniversary Date at the election of the Maker
and without the prior written consent of the Holder.


 


4.             Events of Default.  This Note shall become immediately due and
payable without notice or demand (but subject to the conversion rights set
forth herein) upon the occurrence at any time of any of the following events of
default (individually, an “Event of Default” and collectively, “Events of
Default”):


 


(a)           the Maker fails to pay any
of the principal or interest under this Note within 10 days of Maker’s receipt
of written notice that such amount is due and payable;


 


(b)           the Maker or either
Guarantor files any petition or action for relief under any bankruptcy,
reorganization, insolvency or moratorium law or any other law for the relief
of, or relating to, debtors, now or hereafter in effect, or seeks the
appointment of a custodian, receiver, trustee (or other similar official) of
the Maker or either Guarantor or all or any substantial portion of the Maker’s
or either Guarantor’s assets, or makes any assignment for the benefit of
creditors or takes any action in furtherance of any of the foregoing, or fails
to generally pay its debts as they become due;


 


(c)           an involuntary petition is
filed, or any proceeding or case is commenced, against the Maker or either
Guarantor (unless such proceeding or case is dismissed or discharged within 60
days of the filing or commencement thereof) under any bankruptcy,
reorganization, arrangement, insolvency, adjustment of debt, liquidation or
moratorium statute now or hereafter in effect, or a custodian, receiver,
trustee, assignee for the benefit of creditors (or other similar official) is
applied or appointed for the Maker or either Guarantor or to take possession,
custody or control of any property of the Maker or either Guarantor, or an
order for relief is entered against the Maker or either Guarantor in any of the
foregoing; or


 


(d)           termination of the
Collaboration Agreement by the Holder (or its assignee or successor under the
Collaboration Agreement) by reason of breach of the Collaboration Agreement by
the Maker.


 


Upon the occurrence of an
Event of Default, the Holder shall have then, or at any time thereafter, all of
the rights and remedies afforded creditors generally by the applicable federal
laws or the laws of the Commonwealth of Massachusetts.


 


5.             Guaranty.


 


(a)           Guaranty of Payment. The
Guarantors hereby jointly and severally guaranty to the Holder the due and full
payment within [***] of delivery of the Guaranteed Default Notice (as defined
below) and the performance of all of the indebtedness of the Maker to the
Holder for principal and accrued interest under this Note (the “Obligations”).
Subject to the conditions set forth herein, this Guaranty is an absolute,
unconditional, joint and several and continuing guaranty of the full and
punctual payment and performance of all of the Obligations and not of their 


 


H-3

















 


collectibility only.  Payments by the Guarantors hereunder may be
required by the Holder on any number of occasions.  All payments by the Guarantors hereunder
shall be made to the Holder, in the manner and at the place of payment
specified therefor in this Note. 
Notwithstanding the foregoing, the right of the Holder to demand and
receive payment of any Obligation under this Section 5 shall be subject to
the following conditions precedent:  (i) the
requested amount has become due and payable under this Note, (ii) the
Holder has given written notice of the amount due to the Maker and the
Guarantors, (iii) notwithstanding the notice delivered by the Holder under
clause (ii), the Maker has not paid the Holder or its assigns such amount in
full within 15 days of Maker’s receipt of such notice (a “Guaranteed Default”),
and (iv) the Guarantors have received written notice from the Holder of
such Guaranteed Default (the “Guaranteed Default Notice”).


 


(b)           Waivers by Guarantors;
Holder’s Freedom to Act.  Each Guarantor
agrees that the Obligations will be paid and performed strictly in accordance
with their respective terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Holder with respect thereto. 
Each Guarantor waives promptness, diligences, presentment, demand,
protest, notice of acceptance, notice of any Obligations incurred and all other
notices of any kind (except the Guaranteed Default Notice and any other notice
specifically required to be given to such Guarantor under this Guaranty), all
defenses which may be available by virtue of any valuation, stay, moratorium
law or other similar law now or hereafter in effect, any right to require the
marshalling of assets of the Maker or any other entity or other person
primarily or secondarily liable with respect to any of the Obligations, any
defense, setoff, counterclaim, or claim of any nature or kind arising from the
present or future lack of validity or enforceability of any Obligation, and all
suretyship defenses generally.  Without
limiting the generality of the foregoing, each Guarantor agrees to the provisions
of any instrument evidencing or otherwise executed in connection with any
Obligation and agrees that the obligations of such Guarantor hereunder shall
not be released or discharged, in whole or in part, or otherwise affected by (a) the
failure of the Holder to assert any claim or demand or to enforce any right or
remedy against the Maker or any other entity or other person primarily or
secondarily liable with respect to any of the Obligations; (b) any
extensions, compromise, refinancing, consolidation or renewals of any
Obligation; (c) any change in the time, place or manner of payment of any
of the Obligations or any rescissions, waivers, compromise, refinancing,
consolidation or other amendments or modifications of any of the terms or
provisions of the Note or any other agreement evidencing, securing or otherwise
executed in connection with any of the Obligations, (d) the addition,
substitution or release of any entity or other person primarily or secondarily
liable for any Obligation; (e) the adequacy of any means of obtaining
repayment of any of the Obligations; or (f) any other act or omission
which might in any manner or to any extent vary the risk of such Guarantor or
otherwise operate as a release or discharge of such Guarantor, all of which may
be done without notice to such Guarantor. 
To the fullest extent permitted by law, each Guarantor hereby expressly
waives any and all rights or defenses arising by reason of (i) any “one
action” or “anti-deficiency” law which would otherwise prevent the Holder from
bringing any action, including any claim for a deficiency, or exercising any
other right or remedy (including any right of set-off), against such Guarantor
or (ii) any other law which in any other way would otherwise require any
election of remedies by the Holder.


 


H-4

















 


(c)           Unenforceability of
Obligations Against the Maker.  If for
any reason the Maker has no legal existence or is under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become irrecoverable
from the Maker by reason of the Maker’s insolvency, bankruptcy or
reorganization or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on each of the Guarantors to the same
extent as if such Guarantor at all times had been the principal obligor on all
such Obligations.  In the event that
acceleration of the time for payment of any of the Obligations is stayed upon
the insolvency, bankruptcy or reorganization of the Maker, or for any other
reason, all such amounts otherwise subject to acceleration under the terms of
the Notes or any other agreement evidencing, securing or otherwise executed in
connection with any Obligation shall be immediately due and payable by the
Guarantors.


 


(d)           Waiver of Rights Against
Maker and Subrogation.  Until the final
payment and performance in full of all of the Obligations, each of the
Guarantors shall not exercise and hereby forbears from exercising any rights
against the Maker or any other person or entity (other than the other
Guarantor) arising as a result of payment by such Guarantor hereunder, by way
of subrogation, reimbursement, restitution, contribution or otherwise, and will
not prove any claim in competition with the Holder in respect of any payment
hereunder in any bankruptcy, insolvency or reorganization case or proceedings
of any nature; the Guarantors will not claim any setoff, recoupment or
counterclaim against the Maker in respect of any liability of the Guarantors to
the Maker.


 


6.             Miscellaneous.


 


(a)           All payments by the Maker
under this Note shall be made without set-off or counterclaim and be free and
clear and without any deduction or withholding for any taxes or fees of any
nature whatever, unless the obligation to make such deduction or withholding is
imposed by law.


 


(b)           No delay or omission on the
part of the Holder in exercising any right under this Note shall operate as a
waiver of such right or of any other right of the Holder, nor shall any delay,
omission or waiver on any one occasion be deemed a bar to or waiver of the same
or any other right on any future occasion.


 


(c)           The Maker and every endorser
or guarantor of this Note, regardless of the time, order or place of signing,
hereby waives presentment, demand, protest and notices of every kind and assents
to any permitted extension of the time of payment and to the addition or
release of any other party primarily or secondarily liable hereunder.


 


(d)           Any notices, requests and
other communications hereunder shall be in writing and shall be personally delivered
or sent by express delivery service, registered or certified air mail, return
receipt requested, postage prepaid, or by facsimile (confirmed by prepaid
registered or certified air mail letter or by international express delivery
mail) (e.g., FedEx), and shall be deemed to have been properly served to the
addressee upon receipt of such written communication, to the following
addresses of the parties, or such other address as may be specified in writing
to the other parties hereto:


 


	
  if to Holder:

  	
   

  
	
  [***]

  
	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
						



 


H-5

















 


	
  with a copy to:

  	
   

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  if to Maker:

  	
  Regulus Therapeutics LLC

  	
   

  	
   

  	
   

  
	
  1896 Rutherford Road

  	
   

  	
   

  	
   

  	
   

  
	
  Carlsbad, California 92008

  	
   

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  	
   

  
	
  Attention:

  	
  President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  if to Guarantors:

  	
  Alnylam
  Pharmaceuticals, Inc.

  	
   

  	
   

  	
   

  
	
  300 Third Street, 3rd
  Floor

  	
   

  	
   

  	
   

  	
   

  
	
  Cambridge, MA 02142

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
  617-551-8109

  	
   

  	
   

  	
   

  
	
  Attention:

  	
  Vice President, Legal

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Isis
  Pharmaceuticals, Inc.

  	
   

  	
   

  	
   

  
	
  1896 Rutherford Road

  	
   

  	
   

  	
   

  	
   

  
	
  Carlsbad, California 92008

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
  760-268-4922

  	
   

  	
   

  	
   

  
	
  Attention:

  	
  General Counsel

  	
   

  	
   

  	
   

  
										



 


(e)           The Holder agrees that no
director or officer of the Maker or Guarantors shall have any personal
liability for the repayment of this Note.


 


(f)            This Note may not be amended
or modified except by an instrument executed by the Maker, the Holder and each
of the Guarantors.


 


(g)           Until the conversion of this
Note, the Holder shall not have or exercise any rights by virtue hereof as a
member or stockholder of the Maker.


 


(h)           All rights and obligations
hereunder shall be governed by the laws of the Commonwealth of Massachusetts
(without giving effect to principles of conflicts or choices of law) and this
Note is executed as an instrument under seal.


 


MAKER:


 


REGULUS THERAPEUTICS LLC


By:


Title:


 


H-6

















 


	
  GUARANTORS:

  	
   

  
	
   

  	
   

  
	
  ALNYLAM PHARMACEUTICALS,
  INC.

  	
   

  
	
  By:

  	
   

  
	
  Title:

  	
   

  
	
   

  	
   

  
	
  ISIS PHARMACEUTICALS, INC.

  	
   

  
	
  By:

  	
   

  
	
  Title:

  	
  .

  



 


H-7