exv10w3





 Exhibit 10.3

Text Marked By [* * *] Has Been Omitted Pursuant To A Request For Confidential Treatment And Was

Filed Separately With The Securities And Exchange Commission.




RXi Pharmaceuticals Corporation

One Innovation Drive

Worcester, MA 01605



Attention: Tod Woolf, President and CEO



Re: Patent Rights Based On Certain Patent Applications To Be Filed Claiming The Benefit Of One Or
More Of USSN 10/940892, 10/7 14333, 60/502050 and 60/426 137



Ladies and Gentlemen:




     In connection with the future filing of U.S. patent applications by Dharmacon, Inc., a
Delaware corporation (“Dharmacon”) claiming the benefit of one or more of U.S. applications
10/940892, 10/714333, 60/502050 and 60/426137 (the ‘Priority Applications”), Dharmacon and RXi
agree as follows:




	 	1.	 	RXi shall pay Dharmacon $150,000 as a non-refundable (except if the 12 applications
are not able to be filed, the pro rata amount shall be refundable) fee within 30 days of
the signing of this letter. The $150,000 shall be credited towards the $[***] fee per
application filed between October 24, 2007 and October 31, 2007 that meets the criteria
of paragraph 3, below. RXi shall pay Dharmacon a further non-refundable fee of $[***] per
additional (beyond the first 12 cited above) application filed between October 24, 2007
and October 31, 2007 that meets the criteria of paragraph 3, below, payable within thirty
(30) days of RXi’s receipt of notice of the filing of the respective First Round
Application. If it comes to pass that the U S Patent And Trademark Office allows claims
to additional gene targets to be filed and prosecuted subsequent to Nov 1st
2007, then RXi shall have the right to add additional human gene targets under the terms
of this agreement for an initial fee of $[***] per additional human gene target for the
First Round Application as specified herein and under the additional terms and
restrictions set forth in this agreement.
	 
	 	2.	 	At or before 3 PM MDT on October 26, 2007, RXi shall transmit to Dharmacon a list
of no more than fifty (50) proposed human gene targets (by name and NCBI accession
number) in priority ranking order. Dharmacon shall promptly inform RXi which of the
proposed gene targets are excluded because of Dharmacon commitments to third




 









 






	 	 	 	parties (“Excluded Targets”) or because Dharmacon has already filed, prior to October
24, 2007, a U S patent application claiming priority from one or more of the Priority
Applications directed to sequences for silencing that human gene target (“Already Filed
Targets”).
	 
	 	3.	 	For each human gene target proposed by RXi which is not an Excluded Target or an
Already Filed Target, Dharmacon shall use commercially reasonable efforts (following
RXi’s prioritization) to file a target-specific application before November 1, 2007
directed at multiple sequences disclosed, but not claimed, in at least one of the
Priority Applications. Dharmacon shall report promptly to RXi which such patent
applications (First Round Applications) have been filed and, for each, the serial number
and filing date. After Dharmacon’s receipt of the $[***] fee per First Round
Application, Dharmacon shall transmit to RXi a copy of the respective First Round
Application Information transmitted by either party to the other under Paragraphs 2 and 3
shall be subject to an obligation of non-disclosure in effect until December 31, 2008,
excluding that which is in the public domain, but otherwise shall be without obligation
except as expressly provided in this agreement.
	 
	 	4.	 	Each human gene target on which a First Round Application has been filed shall
remain subject to the following terms so long as the First Round Application and any
divisional or continuation of that First Round Application remains pending or, if issued,
remains in force, provided, however, that RXi may remove any First Round Application (and
the associated human gene target) from the coverage of these terms by thirty days notice
to Dharmacon.
	 
	 	5.	 	So long as a human gene target is subject to these terms, RXi shall promptly
reimburse Dharmacon for: (a) any and all out-of-pocket expenses (including outside
attorney fees and USPTO fees) associated with the prosecution (but not filing which would
have already been paid as part of the fees specified above) of each respective First
Round Application and (b) any and all out-of-pocket expenses (including outside attorneys
fees and USPTO fees) associated with the filing and prosecution of each divisional or
continuation of each respective First Round Application which RXi either proposes (and
Dharmacon accepts) or which Dharmacon proposes (and RXi accepts). Neither party shall be
obligated to file or support more than three pending applications at any one time on the
same human gene target.
	 
	 	6.	 	So long as a human gene target is subject to these terms, RXi shall have a
non-exclusive license under the respective First Round Application and all continuations
and divisionals of it to make, use and sell siRNA (defined herein as RNAi having a
duplexed region shorter than 25 nucleotides) compositions and methods for all purposes
including, without limitation, research, diagnostics, the development of therapeutics
(subject to the progress payments of Paragraph 10) and therapeutics compositions and
methods (subject to the progress payments of Paragraph 10 having been paid). Each such
license shall be without the right to sublicense or assign, except as provided in
paragraphs 8 and 9, below. Furthermore, so long as a human gene target is subject to
these terms, RXi shall have an exclusive license




 









 






	 	 	 	under the respective First Round Application and all continuations and divisionals of it
to make, use and sell RNAi compositions and methods for RNAi compounds having a duplexed
region 25 nucleotides or longer that cleave the respective target mRNA and specifically
excludes antigomers, for all purposes including, without limitation, research,
diagnostics, the development of therapeutics (subject to the progress payments of
Paragraph 10) and therapeutics compositions and methods (subject to the progress
payments of Paragraph 10 having been paid); provided, however, that for RNAi compounds
having a duplexed region of 25 nucleotides or longer, Dharmacon reserves a non-exclusive
right to make, use and sell for research purposes. Each such license shall be without
the right to sublicense or assign, except as provided in paragraphs 8 and 9, below.
	 
	 	7.	 	Dharmacon shall consult with, and give reasonable consideration to the comments and
recommendations of RXi in the prosecution of each First Round Application subject to this
agreement and in the selection, filing and prosecution of divisional applications and
continuation applications claiming priority from each such First Round Application
(“Subsequent Round Applications”). To the extent that RXi has made a progress payment
under paragraph 10 with respect to a particular sequence which is within the scope of a
First Round Application as filed which has been subject to a restriction requirement,
Dharmacon shall either (after consultation with RXi) elect a species which covers RXi’s
sequence of interest or, if the period for such election has passed, file a divisional
application directed to a species which covers RXi’s sequence of interest.
	 
	 	8.	 	RXi may not sublicense any rights under this agreement to any third party, except
for the limited purpose of evaluating siRNA composition made by RXi for possible
acquisition of rights consistent with the terms of paragraph 9, below.
	 
	 	9.	 	RXi may not assign its rights under this agreement to any third party (including
without limitation, a change of control in RXi), in whole or in part, except:






	 	a.	 	With respect to a particular human gene target which is subject to this
Agreement, RXi may assign its license rights to a third party upon paying Dharmacon
a non-refundable, non-creditable fee of [***], provided that RXi shall remain
liable (along with the third party assignee) to reimburse Dharmacon for patent
filing and prosecution costs unless and until Dharmacon is notified by RXi that the
license rights with respect to that human gene target have been terminated.
	 
	 	b.	 	With respect to all of RXi’s license rights (excluding those assigned
to other third parties under subparagraph 9(a)), RXi may assign all of its rights
hereunder in case of a merger or acquisition of its RNAi therapeutics program to a
single third party (or such rights may survive a change of control in RXi).




 









 






	 	c.	 	If such merger or acquisition involves payment to RXi or RXi
shareholders of $[***] or more by a company worth [***] dollars or more, RXi pays
Dharmacon $[***].






	 	10.	 	If RXi or a permitted assignee under subparagraph 9(a) or 9(b) achieves any of the
following milestones with respect to the therapeutic development of an siRNA composition
covered by any of: a) a First Round Application as filed or b) a pending continuation or
division of a First Round Application or c) any patent issuing on either, then Dharmacon
shall be paid the milestone payment indicated below (for which RXi shall remain
responsible, jointly and severally with the permitted assignee unless Dharmacon has
expressly accepted the assignee as solely responsible):






	 	a.	 	Approval of IND or equivalent $[***]
	 
	 	b.	 	First dosing in a Phase II study $[***]
	 
	 	c.	 	First dosing in a Phase III study $[***]
	 
	 	d.	 	Regulatory approval (USA) $[***]
	 
	 	e.	 	Regulatory approval (EU) $[***]





     Each of milestone payments (a) through (e) shall be payable only once per therapeutic
indication for any particular human gene target.




	 	11.	 	For sales of siRNA compositions covered by a claim of an issued patent in the
country of manufacture, use or sale, RXi and its permitted assignee shall pay Dharmacon a
royalty of one half percent (0.5%) of Net Sales (subject to standard definitions) for an
exclusive license or one quarter percent (0.25%) for a non-exclusive license. RXi shall be
permitted to downgrade to a nonexclusive license at it sole discretion.
	 
	 	12.	 	Upon payment of either Regulatory Approval milestone payment with respect to a
particular human gene target and indication, RXi or its permitted assignee may notify
Dharmacon which particular sequence (among those disclosed in the respective First Round
Application) is the basis for the approval and, then and only then, the licenses provided
in this Agreement shall become exclusive for nucleic acids compositions containing that
sequence, directed against that human gene target for that clinical indication (subject
to whatever rights Dharmacon may have granted to third parties during the period of
non-exclusivity). Within the scope of such exclusivity, RXi or the permitted licensee
shall have the right to participate (at its own expense) in any enforcement of
Dharmacon’s patent rights on such basis as the parties then reasonably determine.




 









 






	 	13.	 	No license is granted by either party to the other under any invention, patent
application or patent, nor are any rights granted by either party to the other expressly
or by implication with respect to any trade secret or other propriety right by virtue of
this Letter Agreement.
	 
	 	14.	 	While the parties shall negotiate in good faith a restated License Agreement to
memorialize the terms of this Letter Agreement in greater detail, it is the intention of
the parties that this Letter Agreement be a binding agreement, enforceable as of October
26, 2007 (the “Effective Date”). The parties may address, but undertake no obligation to
address intellectual property in the License Agreement which is not addressed in this
Letter Agreement.
	 
	 	15.	 	This Letter Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts irrespective of conflict of laws principles.
Any legal action that arises out of or in connection with its provisions shall be brought
solely in the Superior Court of Suffolk County, Massachusetts unless subject to the
exclusive jurisdiction of federal courts, in which event it shall be brought in the
federal district of Massachusetts.
	 
	 	16.	 	This letter agreement may be executed via facsimile or electronic means, and each
fully-signed copy exchanged by the parties shall be deemed to be an original of the same
instrument and agreement.





	 	 	 	 	 
	 	Dharmacon, Inc.

 	 
	 	By:  	/s/ Mitchell Kennedy
 	 
	 	 	Mitchell Kennedy, General Manager 	 
	 	 	Date: October 29, 2007	 
	 
	 	RXi Pharmaceuticals Corporation

 	 
	 	By:  	/s/ Tod Woolf
 	 
	 	 	Tod Woolf, Ph.D. 	 
	 	 	President and CEO