Exhibit 10.2


 


CONFIDENTIAL


 


CONFIDENTIAL
TREATMENT REQUESTED


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


 


EXCLUSIVE LICENSE
AND

NONEXCLUSIVE OPTION AGREEMENT


 


BETWEEN


 


GLAXO GROUP
LIMITED


 


AND


 


REGULUS
THERAPEUTICS INC.


 

















 


This
EXCLUSIVE LICENSE AND NONEXCLUSIVE OPTION AGREEMENT
(this “Agreement”) is entered into
and made effective as of the 24th day of February 2010
(the “Effective Date”) by and
between Regulus Therapeutics Inc., a Delaware corporation 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 Delaware
corporation that is jointly owned by Isis Pharmaceuticals, Inc. (“Isis”) and Alnylam Pharmaceuticals, Inc.
(“Alnylam” and together with Isis,
Regulus’ “Founding Companies”, and
each a “Founding Company”);


 


WHEREAS, Regulus and GSK are
parties to the Product Development and Commercialization Agreement dated April 17,
2008, as amended (the “Existing Collaboration”);


 


WHEREAS, Regulus possesses
proprietary technology and know-how related to the research, discovery,
identification, synthesis and development of single-stranded oligonucleotide
miRNA Antagonists in the Field (each 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 in the Field;


 


WHEREAS, GSK may obtain from
Santaris a license to commercialize the miRNA Compound known as SPC-3649;


 


WHEREAS, GSK desires, upon
obtaining certain rights to SPC-3649 from Santaris, to obtain from Regulus an
exclusive license to develop and commercialize SPC-3649 in the Field; and
Regulus desires to grant GSK such rights, all on the terms and conditions set
forth herein; and


 


WHEREAS, GSK may, during the term
of this Agreement, desire to obtain from Regulus a nonexclusive license to
certain other patents in the Field, and in such case, GSK and Regulus agree to
negotiate in good faith, in accordance with the terms and conditions of this
Agreement to the extent possible, and in accordance with the Agreement between
Regulus and Garching Innovation
GmbH, as appropriate.


 


1

















 


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


 


1.1          The capitalized terms used and not otherwise defined
in this Agreement shall have the meanings set forth in Exhibit A
attached hereto 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.


 


ARTICLE 2

[***] OPTION


 


2.1          Option
to License the [***] Patents.  If GSK provides Regulus with written notice
of a desire to negotiate in good faith to obtain a nonexclusive license to the
[***] Patents, then Regulus and GSK shall, in good faith, use commercially
reasonable efforts to conclude a written license agreement (the “[***] Sublicense”) within sixty
(60) days of such written notice for the grant by Regulus to GSK of a
worldwide, nonexclusive, royalty-bearing, sublicenseable (in accordance with Section 3.1.2
below) license, under the [***] Patents solely to Develop, Manufacture and
Commercialize SPC-3649 in the Field; provided, that, such license will (a) be
subject to the terms and conditions of those certain agreements between Regulus
and those certain Third Parties in effect as of the Effective Date and as
listed on Exhibit G, and (b) have a maximum royalty rate to be
paid by GSK under such agreement capped at the Third Party License Pass-Through
Costs under the [***].  Upon GSK’s and
Regulus’ execution of the [***]Sublicense, and subject to the terms and
conditions of the [***] Sublicense, (i) the [***] shall be deemed listed on Exhibit G, and (ii) the [***]
Patents shall be deemed included in the definition of Regulus Patents and
therefore subject to ARTICLE 3.


 


ARTICLE 3

GRANT OF LICENSE RIGHTS


 


3.1          License
Grants to GSK.


 


3.1.1       Development and Commercialization License.  Subject to the terms and conditions of this
Agreement (including but not limited to the limitations set forth in this
ARTICLE 3) and those certain agreements between Regulus and those certain Third
Parties in effect as of the Effective Date and as listed on Exhibit G,
Regulus hereby grants to GSK a worldwide, exclusive, royalty-bearing,
sublicenseable (in accordance with Section 3.1.2 below) license, under the
Regulus Patents solely to Develop, Manufacture and Commercialize SPC-3649 in
the Field.


 


2

















 


3.1.2       Sublicense Rights.  Subject to the terms and conditions of this
Agreement (including but not limited to the limitations set forth in this
ARTICLE 3) and those certain agreements between Regulus and those certain Third
Parties in effect as of the Effective Date and as listed on Exhibit G,
GSK shall have the right to grant to its Affiliates and/or Third Parties
sublicenses under the license granted under Section 3.1.1 above solely to continue the Development,
Manufacture or Commercialization of SPC-3649; provided, that, (a) each
such sublicense shall be subject and subordinate to, and consistent with, the
applicable terms and conditions of this Agreement; (b) GSK may not grant a
sublicense to Santaris or any of Santaris’ Affiliates; and (c) GSK cannot
sublicense the Stanford Patents.  GSK
shall provide Regulus with a copy of any sublicense granted pursuant to this Section 3.1.2
within thirty (30) days after the execution thereof.  Such copy may be redacted to exclude
confidential scientific information and other sensitive information required by
a Sublicensee or GSK to be kept confidential; provided, that for
agreements that are entered into by GSK or its Affiliates after the Effective
Date that materially relate to the Regulus Patents, GSK will reasonably
endeavor to facilitate the communication of information between the Parties
with respect to any subsequent Development activities by GSK to the extent
required by those certain agreements between Regulus and those certain Third Parties
in effect as of the Effective Date and as listed on Exhibit G.  Regulus may share such copy or information
with its Founding Companies and relevant Third Party licensors who have a
contractual right and material need to know such information under obligations
of confidentiality which are no less strict than the confidentiality
obligations imposed upon Regulus 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.


 


3.1.3       Retained Rights; No Implied Licenses.  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 use and exploit Alnylam’s Founding
Company Know-How and Founding Company Patents solely to support its own
internal Research 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 use and exploit Isis’
Founding Company Know-How and Founding Company Patents solely to support its
own internal Research in the Isis Field (each as defined in the Regulus License
Agreement).  All rights in and to Regulus
Patents not expressly licensed to GSK 


 


3

















 


hereunder, under the Existing Collaboration
or pursuant to the operation of the relevant applicable express provisions of
this Agreement or the Existing Collaboration, and any other Patent Rights or
Know-How of Regulus or its Founding Companies or Affiliates, are hereby
retained by Regulus or such Founding Company or Affiliate.  Except as expressly provided in this
Agreement, no Party will be deemed by estoppel or implication to have granted
the other Parties any license or other right with respect to any intellectual
property of such Party.


 


3.1.4       Stanford License Considerations.  For purposes of clarification, with respect
to the sublicense granted by Regulus to GSK under the Stanford Patents, GSK
acknowledges and agrees that (a) such sublicense is subject and
subordinate to the terms and conditions of the Stanford License Agreement, (b) Stanford
is a third party beneficiary to this Agreement as it relates to Articles 8, 9
and 10 of the Stanford License Agreement, such that Stanford may directly
enforce Articles 8, 9 and 10 of the Stanford License Agreement against GSK, and
(c) if Stanford terminates the Stanford License Agreement as it relates to
Regulus (but not as it relates to this Agreement), GSK will assume (and be
directly liable to Stanford for) all Third Party License Pass-Through Costs and
all Third Party and Founding Company-Originated Rights and Obligations due
Stanford in connection with this Agreement; provided, that if, by
operation of this Section 3.1.4 GSK actually pays any such costs or fees
to Stanford in satisfaction of any amounts owed under Section 4.5, Article 7
or Section 13.2 of the Stanford License Agreement, then GSK shall have the
right, in addition to all other rights available at law and in equity, to
[***].  If GSK exercises its right of
[***] under this Section 3.1.4, then GSK will provide written notice to
Regulus of such [***] claim.


 


3.2          Santaris
Option to [***] Patents. 
Regulus hereby agrees that it will grant Santaris an exclusive license
under the [***] Patents to develop and commercialize SPC-3649 within the Field
(the “Santaris License”) if (a) GSK
obtains rights to Develop and/or Commercialize SPC-3649 from Santaris or its
Affiliates (“SPC-3649 Rights”), and (b) if
GSK subsequently ceases development of SPC-3649 and returns rights to SPC-3649
to Santaris (the “Santaris Option Trigger Date”); provided,
(a) Santaris gives Regulus a written notice electing to obtain the
Santaris License on or before 5:00 p.m. Pacific time on the sixtieth (60th) day following the Santaris
Option Trigger Date, and (b) Regulus and Santaris execute the Santaris
License within sixty (60) days following Regulus’ receipt of such election
notice.  The Santaris License, if
granted, will include the material terms listed in Exhibit H
attached hereto.  Regulus and GSK agree
that if GSK obtains the SPC-3649 Rights, then Santaris is an intended third party
beneficiary of this Agreement with respect to the rights granted to Santaris
pursuant to this Section 3.2 and that Santaris may exercise its rights
under this Section 3.2 independently. 
For clarity, if Santaris does not give Regulus a written notice electing
to obtain the Santaris License on or before 5:00 p.m. Pacific time on the
60th day following the Santaris Option Trigger
Date, or if Regulus and Santaris have not executed the Santaris License within
sixty (60) days following Regulus’ receipt of such election notice, then in
each case this Section 3.2 will be null and void.


 


4

















 


ARTICLE 4

[Intentionally Left Blank]


 


ARTICLE 5

SPC-3649 MILESTONES AND ROYALTIES; SPC-3649 PAYMENTS


 


5.1          Upfront
Payment to Regulus.  In partial
consideration for the license and option granted to GSK under Section 2.1
and ARTICLE 3 of this Agreement, 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 Three Million U.S.
Dollars ($3,000,000) no later than ten (10) Business Days after receipt by
GSK of an invoice sent from Regulus on or after the Effective Date of this
Agreement (the “Upfront Payment”).


 


5.2          [Intentionally
Left Blank].


 


5.3          SPC-3649
Exclusive License Fees.  If (a) GSK
obtains the SPC-3649 Rights; and (b) [***] GSK obtaining such SPC-3649
Rights, then GSK shall pay to Regulus a non-refundable, non-creditable fee of
[***] within thirty (30) days of receipt by GSK of an invoice sent from Regulus
regarding such fee; provided, however, if [***] GSK obtaining
such SPC-3649 Rights and GSK subsequently [***]], then GSK shall pay to Regulus
a non-refundable, non-creditable fee [***] within thirty (30) days of receipt
by GSK of an invoice sent from Regulus regarding such fee.  Notwithstanding the foregoing, if GSK either:
(i) holds the SPC-3649 Rights as of [***] and GSK has not previously paid
Regulus the [***] fee under this Section 5.3 or (ii) GSK licenses the
SPC-3649 Rights after [***], GSK shall pay to Regulus a non-refundable,
non-creditable fee of [***] within thirty (30) days of receipt of an invoice
from Regulus for such fee.


 


5.4          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 5.4
within thirty (30) days of receipt by GSK of an invoice sent from Regulus on or
after the date of first achievement of such Milestone Event by SPC-3649 or an
SPC-3649 Product.  GSK shall send Regulus
a written notice thereof promptly following the date of achievement of each
Milestone Event.


 


5

















 


	
   

  	
   

  	
  Milestone
  Payment*

  	
   

  
	
  Milestone Event (each a “Milestone Event”)

  	
   

  	
  US$Million
  (“m”)

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
	
  TOTAL Potential Milestones

  	
   

  	
  $

  	
  [***]

  	
   

  



 






*Each
milestone will be paid only once upon the first achievement of the Milestone
Event.


 


†Such
milestone will only be payable if, at the time such milestone is achieved there
is a Valid Claim within the Regulus Patents, which covers the [***] of SPC-3649
or an SPC-3649 Product; provided, however, that if there is no Valid
Claim at the time of such Milestone Event, then (a) GSK must pay to
Regulus [***] percent ([***]%) of such milestone payment upon [***] of an
SPC-3649 Product in any country in the [***]; and (b) if a Pending Claim
within the Regulus Patents issues such that it is a Valid Claim in the [***]
prior to the [***] anniversary of the date of the First Commercial Sale
described in clause (a) above, then GSK will pay Regulus the remaining
[***] percent ([***]%) of such milestone within thirty (30) days of receipt by
GSK of an invoice sent from Regulus on or after the date of the issuance of the
applicable Pending Claim.


 


5.5          Royalty
Payments for SPC-3649 to Regulus.


 


5.5.1       GSK Patent Royalty. As partial
consideration for the license granted to GSK hereunder, GSK will pay to Regulus
royalties on Annual worldwide Net Sales of any SPC-3649 Product sold by GSK,
its Affiliates or Sublicensees during a calendar year, on a country-by-country
basis, in the Field in the countries of the Territory in which there is a Valid
Claim in the Field within the Regulus Patents, which covers the [[***] SPC-3649
or such SPC-3649 Product, in the amounts as follow (the “GSK Patent Royalty”).  For purposes of clarity, in no event shall
GSK be obligated to pay royalties more than once with respect to the same unit
of SPC-3649 Product and GSK shall owe no royalties or milestones to Regulus,
its Affiliates, Founding Companies, or anyone on behalf of Regulus, its
Affiliates, or Founding Companies, on SPC-3649 Product under any terms of the
Existing Collaboration.


 


(a)           GSK shall pay
to Regulus the royalties at the percentages as described in the table below:


 


6

















 




	
  Annual Worldwide Net Sales (U.S. $ Million)

  of SPC-3649 Product per Calendar Year

  US$Million (“m”)

  	
   

  	
  Applicable
  Royalty Rate

  	
   

  
	
  up to $1000m

  	
   

  	
  [***]

  	
  %

  
	
  $1000m up to $2000m

  	
   

  	
  [***]

  	
  %

  
	
  $2000m up to $3000m

  	
   

  	
  [***]

  	
  %

  
	
  > $3000m

  	
   

  	
  [***]

  	
  %

  






 


(b)           In the event
any Combination Product(s) are sold, royalties on such Combination
Products will be determined pursuant to the definition of “Net Sales”
on Exhibit A.


 


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


 


5.5.2       Royalty Adjustment. 
If there are no Valid Claims within the Regulus Patents that
[***] an SPC-3649 Product sold in a particular country, the GSK Patent Royalty
set forth in Section 5.5.1 shall be reduced to [***] percent ([***]%) of
the GSK Patent Royalty rates above in such countries where a Pending Claim
within the Regulus Patents claims [***] an SPC-3649 Product has not yet been
issued.  For the avoidance of doubt, for
such Pending Claims, GSK shall pay Regulus [***] percent ([***]%) of the GSK
Patent Royalty set forth in Section 5.5.1 above, and shall pay the
remaining [***] percent ([***]%) of the GSK Patent Royalty into an escrow
account, until such time as a Valid Claim within the Regulus Patents issues
that covers [***] an SPC-3649 Product being sold in the country of sale, provided
that such Valid Claim must issue within [***] years of date of First
Commercial Sale of an SPC-3649 Product (the “Royalty
Tail Period”).  In the event
such Valid Claim issues during the Royalty Tail Period, (i) the escrow
account and any interest thereon shall be paid to Regulus and (ii) GSK
will pay the full GSK Patent Royalty in such countries starting only from the
date of such issuance of the Valid Claim and shall not owe any GSK Patent
Royalty in such countries for any preceding period.  In the event that no such Valid Claim issues
during the Royalty Tail Period, then the escrowed amounts and any interest
thereon shall be returned to GSK and any obligations GSK may have had with
respect to the Pending Claims shall cease. 
If GSK maintains sole control over such escrow account then GSK shall be
solely responsible for the costs and expenses associated with maintaining such
escrow account, otherwise GSK and Regulus  shall be 


 


7

















 


mutually responsible for the costs and
expenses associated with maintaining such escrow account; provided, that
the Parties must mutually agree (such agreement not to be unreasonably
withheld) before taking any action that would cause GSK to lose sole control of
such escrow account.  If a Valid Claim
within the Regulus Patents that [***] an SPC-3649 Product issues after the
Royalty Tail Period, then GSK will pay Regulus the full GSK Patent Royalty in
such countries starting only from the date of such issuance of the Valid Claim
and shall not owe any GSK Patent Royalty in such countries for any preceding
period.


 


5.5.3            Patent Royalty Term.


 


(a)           For Pending Claims, GSK’s
obligation to pay the GSK reduced GSK Patent Royalty in Section 5.5.2
above with respect to SPC-3649 Product or Combination Product will continue on
a country-by-country basis from the date of First Commercial Sale of an
SPC-3649 Product or Combination Product in the Field until the end of the
Royalty Tail Period.


 


(b)           For Valid Claims, GSK’s
obligation to pay the GSK Patent Royalty Rate above with respect to SPC-3649
Product or Combination Product will continue on a country-by-country basis from
the date of First Commercial Sale of an SPC-3649 Product or Combination Product
in the Field until the date of expiration of the last Valid Claim in the Field within the Regulus Patents, which
covers [***] of an SPC-3649 Product or Combination Product. 
In no circumstance will GSK pay a GSK Patent Royalty or any other
royalty hereunder beyond the date of expiration of the last Valid Claim in the
Field.


 


5.6          Pass
Through Payments.


 


5.6.1       Regulus Obligations.  Regulus will be solely responsible for paying
[***] Total License Pass-Through Costs (a) [***] (as such term is defined
in the Existing Collaboration) except pursuant to the terms of Section 5.6.2
herein, and (b) due under the [***].


 


5.6.2       Obligations for Future IP.  After the Effective Date, Regulus may wish to
in-license or acquire rights to Patent Rights controlled by a Third Party (such
a Third Party in-license or acquisition agreement being an “Additional Third Party Agreement”) which,
if so licensed or acquired, may be included in the Regulus Patents licensed to
GSK under Section 3.1.  Once Regulus
has executed such Additional Third Party Agreement, Regulus will offer such
Third Party Patent Rights to GSK (including a description of the payments paid
or potentially payable by Regulus thereunder). 
At such time, if GSK wishes to include such Third Party Patents under
the licenses granted under Section 3.1, GSK will notify Regulus of its
desire to do so and the Parties will fairly and in good faith allocate upfront
payments or ongoing payment obligations between SPC-3649 and compounds that are
not SPC-3649.  If GSK does not agree to 


 


8

















 


reimburse Regulus for the amount of any
upfront or similar acquisition payments fairly allocated to SPC-3649, and to be
responsible for the payment of GSK’s share of any [***] payments under the
Additional Third Party Agreement, then the Third Party Patents acquired or
in-licensed by Regulus under the Additional Third Party Agreement will not be
considered a Regulus Patent licensed to GSK under this Agreement.  Should the Parties agree, then GSK shall
reimburse Regulus for GSK’s share of such amounts within forty-five (45) days
after GSK’s receipt of an invoice from Regulus therefor.


 


5.6.3       Regulus Obtains Rights to SPC-3649. 
Should Regulus obtain SPC-3649 Rights from Santaris or its Affiliate(s),
then this Agreement shall automatically terminate, and the provisions of [***]
the Product Development and Commercialization Agreement between the Parties of
even date herewith shall apply.


 


5.7          Third Party Licenses.  Subject to Section 5.6.2,
GSK shall be solely responsible for obtaining any licenses from Third Parties
that GSK determines, in its sole discretion, are required in order to lawfully
develop, manufacture, and commercialize SPC-3649 in the Field for patents (i) not
included within the license grants to GSK as set forth in Section 3.1 of
this Agreement and/or (ii) not included within Regulus Patents.


 


5.8          Minimum
Royalty Payment.  Notwithstanding any other provision of this Agreement, at a
minimum, GSK will pay Regulus a minimum royalty on Net Sales of SPC-3649
Product by GSK, its Affiliates or Sublicensees equal to (a) the Total Pass
Through Costs that are royalty obligations Regulus must pay under [***]; and (b) any
royalty payments GSK agrees to pay under Section 2.1 and/or Section 5.6.2.


 


5.9          Payments.


 


5.9.1       Commencement.  Beginning with the Calendar Quarter in which
the First Commercial Sale of an SPC-3649 Product is made and for each Calendar
Quarter thereafter, royalty payments shall be made by GSK to Regulus under this
Agreement within forty-five (45) days following the end of each such Calendar
Quarter.  Each royalty payment shall be
accompanied by a report, summarizing Net Sales for each SPC-3649 Product during
the relevant Calendar Quarter and the calculation of royalties (including the
details of any adjustments or credits permitted under this Agreement), 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.


 


5.9.2       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 SPC-3649 Product sold in a currency other than U.S.
Dollars, such


 


9
















 


currency shall be converted into U.S. Dollars as calculated at the
actual average rates of exchange for the pertinent quarter or year to date, as
the case may be, as reasonably used by the Payor in producing its quarterly and
annual accounts.  Such payments shall be
without deduction of exchange, collection or other charges.


 


5.9.3       Records
Retention.  Commencing
with the First Commercial Sale of SPC-3649 Product, the Payor shall keep
complete and accurate records pertaining to the sale of SPC-3649 Product, for a
period of three (3) 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.


 


5.10        Audits.  During the term of this Agreement and for a
period of three (3) 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 Annual
worldwide Net Sales payments made under this Agreement for any period within
the preceding three (3) years.  The
independent, certified public accountant shall disclose to the Payee only the
royalty 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.  GSK shall also have the right to
have audited, in accordance with this Section 5.10, the relevant books and
records of Regulus as may be necessary for the sole purpose of verifying the
amount of Third Party License Pass-Through Costs or Total License Pass-Through
Costs actually being paid by Regulus. 
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
Third Party or (except for the information expressly sought to be confirmed by
the auditing Party as set forth in this Section 5.5) 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 amount
which should have been paid, then such audited Party shall make all payments
required to be made, or (y) the amount paid to Third Parties 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 sixty (60) 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 


 


10

















 


that
in the event that the royalty payments and/or the amount of pass-through costs
made by the audited Party were less than ninety percent (90%) 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.


 


5.11        Taxes.


 


5.11.1     Sales or
Other Transfers.  The
recipient of any transfer under this Agreement of Regulus Patents, GSK
Technology, and/or Confidential Information, as the case may be, shall be
solely responsible for any sales, use, value added, excise or other taxes
applicable to such transfer.


 


5.11.2     Withholding
Tax.  The Parties acknowledge and
agree that, under applicable laws in effect as of the Effective Date, GSK shall
not be required to withhold any taxes from the Withholding-Free Payments
payable to Regulus under this Agreement. 
Consequently, GSK agrees not to withhold any taxes from payment of the
Withholding-Free Payments hereunder.  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 Withholding-Free Payments)
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 a Delaware corporation 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 time, Regulus shall be entitled to
relief from United Kingdom income tax under the terms of the double tax
agreement between the UK and the US.  Regulus
shall notify GSK immediately in writing in the event that Regulus ceases to be
entitled to such relief. Pending receipt of formal certification from the UK
Inland Revenue, GSK may pay royalty income and any other payments (other than
the Withholding-Free Payments) 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 any future claim by a UK tax authority
or other similar body alleging that GSK was not entitled to deduct withholding
tax on such payments at source at the treaty rate, except that Regulus’
indemnification obligation under this Section 5.11.2 shall not apply to
GSK’s payment of the Withholding-Free Payments. 
Regulus shall timely complete all US and UK tax forms as reasonably
requested by GSK with respect to taxes withheld pursuant to this Section 5.11.2.  Notwithstanding the foregoing, if UK tax law 


 


11

















 


changes
after the Effective Date and GSK has a good faith belief  that such change requires GSK to withhold
taxes from any Withholding-Free Payment, then GSK will first notify Regulus in
writing thereof, and GSK may withhold taxes from the Withholding-Free Payments
that GSK reasonably believes is necessary to comply with the new UK tax law,
consistently applied by GSK to similarly situated licensing arrangements.


 


ARTICLE 6

OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT PROSECUTION


 


6.1          Ownership.  The determination of inventorship shall be
made in accordance with United States patent laws.


 


6.2          Prosecution
and Maintenance of Patents.


 


6.2.1       Regulus
Patents.  At Regulus’ expense, Regulus
shall (but shall not be obligated to) control and be responsible for all
aspects of the Prosecution, Maintenance, enforcement and defense of all Regulus
Patents.


 


6.2.2       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 Patent in the Field, by reason of the Development,
Manufacture, use or Commercialization in the Field 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 SPC-3649 (“Competitive Infringement”), such Party
shall promptly notify the other Party and shall provide such other Party with
available evidence of such Competitive Infringement.


 


6.3          [***]


 


ARTICLE 7

CONFIDENTIALITY


 


7.1          Confidentiality;
Exceptions.  Except to
the extent expressly authorized by this Agreement or otherwise agreed in
writing, the Parties agree that, during the Agreement Term and for five (5) years
thereafter, the receiving Party (the “Receiving
Party”), its Affiliates and, with respect to Regulus, its Founding
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 Founding 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, 


 


12

















 


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 Founding 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:


 


7.1.1       was in the lawful knowledge
and possession of the Receiving Party, its Affiliates or Founding Companies
prior to the time it was disclosed to, or learned by, the Receiving Party, its
Affiliates or Founding Companies, or was otherwise developed independently by
the Receiving Party, its Affiliates or Founding 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 Founding Companies;


 


7.1.2       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 Founding Companies;


 


7.1.3       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 Founding Companies in breach of this Agreement; or


 


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


 


7.2          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 Founding 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 SPC-3649, 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, complying with applicable governmental regulations, obtaining 


 


13

















 


Regulatory
Approvals, conducting Pre-Clinical Studies or Clinical Studies, marketing
SPC-3649, 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
Founding Companies is required by law or regulation (including the rules of
the SEC and any stock exchange) 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) in communication with actual or
potential licensees outside the Field on a need to know basis, in each case
under confidentiality provisions no less restrictive than those of this
Agreement and such Confidential Information may be redacted to exclude
confidential scientific information, the name of the Disclosing Party and other
sensitive information reasonably required by the Disclosing Party to be kept
confidential; (v) 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 Founding Company’s
licensor with respect to any intellectual property licensed under this
Agreement; or (vi) to the extent mutually agreed to in writing by the
Parties.  If a Founding Company receives GSK’s
Confidential Information as permitted pursuant to this Section 7.2, such
Founding Company may only use and disclose GSK’s Confidential Information
solely in accordance with this Section 7.2 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 of a licensor to Regulus Patents, or (y) for
such Founding Company to perform its rights or obligations in connection with
this Agreement.


 


7.3          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 D.  Except to the
extent required to comply with applicable law, regulation, rule or legal
process or as otherwise permitted in accordance with this Section 7.3,
neither Party nor such Party’s Affiliates or Founding Companies shall make any
public announcements, press releases or other public disclosures concerning
this Agreement 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) GSK and its Affiliates may make disclosures pertaining 


 


14

















 


solely
to SPC-3649, provided, however, that GSK will immediately notify (and
provide as much advance notice as possible to) Regulus of any event materially
related to SPC-3649 (including any Regulatory Approval) so that the Parties may
analyze the need for or desirability of publicly disclosing or reporting such
event; provided any press release or other similar public communication by GSK
related to efficacy or safety data and/or results of SPC-3649 will be submitted
to Regulus for review at least five (5) Business Days (to the extent
permitted by law) in advance of such proposed public disclosure, Regulus 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 Founding
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 to potential, investors and
investment bankers, in each case, 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 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 for which confidential treatment
should be sought.


 


7.4          Remedies.  Notwithstanding Section 11.1, 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 7.


 


ARTICLE 8

REPRESENTATIONS AND WARRANTIES


 


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


 


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


 


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


 


15

















 


8.1.3       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;


 


8.1.4       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; and


 


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


 


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


 


8.2.1       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 Patents under this Agreement;


 


8.2.2       To the best of its knowledge
and belief, without having conducted any special inquiry, Regulus is not aware
of any other intellectual property rights owned or controlled by Regulus or any
of its Founding Companies that are necessary for GSK to develop, manufacture,
or commercialize SPC-3649 in the Field; and


 


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


 


8.3          Regulus
Covenants.  Regulus
hereby covenants to GSK, that:


 


8.3.1       [Intentionally Left Blank];
and


 


8.3.2       with respect to the rights
to Regulus Patents existing as of the Effective Date, Regulus will not enter
into any agreement after the Effective Date with a Founding Company or a Third
Party that would restrict or limit (i) the licenses granted by Regulus to
GSK under Section 3.1 above, or (ii) the options granted by Regulus
to GSK under Section 2.1.  For
purposes of clarification, this Section 8.3.2 will not restrict Regulus’
ability to Prosecute and Maintain the Regulus Patent Rights in accordance with Section 6.2.


 


16

















 


8.4          GSK
Covenants.  GSK hereby
covenants to Regulus that:


 


8.4.1       GSK shall notify Regulus in
writing within ten (10) Business Days of the date that GSK or its
Affiliate acquires from Santaris or one of Santaris’ Affiliates the SPC-3649
Rights; and


 


8.4.2       If GSK or its Affiliate
acquires from Santaris or one of Santaris’ Affiliates a license to develop
and/or commercialize SPC-3649, Regulus and GSK will jointly prepare a research
plan for SPC-3649; provided, that (i) GSK shall not be required to
share with Regulus or any Founding Company any confidential information if
doing so would result in a breach of an agreement between GSK and Santaris; and
(ii) GSK will have the sole decision making authority with respect to such
research plan.


 


8.5          DISCLAIMER. EXCEPT AS
OTHERWISE EXPRESSLY SET FORTH IN THIS 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 PATENT 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 SPC-3649 IS THE SUBJECT
OF ONGOING CLINICAL RESEARCH AND DEVELOPMENT AND THAT REGULUS CANNOT ASSURE THE
SAFETY, USEFULNESS OR COMMERCIAL OR TECHNICAL VIABILITY OF SUCH COMPOUNDS.


 


ARTICLE 9

INDEMNIFICATION; INSURANCE


 


9.1          Indemnification
by GSK.  Subject to this ARTICLE 9, GSK
shall indemnify, defend and hold harmless Regulus, and its Affiliates and
Founding 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:


 


9.1.1       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;


 


17

















 


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


 


9.1.3       the Development or
Manufacturing activities that are conducted by and/or on behalf of GSK or its
Affiliates or Sublicensees, including handling and storage and manufacture by
and/or on behalf of GSK or its Affiliates or Sublicensees of SPC-3649 or
SPC-3649 Product for the purpose of conducting Development or Commercialization
by or on behalf of GSK or its Affiliates or Sublicensees; or


 


9.1.4       the Commercialization by or
on behalf of GSK, its Affiliates or Sublicensees of SPC-3649 or SPC-3649
Product;


 


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, Founding
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 Founding Companies
hereunder.


 


9.1.5       For the avoidance of doubt, (i) the
term “Loss” or “Losses”
of Section 9.1 does not include liabilities, damages, losses, costs,
expenses, or fees of attorneys and other professionals arising out of or
resulting from any suit brought by a Founding Company to enforce any patent or
claim thereof owned by or controlled by said Founding Company; and (ii) the
term “Claim” or “Claims”
of Section 9.1 does not include suits, claims, actions, proceedings or
demands brought by a Founding Company to enforce any patent or claim thereof
owned by or controlled by said Founding Company.


 


9.2          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 any breach of any representation or warranty or express covenant made by
Regulus under ARTICLE 8 or any other provision under this Agreement; except,
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.


 


18

















 


9.3          Procedure.  In the event that any Person entitled to
indemnification under Section 9.1 or Section 9.2 (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).  Notwithstanding anything in
this Agreement to the contrary, the indemnifying Party shall have no liability
under Section 9.1 or 9.2, as the case may be, with respect to Claims
settled or compromised by the Indemnitee without the indemnifying Party’s prior
written consent.


 


9.4          Insurance.  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.


 


9.5          LIMITATION
OF CONSEQUENTIAL DAMAGES. 
EXCEPT FOR CLAIMS OF A THIRD PARTY WHICH ARE SUBJECT TO INDEMNIFICATION
UNDER THIS ARTICLE 9 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.


 


19
















 


ARTICLE 10

TERM AND TERMINATION


 


10.1        Agreement
Term; Expiration.  Unless
earlier terminated pursuant to Section 5.6.3 or the other provisions of
this ARTICLE 10, this Agreement shall be effective as of the Effective Date and
shall continue in full force and effect until the date of the expiration of all
payment obligations by GSK under this Agreement, (the “Agreement  Term”).


 


10.2        Termination
for Cause.


 


10.2.1     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 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, 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.


 


10.2.2     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 10.2.1 above, the Party
which seeks to dispute that there has been a material breach may contest the
allegation in accordance with Section 11.1.  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. 
Any termination of the Agreement under this Section 10.2 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 Agreement shall not be affected in any way by
such Party’s waiver or failure to take action with respect to any previous
default.


 


10.3        GSK
Unilateral Termination Rights.  GSK shall have the right, at its sole
discretion, exercisable at any time during the Agreement Term, to
terminate  (i) its license under
ARTICLE 3 (including all other provisions of this Agreement related thereto),
or (ii) this Agreement in its entirety, for any reason or for no reason at
all, upon ninety (90) days written notice to Regulus.  Except as set forth in Section 10.5, GSK
shall not have any additional cost, liability, expense, or obligation of any
kind whatsoever on account of any termination under this Section 10.3.  For purposes of clarity, in no event shall
GSK have the right to exercise its right to terminate the Agreement under this Section 10.3
following Regulus’ notice of termination under Section 10.2.


 


20

















 


10.4        Termination
for Insolvency.


 


10.4.1     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.


 


10.4.2     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.


 


10.5        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 5 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.


 


(b)           The provisions
of Sections 3.1.4 (solely to the extent Articles 8, 9 or 10 of the Stanford
Agreement survive and are applicable to GSK as a current or former sublicensee
under the Stanford Agreement), 5.9.3, 5.10, 5.11, 8.5, 10.5 and ARTICLE 6,
ARTICLE 7, ARTICLE 9, and ARTICLE 11 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.


 


21

















 


ARTICLE 11

MISCELLANEOUS


 


11.1        Dispute
Resolution by Binding Arbitration.  Any controversy or claim arising out of or
under this Agreement, or the breach thereof, 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
acceptable to GSK and Regulus, within forty-five (45) 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 11.1 shall not apply to alter or modify the indemnity
obligations of the respective Parties under ARTICLE 9, 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.


 


11.2        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.


 


11.3        Assignment.  This Agreement shall not be assignable by
either Party to any Third Party or Founding 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 Founding 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) Regulus
may assign or transfer its rights to receive royalties and milestones under
this Agreement (but no liabilities), without GSK’s consent, to an Affiliate, to
its Founding 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 Founding Company, in the case of Regulus,



 


22

















 


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. 
Notwithstanding anything in this Section 11.3 to the contrary, any
Person to whom Regulus assigns this Agreement or any of its rights under this
Agreement shall be required to complete any paperwork requested by GSK pursuant
to Section 5.11.2;  such obligations
shall continue to any other Person(s) thereafter, if any, to whom this
Agreement and any rights hereunder are assigned. 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.


 


11.4        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.


 


11.5        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.


 


23

















 


11.6        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 Inc.

  
	
   

  	
   

  	
  1896
  Rutherford Road

  
	
   

  	
   

  	
  Carlsbad,
  California 92008

  
	
   

  	
   

  	
  Attention:
  Chief Executive Officer

  
	
   

  	
   

  	
  Fax:
  760-268-6868

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896
  Rutherford Road

  
	
   

  	
   

  	
  Carlsbad,
  California 92008

  
	
   

  	
   

  	
  Attention:
  General Counsel

  
	
   

  	
   

  	
  Fax:
  760-268-4922

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cooley
  Godward Kronish LLP

  
	
   

  	
   

  	
  4401
  Eastgate Mall

  
	
   

  	
   

  	
  San
  Diego, CA  92121-1909

  
	
   

  	
   

  	
  Attention:
  Thomas A. Coll

  
	
   

  	
   

  	
  Fax:
  858-550-6420

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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:

  	
   

  	
  Attention:
  Business Development

  
	
   

  	
   

  	
  GlaxoSmithKline

  
	
   

  	
   

  	
  Greenford
  Road

  
	
   

  	
   

  	
  Greenford

  
	
   

  	
   

  	
  Middlesex

  
	
   

  	
   

  	
  UB6
  0HE, United Kingdom

  
	
   

  	
   

  	
  Fax:
  +44 208 966 5371

  



 


24

















 


	
  with
  a copy to:

  	
   

  	
  Attention:
  Vice President and

  
	
   

  	
   

  	
  Associate
  General Counsel,

  
	
   

  	
   

  	
  R&D
  Legal Operations

  
	
   

  	
   

  	
  GlaxoSmithKline301

  
	
   

  	
   

  	
  Renaissance
  Boulevard

  
	
   

  	
   

  	
  Mail
  Code RN0220

  
	
   

  	
   

  	
  King
  of Prussia, PA 19406

  
	
   

  	
   

  	
  Telecopy:
  (610) 787-7084

  



 


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.


 


11.7        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.


 


11.8        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.


 


11.9        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.


 


11.10      Entire
Agreement; Existing Collaboration.  This Agreement, together with the Schedules
and Exhibits hereto, and the relevant applicable cited provisions of the
Existing 


 


25

















 


Collaboration,
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.  Notwithstanding the first
sentence of this Section 11.10, except as explicitly stated in this
Agreement, all the terms and conditions of the Existing Collaboration and the
existing convertible promissory note by Regulus and its Founding Companies to
GSK, dated April 24, 2008, shall remain unchanged and will continue in
full force and effect.


 


11.11      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.


 


11.12      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.


 


11.13      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 (or any successor standard) 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.


 


11.14      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.


 


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


 


26

















 


11.16      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.


 


11.17      Compliance
with Laws: Each Party shall and shall ensure that its
Affiliates, Founding Companies, in the case of Regulus, and Sublicensees will,
comply with all relevant laws and regulations in exercising their rights and
fulfilling their obligations under this Agreement.


 


* - * - * - *


 


27

















 


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


 


	
  Regulus
  Therapeutics Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Kleanthis G.
  Xanthopoulos

  	
   

  	
   

  
	
  Name:

  	
  Kleanthis
  G. Xanthopoulos

  	
   

  	
   

  
	
  Title:

  	
  President
  and CEO

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Glaxo
  Group Limited

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Victoria Whyte

  	
   

  	
   

  
	
  Name:

  	
  Victoria
  Whyte

  	
   

  	
   

  
	
  Title:

  	
  For
  and on behalf of the Wellcome Foundation Limited

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
										



 


28

















 


LIST OF SCHEDULES AND
EXHIBITS


 


	
  EXHIBIT
  A — Definitions

  
	
   

  
	
  EXHIBIT
  B — Representative List of Regulus Patents

  
	
   

  
	
  EXHIBIT
  C — [***] Patent Rights

  
	
   

  
	
  EXHIBIT
  D — Press Release

  
	
   

  
	
  EXHIBIT
  E — [Intentionally Left Blank]

  
	
   

  
	
  EXHIBIT
  F — Stanford Patents

  
	
   

  
	
  EXHIBIT
  G — Relevant In-Licenses

  



 


29




















 


DEFINITIONS


 


1.             “Acceptance” means, with respect to an NDA filed for SPC-3649
or an SPC-3649 Product, (a) in the United States, the receipt by GSK, its
Affiliates or Sublicensees 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 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”).


 


2.             “Additional Third Party Agreement” shall have the meaning
assigned to such term in Section 5.6.2.


 


3.             “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 Founding Companies of Regulus shall be deemed an Affiliate of
Regulus for the purposes of this Agreement under any circumstances.


 


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


 


5.             “Agreement Term” shall have the meaning assigned to such term
in Section 10.1


 


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


 


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


 


8.             “Bankruptcy  Code” shall
have the meaning assigned to such term in Section 10.4.2.


 


9.             “Breaching Party” shall have the meaning assigned to such
term in Section 10.2.1.


 


10.           “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.


 


11.           “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.


 


A-1

















 


12.           “Calendar Year” shall mean a year of 365 days (or 366 days in
a leap year) beginning on January 1st (or, with respect to 2010, the
Effective Date) and ending December 31st, and so on year-by-year.


 


13.           “Claims” shall have the meaning assigned to such term in Section 9.1.


 


14.           “Clinical Studies” shall mean human studies designed to
measure the safety, efficacy, tolerability and/or appropriate dosage of
SPC-3649, 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).


 


15.           “Collaboration Target” shall have the meaning assigned to
such term in the Existing Collaboration.


 


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


 


17.           “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 an SPC-3649 Product following receipt of Regulatory
Approval for such SPC-3649 Product.


 


18.           “Competitive Infringement” shall have the meaning assigned to
such term in Section 6.2.2.


 


19.           “Confidential Information” shall have the meaning assigned to
such term in Section 7.1.


 


20.           “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 Founding Company of Regulus.


 


21.           “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.


 


22.           “Disclosing  Party” shall
have the meaning assigned to such term in Section 7.1.


 


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


 


A-2

















 


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


 


25.           “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.


 


26.           “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).


 


27.           “Existing  Collaboration”
shall have the meaning assigned to such term in the Recitals.


 


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


 


29.           “Field” shall mean the treatment and/or prophylaxis of
hepatitis C virus.


 


30.           “First  Commercial  Sale” means, with respect to an SPC-3649 Product in a
country in the Territory, the first sale, transfer or disposition for value by GSK, its Affiliates or Sublicensees to
an end user of an SPC-3649 Product in such country; provided, that, the
following shall not constitute a First Commercial Sale: (a) any sale to an
Affiliate, Founding Company or Sublicensee unless the Affiliate, Founding
Company or Sublicensee is the last entity in the distribution chain the
SPC-3649 Product, (b) any use of SPC-3649 or an SPC-3649 Product in
Clinical Studies, pre-clinical studies or other research or development
activities, or disposal or transfer of SPC-3649 or an SPC-3649 Product 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.


 


31.           “Founding  Company” shall
have the meaning assigned to such term
in the Recitals.


 


32.           “Founding  Company  Patents” shall mean, with respect to each Founding Company,


 


(a)           all Patent
Rights Controlled by such Founding Company on the Effective Date that claim:


 


(i)            miRNA Compounds
or miRNA Therapeutics in general,


 


(ii)           specific miRNA
Compounds or miRNA Therapeutics,


 


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


 


A-3

















 


(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 Founding Company Patents, and (y) Founding
Company Patents do not include [***].


 


33.           “Garching
Agreement” means the Amended License Agreement dated October 18,
2004 among Max Plank Innovation GmbH (formerly Garching Innovation GmbH), Isis
and Alnylam


 


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


 


35.           “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).


 


36.           “Indemnitee” shall have the meaning assigned to such term in Section 9.3.


 


37.           “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.


 


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


 


39.           “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.


 


40.           “Losses” shall have the meaning assigned to such term in Section 9.1.


 


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


 


42.           “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.


 


A-4

















 


43.           “Milestone  Event” shall
have the meaning assigned to such term in Section 5.4.


 


44.           “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 expand this definition.


 


45.           “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 [***].


 


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


 


47.           “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.


 


48.           “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.


 


49.           “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.


 


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


 


51.           “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).


 


52.           “Net Sales”
shall mean, with respect to any
SPC-3649 Product, the gross invoiced sales of SPC-3649 Product sold by GSK, its Affiliates or Sublicensees (in each
case, the “Selling Party”), in
finished product form, packaged and labeled 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 


 


A-5

















 


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 SPC-3649
Product; (c) [***] charges relating
to such SPC-3649 Product, including [***] thereto; (d) [***] directly
linked to the sales of such SPC-3649 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 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 Founding Companies or direct Sublicensees.


 


SPC-3649 Product provided to patients for [***] will not be included in
Net Sales.


 


In
the event SPC-3649 is sold as part of a Combination Product (as defined below),
the Net Sales from the SPC-3649, 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 SPC-3649 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 SPC-3649 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 SPC-3649 and other
therapeutically active pharmaceutical compound(s).


 


53.           “Non-breaching Party” shall have the meaning assigned to such
term in Section 10.2.1.


 


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


 


55.           “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.


 


A-6

















 


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


 


57.           “Payor” shall mean GSK and, with respect to milestone
payments, GSK.


 


58.           “Pending Claim” means a claim within any patent application
in the Regulus Patents that has not been cancelled, withdrawn, or
abandoned.  For purposes of clarity, if
any Pending Claim of a patent application subsequently issues, such claim shall
be deemed to qualify as a Valid Claim (as defined herein).


 


59.           “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.


 


60.           “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.


 


61.           “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.


 


62.           “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.


 


63.           “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.


 


64.           “PoC Trial” shall mean the first human in-patient study
designed to provide evidence of efficacy, safety and tolerability of SPC-3649
or an SPC-3649 Product.


 


65.           “PoC Trial Reports” shall mean 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 SPC-3649 or an SPC-3649 Product.


 


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


 


A-7

















 


67.           “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.


 


68.           “Receiving Party” shall have the meaning assigned to such
term in Section 7.1.


 


69.           “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 SPC-3649 or an SPC-3649 Product in
the applicable jurisdiction.


 


70.           “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
SPC-3649 or an SPC-3649 Product in such country, and any successor(s) thereto.


 


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


 


72.           “Regulus License Agreement” means the Amended and Restated
License and Collaboration Agreement dated January 1, 2009 among Regulus,
Isis and Alnylam.


 


73.           “Regulus Patents” shall mean:


 


(a)           all Founding
Company Patents Controlled by Regulus or any of its Affiliates as of the
Effective Date and/or after the Effective Date and having an earliest priority
date of no later than the Effective Date, including without limitation those
listed on Exhibit B,


 


(b)           all Patent
Rights, other than Founding Company Patents, Controlled by Regulus or any of
its Affiliates as of the Effective Date and/or after the Effective Date and
having an earliest priority date of no later than the Effective Date, including
without limitation the Patent Rights listed on Exhibit F,


 


in
each case, that are necessary to Development, Manufacture or Commercialize
SPC-3649 in the Field: provided, however, that in each case of (a) through
(b), (y) for any Patent Right that is the subject of an Additional Third
Party Agreement, the provisions of Section 5.6.2
will govern whether such Patent Right will be included as a Regulus Patent
hereunder, and (z) unless the Parties enter into a Tuschl 3 Sublicense
under Section 2.1 of this
Agreement , Regulus Patents will exclude the Tuschl 3 Patents.


 


74.           “Royalty Tail Period” shall have the meaning assigned to such
term in Section 5.5.2.


 


A-8

















 


75.           “Santaris” shall mean Santaris Pharma A/S.


 


76.           “Santaris Agreement” shall mean that certain Research and
Development Collaboration and License Agreement between SmithKline Beecham
Corporation d/b/a/ GlaxoSmithKline and Santaris, dated December 18, 2007.


 


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


 


78.           “Selling Party” shall have the meaning assigned to such term
in Section 52 .


 


79.           “SPC-3649” shall mean (a) the proprietary Santaris
compound known on the Effective Date as SPC-3649, and (b) any and all
salts, crystalline and amorphous forms, and solvates (including hydrates)
thereof.  The sequence and chemistry of
SPC-3649 is described in [***].


 


80.           “SPC-3649 Product” means any product that includes SPC-3649
as an active ingredient, or includes SPC-3649 in any base form, salt form,
prodrug, ester, crystalline polymorph, hydrate or solvate thereof, whether or
not as the sole active ingredient and in any dosage, form or formulation, sold
by GSK, its Affiliates or Sublicensees, in finished product form, packaged and
labeled for sale.  Unless otherwise
indicated by context, “Product” or “SPC-3649 Product” includes Combination
Products.


 


81.           “SPC-3649 Rights” shall have the meaning assigned to such
term in Section 3.2(a).


 


82.           “Stanford” means The Board of Trustees of the Leland Stanford
Junior University.


 


83.           “Stanford License Agreement” means the Co-Exclusive License
Agreement dated August 31, 2005 among Stanford and the Founding Companies
(as assigned by Isis to Regulus on July 13, 2009).


 


84.           “Stanford Patent(s)” means any Patent Right licensed under
the Stanford License Agreement.  A list
of the Stanford Patents as of the Effective Date is attached hereto under Exhibit F.


 


85.           “Sublicensee” shall mean a Third Party or Founding Company to
whom a Party or its Affiliates or Sublicensees has granted a sublicense or
license under any Regulus Patents, licensed to such Party in accordance with
the terms of this Agreement.


 


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


 


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


 


88.           “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 


 


A-9

















 


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 SPC-3649 hereunder,
including, without limitation, all [***] 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 Regulus,
[***], 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 Founding 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 [***].


 


89.           “Third Party and Founding Company-Originated Rights and Obligations”
shall mean the rights of, and any limitations, restrictions or obligations
imposed by, (a) Founding 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, including but not limited to the Stanford
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)
[***]


 


90.           “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 [***] in the Development, Manufacture and/or
Commercialization of SPC-3649 or an SPC-3649 Product 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 of [***] (although, for clarity, if
such costs and payments are paid [***] 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 [***].


 


91.           “[***] Patents” means all Patent Rights licensed by Isis and/or
Alnylam under the License Agreement among [***], Isis and Alnylam dated [***],
as amended.  A representative list of the
[***] Patents as of the Effective Date is attached hereto under Exhibit C.


 


92.           “[***] Sublicense” will have the meaning assigned to such term in Section 2.1.


 


93.           “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.


 


94.           “Upfront Payment” shall have the meaning assigned to such
term in Section 5.1.


 


A-10

















 


95.           “Valid Claim” means a claim within an issued Patent in the
Regulus Patents that has not expired, lapsed, been cancelled or abandoned, and
that has not been dedicated to the public, disclaimed or been revoked,
cancelled or held unenforceable or invalid by a decision of a court or
governmental administrative 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 including through opposition, re-examination, reissue,
disclaimer or otherwise.


 


96.           “Withholding-Free Payments” means the [***] and [***]
payments payable to Regulus under Sections [***] and [***] of this Agreement.


 


A-11
















 


EXHIBIT B


 


Representative
List of Regulus Patents as of the Effective Date


 


[***]


 


B-1





















 


EXHIBIT C


 


[***] Patents as
of the Effective Date


 


[***]


 


 


C-1





















 


EXHIBIT D


 


Press Release


 


Regulus Therapeutics and
GlaxoSmithKline Establish New Collaboration to Develop and Commercialize
microRNA Therapeutics Targeting miR-122


 


- miR-122 Represents a Novel “Host
Factor” Strategy for Treatment of Hepatitis C Infection —


 


- Further Demonstration of
Regulus Leadership in microRNA Science, Technology and Intellectual Property -


 


Carlsbad,
CA., February 24, 2010 — Regulus Therapeutics Inc.
today announced the establishment of a new collaboration with
GlaxoSmithKline (GSK) to develop and commercialize microRNA therapeutics
targeting microRNA-122 in all fields with Hepatitis C Viral infection (HCV) as
the lead indication.  Under the terms of
the new collaboration, Regulus will receive additional upfront and early-stage
milestone payments with the potential to earn more than $150 million in
miR-122-related combined payments, and tiered royalties up to
double digits on worldwide sales of products.


 


“This
new collaboration with GSK demonstrates the clear scientific leadership that Regulus
has established in advancing a whole new frontier of pharmaceutical
research.  microRNA therapeutics target
the pathways of human diseases, not just single disease targets, and hold
considerable promise as novel therapies across a broad range of unmet medical
needs,” said Kleanthis G. Xanthopoulos, Ph.D., President and Chief Executive
Officer of Regulus. “It also further validates Regulus’ microRNA product
platform built on fundamental biology of human diseases and intellectual
property, and also extends the therapeutic scope of our existing collaboration
formed with GSK in 2008.  Furthermore,
the funding from this alliance supports Regulus’ efforts in advancing high
impact, novel medicines based on microRNA biology to patients.”


 


The
collaboration provides GSK with access to Regulus’ comprehensive and robust
intellectual property estate.  Regulus
exclusively controls patent rights covering miR-122 antagonists and their use
as HCV therapeutics in the United States, Europe, and Japan, including but
not limited to the patent families which encompass:  the ‘Sarnow’ patent pertaining to the method
of use of anti-miR-122 to inhibit HCV replication, the ‘Esau’ patent
application claiming the use of anti-miRs targeting miR-122 as inhibitory
agents, the ‘Tuschl III’ patent claiming composition of matter for miR-122 and
complementary oligonucleotides, and the ‘Manoharan’ patent claiming antagomirs,
including antagomirs targeting miR-122.


 


miR-122
is a liver-expressed microRNA that has been shown to be a critical endogenous “host
factor” for the replication of HCV, and anti-miRs targeting miR-122 have been
shown to block HCV infection (Jopling et al. (2005) Science 309, 1577-81). In earlier work, scientists at
Alnylam and Isis demonstrated the ability to antagonize miR-122 in vivo using chemically modified single-stranded anti-miR
oligonucleotides. Further, work by Regulus scientists and collaborators showed
that inhibiting miR-122 results in significant inhibition of HCV replication in
human liver cells, suggesting that antagonism of miR-122 may comprise a novel “host
factor” 


 


D-1





















 


therapeutic
strategy. Regulus scientists have shown in multiple preclinical studies a
robust HCV antiviral effect following inhibition of miR-122.  Regulus plans to identify a clinical
development candidate in the second half of 2010 and file an investigational
new drug (IND) application in 2011.


 


About
microRNAs


 


The discovery of microRNA in humans is one of the most
exciting scientific breakthroughs in the last decade. microRNAs are small RNA
molecules, typically 20 to 25 nucleotides in length, that do not encode
proteins but instead regulate gene expression. Nearly 700 microRNAs have been
identified in the human genome, and more than one-third of all human genes are
believed to be regulated by microRNAs. As a single microRNA can regulate entire
networks of genes, these new molecules are considered the master regulators of
the genome. microRNAs have been shown to play an integral role in numerous
biological processes including the immune response, cell-cycle control,
metabolism, viral replication, stem cell differentiation and human development.
Many microRNAs are conserved across multiple species indicating the
evolutionary importance of these molecules as modulators of critical biological
pathways. Indeed, microRNA expression or function has been shown to be
significantly altered in many disease states, including cancer, heart failure
and viral infections. Targeting microRNAs opens the possibility of a novel
class of therapeutics and a unique approach to treating disease by modulating
entire biological pathways.


 


About Hepatitis C Virus (HCV)


 


HCV
infection is a disease with an estimated prevalence of 170 million patients
worldwide, with more than 3 million patients in the United States. HCV shows
significant genetic variation in worldwide populations due to its frequent
rates of mutation and rapid evolution. There are six genotypes of HCV, with
several subtypes within each genotype, which vary in prevalence across the
different regions of the world. The response to treatment varies from
individual to individual underscoring the inadequacy of existing therapies and
highlights the need for combination therapies that not only target the virus
but endogenous “host factors” as well. Strategies that include the Regulus
miR-122 antagonist as part of emerging combination therapies to shorten
duration of treatment and interferon use, improve the safety profile and
sustained virologic response (SVR), increase the barrier to drug resistance,
and address difficult-to-treat genotypes hold significant potential to expand
the limited therapies available to physicians treating HCV patients.


 


About Regulus Therapeutics Inc.


 


Regulus
Therapeutics is a biopharmaceutical company leading the discovery and
development of innovative new medicines based on microRNAs.  Regulus is targeting microRNAs as a new class
of therapeutics by working with a broad network of academic collaborators and
leveraging oligonucleotide drug discovery and development expertise from its
founding companies Alnylam Pharmaceuticals (Nasdaq:ALNY)
and Isis Pharmaceuticals (Nasdaq:ISIS).
Regulus is advancing microRNA therapeutics towards the clinic in several areas
including hepatitis C infection, cardiovascular disease, fibrosis, oncology,
immuno-inflammatory diseases, and metabolic diseases. Regulus’ intellectual property estate contains both the fundamental and
core patents in the field as well as over 600 patents and more than 300 pending
patent applications pertaining primarily to chemical modifications of
oligonucleotides targeting microRNAs for therapeutic 


 


D-2





















 


applications.  In 2008, Regulus entered into a major
alliance with GlaxoSmithKline to discover and develop microRNA therapeutics for
immuno-inflammatory diseases. For more information, visit
www.regulusrx.com.


 


Forward-Looking Statements


 


This press release includes
forward-looking statements regarding the future therapeutic and commercial
potential of Regulus’, Alnylam’s, and Isis’ business plans, technologies and
intellectual property related to microRNA therapeutics being discovered and
developed by Regulus, including statements regarding expectations around the
relationship between GSK and Regulus. 
Any statement describing Regulus’, Alnylam’s, and Isis’ goals,
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 their 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 Regulus’, Alnylam’s, and Isis’
management as the case may be.  As a
result, you are cautioned not to rely on these forward-looking statements.  These and other risks concerning Regulus’,
Alnylam’s, and Isis’ programs are described in additional detail in Alnylam’s
and Isis’ annual reports on Form 10-K for the year ended December 31,
2008, and their most recent quarterly reports on Form 10-Q which are on
file with the SEC.  Copies of these and
other documents are available from Alnylam or Isis.


 


D-3





















 


EXHIBIT E


 


[Intentionally
Left Blank]


 


E-1





















 


EXHIBIT F


 


Stanford Patents
as of the Effective Date


 


[***]


 


F-1





















 


EXHIBIT G


 


Third Party In-Licenses


 


[***]


 


G-1




















 


EXHIBIT H


 


[***] License Terms


 


The
following is a summary of material terms that would apply to a license under
[***] Patents (as set forth in Appendix 1) for SPC-3649, in relation to
SPC-3649 Rights.  Terms used herein and
not otherwise defined shall have the meaning assigned to such term in the
Agreement.


 


	
  Licensor

  	
   

  	
  Regulus Therapeutics
  Inc.

  
	
   

  	
   

  	
   

  
	
  Licensee

  	
   

  	
  Santaris
  A/S

  
	
   

  	
   

  	
   

  
	
  Field

  	
   

  	
  The
  treatment and/or prophylaxis of hepatitis C virus 

  
	
   

  	
   

  	
   

  
	
  Territory

  	
   

  	
  Worldwide

  
	
   

  	
   

  	
   

  
	
  Santaris
  Option

  	
   

  	
  Santaris’
  option (the “Santaris Option”) to take an exclusive license from Regulus
  under the [***] Patents to develop and commercialize only SPC-3649 within the
  Field.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Santaris Option can be exercised by Santaris:

  
	
   

  	
   

  	
  1.     if
  after GSK takes a license to SPC-3649 it subsequently ceases development of
  SPC-3649 and returns rights to SPC-3649 to Santaris.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The
  Santaris Option would expire sixty (60) days following the event above.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [***]

  
	
  Up-front
  Payment

  	
   

  	
  [***]]
  however if GSK has taken license to SPC-3649 and made the corresponding
  $[***] payment to Regulus following completion of the PoC Trial, then this
  payment would be waived.

  
	
   

  	
   

  	
   

  
	
  Milestones
  to Regulus

  	
   

  	
  Santaris
  would pay the following milestones to Regulus, based upon the achievement of
  the milestone event by SPC-3649:

  



 


	
   

  	
   

  	
  Milestone Payment*

  	
   

  
	
  Milestone
  Event

  	
   

  	
  US$Million (“m”)

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  



 






	
   

  	
   

  	
  *Each
  milestone will be paid only once upon the first achievement of the Milestone
  Event by SPC-3649.  For clarity, if GSK
  had paid a milestone, then the milestone would not be payable a second time
  by Santaris.

  



 


H-1

















 


	
   

  	
   

  	
  †Such
  milestone will only be payable if, at the time such milestone is achieved
  there is a Valid Claim within the [***] Patents, which covers [***];
  provided, however, that if there is no Valid Claim at the time of such
  Milestone Event, then (a) Santaris must pay to Regulus [***] of such
  milestone payment upon the First Commercial Sale of an SPC-3649 Product in
  any country in the [***]; and (b) if a Pending Claim within the [***]
  Patents issues such that it is a Valid Claim in the [***] prior to the [***]
  anniversary of the date of the First Commercial Sale described in clause (a) above,
  then Santaris will pay Regulus the remaining [***] of such milestone within
  thirty (30) days of receipt by Santaris of an invoice sent from Regulus on or
  after the date of the issuance of the applicable Pending Claim.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Clinical
  Studies” shall mean human studies designed to measure the safety, efficacy,
  tolerability and/or appropriate dosage of SPC-3649, 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).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “First
  Commercial Sale” means, with respect to an SPC-3649 Product in a country in
  the Territory, the first sale, transfer or disposition for value by Santaris, its Affiliates or Sublicensees
  to an end user of an SPC-3649 Product in such country; provided,
  that, the following shall not constitute a First Commercial Sale: (a) any
  sale to an Affiliate, Founding Company or Sublicensee unless the Affiliate,
  Founding Company or Sublicensee is the last entity in the distribution chain
  the SPC-3649 Product, (b) any use of SPC-3649 or an SPC-3649 Product in
  Clinical Studies, pre-clinical studies or other research or development
  activities, or disposal or transfer of SPC-3649 or an SPC-3649 Product 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.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Pending
  Claim” means a claim within any patent application in the [***] Patents that
  has not been cancelled, withdrawn, or abandoned.  For purposes of clarity, if any Pending
  Claim of a patent application subsequently issues, such claim shall be deemed
  to qualify as a Valid Claim.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “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,

  



 


H-2

















 


	
   

  	
   

  	
  department,
  bureau or other government entity that are necessary for the manufacture,
  use, storage, import, transport and/or sale of SPC-3649 or an SPC-3649
  Product in the applicable jurisdiction.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “SPC-3649
  Product” means any product that includes SPC-3649 as an active ingredient, or
  includes SPC-3649 in any base form, salt form, prodrug, ester, crystalline
  polymorph, hydrate or solvate thereof, whether or not as the sole active
  ingredient and in any dosage, form or formulation, sold by Santaris, its
  Affiliates or Sublicensees, in finished product form, packaged and labeled
  for sale.  Unless otherwise indicated
  by context, “Product” or “SPC-3649 Product” includes Combination Products.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “Valid
  Claim” means a claim within an issued Patent in the [***] Patents that has
  not expired, lapsed, been cancelled or abandoned, and that has not been
  dedicated to the public, disclaimed or been revoked, cancelled or held
  unenforceable or invalid by a decision of a court or governmental
  administrative 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 including through opposition, re-examination,
  reissue, disclaimer or otherwise.

  
	
   

  	
   

  	
   

  
	
  Royalties
  to Regulus

  	
   

  	
  Santaris
  will pay to Regulus royalties on Annual worldwide Net Sales of any SPC-3649
  Product sold by Santaris, its Affiliates or Sublicensees (“Santaris Patent
  Royalty”) during a calendar year, on a country-by-country basis, in the Field
  in the countries of the Territory in which there is a Valid Claim in the
  Field within the [***] Patents, which [***], in the amounts as follows:

  



 


	
  Annual Worldwide Net Sales
  (U.S. $

  Million) of SPC-3649 Product per

  Calendar Year US$Million (“m”)

  	
   

  	
  Applicable
  Royalty

  Rate

  	
   

  
	
  up to $1000m

  	
   

  	
  [***]

  	
  %

  
	
  $1000m up to $2000m

  	
   

  	
  [***]

  	
  %

  
	
  $2000m up to $3000m

  	
   

  	
  [***]

  	
  %

  
	
  > $3000m

  	
   

  	
  [***]

  	
  %

  



 


	
   

  	
   

  	
  The royalty rates in
  the table above are incremental rates, which apply only for the respective
  increment of Annual worldwide Net Sales described in the Annual worldwide Net
  Sales column.  Thus, once a total
  Annual worldwide Net Sales figure is achieved for the year, the

  



 


H-3

















 


	
   

  	
   

  	
  royalties owed on any
  lower tier portion of Annual worldwide Net Sales are not adjusted up to the
  higher tier rate.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Royalty Adjustment. 
  If there are no Valid Claims within the [***] Patents that claim [***]
  SPC-3649 Product sold in a particular country, the Santaris Patent Royalty
  set forth above shall be reduced to [***] of the Santaris Patent Royalty
  rates above in such countries where a Pending Claim within the [***] Patents
  claims [***] has not yet been issued. 
  For the avoidance of doubt, for such Pending Claims, Santaris shall
  pay Regulus [***] of the Santaris Patent Royalty set forth in the table
  above, and shall pay the remaining [***] of the Santaris Patent Royalty into
  an escrow account, until such time as a Valid Claim within the [***] Patents
  issues that covers the [***] being sold in the country of sale, provided that
  such Valid Claim must issue within [***] years of date of First Commercial
  Sale of an SPC-3649 Product (the “Royalty Tail Period”).  In the event such Valid Claim issues during
  the Royalty Tail Period, (i) the escrow account and any interest thereon
  shall be paid to Regulus and (ii) Santaris will pay the full Santaris
  Patent Royalty in such countries starting only from the date of such issuance
  of the Valid Claim and shall not owe any Santaris Patent Royalty in such
  countries for any preceding period.  In
  the event that no such Valid Claim issues during the Royalty Tail Period,
  then the escrowed amounts and any interest thereon shall be returned to
  Santaris and any obligations Santaris may have had with respect to the
  Pending Claims shall cease.  If
  Santaris maintains sole control over such escrow account then Santaris shall
  be solely responsible for the costs and expenses associated with maintaining
  such escrow account, otherwise Santaris and Regulus shall be mutually
  responsible for the costs and expenses associated with maintaining such
  escrow account; provided, that the Parties must mutually agree (such
  agreement not to be unreasonably withheld) before taking any action that
  would cause Santaris to lose sole control of such escrow account.  If a Valid Claim within the [***] Patents
  that [***] issues after the Royalty Tail Period, then Santaris will pay
  Regulus the full Santaris Patent Royalty in such countries starting only from
  the date of such issuance of the Valid Claim and shall not owe any Santaris
  Patent Royalty in such countries for any preceding period.

  
	
   

  	
   

  	
   

  
	
  Prosecution and
  Maintenance of Sarnow Patents

  	
   

  	
  At Regulus’ expense,
  Regulus shall (but shall not be obligated to) control and be responsible for
  all aspects of the Prosecution, Maintenance, enforcement and defense of all
  Sarnow Patents

  
	
   

  	
   

  	
   

  
	
  No Challenge

  	
   

  	
  Santaris covenants to
  Regulus that pursuant to the Santaris Option to take a license to the [***]
  Patents, that during the term of the Santaris Option and any license
  agreement granted thereunder, solely with respect to claims within the
  Regulus Patent Rights to the [***] Patents that are to be included in the
  license to be granted to Santaris pursuant to the terms set forth in this
  Exhibit H, Santaris, its Affiliates or

  



 


H-4

















 


	
   

  	
   

  	
  Sublicensees will not,
  in the U.S. or any other Major Country, (a) commence or otherwise
  voluntarily determine to participate in (other than as may be necessary or
  reasonably required to assert a cross-claim or a counter-claim or to respond
  to a court request or order or administrative law request or order) any
  action or proceeding, challenging or denying the validity of any claim within
  an issued patent or patent application within the [***] Patents, or
  (b) direct, support or actively assist any other Person (other than as
  may be necessary or reasonably required to assert a cross-claim or a
  counter-claim or to respond to a court request or order or administrative law
  request or order) in bringing or prosecuting any action or proceeding
  challenging or denying the validity of any claim within an issued patent or
  patent application within the [***] Patents. 
  For purposes of clarification, any breach of these terms will be a
  material breach of the license granted to Santaris, and will be grounds for
  termination by Regulus of the license.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  “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.

  
	
   

  	
   

  	
   

  
	
  Research Plan 

  	
   

  	
  If Santaris exercises
  the Santaris Option to take a license to the [***] Patents, Regulus and
  Santaris will jointly prepare a research plan for SPC-3649; provided, that
  (i) Santaris shall not be required to share with Regulus or any
  confidential information; and (ii) Santaris will have the sole decision
  making authority with respect to such research plan.

  
	
   

  	
   

  	
   

  
	
  Stanford License
  Considerations

  	
   

  	
  With respect to the
  sublicense granted by Regulus under the [***] Patents, Santaris acknowledges
  and agrees that (a) such sublicense is subject and subordinate to the
  terms and conditions of the Stanford License Agreement, (b) Stanford is
  a third party beneficiary to this Agreement as it relates to Articles 8, 9
  and 10 of the Stanford License Agreement, such that Stanford may directly
  enforce Articles 8, 9 and 10 of the Stanford License Agreement against
  Santaris, and (c) if Stanford terminates the Stanford License Agreement
  as it relates to Regulus (but not as it relates to this Agreement), Santaris
  will assume (and be directly liable to Stanford for) all Third Party License
  Pass-Through Costs and all Third Party and Founding Company-Originated Rights
  and Obligations due Stanford in connection with this Agreement.

  



 


H-5

















 


	
  Term

  	
   

  	
  Unless earlier
  terminated pursuant to Santaris’ termination rights below, the license
  agreement would continue in full force and effect until the date of
  expiration of all payment obligations by Santaris under such license
  agreement (the “Santaris Agreement Term”).

  
	
   

  	
   

  	
   

  
	
  Santaris termination
  rights

  	
   

  	
  Santaris would have the
  right, at its sole discretion, exercisable at any time during the Santaris
  Agreement Term, to terminate the license agreement in its entirety, for any
  reason or for no reason at all, upon ninety (90) days written notice to
  Regulus.

  



 


H-6

















 


Appendix 1


 


The [***] Patents are all Patent Rights related to
the following:


 


[***]


 


H-7