Exhibit 10.5


 


	
  CONFIDENTIAL

  	
   

  	
  CONFIDENTIAL TREATMENT
  REQUESTED

  
	
  Execution
  Copy

  	
   

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

  



 


RESEARCH, DEVELOPMENT AND LICENSE
AGREEMENT


 


BETWEEN


 


ISIS PHARMACEUTICALS, INC.,


 


AND


 


GLAXO GROUP LIMITED


 

















 


RESEARCH, DEVELOPMENT AND LICENSE
AGREEMENT


 


This RESEARCH, DEVELOPMENT AND LICENSE AGREEMENT
(together with all Appendices and Schedules hereto, the “Agreement”)
is entered into as of the 30th day of March, 2010 (the “Effective
Date”) by and between ISIS PHARMACEUTICALS, INC.,
a Delaware corporation, having its principal place of business at 1896
Rutherford Road, Carlsbad, CA 92008 (“Isis”), 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”).  GSK and Isis each may be referred to herein
individually as a “Party” or collectively as the
“Parties.”  The terms
used in this Agreement with initial letters capitalized, whether used in the
singular or the plural, will have the meaning set forth in APPENDIX 1.


 


RECITALS


 


WHEREAS, Isis is the acknowledged leader in the field of
Antisense and possesses certain Patent Rights, Know-How and technology with
respect to Antisense therapeutics, and has novel and valuable capabilities for
the research, discovery, identification, synthesis and development of Antisense
therapeutics;


 


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


 


WHEREAS, GSK desires (y) Isis to conduct Collaboration
Programs to discover, research and develop Compounds through completion of a
Phase 2 PoC Trial, and (z) to have exclusive options, exercisable at or
prior to completion of a Phase 2 PoC Trial, to further Develop and
Commercialize such Collaboration Programs; and


 


WHEREAS, upon GSK’s exercise of any of its options to such
Collaboration Programs, GSK will obtain an exclusive license under this
Agreement to Develop and Commercialize Licensed Products.


 


NOW, THEREFORE, in consideration of the respective covenants,
representations, warranties and agreements set forth herein, the Parties hereto
agree as follows:


 


ARTICLE
1.


COLLABORATION
PROGRAMS


 


1.1.                            Overview.  The intent of
the Collaboration is for Isis to continue to independently (i) conduct
Collaboration Programs to generate at least one (1) Development Candidate
and, subject to Section 1.4.4(a) regarding [***], one (1) Back-Up
Compound for each Collaboration Program; and (ii) advance each Development
Candidate through the completion of the first Phase 2 PoC Trial under the
applicable Collaboration Program, with respect to which Collaboration Program
GSK may exercise its option to further Develop and ultimately Commercialize
such Collaboration Program through Licensed Products under an exclusive license
from Isis (the “Objective”).  Isis will be responsible to progress each
Collaboration Program through completion of a Phase 2 PoC


 


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Trial.  For each
Collaboration Program, GSK will have an option (exercisable on or before the
completion of the first Phase 2 PoC Trial) to obtain from Isis an exclusive
license to Develop and Commercialize the Licensed Compounds and Licensed
Products under such Collaboration Program. 
The purpose of this Section 1.1 is to provide a high-level
overview of the roles, responsibilities, rights and obligations of each Party
under this Agreement, and therefore this Section 1.1 is qualified
in its entirety by the more detailed provisions of this Agreement set forth
below.


 


1.2.                            Collaboration Term. 
Subject to Section 1.8, the term for the conduct of
Collaboration Programs (the “Collaboration Term”)
will begin on the Effective Date and end on the [***] ([***]) anniversary of
the Effective Date.


 


1.3.                            Collaboration Management.


 


1.3.1.                  JSC. The Parties will establish a joint
steering committee (the “JSC”) to
provide advice and make recommendations on how to conduct the
Collaboration.  The JSC will consist of
three (3) representatives appointed by Isis and three (3) representatives
appointed by GSK.  Each Party will
designate one of its three (3) representatives who possesses a thorough
understanding of the scientific and business issues relevant to this Agreement
to act as the co-chair of the JSC. The co-chairs will be responsible for
ensuring that activities occur as set forth in this Agreement, including
ensuring that the JSC meetings occur, material recommendations of the JSC are
properly reflected in the minutes, and any dispute is given prompt attention
and resolved in accordance with Sections 1.3.3 and 12.1.


 


(a)           The JSC operating procedures, including
but not limited to frequency of meetings (at least quarterly), location of
meetings, and responsibilities for agendas and minutes, will be determined by
the JSC. The JSC will codify these operating procedures in the written minutes
of the first meeting.


 


(b)           The JSC may hold quarterly meetings in
person or by audio or video conference as determined by the JSC and will hold
meetings as necessary under Section 1.5; but at least two (2) meetings
per year will be in person (one held at Isis’ facilities, and the other held at
GSK’s U.S. facilities). Alliance Managers will attend JSC meetings as
participating non-members. In addition, upon prior approval of the other Party
each Party may invite its employees or consultants to attend JSC meetings,
including, without limitation, any subject matter expert(s) with valuable
knowledge of a specific Collaboration Target, disease, or Indication that is
the subject of a Collaboration Program.


 


(c)           The JSC members from the same Party will
collectively have one (1) vote.  The
JSC will strive to make recommendations with approval of both Isis members and
GSK members, and record such recommendations in the minutes of the applicable
JSC meeting.


 


(d)           Each Party will be responsible for the
costs and expenses of its own JSC members.


 


1.3.2.                  Role of the JSC. 
Without limiting any of the foregoing, subject to Section 1.3.3,
the JSC will perform the following functions, some or all of which may be
addressed directly at any given meeting of the JSC:


 


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(a)                                  review progress on improvements to
Antisense technology and advances in mechanistic understandings of Antisense
technology;


 


(b)                                  review and provide advice on the
Collaboration Program Research Plan (defined below) for each Collaboration
Program, and the Early Development Plan (defined below) for each Development
Candidate;


 


(c)                                  review the overall progress of Isis’
efforts to achieve Sanctioned Target status with respect to each Collaboration
Program that has not achieved Sanctioned Target status;


 


(d)                                  review the overall progress of Isis’
efforts to discover, identify, optimize and otherwise Develop Compounds under
each Collaboration Program;


 


(e)                                  review and approve new gene targets for
substituting any Unvalidated Collaboration Program and determine whether the
new Collaboration Targets are primarily associated with a Rare Disease in
accordance with Section 1.5.2;


 


(f)                                    review and provide advice on (i) design
and content of the [***] for each Collaboration Program and (ii) the [***]
for each Collaboration Program, with each of (i) and (ii) being
subject to [***] as described in Section 1.3.3; and


 


(g)                                 such other review and advisory
responsibilities as may be assigned to the JSC pursuant to this Agreement or as
may be mutually agreed upon in writing by the Parties from time to time.


 


1.3.3.                  Decision Making. The Parties will conduct the
Collaboration giving due consideration to the recommendations and advice of the
JSC.  Isis will have the final
decision-making authority regarding [***], subject to compliance with the Collaboration
Program Research Plan (where applicable) and the terms of this Agreement.  GSK will have the final decision-making
authority (i) with respect to any [***], any disputes concerning the
interpretation and application of the [***], which [***] is set forth in [***],
and the establishment of the [***]; and (ii) with respect to any [***],
any disputes concerning the interpretation and application of the [***], which
[***] is set forth in [***] and the establishment of the [***].  Notwithstanding anything in this Agreement to
the contrary, the [***] and the [***] for the applicable Collaboration Programs
will at all times be documented in APPENDIX 8(A) or APPENDIX
8(B), as applicable, and APPENDIX 8(A) and APPENDIX 8(B) may
only be modified as mutually agreed in writing by both GSK and Isis.
Notwithstanding the foregoing, the approval of a new gene target for
substituting an Unvalidated Collaboration Program in accordance with Section 1.5.2
and the determination of whether In Vivo Efficacy has been demonstrated require
mutual consent of the Parties and if the Parties cannot reach such mutual
consent, the Parties will resolve such dispute by submitting the matter to an
Expert Panel pursuant to Section 12.1.3.


 


1.3.4.                  Term of the JSC.  The JSC (and
any of its subcommittees and working groups) as a formal governing body under
this Agreement will be dissolved upon the later of (i) the expiration of
the Collaboration Term and (ii) the exercise or expiration of the Option
with respect to the last Collaboration Program.


 


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1.3.5.                  Alliance Managers.  Each Party
will appoint one representative who possesses a general understanding of the
scientific and business issues relevant to this Agreement to act as its
alliance manager (each, an “Alliance Manager”)
under this Agreement. Each Alliance Manager will be responsible for performing
the Alliance Management Activities.


 


1.3.6.                  IDJSC.  The Parties
will also establish a joint steering committee to provide advice and make
recommendations on how to conduct the ID/Additional Programs (the “IDJSC”).  The IDJSC will consist of three (3) representatives
appointed by Isis and three (3) representatives appointed by GSK.  Each Party will designate one of its three (3) representatives
who possesses a thorough understanding of the scientific and business issues
relevant to infectious diseases to act as the co-chair of the IDJSC. The
co-chairs will be responsible for ensuring that activities occur as set forth
in this Agreement with respect to the ID/Additional Programs, including
ensuring that the IDJSC meetings occur, and material recommendations of the
IDJSC are properly reflected in the minutes. 
The IDJSC will operate in accordance with the same operating procedures
for the JSC as set forth in Section 1.3.1.  The IDJSC members from the same Party will
collectively have one (1) vote.  The
IDJSC will strive to make recommendations with approval of both Isis members
and GSK members, and record such recommendations in the minutes of the
applicable IDJSC meeting.  Any dispute
with respect to the ID/Additional Programs that cannot be resolved by the IDJSC
shall be submitted to the JSC and JSC shall resolve such dispute in accordance
with Sections 1.3.3 and 12.1. 
With respect to the ID/Additional Programs, unless the context otherwise
requires, a reference in this Agreement to the “JSC”
will be a reference to the “IDJSC.”


 


1.3.7.                  Role of the IDJSC. 
Subject to Section 1.3.3 and solely in connection with the
ID/Additional Programs, the IDJSC will perform the following functions, some or
all of which may be addressed directly at any given meeting of the IDJSC:


 


(a)                                  review progress on improvements to
Antisense technology and advances in mechanistic understandings of Antisense
technology;


 


(b)                                  review and provide advice on the
Collaboration Program Research Plan for each ID/Additional Program, and the
Early Development Plan for each Development Candidate under the ID/Additional
Programs;


 


(c)                                  review the overall progress of Isis’
efforts to achieve Sanctioned Target status with respect to each ID/Additional
Program;


 


(d)                                  review the overall progress of Isis’
efforts to discover, identify, optimize and otherwise Develop Compounds under
each ID/Additional Program;


 


(e)                                  determine criteria for achieving In Vivo
Efficacy for the 6th Collaboration Program, if any, within sixty (60) days
following selection;


 


(f)                                    discuss and approve the design and
expenditure for animal efficacy studies;


 


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(g)                                 review and determine whether In Vivo
Efficacy  has been demonstrated under the
ID/Additional Programs;


 


(h)           subject to [***] as described in Section 1.3.3,
review and provide advice on (i) design and content of the [***] and the
[***] for each ID/Additional Program and (ii) the [***] and [***] for each
ID/Additional Program, including [***]; and


 


(i)                                    such other review and advisory
responsibilities as may be assigned to the IDJSC pursuant to this Agreement or
as may be mutually agreed upon in writing by the Parties from time to time.


 


1.3.8.                  Term of IDJSC.  The IDJSC (and
any of its subcommittees and working groups) as a formal governing body under
this Agreement will be dissolved upon the later of (i) the expiration of
the Collaboration Term and (ii) the exercise or expiration of the Option
with respect to the last ID/Additional Program.


 


1.3.9.                  ID Alliance Managers.  Each Party
will appoint one representative who possesses a general understanding of the
scientific and business issues relevant to infectious diseases to act as its
Alliance Manager with respect to the ID/Additional Programs. Such Alliance
Manager will be responsible for performing the Alliance Management Activities
solely with respect to the ID/Additional Programs.


 


1.3.10.           Meeting Coordination. Isis and GSK will schedule meetings of
the JSC and IDJSC to take place at the same location and on the same dates to
maximize the use of each Party’s time, increase information sharing
efficiencies and reduce the cost of additional travel, lodging and related
expenses.


 


1.4.                               Isis’ Collaboration
Responsibilities.


 


1.4.1.     (a)            Collaboration Programs. 
Subject to and in accordance with the terms of this Agreement, Isis will
be responsible for conducting five (5) Collaboration Programs, each to be
focused on a different Collaboration Target; provided,
however, that GSK may add a sixth (6th)
Collaboration Program for Isis to conduct under this Agreement by notifying
Isis in writing of its intention to add the sixth (6th)
Collaboration Program on or before the [***] ([***]) anniversary of the
Effective Date and paying Isis a fee of $[***] within thirty (30) days after
the final selection of the sixth (6th)
Collaboration Target pursuant to Section 1.5.1. A brief description
of the initial five (5) Collaboration Programs, including the applicable
Collaboration Targets (and whether such Collaboration Programs are Rare Disease
Programs, [***] Program or ID/Additional Programs), is set forth on APPENDIX
5, attached hereto.


 


(b)                                  Isis Diligence. 
Isis will use Commercially Reasonable Efforts, subject to Section 1.6,
to conduct (i) drug discovery activities including drug screening,
identification, characterization, optimization and other necessary activities
according to the applicable Collaboration Program Research Plans, and (ii) drug
development of each Development Candidate under a Collaboration Program in
accordance with the applicable Early Development Plan.  To that end, Isis will dedicate to the


 


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conduct of the activities hereunder the appropriate resources and
allocate personnel with an appropriate level of education, experience and
training reasonably necessary to achieve the Objective efficiently and
expeditiously, which will at a minimum be the capacity with which Isis runs its
drug discovery efforts for similar programs as of the Effective Date.


 


(c)                                  Collaboration Program
Research Plans; Early Development Plans. 
Isis will
carry out its drug discovery efforts for each Collaboration Program pursuant to
the applicable Collaboration Program Research Plan; and its drug development
efforts for each Development Candidate pursuant to an Early Development Plan,
in each case subject to Section 1.6 and Section 1.7,
and review and comment by the JSC as described in Section 1.3.2(b).
Isis will update each Collaboration Program Research Plan and Early Development
Plan as needed, but at least once annually, and submit it to the JSC for its
review and comment, subject to [***] as described in Section 1.3.3
on the [***] and the [***] for all Collaboration Programs, and for
ID/Additional Programs, the [***] and the [***], as applicable.


 


For each Collaboration Program, and each Development Candidate, as
applicable, Isis will provide the JSC:


 


(i)                                    promptly (but no later than ninety (90)
days) following the Effective Date (or, with respect to the sixth (6th) Collaboration Program or any Collaboration Program
for a substituted target, within ninety (90) days after its designation) for
each Collaboration Program that has not reached [***];


 


(ii)                                the [***] approved by Isis’ RMC for each
[***], as may be modified from time to time to address the [***] and [***]
activities Isis will conduct under the Collaboration for such [***] (each such
plan under Sections 1.4.1(c)(i) and 1.4.1(c)(ii), a “Collaboration Program Research Plan”);
and


 


(iii)                            (A) for each [***] under a
Collaboration Program for Rare Diseases or [***], an [***] that will first
consist of the [***] approved by Isis’ DMC following designation of the
applicable [***] by Isis’ RMC, and thereafter Isis will update as the program
advances to include an initial [***], and once GSK provides the [***], a [***];
and (B) for each [***] under an ID/Additional Program, an initial [***]
that will first consist of the [***] approved by Isis’ DMC following
designation of the applicable [***] by Isis’ RMC, and thereafter Isis will
update as the program advances to include the [***] provided by GSK; and once
GSK provides the [***], a [***] (each such plan, an “Early
Development Plan”), in all cases taking into consideration the
recommendations of the JSC or IDJSC as described in Section 1.3.2(b) and
Section 1.3.7(b), as applicable.


 


(d)                                  Briefing the JSC. At each regularly scheduled meeting of the JSC, Isis
will provide to the JSC (i) progress updates on the status of the Collaboration
generally; (ii) progress updates of Collaboration Program Research Plans;
and (iii) progress updates of Early Development Plans for each Development
Candidate, in each case, together with a summary of data associated with Isis’
research and/or Development activities for each Collaboration Program.


 


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1.4.2.                  Drug Discovery.  Isis will use
Commercially Reasonable Efforts to apply Antisense technology to and otherwise
conduct the following Collaboration drug discovery research activities, in each
case consistent with the level of quality, effort, resources and diligence Isis
applies to its other internal and partnered programs:


 


(a)           conduct early-stage drug discovery on
each Collaboration Program that has not achieved Sanctioned Target status;


 


(b)           conduct late-stage drug discovery on each
Collaboration Program that has achieved Sanctioned Target status with the goals
of identifying one (1) lead compound that would qualify as a Development
Candidate and, subject to Section 1.4.4(a) regarding [***], at
least one (1) Back-Up Compound in each Collaboration Program; and


 


(c)           each time a Development Candidate is
designated under a Collaboration Program, Isis will notify GSK in writing
within thirty (30) days of such designation and will provide GSK (i) the
[***] Isis provided to its RMC and the JSC in connection with Isis’ designation
of the applicable Compound as a Development Candidate, (ii) a proposed
Early Development Plan with respect to such Development Candidate, (iii) a
summary of the [***] and, to the best of Isis’ knowledge and belief, the need
to [***], and (iv) a description of any [***] applicable to such
Development Candidate (such notice and package, a “Development
Candidate Package”).


 


1.4.3.                  Drug Development. 
Isis will
use Commercially Reasonable Efforts to conduct the following drug development
activities under this Agreement:


 


(a)           Subject to Section 1.6 and Section 1.7
below, for each Collaboration Program, Develop at least one (1) Development
Candidate through the completion of the first Phase 2 PoC Trial; provided, however, Isis may discontinue such Development if
at any time (i) Isis in good faith believes, and a majority of the JSC
recommends, that continuing such Development is not warranted because the
Development Candidate has not demonstrated sufficient efficacy or activity in
human trials or animal studies, or (ii) after having consulted the JSC,
Isis in good faith believes that continuing such Development would (x) pose
an unacceptable risk or threat of harm in humans, or (y) violate any
Applicable Law, ethical principles, or principles of scientific integrity; provided, further, that Isis will [***] the expiration or
termination of the Collaboration Term;


 


(b)           Phase 1 Trial Design.  For any Phase
1 Trial conducted by Isis for a Collaboration Program, which Phase 1 Trial may
include patients as well as healthy volunteers, Isis will include a [***] when
feasible and appropriate for the Development Candidate; provided
that for ID/Additional Programs, [***], including that the total
number of healthy subjects and patients in Phase 1 and Phase 2 PoC Trials shall
be [***].  Isis acknowledges that for the
ID/Additional Programs, unless otherwise agreed by GSK and Isis in APPENDIX
8(B), [***], and Isis shall conduct such [***], prior to commencement of
the [***]; and


 


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(c)                                  Phase 2 PoC Trial.  Each Phase 2
PoC Trial shall be designed in accordance with the [***] for Collaboration
Programs for Rare Diseases and [***], and [***] for ID/Additional
Programs.  No later than [***] days prior
to the anticipated commencement date of a Phase 2 PoC Trial, Isis will provide
GSK with an [***] for the Phase 2 PoC Trial, and GSK will have the right to
provide input regarding [***] for such Phase 2 PoC Trial.  Isis will keep GSK informed of the progress
and status of each Phase 2 PoC Trial and will provide GSK with the applicable
Phase 2 PoC Data Package upon completion of such Phase 2 PoC Trial.


 


1.4.4.                  Development of Back-Up
Compounds.


 


(a)                                  Prior to GSK’s exercise of an Option with
respect to the Collaboration Program, Isis will use Commercially Reasonable
Efforts to develop the Back-Up Compound to Development Candidate status in
addition to the lead Development Candidate, at no additional cost to GSK; provided, however, the
Parties acknowledge [***] presents a significant challenge for the
identification of Back-Up Compounds and, as such, it may be commercially
reasonable to [***], as the case may be, Development of any Back-Up Compounds
for any Collaboration Program focused on a [***].


 


(b)           In addition, if, prior to the date GSK
exercises the applicable Option, GSK or the JSC reasonably determines that a
Development Candidate [***] or has otherwise [***] Trial [***], Isis will
Develop the Back-Up Compound for such Collaboration Program through completion
of a Phase 2 PoC Trial in accordance with this Agreement as long as the Parties
and the JSC share a reasonable belief that such Back-Up Compound has properties
that are likely to make it successful in Development and
Commercialization.  [***] will be
responsible for the costs and expenses to Develop such Back-Up Compound in
accordance [***].


 


(c)                                  Notwithstanding the provisions of Section 1.4.4(a),
but subject to the proviso in Section 1.4.4(a) regarding
[***], at any time before or after GSK exercises an Option for a given
Collaboration Program, upon written request from GSK, Isis will commence
further Development work on a Back-Up Compound beyond Development Candidate
status in the same manner as Isis would develop a Development Candidate under Section 1.4.3.  Isis will perform such Development work
contemporaneously with the Development Isis is conducting on the Development
Candidate under the applicable Collaboration Program and in accordance with a
budget approved by GSK.  [***] will be
responsible for the costs and expenses to further Develop such Back-Up Compound
in accordance [***].


 


1.4.5.                  Follow-On Compounds. After GSK has [***], if GSK wants Isis to discover
and develop a Follow-On Compound for the applicable Licensed
Product/Collaboration Program, then GSK will provide a written request to
Isis.  Upon Isis’ receipt of such
request, Isis will commence drug discovery efforts to identify a Follow-On
Compound against the same Collaboration Target within the applicable
Collaboration Program, and use Commercially Reasonable Efforts to develop such
Follow-On Compound to the Development Candidate stage [***].  Once a Follow-On Compound is designated as a
Development Candidate in accordance with this Agreement, GSK is solely
responsible, [***], for Developing and 


 


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Commercializing such Follow-On Compound. So long as
GSK has exercised the applicable Option and is compliant with the terms of this
Agreement with respect to such Follow-On Compound, such Follow-On Compound will
be considered a Licensed Product under this Agreement.  Notwithstanding the foregoing, Isis will not
be required to discover or Develop a Follow-On Compound for any Collaboration
Program focused on a [***].  The Party
responsible for the costs and expenses to Develop such Follow-On Compounds will
be determined in accordance with Section 1.7.4.


 


1.4.6.                  Data Integrity.


 


(a)                                  Isis acknowledges the importance to GSK of ensuring that
the activities under  Collaboration Programs are undertaken in accordance
with the following good data management practices (“Good
Data Management Practices”):


 


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


 


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


 


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


 


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


 


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


 


(b)           Isis agrees that it will carry out the
activities under the Collaboration Programs and collect and record any data
generated therefrom in a manner consistent with the above requirements, and
will, upon reasonable request by GSK, permit review of relevant notebooks and
records by GSK during normal business hours.


 


1.4.7.                  Isis Technology. In performing its research and development
responsibilities under this Agreement, Isis will utilize any next generation
Antisense chemistries and oligonucleotides Controlled by Isis or its
Affiliates, using traditional and novel mechanisms of action, including, but
not limited to, [***], as recommended by the JSC.  Except as otherwise set forth in this
Agreement, Isis’ use of any and all improvements that are Controlled by Isis or
its Affiliates to its Antisense chemistries or oligonucleotide motifs in the
Collaboration Programs [***].


 


1.5.                            Adding Sixth (6th) Collaboration Program;
Limited Right to Substitute Collaboration Programs.


 


1.5.1.                  Selecting Sixth (6th) Collaboration Program
(if any).  If GSK elects to add a sixth (6th) Collaboration Program under Section 1.4.1(a),
then within thirty (30) days of GSK’s notice 


 


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electing such addition, GSK will provide Isis a gene
target for consideration to be the focus of the sixth (6th) Collaboration Program, including the gene name and
the NCBI accession number or nucleic acid sequence for such proposed
target.  Together with GSK, Isis will review
and evaluate if, at the time of such request, [***] for such proposed gene
target; [***] Isis has [***] under this Agreement for such program [***]; and
[***] Isis [***] the program proposed by GSK [***] collectively, the “Collaboration Target Acceptance Criteria”).  If, at such time, the proposed gene target
fails to meet the Collaboration Target Acceptance Criteria, the proposed gene
target will be rejected and will not become the focus of the sixth (6th) Collaboration Program.  If the proposed gene target is rejected, GSK
may request another gene target in accordance with the terms of this Section 1.5.1.  If the proposed gene target is not rejected,
such proposed gene target will be the sixth (6th)
Collaboration Target.  Isis will not
directly or indirectly research, develop or commercialize any Compounds with
respect to any gene target rejected under this Section 1.5.1 if
such gene target is rejected as a result of [***].  For purposes of this Section 1.5.1
and the sixth (6th) Collaboration Program, if the relevant
gene target is an infectious agent, then the gene target shall be deemed the
entire infectious agent and not a specific gene of the infectious agent.


 


1.5.2.                  Limited Right of
Substitution.  If, by the [***] ([***]) anniversary of the
Effective Date, a Rare Disease Program or a [***] Program has not reached the
Sanctioned Target stage (each such program, an “Unvalidated
Collaboration Program”), then within thirty (30) days following
such [***] ([***]) anniversary, GSK will notify Isis whether GSK wishes (i) Isis
to continue its research and development activities under this Agreement for
such Unvalidated Collaboration Program; or (ii) subject to the procedures
set forth below, to substitute a new program for such Unvalidated Collaboration
Program; provided GSK may only substitute up to a
total of [***] ([***]) Unvalidated Collaboration Programs (and for purposes of
clarity, may not substitute any [***]). 
If GSK timely elects to substitute an Unvalidated Collaboration Program
under this Section 1.5.2, then GSK will propose a list of new gene
targets for consideration as part of the substituted Collaboration Program, by
adding such gene targets (including the gene name and the NCBI accession number
or nucleic acid sequence for the proposed gene target and whether GSK believes
such gene target is primarily associated with a Rare Disease) to the written
agenda for the next scheduled JSC meeting; provided GSK
must make such proposal at least fifteen (15) Business Days prior to such JSC
meeting.  GSK may call an emergency JSC
meeting for such purpose.  At such JSC
meeting, the representatives of Isis and GSK will (i) mutually agree upon
the replacement Collaboration Program(s) based on the greatest likelihood
of success and using the same process as set forth in Section 1.5.1
above, and (ii) determine whether the applicable Collaboration Targets
that are the focus of such Collaboration Programs are primarily associated with
a Rare Disease.  With respect to any
Collaboration Program substituted in under this Section 1.5.2 where
the Parties agree the applicable Collaboration Target is primarily associated
with a Rare Disease, then, for purposes of calculating the applicable payments
under ARTICLE 5 of this Agreement, the Collaboration Program associated
with such Collaboration Target will be treated as a Rare Disease Program.  With respect to any Collaboration Program
substituted in under this Section 1.5.2 where the Parties agree the
applicable Collaboration Target is not primarily
associated with a Rare Disease, then, for purposes of calculating the
applicable payments under ARTICLE 5 of this Agreement, the Collaboration
Program associated with such 


 


11

















 


Collaboration Target will be treated as a [***] Program.  If, within thirty (30) days following such
JSC meeting, the Parties cannot agree whether the applicable Collaboration
Target is primarily associated with a Rare Disease, the Parties will resolve
such dispute by submitting the matter to an Expert Panel pursuant to Section 12.1.3.
Any Unvalidated Collaboration Program that GSK elects to substitute out under
this Section 1.5.2 will no longer be a Collaboration Program under
this Agreement and the applicable gene target associated therewith will no
longer be a Collaboration Target under this Agreement.  Isis’ obligations (including but not limited
to ARTICLE 1 and ARTICLE 2) and GSK’s rights and Options under
this Agreement with respect to such substituted out gene targets and Compounds
directed against such gene targets will terminate.  As of the Effective Date, the Collaboration
Program focused on [***] and the Collaboration Program focused on [***] have
each reached the [***] stage.  Isis will
not directly or indirectly research, develop or commercialize any Compounds
with respect to any gene target rejected pursuant to this Section 1.5.2
if such gene target is rejected as a result of Clause (A) set forth in the
Collaboration Target Acceptance Criteria without providing GSK during the
Collaboration Term with [***].


 


1.6.                            [***]Special Conditions of
[***] and [***] Programs.


 


1.6.1.                  [***] Program


 


(a)                                  [***]. 
Isis will use Commercially Reasonable Efforts to conduct drug discovery
activities including drug screening, identification, characterization,
optimization and other necessary activities according to the applicable
Collaboration Program Research Plans for each [***], with the goal of reaching
the Sanction Target stage for each [***]. 
Isis’ drug discovery and development programs on each [***] will be considered
a separate and distinct Collaboration Program under this Agreement and the
[***] ([***]) [***] will only count as a single Collaboration Program against
the limit on the maximum number of Collaboration Programs set forth in Section 1.4.1(a).  Each time Isis designates a [***] as a
Sanctioned Target, Isis will notify GSK in writing within thirty (30) days of
such designation and will provide GSK (a) the same [***] Isis provided its
RMC and the JSC in connection with Isis’ decision to designate such [***] as a
Sanctioned Target, (b) a proposed [***] with respect to such [***], (c) a
summary of the [***] and, to the best of Isis’ knowledge and belief, the need
to [***] any [***], and (d) a description of any [***] applicable to such
[***] (such notice and package, a “[***] Sanction Notice”).  GSK will then have ninety (90) days following
its receipt of the applicable [***] Sanction Notice (each, a “[***] Election Deadline”) to notify
Isis whether GSK elects to maintain such [***] as a Collaboration Program.  If GSK delivers a written notice to Isis that
affirmatively elects to maintain the applicable [***] as a Collaboration
Program before the applicable [***] Election Deadline, then Isis’ drug
discovery program focused on such [***] will remain a Collaboration Program
under this Agreement, and Isis will perform the applicable research and
development activities set forth in Section 1.4 above.  If GSK does not deliver a written notice to
Isis that affirmatively elects to maintain the applicable [***] as a Collaboration
Program before the applicable [***] Election Deadline, or if GSK delivers a
notice indicating that GSK does not wish to maintain the 


 


12

















 


applicable [***] as a Collaboration Program, then, in
each case, (i) Isis will no longer be required to perform any work on such
[***] under this Agreement, and (ii) such [***] will no longer be
considered a Collaboration Target or part of a Collaboration Program.  For clarity, if a [***] is no longer a Collaboration
Target but another [***] continues to be part of a Collaboration Program, GSK
will not have a replacement right under Section 1.5.2 above with
respect to the discontinued [***].  In
addition, following delivery of the applicable [***] Sanction Notice, if GSK
elects to maintain the [***] ([***]) [***] as a Collaboration Program under
this Section 1.6.1, then within sixty (60) days after receipt by
GSK of an invoice (sent from Isis on or after the date GSK makes the applicable
election), GSK will pay a fee of $[***] for such [***] election (i.e., [***] Collaboration Programs will require [***] $[***]
payment and no additional payment if GSK elects to have only [***] ([***])
[***] Collaboration Program) under this Section 1.6.1.


 


(b)           Right of First Negotiation
with Respect to [***]. If, during the Collaboration Term, Isis (a) has a good-faith
desire to grant any Third Party any right with respect to [***] or collaborate
with any Third Party in researching, developing or commercializing Compounds
with respect to [***] or (b) Initiates a Phase 2 PoC Trial for a Compound
with respect to [***], then Isis will promptly (but in any case within thirty
(30) days) provide written notice to GSK, and Isis will promptly deliver to GSK
evaluation materials reasonably relevant to its [***] program and no less than
those materials provided to applicable Third Parties, including a proposed
collaboration plan, if any, and all information about the Compounds with
respect to [***] consistent with the information Isis is required to disclose
as part of a Phase 2 PoC Data Package, if any. 
GSK will then have forty-five (45) days to notify Isis in writing
whether GSK desires to collaborate with Isis in researching, Developing or
Commercializing Compounds with respect to [***].  If GSK provides Isis with timely written
notice that GSK desires to collaborate with Isis in researching, Developing or
Commercializing Compounds with respect to [***] (including obtaining an
exclusive license), then Isis and GSK will, in good faith, use commercially
reasonable efforts to conclude a written collaboration and license agreement
within [***]([***]) days.  If GSK fails
to timely notify Isis that GSK desires to collaborate and obtain an exclusive
license with respect to the [***] program, or if despite good-faith
commercially reasonable efforts GSK and Isis are unable to reach an agreement
within [***] ([***]) days after Isis’ receipt of such notice from GSK, then
Isis may enter into a collaboration and license agreement with any Third Party
with respect to [***].  For the avoidance
of doubt, the right of first negotiation described herein will (x) not
prevent Isis from researching or developing the applicable gene target,
Compound or Development Candidate for itself through the use of Third-Party
contract research organizations and other Third Parties performing similar
fee-for-service drug research and development services for or on behalf of
Isis; and (y) expire upon the [***], and will only be extended beyond the
[***] if and to the extent GSK has the right to notify Isis in writing within
the forty-five (45) day period described above and, if such notice is timely
delivered by GSK, to the extent Isis and GSK are negotiating in good faith to
conclude a written collaboration and license agreement within the [***] ([***])
day period described above.


 


13

















 


1.6.2.                  [***] Programs.


 


(a)           Prior to Sanctioned Target
Status.  With respect to the
[***] Program, initially Isis will perform the drug discovery and Development
activities under this Agreement for [***] and in a [***] using the same
Compounds for the treatment of [***] via [***] and [***] with the goal of
reaching the Sanctioned Target stage; provided, however,
that, as part of such [***] Program, GSK may, at its sole cost and subject to Section 1.9.2,
conduct or have conducted drug discovery activities with such Compounds for
[***] using other [***] available to GSK, pursuant to mutually agreed
protocols.


 


(b)           Initial Election; [***]
Field.  Once Isis designates
[***] as a Sanctioned Target, Isis will notify GSK in writing within thirty
(30) days of such designation and will provide GSK (i) the same [***] Isis
provided its RMC and the JSC in connection with Isis’ decision to designate
[***] as a Sanctioned Target, (ii) a proposed [***] with respect to [***]
in both the field of [***] and [***], (iii) a summary of the [***] and, to
the best of Isis’ knowledge and belief, the need to [***] any [***]; and (iv) a
description of any [***] applicable to [***] (such notice and package, a “[***] Notice”). GSK will then have
ninety (90) days following its receipt of the [***] Notice (the “First [***] Election Deadline”) to
notify Isis whether GSK elects to continue the [***] Program in the field of
[***], in the field of [***], or in both the fields of [***] and [***] using
the same Compounds for treating [***]. 
If GSK elects to continue with only one field, then the field in which
GSK elects to continue the [***] Program under this Section 1.6.2(b) will
be considered the “Base [***] Field” and the
field in which GSK does not elect to continue will be considered the “Expanded [***] Field.”  If GSK does not elect either [***] or [***]
by the First [***] Election Deadline, then the Base [***] Field will be
considered [***], and the Expanded [***] Field will be considered [***].  Isis will perform the drug discovery and
Development activities in accordance with this Agreement, including but not
limited to Section 1.4, in the Base [***] Field (the “Base [***] Program”) and the
Expanded [***] Field if GSK elects to have Isis perform the drug discovery and
Development activities in the Expanded [***] Field (the “Expanded
[***] Program”).


 


(c)                                  Subsequent Option to
Expand.  At any time from the First [***] Election Deadline through
the date of the first Option Deadline under Section 3.1 for the
[***] Program (the “Final [***] Election Deadline”),
GSK may elect to have Isis perform the Expanded [***] Program either (i) using
the same Compound Isis is Developing under the Base [***] Program (such
program, the “Same Compound-Expanded [***] Program”),
or (ii) using a different Compound than the Compound Isis is Developing
under the Base [***] Program (such program, the “Different
Compound-Expanded [***] Program”). GSK will make any election
under this Section 1.6.2, by providing written notice to Isis, or
specifically making such election at a JSC meeting where such election is
documented in the minutes of the applicable meeting.  Within sixty (60) days after GSK notifies
Isis of its desire to expand the [***] Program, Isis shall provide GSK with (i) a
[***] summarizing the [***] of the Base [***] Program; (ii) a proposed
[***] or [***] with respect to 


 


14

















 


the Expanded [***] Program; (iii) a summary of
the [***] and, to the best of Isis’ knowledge and belief, the need to [***] any
[***] (iv) a description of any [***] applicable to the Expanded [***]
Program; and (v) all other information that is useful to GSK’s election to
expand the Base [***] Program (the “[***] Data Package”).  If GSK elects to expand the [***] Program to
include the Expanded [***] Program, the Base [***] Program and such Expanded
[***] Program will only count as a single Collaboration Program against the
limit on the maximum number of Collaboration Programs set forth in Section 1.4.1(a).  If GSK does not provide Isis with a written
notice electing to expand the [***] Program in accordance with this Section 1.6.2
prior to the expiration of the Final [***] Election Deadline, Isis shall have
no obligation to conduct the [***] Program in the Expanded [***] Field, the
Expanded [***] Field will not be considered a Collaboration Program under this
Agreement.


 


(d)                                  Electing the Same
Compound-Expanded [***] Program at or Before [***].  If GSK elects
the Same Compound-Expanded [***] Program at or before [***]:


 


(i)                                    Within thirty (30) days, the JSC will
meet and prepare a research or Development plan for advancing such Expanded
[***] Program to the next stage.


 


(ii)                                Isis will provide a good-faith estimate
of the costs (including external costs, internal costs and FTEs) to advance the
Same Compound-Expanded [***] Program to the next stage based on the JSC’s
research or Development plan, as well as a good-faith estimate of the costs
(including external costs, internal costs and FTEs) to advance the Base [***]
Program to the next stage based on the existing Collaboration Program Research
Plan or Collaboration Program Development Plan, as the case may be, for the
Base [***] Program. Isis’ estimate of such costs shall be subject to GSK’s
approval; provided, however, that Isis has no
obligation to conduct the Same Compound-Expanded [***] Program unless and until
GSK approves such costs and pays Isis the milestones set forth in Section 1.6.2(d)(iii) below.


 


(iii)                            After GSK’s approval of the estimated
costs described in Section 1.6.2(d)(ii) above, GSK will make
milestone payments to Isis equal to [***] (including [***]) to advance the Same
Compound-Expanded [***] Program to the next Development stage minus the [***] [***] to advance the Base [***] Program to
the same Development stage (such [***], the “[***]”)
as follows:


 


(A) within thirty
(30) days after reaching the [***] stage, the [***] for developing the Compound
through [***],


 


(B) within thirty
(30) days after the [***], the [***] for developing the Development Candidate
through [***],


 


(C) within thirty
(30) days after the [***], the [***] for developing the 


 


15

















 


Development Candidate from
[***] through the [***], and


 


(D) within thirty
(30) days after the [***], the [***] for developing the Development Candidate
from [***] through completion of  the
[***]


 


(iv)          GSK will pay Isis [***] ([***]) Option
exercise fee under Section 5.4 for the [***] Program, [***] if GSK
exercises its Option for both the Base [***] Program and the Same
Compound-Expanded [***] Program under this Section 1.6.2(d).  In addition, subject to Section 1.6.2(g) below,
GSK will pay (a) the [***] ([***]) [***] payments under [***] of [***]
of [***] for any Development Milestone Events achieved by the Base [***]
Program after such Option exercise, and (b) the [***] payments under [***]
of [***] of [***] for any Development Milestone Events achieved
by the Same Compound-Expanded [***] Program after such Option exercise.


 


(e)                                  Electing the Same
Compound-Expanded [***] Program After [***]. If GSK elects the Same Compound-Expanded [***]
Program after [***] but prior to the expiration of the Final [***] Election
Deadline (including re-electing the Same Compound-Expanded [***] Program after
it discontinues the Same Compound-Expanded [***] Program that it has elected
previously), GSK will pay Isis:


 


(i)                                    a fee of $[***] within thirty (30) days
after GSK’s receipt of the updated [***] Data Package from Isis. GSK’s election
will become effective upon such payment to Isis;


 


(ii)                                for each Development Milestone Event
achieved by a Compound after [***] but through and including the first [***],
GSK will pay [***] to Isis for both the Base [***] Program and the Same
Compound-Expanded [***] Program as set forth in [***] of [***] of
[***];[***]subject to Section 1.6.2(g) below, for each
Development Milestone Event achieved by a Compound after the [***] ([***])
[***] GSK will pay (a) the [***] ([***]) [***] of [***] of [***]
for any such Development Milestone Events achieved by the Base [***] Program,
and (b) the [***] payments under [***] of [***] of [***]
for any such Development Milestone Events achieved by the Same
Compound-Expanded [***] Program; and


 


(iii)                            only one (1) [***] under [***]
for the [***] Program, even if GSK exercises its Option for both the Base [***]
Program and the Same Compound-Expanded [***] Program under this Section 1.6.2(e).


 


(f)                                    Electing the Different
Compound-Expanded [***] Program.  If GSK elects
the Different Compound-Expanded [***] Program at any time prior to the
expiration of the Final [***] Election Deadline, (i) GSK will pay Isis a
fee of $[***] within thirty (30) days after its receipt of the updated [***]
Data Package, and GSK’s election will only become effective upon such payment
to Isis; (ii) GSK will pay [***] ([***]) separate [***] under [***]
of [***] of [***] for the Base [***] Program and the Different
Compound-Expanded [***] Program if GSK exercises its Option for both such
programs; and (iii) GSK will pay [***] ([***]) separate 


 


16

















 


[***] to Isis for both the Base [***] Program and the
Different Compound-Expanded [***] Program as set forth in [***] of [***]of
[***] if and when such Development Milestone Event is achieved by a
Compound from such [***] Program.


 


(g)                                 Milestone Payments for the
[***] Program.  Section 1.6.2(d)(iv) and Section 1.6.2(e)(ii) above
assume that the Development Milestone Events set forth in [***] of [***]
will first be achieved by the Base [***] Program; provided, however,
that irrespective of whether achieved by a Compound in the Base [***] Program
or the Expanded [***] Program, except as otherwise provided in Section 1.6.2(e)(ii),
any Development Milestone Event achieved by a Compound being Developed under
the [***] Program under Section 1.6.2(d) or Section 1.6.2(e) will
trigger (i) the [***] ([***]) [***] for such Development Milestone Event
set forth in [***] of [***] of [***] if such Compound is
the first (1st) Compound under the [***] Program to
achieve such Development Milestone Event; or (ii) the [***] ([***]) [***]
for such Development Milestone Event set forth in [***] of [***]of
[***] if such Compound is not the first (1st)
Compound under the [***] Program to achieve such Development Milestone Event.


 


1.7.                            Collaboration Costs and
Expenses.


 


1.7.1.                  Development Candidates.


 


(a)           PoC Cost Limit for Rare
Disease Programs and [***] Program.  Subject to Section 1.7.2
below, Isis will be responsible for its costs and expenses in performing its
obligations under Section 1.4 for each Collaboration Program and
each Development Candidate; except with
respect to the Rare Disease Programs and the [***] Program, Isis will only be
responsible for paying the Phase 2 PoC Trial Costs of the Phase 2 PoC Trial for
a Development Candidate up to a total of [***] ($[***]) (the “PoC Cost Limit”); provided that for any Phase 2 PoC Trial that involves [***]
([***]) or fewer patients, dosed at [***] ([***]) [***] or less per week, for
[***] ([***]) [***] or less, Isis may only apply up to [***] ($[***]) of its
Cost of Goods toward the PoC Cost Limit. 
If, for a Rare Disease Program or a [***] Program, the Phase 2 PoC Trial
Costs for a Development Candidate are greater than the PoC Cost Limit, GSK
[***] in order to complete the Phase 2 PoC Trial for such Development
Candidate; provided that GSK will not have [***]
Isis for the [***], including, without limitation, for the labor cost of Isis’
employees who are clinical scientists, clinicians, and project managers.  Isis’ [***] to
manufacture API [***] in accordance with APPENDIX 4.


 


(b)           IND-Supporting Toxicology
Studies for Rare Disease Programs and [***] Program.  
For clarity, for a Rare Disease Program or a [***] Program, Isis will
conduct IND-Supporting Toxicology Studies at its cost for a duration of up to
[***]([***]) months to support the dosing in up to a [***] ([***]) month Phase
2 PoC Trial; provided, however,
if GSK requests that Isis conduct an IND-Supporting Toxicology Study that is
longer than [***] ([***]) months, then GSK will pay Isis the costs of such
longer study to the extent such costs exceed the cost of a [***] ([***]) month
study, in accordance with a mutually agreed budget.  Isis will 


 


17

















 


provide GSK with such a budget containing Isis’
good-faith estimate of the cost of such longer IND-Supporting Toxicology Study.
Isis’ estimated budget of such costs shall be subject to GSK’s approval; provided, however, that
Isis has no obligation to conduct such longer IND-Supporting Toxicology Study
unless and until Isis and GSK mutually agree on a budget.


 


(c)                                  Quarterly Invoice;
Reimbursement True Up.  Isis will deliver to GSK an
invoice for the portion of the budget attributable to the costs that exceed the
PoC Cost Limit pursuant to Section 1.7.1(a) or the costs that
exceed the costs of a [***] ([***]) month IND-Supporting Toxicology Study
pursuant to Section 1.7.1(b) for the coming quarter on a
quarterly basis no earlier than thirty (30) days prior to the beginning of such
quarter, based on the approved budget for the applicable study, which GSK will
pay within sixty (60) days after GSK’s receipt. 
At the time Isis delivers its quarterly invoice to GSK, Isis shall also
deliver to GSK a report summarizing the actual costs and expenses to conduct
the applicable study in the previous quarter. GSK will reimburse Isis for such
actual costs and expenses incurred by Isis in the previous quarter that is not
covered by the advance payments made by GSK to Isis under Section 1.7.1(a) or
Section 1.7.1(b) for such study for the previous quarter.  GSK may use the balance of its advance
payments to Isis for the previous quarter to offset its payment obligation for
the coming quarter.


 


1.7.2.                  Special Funding Conditions
Related to ID/Additional Programs.


 


(a)           In Vivo Efficacy Studies.  
With respect to the ID/Additional Programs, Isis will conduct the
pharmacology efficacy models specified in APPENDIX 2(B), including, but
not limited to, the [***] model at its cost; provided
that Isis will only be responsible for paying its external
out-of-pocket costs (for clarity, excluding the cost of Isis’ internal FTEs and
Isis’ costs to manufacture API) up to a total of $[***] and [***] such external
costs incurred pursuant to a budget pre-approved by GSK to the extent such cost
exceeds $[***] per ID/Additional Program. Isis will provide GSK with a budget
containing Isis’ good-faith estimate of such additional costs and the
underlying activities.  Isis’ estimate of
such costs shall be subject to GSK’s approval; provided, however, that Isis has no obligation to conduct such
activities unless and until Isis and GSK mutually agree on a budget.


 


(b)           IND-Supporting Toxicology
Studies.  For clarity, for an ID/Additional Program,
Isis will conduct IND-Supporting Toxicology Studies at its cost for a duration
of up to [***] ([***]) months to support the dosing in up to a [***] ([***])
month Phase 2 PoC Trial; provided, however, if GSK requests that Isis conduct an
IND-Supporting Toxicology Study that is longer than [***] ([***]) months, then
GSK will pay Isis the costs of such longer study to the extent such costs
exceed the cost of a [***] ([***]) month study, in accordance with a mutually
agreed budget.  Isis will provide GSK
with such a budget containing Isis’ good-faith estimate of the cost of such
longer IND-Supporting Toxicology Study. Isis’ estimated budget of such costs
shall be subject to GSK’s approval; provided, however, that Isis has no obligation to conduct such longer
IND-Supporting Toxicology Study unless and until Isis and GSK mutually agree on
a budget.


 


18

















 


(c)                                  Clinical Studies. 
In addition, with respect to the ID/Additional Programs, if the Early
Development Plan includes studies that are in addition to or exceed the studies
contemplated by APPENDIX 8(B), Isis will provide GSK with a budget
containing Isis’ good-faith estimate of the cost of such additional or expanded
studies.  Isis’ estimate of such costs
shall be subject to GSK’s approval and GSK will be responsible for the costs
set forth in the approved budget for conducting such additional or expanded
studies; provided, however,
that Isis has no obligation to conduct such activities unless and until Isis
and GSK mutually agree on a budget and provided, further, that Isis will provide [***] and/or [***] for the
studies designed in accordance with APPENDIX 8(B) [***].


 


(d)           Post PoC Tox Studies. 
If the
IDJSC agrees that post-PoC enabling activities such as long-term toxicity
studies need to be initiated prior to exercise by GSK of an Option, GSK will
propose the study design, timeline and drug product requirements to Isis.  [***]; provided that
Isis will provide up to [***] of API as required for such post-PoC enabling
studies [***] per Collaboration Program.


 


(e)                                  Quarterly Invoice;
Reimbursement True Up.  Isis will deliver to GSK an
invoice for the portion of the budget attributable to the costs that exceed the
[***] ($[***]) limit pursuant to Section 1.7.2(a), the costs that
exceed the cost of a [***] ([***]) month study pursuant to Section 1.7.2(b) or
the costs that exceed the cost of the IND-Supporting Toxicology Studies
contemplated by APPENDIX 8(B) pursuant to Section 1.7.2(c),
as the case may be, for the coming quarter on a quarterly basis no earlier than
thirty (30) days prior to the beginning of such quarter, based on the approved
budget for the applicable study, which GSK will pay within sixty (60) days
after GSK’s receipt.  At the time Isis
delivers its quarterly invoice to GSK pursuant to Section 1.7.2(a),
1.7.2(b) or 1.7.2(c) above, Isis shall also deliver to
GSK a report summarizing the actual costs and expenses to conduct the
applicable study in the previous quarter. GSK will reimburse Isis for such
actual costs and expenses incurred by Isis in the previous quarter that is not
covered by the advance payments made by GSK to Isis under Section 1.7.2(a),
1.7.2(b) or 1.7.2(c) for such study for the previous
quarter.  GSK may use the balance of its
advance payments to Isis for the previous quarter to offset its payment
obligation for the coming quarter.


 


1.7.3.                  Back-Up Compounds.  [***] is
responsible for [***] costs and expenses in performing its obligations under Sections
1.4.4(a) and 1.4.4(b) for any Back-Up Compound.  If Isis is further Developing a Back-Up
Compound beyond the Development Candidate status under Section 1.4.4(c),
then [***] for all reasonable costs and expenses of advancing such Back-Up
Compound beyond the stage of Development Candidate designation, subject to a
budget approved in writing in advance by GSK.


 


1.7.4.                  Follow-On Compounds.  [***] is
responsible for [***] costs and expenses in performing its obligations to
discover and Develop a Follow-On Compound to the Development Candidate stage
pursuant to Section 1.4.5. Once a Follow-On Compound has reached
the Development Candidate stage in accordance with this Agreement, [***] is
[***] responsible, at [***] cost, for Developing and Commercializing such
Follow-On Compound.


 


19

















 


1.8.                            End of Collaboration Term.  Upon the
expiration of the Collaboration Term, (i) Isis will no longer have an
obligation to perform any activities under Section 1.4.2; (ii) any
Collaboration Programs that have not reached the [***] stage will no longer be
Collaboration Programs and the applicable gene targets associated therewith
will no longer be Collaboration Targets; (iii) Isis’ obligations and GSK’s
rights under this Agreement with respect to such gene target and any ASOs
targeting such gene target will then terminate, and Isis will be free to
Develop and Commercialize on its own or with a Third Party such gene target and
any Compounds targeting such gene target; and (iv) Isis will own any data
generated under the Collaboration for such gene target and any Compounds
targeting such gene target.  For clarity,
except to the extent explicitly set forth in the foregoing, the expiration of
the Collaboration Term will not affect GSK’s rights or Isis’ obligations with
respect to Collaboration Programs under this Agreement that have reached the
[***] stage, including, but not limited to, Isis’ obligation under Section 1.4.3
to Develop each such [***] under the remaining Collaboration Programs through
the completion of the Phase 2 PoC Trial. 
Notwithstanding the foregoing, if Isis is not developing at least [***]
([***]) [***] under the applicable Collaboration Programs at the end of the
Collaboration Term, (a) the Collaboration Term will be automatically
extended for [***] ([***]) additional term of [***]([***]) [***] with respect
to all Collaboration Programs that have reached the [***] stage, but have not
generated a [***] by the end of the Collaboration Term, (b) Isis will
continue its research and Development activities in accordance with Section 1.4.2
to generate [***] under such Collaboration Programs and (c) all rights and
obligations of each Party with respect to such Collaboration Programs will
remain the same during such extended [***] ([***]) [***] period.  For clarity, (y) following the
expiration of the Collaboration Term (including any such extension), Isis will
continue to Develop each Development Candidate in accordance with each Early
Development Plan through the completion of the Phase 2 PoC Trial,  and (z) the automatic extension of the
Collaboration Term set forth in this Section 1.8 cannot extend the
Collaboration Term beyond the [***] ([***]) anniversary of the Effective Date.


 


1.9.                            General Collaboration
Matters.


 


1.9.1.                  Conduct of Collaboration.  Isis will
conduct its work under the Collaboration in a good scientific manner, and in
compliance with all applicable good laboratory practices, and all Applicable
Laws, to use Commercially Reasonable Efforts to efficiently and expeditiously
achieve the Objective of each Collaboration Program.


 


(a)                                  Isis will, at its own expense and risk,
maintain laboratories, offices, and all other facilities necessary to carry out
its respective responsibilities under each Collaboration Program.


 


(b)                                  Isis will maintain complete and accurate
records of all work it conducts in the performance of each Collaboration
Program and all results, data, inventions and developments made in the
performance of each Collaboration Program. 
Such records will be in sufficient detail and in good scientific manner
appropriate for patent and regulatory purposes.


 


1.9.2.                  GSK Assistance in
Collaboration.  In GSK’s discretion, and as mutually agreed
by GSK and Isis, GSK may, at GSK’s cost and expense, assist Isis with certain
of the 


 


20
















 


pharmacology studies for certain therapeutic areas included in the
Collaboration, and, in the event GSK has access to animal models or other
assays that Isis does not have in-house, GSK may perform portions of the
Collaboration as mutually agreed therein. 
GSK will promptly provide Isis any data generated by GSK under this Section 1.9.2
for use in connection with the research, Development and Commercialization of
Discontinued Products.


 


1.9.3.                  Materials Transfer.  In order to
facilitate the Collaboration, either Party may provide to the other Party
certain materials for use by the other Party in furtherance of the
Collaboration.  All such materials will
be used by the receiving Party in accordance with the terms and conditions of
this Agreement solely for purposes of performing its rights and obligations
under this Agreement, and the receiving Party will not transfer such materials
to any Third Party unless expressly contemplated by this Agreement or upon the
written consent of the supplying Party.


 


1.9.4.                  Additional
Research/Opportunities. In
addition, under a separate, mutually agreed upon written research plan, the
Parties may explore the opportunity for GSK and Isis to work together to
further the technology, such as with formulation work, to allow [***],
including exploring ways to [***]. GSK may present Isis with proposals
regarding GSK’s access to Isis’ technology, outside of the Collaboration, which
may include the formation of a joint venture with another party particularly as
it relates to delivery technologies. Isis and GSK will evaluate and discuss
such proposals in good faith, but will not be required to expand the scope of
the Collaboration without executing a written agreement.


 


ARTICLE
2.


EXCLUSIVITY
COVENANTS


 


2.1.                            Isis’ Exclusivity
Covenants.


 


2.1.1.                  Isis’ Exclusivity
Covenants.  Except as set forth in Section 2.1.2
or in Section 9.3.2, prior to GSK’s exercise of an Option, on a
Collaboration Target-by-Collaboration Target basis, Isis agrees that it will
not work independently of this Agreement for itself or any Affiliates or for or
with any Third Party (including the grant of any license to any Third Party)
with respect to discovery, research, development and/or commercialization
activities of an ASO that is [***] a Collaboration Target for the period set
forth below:


 


(a)           Collaboration Target.  Such
exclusivity on a Collaboration Target will continue until the earlier of (i) the
date such Collaboration Target is removed from the Collaboration in accordance
with Section 1.5.2, 1.6.1 or 1.8; and (ii) the
occurrence of an Option Deadline with respect to the applicable Collaboration
Program and GSK does not exercise the Option for such Collaboration Program.


 


(b)           Licensed Program.  If GSK
exercises its Option with respect to a Collaboration Program, then Isis’
exclusivity obligations with respect to such Collaboration Program will
continue with respect to the applicable Collaboration Target and any and all
Development Candidates, Licensed Compounds and Licensed Products under such
Collaboration Program for so long as the exclusive license under Section 4.1.1
for the applicable Collaboration Program remains in effect.


 


21

















 


2.1.2.                  Limitations and
Exceptions to Isis’ Exclusivity Covenants. 
Notwithstanding
anything to the contrary in this Agreement, Isis’ practice of the following
will not violate Section 2.1.1:


 


(a)                                  Any activities pursuant to the Prior
Agreements;


 


(b)                                  Permitted Licenses;


 


(c)                                  Isis (for itself and not for a Third
Party) will be permitted to discover, research and develop with respect to the
Collaboration Target within such Collaboration Program (an “Isis Follow-On Product”) if (1) (i) GSK
does not ask Isis to identify a Follow-On Compound for a Collaboration Program
under Section 1.4.5 prior to the applicable Development Candidate
successfully completing its first (1st)
[***], or (ii) Isis identifies a Follow-On Compound for a Collaboration
Program under Section 1.4.5, but thereafter GSK does not use
Commercially Reasonable Efforts to continue to Develop and Commercialize such
Follow-On Compound (on its own or with Isis); and (2) all [***]; provided, however, that (y) Isis
will not have the right to develop or commercialize any Licensed Product being
Developed or Commercialized by GSK under this Agreement, and (z) Isis
hereby provides GSK with a [***]; and


 


(d)           After any exercise by GSK of its Option
for the [***] Programs, if GSK is Developing or Commercializing the [***]
Program for [***] (“[***] Program”), and is not
Developing or Commercializing the [***] Program for [***] (“[***] Program”), Isis may Develop
and Commercialize ASOs under a [***] Program in accordance with the following
conditions:


 


(i)                                    Isis will have no access to, nor will GSK
be obligated to grant Isis, a license to any of the Isis Product-Specific
Patents assigned by Isis to GSK under this Agreement related to the [***]
Program;


 


(ii)                                Isis’ ASO for [***] will not have [***]
to the Licensed Compound or Licensed Product within GSK’s [***] Program for
[***];


 


(iii)                            Isis will not grant a Third Party a
license to Isis’ [***] Program until such program reaches the [***] stage of
Development, at which time GSK will have a [***] with respect to such [***]
Program [***], mutatis mutandis;


 


(iv)          If Isis and GSK do not consummate a license
agreement for the [***] Program during GSK’s [***], then during (i) the
period in which there is an issued claim within a patent Controlled by GSK in a
Major Country Covering the composition of matter or approved method of use of
the Licensed Compound or Licensed Product in the [***] Program or (ii) the
data exclusivity period conferred by the applicable Regulatory Authority in
such country with respect to such Licensed Product (such as in the case of an
orphan drug), Isis will not, and will not allow its Third Party partner, to do
any of the following:


 


[***].


 


22

















 


(v)            Isis will include GSK as an intended
third party beneficiary in its agreement with a Third-Party partner for the
[***] Program, solely to allow GSK to enforce the obligations and restrictions
set forth in this Section 2.1.2(d) directly against such Third
Party partner; and


 


(vi)          As long as there is (i) an issued
claim within a patent Controlled by GSK in a Major Country Covering the composition
of matter or approved method of use of the Licensed Compound or Licensed
Product in the [***] Program or (ii) a data exclusivity period conferred
by the applicable Regulatory Authority in such country with respect to such
Licensed Product (such as in the case of an orphan drug), Isis will pay GSK
royalties [***] on Net Sales by Isis, its Affiliates or its Third-Party partner
of such ASO within the [***] Program arising from prescriptions written by
[***] or [***] for any [***] Indications in any Major Country (as determined by
IMS data).


 


(e)                                  After any exercise by GSK of its Option
for the [***] Programs, if such [***] Programs include both [***] and [***] and
GSK is not Developing or Commercializing a Compound or Licensed Product for
[***], Isis may Develop and Commercialize an ASO for [***], provided that Isis satisfies the conditions set forth in Section 2.1.2(d)(i) through
Section 2.1.2(d)(vi) above.


 


For the avoidance of doubt, so long as GSK is Developing or
Commercializing a Licensed Compound or Licensed Product for [***] via [***] in
accordance with this Agreement, Isis will not have the right to Develop or
Commercialize any ASO for [***].


 


2.1.3.                  Except as otherwise expressly provided in
this Agreement, Isis will not enter into any research or development
collaborations with a Third Party that would or be reasonably likely to
diminish Isis’ ability to perform its obligations under this Agreement in any
material respect.


 


2.2.                            GSK’s Exclusivity
Covenants.


 


2.2.1.                  GSK’s Exclusivity
Covenants.  Except as set forth in Section 2.2.2
or in Section 9.3.1, on a Collaboration Target-by-Collaboration
Target basis and solely with respect to a Collaboration Target that Isis has
generated a Development Candidate, GSK agrees that it will not work
independently of this Agreement for itself or any Affiliates or for or with any
Third Party in researching or Developing a nucleic acid—based approach [***]
with respect to a Collaboration Target that has generated a Development
Candidate until the earlier of (i) the date such Collaboration Target is
removed from the Collaboration in accordance with Section 1.5.2,  1.6.1
or 1.8; and (ii) the date GSK elects to exercise or declines to
exercise its Option with respect to the Collaboration Program relating to such
Collaboration Target.


 


23

















 


2.2.2.                  Limitations and
Exceptions to GSK’s Exclusivity Covenants. 
Notwithstanding
anything to the contrary in this Agreement, GSK’s practice of the following
will not violate Section 2.2.1:


 


(a)                                  Modalities other than Antisense;


 


(b)                                  [***] the practice of which is [***]; and


 


(c)                                  GSK continuing its (i) internal
research and development efforts and (ii) collaborative work with a Third
Party with respect to any gene target unless and until such gene target is a
Collaboration Target with respect to which Isis has generated a Development
Candidate. If GSK (by itself or with a Third Party) is researching or
developing a nucleic acid-based therapeutic [***] against a Collaboration
Target outside of the Collaboration, GSK will provide Isis with written notice
thereof on the Effective Date, or at the time such Collaboration Target is
proposed for inclusion in this Agreement, as applicable, which notice will only
state that GSK is researching or developing a nucleic acid-based therapeutic
[***] against a Collaboration Target outside of the Collaboration without
disclosing any other information.


 


2.3.                            Effect of Exclusivity on
Future Indications. Each
Collaboration Program is focused on delineated gene targets that are known to
play a role in certain therapeutic areas. 
Nevertheless, GSK’s license to any drugs arising therefrom will not be
limited to a particular therapeutic area or Indication. Isis is subject to
exclusivity obligations under Section 2.1 of this Agreement with
respect to Collaboration Targets; however, GSK
acknowledges and agrees that, except as prohibited under Section 2.1
above, Isis (on its own or with a Third Party) may continue to discover,
research, develop and commercialize products for any Indication, including
Indications in the same therapeutic areas as a Collaboration Program.


 


ARTICLE
3.


EXCLUSIVE
OPTION; MANUFACTURING


 


3.1.                            Option.  On a
Collaboration Program-by-Collaboration Program basis, on or before 5:00 p.m.
(Eastern time) on the [***] ([***]) day (each, an “Option
Deadline”) following GSK’s receipt of (i) written notice
from Isis regarding the completion of the first Phase 2 PoC Trial for the
applicable Development Candidate, and (ii) the applicable Phase 2 PoC Data
Package (such notice and package, a “PoC Trial Completion
Notice”), GSK will have the exclusive option to obtain from Isis
the license set forth in Section 4.1.1 below.  GSK will notify Isis whether GSK is
exercising its option to license the Collaboration Program by notifying Isis in
writing on or before the applicable Option Deadline.


 


3.1.1.                  If GSK does not notify Isis before the
applicable Option Deadline of GSK’s determination to license a Collaboration
Program, then GSK’s option under Section 3.1 with respect to such
Collaboration Program will expire and, subject to Section 5.10,
Isis will be free to develop and commercialize any Compounds that were included
in such Collaboration Program on its own or with a Third Party.  In such a case, except as specified in Section 5.10,
GSK will have no further rights to such Collaboration Program (including all
Compounds included therein) and the gene target to which such Development
Candidate is 


 


24

















 


directed will no longer be a Collaboration Target.  Following any expiration of an Option under
this Section 3.1.1, GSK will promptly transfer to Isis all data,
results and information related to the testing and studies in the Collaboration
Program in the possession of GSK and its contractors to the extent such data,
results and information were generated by or on behalf of GSK under this
Agreement.


 


3.1.2.                  If GSK notifies Isis in writing before
the applicable Option Deadline of GSK’s determination to exercise an Option for
a Collaboration Program, Isis will grant to GSK the license set forth in Section 4.1.1
for such Collaboration Program.


 


3.1.3.                  Early Exercise of an
Option. For the
avoidance of doubt, notwithstanding anything to the contrary in this Agreement,
GSK will have the right to exercise any Option prior to GSK’s receipt of a PoC
Trial Completion Notice by notifying Isis in writing of GSK’s good-faith intent
to exercise its Option for the applicable Collaboration Program. In such event,
Isis will promptly provide GSK the Phase 2 PoC Data Package, to the extent
available, for the applicable Collaboration Program. If, before the applicable
Option Deadline, GSK then notifies Isis that it is exercising its Option early
under this Section 3.1.3, Isis will grant to GSK the license under Section 4.1.1
for such Collaboration Program on the terms and conditions of this Agreement
(including, without limitation, the terms and conditions of ARTICLE 5).
In the event that GSK does not exercise such Option early under this Section 3.1.3,
such Collaboration Program will continue to be subject to exercise of an Option
until the applicable Option Deadline under Section 3.1.


 


3.2.                            HSR Compliance.


 


3.2.1.                  If either Party reasonably determines it
is required for the exercise of any Option, each Party will use commercially
reasonable efforts to satisfy any applicable requirements under HSR, and the
regulations promulgated thereunder, including by making an initial HSR filing
no later than five (5) days after GSK’s delivery of written notice of its
exercise of an Option, or upon such other timing as mutually agreed by the
Parties.


 


3.2.2.                  Each Party will cooperate with the other
Party in the prompt preparation, execution and filing of all documents that are
required or permitted to be filed pursuant to HSR, and to notify the other
Party upon receipt of any formal or informal requests for information from any
antitrust agency in connection with any filings under HSR.  Each Party will bear its own costs and expenses
with respect to performing its obligations under this Section 3.2
and complying with HSR.


 


3.2.3.                  No exercise of an Option will be
effective until the date (the “Option Exercise Effective
Date”) when either (a) the requirements described in this Section 3.2
have been satisfied and all applicable waiting periods (including any
extensions thereof) under HSR have expired or been terminated, or (b) GSK
delivers to Isis a legal opinion addressed to Isis from a nationally recognized
law firm that no HSR filings are required hereunder with respect to the
exercise of such Option.


 


3.3.                            Manufacturing.


 


3.3.1.                  Isis will Manufacture and supply API for
each Collaboration Program through [***]. Such API will be Manufactured with
systems, processes and procedures consistent with cGMP practices. The Parties
may discuss, without obligation, the continued Manufacture and supply of API
for Development Candidates after [***].


 


25

















 


3.3.2.                  Following the exercise of any Option
hereunder, GSK will notify Isis in writing of GSK’s good faith intention to use
a Third Party to Manufacture clinical supplies of API for any Licensed Compound(s) or
Licensed Products. Isis will have thirty (30) days from the receipt of such
notice to notify GSK in writing whether Isis desires to negotiate with GSK
regarding the Manufacture of the API for such Licensed Compound(s).  If Isis fails to respond to GSK’s notice
within such thirty (30) day period, or if Isis declines in writing to exercise
its right of first negotiation, then GSK will be free to use a Third Party to
Manufacture and supply the API for such Licensed Compound(s) and Isis
shall promptly transfer its Licensed Know-How to such Third Party pursuant to Section 4.2.1
solely for use by such Third Party to Manufacture API for such Licensed
Compound(s) for GSK. If Isis wishes to Manufacture the API for such
Licensed Compound(s), the Parties will negotiate in good faith the terms of a
manufacturing agreement regarding clinical supplies of such API.  If, despite good-faith negotiations, GSK and
Isis do not reach an agreement within ninety (90) days from Isis’ exercise of
its right of first negotiation, then GSK will be free to use a Third Party to
Manufacture and supply the API for such Licensed Compound(s) on terms,
which, when taken as a whole, are not more favorable than the terms last
offered to Isis by GSK.


 


ARTICLE
4.


LICENSE
GRANTS TO GSK; DEVELOPMENT AND DILIGENCE; FOLLOW-ON COMPOUNDS


 


4.1.                            License Grants to GSK.


 


4.1.1.                  Development and
Commercialization License. On a Collaboration Program-by-Collaboration Program
basis, subject to the terms and conditions of this Agreement, Isis hereby
grants to GSK a worldwide, exclusive, royalty-bearing, sublicensable (in
accordance with Section 4.1.2 below) license under the Licensed IP
to Manufacture, Develop, and Commercialize Licensed Compounds and Licensed
Products.


 


Notwithstanding the foregoing, (A) the licenses granted by Isis
under this Section 4.1.1 are only effective upon (i) compliance
with Section 3.2 above, and (ii) GSK’s exercise of any Option
or by operation of the applicable termination provisions of Section 9.3.1
or Section 12.4 wherein the effect of such provisions is the grant
of an exclusive license to GSK under this Section 4.1.1; and (B) with
respect to Isis’ [***] Programs, the license granted by Isis under this Section 4.1.1
will be limited to the [***] Field, subject to Section 2.1.2(d).


 


4.1.2.                  Sublicense Rights.


 


(a)           Subject to the terms and conditions of
this Agreement and at no additional costs to GSK, GSK will have the right to
grant to its Affiliates and/or Third Parties sublicenses under the licenses
granted under Section 4.1.1 above, in each case 


 


26

















 


solely to further the Development and/or Commercialization of a Licensed
Compound and/or Licensed Product; provided that
each such sublicense will (i) be subject to, and consistent with, the
applicable terms and conditions of this Agreement; and (ii) name Isis as
an intended third party beneficiary with the right to directly enforce the
applicable terms and conditions of this Agreement against such Affiliate or
Sublicensee. GSK will provide Isis with a redacted copy of any sublicense
granted pursuant to this Section 4.1.2 within thirty (30) days
after the execution thereof; provided such
redacted copy will at a minimum provide the information necessary for Isis to
determine GSK’s and such Sublicensee’s compliance with this Agreement.


 


(b)           Effect of Termination on
Sublicenses.  If this Agreement terminates for any reason,
any Sublicensee will, from the effective date of such termination,
automatically become a direct licensee of Isis with respect to the rights
originally sublicensed to the Sublicensee by GSK, and GSK agrees that it will
confirm the foregoing in writing at the request and for the benefit of Isis
and/or the Sublicensee; provided, however, that (i) such Sublicensee is not in breach of
its sublicense agreement, (ii) such Sublicensee agrees to comply with all
of the terms of this Agreement to the extent applicable from the rights
originally sublicensed to it by GSK, and (iii) such Sublicensee agrees to
pay directly to Isis such Sublicensee’s payments under this Agreement to the
extent applicable to the rights sublicensed to it by GSK.


 


4.1.3.                  No Implied Licenses.  All
rights in and to Licensed IP not expressly licensed to GSK hereunder or
pursuant to the operation of the relevant applicable express provisions of this
Agreement, and any other Patent Rights or Know-How of Isis or its Affiliates,
are hereby retained by Isis or its Affiliates. 
All rights in and to GSK Technology not expressly licensed to Isis under
Section 10.1 or pursuant to the operation of the relevant
applicable express provisions of this Agreement, and any other Patent Rights or
Know-How of GSK or its Affiliates, are hereby retained by GSK or its
Affiliates.  Except as expressly provided
in this Agreement, no Party will be deemed by estoppel or implication to have
granted the other Party any license or other right with respect to any
intellectual property of such Party.


 


4.1.4.                  License Conditions;
Limitations.  Subject to Section 5.11, any
license granted under Section 4.1.1 and the sublicense rights under
Section 4.1.2 are subject to and limited by (i) any applicable
Third Party Obligations, and (ii) the Prior Agreements, in each case to
the extent provisions of such obligations or agreements are specifically
disclosed to GSK in writing prior to GSK’s exercise of the applicable
Option.  Isis will disclose to GSK the
applicable Third Party Obligations each time (x) Isis provides GSK with a
Development Candidate Package under Section 1.4.2(c); and (y) Isis
provides GSK with a Phase 2 PoC Data Package under Section 3.1.


 


4.1.5.                  Trademarks for Licensed
Products.  If GSK has exercised its Option with respect
to a Collaboration Program hereunder, to the extent that (i) Isis owns any
trademark(s) which Isis used prior to the exercise of the Option, (ii) such
trademarks are specific to any Licensed Compound developed under such
Collaboration Program, and (iii) GSK 


 


27

















 


reasonably believes such trademark(s) would be reasonably
necessary or useful for the marketing and sale of such Licensed Compound or
related Licensed Product, then Isis will, upon GSK’s request and at GSK’s sole
cost and expense relating to such assignment, assign its rights and title to
such trademark(s) to GSK reasonably in advance of the First Commercial
Sale of such Licensed Products (but in no event prior to NDA Filing for such
Licensed Product). Other than the trademarks described above which are owned by
Isis prior to the exercise of an Option by GSK, GSK will be solely responsible
for developing, selecting, searching, registering and maintaining, and will be
the exclusive owner of, all trademarks, trade dress, logos, slogans, designs,
copyrights and domain names used on and/or in connection with any of the
Licensed Compounds and Licensed Products resulting from a Collaboration
Program.


 


4.1.6.                  New Licensed Know-How. 
During the Agreement Term, at no additional cost or expense to GSK, Isis
will provide all Licensed Know-How that has not previously been provided
hereunder for use solely in accordance with the licenses granted under Section 4.1.1.  Isis will provide such Licensed Know-How
promptly upon such Licensed Know-How coming under the control of Isis.


 


4.1.7.                  Subcontracting. 
Each Party will have the right to engage Third-Party subcontractors to
perform certain of its obligations under this Agreement; provided
that Isis will not have the right to subcontract, in whole or in
part, any activities to be performed by Isis under this Agreement if doing so
would be inconsistent with Isis’ normal business practices for its own programs
as of the Effective Date.  Any
subcontractor to be engaged by a Party to perform a Party’s obligations set
forth in the Agreement will meet the qualifications typically required by such
Party for the performance of work similar in scope and complexity to the
subcontracted activity.  Notwithstanding
the preceding, any Party engaging a subcontractor hereunder (including, without
limitation, for the performance of clinical trials) will remain responsible and
obligated for such activities and will in all cases retain or obtain exclusive
Control (i.e., either ownership or an exclusive, sublicenseable license or an
option to obtain such a license) of any and all intellectual property created
by (or used with the relevant Party’s permission by) such subcontractor
directly related to such subcontracted activity, at the sole cost and expense
of the Party engaging such subcontractor, and any such costs and expenses will
be included in Isis Supported Pass-Through Costs or GSK Supported Pass-Through
Costs, as the case may be.  To the extent
that such exclusive Control of rights cannot be obtained by Isis with respect
to any intellectual property from any such subcontractor of Isis, prior to
entering into any such arrangement with any such subcontractor, Isis will bring
such matter to GSK in writing in a timely fashion in order to seek the prior
written consent from GSK to enter into such an arrangement, such consent not to
be unreasonably withheld.  For clarity,
this Section 4.1.7 will not apply to restrict or otherwise limit
the rights of GSK to use a subcontractor after the exercise of its Option or
the acquisition of exclusive rights to the Collaboration Compounds of a
Collaboration Program pursuant to the express provisions of Section 9.3.1
and Section 12.4 for the relevant Collaboration Program.


 


28

















 


4.2.                            Technology Transfer after
Exercise by GSK of an Option.


 


4.2.1.                  Generally. 
Isis will promptly, but no later than [***] ([***]) [***] after GSK
exercises its Option for a Collaboration Program hereunder, deliver to GSK
and/or GSK’s Third-Party designee solely for use by such Third Party to
Manufacture API for such Licensed Compound(s) for GSK, if Isis does not
elect to Manufacture the API for GSK under Section 3.3.2, [***],
all Licensed Know-How in Isis’ Control relating to the Compounds included in
such Collaboration Program, including, but not limited to, (a) information
regarding the bulk drug substance and methods of manufacturing the same,
including bulk and final product manufacturing processes, manufacturing data,
batch records, vendor information and validation documentation, which is
necessary or useful for the exercise by GSK of the Manufacturing rights granted
under Section 4.1.1; (b) pre-clinical and clinical data and
results (including pharmacology, toxicology, emulation and stability studies),
adverse event data, protocol results and analytical methodologies; (c) copies
of patent applications and patents included within Isis Product-Specific
Patents and other relevant patent information; and (d) regulatory filings
(including all relevant INDs and Approvals), regulatory documentation,
regulatory correspondence, and applicable reference standards relating to the
applicable Licensed Compounds to the extent permitted under applicable law, provided, that, at GSK’s
reasonable discretion if no such transfer is reasonably practical, then Isis
will grant to GSK a right of reference to such regulatory filings; and (e) pursuant
to a mutually agreed supply agreement, bulk drug substance or other materials,
including drug substance, drug product and intermediate stocks, reference
standards and analytical specification and testing methods used to Manufacture
the applicable Licensed Compounds, as well as any then-existing supplies of
such materials, which are deemed suitable by GSK, of such Licensed Compounds,
including Back-Up Compounds and other Licensed Compounds under such
Collaboration Program. Further, Isis shall, in good faith and [***], provide up
to [***] ([***]) hours of support to GSK, including, but not limited to, its
internal resource, to enable GSK to successfully manufacture at least one (1) post-technology
transfer demonstration batch of Licensed Product.  If GSK desires to receive additional support
from Isis beyond such initial [***] ([***]) hours, GSK will pay Isis to provide
such assistance at the FTE Rate.  All
information should be supplied to GSK in electronic format to the extent
possible.  Without limiting the
foregoing, Isis will use Commercially Reasonable Efforts to perform the
transfer of such information and materials to GSK in an orderly manner, without
undue interruption of Isis’ business operations and GSK’s Development of
Licensed Compounds and related Licensed Products hereunder.  Upon delivery of such information and
materials to GSK, GSK will use Commercially Reasonable Efforts to promptly
implement such information and materials into its Development and
Commercialization activities with respect to such Licensed Compounds and
related Licensed Products hereunder. For the avoidance of doubt, the obligation
on Isis to deliver to GSK all Licensed Know-How and other information in
accordance with this Section 4.2.1 will include the use of
Commercially Reasonable Efforts to procure any Licensed Know-How in the
possession of any Third Party subcontractor engaged by Isis as a subcontractor
in the performance of the Collaboration Program.


 


4.2.2.                  Additional Services. 
In the event that GSK reasonably requests Isis to provide GSK with any
materials or services beyond those set forth in Section 4.2.1, such
materials and/or services may be scheduled and provided by Isis to GSK on such
terms and conditions as may be mutually agreed between the Parties at the time
of any such request, if the Parties mutually desire to engage in the transfer
or provision of such additional materials or services.


 


29

















 


4.3.                            GSK Diligence.  As soon as
practicable after the exercise by GSK of an Option for a Collaboration Program,
GSK will use Commercially Reasonable Efforts to promptly commence and pursue a
program of ongoing Development and Commercialization for the Licensed Compound
and related Licensed Product under such Collaboration Program, in accordance
with GSK’s diligence obligations set forth below.  GSK will be solely responsible for all Development
and Commercialization activities, and for all costs and expenses associated
therewith, with respect to the Development, Manufacture and Commercialization
of the Licensed Compound and related Licensed Product of a Collaboration
Program, following the exercise of its Option for such Collaboration Program,
and will exercise Commercially Reasonable Efforts in Developing and
Commercializing such Licensed Product for each Collaboration Program for which
GSK exercises the Option.


 


4.3.1.                  Specific GSK Responsibilities.  Without
limiting any of the foregoing, following the exercise of an Option for a
Collaboration Program hereunder, GSK will use Commercially Reasonable Efforts
to:


 


(a)           conduct all Pre-Clinical Studies and
Clinical Studies on the Licensed Compound and related Licensed Product as
deemed necessary or desirable by GSK or any applicable Regulatory Authority,
but at a minimum consistent with the level and type of activities GSK would
reasonably conduct for its other compounds or products of similar market
potential at similar stages in development or product life;


 


(b)           conduct additional formulation
development of the Licensed Compound and related Licensed Product as and if
deemed necessary or appropriate by GSK;


 


(c)                                  provide to Isis reasonable progress
updates and product plans in accordance with Section 4.3.2 and Section 4.3.3
below on the status of GSK’s Development and Commercialization efforts with
respect to the Licensed Compounds and related Licensed Products;


 


(d)           prepare and file all regulatory filings
for the Licensed Compound or related Licensed Product, including all INDs, NDAs
and other filings;


 


(e)                                  except as provided in Section 3.3.2,
Manufacture or have Manufactured (including process development and scale up)
bulk drug substance or drug product material with respect to the Licensed
Compound and related Licensed Product for ongoing Development and
Commercialization requirements, consistent with GSK’s internal practices and
all Applicable Laws;


 


(f)            own and maintain INDs, NDAs, Approvals
and other regulatory filings and approvals, and brands and trademarks for any
resulting Licensed Product;


 


(g)                                 maintain a safety database with respect
to the Licensed Compound and related Licensed Product Developed and
Commercialized by GSK, and report all adverse drug reaction experiences related
to such Licensed Compound and Licensed 


 


30

















 


Product in connection with the activities of GSK under this Agreement
to the appropriate Regulatory Authorities in which the Licensed Compound and
related Licensed Product are being Developed and Commercialized, in accordance
with Applicable Laws of the relevant countries and Regulatory Authorities and
in accordance with GSK’s internal policies and, without limiting Section 4.4,
GSK will provide Isis with such safety-related information as required under Section 4.4;
and


 


(h)           conduct, at GSK’s sole expense,
Commercialization activities in connection with the marketing, promotion, and
sale of such Licensed Product.


 


4.3.2.                  Development Status Reports
by GSK. After
GSK exercises its Option for a Collaboration Program hereunder, GSK agrees to
keep Isis informed with respect to activities and progress with the Development
of the Licensed Compound and related Licensed Product, and agrees to provide to
Isis every six (6) months a written summary of such activities and
progress. Each such report will contain the same summary information of all key
strategic decisions and management approvals regarding a Licensed Compound and
related Licensed Product as presented in the report provided to the internal
GSK committee primarily responsible for overseeing the Development of the
particular Licensed Compound and related Licensed Product; provided
that GSK may redact all unrelated information and all information belonging to
a Third Party that is the subject of an agreement between GSK and such Third
Party that prevents GSK from disclosing such information to Isis.


 


4.3.3.                  Product Development Plans;
Integrated Product Plans.  For each Licensed Product Developed by GSK
under this Agreement, GSK will prepare a Development plan outlining key aspects
of the Development of such Licensed Product through Approval. GSK will prepare
each Development plan at the same time and containing information consistent
with GSK’s Development plans for its similar products at similar stages of
development (each a “Product Development Plan”).  In addition, GSK will prepare a global
integrated Licensed Product plan outlining the key aspects of market launch and
Commercialization (the “Integrated Product Plan”
or “IPP”).  GSK will prepare each IPP at the same time
and containing information and target markets as customarily contained in GSK’s
Commercialization plans for its similar products at similar stages of development.
Once GSK has prepared such plans, GSK will update each Product Development Plan
and IPP consistent with GSK’s standard practice and provide such update to Isis
annually.  GSK and Isis will meet on a
yearly basis to discuss the draft of each Product Development Plan and IPP and
GSK will consider, in its sole discretion, any proposals and comments made by
Isis for incorporation in the final Product Development Plan or IPP (as the
case may be).  Notwithstanding the
foregoing, following the closing of any Change of Control with respect to Isis,
this Section 4.3.3 will no longer apply to GSK.


 


4.3.4.                  Class Generic Claims.  To the extent
GSK intends to make any claims in a Licensed Product label that are class
generic to ASOs, GSK will provide such claims to Isis in advance and will [***]
any proposals and comments made by Isis.


 


31

















 


4.4.                            Safety Database.


 


4.4.1.                  Isis maintains a database that includes
information regarding the tolerability of its drug compounds, individually and
as a class, including information discovered during pre-clinical and clinical
development (the “Isis Database”). In an effort
to maximize understanding of the safety profile and pharmacokinetics of Isis
compounds, after GSK exercises its Option for a Collaboration Program
hereunder, GSK will cooperate in connection with populating the Isis Database.
To the extent collected by GSK and in the form in which GSK uses/stores such
information for its own purposes, GSK will provide Isis with information
concerning toxicology, pharmacokinetics, safety pharmacology study(ies),
serious adverse events and other safety information related to each Licensed
Compound and Licensed Product as soon as practicable following the date such
information is available to GSK (but not later than thirty (30) days after GSK’s
receipt of such information). In connection with any reported serious adverse
event, GSK will provide Isis all serious adverse event reports, including
initial, interim, follow-up, amended, and final reports.  In addition, with respect to each Licensed
Compound and Licensed Product, GSK will provide Isis with copies of annual
safety updates filed with each IND and the safety sections of any final
Clinical Study reports within thirty (30) days following the date such
information is filed or is available to GSK, as applicable. Furthermore, GSK
will promptly provide Isis with any supporting data and answer any follow-up
questions reasonably requested by Isis. All such information disclosed by GSK
to Isis will be GSK Confidential Information; provided, however, that Isis may disclose any such GSK Confidential
Information to (a) Isis’ other partners pursuant to Section 4.4.2
below if such information is regarding class generic properties of ASOs, and/or
(b) any Third Party, in each case, so long as Isis does not disclose the
identity of the Licensed Compound, Licensed Product, or GSK. GSK will deliver
all such information to Isis for the Isis Database to Isis Pharmaceuticals, Inc.,
1896 Rutherford Road, Carlsbad, California 92008, Attention: Chief Medical
Officer (or to such other address/contact designated in writing by Isis).


 


4.4.2.                  From time to time, Isis utilizes the
information in the Isis Database to conduct analyses to keep Isis and its
partners informed regarding class generic properties of ASOs, including with
respect to safety.  As such, if and when
Isis identifies safety or other related issues that may be relevant to a
Licensed Compound and Licensed Product (including any potential class-related
toxicity), Isis will promptly inform GSK of such issues and, if requested,
provide the data supporting Isis’ conclusions.


 


ARTICLE
5.


FINANCIAL
PROVISIONS


 


5.1.                            Overview.  The specific
amount of each payment GSK is required to make under this ARTICLE 5 will
depend on whether the Collaboration Program is a Rare Disease Program, a [***]
Program or an ID/Additional Program; and additionally with respect to the [***]
Program, whether the payment is triggered by the first Indication, second
Indication, and/or the Different Compound-Expanded [***] Program.  As such, the provisions in this ARTICLE 5
contain tables that specify the amount of each payment applicable to each type
of Collaboration Program, and with respect to [***] Programs and ID/Additional
Programs, whether such milestone is achieved in the first or second
Indication.  For purposes of clarity,
each [***] that GSK elects to continue under Section 


 


32

















 


1.6.1 will be counted as a separate and distinct Collaboration
Program under this Agreement, such that by way of example and not limitation,
if GSK exercised its Option for [***], GSK would pay Isis [***] ([***])
separate $[***] Option exercise fees under Column 1 of Table 1 in
Section 5.4, and Isis would be eligible to receive [***] ([***])
[***] of milestone payments (totaling $[***] for each Collaboration Program,
and $[***] in the aggregate) under Column 1 of Table 2 in Section 5.5.  For purposes of clarity, the Different
Compound-Expanded [***] Program will be counted as a separate and distinct
Collaboration Program from the Base [***] Program under Section 5.4
and Section 5.5, such that by way of example and not limitation,
GSK would pay Isis [***] ([***]) separate $[***] Option exercise fees under Column
2 of Table 1 in Section 5.4, Isis would be eligible to
receive [***] ([***]) [***] of milestone payments for the first Indication
(totaling $[***] for each Collaboration Program, and $[***] in the aggregate)
under Column 2 of Table 2 in Section 5.5 and
[***]([***]) [***] of milestone payments for the second Indication (totaling
$[***] for each Collaboration Program, and $[***] in the aggregate) under Column
3 of Table 2 in Section 5.5.  The Base [***] Program is a part of the Same
Compound-Expanded [***] Program, and GSK’s exercise of its option to expand the
[***] Program to include the Same Compound-Expanded [***] Program pursuant to Section 1.6.2(d) 
will not entitle Isis to receive additional sets of payments under Section 5.4
and Section 5.5; provided, however,
that if GSK exercises such expansion option after the [***] stage under Section 1.6.2(e),
GSK will pay the first Indication milestone payments under Column 2 of Table
2 in Section 5.5 for both the Base [***] Field and the Expanded
[***] Field for Development Milestone Events after [***] but through and
including the first [***] (totaling $[***] for the Base [***] Program and
$[***] for the Same Compound-Expanded [***] Program, and $[***] in the
aggregate) and will thereafter resume milestone payments in accordance with Table
2 of Section 5.5 for first and second Indications, as
applicable.  The purpose of this Section 5.1
is to provide examples of certain actual payments Isis is eligible to receive
hereunder and a high-level overview of the financial terms under this
Agreement, and therefore this Section 5.1 is qualified in its
entirety by the more detailed financial provisions in the remainder of this ARTICLE
5.


 


5.2.                            Up-Front Payment. In partial consideration for GSK’s
Options hereunder, within five (5) Business Days following the Effective
Date and receipt of an invoice by GSK, GSK will pay Isis a technology access
fee equal to $35,000,000.


 


5.3.                            Other Payments.


 


5.3.1.                  If GSK elects to add a sixth (6th) Collaboration Program to this Agreement under Section 1.4.1,
then GSK will pay Isis the $[***] payment specified in Section 1.4.1.


 


5.3.2.                  If GSK elects to pursue [***] ([***])
[***] under Section 1.6.1, then GSK will pay Isis a $[***] payment
as further specified in Section 1.6.1.


 


5.3.3.                  If GSK elects to expand the Base [***]
Program to include the Same Compound-Expanded [***] Program pursuant to Section 1.6.2(d),
then GSK will pay Isis the milestone payments in accordance with Section 1.6.2(d).  If GSK elects to pursue the Same
Compound-Expanded [***] Program pursuant to Section 1.6.2(e), then
GSK will pay Isis the $[***] payment specified in Section 1.6.2(e).  If GSK elects to pursue the Different
Compound-Expanded [***] Program pursuant to Section 1.6.2(f), then
GSK will pay Isis the $[***] payment specified in Section 1.6.2(f).


 


33
















 


5.4.                            Option Exercise Fees. 
On an Option-by-Option basis, upon the exercise by GSK of an Option for
a given Collaboration Program in accordance with Section 3.1, GSK
will pay to Isis an Option exercise fee in accordance with Table 1 below
(as determined by the type of Collaboration Program for which GSK so exercised
its Option) within [***] ([***]) days of receipt by GSK of an invoice sent from
Isis on or after the Option exercise becomes effective pursuant to Section 3.2.  For purposes of clarification, except as set
forth in Section 1.6.2(f) for any Option exercised by GSK for
a Different Compound-Expanded [***] Program, once GSK has paid the Option
exercise fee under this Section 5.4 in connection with the exercise
of an Option, then GSK will not be required to pay a second exercise fee for
any Follow-On Compound, Back-Up Compound or other Licensed Compound under the
same Collaboration Program Developed and Commercialized by GSK.


 


Table
1


 


	
   

  	
   

  	
  Column 1

  	
   

  	
  Column 2

  	
   

  	
  Column 3

  	
   

  
	
   

  	
   

  	
  Each
  Rare

  Disease

  Program

  	
   

  	
  Each [***] Program

  	
   

  	
  Each

  ID/Additional

  Program

  	
   

  
	
  Option Exercise Fee

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  	
  $

  	
  [***]

  	
   

  
											



 


5.5.                            Milestone Payments for
Achievement of Development Milestone Events for Rare Disease Programs or [***]
Programs.


 


5.5.1.                  Milestone Payments for
First Achievement of Development Milestone Event. On a Collaboration
Program-by-Collaboration Program basis in either a Rare Disease Program or a
[***] Program, GSK will pay to Isis the applicable one-time milestone payments
as set forth in Table 2 below (as determined by the type of
Collaboration Program to achieve such event, and with respect to the [***]
Programs, whether the first Indication or second Indication achieved such
event, subject to Section 1.6.2) after a Licensed Product that is
part of such Collaboration Program first achieves the events (each, a “Development Milestone Event”)
listed in Table 2 by or on behalf of GSK or its Affiliates or
Sublicensees.


 


34

















 


Table
2


 


	
  Development Milestone

  	
   

  	
  Column 1

  	
   

  	
  Column 2

  	
   

  	
  Column 3

  	
   

  
	
  Events for a Licensed

  Product

  	
   

  	
  Each Rare Disease

  Program

  	
   

  	
  Each [***] Program

  (1st Indication)

  	
   

  	
  Each [***] Program

  (2nd Indication)

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Total Development Milestone Payments per Collaboration
  Program

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 


35

















 


5.5.2.                  Development Milestone
Payments for Follow-On Compounds.  For each
Collaboration Program that is either a Rare Disease Program or a [***] Program
for which GSK has requested a Follow-On Compound under Section 1.4.5,
(i) upon the designation of a Follow-On Compound as a Development
Candidate, GSK will pay to Isis a milestone payment equal to [***] ($[***]),
and (ii) when such Follow-On Compound first achieves a listed Development
Milestone Event, by or on behalf of GSK or its Affiliates or Sublicensees,
[***] percent ([***]%) of the milestone payments for such Development Milestone
Event set forth in Table 2 above if such Follow-On Compound is the first
Licensed Product under the applicable Option to achieve such Development
Milestone Event, or in amounts that are [***] percent ([***]%) of the
applicable milestone payments for such Development Milestone Event set forth in
Table 2 above if such Follow-On Compound is not the first Licensed
Product under the applicable Option to achieve such Development Milestone
Event.


 


5.6.                            Milestone Payments for
Achievement of Development and Regulatory Milestone Events by ID/Additional
Program.


 


5.6.1.                  Milestone Payments for
First Achievement of Milestone Event. On a Collaboration Program-by-Collaboration Program
basis and with respect to the ID/Additional Program, GSK will pay to Isis the
applicable one-time milestone payments as set forth in Table 3 below (as
determined by whether the first or second Indication achieves such event) after
a Licensed Product that is part of such Collaboration Program first achieves
the Development Milestone Event listed in Table 3, by or on behalf of
GSK or its Affiliates or Sublicensees. 
For clarity, except as otherwise set forth in the footnotes to Table
3 below, GSK will be required to make a milestone payment only if the
corresponding Development Milestone Event has actually occurred.  For example, if Isis initiates a [***] for a
second Indication without the need to conduct a [***], then Isis will not be
entitled to receive the $[***] milestone payment for the [***].


 


36

















 


GSK Comments (03/15/10)


For Discussion Purpose Only


 


Table 3


 


	
  Development Milestone

  Events for a Licensed

  	
   

  	
  ID /Additional Programs

  – 1st Indication

  	
   

  	
  ID /Additional Programs –

  2nd Indication

  	
   

  
	
  Product

  	
   

  	
  Column 1

  	
   

  	
  Column 2

  	
   

  
	
  [***]†♣

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]♣

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]††

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]†††

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  [***]†††[***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Total Development Milestone Payments per Collaboration
  Program

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 






† For the ID/Additional
Program for [***], the “[***]”
Development Milestone Event (i) occurs when such Development Milestone
Event is achieved in a [***] and (ii) shall also be deemed to have
occurred when the “[***]” Development
Milestone Event is achieved for the same Collaboration Program. For the
ID/Additional Program that is the 6th Collaboration Program, the “[***]” Development Milestone Event (i) occurs when such
Development Milestone Event is achieved in the [***] agreed to by the Parties
and (ii) it shall also be deemed to have occurred when the “[***]” Development Milestone Event is achieved for the same
Collaboration Program.


 


♣ For the ID/Additional Program for [***], if
the [***] is completed and [***] has not been achieved but GSK desires to
continue Development under such ID/Additional Program, then GSK may waive the
condition that [***] be achieved in such [***] and the “[***]”
Development Milestone Event for such ID/Additional Program will be deemed to
have been achieved.


 


37

















 


†† For clarity with
respect to this Milestone Event, “[***]” by the
applicable Regulatory Authority in [***] (or any other [***] such as [***] or
the [***]) of the equivalent of [***] in [***] (or any other [***] such as
[***] or the [***]) will satisfy the requirements for achievement of this
Development Milestone Event.


 


††† For clarity with
respect to this Milestone Event, “[***]” by the
applicable Regulatory Authority in [***] (or any other [***] such as [***] or
the [***]) of the equivalent of [***] in [***] (or any other [***] such as
[***] or the [***]) will satisfy the requirements for achievement of this
Development Milestone Event.


 


5.6.2.                  Milestone Payments for
Follow-On Compounds in ID/Additional Programs. 
For each
Collaboration Program that is an ID/Additional Program for which GSK has
requested a Follow-On Compound under Section 1.4.5, (i) upon
the designation of a Follow-On Compound as a Development Candidate, GSK will
pay to Isis a milestone payment equal to [***] ($[***]), and (ii) when
such Follow-On Compound first achieves a listed Milestone Event, by or on
behalf of GSK or its Affiliates or Sublicensees, [***] percent ([***]%) of the
milestone payments for such Development Milestone Event set forth in Table 3
above if such Follow-On Compound is the first Licensed Product under the
applicable Option to achieve such Development Milestone Event, or in amounts
that are [***] percent ([***]%) of the applicable milestone payments for such
Development Milestone Event set forth in Table 3 above if such Follow-On
Compound is not the first Licensed Product under the applicable Option to
achieve such Development Milestone Event.


 


5.7.                            Milestone Payments for
Achievement of Sales Milestone Events.


 


5.7.1.                  Milestone Payments for
First Achievement of Sales Milestone Event. On a Collaboration Program-by-Collaboration Program
basis, GSK will pay to Isis the applicable one-time milestone payments as set
forth in Table 4 below (as determined by the type of Collaboration
Program to achieve such event) after a Licensed Product that is part of such
Collaboration Program first achieves the listed events (each, a “Sales Milestone Event”), by or on
behalf of GSK or its Affiliates or Sublicensees.


 


38

















 


Table
4


 


	
  Sales Milestones for each Licensed
  Product

  	
   

  	
  Each Rare Disease

  Program

  	
   

  	
  Each ID/ Additional

  Program

  	
   

  
	
  $[***] in worldwide Annual Net Sales

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  $[***] in worldwide Annual Net Sales

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  $[***] in worldwide Annual Net Sales

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  
	
  Total Sales Milestone Payments per Collaboration Program

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  



 


5.8.                            Limitations on Milestone
Payments; Notice.


 


5.8.1.                  Except as expressly set forth in Section 5.5.2,
Section 5.6.2 and Section 1.6.2, each milestone set
forth in Table 2, Table 3 and Table 4 above will be paid
only once per Collaboration Program upon the first achievement of the Milestone
Event, regardless of the number of Licensed Compounds, Follow-On Compounds or
Licensed Products resulting under the Collaboration Program. So long as GSK has
paid Isis the [***] milestone payment for the first Development Candidate in a
Collaboration Program, GSK will not be required to pay Isis an additional [***]
milestone payment under Table 2 or Table 3, as applicable, for a
Back-Up Compound under the same Collaboration Program.  If GSK is reimbursing Isis for all costs and
expenses of advancing a Back-Up Compound beyond the stage of Development
Candidate designation as described in Section 1.7.3 above, no
milestone payments will be payable under Table 2 or Table 3, as
applicable, with respect to such Back-Up Compound unless GSK later ceases to
actively Develop the Development Candidate under the applicable Collaboration
Program, in which case, if GSK or its Affiliate or Sublicensee achieves a
Milestone Event with respect to such Back-Up Compound, GSK will make the
applicable milestone payment only if such milestone payment has not been made
by GSK to Isis with respect to the Development Candidate already.


 


5.8.2.                  Each time a Milestone Event is achieved
under this ARTICLE 5, GSK will send Isis, or Isis will send GSK, as the
case may be, a written notice thereof promptly (but in any event no later than
ten (10) Business Days) following the date of achievement of such
Milestone Event and such payment will be due within [***] ([***]) days of
receipt by GSK of an invoice sent from Isis.


 


5.9.                            Royalty Payments to Isis.


 


5.9.1.                  GSK Patent Royalty. As partial consideration for the rights
granted to GSK hereunder, GSK will pay to Isis royalties on Annual Net Sales of
each Licensed Product sold by GSK, its Affiliates or Sublicensees, on a
country-by-country basis and Licensed Product-by-Licensed Product basis, in the
countries in which either (i) there is a Valid Claim within [***] Patents
(or the foreign equivalent or counterpart of such [***] Patents) that is either
licensed or assigned by Isis to GSK that Covers the [***] such Licensed Product
or (ii) the data exclusivity period conferred by the applicable Regulatory
Authority in such country with respect to such Licensed Product (such as in the
case of an orphan drug), in each case in the amounts as follows (the “GSK Patent Royalty”). For purposes
of clarification, 


 


39

















 


royalties are payable on Follow-On Products in the
same manner as they are payable for Licensed Products containing the lead
Development Candidates except that royalties on Licensed Products containing a
Follow-On Compound will be paid at [***] percent ([***]%) of the rates set
forth in Table 5 below otherwise applicable for Licensed Products; provided, however, if the Follow-On Product is the first
Licensed Product to achieve First Commercial Sale for the applicable license
Option, then GSK will pay [***] percent ([***]%) of the royalty rates set forth
in Table 5 below for such Licensed Product, and any subsequent Licensed
Products sold pursuant to the same license Option will be treated as Follow-On
Products subject to the reduced royalty rate described in this Section 5.9.1.


 


(a)                                  Subject to the provisions of this Section 5.9.1
and Section 5.9.2, GSK will pay to Isis the royalties at the
percentages as described in Table 5 below:


 


Table 5


 


	
  Annual Net Sales of each Licensed
  Product Worldwide

  	
   

  	
  Royalty Rate

  	
   

  
	
  for
  the portion up to and including $[***]

  	
   

  	
  [***]

  	
  %

  
	
  for
  the portion above $[***] and up to and including $[***]

  	
   

  	
  [***]

  	
  %

  
	
  for
  the portion above $[***]

  	
   

  	
  [***]

  	
  %

  



 


(b)           In the event any Combination Products are
sold, royalties on such Combination Products will be calculated pursuant to the
definition of “Net Sales” and “Combination Products” set forth in APPENDIX 1 to this
Agreement.


 


(c)           The royalty rates in Table 5 above
are incremental rates, which apply only for the respective increment of
worldwide Annual Net Sales described in the Annual Net Sales column.  Thus, once a total worldwide Annual Net Sales
figure is achieved for the Calendar Year, the royalties owed on any lower-tier
portion of Annual Net Sales are not adjusted up to the higher-tier rate and the
higher tier rate will only apply to the portion of the Annual Net Sales that
are within the higher tier Annual Net Sales.


 


5.9.2.                  Application of Royalty
Rates.  All royalties set forth under Section 5.9.1
are subject to the provisions of this Section 5.9.2, and will be
payable as follows, on a Licensed Product-by-Licensed Product and
country-by-country basis:


 


(a)           Patent Royalty Term. GSK’s obligation to pay the GSK Patent
Royalty above with respect to a Licensed Product and/or Combination Product
will continue on a country-by-country and Licensed Product-by-Licensed Product
basis from the date of First Commercial Sale of the Licensed Product until the
later of the date of expiration of (i) the last Valid Claim within the
[***] Patents (or the foreign equivalent or counterpart of such [***] Patents)
that are either licensed or assigned 


 


40

















 


by Isis to GSK under this Agreement that Covers the
[***] such Licensed Product sold in such country or (ii) the data
exclusivity period conferred by the applicable Regulatory Authority in such
country with respect to such Licensed Product (such as in the case of an orphan
drug).


 


(b)           Know-How Royalty. On a country-by-country and Licensed
Product-by-Licensed Product basis, if GSK is not required to pay the GSK Patent
Royalty, at any time during the period within [***] ([***]) years after the
date of First Commercial Sale of such Licensed Product in such country, GSK
will pay Isis a royalty at the rate of [***] percent ([***]%) of the GSK Patent
Royalty rates as described in Section 5.9.1 above (the “GSK Know-How Royalty”); provided, however, if the Licensed Product is Covered by
Third Party technology that is sublicensed by Isis to GSK under this Agreement
and within the Licensed IP that bears a royalty or other financial obligation
to such Third Party (including but not limited to any Isis Supported
Pass-Through Costs) extending beyond such [***] ([***]) year term (such as
manufacturing or formulation technology), GSK will, subject to Section 5.9.2(d) below,
pay Isis a continuing royalty sufficient to cover Isis’ obligations under such
Third Party license or cease using such Third Party technology.


 


(c)                                  Reduction of Royalty for
Competition from Generic Products.  On a
country-by-country and Licensed Product-by-Licensed Product basis, if at any
time during the Agreement Term one or more Third Parties are selling one or
more Generic Products during the applicable Calendar Quarter, and such Generic
Products taken in the aggregate have a market share (measured in number of
prescriptions with the numerator of such fractional share being the Generic
Products taken in the aggregate, and the denominator being the total of the
Generic Products taken in the aggregate plus the Licensed Products taken in the
aggregate, as provided by IMS) in such country of at least [***] percent
([***]%), then, subject to Section 5.9.2(d) below, GSK’s
obligation to pay royalties to Isis on Net Sales of the relevant Licensed
Products in such country will be reduced to the amount which is [***] percent
([***]%) of the otherwise applicable GSK Patent Royalty rate under Section 5.9.1(a).


 


(d)           Limitation on Aggregate
Reduction for GSK Royalties. Notwithstanding anything in this Agreement to the
contrary, on a Collaboration Program-by-Collaboration Program basis, in no
event will Isis receive royalties for Annual Net Sales of Licensed Products
sold by GSK or its Affiliates or Sublicensees, with respect to any Calendar
Quarter, less than the sum of the Isis Supported Pass-Through Costs; provided
such sum of the Isis Supported Pass-Through Costs is less than [***] percent
([***]%) of the Annual Net Sales of Licensed Products sold by GSK or its
Affiliates or Sublicensees.


 


5.10.                     Reverse Royalty Payments
to GSK for Discontinued Products.


 


5.10.1.           Reverse Royalty for
Discontinued Products.  In the event that Isis or any of its
Affiliates or Sublicensees Develops and Commercializes any Discontinued Product
for which GSK has paid Isis the applicable [***] milestone payment, Isis will
pay the following royalty payments to GSK set forth in Table 6 below,
following the First Commercial Sale of a 


 


41

















 


Discontinued Product by Isis or its Affiliates or
Sublicensees, on a country-by-country basis and Discontinued
Product-by-Discontinued Product basis, for worldwide Annual Net Sales of all
Discontinued Products within the relevant Collaboration Program (“Reverse  Royalties”) as follows:


 


Table 6


 


	
  Development/Regulatory
  Status of Discontinued

  Product at time of reversion under this

  Agreement

  	
   

  	
  Applicable Royalty Rate on worldwide

  Annual Net Sales of Discontinued Product

  	
   

  
	
  Discontinued
  Products for which GSK has paid Isis the applicable [***] milestone payment

  	
   

  	
  [***]

  	
  %

  
	
  Discontinued
  Products for which GSK has (i) [***], and
  (ii) paid Isis the applicable [***] milestone payment

  	
   

  	
  [***]

  	
  %

  
	
  [***]

  	
   

  	
  [***]

  	
  %

  
	
  [***]

  	
   

  	
  [***]

  	
  %

  
	
  [***]

  	
   

  	
  [***]

  	
  %

  



 


5.10.2.           Applicable Royalty
Provisions.  In addition to this Section 5.10,
the definition of Net Sales in APPENDIX 1 and the other provisions
contained in this ARTICLE 5 governing payment of royalties from GSK to
Isis will govern the payment of royalties from Isis to GSK under this Section 5.10,
mutatis mutandis, including, without
limitation, the provisions of Sections 5.9.2(a), 5.12, 5.13,
5.14, and 5.15.


 


5.11.                     Third Party Payment
Obligations.


 


5.11.1.           Isis In-License Agreements.


 


(a)           Certain of the Licensed IP Controlled by
Isis as of the Effective Date and during the Collaboration Term that are
licensed to GSK under Section 4.1.1 are in-licensed or were
acquired by Isis under agreements with Third Party licensors or sellers (such
license or purchase agreements being the “Isis In-License Agreements”),
and certain milestone and/or royalty payments may become payable by Isis to
such Third Party under Isis In-License Agreements based on the Development and
Commercialization of a Licensed Compound or Licensed Product by GSK under this
Agreement.  SCHEDULE 5.11.1 sets
forth a list of Isis In-License Agreements related to Collaboration Programs
existing as of the Effective Date.  The
Parties acknowledge that whether a milestone and/or royalty payment becomes
payable by Isis to such Third Party licensor depends on the terms and
conditions of the Isis In-License Agreement.


 


(b)           Isis will be responsible for paying 100%
of the Isis Supported Pass-Through Costs arising under any Isis In-License
Agreements as they apply to any Licensed Compound or Licensed Product.


 


42

















 


(c)           GSK will be responsible for paying Isis
100% of the GSK Supported Pass-Through Costs arising under any Isis In-License
Agreements as they apply to any Licensed Compound or Licensed Product.


 


5.11.2.           Platform Blocking IP
In-License Agreements.  If GSK provides Isis with
written notice of GSK’s reasonable determination that a license to Platform
Blocking IP is necessary to Develop and/or Commercialize a particular Licensed
Product, then Isis will have the first right to negotiate with and obtain such
a license from such Third Party.  After
obtaining such a Third Party license, Isis will include such Platform Blocking
IP in any applicable license grant to GSK under Section 4.1.1 for
such Licensed Product, and any financial obligations under such Third Party
agreement will be paid solely by Isis as Isis-Supported Pass-Through
Costs.  If, however, Isis elects not to
obtain such a license to such Third Party intellectual property, Isis will so
notify GSK, and GSK may obtain such Third Party license and GSK may offset
[***] percent ([***]%) of the payments applicable to such Licensed Product paid
by GSK under such Third Party license against any milestone payments and Patent
Royalty payments due to Isis under Section 5.5.1,  Section 5.6.1
and/or Section 5.9.1 of this Agreement for such Licensed Product; provided, that in no event will Isis receive, with respect
to any Calendar Quarter, less than the minimum royalty amount for such Licensed
Product as stated in Section 5.9.2(d).  GSK will have the right to carry forward and
apply in future Calendar Quarters or Years any such unused offset to which GSK
is entitled for such Licensed Product.


 


5.12.                     Payments.


 


5.12.1.           Commencement. 
Beginning with the Calendar Quarter in which the First Commercial Sale for
an applicable Licensed Product is made and for each Calendar Quarter
thereafter, royalty payments will be made by GSK to Isis under this Agreement
within [***] ([***]) days following the end of each such Calendar Quarter.  Each royalty payment will be accompanied by a
report, summarizing Net Sales for the applicable Licensed Product during the
relevant Calendar Quarter and the calculation of royalties, if any, due
thereon.  Notwithstanding the foregoing,
in the event that no royalties are payable in respect of a given Calendar
Quarter, GSK will submit a written royalty report to Isis so indicating.  In addition, beginning with the Calendar
Quarter in which the First Commercial Sale for an applicable Licensed Product
is made and for each Calendar Quarter thereafter, within [***] ([***]) Business
Days following the end of each such Calendar Quarter, GSK will provide Isis a
preliminary non-binding quarterly report estimating the total sales revenue of
Licensed Products projected for such Calendar Quarter.


 


5.12.2.           Mode of Payment. 
All payments under this Agreement will be (i) payable, in full, in
U.S. dollars, regardless of the country(ies) in which sales are made, (ii) made
by wire transfer of immediately available funds to an account designated by
Isis in writing, and (iii) irrevocable, non-refundable, and
non-creditable.  For the purposes of
computing Net Sales of Licensed Products sold in a currency other than U.S.
dollars, such currency will be converted into U.S. dollars as calculated using
the average exchange rates as calculated and utilized by GSK’s group reporting
system and published accounts.


 


43

















 


5.12.3.           Records Retention. 
Commencing with the First Commercial Sale of a Licensed Product, GSK
will keep complete and accurate records pertaining to the sale of such Licensed
Products for a period of three (3) Calendar Years after the year in which
such sales occurred, and in sufficient detail to permit Isis to confirm the
accuracy of the Net Sales or royalties paid by GSK hereunder.


 


5.13.                     Audits. 
During the Agreement Term and for a period of three (3) years
thereafter, at the request and expense of Isis, GSK will permit an independent
certified public accountant of nationally recognized standing appointed by
Isis, and reasonably acceptable to GSK, 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 made under this Agreement for any period within the preceding three (3) years.  The independent certified public accountant
will disclose to Isis only the royalty amounts which the independent certified
public accountant believes to be due and payable hereunder to the payee and
will disclose no other information revealed in such audit.  Any and all records of GSK examined by such
independent certified public accountant will be deemed GSK’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 Isis as set forth in this Section 5.13) to
Isis.  If, as a result of any inspection
of the books and records of GSK, it is shown that GSK’s payments under this
Agreement were less than the royalty amount which should have been paid, then
GSK will make all payments required to be made by paying Isis the difference
between such amounts to eliminate any discrepancy revealed by said inspection
within sixty (60) days.  If it is shown
that GSK’s payments under this Agreement were more than the royalty amount
which should have been paid, then Isis will return that overpaid amount by
paying GSK the difference between such amounts to eliminate any discrepancy
revealed by said inspection within sixty (60) days.  Isis will pay for such audits, except that in
the event that GSK is found to have underpaid Isis by more than ten percent
(10%) of the amount that should have been paid during the period in question,
GSK will reimburse Isis’ reasonable costs of the audit.


 


5.14.                     Taxes.


 


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


 


5.14.2.           Withholding Tax. 
The Parties acknowledge and agree that, under applicable laws in effect
as of the Effective Date, GSK will not be required to withhold any taxes from
the technology access fee under Section 5.2, election fees under Section 5.3,
Option exercise fees under Section 5.4, milestone payments under Section 5.5
or Section 5.6, or any reimbursement payments for Developing
Compounds under this Agreement (including under Section 1.7),
(collectively, the “Withholding-Free  Payments”) in each case payable to
Isis under this Agreement. Consequently, GSK agrees not to withhold any taxes
from payment of the Withholding-Free Payments. 
Any tax paid or required to be withheld by GSK for the benefit of Isis
on account of any royalties payable to Isis under this Agreement will be
deducted from the amount of royalties or other payments otherwise due.  GSK will secure and send to Isis proof of any
such taxes withheld and paid by GSK for the benefit of Isis, and will, at Isis’
request, provide reasonable assistance to Isis in recovering 


 


44

















 


such taxes. Isis warrants that Isis is a Delaware
corporation as of the Effective Date and, prior to the payment of royalties by
GSK hereunder, will be a resident for tax purposes in the US and that, as of
such time, Isis will be entitled to relief from United Kingdom income tax under
the terms of the double tax agreement between the UK and the US.  Isis will notify GSK immediately in writing
in the event that Isis ceases to be entitled to such relief. Pending receipt of
formal certification from the UK Inland Revenue (the “UK
Tax Certification”), GSK may pay royalty income under this
Agreement to Isis by deducting tax at the applicable rate specified in the
double tax treaty between the UK and US. 
After receipt of the UK Tax Certification, and so long as the UK Tax
Certification remains current, GSK will not withhold any taxes from the payment
of any royalties, unless GSK is advised such withholding is required under
Applicable Law.  Isis 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, unless such
loss, damage, expense or liability arises as a result of any legislative
changes in the future, and except that Isis’ indemnification obligation under
this Section 5.14.2 will not apply to GSK’s payment of the
Withholding-Free Payments.  GSK will
indemnify and hold harmless Isis against any loss, damage, expense or liability
arising in any way from a claim by a UK tax authority or other similar body
alleging that the Withholding-Free Payments are subject to the withholding of
taxes by GSK, unless such loss, damage, expense or liability arises as a result
of any legislative changes in the future.


 


5.15.                     Interest.  Any undisputed
payments to be made hereunder that are not paid on or before the date such
payments are due under this Agreement will bear interest at a rate per annum
equal to the lesser of (i) the rate announced by Bank of America (or its
successor) as its prime rate in effect on the date that such payment would have
been first due plus [***] percent ([***]%) or (ii) the maximum rate
permissible under applicable law. 
However, the interest on late payments shall not apply if the payment
has been delayed by Isis (for instance due to invalid or late changes to bank
details, non-compliance invoices, etc.) or if Isis has not responded to genuine
questions or queries from GSK.


 


ARTICLE 6.


INTELLECTUAL PROPERTY


 


6.1.                            Ownership.


 


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


 


6.1.2.                  Collaboration
Technology.  As between the
Parties, GSK will be the sole owner of any Know-How discovered, developed,
invented or created solely by or on behalf of GSK and/or its Affiliates under
this Agreement (“GSK Collaboration Know-How”)
and any Patent Rights that claim or cover GSK Collaboration Know-How (“GSK Collaboration 


 


45

















 


Patents” and together with the
GSK Collaboration Know-How, the “GSK Collaboration
Technology”), and will retain all of its rights, title and
interest thereto, subject to any rights or licenses expressly granted by GSK to
Isis under this Agreement.  As between
the Parties, Isis will be the sole owner of any Know-How discovered, developed,
invented or created solely by or on behalf of Isis and/or its Affiliates (“Isis Collaboration Know-How”) and
any Patent Rights that claim or cover such Know-How (“Isis
Collaboration Patents” and together with the Isis Collaboration
Know-How, the “Isis Collaboration Technology”),
and will retain all of its rights, title and interest thereto, subject to any
rights or licenses expressly granted by Isis to GSK under this Agreement. Any
Know-How that is discovered, developed, invented or created jointly under this
Agreement by or on behalf of a Party or its Affiliates, on the one hand, and
the other Party or such other Party’s Affiliates, on the other hand (“Jointly-Owned Collaboration Know-How”),
and any Patent Rights that claim or cover such Jointly-Owned Collaboration Know-How
(“Jointly-Owned Collaboration Patents”)
and together with the Jointly-Owned Collaboration Know-How, the “Jointly-Owned Collaboration Technology”),
will be owned jointly by GSK and Isis on an equal and undivided basis,
including all rights, title and interest thereto, subject to any rights or
licenses expressly granted by one Party to the other Party under this
Agreement.  Except as expressly provided
in this Agreement, neither Party will have any obligation to account to the
other for profits with respect to, or to obtain any consent of the other Party
to license or exploit, Jointly-Owned Collaboration Technology by reason of
joint ownership thereof, and each Party hereby waives any right it may have
under the laws of any jurisdiction to require any such consent or
accounting.  Each Party will promptly
disclose to the other Party in writing, and will cause its Affiliates to so
disclose, the discovery, development, invention or creation of any
Jointly-Owned Collaboration Technology. 
The GSK Collaboration Patents, Isis Collaboration Patents and
Jointly-Owned Collaboration Patents are collectively referred to herein as the “Collaboration Patents.”


 


6.1.3.                  Joint
Patent Committee.


 


(a)           The Parties will establish a “Joint Patent Committee” or “JPC.”  The JPC will serve as the primary contacts
and forum for discussion between the Parties with respect to intellectual
property matters arising under this Agreement, and will cooperate with respect
to the activities set forth in this ARTICLE 6.  A strategy will be discussed with regard to
prosecution and maintenance, defense and enforcement of Isis Product-Specific
Patents, GSK Product-Specific Patents and Jointly-Owned Collaboration Patents
that would be and/or are licensed to GSK under Section 4.1.1 in
connection with a
Collaboration Target or a Compound included in a Collaboration Program, defense against allegations of infringement of
Third Party Patent Rights, and licenses to Third Party Patent Rights or
Know-How, and any material change to any license to Third Party Patents Rights
or Know-How in existence as of the Effective Date, in each case to the extent
such matter would be reasonably likely to have a material impact on the
Collaboration or the licenses granted hereunder.  The Joint Patent Committee is established
as of the Effective Date and will dissolve as a formal governing body upon the
earlier of (i) the exercise or expiration of the Option with respect to
the last Collaboration Program (ii) the Parties’ mutual agreement or (iii) after
the Collaboration Term, Isis’ written 


 


46

















 


notice to GSK of its intention to disband and no
longer participate in the JPC. Once Isis has provided such written notice, the
JPC shall have no further obligations under this Agreement and the matters to
be decided by the JPC shall be decided by the Parties.


 


(b)                                  In addition, the Joint
Patent Committee will be responsible for the determination of
inventorship.  The determination of
inventorship will be made in accordance with United States patent laws.  In case of a dispute in the Joint Patent
Committee (or otherwise between Isis and GSK) over inventorship and, as a
result, whether (i) any particular technology arising from the
Collaboration is solely owned by one Party or the other or jointly owned by
both Parties, or (ii) whether any particular Know-How is Isis Know-How,
GSK Know-How or Jointly-Owned Collaboration Know-How, such dispute will be
resolved pursuant to Section 6.1.3(d).


 


(c)                                  The Joint Patent
Committee will meet as often as agreed by them (and at least semi-annually if
requested), via teleconference or videoconference or as otherwise agreed, to
discuss matters arising out of the activities set forth in ARTICLE 6.  To the extent reasonably requested by either
Party, the Joint Patent Committee will solicit the involvement of more senior
members of their respective legal departments (up to the most senior
intellectual property attorney, where appropriate) with respect to critical
issues, and may escalate issues to the JSC for input and resolution pursuant to
Section 6.1.3(d).  Each Party’s
representatives on the Joint Patent Committee will consider comments and
suggestions made by the other in good faith. 
Notwithstanding anything in this Agreement to the contrary, neither Party
will have the obligation to disclose information to the other Party through the
Joint Patent Committee to the extent prohibited by obligation of
confidentiality or protective order, that would result in loss of
attorney-client or other relevant legal privilege, that constitutes proprietary
manufacturing information or where the other Party has an actual or potential
conflict of interest with respect to such information (e.g., where sharing such
information would be reasonably likely to provide the recipient with an
inappropriate commercial advantage).


 


(d)           In the event the Joint Patent
Committee cannot resolve any dispute arising thereunder, even with JSC’s input,
such dispute will be resolved by independent patent counsel not engaged or
regularly employed in the past two (2) years by either Party and
reasonably acceptable to both Parties to resolve such dispute.  The decision of such independent patent
counsel will be binding on the Parties with respect to the issue of
inventorship.  Expenses of such patent
counsel will be shared equally by the Parties.


 


6.2.                            Prosecution
and Maintenance of Patents.


 


6.2.1.                  Patent
Filings. The Party responsible for Prosecution and Maintenance of
any Patent Rights as set forth in Sections 6.2.2 and 6.2.3 will
endeavor to obtain patent protection for Compounds and Licensed Products, if
and as applicable, as it Prosecutes and Maintains its other patents Covering
products in development, using counsel of its own choice but reasonably
acceptable to the other Party, in such countries as the responsible Party sees
fit.


 


47
















 


6.2.2.                  Isis
Patents and GSK Patents.


 


(a)           Isis will control and be responsible
for all aspects of the Prosecution and Maintenance of all Isis Patents, subject
to Section 6.2.2(b) and Section 6.2.4.


 


(b)           Isis Patents After
Exercise of Option.  After GSK has obtained the
applicable license under Section 4.1.1 and following review and
approval of a majority of the members of the Joint Patent Committee, Isis will
assign to GSK all Isis Product-Specific Patents that Cover Licensed Compounds,
Licensed Products and/or the Collaboration Target included in such
Collaboration Program, and GSK will thereafter control and be responsible for
all aspects of the Prosecution and Maintenance of all such Isis
Product-Specific Patents, subject to Section 6.2.4.


 


(c)           GSK will control and be responsible
for all aspects of the Prosecution and Maintenance of all GSK Patents, subject
to Section 6.2.4.


 


6.2.3.                  Jointly-Owned
Collaboration Patents.  The strategy
and responsibility for Prosecution and Maintenance of all Jointly-Owned Collaboration
Patents will be decided by the Joint Patent Committee.


 


6.2.4.                  Other
Matters Pertaining to Prosecution and Maintenance of Patents.


 


(a)           Each Party will keep the other Party
informed through the Joint Patent Committee as to material developments with
respect to the Prosecution and Maintenance of Isis Product-Specific Patents or
GSK Orange Book Patents for which such Party has responsibility for Prosecution
and Maintenance pursuant to Section 6.2.2, Section 6.2.3
or this Section 6.2.4, including, without limitation, by
providing copies of material data as it arises, any office actions or office
action response or other correspondence that such Party provides to or receives
from any patent office, including notice of all interferences, reissues, re-examinations,
oppositions or requests for patent term extensions, and all patent-related
filings, and by providing the other Party the timely opportunity to have
reasonable input into the strategic aspects of such Prosecution and
Maintenance.


 


(b)           If, during the Agreement Term, GSK
intends to allow any GSK Product-Specific Patent with respect to which GSK is
responsible for Prosecution and Maintenance to lapse or become abandoned
without having first filed a continuation or substitution and such GSK Product-Specific
Patent Covers any Discontinued Product, GSK will notify Isis of such intention
at least sixty (60) days prior to the date upon which such Patent Right will
lapse or become abandoned, and Isis will thereupon have the right, but not the
obligation, to assume responsibility for the Prosecution and Maintenance of the
claims within such GSK Product-Specific Patent that Covers the Discontinued
Product at its own expense (subject to Section 6.3.1) with counsel
of its own choice.  For the avoidance of
doubt, if Isis assumes responsibility for the Prosecution and Maintenance of
any such GSK Product-Specific Patent under this Section 6.2.4(b),
Isis will have no obligation to notify GSK of any intention of Isis to allow
such GSK Product-Specific Patent to later lapse or become abandoned.


 


48

















 


(c)                                  If, during the
Agreement Term, Isis intends to allow any Isis Product-Specific Patent with
respect to which Isis is responsible for Prosecution and Maintenance to lapse
or become abandoned without having first filed a continuation or substitution,
then, if GSK has obtained a license to a Licensed Product under Section 4.1.1
(or still has the right to exercise its Option with respect to a Collaboration
Program), then Isis will notify GSK of such intention at least sixty (60) days
prior to the date upon which such Patent Right will lapse or become abandoned,
and GSK will thereupon have the right, but not the obligation, to assume
responsibility for the Prosecution and Maintenance thereof at its own expense
(subject to Section 6.3.1) with counsel of its own choice.  For the avoidance of doubt, if GSK assumes
responsibility for the Prosecution and Maintenance of any such Isis
Product-Specific Patent under this Section 6.2.4(c), GSK will have
no obligation to notify Isis of any intention of GSK to allow such Isis
Product-Specific Patent to later lapse or become abandoned.


 


(d)           The Parties, through the Joint
Patent Committee, will cooperate in good faith to determine if and when any
divisional applications will be filed with respect to any Collaboration Patents
or Isis Patents, and where a divisional patent application filing would be
practical and reasonable, then such a divisional filing will be made and (i) GSK
will have the first right to control the Prosecution and Maintenance of such
claims within the Jointly-Owned Collaboration Patents or Isis Patents which
solely Cover Licensed Compound or Licensed Product with respect to a
Collaboration Program after exercise of an Option by GSK, or (ii) Isis
will have the first right to control the Prosecution and Maintenance of such
claims within the Collaboration Patents or Isis Patents which solely Cover
Discontinued Products.  If the Party
responsible for Prosecution and Maintenance pursuant to this Section 6.2.4(d) is
an owner or co-owner of such Collaboration Patent or Isis Patent, the other
Party will have the step-in right described in Section 6.2.4(b) or
Section 6.2.4(c), as applicable.


 


(e)                                  If the Party
responsible for Prosecution and Maintenance pursuant to Section 6.2.3
intends to allow such Jointly-Owned Collaboration Patent to lapse or become
abandoned without having first filed a continuation or substitution, then such
Party will notify the other Party of such intention at least sixty (60) days
prior to the date upon which such Jointly-Owned Collaboration Patent will lapse
or become abandoned, and such other Party will thereupon have the right, but
not the obligation, to assume responsibility for the Prosecution and Maintenance
thereof at its own expense (subject to Section 6.3.1) with counsel
of its own choice, in which case the abandoning Party will, and will cause its
Affiliates to, assign to the other Party (or, if such assignment is not
possible, grant a fully-paid exclusive license in) all of their rights, titles
and interests in and to such Jointly-Owned Collaboration Patents.  For the avoidance of doubt, if a Party
assumes responsibility for the Prosecution and Maintenance of any such
Jointly-Owned Collaboration Patents under this Section 6.2.4(e),
such Party will have no obligation to notify the other Party of any intention
of such Party to allow such Jointly-Owned Collaboration Patents to later lapse
or become abandoned.


 


49

















 


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


 


6.3.                            Patent
Costs.


 


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


 


6.3.2.                  Isis
Patents and GSK Patents. 
Except as set forth in Section 6.2.4 and Section 6.3.1,
each Party will be responsible for all Patent Costs incurred by such Party
prior to and after the Effective Date in all countries in the Prosecution and
Maintenance of Patent Rights for which such Party is responsible under Section 6.2.


 


6.4.                            Defense
of Claims Brought by Third Parties.


 


6.4.1.                  Prior to
Exercise of Option.  If a Third
Party initiates a Proceeding claiming that any Patent Right owned by or
licensed to such Third Party is infringed by the Development, Manufacture or
Commercialization of any Compound (and related Licensed Product) being
Developed under a Collaboration Program with respect to which GSK has not yet
exercised its Option, Isis will have the first right, but not the obligation,
to defend against such Proceeding at its sole cost and expense.  In the event Isis elects to defend against
such Proceeding, Isis will have the sole right to direct the defense and to
elect whether to settle such claim; provided, if
such Compound (and related Licensed Product) is being Developed under a
Collaboration Program, then Isis will not settle such Proceeding without the
prior written consent of GSK, not to be unreasonably withheld.  In the event that Isis elects not to defend
against such Proceeding within sixty (60) days after it first receives written
notice of the actual initiation of such Proceeding, GSK will have the right,
but not the obligation, to defend against such Proceeding at its sole cost and
expense, which right GSK may exercise by providing Isis with a written notice
thereof within thirty (30) days after GSK’s receipt of Isis’ notice of its
election not to defend such Proceeding. 
After such exercise and thereafter, GSK will have the sole right to
direct the defense of such Proceeding, including, without limitation, the right
to settle such claim (but only with the prior written consent of Isis, not to
be unreasonably withheld). In any event, the Party not defending such
Proceeding will reasonably assist the Party defending such Proceeding and
cooperate in any such litigation at the request and expense of the Party
defending such Proceeding.  Each Party
may at its own expense and with its own counsel join any defense initiated
and/or directed by the other Party under this Section 6.4.1.  Each Party will provide the other Party with
prompt written notice of the commencement of any such 


 


50

















 


Proceeding, or of any allegation of
infringement of which such Party becomes aware and that is of the type
described in this Section 6.4.1, and such Party will promptly
furnish the other Party with a copy of each communication relating to the
alleged infringement that is received by such Party.


 


6.4.2.                  Following
Exercise of Option.  If a Third
Party initiates a Proceeding claiming that any Patent Right or Know-How owned
by or licensed to such Third Party is infringed by the Development, Manufacture
or Commercialization of any Licensed Product being Developed or Commercialized
by GSK under a license granted under Section 4.1.1, GSK will have
the first right, but not the obligation, to defend against any such Proceeding
at its sole cost and expense.  In the
event GSK elects to defend against such Proceeding, GSK will have the sole
right to direct the defense and to elect whether to settle such claim (but only
with the prior written consent of Isis, not to be unreasonably withheld).  In the event that GSK elects not to defend
against a particular proceeding, then it will so notify Isis in writing within
sixty (60) days after it first receives written notice of the actual initiation
of such Proceeding, Isis will have the right, but not the obligation, to defend
against such Proceeding at its sole cost and expense and thereafter Isis will
have the sole right to direct the defense thereof, including, without
limitation, the right to settle such claim (but only with the prior written
consent of GSK, not to be unreasonably withheld).  In any event, the Party not defending such
Proceeding will reasonably assist the Party defending such Proceeding and
cooperate in any such litigation at the request and expense of the Party
defending such Proceeding.  Each Party
may at its own expense and with its own counsel join any defense initiated
and/or directed by the other Party under this Section 6.4.2.  Each Party will provide the other Party with
prompt written notice of the commencement of any such Proceeding, or of any
allegation of infringement of which such Party becomes aware and that is of the
type described in this Section 6.4.2, and such Party will promptly
furnish the other Party with a copy of each communication relating to the
alleged infringement that is received by such Party.


 


6.4.3.                  Discontinued
Products.  If a Third Party
initiates a Proceeding claiming that any Patent Right or Know-How owned by or
licensed to such Third Party is infringed by the Development, Manufacture or
Commercialization of any Discontinued Product, Isis will have the right, but
not the obligation, to defend against and settle such Proceeding at its sole
cost and expense; provided, however, if such Patent
Right or Know-How also Covers the Development, Manufacture or Commercialization
of any Licensed Product or Licensed Compound, GSK will have the sole right to
direct the defense and to elect whether to settle such claim (but only with the
prior written consent of Isis, not to be unreasonably withheld). In any event,
GSK will reasonably assist Isis in defending such Proceeding and cooperate in
any such litigation at the request and expense of Isis.  Each Party may at its own expense and with
its own counsel join any defense directed by the other Party. GSK will provide
Isis with prompt written notice of the commencement of any such Proceedings, or
of any allegation of infringement of which GSK becomes aware and that is of the
type described in this Section 6.4.3, and GSK will promptly furnish
Isis with a copy of each communication relating to the alleged infringement
that is received by GSK.


 


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6.4.4.                  Interplay
Between Enforcement of IP and Defense of Third Party Claims.   Notwithstanding the provisions of Sections
6.4.2 and 6.4.3, to the extent that a Party’s defense against a
Third Party claim of infringement under this Section 6.4 (excluding
Section 6.4.1) would involve (i) the enforcement of the other
Party’s Know-How or Patent Rights, or (ii) the defense of an invalidity
claim with respect to such other Party’s Know-How or Patent Rights, then, in
each case, the general concepts of Section 6.5 will apply to the
enforcement of such other Party’s Know-How or Patent Rights or the defense of
such invalidity claim (i.e., each
Party has the right to enforce its own intellectual property, except that the
relevant Commercializing Party will have the initial right, to the extent
provided in Section 6.5, to enforce such Know-How or Patent Rights
or defend such invalidity claim, and the other Party will have a step-in right,
to the extent provided in Section 6.5, to enforce such Know-How or
Patent Rights or defend such invalidity claim).


 


6.5.                            Enforcement
of Patents Against Competitive Infringement.


 


6.5.1.                  Duty to
Notify of Competitive Infringement. 
If either Party learns of an infringement, unauthorized use,
misappropriation or threatened infringement by a Third Party to which such Party
does not owe any obligation of confidentiality with respect to any Licensed
Patents, Jointly-Owned Collaboration Technology, Licensed Know-How or, solely
for purposes of Section 6.5.4, GSK Technology, by reason of the
development, manufacture, use or commercialization of (i) a product that
contains or consists of a compound as an active ingredient that is
substantially identical in structure, sequence or composition to a Compound in
any Licensed Compound or Licensed Product being Developed or Commercialized
under a license granted under Section 4.1.1 of this Agreement, or (ii) an
Antisense product directed against a Collaboration Target (“Competitive  Infringement”), such Party will promptly notify
the other Party in writing and will provide such other Party with available
evidence of such Competitive Infringement; provided, however,
that for cases of Competitive Infringement under Section 6.5.6
below, such written notice will be given within ten (10) days.


 


6.5.2.                  Following
Exercise of Option.  For any Competitive
Infringement with respect to any Licensed Compound (and any related Licensed
Product) (except for any Discontinued Products) that occurs after GSK’s
exercise of an Option in reference to the Collaboration Program under which
such Licensed Compounds were Developed, so long as part of such Proceeding GSK
also enforces any GSK Orange Book Patents Controlled by GSK (including any Isis
Product-Specific Patents assigned by Isis to GSK under this Agreement) being
infringed that Cover such Licensed Compound (and any related Licensed Product),
then GSK will have the first right, but not the obligation, to institute,
prosecute, and control a Proceeding with respect thereto (including, without
limitation, with respect to any defense or counterclaim brought in connection
therewith that a GSK Orange Book Patent is invalid or unenforceable) by counsel
of its own choice at its own expense, and Isis will have the right, at its own
expense, to be represented in that action by counsel of its own choice, however, GSK will have the right to control such litigation,
irrespective of whether Isis is represented by counsel of its own choice.  If GSK fails to initiate a Proceeding within
a period of ninety (90) days after receipt of written notice of such
Competitive Infringement (subject to a ninety (90) day extension to conclude
negotiations, if GSK has commenced good faith negotiations with an alleged
infringer for elimination of such Competitive Infringement within such ninety
(90) day period), Isis will have the right to initiate and control a Proceeding
with respect to such Competitive Infringement by counsel of its own choice, and
GSK will have the right to be represented in any such action by counsel of its
own choice at its own expense.


 


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6.5.3.                  Joinder.


 


(a)           If one Party initiates a Proceeding
in accordance with this Section 6.5, the other Party agrees to be
joined as a party plaintiff where necessary and to give the first Party
reasonable assistance and authority to file and prosecute the Proceeding.  Subject to Section 6.5.4, the
costs and expenses of the Party initiating the Proceeding under this Section 6.5.3(a) and
the costs and expenses of the other Party incurred pursuant to this Section 6.5.3(a),
will be borne by the Party initiating such Proceeding.


 


(b)           If one Party initiates a Proceeding
in accordance with this Section 6.5.3, the other Party may join
such Proceeding as a party plaintiff where necessary for such other Party to
seek lost profits with respect to such infringement.


 


6.5.4.                  Share of
Recoveries.  Any damages or
other monetary awards recovered with respect to a Proceeding brought pursuant
to this Section 6.5 will be shared as follows: (i) the amount
of such recovery will first be applied to the Parties’ reasonable out-of-pocket
costs incurred in connection with such Proceeding (which amounts will be
allocated pro rata if insufficient to cover the totality of such expenses); and
then (ii) any remaining proceeds will be allocated between the Parties as
follows:  (A) if Isis initiates the
Proceeding pursuant to Section 6.4.1 or Section 6.5.2,
Isis will retain or receive such remaining proceeds; and (B) if GSK
initiates the Proceeding pursuant to Section 6.5.2, GSK will
receive and retain [***] [***].


 


6.5.5.                  Settlement.  Neither Party may enter a settlement, consent
judgment or other voluntary final disposition of a suit under this ARTICLE 6
that disclaims, limits the scope of, admits the invalidity or unenforceability
of, or grants a license under a Patent Controlled by the other Party without
first obtaining the written consent of the Party that Controls the relevant
Patent.


 


6.5.6.                  35 USC
271(e)(2) Infringement. 
Notwithstanding anything to the contrary in this Section 6.5,
solely with respect to Licensed Patents that have not been assigned to GSK
under this Agreement for a Competitive Infringement under 35 USC 271(e)(2) the
time period set forth in Section 6.5.2 during which a Party will
have the initial right to bring a Proceeding will be shortened to a total of
twenty five (25) days, so that, to the extent the other Party has the right,
pursuant to such Sections, to initiate a Proceeding if the first Party does not
initiate a Proceeding, such other Party will have such right if the first Party
does not initiate a Proceeding within twenty five (25) days after such first
Party’s receipt of written notice of such Competitive Infringement.


 


6.6.                            Other
Infringement.


 


6.6.1.                  Jointly-Owned
Collaboration Patents. With respect to the infringement of a Jointly-Owned
Collaboration Patent which is not a Competitive Infringement, the Parties will
cooperate in good faith to bring suit together against such infringing party or
the Parties 


 


53

















 


may decide to permit one Party to
bring suit solely. Any damages or other monetary awards recovered with respect
to a Proceeding brought pursuant to this Section 6.6.1 will be
shared as follows:  (i) the amount
of such recovery will first be applied to the Parties’ reasonable out-of-pocket
costs incurred in connection with such Proceeding (which amounts will be
allocated pro rata if insufficient to cover the totality of such expenses); and
then (ii) (A) if the Parties jointly initiate a Proceeding pursuant
to this Section 6.6.1, each Party will retain or receive fifty
percent (50%) of such remaining proceeds; and (B) if only one Party
initiates the Proceeding pursuant to Section 6.6.1, such Party will
retain or receive such remaining proceeds.


 


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


 


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


 


6.7.                            Patent
Listing.


 


6.7.1.                  GSK’s
Obligations. GSK will promptly, accurately and completely list, with
the applicable Regulatory Authorities during the Agreement Term, all applicable
GSK Orange Book Patents.  Prior to such
listings, the Parties will meet, through the Joint Patent Committee, to evaluate
and identify all applicable Patent Rights, and GSK will have the right to
review, where reasonable, original records relating to any invention for which
Patent Rights are being considered by the Joint Patent Committee for any such
listing.  Notwithstanding the preceding
sentence, GSK will retain final decision-making authority as to the listing of
all applicable GSK Orange Book Patents for such Licensed Product (excluding
Isis Core Technology Patents), regardless of which Party owns such GSK Orange
Book Patent.


 


6.7.2.                  Isis’
Obligations.  Isis will promptly,
accurately and completely list, with the applicable Regulatory Authorities
during the Agreement Term, all applicable Isis Orange Book Patents.  Prior to such listings, the Parties will
meet, through the Joint Patent Committee, to evaluate and identify all
applicable Patent Rights, and Isis will have the right to review, where
reasonable, original records relating to any invention for which Patent Rights
are being considered by the Joint Patent Committee for any such listing.  Notwithstanding the preceding sentence, Isis
will retain final decision-making authority as to the listing of all applicable
Isis Orange Book Patents for such Discontinued Products, as applicable,
regardless of which Party owns such Isis Orange Book Patents.


 


6.8.                            CREATE
Act.  Notwithstanding anything to the
contrary in this ARTICLE 6, neither Party will have the right to make an
election under the Cooperative Research and Technology Enhancement Act of 2004,
35 U.S.C. § 103(c)(2)-(c)(3) (the “CREATE Act”)
when exercising its rights under this ARTICLE 6 without the prior
written consent of the other Party, which will not be unreasonably withheld,
conditioned or delayed.  With respect to
any such permitted election, the Parties will use reasonable efforts to cooperate
and coordinate their activities with respect to any submissions, filings or
other activities in support thereof.  The
Parties acknowledge and agree that this Agreement is a “joint
research agreement” as defined in the CREATE Act.


 


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6.9.                            Obligations
to Third Parties.  Notwithstanding any
of the foregoing, each Party’s rights and obligations with respect to Licensed
IP under this ARTICLE 6 will be subject to any Third Party rights and
obligations existing as of the Effective Date.


 


6.10.                     Additional
Right and Exceptions. 
Notwithstanding any provision of this ARTICLE 6, Isis retains the
sole right to Prosecute and Maintain Isis Core Technology Patents and Isis
Manufacturing and Analytical Patents during the Agreement Term and, except as
provided in Section 6.5.2, to control any enforcement of Isis Core
Technology Patents and Isis Manufacturing and Analytical Patents and will take
the lead of such enforcement solely to the extent that the scope or validity of
any Patent Rights Controlled by Isis and Covering the Isis Core Technology
Patents or Isis Manufacturing and Analytical Patents is at risk.


 


6.11.                     Patent Term Extension. The Parties will cooperate with each other in gaining
patent term extension wherever applicable to any Licensed Product. The
Commercializing Party will determine which patents will be extended. All
filings for such extension will be made by the Party to whom the patent is
assigned; provided, however, that in the event
that the Party to whom the patent is assigned elects not to file for an
extension, such Party will (i) inform the other Party of its intention not
to file, (ii) grant the other Party the right to file for such extension,
and (iii) cooperate as necessary to assist the other Party in filing such
extension.


 


6.12.                     [***]


 


6.13.                     Rights for [***] Programs
Limited to [***] Field.  Notwithstanding anything to the contrary in
this ARTICLE 6, with respect to the [***] Program, GSK’s rights under Sections
6.2, 6.3, 6.4, 6.5 and 6.6 are limited to the
extent of the scope of the [***] Field.


 


ARTICLE 7.


REPRESENTATIONS AND WARRANTIES


 


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


 


7.1.1.                  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;


 


7.1.2.                  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;


 


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


 


7.1.4.                  the execution, delivery and performance
of this Agreement by such Party will not constitute a default under or conflict
with any agreement, instrument or understanding, oral or written, to which it
is a party or by which it is bound, or violate any law or regulation of any
court, governmental body or administrative or other agency having jurisdiction
over such Party;


 


55

















 


7.1.5.                  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; and


 


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


 


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


 


7.2.1.                  Isis is the owner of, or otherwise has
the right to grant, all rights and licenses (or sublicenses, as the case may
be) it purports to grant to GSK with respect to the Licensed IP under this
Agreement for all Collaboration Programs as they exist on the Effective Date;


 


7.2.2.                  to the best of its knowledge and belief,
after due inquiry, Isis does not require any additional licenses or other
intellectual property rights to conduct the identification, research,
optimization and other Development activities contemplated to be conducted by
Isis with respect to the Collaboration Programs as they exist on the Effective
Date;


 


7.2.3.                  to the best of its knowledge and belief,
after due inquiry, no written claims have been made against Isis alleging that (i) any
of the Licensed Patents existing as of the Effective Date are invalid or
unenforceable or (ii) the practice of the Licensed Patents in connection
with a Collaboration Program infringes any intellectual property rights of a
Third Party;


 


7.2.4.                  to the best of its knowledge and belief,
there are no additional licenses (beyond those that would be granted to GSK
under ARTICLE 4 upon the exercise of an Option) under any intellectual
property that is owned or Controlled by Isis or its Affiliates as of the
Effective Date that would be required in order for GSK to further Develop and
Commercialize any Compounds that bind to the Collaboration Targets as of the
Effective Date, in each case assuming the exercise by GSK of such Option on the
Effective Date;


 


7.2.5.                  SCHEDULE 7.2.5(a), SCHEDULE 7.2.5(b) and SCHEDULE
7.2.5(c) set forth true, correct and complete lists of all Isis Core
Technology Patents, Isis Manufacturing and Analytical Patents, and
Product-Specific Patents that apply to the Collaboration Programs as such
programs exist on the Effective Date, respectively, and indicates whether each
such Patent is owned by Isis or licensed by Isis from a Third Party and if so,
identifies the licensor or sublicensor from which the Patent is licensed;


 


56

















 


7.2.6.                  SCHEDULE 5.11.1 sets forth true, correct and complete
lists of all Isis In-License Agreements that Isis considers in good faith to be
most relevant to the research, Development, Manufacture or Commercialization of
Compounds as contemplated under the Collaboration Programs existing on the
Effective Date (together with a description of all applicable Isis Supported
Pass Through Costs); Isis is in compliance in all material respects with Isis
In-License Agreements and is not in default or breach under any Isis In-License
Agreements and, to the best of its knowledge and belief, there is no ground
that would give any Third Party that is a party to any In-License Agreement the
right to terminate such In-License Agreement, and to Isis’ best knowledge and
belief, none of such Third Parties are in default or breach under any Isis
In-License Agreement;


 


7.2.7.                  SCHEDULE 7.2.7 is a complete and accurate list of all
agreements that create Third Party Obligations, that Isis considers in good
faith may materially limit or restrict the rights granted by Isis to GSK under
this Agreement;


 


7.2.8.                  Isis has not granted to any Third Party
rights under the Licensed IP to Develop, Manufacture or Commercialize any ASOs
that bind to the Collaboration Targets existing as of the Effective Date,
except Isis granted (i) Permitted Licenses, and (ii) Alnylam the
right to practice the Isis Core Technology Patents for double-stranded RNAi
under the Alnylam Agreement;


 


7.2.9.                  Isis owns or possesses adequate licenses
or other rights to use all existing research tools that it uses or has used to
identify the Compounds as of the Effective Date; and


 


7.2.10.           Isis has not withheld from GSK any
material data or any material correspondence, including to or from any
Regulatory Authority, in Isis’ possession as of the Effective Date that would
be material and relevant to a reasonable assessment of the scientific,
commercial, safety and regulatory liabilities and commercial value of the
Collaboration Programs as listed on the Effective Date.


 


Further, except as otherwise set forth in the
applicable Phase 2 PoC Data Package or schedule of exceptions provided to GSK
in accordance with the procedures set forth below, the foregoing
representations and warranties (other than those contained in Section 7.2.2
and Section 7.2.9) shall be deemed to be made by Isis to GSK upon
the Bring Down Date (as defined below) with respect to each Collaboration
Program, solely with respect to such Collaboration Program and solely with
respect to the ASOs, Compounds, Collaboration Targets and Licensed IP
applicable to such Collaboration Program as if the “Effective Date” is the
Bring Down Date.  If GSK has a good faith
intention of exercising an Option prior to its receipt of the applicable Phase
2 PoC Data Package, GSK will notify Isis thereof, and Isis will have thirty
(30) days following such notice to deliver to GSK a schedule of exceptions to
the representations and warranties provided under this Section 7.2.  For purposes of this Section 7.2,
“Bring Down Date” will mean the date
GSK receives from Isis (i) the applicable Phase 2 PoC Data Package, if GSK
exercises the applicable Option after the applicable Collaboration Program
completes the first Phase 2 PoC Trial; or (ii) the applicable Phase 2 PoC
Data Package, to the extent available, delivered under Section 3.1.3,
if GSK exercises the applicable Option before the applicable Collaboration
Program completes the first Phase 2 PoC Trial.


 


57

















 


7.3.                            Isis Covenants. 
Isis hereby covenants to GSK that:


 


7.3.1.                  during the Term, Isis will maintain and
not breach any agreements with Third Parties that provide a grant of rights
from such Third Party to Isis that are Controlled by Isis and are licensed or
become subject to a license from Isis to GSK under this Agreement;


 


7.3.2.                  all employees of Isis performing
Development activities hereunder on behalf of Isis will be obligated to assign
all right, title and interest in and to any inventions developed by them,
whether or not patentable, to Isis or such Affiliate, respectively, as the sole
owner thereof;


 


7.3.3.                  Isis will, as appropriate, hire and
maintain sufficient staff and management to meet its Commercially Reasonable
Efforts in order to support and conduct all the Collaboration Programs
hereunder in a timely fashion;


 


7.3.4.                  except as permitted under Section 2.1.2,
it will not during the Agreement Term grant any right or license to any Third
Party that would conflict or interfere with any of the rights or licenses
granted to GSK hereunder, or would encumber the Isis Patents that apply to the
rights or licenses granted to GSK hereunder including, without limitation, any
liens, mortgages, security interests or another similar interest that would
give the holder the right to convert the interest into ownership of such Isis
Patent(s);


 


7.3.5.                  in the event that Isis has knowledge, at
any time during the Agreement Term of any settled, pending or threatened (in
writing) claim or lawsuit or legal proceeding of a Third Party against Isis
alleging that any Isis Patent is invalid or unenforceable, or Isis or GSK’s
practices of such Isis Patent(s) under this Agreement infringes or
misappropriates in part or in whole the intellectual property or intellectual
property rights of such Third Party, Isis will promptly inform GSK in writing
of the same; and


 


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


 


58

















 


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


 


7.5.                            DISCLAIMER. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY NOR ITS AFFILIATES 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 AND ISIS UNDERSTAND THAT THE COMPOUNDS
ARE THE SUBJECT OF ONGOING CLINICAL RESEARCH AND DEVELOPMENT AND THAT NEITHER
PARTY CAN ASSURE THE SAFETY, USEFULNESS OR COMMERCIAL OR TECHNICAL VIABILITY OF
RESULTING DEVELOPMENT CANDIDATES, LICENSED COMPOUNDS, AND/OR LICENSED PRODUCTS.


 


ARTICLE 8.


INDEMNIFICATION; INSURANCE


 


8.1.                            Indemnification by GSK. 
GSK will indemnify, defend and hold harmless Isis and its Affiliates,
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:


 


8.1.1.                  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;


 


8.1.2.                  any breach of any representation or
warranty or express covenant made by GSK under ARTICLE 7 or any other
provision under this Agreement;


 


8.1.3.                  the Development or Manufacturing
activities that are conducted by and/or on behalf of GSK or its Affiliates or
Sublicensees (which will exclude any Development or Manufacturing activities
that are conducted by and/or on behalf of Isis pursuant to this 


 


59

















 


Agreement), including handling and storage and
manufacture by and/or on behalf of GSK or its Affiliates or Sublicensees of any
Licensed Compounds or Licensed Product for the purpose of conducting
Development or Commercialization by or on behalf of GSK or its Affiliates or
Sublicensees; or


 


8.1.4.                  the Commercialization by or on behalf of
GSK or its Affiliates or Sublicensees of any Licensed Product pursuant to the
exercise by GSK of the relevant Option;


 


except, in each case above, to the extent such Claim
arose out of or resulted from or is attributable to any acts or omissions of
Isis and/or its Affiliates, licensees, Sublicensees or contractors, and its or
their respective directors, officers, employees and agents, for which Isis is
required to indemnify GSK pursuant to Section 8.2.


 


8.2.                            Indemnification by Isis. 
Isis will 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:


 


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


 


8.2.2.                  any breach of any representation or
warranty or express covenant made by Isis under ARTICLE 7 or any other
provision under this Agreement;


 


8.2.3.                  the discovery, Development or
Manufacturing activities conducted by or on behalf of Isis (which will exclude
any Development or Manufacturing activities conducted by or on behalf of GSK
pursuant to this Agreement), including the storage and handling and manufacture
by and/or on behalf of Isis and/or its Affiliates and/or its Sublicensees or
subcontractors of any Compounds for the purpose of Development or
Commercialization by or on behalf of Isis or GSK under this Agreement; or


 


8.2.4.                  the Commercialization of any Discontinued
Products by or on behalf of Isis and/or its Affiliates or Sublicensees;


 


except, in each case above, to the extent such Claim
arose out of or resulted from or is attributable to any acts or omissions of GSK
and/or its Affiliates, licensees, Sublicensees or contractors and its or their
respective directors, officers, employees and agents for which GSK is required
to indemnify Isis pursuant to Section 8.1.


 


8.3.                            Procedure. 
In the event that any Person entitled to indemnification under Section 8.1
or Section 8.2 (an “Indemnitee”)
is seeking such indemnification, such Indemnitee will (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, or impose any obligation on, or otherwise materially
adversely affect, the Indemnitee or other Party), (iii) cooperate as
reasonably requested (at the 


 


60

















 


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. The provisions of Section 6.4
will govern the procedures for responding to a Claim of infringement described
therein. Notwithstanding anything in this Agreement to the contrary, the
indemnifying Party will have no liability under Section 8.1 or 8.2,
as the case may be, with respect to Claims settled or compromised by the
Indemnitee without the indemnifying Party’s prior written consent.


 


8.4.                            Insurance.


 


8.4.1.                  Isis’ Insurance
Obligations.  Isis will maintain, at its cost, reasonable
insurance against liability and other risks associated with its activities
contemplated by this Agreement, including but not limited to its clinical
trials and its indemnification obligations herein, in such amounts and on such
terms as are customary for prudent practices for biotech companies of similar
size and with similar resources in the pharmaceutical industry for the
activities to be conducted by it under this Agreement taking into account the
scope of development of products, provided, that,
at a minimum, Isis will maintain, in force from thirty (30) days prior to
enrollment of the first patient in a Clinical Study, at its sole cost, a
clinical trials/product liability insurance policy providing coverage of at
least [***] Dollars ($[***]) per claim and annual aggregate and, provided
further that such coverage is increased to at least [***] Dollars ($[***]) at
least thirty (30) days before Isis initiates the First Commercial Sale of any
Discontinued Product hereunder.  Isis
will furnish to GSK evidence of such insurance upon request.


 


8.4.2.                  GSK’s Insurance
Obligations.  GSK hereby represents and warrants to Isis
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 will furnish to Isis
evidence of such self-insurance upon request.


 


8.5.                            LIMITATION OF
CONSEQUENTIAL DAMAGES.  EXCEPT FOR CLAIMS OF A THIRD
PARTY WHICH ARE SUBJECT TO INDEMNIFICATION UNDER THIS ARTICLE 8 OR AS
OTHERWISE EXPRESSLY STATED IN THIS AGREEMENT, NEITHER ISIS NOR GSK, NOR ANY OF
THEIR AFFILIATES OR SUBLICENSEES WILL BE LIABLE TO THE OTHER PARTY TO THIS
AGREEMENT OR ITS AFFILIATES OR ANY OF THEIR SUBLICENSEES 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.


 


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ARTICLE 9.


TERM; TERMINATION


 


9.1.                            Agreement Term; Expiration. This Agreement will be effective as of the Effective
Date and will continue in force and effect until expiration as described in
this Section 9.1, unless earlier terminated pursuant to the other
provisions of this ARTICLE 9, and will expire as follows:


 


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


 


9.1.2.                  in its entirety upon the expiration of
all payment obligations under this Agreement with respect to the last Licensed
Product (including Discontinued Products) in all countries pursuant to Section 9.1.1;
and


 


9.1.3.                  where GSK declines to exercise a given
Option on or before the applicable Option Deadline for a given Collaboration
Program, on a Collaboration Program-by-Collaboration Program basis, the rights
and obligations of each Party with respect to such Collaboration Program will
terminate upon expiration of the Option Deadline with respect to the relevant
Collaboration Program.


 


9.1.4.                  the period from the Effective Date until
the date of expiration of this Agreement or as the case may be, until the date
of expiration of this Agreement in part with respect to a given Licensed
Product pursuant to this Section 9.1 will be the “Agreement Term.”


 


9.1.5.                  Effect of Expiration of
the Agreement Term.
Following the expiration of the Agreement Term with respect to a Licensed
Product (including Discontinued Products) in a country pursuant to Section 9.1.1,
(i) if GSK is the Commercializing Party, the license granted to GSK
pursuant to Section 4.1.1 with respect to such Licensed Product
will convert to an exclusive, fully paid and royalty-free, right and license,
with the right to grant sublicenses (as set forth in Section 4.1.2),
under all of Isis’ rights in and to the Know-How within the Licensed IP, solely
as necessary to continue to Develop, Manufacture and Commercialize such
Licensed Product in such country, for so long as it continues to do so; (ii) if
Isis is the Commercializing Party, the license granted to Isis pursuant to Section 10.1,
with respect to such Discontinued Product, will convert to an exclusive, fully
paid and royalty-free right and license, with the right to grant sublicenses,
under all of GSK’s rights in and to the Know-How within the GSK Technology,
solely as necessary to continue to Develop, Manufacture and Commercialize such
Discontinued Product in such country, for so long as it continues to do so; and
(iii) any remaining exclusivity obligation under ARTICLE 2 will no
longer apply to bind or restrict either Party or its Affiliates with respect to
the gene target against which such Licensed Product, or Discontinued Product,
as the case may be, is directed.


 


9.2.                            Termination of the
Agreement.


 


9.2.1.                  GSK’s Right to Terminate.  At any time
during the Agreement Term, but following payment by GSK of the up-front payment
described in Section 5.2, GSK will be entitled to terminate this
Agreement in its entirety or in part on a Licensed Product-by-Licensed Product,
Collaboration Program-by-Collaboration Program basis by providing ninety (90)
days’ written notice to Isis of such termination; provided,
however, with respect to each Voluntarily Terminated Collaboration
Program (as defined below) GSK will pay Isis an 


 


62

















 


amount equal to [***] percent ([***]%) of the milestone
payment associated with the next Development Milestone Event that is a [***]
Development Milestone Event unachieved as of the date of such notice (such
payment, the “Termination Payment”).  If Isis enters into a licensing or
collaboration agreement with a Third Party for such Voluntarily Terminated
Collaboration Program within [***] ([***]) months after the effective date of
GSK’s termination of such Voluntarily Terminated Collaboration Program, then
Isis shall pay GSK an amount equal to the applicable Termination Payment in
full within ten (10) days.  For
purposes of this Section 9.2.1, a “Voluntarily
Terminated Collaboration Program” means a Collaboration Program
terminated by GSK under this Section 9.2.1 meeting the following
conditions:


 


(a)                                  the Collaboration Program is not focused
on [***] or [***];


 


(b)           GSK terminated such Collaboration Program
after Sanctioned Target stage but prior to GSK’s exercise of the applicable
Option for such Collaboration Program;


 


(c)                                  at the time of such termination, Isis had
initiated Development work past the Sanctioned Target stage for such
Collaboration Program and in Developing such Collaboration Program Isis spent
at least an amount equal to (i) $[***] plus (ii) [***]
percent ([***]%) of the aggregate amount of the [***] and [***] paid by GSK to
Isis pursuant to Section 5.3 and Section 5.5 or 5.6,
as demonstrated by documentation provided to GSK;


 


(d)           solely with respect to [***], such
terminated Collaboration Program was the last Collaboration Program focused on
[***]; and


 


(e)                                  solely with respect to the [***] Program,
such terminated Collaboration Program was the last [***] Program subject to an
Option under this Agreement.


 


Subject to Section 9.3.4 and Section 9.3.5,
immediately following such termination notice date, GSK’s obligations under Section 5.5
through Section 5.9 will cease. 
Notwithstanding the foregoing, in the event GSK believes in good faith
that there are safety concerns with respect to a Licensed Product or a
Collaboration Program, which concerns merit the immediate termination of
Licensed Product or Collaboration Program, GSK will have the right to terminate
this Agreement with respect to such Licensed Product or Collaboration Program
immediately upon written notice to Isis and without such ninety (90) day notice
period for termination [***].


 


9.2.2.                  Termination for Material
Breach.


 


(a)           If either Party (the “Non-Breaching Party”) believes that
the other Party (the “Breaching Party”)
is in material breach of this Agreement (other than with respect to a failure
to use Commercially Reasonable Efforts under Section 1.4 or Section 4.3,
which is governed by Section 9.2.3 below), then the Non-Breaching
Party may deliver notice of such material breach to the Breaching Party. In
such notice, the Non-Breaching Party will identify the actions or conduct that
it wishes such Breaching Party to take for an acceptable and prompt cure of
such breach (or will otherwise state its good-faith belief that such breach is
incurable); provided, 


 


63

















 


however, that such identified actions or conduct will not be
binding upon the Breaching Party with respect to the actions that it may need
to take to cure such breach. If the breach is curable, the Breaching Party will
have ninety (90) days to either cure such breach (except to the extent such
breach involves the failure to make a payment when due, which breach must be
cured within thirty (30) days following such notice) or, if a cure cannot be
reasonably effected within such ninety (90) day period, to deliver to the
Non-Breaching Party a plan for curing such breach which is reasonably
sufficient to effect a cure within a reasonable period.  If the Breaching Party fails to (a) cure
such breach within the ninety (90) day or thirty (30) day period, as
applicable, or (b) use Commercially Reasonable Efforts to carry out the
plan and cure the breach, the Non-Breaching Party may terminate this Agreement
in its entirety if such breach relates to this Agreement in its entirety, or in
relevant part if such breach does not relate to this Agreement in its entirety,
by providing written notice to the Breaching Party.


 


(b)           The termination right set forth in this Section 9.2.2
will be in addition to the provisions of Section 9.2.3 and Section 9.2.4.


 


9.2.3.                  Termination for Failure to
Use Commercially Reasonable Efforts.


 


(a)           If Isis, in GSK’s reasonable
determination, fails to use Commercially Reasonable Efforts in the activities
contemplated in Section 1.4 above, GSK will notify Isis and, within
thirty (30) days thereafter, Isis and GSK will meet and confer to discuss and
resolve the matter in good faith, and attempt to devise a mutually agreeable
plan to address any outstanding issues related to Isis’ use of Commercially
Reasonable Efforts in Section 1.4. Following such a meeting, if
Isis fails to use Commercially Reasonable Efforts as contemplated by Section 1.4,
then subject to Section 9.2.3(c), Section 9.2.3(d), and
Section 9.2.4 below, GSK will have the right, at its sole
discretion, to terminate this Agreement in whole or in part on a Collaboration
Program-by-Collaboration Program basis.


 


(b)           If GSK, in Isis’ reasonable
determination, fails to use Commercially Reasonable Efforts under Section 4.3
above, Isis will notify GSK and, within thirty (30) days thereafter, Isis and
GSK will meet and confer to discuss and resolve the matter in good faith, and
attempt to devise a mutually agreeable plan to address any outstanding issues
related to GSK’s use of Commercially Reasonable Efforts in Section 4.3.
Following such a meeting, if GSK fails to use Commercially Reasonable Efforts
as contemplated by Section 4.3, then subject to Section 9.2.3(c),
Section 9.2.3(d), and Section 9.2.4 below, Isis will
have the right, at its sole discretion, to terminate this Agreement in part on
a Licensed Product-by-Licensed Product basis.


 


(c)                                  Notwithstanding the foregoing, this
Agreement will not so terminate unless (x) the Breaching Party is given
ninety (90) days prior written notice by the Non-Breaching Party of the
Non-Breaching Party’s intent to terminate, stating the reasons and
justification for such termination and recommending steps which the Breaching
Party should take, and (y) the Breaching Party or its Sublicensee has not
used good-faith Commercially Reasonable Efforts during the ninety (90) day
period following such notice to diligently pursue a cure of such material
breach or exercised its rights under Section 9.2.4.


 


64

















 


(d)           This Section 9.2.3 and Section 9.3
set forth the Non-Breaching Party’s sole and exclusive remedy for the Breaching
Party’s breach of its obligation to use Commercially Reasonable Efforts.


 


9.2.4.                  Disputes Regarding
Material Breach.  Notwithstanding the foregoing, if the
Breaching Party in Section 9.2.2 or Section 9.2.3
disputes in good faith the existence, materiality, or failure to cure of any
such breach which is not a payment breach, and provides notice to the
Non-Breaching Party of such dispute within such ninety (90) day period or such
other reasonable cure period, as applicable, the Non-Breaching Party will not
have the right to terminate this Agreement in accordance with Section 9.2.2
or Section 9.2.3, as applicable, unless and until it has been
determined in accordance with Section 12.1 that this Agreement was
materially breached by the Breaching Party and the Breaching Party fails to
cure such breach within the allowed cure period following such determination.
It is understood and acknowledged that during the pendency of such dispute, all
the terms and conditions of this Agreement will remain in effect and the
Parties will continue to perform all of their respective obligations hereunder.


 


9.2.5.                  Termination for Insolvency.


 


(a)           Either Party may terminate this Agreement
if, at any time, the other Party files 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 will be served with an
involuntary petition against it, filed in any insolvency proceeding, and such
petition will not be dismissed within ninety (90) days after the filing
thereof; or if the other Party will propose or be a party to any dissolution or
liquidation; or if the other Party will make an assignment of substantially all
of its assets for the benefit of creditors.


 


(b)           All rights and licenses granted under or
pursuant to any section of this Agreement are and will 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 will 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 will further be entitled to a complete
duplicate of, or complete access to, any such intellectual property, and such,
if not already in its possession, will 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.


 


9.3.                            Consequences of
Termination of the Agreement. In the
event of a termination of this Agreement by a Party in its entirety or on a
Collaboration Program-by-Collaboration Program basis or Licensed
Product-by-Licensed Product basis, as the case may be, the following terms will
apply to any such termination, but only to the extent of any such termination (i.e., in part or in its entirety):


 


65

















 


9.3.1.                  Special Consequences for
Termination by GSK.  In the event of a termination of this
Agreement either in its entirety or on a Collaboration Program-by-Collaboration
Program basis by GSK pursuant to Section 9.2.2, 9.2.3 or 9.2.5,
then:


 


(a)                                  the licenses granted by GSK to Isis under
this Agreement will terminate, except that Isis, its Affiliates and
Sublicensees may sell any remaining inventory of such Discontinued Products
obtained from GSK pursuant to Section 10.1 over a period of no
greater than twelve (12) months after the effective date of such termination;
and Isis will pay GSK royalties in accordance with Section 5.10 on
the Net Sales of such inventory of such Discontinued Products;


 


(b)           except as explicitly set forth in this Section 9.3.1,
Section 9.3.3, 9.3.4 or 9.2.5 Isis will have no
further rights and GSK will have no further obligations with respect to the
applicable terminated Collaboration Program(s);


 


(c)                                  notwithstanding anything contained herein
to the contrary, for each Collaboration Program for which GSK has not exercised
its Option, GSK will have and Isis hereby grants, with respect to each
Collaboration Program terminated under Section 9.2.2 or Section 9.2.3,
the exclusive licenses granted to GSK under Section 4.1.1 with respect
to the Licensed Compounds and Licensed Products under such Collaboration
Program at the Option exercise payment, milestones, and royalties that are set
forth in ARTICLE 5 (subject to Section 9.3.1(e) and Section 9.3.1(f) below);


 


(d)           Isis will perform its obligations under Section 4.2.1
with respect to the applicable terminated Collaboration Program(s);


 


(e)                                  GSK will not be required to pay milestone
payments for any Development Milestone Event up to and including the [***] with
respect to the applicable terminated Collaboration Programs (i.e., including the milestone payment for the [***]); provided, however, GSK will be required to pay Isis the full
amount of the (i) milestone payments for any achieved Development
Milestone Event after the [***], (ii) milestone payments for any achieved
Sales Milestone Events, (iii) Option exercise payments, and (iv) royalties,
with respect to the applicable terminated Collaboration Programs, in each case
in accordance with ARTICLE 5; and


 


(f)                                    As a result of such termination, Isis will pay GSK on a
quarterly basis within [***] days of Isis’ receipt of GSK’s invoice, an amount
equal to the product of (i) the [***], minus the
[***], multiplied by (ii) [***]percent
([***]%).  The Parties will enter into
any agreements required to address clinical safety, clinical trial
responsibilities and regulatory matters to comply with applicable laws and
regulations.


 


66

















 


The Parties acknowledge and agree that the special
consequences set forth in this Section 9.3.1 constitute a genuine
and reasonable good faith pre-estimate of the damages that will be suffered by
GSK upon the occurrence of any termination by GSK under Section 9.2.2,
9.2.3 or 9.2.5 and will not be characterized as or deemed to be a
penalty.


 


9.3.2.                  Special Consequences for
Termination by Isis or Voluntary Termination by GSK.  In the event
of a termination of this Agreement either in its entirety or on a Licensed
Product-by-Licensed Product basis by Isis pursuant to Section 9.2.2
or Section 9.2.3, or by GSK pursuant to Section 9.2.1,
then


 


(a)                                  the licenses granted by Isis to GSK under
this Agreement will terminate and GSK, its Affiliates and Sublicensees will
cease selling all Licensed Products that are the subject of such termination; provided that GSK, its Affiliates and Sublicensees will have
the right to sell any remaining inventory of such Licensed Products over a
period of no greater than [***] ([***]) months after the effective date of such
termination and GSK will pay Isis royalties in accordance with Section 5.9
on the Net Sales of such inventory of Licensed Products;


 


(b)           each such Licensed Product will revert
back to Isis as a Discontinued Product in accordance with Section 10.1
and Isis will have the obligation to pay royalties to GSK at a rate that is
[***] percent ([***]%) of the otherwise applicable royalty under Section 5.10
with respect to such Discontinued Product;


 


(c)                                  GSK will perform the obligations under Section 4.2.1
for the Collaboration Program to which such Discontinued Product relates, as
though such obligations under Section 4.2 were obligations owed by
GSK to Isis, mutatis mutandis; and


 


(d)           except as explicitly set forth in this Section 9.3.2,
Section 9.3.3, 9.3.4 or 9.3.5, GSK will have no
further rights and Isis will have no further obligations with respect to the
applicable terminated Collaboration Program(s).


 


The Parties acknowledge and agree that the special
consequences set forth in this Section 9.3.2 constitute a genuine
and reasonable good faith pre-estimate of the damages that will be suffered by
Isis upon the occurrence of any termination by Isis pursuant to Section 9.2.2
or Section 9.2.3, or by GSK pursuant to Section 9.2.1,
and will not be characterized as or deemed to be a penalty.


 


9.3.3.                  Return of Information and
Materials.  The Parties will return (or destroy, as
directed by the other Party) all data, files, records and other materials
containing or comprising the other Party’s Confidential Information that are
the subject of such termination. Notwithstanding the foregoing, the Parties
will be permitted to retain one copy of such data, files, records, and other
materials for archival purposes.


 


9.3.4.                  Accrued Rights. Termination of this Agreement (in whole or in part)
for any reason will be without prejudice to any rights or financial
compensation that will have accrued to the benefit of a Party prior to such
termination or expiration, including, but not limited to, any obligation to
reimburse Isis for research and/or Development expenses accrued under Section 1.7.1
or Section 1.7.2 prior to the date of such termination or
expiration. Such termination or expiration will not relieve a Party from
obligations that are expressly 


 


67

















 


indicated to survive the termination or expiration of
this Agreement.  For purposes of
clarification, milestone payments under ARTICLE 5 accrue as of the date
the applicable Milestone Event occurs even if the payment is not due under Section 5.8.2
until receipt of an invoice therefor.


 


9.3.5.                  Survival.  The following
provisions of this Agreement will survive the expiration or termination of the
Agreement (in whole or in part): Section 3.2 (but only to the
extent necessary to carry out the provisions of Section 9.3.1), Section 4.2.1
(but only to the extent necessary to satisfy the requirements of Section 9.3.1
or Section 9.3.2, as applicable), Section 4.4 (but only
to the extent GSK is Developing or Commercializing a Licensed Compound or
Licensed Product), Section 5.10, Section 5.12.3, Section 5.13,
Section 5.14.2, Section 6.1.1, Section 6.1.2,
Section 6.8, Section 7.5, Section 9.3, ARTICLE
6 (but only to the extent GSK is Developing or Commercializing a Licensed
Compound or Licensed Product), ARTICLE 8, ARTICLE 10 (if the
Agreement is terminated (i) by GSK
under Section 9.2.1, or (ii) by Isis under Section 9.2.2
or Section 9.2.3), ARTICLE 11 and ARTICLE 12 and APPENDIX
1 (to the extent definitions are embodied in the foregoing listed Articles
and Sections).


 


ARTICLE 10.


ISIS REVERSION RIGHTS


 


10.1.                     Reversion Rights.  Isis may elect to continue to Develop and Commercialize any Discontinued
Products that are the subject of a termination (i) by GSK under Section 9.2.1,
or (ii) by Isis under Section 9.2.2 or Section 9.2.3,
by notice in writing to GSK after such termination (an “Election Notice”) that Isis is
exercising its rights under this Section 10.1, in which case GSK
will grant to Isis a sublicensable, worldwide, exclusive license or sublicense,
as the case may be, to all GSK Technology Controlled by GSK as of the date of
the Election Notice solely as they are necessary to make, have made, use, sell,
offer for sale, have sold and import Discontinued Products. Such license will
be sublicensable by Isis in accordance with Section 4.1.2, mutatis mutandis. In addition, if Isis provides GSK an
Election Notice within ninety (90) days of such termination, then GSK will (x) assign
back to Isis any GSK Orange Book Patents (or any other Patent Rights) that
relate to such Discontinued Products assigned by Isis to GSK under this
Agreement, and (y) transfer to Isis for Isis’ use with respect to the
Development and Commercialization of the Discontinued Products, any Know-How
data, results, regulatory information, filings, and files in the possession of
GSK as of the date of the Election Notice that relate to such Discontinued
Products, and any other information or material specified in Section 4.2.1.


 


10.2.                     Reversion Royalty Rates.  In
consideration for the rights granted by GSK to Isis under Section 10.1,
subject to the terms of this Agreement, Isis will pay a royalty on Net Sales of
each Discontinued Product by Isis, its Affiliates and Sublicensees in
accordance with Section 5.10 above.


 


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ARTICLE 11.


CONFIDENTIALITY


 


11.1.                     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”) and its
Affiliates will keep confidential and will 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”) or its Affiliates
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, 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 or its Affiliates and the pricing
thereof (collectively, “Confidential Information”),
except to the extent that it can be established by the Receiving Party that
such Confidential Information:


 


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


 


11.1.2.           was generally available to the public or
otherwise part of the public domain at the time of its disclosure to the
Receiving Party or its Affiliates;


 


11.1.3.           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 or its Affiliates in breach
of this Agreement; or


 


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


 


For clarity the fact that a particular Collaboration
Target is included in a Collaboration Program is Confidential Information of
GSK.


 


11.2.                     Authorized Disclosure. 
Except as expressly provided otherwise in this Agreement, a Receiving
Party or its Affiliates may use and disclose to Third Parties 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 Compounds, Licensed Products, and/or Discontinued Products, and
to grant licenses and sublicenses hereunder), provided,
that Confidential Information may be disclosed by a Receiving Party to a
governmental entity or agency without requiring such entity or agency to enter
into a confidentiality agreement with such Receiving Party if such Receiving
Party has used reasonable efforts to impose such requirement without success
and disclosure to such governmental entity or agency is necessary for the
performance of the Receiving Party’s obligations hereunder; (ii) to the
extent such disclosure is reasonably necessary in filing or prosecuting patent,
copyright and 


 


69

















 


trademark applications (subject to Section 11.6
below), complying with applicable governmental regulations, obtaining
Approvals, conducting Pre-Clinical Studies or Clinical Studies, marketing
Licensed Products, or as otherwise required by applicable law, regulation, rule or
legal process (including the rules of the SEC and any stock exchange); provided, however, that if a Receiving Party or any of its
Affiliates is required by law or regulation to make any such disclosure of a
Disclosing Party’s Confidential Information it will, except where impracticable
for necessary disclosures, for example, but without limitation, in the event of
a 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 lenders,
investors, merger partners, acquirers, consultants, or professional advisors on
a need-to-know basis, in each case under confidentiality provisions no less
restrictive than those of this Agreement; (iv) to the extent and only to
the extent that such disclosure is required to comply with existing expressly
stated contractual obligations owed to such Party’s or its Affiliates’ licensor
with respect to any intellectual property licensed to the other Party under
this Agreement; or (v) to the extent mutually agreed to in writing by the
Parties.


 


11.3.                     Press Release; Disclosure
of Agreement.  On or promptly after the Effective Date, the
Parties will jointly issue a public announcement of the execution of this
Agreement in form and substance substantially as set forth on SCHEDULE 11.3.  Except to the extent required to comply with
applicable law, regulation, rule or legal process or as otherwise
permitted in accordance with this Section 11.3, neither Party nor
such Party’s Affiliates will make any public announcements, press releases or
other public disclosures concerning this Agreement or the terms or the subject
matter hereof without the prior written consent of the other, which will not be
unreasonably withheld. Notwithstanding the foregoing, (a) except for
scientific presentations and publications (which will be governed by Section 11.6
below) each Commercializing Party or its Affiliates may, without the other
Party’s approval, make disclosures pertaining solely to Licensed Products (as
to GSK) or Discontinued Products (as to Isis), provided,
however, that GSK will immediately notify (and provide as much
advance notice as possible to) Isis of any event materially related to Licensed
Products (including in such notice any disclosure of clinical data or results,
material regulatory filings or Approval) so that the Parties may analyze the
need for or desirability of publicly disclosing or reporting such event, any
press release or other similar public communication by GSK related to efficacy
or safety data and/or results of a Licensed Product will be submitted to Isis
for review at least [***] ([***]) Business Days (to the extent permitted by
law) in advance of such proposed public disclosure, Isis will have the right to
expeditiously review and recommend changes to such communication and GSK will
in good faith consider any changes that are timely recommended by Isis or GSK,
as the case may be, and (b) to the extent information regarding this
Agreement has already been publicly disclosed, either Party (or its Affiliates)
may subsequently disclose the same information to the public without the
consent of the other Party. Each Party will 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 will 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.


 


70

















 


11.4.                     Prior Confidentiality
Agreement Superseded.  As of the Effective Date, this
Agreement supersedes the Confidential Disclosure Agreement executed by Isis and
GSK on September 26, 2008 (including any and all amendments thereto).  All information exchanged between the Parties
under that agreement will be deemed Confidential Information hereunder and will
be subject to the terms of this ARTICLE 11.


 


11.5.                     Remedies. 
Notwithstanding Section 12.1, each Party will 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 11.


 


11.6.                     Publications.


 


(a)                                  Prior to Exercise of an
Option.  Prior to GSK’s exercise of an Option for a
given Collaboration Program, all Compounds and Development Candidates with
respect to such Collaboration Program will be considered the sole property of
Isis, and Isis will be free, consistent with its practice with its other
compounds and products, to publish and present data regarding any such
Collaboration Program, and/or Development Candidate; provided,
however, that GSK will have a right to review and comment on any
such publications and Isis will incorporate GSK’s requested changes unless
there is a reasonable basis, that is discussed with GSK, to decline to do
so.  Notwithstanding the foregoing, Isis
may not publish or present any data or information that contains any of GSK’s
Confidential Information without GSK’s prior written consent.


 


(b)                                  After Exercise of an
Option.  After GSK exercises its Option for a given
Collaboration Program, GSK and Isis will publish and present data regarding any
such Collaboration Program pursuant to the provisions of this Section 11.6(b).
After GSK exercises its Option for a given Collaboration Program, and subject
to this Section 11.6(b), GSK will have the right to publish
summaries of results from any human clinical trials generated by Isis or GSK
with respect to the Licensed Compounds without obtaining the consent of Isis
and, except as required under Law, Isis may not publish any of such data,
without the prior consent of GSK.  The
Parties will discuss and reasonably cooperate in order to facilitate the
process to be employed in order to ensure the publication of any such summaries
of human clinical trials data and results as required on the clinical trial
registry of each respective Party, and will provide the other Party via submission
to the Joint Patent Committee, at least [***] ([***]) days prior notice to
review the clinical trials results to be published for the purposes of
preparing any necessary Patent Rights filings. The Parties acknowledge that
scientific lead time is a key element of the value of the Collaboration under
this Agreement and further agree to use Commercially Reasonable Efforts to
control public scientific disclosures of the results of the Development
activities under this Agreement to prevent any potential adverse effect of any
premature public disclosure of such results. The Parties will establish a
procedure for publication review and each Party will first submit to the other
Party through the Joint Patent Committee an early draft of all such publications,
whether they are to be presented orally or in written form, at least [***]
([***]) days prior to submission for publication including, without limitation,
to facilitate the publication of any summaries of human clinical trials data
and 


 


71

















 


results as required on the clinical trial registry of
each respective Party. Each Party will review such proposed publication in
order to avoid the unauthorized disclosure of a Party’s Confidential
Information and to preserve the patentability of inventions arising from the
Collaboration.  If, as soon as reasonably
possible, but no longer than [***] ([***]) days following receipt of an advance
copy of a Party’s proposed publication, the other Party informs such Party that
its proposed publication contains Confidential Information of the other Party,
then such Party will delete such Confidential Information from its proposed
publication.  In addition, if at any time
during such [***] ([***]) day period, the other Party informs such Party that
its proposed publication discloses inventions made by either Party in the
course of the collaboration under this Agreement that have not yet been
protected through the filing of a patent application, or the public disclosure
of such proposed publication could be expected to have a material adverse
effect on any Patents or Know-How solely owned or Controlled by such other
Party, then such Party will either (a) delay such proposed publication,
for up to [***] ([***]) days from the date the other Party informed such Party
of its objection to the proposed publication, to permit the timely preparation
and first filing of patent application(s) on the information involved or (b) remove
the identified disclosures prior to publication.


 


11.7.                     Acknowledgment. Unless otherwise agreed upon in writing
by the Parties, each Party will acknowledge in any press release, public
presentation or publication regarding a Collaboration Program and/or a Licensed
Product, the other Party’s role in discovering and developing the Collaboration
Program, Licensed Product and/or Discontinued Product, as applicable, and that
such Collaboration Program, Licensed Products and Discontinued Products are
under license from Isis and otherwise acknowledge the contributions from the
other Party.


 


ARTICLE 12.


MISCELLANEOUS


 


12.1.                     Dispute Resolution.


 


12.1.1.           Escalation.  In the event
any dispute, controversy or claim arises under, out of, in connection with or
in relation to this Agreement, or the breach, termination, validity or
enforceability of any provision hereof (a “Dispute”),
the Parties will discuss and negotiate in good faith a solution acceptable to
the Parties and in the spirit of this Agreement.  If, after negotiating in good faith pursuant
to the foregoing sentence the Parties fail to reach agreement within sixty (60)
days, then the Dispute may be referred to the executives of each Party (the “Executives”) for resolution at the
request of either Party.  If the
Executives fail, after good-faith discussions, to reach an amicable agreement
on the Dispute within ten (10) Business Days of submission to the
Executives, then either Party’s sole recourse is to submit such Dispute to
binding arbitration pursuant to Section 12.1.2 after providing
written notice to the other Party.


 


12.1.2.           Binding Arbitration.  Any
controversy or claim arising out of or under this Agreement, or the breach
thereof, which is not settled under the procedures set forth in the appropriate
provisions of Section 1.3.3 or Section 12.1.1 and which
is not subject to the final decision-making authority of a Party under the
provisions of Section 1.3.3 will be finally resolved 


 


72

















 


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.  If the
Parties cannot mutually agree on a single arbitrator, the Parties will make
reasonable efforts to appoint three (3) arbitrators, who are each mutually
acceptable to GSK and Isis, 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, the arbitrators will be appointed in accordance with the
rules.  The Parties will share the
expenses for the arbitrators, but will 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 12.1.2 will not
apply to alter or modify the indemnity obligations of the respective Parties
under ARTICLE 8, but arbitration may be sought to interpret such
obligations.  For clarity, the
Arbitrators will not have authority or discretion to decide any matter other
than the matter for decision before them, and any such decision will not
include any award or determination which would amend the applicable terms of
this Agreement.


 


12.1.3.           Certain Matters Subject to
Expert Panel. If, at
any time during the relevant Collaboration Term, the Parties cannot agree
whether [***] has been demonstrated in a particular Collaboration Program, or
whether any applicable Collaboration Target substituted in under Section 1.5.2
is primarily associated with a Rare Disease, the Parties will submit such matter
to a panel of three (3) experts who are experienced in the field of
biopharmaceuticals (an “Expert Panel”).  All members of the Expert Panel must be
mutually agreed by the Parties in good faith and as promptly as possible and
must be free of any conflicts of interest with respect to either or both
Parties.  The Expert Panel will promptly
hold a hearing to review the matter, at which they will consider briefs
submitted by each Party at least fifteen (15) days before the hearing, as well
as reasonable presentations that each Party may present.  The Parties may elect to use separate Expert
Panels for different Collaboration Programs in order to align the expertise of
the members of the Expert Panels with the subject matter of the respective
Collaboration Programs. The determination of the relevant Expert Panel as to
such dispute will be binding on both Parties. 
The Parties will share equally in the costs of the Expert Panel, and
each Party shall bear its own costs associated with preparing for and presenting
to the Expert Panel.  The Parties may
also elect by mutual agreement to use an Expert Panel (or other panels of key
opinion leaders) for guidance on other issues that may arise during the
Collaboration Term.


 


12.2.                     Governing Law.  This Agreement
and any dispute arising from the performance or breach hereof will 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.


 


12.3.                     Assignment and Successors. 
Neither this Agreement nor any obligation of a Party hereunder may be
assigned by either Party without the consent of the other, which will not be
unreasonably withheld, except that each Party may assign this Agreement and the
rights, obligations and interests of such Party, in whole or in part, to any of
its Affiliates, to any purchaser of all or substantially all of its assets or
all or substantially all of its assets to which this Agreement relates or to
any successor corporation resulting from any merger, consolidation, share
exchange or other 


 


73

















 


similar transaction. In addition, Isis may assign or
transfer its rights to receive royalties and milestones under this Agreement
(but no liabilities and provided no security interest is granted to such Third
Party in any Patent Rights that are licensed to GSK under this Agreement for a
Licensed Product or Discontinued Product), without GSK’s consent, to an
Affiliate or to a Third Party in connection with a payment factoring
transaction.


 


12.4.                     Change of Control.


 


12.4.1.           In the event of a Change of Control of
Isis, then, notwithstanding anything to the contrary in this Agreement, Isis
will provide written notice to GSK of the closing of such Change of Control,
and GSK will have the right, within [***] ([***]) days following the public
announcement of the closing thereof, to either:


 


(a)           exercise any unexercised Options by
notifying Isis in writing of GSK’s election to license any Collaboration
Program at a pro-rata reduced Option exercise payment as compared to the Option
exercise payment set forth in Section 5.4 (“Reduced
Option Payment”), based upon the stage of Development of such
Collaboration Program at the time of Change of Control as compared to
completion of a Phase 2 PoC Trial stage of Development, which is set forth on SCHEDULE
12.4 hereto.  Upon GSK’s exercise of
its option pursuant to this Section 12.4.1(a), GSK will be deemed
to have obtained and Isis will be deemed to have granted the license set forth
in Section 4.1.1 with respect to such Collaboration Program(s); or


 


(b)           require Isis and its successor to
reimburse GSK on a quarterly basis within [***] days of Isis’ receipt of GSK’s
invoice, in an amount equal to the product of (i) the [***] minus the [***] multiplied by (ii) [***]
percent ([***]%).  The Parties will enter
into any agreements required to address clinical safety, clinical trial
responsibilities and regulatory matters to comply with applicable laws and
regulations. In the event of GSK’s exercise of its option pursuant to this Section 12.4.1(b) and
the further completion of such Phase 2 PoC Trial, GSK will have the right to
exercise its Option in accordance with this Agreement; or


 


(c)                                  Allow such [***] ([***]) day period to
lapse without providing any such notice of election under this Section 12.4.1,
or otherwise provide Isis with written notice within such period electing not
to exercise either of its options pursuant to Section 12.4.1(a) or
Section 12.4.1(b) above, in either of which cases Isis and GSK
will continue to perform and enjoy their respective rights and obligations with
respect to such Collaboration Programs under the terms of this Agreement.


 


12.4.2.           Upon GSK’s exercise of its option
pursuant to Section 12.4.1(a) or Section 12.4.1(b) above,
Isis will carry out its technology transfer obligations pursuant to Section 4.2
with respect to such Collaboration Program(s). 
For the avoidance of doubt, except as set forth in this Section 12.4,
all other terms and conditions of this Agreement will apply to any such license
granted pursuant to GSK’s exercise of its right hereunder.


 


12.4.3.           Upon the occurrence of a Change of
Control of Isis, Isis will no longer have any rights and GSK will no longer
have any obligations under Section 4.3.3.


 


74
















 


12.5.                     Performance Warranty.  Each Party
hereby acknowledges and agrees that it will 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 Affiliates
and Sublicensees.


 


12.6.                     Force Majeure.  No Party will
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; terrorism; civil commotion;
destruction of production facilities or materials by fire, flood, earthquake,
tornado, tsunami, explosion or storm; labor disturbances; pandemic; epidemic
and failure of public utilities or common carriers.  In such event the Party so failing or
delaying will 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 will 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 will use
reasonable efforts to minimize the duration of any force majeure.


 


12.7.                     Notices.  Any notice or
request required or permitted to be given under or in connection with this
Agreement will 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 Isis, addressed
  to:

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attention: Chief
  Operating Officer & CFO

  
	
   

  	
   

  	
  Fax: 760-918-3592

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attention: General
  Counsel

  
	
   

  	
   

  	
  Fax: 760-268-4922

  
	
   

  	
   

  	
   

  
	
  If to GSK, addressed
  to:

  	
   

  	
  Glaxo Group Limited

  
	
   

  	
   

  	
  Glaxo Wellcome House, Berkeley
  Avenue,

  
	
   

  	
   

  	
  Greenford. Middlesex

  
	
   

  	
   

  	
  UB6 0NN, England

  
	
   

  	
   

  	
  Facsimile: 44 20 8 047
  6904

  
	
   

  	
   

  	
  Attention: Company
  Secretary

  



 


75

















 


	
  with a copy to:

  	
   

  	
  GlaxoSmithKline, LLC

  
	
   

  	
   

  	
  2301 Renaissance
  Boulevard

  
	
   

  	
   

  	
  Mail Code RN0220

  
	
   

  	
   

  	
  King of Prussia, PA
  19406

  
	
   

  	
   

  	
  Attention: Vice
  President and

  
	
   

  	
   

  	
  Associate General
  Counsel,

  
	
   

  	
   

  	
  Legal Operations —
  Business Development

  
	
   

  	
   

  	
  Fax: 610-787-7084

  
	
   

  	
   

  	
   

  
	
  and a copy to:

  	
   

  	
  Morgan,
  Lewis & Bockius LLP

  
	
   

  	
   

  	
  502 Carnegie Center

  
	
   

  	
   

  	
  Princeton, NJ 08540

  
	
   

  	
   

  	
  Attention: Randall B.
  Sunberg

  
	
   

  	
   

  	
  Fax: (609) 919-6701

  



 


or to such other address for such Party as it will have specified by
like notice to the other Party; provided that notices of a change of address
will be effective only upon receipt thereof. 
If delivered personally or by facsimile transmission, the date of
delivery will 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 will 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 will be deemed to be the third (3rd) Business Day after such notice or
request was deposited with the U.S. Postal Service.


 


12.8.                     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.


 


12.9.                     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 will 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 will be construed as a continuing waiver or
subsequent waiver of such condition or term or of another condition or term.


 


12.10.              Severability.  If any
provision hereof should be held invalid, illegal or unenforceable in any
jurisdiction, the Parties will 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 will remain in full force and
effect in such jurisdiction and will 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 will not affect the validity, legality or enforceability of
such provision in any other jurisdiction.


 


12.11.              Entire Agreement.  This
Agreement, together with the Schedules and Appendices hereto, sets forth all
the covenants, promises, agreements, warranties, representations, conditions
and understandings between the Parties and supersedes and terminates all prior
agreements and 


 


76

















 


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 will be binding upon the
Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.


 


12.12.              Independent Contractors. Nothing herein will 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 will assume, either directly or indirectly, any liability
of or for the other Party.  Neither Party
will have the authority to bind or obligate the other Party and neither Party
will represent that it has such authority.


 


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


 


12.14.              Books and Records. Any books and records to be maintained under this
Agreement by a Party or its Affiliates or Sublicensees will be maintained in
accordance with U.S. Generally Accepted Accounting Principles (or any successor
standard) in the case of Isis, and will be maintained in accordance with
International Financial Reporting Standards in the case of GSK, consistently
applied, except that the same need not be audited.


 


12.15.              Further Actions.  Each Party
will 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.


 


12.16.              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 will 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 will be interpreted
or construed against the Party whose attorney prepared the executed draft or
any earlier draft of this Agreement.


 


12.17.              Supremacy.  In the event
of any express conflict or inconsistency between this Agreement and any
Schedule or Appendix hereto, the terms of this Agreement will apply.  The Parties understand and agree that the
Schedules and Appendices hereto are not intended to be the final and complete
embodiment of any terms or provisions of this Agreement, and are to be updated
from time to time during the Agreement Term, as appropriate and in accordance
with the provisions of this Agreement.


 


12.18.              Counterparts. This Agreement may be signed in counterparts, each
and every one of which will 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 will be treated as original
signatures.


 


77

















 


12.19.              Compliance with Laws. Each Party will, and will ensure that its Affiliates
and Sublicensees will, comply with all relevant laws and regulations in
exercising its rights and fulfilling its obligations under this Agreement.


 


[SIGNATURE PAGE FOLLOWS]


 


* - * - * - *


 


78

















 


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


 


 


	
  GLAXO GROUP LIMITED

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Paul Williamson

  	
   

  
	
  Name:

  	
  Paul Williamson

  	
   

  
	
  Title: 

  	
  For and on behalf of
  Edinburgh 

  Pharmaceutical Industries Limited

  	
   

  
	
   

  	
  Corporate Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ISIS PHARMACEUTICALS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ B. Lynne Parshall

  	
   

  
	
  Name:

  	
  B. Lynne Parshall

  	
   

  
	
  Title:

  	
  Chief Operating Officer
  and

  	
   

  
	
   

  	
  Chief Financial Officer

  	
   

  



 


79

















 


List of Appendices and Schedules


 


APPENDIX 1 — Definitions


 


APPENDIX 2(A) — Isis’ Development Candidate
Designation Criteria for Rare Disease Programs / [***] Programs


 


APPENDIX 2(B) — Isis’ Development Candidate
Designation Criteria for ID/Additional Programs


 


APPENDIX 3 — Isis’ Sanctioned Target Designation
Checklist


 


APPENDIX 4 — Isis’ Manufacturing Cost Methodology


 


APPENDIX 5 — Collaboration Programs and
Collaboration Targets


 


APPENDIX 6 — Examples Illustrating Indications


 


APPENDIX 7 — [***] Criteria for the Fifth (5th) Collaboration Program for [***]


 


APPENDIX 8(A) — PoC Success Criteria for Rare
Disease Programs / [***] Programs


 


APPENDIX 8(B) — Phase 1 Success Criteria and PoC
Success Criteria for ID/Additional Programs


 


SCHEDULE 2.1.2(c) — ROFN Terms


 


SCHEDULE 5.11.1 — Isis In-License Agreements


 


SCHEDULE 7.2.5(a) — Isis Core Technology Patents


 


SCHEDULE 7.2.5(b) — Isis Manufacturing and Analytical
Patents


 


SCHEDULE 7.2.5(c) — Isis Product-Specific Patents


 


SCHEDULE 7.2.7 — Prior Agreements


 


SCHEDULE 11.3 — Press Release


 


SCHEDULE 12.4.1 — Applicable Option Exercise Payments in
Change of Control


 


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APPENDIX
1


 


DEFINITIONS


 


For purposes of this Agreement, the following
capitalized terms will have the following meanings.


 


“Acceptance”
means, with respect to an NDA filed for a Licensed Product, (a) in the
United States, the receipt of written notice from the FDA in accordance with 21
C.F.R. § 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 will 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 JNDA
from the Koseisho  (i.e., the Japanese
Ministry of Health and Welfare, or any successor agency thereto).


 


“Affiliate”
of an entity means any corporation, firm, partnership or other entity, whether
de jure or de facto, which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with a
Party to this Agreement. An entity will be deemed to control another entity if
it (i) owns, directly or indirectly, 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 foreign corporation in a particular
jurisdiction) of such other entity, or has other comparable ownership interest
with respect to any entity other than a corporation; or (ii) has the
power, whether pursuant to contract, ownership of securities or otherwise, to
direct the management and policies of the entity.  Notwithstanding the above, Regulus
Therapeutics Inc. will not be deemed an “Affiliate” of
Isis for the purposes of this Agreement under any circumstances.


 


“Agreement”
will mean this Research, Development and License Agreement.


 


“Agreement  Term” has the meaning set forth in Section 9.1.4.


 


“Alliance Management
Activities” means the following:


 


(a)                                  Promoting the overall health of the
Collaboration and relationship between the Parties;


 


(b)                                  Developing a mutually agreed alliance
launch plan covering any activities and systems that the Parties need to
implement within the first one hundred (100) days after the Effective Date to
support the Collaboration;


 


(c)                                  Organizing JSC meetings, including
agendas, drafting minutes, and publishing final minutes;


 


(d)                                  Creating and maintaining a current list
of Collaboration Targets, Collaboration Programs (including whether such
programs are Rare Disease Programs, CFB Programs or ID/Additional Programs),
applicable Development Candidates and Back-Up Compounds, and Phase 2 PoC
Trials, as determined pursuant to this Agreement;


 


81

















 


(e)                                  Supporting the co-chairs of the JSC with
organization of meetings, information exchange, meeting minutes, and
facilitating dispute resolution as necessary;


 


(f)                                    Preparing status and progress reports on
the above as determined necessary by the JSC;


 


(g)                                 Ensuring compliance in maintaining Isis’
Safety Database as outlined in Section 4.4; and


 


(h)                                 Ensuring proper approval of publications
prior to submission as required in Section 11.6.


 


“Alliance Manager”
has the meaning set forth in Section 1.3.5.


 


“Alnylam”
means Alnylam Pharmaceuticals, Inc.


 


“Alnylam Agreement”
means that certain Amended and Restated Strategic Collaboration and License
Agreement dated April 28, 2009 entered into between Isis and Alnylam.


 


[***][***]


 


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


 


“Annual”
means a Calendar Year.


 


“Antisense”
means the use of an ASO to modulate expression of a target gene.


 


“API” means
the bulk active pharmaceutical ingredient manufactured in accordance with cGMP
for a Development Candidate or Licensed Product.


 


“Applicable Law”
or “Law” means all applicable laws,
statutes, rules, regulations and other pronouncements having the effect of law
of any federal, national, multinational, state, provincial, county, city or
other political subdivision, agency or other body, domestic or foreign,
including but not limited to any applicable rules, regulations, guidelines, or
other requirements of the regulatory authorities that may be in effect from
time to time.


 


“Approval” means, with respect to any Licensed Product in any
regulatory jurisdiction, approval from the applicable Regulatory Authority
sufficient for the manufacture, distribution, use and sale of the Licensed
Product in such jurisdiction in accordance with Applicable Laws. In
jurisdictions where the applicable Regulatory Authority sets the pricing
authorizations necessary for a Licensed Product, except for MAA Approval,
Approval will not be deemed to have occurred if the final approval to market
and sell the Licensed Product is being withheld because GSK (or its Affiliates
or Sublicensee) and the Regulatory Authority have not yet determined pricing
even if all other approvals, licenses, registrations or authorizations
necessary for marketing, sale and/or use of such Licensed Product in such
jurisdiction have been obtained.


 


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“Aptamer”
means an oligonucleotide that was designed to specifically bind, and does
specifically bind, to a target protein.


 


“ASO”
means an oligonucleotide compound, or analog, mimic or mimetic thereof, having
a sequence that is at least six (6) bases long and that modulates
expression of a gene target via the binding, partially or wholly, of such
compound to the RNA of such gene target.


 


“Back-Up Compound”
means, with respect to a given Compound for a given Collaboration Program, any
Compound other than the lead Development Candidate developed under such
Collaboration Program, that (i) is identified at the time the lead
Development Candidate is identified and has the same or similar chemistry as
the lead Development Candidate and (ii) is designed to inhibit the same
Collaboration Target as the lead Development Candidate. A “Back-Up
Compound” includes, without limitation, any Development Candidate in
a given Collaboration Program that has been modified, for example, by
formulation, linker to antibody or any other targeting approach.


 


“Bankruptcy Code”
has the meaning set forth in Section 9.2.5(b).


 


“Base [***] Field”
has the meaning set forth in Section 1.6.2(b).


 


“Base [***] Program”
has the meaning set forth in Section 1.6.2(b).


 


“Breaching Party”  has the meaning set forth in Section 9.2.2(a).


 


“Bring Down Date”
has the meaning set forth in Section 7.2.


 


“Business Day”
means 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.


 


“Calendar Quarter”
means 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.


 


“Calendar Year”
means a year of 365 days (or 366 days in a leap year) beginning on January 1
(or, with respect to 2009, the Effective Date) and ending on December 31,
and so on year-by-year.


 


[***]


 


“[***] Data Package”
has the meaning set forth in Section 1.6.2(c).


 


[***] means (i) the
[***], so long as the [***] Program in the [***]remains the subject of a
Collaboration Program or license granted under Section 4.1.1; and (ii) if
GSK elects to pursue a [***] Program in the [***] (and pays Isis the applicable
payments under [***]), the [***] will also include the [***] so long as
the [***] remains the subject of a Collaboration Program or license granted
under Section 4.1.1.


 


“[***] Notice”
has the meaning set forth in Section 1.6.2(b).


 


“[***] Program”
has the meaning set forth in Section 2.1.2(d).


 


“[***] Program”
means a Collaboration Program focused on the gene target, [***] and will
include (i) the Base [***] Program, (ii) the Same Compound-Expanded
[***] Program if elected in accordance with Section 1.6.2, and (iii) the
Different Compound-Expanded [***] Program if 


 


83

















 


elected in accordance with Section 1.6.2.


 


“[***] Program”
has the meaning set forth in Section 2.1.2(d).


 


“cGMP” means
current Good Manufacturing Practices as specified in the United States Code of
Federal Regulations, ICH Guideline Q7A, or equivalent laws, rules, or
regulations of an applicable Regulatory Authority at the time of manufacture.


 


“Change of Control”
means, with respect to a Party, (a) a merger or consolidation of such
Party with a Third Party which results in the voting securities of such Party
outstanding immediately prior thereto ceasing to represent at least fifty percent
(50%) of the combined voting power of the surviving entity immediately after
such merger or consolidation, (b)  a transaction or series of related
transactions in which a Third Party, together with its Affiliates, becomes the
owner of fifty percent (50%) or more of the combined voting power of the
outstanding securities of such Party, (c) the sale or other transfer to a
Third Party of all or substantially all of such Party’s business to which the
subject matter of this Agreement relates, (d) the stockholders or equity
holders of such Party will approve a plan of complete liquidation of such Party
or an agreement for the sale or disposition by such Party of all or a
substantial portion of such Party’s assets, other than pursuant to the
transaction as described above or to an Affiliate, or (e) a change in the
composition of the Board over a period of twelve (12) consecutive months or
less such that a majority of the Board members ceases by reason of one or more
contested elections by a Third Party for Board membership to be comprised of
individuals whose election is not endorsed by a majority of the members of the
Board immediately before the date of election.


 


“Claims” has
the meaning set forth in Section 8.1.


 


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


 


“Collaboration”
means the conduct of Collaboration Programs in accordance with this Agreement,
including activities associated with any Back-Up Compounds and Follow-On
Compounds in accordance with ARTICLE 1.


 


“Collaboration Patents”
has the meaning set forth in Section 6.1.2.


 


“Collaboration
Program” means (i) a research and development program set
forth on APPENDIX 5 as of the Effective Date, (ii) the sixth (6th) research and
development program added to this Agreement in accordance with Section 1.5.1,
and (iii) any research and development program substituted into this
Agreement in accordance with Section 1.5.2.


 


“Collaboration Program
Research Plan” has the meaning set forth in Section 1.4.1(c)(ii).


 


“Collaboration Target”
means a gene target that is the subject of (i) a
Collaboration Program set forth on APPENDIX 5 as of the Effective Date, (ii) the
sixth (6th) research and development program added to this
Agreement in accordance with Section 1.5.1, or (iii) any
research and development program substituted into this Agreement in accordance
with Section 1.5.2.


 


“Collaboration
Target Acceptance Criteria” has the meaning set forth in Section 1.5.1.


 


“Collaboration
Term” has the meaning set forth in Section 1.2.


 


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


 


“Commercialize,”
“Commercialization” or “Commercializing” means any and all
activities directed to marketing, promoting, detailing, distributing,
importing, having imported, exporting, having exported, selling or offering to
sell a Licensed Product following receipt of Approval for such Licensed Product
in the applicable country, including, without limitation, conducting pre-and
post-Approval activities, including studies reasonably required to increase the
market potential of the Licensed Product and studies to provide improved
formulation and Licensed Product delivery, and launching and promoting the
Licensed Product in each Major Country.


 


“Commercializing Party”
means (a) GSK, with respect to any Licensed Compounds and any Licensed
Products other than Discontinued Products, in each case which are being
Developed and Commercialized by or on behalf of GSK, its Affiliates or
Sublicensees hereunder, and (b) Isis, with respect to any Discontinued
Products, in each case which are being Developed and Commercialized by or on
behalf of Isis, its Affiliates or Sublicensees hereunder.


 


“Commercially Reasonable
Efforts” means the carrying out of discovery, research,
development or commercialization activities using good-faith commercially
reasonable and diligent efforts, using the efforts that the applicable Party
would reasonably devote to a compound or product of similar market potential or
profit potential at a similar stage in development or product life resulting
from its own research efforts, based on conditions then prevailing and taking
into account, without limitation, issues of safety and efficacy, regulatory
authority-approved labeling, product profile, the competitiveness of
alternative products in the marketplace, the likely timing of the product’s
entry into the market, the patent and other proprietary position, the
likelihood of regulatory approval and other relevant scientific, technical and
commercial factors.


 


“Competitive Infringement”
has the meaning set forth in Section 6.5.1.


 


“Compound”
means any ASO discovered by Isis that modulates the expression of a
Collaboration Target via the binding, partially or wholly, of such ASO to the
RNA of such Collaboration Target, and any salts, solvates, hydrates,
hemihydrates, metabolites, enantiomers, racemates and all other optically
active forms, prodrugs and conjugates of such ASO.


 


“Confidential Information”
has the meaning set forth in Section 11.1.


 


“Control” or
“Controlled” means, with respect to
any patent or other intellectual property right, possession by a Party
(including its Affiliates) of the right (whether by ownership, license or
otherwise) to grant to the other Party access, ownership or a license,
sublicense and/or other right to or under such patent or other intellectual
property right as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party. Notwithstanding anything
to the contrary under this Agreement, with respect to any Third Party that
becomes an Affiliate of Isis after the Effective Date (as the result of a
Change of Control wherein such Third Party acquires Isis), no intellectual
property of such Third Party will be included in the licenses granted hereunder
by virtue of such Third Party becoming an Affiliate of Isis, in each case where
such intellectual property (1) existed at the time such Third Party became
an Affiliate of Isis, or (2) is created by such Third Party after it
becomes an Affiliate without using any Isis intellectual property.


 


“Cover,” “Covered” or “Covering”
means, with respect to a patent, that, but for rights granted to a Person under
such patent, the practice by such Person of an invention claimed in such patent
would infringe a Valid Claim included in such patent, or in the case of a
patent that is a patent application, would infringe a Valid Claim in such
patent application if it were to issue as a patent.


 


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“CREATE Act”
has the meaning set forth in Section 6.8.


 


“Develop,” “Developing” or “Development”
means with respect to a Compound or a Licensed Product, any and all discovery,
characterization, or preclinical, clinical, or regulatory activity with respect
to such Compound or Licensed Product to seek Approval (including the submission
of all necessary filings with applicable Regulatory Authorities to support such
preclinical and clinical activities and Approval), including human clinical
trials conducted after Approval of such Licensed Product to seek Approval for
additional Indications for such Licensed Product.


 


“Development Candidate” means any Compound targeting a
Collaboration Target that is reasonably determined by Isis’ RMC in accordance
with Isis’ standard procedures for designating development candidates as ready
to start IND-Supporting Toxicology Studies except as otherwise set forth in APPENDIX
2(B) with respect to ID/Additional Programs. APPENDIX 2(A) lists
examples of certain criteria Isis considers when determining whether a Compound
should be designated a Development Candidate under the Rare Diseases Programs
and the [***] Program.  APPENDIX 2(B) lists
examples of certain criteria Isis considers when determining whether a Compound
should be designated a Development Candidate under the ID/Additional Programs.


 


“Development Milestone
Event” has the meaning set forth in Section 5.5.1.


 


“Different
Compound-Expanded [***] Program” has the meaning set forth in Section 1.6.2(d).


 


“Disclosing Party”
has the meaning set forth in Section 11.1.


 


“Discontinued
Product” means (x) a Returned Candidate, and/or (y) any
Compound or Licensed Product that is the subject of a termination in the event
GSK terminates this Agreement (or the applicable license under this Agreement)
under Section 9.2.1 or Isis terminates this Agreement (or the
applicable license under this Agreement) under Section 9.2.2 or 9.2.3.


 


“Dispute”
has the meaning set forth in Section 12.1.1.


 


“DMC”
means Isis’ Development Management Committee, or any successor committee.


 


“Effective Date”
has the meaning set forth in the Preamble of this Agreement.


 


“Election Notice”
has the meaning set forth in Section 10.1.


 


“EMEA” means
the European Medicines Agency and any successor entity thereto.


 


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


 


“Estimated Incremental
Costs” has the meaning set forth in Section 1.6.2(d)(iii).


 


“Executives”
has the meaning set forth in Section 12.1.1.


 


“Expanded [***] Field”
has the meaning set forth in Section 1.6.2(b).


 


“Expert Panel”
has the meaning set forth in Section 12.1.3.


 


86
















 


“First [***] Election
Deadline” has the meaning set forth in Section 1.6.2(b).


 


“Final [***] Election
Deadline” has the meaning set forth in Section 1.6.2(c).


 


“First Commercial Sale”
means the first sale of a Licensed Product by GSK, its Affiliate or a Sublicensee
to a Third Party in a particular country after Approval of such Licensed
Product has been obtained in such country.


 


“Follow-On Compound”
means, with respect to a given Compound for a given Collaboration Program, any
Compound other than the Development Candidate and Back-Up Compound developed
under such Collaboration Program that is designed to inhibit the same
Collaboration Target as such lead Development Candidate and Back-Up Compound
but has a different chemistry.  For
clarity, a “Follow-on Compound” will not include any
Back-Up Compound to the lead Development Candidate in a given Collaboration
Program.


 


“Generic Product”  means a Third Party’s product(s) having the same or
substantially the same active pharmaceutical ingredient as a Licensed Product
and for which in the US an ANDA has been filed naming the Licensed Product as
the reference listed drug or outside of the U.S., an equivalent process where
bioequivalence to the Licensed Product has been asserted.


 


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


 


“Good Data Management
Practices” has the
meaning set forth in Section 1.4.6(a).


 


“GSK” has
the meaning set forth in the Preamble of this Agreement.


 


“GSK Collaboration Know-How”
has the meaning set forth in Section 6.1.2.


 


“GSK Collaboration Patents”
has the meaning set forth in Section 6.1.2.


 


“GSK Collaboration
Technology” has the meaning set forth in Section 6.1.2.


 


“GSK Know-How”
means any Know-How Controlled by GSK on the Effective Date and/or during the
Collaboration Term, but specifically excluding
the GSK Collaboration Know-How.


 


“GSK Know-How Royalty”
has the meaning set forth in Section 5.9.2(b).


 


“GSK
Orange Book Patents” means the Patent Rights that are listed
with, and/or are required to be listed with, applicable Regulatory Authorities
Covering any Licensed Product being Developed by GSK, its Affiliates or
Sublicensees hereunder that GSK, its Affiliate or Sublicensee intends to, or
has begun to, Commercialize, and that have become the subject of an NDA
submitted to any applicable Regulatory Authority, such listings to include,
without limitation, all so-called “Orange Book”
listings required under the Hatch-Waxman Act and all so-called “Patent Register” listings as required in Canada.  For purposes of determining royalties payable
under Section 5.9, GSK Orange Book Patents will include any and all foreign
equivalent and counterpart Patent Rights to the Patent Rights described above.


 


“GSK Patent”
means any Patent Rights included in the GSK Technology.


 


“GSK Patent Royalty”
has the meaning set forth in Section 5.9.1.


 


“GSK Product-Specific
Patents” means all Product-Specific Patents Controlled by GSK on
or after the Effective Date.


 


“GSK Supported Pass-Through
Costs” means (1) the licensing costs and payments payable
by 


 


87

















 


Isis to Third Parties to the extent arising from
Patent Rights, Know-How or other intellectual property rights that (i) are
included in the Licensed Patents or Licensed Know-How; (ii) are necessary
to Develop, Manufacture and/or Commercialize Compounds within a Collaboration
Program, Licensed Compounds and/or Licensed Products; and (iii) [***]


 


“GSK Technology”
means the GSK Collaboration Technology, Jointly-Owned Collaboration Technology,
GSK Product-Specific Patents and any trademarks described in Section 4.1.5.


 


“HSR” means
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.


 


[***]


 


“ID/Additional Program”
means (i) the fifth (5th)
Collaboration Program focused on [***]; and (ii) the sixth (6th), if any, Collaboration Program added to this
Agreement in accordance with Section 1.5.1.


 


“IDJSC” has
the meaning set forth in Section 1.3.6.


 


“IND” means
an Investigational New Drug Application (as defined in the Food, Drug and
Cosmetic Act, as amended) filed with the FDA or its foreign counterparts.


 


“IND-Supporting Toxicology
Studies” means the pharmacokinetic and toxicology studies
required to meet the requirements for filing an IND.


 


“Indemnitee”
has the meaning set forth in Section 8.3.


 


“Indication”
means, with respect to a Licensed Product, such Licensed Product’s interference
with a gene to affect a specific primary endpoint of a pathophysiologic state,
regardless of etiology.  For example
only, in the disease of hypercholesterolemia, the reduction of LDL-C in
different patient populations is considered the same Indication in each such
population, irrespective of the fact that homozygous familial
hypercholesterolemia (FH) patients, heterozygous FH patients, and severe
hypercholesterolemia patients are distinct patient populations all having the
same pathophysiologic state, as illustrated with examples set forth on APPENDIX
6 attached hereto.  Conversely, and
for example only, in the disease, age-related macular degeneration (AMD), the
improvement of visual acuity in a patient population is considered a different
Indication for patients with wet AMD as compared to patients with dry AMD,
irrespective of the fact the drug treats the same endpoint (i.e., visual acuity), because wet AMD versus dry AMD are
distinct pathophysiologic states.


 


“Initiation of A Phase 1
Trial” means the first visit by the first human subject in a
Phase 1 Trial during which dosing of a Development Candidate occurs.


 


“Initiation of A Phase 2
PoC Trial” means the first visit by the first human subject in a
Phase 2 PoC Trial during which dosing of a Development Candidate occurs.


 


“Initiation of A Phase 3 Trial”
means the first visit by the first human subject in a Phase 3 Trial during
which dosing of a Licensed Compound or Licensed Product occurs.


 


“Integrated Product Plan”
or “IPP” has the meaning set forth in Section 4.3.3.


 


“In Vivo Efficacy”
means, on an ID/Additional Program-by-ID/Additional Program basis, the
Development Milestone Event that is achieved hereunder upon the later of (i) demonstration
of pharmacodynamic modulation in vivo or,
with respect to the fifth (5th)
Collaboration Program, achievement of the criteria set forth on APPENDIX 7,
in each case as confirmed by the JSC (subject to the dispute resolution
provisions in Section 12.1.3, if the Parties cannot reach
consensus), or (ii) designation of a Development Candidate for such
ID/Additional Program.


 


88

















 


“Isis” means
Isis Pharmaceuticals, Inc.


 


“Isis Collaboration
Know-How” has the meaning set forth in Section 6.1.2.


 


“Isis Collaboration Patents”
has the meaning set forth in Section 6.1.2.


 


“Isis Collaboration
Technology” has the meaning set forth in Section 6.1.2.


 


“Isis Core Technology
Patents” means all Patent Rights Controlled by Isis or its
Affiliates on or after the Effective Date necessary or useful for the
Development and/or Commercialization of Licensed Compounds and/or Licensed
Products, in any case other than Isis Product-Specific Patents or Isis
Manufacturing and Analytical Patents.  A
list of Isis Core Technology Patents as of the Effective Date is set forth on SCHEDULE
7.2.5(a) attached hereto.


 


“Isis Database”
has the meaning set forth in Section 4.4.1.


 


“Isis Follow-On Product”
has the meaning set forth in Section 2.1.2(c).


 


“Isis In-License Agreements”
has the meaning set forth in Section 5.11.1(a).


 


“Isis Know-How”
means any Know-How Controlled by Isis or its Affiliates on or after the
Effective Date, including any Jointly-Owned Collaboration Know-How and Isis
Collaboration Know-How, necessary or useful for the Development and/or
Commercialization of Licensed Compounds and/or Licensed Products. Isis Know-How
does not include the Isis Manufacturing and Analytical Know-How.


 


“Isis Manufacturing and
Analytical Know-How” means Know-How Controlled by Isis or its
Affiliates on or after the Effective Date, including Jointly-Owned Collaboration
Know-How that relates to the synthesis or analysis of Licensed Compounds and/or
Licensed Products regardless of sequence or chemical modification. Isis
Manufacturing and Analytical Know-How does not include the Isis Know-How.


 


“Isis Manufacturing and Analytical
Patents” means Patent Rights Controlled by Isis or its
Affiliates on or after the Effective Date, including Jointly-Owned
Collaboration Patents, that claim methods and materials used in the synthesis
or analysis of Licensed Compounds and/or Licensed Products regardless of
sequence or chemical modification. A list of Isis Manufacturing and Analytical
Patents as of the Effective Date is set forth on SCHEDULE 7.2.5(b) attached
hereto.  Isis Manufacturing and
Analytical Patents do not include the Product-Specific Patents or the Isis Core
Technology Patents.


 


“Isis
Orange Book Patents” means the Patent Rights that are listed
with, and/or are required to be listed with, applicable Regulatory Authorities
Covering any Discontinued Product being Developed by Isis, its Affiliates or
Sublicensees hereunder, that Isis, its Affiliate or Sublicensees intend to, or
has begun to, Commercialize, and that have become the subject of an NDA
submitted to any applicable Regulatory Authority, such listings to include, without
limitation, all so-called “Orange Book”
listings required under the Hatch-Waxman Act and all so-called “Patent Register” listings as
required in Canada.  For purposes of
determining royalties payable under Section 5.10, Isis Orange Book
Patents will include any and all foreign equivalent and counterpart Patent
Rights to the Patent Rights described above.


 


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“Isis Patents”
means any Patent Rights included in the Licensed Patents.


 


“Isis Product-Specific
Patents” means all Product-Specific Patents Controlled by Isis
or its Affiliates on or after the Effective Date necessary or useful for the
Development and/or Commercialization of Licensed Compounds and/or Licensed
Products. A list of Isis Product-Specific Patents as of the Effective Date is
set forth on SCHEDULE 7.2.5(c) attached hereto.  For purposes of clarification, any Isis
Product-Specific Patents assigned to GSK as set forth in Section 6.2.2(b) will
still be considered Isis Product-Specific Patents for determining the royalty
term and applicable royalty rates under ARTICLE 5.


 


“Isis Supported
Pass-Through Costs” means (1) the licensing costs and
payments payable by Isis to Third Parties to the extent arising from any Third
Party intellectual property in-licensed by Isis that is (i) included in
the Licensed Patents or Licensed Know-How; and (ii) necessary to Develop,
Manufacture and/or Commercialize Compounds within a Collaboration Program,
Licensed Compounds and/or Licensed Products; and (2) all costs and
payments of any kind owing to [***] or its affiliate under that certain [***]; provided, however, that “Isis Supported
Pass-Through Costs” specifically excludes any licensing costs and
payments owed to a Third Party that primarily claim or Cover [***].


 


“Japan NDA”
or “JNDA” means the Japanese equivalent of an NDA filed with the Koseisho (i.e.,
the Japanese Ministry of Health and Welfare, or any successor agency thereto).


 


“JNDA Approval” means the Approval of
a JNDA by the Koseisho  (i.e., the Japanese Ministry of Health and Welfare, or any
successor agency thereto) for the
applicable Licensed Product in Japan.


 


“JNDA Filing” means the acceptance by
the Koseisho  (i.e., the Japanese Ministry of Health and Welfare, or any
successor agency thereto) of the filing
of a JNDA for the applicable Licensed Product.


 


“Joint Patent Committee” will have
the meaning set forth in Section 6.1.3.


 


“Jointly-Owned
Collaboration Know-How” has the meaning set forth in Section 6.1.2.


 


“Jointly-Owned
Collaboration Patents” has the meaning set forth in Section 6.1.2.


 


“Jointly-Owned
Collaboration Technology” has the meaning set forth in Section 6.1.2.


 


“JSC” has
the meaning set forth in Section 1.3.1.


 


“Know-How”
means inventions, technical information, know-how and materials, including
technology, software, instrumentation, devices, data, compositions, formulas,
biological materials, assays, reagents, constructs, compounds, discoveries,
procedures, processes, practices, protocols, methods, techniques, results of
experimentation or testing, knowledge, trade secrets, skill and experience, in
each case whether or not patentable or copyrightable.


 


“Licensed Compound”
means any Compound included in a Collaboration Program for which GSK has
exercised its Option under Section 3.1 of this Agreement.


 


“Licensed IP”
means the Licensed Patents and Licensed Know-How.


 


“Licensed Know-How”
means Isis Manufacturing and Analytical Know-How, and Isis Know-How.


 


“Licensed Patents”
means the Isis Product-Specific Patents, Isis Core Technology Patents and Isis
Manufacturing and Analytical Patents.


 


90

















 


“Licensed Product”
means a pharmaceutical product having a Licensed Compound as its active
ingredient.


 


“Losses” has
the meaning set forth in Section 8.1.


 


“MAA Approval”
means the receipt of the first Approval for the applicable Licensed Product in
any EU country, and the grant of pricing and reimbursement approval for such
Licensed Product at a level acceptable to GSK [***].


 


“MAA
Filing” means filing with
the EMEA of a marketing authorization application (“MAA”) for the applicable Licensed
Product under the centralized European procedure.  If the centralized EMEA filing procedure is
not used, MAA Filing will be achieved upon the first filing of an MAA for the
applicable Licensed Product in any Major Country.


 


“Major Country”
will mean any of the following countries: the United States, Japan, the United
Kingdom, Germany, France, Italy or Spain and, [***].


 


“Major EU Markets”
means the United Kingdom, France, Germany, Italy and Spain.


 


“Manufacture”
or “Manufacturing” means 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 and clinical purposes, of API, a Compound, or a Licensed
Product.


 


“Milestone Event”
means a Development Milestone Event or a Sales Milestone Event, as the case may
be.


 


“NDA”  means a New Drug Application filed with the FDA after completion of
clinical trials to obtain Approval for the applicable Licensed Product in the
United States.


 


“NDA
Approval” means the
Approval of an NDA by the FDA for the applicable Licensed Product in the U.S.


 


“NDA Filing” means the acceptance by
the FDA of the filing of an NDA for the applicable Licensed Product.


 


“Net Sales”
means, with respect to any Licensed Product, the gross invoiced sales of such
Licensed Product sold by either (i) GSK, its Affiliates or Sublicensees or
(ii) as the case requires, Isis, 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 extent actually taken by such Third Party
customer), on such sales for:  (a) customary
trade, quantity, and cash discounts; (b) customary and reasonable credits,
rebates and chargebacks (including those to managed-care entities and
government agencies including Medicare and Medicaid), and allowances or credits
to customers on account of rejection or returns (including, but not limited to,
wholesaler and retailer returns) or on account of retroactive price reductions
affecting such Licensed Product; (c) freight, postage and duties, and
transportation charges relating to such Licensed Product, including handling
and insurance thereto; (d) sales taxes, value added taxes (VAT), and other
taxes directly linked to the sales of such Licensed Product to the extent
included in the gross amount invoiced; (e) actual bad debt, in an amount
up to 2% of Net Sales; (f) commissions 


 


91

















 


allowed or paid to Third Party distributors, brokers,
or agents relating to such Licensed Product other than sales personnel, sales
representatives, and sales agents 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 Isis’ 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 direct Sublicensees
unless as part of a commercial sale and the paying party is the end user of the
relevant Licensed Product.


 


A Licensed Product provided to patients free of charge
for compassionate use will not be included in Net Sales.


 


In the event a Licensed Product is sold as part of a
Combination Product (as defined below), the Net Sales from the Licensed Product,
for the purposes of determining royalty payments, will be determined by
multiplying the Net Sales (as determined without reference to this paragraph)
of the Combination Product by the fraction A/A+B, where A is the average net
sales price (determined substantially in accordance with the above) of the
Licensed Product when sold separately in finished form and B is the average net
sales price (determined substantially in accordance with the above) of the
other therapeutically active pharmaceutical compound(s) included 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 average
net sales price cannot be determined for both the Licensed Product and all
other therapeutically active pharmaceutical compounds included in the
Combination Product, Net Sales for the purposes of determining royalty payments
will be calculated as above, but the average net sales price in the above
equation will be replaced by a good-faith estimate of the fair market value of
the compound(s) for which no such price exists.  As used above, the term “Combination
Product” means any pharmaceutical product which consists of a
Licensed Product and any other therapeutically active pharmaceutical
compound(s).


 


“Non-Breaching Party”
has the meaning set forth in Section 9.2.2(a).


 


“Objective”
has the meaning set forth in Section 1.1.


 


[***]


 


“Option”
means GSK’s exclusive option set forth in Section 3.1 to
exclusively license a Collaboration Program.


 


“Option Deadline”
has the meaning set forth in Section 3.1.


 


“Option Exercise Effective
Date” has the meaning set forth in Section 3.2.3.


 


“Party” or “Parties” means GSK and Isis
individually or collectively.


 


“Patent Costs”
will mean the reasonable fees and expenses paid to outside legal
counsel, and filing, maintenance and other reasonable out-of-pocket expenses
paid to Third Parties, incurred in connection with the Prosecution and
Maintenance of Patent Rights.


 


92

















 


“Patent Rights”
means (a) patents, patent applications and similar government-issued
rights protecting inventions in any country or jurisdiction however
denominated, (b) all priority applications, divisionals, continuations,
substitutions, continuations-in-part of and similar applications claiming
priority to any of the foregoing, and (c) all patents and similar
government-issued rights protecting inventions issuing on any of the foregoing
applications, together with all registrations, reissues, renewals,
re-examinations, confirmations, supplementary protection certificates, and
extensions of any of (a), (b) or (c).


 


“Permitted Licenses”
means (1) licenses granted by Isis before and after the Effective Date to
any Third Party under the Isis Core Technology Patents, the Isis Manufacturing
and Analytical Patents, or the Isis Manufacturing and Analytical Know-How (but
not under the Isis Product-Specific Patents) to (a) use oligonucleotides
(or supply oligonucleotides to end users) in quantities not to exceed [***] per
oligonucleotide per end user solely to conduct Pre-Clinical Research, or (b) enable
such Third Party to broadly manufacture or formulate oligonucleotides, where
such Third Party is primarily engaged in providing contract manufacturing or
services and is not engaged in drug discovery, development or
commercialization; and (2) material transfer agreement with academic collaborators
or non-profit institutions to conduct noncommercial research on gene targets.


 


“Person”
will 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.


 


“Phase 1 Trial”
means a Clinical Study in any country, the principle purpose of which is a
preliminary determination of safety in healthy individuals or patients that
would satisfy the requirements of 21 CFR 312.2(a), or an equivalent clinical
study required by a Regulatory Authority in a jurisdiction outside of the
United States.


 


“Phase 1 Trial
Design/Endpoints for an ID/Additional Program” means the
clinical trial design and primary/secondary endpoints for an ID/Additional
Program (i) to be discussed in consultation with the IDJSC and subject to
GSK’s decision making authority, mutually agreed by Isis and GSK at such time,
if at all, as a Development Candidate is ready to initiate a Phase 1 Trial and (ii) intended
by GSK to meet both sets of the Phase 1 Success Criteria set forth in APPENDIX
8(B).


 


“Phase 2 PoC Data Package”
means, with respect to a particular Development Candidate, [***]


 


“Phase 2  PoC Trial” means, with respect to a Collaboration
Program, the first phase 2a Clinical Study(ies) in human patients designed to
provide evidence of short-term safety,
efficacy and tolerability of a Development Candidate within such
Collaboration Program.  For clarity, for
an ID/Additional Program, the first Clinical Study in HBV infected patients
shall not be deemed a Phase 2 PoC Trial, unless otherwise mutually agreed in
writing by GSK and Isis.


 


“Phase 2 PoC Trial Costs”
means internal and/or external expenses and costs of a Phase 2 PoC Trial,
including, without limitation, investigator grants, laboratory services,
clinical PK assays, carcinogenicity studies, CMC studies, CRO services and
pass-throughs, pharmacovigilance and risk management activities, costs for
packaging, distribution and reconciliation (including labels and translations,
inventory control, IVRS, off-site storage and destruction), data management
(including EDC), clinical study reports, drug costs (API, Compound or drug
product containing a Compound) at Isis’ Cost of Goods, investigator meetings,
monitoring, DSMB costs, program-specific travel, metabolomics assays, courier
services, clinical trial liability insurance costs (allocated to such trial)
quality assurance costs for auditing clinical trial activities and preclinical 


 


93

















 


studies support (report reviews and CMC review). Isis’
internal costs with respect to its employees performing such activities will be
calculated at the FTE Rate at such time.


 


(a)                                  “Cost of Goods”
means, with respect to units of Compound or drug product containing such
Compound manufactured by or on behalf of Isis, the fully absorbed cost incurred
by Isis to manufacture such Compound and such drug product as calculated and
determined in good faith by Isis using the procedures and methodologies
described in APPENDIX 4 which are used by Isis to calculate and
determine the cost incurred by Isis to manufacture compounds and products for
Isis’ Third Party collaboration partners.


 


(b)                                  “FTE” means the
equivalent of the work of one (1) employee with appropriate professional
scientific and/or technical or managerial experience, working on a dedicated
full-time basis for one (1) year (consisting of at least a total of one
thousand eight hundred twenty (1,820) hours per year of dedicated effort,
excluding vacations and holidays) of work. Overtime will not be counted toward
the number of hours that are used to calculate the FTE contribution.


 


(c)                                  “FTE Rate” means the fully
burdened rate Isis charges its Third Party collaboration partners for Isis
FTEs.


 


“Phase 2 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.  A “Phase 2
Trial” includes a Phase 2 PoC Trial.


 


“Phase 3 Trial”
means a pivotal Clinical Study (whether or not denominated as a “Phase 3” Clinical Study under applicable regulations) in
human patients that is of the size and design agreed to by a Regulatory
Authority to be appropriate to establish that the Licensed Product is safe and
effective for its intended use; to define warnings, precautions and adverse
reactions that are associated with the Licensed Product in the dosage range to
be prescribed; and to support Approval of such Licensed Product.


 


“Phase 4 Trial”
means a Clinical Study in any country which is conducted after Approval of a
Licensed 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.


 


“Platform Blocking IP”
means Third Party intellectual property that is necessary to Develop and/or
Commercialize a particular Licensed Product, where the financial obligations
for which would have been considered Isis Supported Pass-Through Costs had Isis
Controlled such Platform Blocking IP on the Effective Date.


 


“PoC Cost Limit”
has the meaning set forth in Section 1.7.1.


 


94

















 


“PoC Success Criteria”
means the criteria to be discussed and, subject to [***] promptly mutually
agreed by Isis and GSK at such time, if at all, as a Collaboration Program
reaches the Development Candidate stage (as may be further refined through
consultations with the JSC).  APPENDIX
8(A) lists PoC Success Criteria for the Rare Diseases Programs and the
[***] Program and APPENDIX 8(B) lists Phase 1 Success Criteria and
PoC Success Criteria for ID/Additional Program.


 


“PoC Trial Completion Notice”
has the meaning set forth in Section 3.1.


 


“PoC Trial Design/Endpoints”
means the clinical trial design and primary/secondary endpoints (i) to be
discussed in consultation with the JSC and subject to [***], mutually agreed by
Isis and GSK at such time, if at all, as a Development Candidate is ready to
initiate a Phase 2 PoC Trial and (ii) intended by GSK to meet the PoC
Success Criteria.


 


“Pre-Clinical Research”
means pre-clinical research including gene function, gene expression and target
validation research using cells and animals, which may include small pilot
toxicology studies but excludes
pharmacokinetic and toxicology studies required to meet the regulations for
filing an IND, Development and Commercialization.


 


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


 


“Prior Agreements”
means the agreements listed on SCHEDULE 7.2.7 attached hereto.


 


“Proceeding”
means an action, suit or proceeding.


 


“Product-Specific Patents”
means Patents Controlled by a Party or any of its Affiliates on or after the
Effective Date, including any Collaboration Patents, claiming (i) the specific composition of matter of a
Licensed Compound and/or a Licensed Product, or (ii) methods of using a
Licensed Compound and/or a Licensed Product as a therapeutic; provided however, patents
Controlled by Isis or any of its Affiliates that (x) include claims that are directed to subject matter
applicable to ASOs in general, or (y) include an ASO, the sequence of
which targets a Collaboration Target and a gene target that is not a Collaboration
Target, will not be considered Product-Specific Patents, and in the case of (x) and
(y), such patents will be considered Isis Core Technology Patents.


 


“Product Development Plan”
has the meaning set forth in Section 4.3.3.


 


“Prosecution and Maintenance”
or “Prosecute and Maintain” means, 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”
will not include any other enforcement actions taken with respect to a Patent
Right.


 


“Rare Disease”
means (i) a disease or condition for which the intended drug affects fewer
than 200,000 people in the United States or, if the drug is a vaccine,
diagnostic drug, or preventive drug, the persons to whom the drug will be
administered in the United States are fewer than 200,000 per year as specified
in Sec. 316.21(b) of the Federal Food, Drug and Cosmetic Act (the “Act”), or (ii) a diseases or
conditions affecting 200,000 or more people, or for a vaccine, 


 


95

















 


diagnostic drug, or preventive drug to be administered
to 200,000 or more persons per year in the United States, there is no
reasonable expectation that costs of research and development of the drug for
the indication can be recovered by sales of the drug in the United States as
specified in Sec. 316.21(c) of the Act.


 


“Rare Disease Program”
means the respective Collaboration Programs focused on each of the
Collaboration Targets, [***], or the [***] or any replacement target for such
targets as determined in accordance with Section 1.5.2, which
replacement target may or may not be primarily associated with a Rare Disease.


 


“Receiving Party”
has the meaning set forth in Section 11.1.


 


“Reduced Option Payment”
has the meaning set forth in Section 12.4.


 


“Regulatory Authority”
means any governmental authority, including the FDA, EMEA or Koseisho (i.e., the Japanese Ministry of Health and Welfare, or any
successor agency thereto), that has responsibility for granting any licenses or
approvals or granting pricing and/or reimbursement approvals necessary for the
marketing and sale of a Licensed Product in any country.


 


“Returned
Candidate” means any Development Candidate for which GSK’s exclusive
Option under Section 3.1 has expired.


 


“Reverse
Royalties” has the meaning set forth in Section 5.10.1.


 


[***]


 


[***]


 


“[***] Election Deadline”
has the meaning set forth in Section 1.6.1.


 


“[***] Sanction Notice”
has the meaning set forth in Section 1.6.1.


 


“RMC”
means Isis’ Research Management Committee, or any successor committee.


 


“Sales Milestone Event”
has the meaning set forth in Section 5.7.


 


“Same Compound-Expanded
[***] Program” has the meaning set forth in Section 1.6.2(c).


 


“Sanctioned Target”
means a Collaboration Target with respect to which therapeutic potential has
been demonstrated in pre-clinical disease models and such Collaboration Target
has received approval by Isis’ RMC to expend resources to identify a human
Development Candidate, all in accordance with Isis’ standard processes.  APPENDIX 3 lists examples of certain
criteria Isis considers when determining whether a gene target should be
approved as a Sanctioned Target.  As of
the Effective Date, [***] are each Sanctioned Targets.


 


“Significant Sequence
Homology” means, with respect to an ASO Isis is practicing and
the Compound being Developed or Commercialized under the CFB Program, the ASO
comprises [***] or more identical, contiguous nucleobases of such Compound
sequence. For example only, an ASO with a sequence comprising [***] or more
identical, contiguous nucleobases of a Compound having a sequence that is [***]
nucleobases in length has Significant Sequence Homology. Conversely, an ASO
with a sequence comprising [***] or less identical, contiguous nucleobases of
such Compound having a sequence that is [***] nucleobases in length does not
have Significant Sequence Homology.


 


96

















 


“Sublicensee”
means a Third Party to whom a Party or its Affiliates or Sublicensees has
granted a sublicense or license under any Licensed IP or GSK Technology, as the
case may be, licensed to such Party in accordance with the terms of this
Agreement.


 


[***]


 


“Termination Payment”
has the meaning set forth in Section 9.2.1.


 


“Third Party”
means a Person or entity other than the Parties or their respective Affiliates.


 


“Third
Party Obligations” means any financial and non-financial
encumbrances, restrictions, or limitations imposed by an agreement between Isis
and a Third Party that relate to a Compound, Licensed Product and/or a
Collaboration Target, including, without limitation, field or territory
restrictions, covenants, milestone payments, diligence obligations, sublicense
revenue, royalties, or other payments.


 


[***]


 


“UK Tax Certification” has
the meaning set forth in Section 5.14.2.


 


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


 


“Unvalidated Collaboration
Program” has the meaning set forth in Section 1.5.2.


 


“Valid Claim”
means a claim of any issued or unexpired patent that has not been revoked or
held unenforceable or invalid by a decision of a court or governmental agency
of competent jurisdiction from which no appeal can be taken, or with respect to
which an appeal is not taken within the time allowed for appeal and that has
not been disclaimed or admitted to be invalid or unenforceable through reissue,
disclaimer or otherwise.


 


“Voluntarily Terminated
Collaboration Program” has the meaning set forth in Section 9.2.1.


 


97
















 


APPENDIX
2(A)


 


Isis’
Development Candidate Designation Criteria for Rare Disease Programs / [***]
Programs


 


[***]


 


98

















 


APPENDIX
2(B)


 


Isis’
Development Candidate Designation Criteria for ID/Additional Programs


 


Milestone:
Candidate Selection Criteria


 


[***]


 


99

















 


Appendix
3


 


Target Sanction
Checklist


 


[***]


 


100

















 


APPENDIX 4


 


2010 Estimate of API Cost per
Kilogram


(000’s)


 


[***]


 


101

















 


APPENDIX
5


 


Collaboration
Programs and Collaboration Targets


 


	
   

  	
   

  	
  Collaboration Target

  	
   

  	
  Collaboration Program

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  [***]

  	
   

  	
  [***]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  [***]

  	
   

  	
  [***]

  



 


102

















 


APPENDIX
6


 


Examples Illustrating Indications


 


	
  Primary
  endpoint(s)

  	
   

  	
  pathophysiologic state, disease, human condition regardless of
  etiology

  
	
   

  	
   

  	
   

  
	
  weight loss

  	
   

  	
  obesity

  
	
   

  	
   

  	
   

  
	
  LDL, Total
  Cholesterol

  	
   

  	
  Hypercholesterolemia

  
	
   

  	
   

  	
   

  
	
  HbA1c

  	
   

  	
  Type 2 diabetes

  
	
   

  	
   

  	
   

  
	
  breast tumor
  size

  	
   

  	
  breast cancer

  
	
   

  	
   

  	
   

  
	
  airway
  restriction

  	
   

  	
  asthma

  



 


103

















 


APPENDIX
7


 


[***] Criteria for ID/Additional Program for [***]


 


[***]


 


104

















 


APPENDIX
8(A)


 


PoC
Success Criteria for Rare Disease Programs / [***] Programs


 


[***]


 

















 


APPENDIX
8(B)


 


Phase I
Success Criteria and PoC Success Criteria for ID/Additional Programs


 


[***]


 
















 


SCHEDULE 2.1.2(c)


 


ROFN Terms


 


If Isis (a) has a
good-faith desire to offer a Third Party an exclusive license to such Isis
Follow-On Product, or (b) Initiates a Phase 3 Trial for such Isis
Follow-On Product, then Isis will promptly (but in any case within thirty (30)
days) provide written notice to GSK, and Isis will promptly deliver to GSK
evaluation materials reasonably relevant to such Isis Follow-On Product and no
less than those materials provided to applicable Third Parties, including
information consistent with the information Isis is required to disclose as
part of a Phase 2 PoC Data Package.  GSK
will then have forty-five (45) days to notify Isis in writing whether GSK
desires to exclusively license such Isis Follow-On Product.  If GSK provides Isis with timely written
notice that GSK desires to exclusively license such Isis Follow-On Product,
then Isis and GSK will, in good faith, use commercially reasonable efforts to
conclude a written license agreement within one hundred twenty (120) days.  If GSK fails to timely notify Isis that GSK
desires to exclusively license such Isis Follow-On Product, or if despite good
faith commercially reasonable efforts GSK and Isis are unable to reach an
agreement within one hundred twenty (120) days after Isis’ receipt of such
notice from GSK, then Isis may grant an exclusive license to any Third Party to
such Isis Follow-On Product on economic terms which, when taken as a whole, are
no more favorable to any such Third Party than the terms last offered under
this right of first negotiation by GSK to Isis.


 

















 


SCHEDULE 5.11.1


 


ISIS
IN-LICENSE AGREEMENTS


(RELEVANT
TO COLLABORATION PROGRAMS AS OF THE EFFECTIVE DATE)


 


[***]


 

















 


SCHEDULE
7.2.5(a)


 


ISIS CORE
TECHNOLOGY PATENTS


 


[***]


 

















 


SCHEDULE
7.2.5(b)


 


Isis
Manufacturing and Analytical Patents


 


[***]


 

















 


SCHEDULE
7.2.5(c)


 


Isis
Product-Specific Patents


 


[***]


 

















 


SCHEDULE 7.2.7


 


PRIOR
AGREEMENTS


 


[***]


 


***************


 


AGREEMENTS
CREATING THIRD PARTY OBLIGATIONS


(AS OF
THE EFFECTIVE DATE)


 


[***]


 

















 


Schedule
11.3


 


GSK and
Isis Pharmaceuticals collaborate on RNA therapeutics for rare and infectious
diseases


 


·                  GSK has right to license and
commercialize compounds at clinical proof-of-concept


·                  Isis gives GSK access to
expertise in discovery and development of anti-RNA therapeutics


 


LONDON, United Kingdom,  and CARLSBAD, Calif., March 31, 2010 — GlaxoSmithKline
(NYSE: GSK) and Isis Pharmaceuticals Inc. (Nasdaq: ISIS) announced today a new
strategic alliance that will apply the Isis antisense drug discovery platform
to seek out and develop new therapeutics against targets for rare and serious
disease, including infectious diseases and some conditions causing blindness.


 


Under the terms of the
agreement, which covers up to six programs, Isis will receive an upfront $35
million payment from GSK and is eligible to receive on average up to $20
million in milestones per program up to Phase 2 proof of concept (PoC). GSK
will have the option to license compounds at PoC, and will be responsible for
all further development and commercialization. 
Isis will be eligible to receive license fees and milestone payments,
totaling nearly $1.5 billion, in the event all six programs are successfully
developed for one or more indications and commercialized through to pre-agreed
sales targets. In addition Isis will receive up to double-digit royalties on
sales, from any product that is successfully commercialized.


 


“As a platform, the Isis
antisense approach offers us an exciting opportunity to target certain severe
diseases in a way that has not previously been possible,” said Dr. Patrick
Vallance, Senior Vice-President and Head of Drug Discovery at GSK.  “Isis Pharmaceuticals is a leader in
antisense technology, and this new alliance will enhance our discovery platform
in this promising research area.”


 


Antisense therapies
target the proteins involved in disease processes through the RNA that is
involved in building these proteins. The Isis discovery platform develops
specific therapies that bind to messenger RNA (mRNA) and inhibit the production
of disease-causing proteins. Isis recently announced data from a Phase 3 trial
in heterozygous familial hypercholesterolemia patients that demonstrated the
therapeutic effect of this approach.


 


This alliance provides
GSK with access to Isis’ expertise in drug discovery and development of
RNA-targeted therapeutics, with Isis retaining responsibility for the discovery
and development of compounds to the alliance targets from inception to POC.


 


“We are excited to be
working with GSK to apply antisense technology to these new therapeutic
areas.  We are particularly excited to
work on the novel targets GSK brought to the alliance,” said Dr. Stanley
T. Crooke, Chairman and Chief Executive Officer for Isis Pharmaceuticals.  “This alliance is exactly the type of deal we
want to do.  We retain control of the
discovery and early development of our drugs while working together with a very
high-quality partner to maximize the value of the drugs in late-stage
development and commercialization.”


 


Isis will hold an
investor conference call and live audio webcast today, March 31, 2010 at
8:30 a.m. ET to provide detailed information on its new strategic alliance
with GSK.


 

















 


About
RNA-targeted therapeutics


 


RNA-targeted
therapeutics, or antisense therapies such as oligonucleotides, represents an
opportunity for a new drug class.  Where
most other medicines are small molecules or biologics that target a specific
protein in a diseases process, antisense therapies prevent protein synthesis by
eliminating the mRNA - the template or pattern that guides the production of
the protein.


 


About
Isis Pharmaceuticals


 


Isis is exploiting its
expertise in RNA to discover and develop novel drugs for its product pipeline
and for its partners.  The Company has
successfully commercialized the world’s first antisense drug and has 22 drugs
in development.  Isis’ drug development
programs are focused on treating cardiovascular, metabolic, and severe
neurodegenerative diseases and cancer. 
Isis’ partners are developing antisense drugs invented by Isis to treat
a wide variety of diseases.  Isis and
Alnylam Pharmaceuticals are joint owners of Regulus Therapeutics Inc., a
company focused on the discovery, development and commercialization of microRNA
therapeutics.  Isis also has made
significant innovations beyond human therapeutics resulting in products that
other companies, including Abbott, are commercializing.  As an innovator in RNA-based drug discovery
and development, Isis is the owner or exclusive licensee of over 1,600 issued
patents worldwide.  Additional
information about Isis is available at www.isispharm.com.


 


About GlaxoSmithKline


 


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


 


	
  GlaxoSmithKline Enquiries:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  UK Media enquiries:

  	
   

  	
  Philip Thomson

  	
   

  	
  (020) 8047 5502

  
	
   

  	
   

  	
  Claire Brough

  	
   

  	
  (020) 8047 5502

  
	
   

  	
   

  	
  Stephen Rea

  	
   

  	
  (020) 8047 5502

  
	
   

  	
   

  	
  Alexandra Harrison

  	
   

  	
  (020) 8047 5502

  
	
   

  	
   

  	
  Jo Revill

  	
   

  	
  (020) 8047 5502

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US Media enquiries:

  	
   

  	
  Nancy Pekarek

  	
   

  	
  (919) 483 2839

  
	
   

  	
   

  	
  Mary Anne Rhyne

  	
   

  	
  (919) 483 2839

  
	
   

  	
   

  	
  Kevin Colgan

  	
   

  	
  (919) 483 2839

  
	
   

  	
   

  	
  Sarah Alspach

  	
   

  	
  (919) 483 2839

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  European
  Analyst/Investor enquiries:

  	
   

  	
  David Mawdsley

  	
   

  	
  (020) 8047 5564

  
	
   

  	
   

  	
  Sally Ferguson

  	
   

  	
  (020) 8047 5543

  
	
   

  	
   

  	
  Gary Davies

  	
   

  	
  (020) 8047 5503

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  US Analyst/ Investor
  enquiries:

  	
   

  	
  Tom Curry

  	
   

  	
  (215) 751 5419

  
	
   

  	
   

  	
  Jen Hill Baxter

  	
   

  	
  (215) 751 7002

  



 


Isis Pharmaceuticals’
Contacts:


 


	
  Kristina
  Lemonidis

  	
   

  	
  Amy
  Blackley, Ph.D.

  
	
  Director,
  Investor Relations

  	
   

  	
  Assistant
  Director, Corporate Communications

  
	
  760-603-2490

  	
   

  	
  760-603-2772

  



 

















 


GSK
Cautionary statement regarding forward-looking statements


 


Under the safe harbor
provisions of the U.S. Private Securities Litigation Reform Act of 1995, GSK
cautions investors that any forward-looking statements or projections made by
GSK, including those made in this announcement, are subject to risks and
uncertainties that may cause actual results to differ materially from those
projected. Factors that may affect GSK’ s operations are described under
‘Risk Factors’ in the ‘Business Review’ in the company’ s Annual Report on Form 20-F
for 2008.


 


Isis
Safe Harbor Statement


 


This
press release includes forward-looking statements regarding Isis’ strategic
alliance with GSK, and Isis’ research and development opportunities in disease
areas including rare and infectious diseases. 
Any statement describing Isis’ goals, expectations, financial or other
projections, intentions or beliefs is a forward-looking statement and should be
considered an at-risk statement.  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. 
Isis’ forward-looking statements also involve assumptions that, if they
never materialize or prove correct, could cause its results to differ
materially from those expressed or implied by such forward-looking
statements.  Although Isis’
forward-looking statements reflect the good faith judgment of its management,
these statements are based only on facts and factors currently known by
Isis.  As a result, you are cautioned not
to rely on these forward-looking statements. 
These and other risks concerning Isis’ programs are described in
additional detail in Isis’ annual report on Form 10-K for the year ended December 31,
2009, which is on file with the SEC. 
Copies of this and other documents are available from the Company.


 


Isis Pharmaceuticals is a registered trademark
of Isis Pharmaceuticals, Inc. 
Regulus Therapeutics is a trademark of Regulus Therapeutics Inc.


 

















 


SCHEDULE 12.4.1


 


Applicable
Option Exercise Payments in Change of Control


 


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