Document:

Exhibit 10.1

 

CONFIDENTIAL
TREATMENT REQUESTED

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

Execution Version

 

LICENSE AND RESEARCH AGREEMENT

 

This
License and Research Agreement (together with all Exhibits, Schedules and other
attachments hereto, this “Agreement”), is dated as of the 7th day of
January, 2008 (the “Execution Date”), by and between Genzyme
Corporation, a Massachusetts corporation (“Genzyme”) and Isis
Pharmaceuticals, Inc., a Delaware corporation (“Isis”).  Genzyme and Isis each may be referred to
herein individually as a “Party” or collectively as the “Parties.”

 

WITNESSETH:

 

WHEREAS,
simultaneously with this Agreement, Isis and Genzyme will enter into that
certain Stock Purchase Agreement of even date herewith in the form attached
hereto as Exhibit A (the “Stock Purchase Agreement”)
pursuant to which Genzyme is purchasing the Shares;

 

WHEREAS,
Isis possesses certain intellectual property with respect to certain
oligonucleotide-based therapeutic compounds;

 

WHEREAS,
Isis desires to grant to Genzyme, and Genzyme desires to obtain, a license
under certain Isis intellectual property to advance mipomersen, formerly known
as ISIS 301012, and related compounds targeting apoB, through human clinical
trials and ultimately commercialize it as a product; and

 

WHEREAS,
Isis and Genzyme desire to enter into a research agreement under which Isis
will conduct research related to certain gene targets selected by Genzyme.

 

NOW,
THEREFORE, in consideration of the Parties’ willingness to enter into the Stock
Purchase Agreement and the respective covenants, representations, warranties
and agreements set forth herein, the Parties hereto agree as follows:

 

ARTICLE
1.

DEFINITIONS

 

For
purposes of this Agreement, the following capitalized terms will have the
following meanings.  Capitalized terms
used without definition in this Agreement will have the meanings ascribed to
them in the Product Term Sheet and the Research Term Sheet.

 

1.1.                              “AAA”
has the meaning set forth in Section 6.2.2 (Binding Arbitration
With Respect to Agreement Terms).

 

1.2.                              “Action”
has the meaning set forth in Section 6.3.1 (Jurisdiction).

 

1.3.                              “Additional
Third Party Agreement” has the meaning set forth in Section 2.1.6
(Additional Rights after Effective Date).

 

1.4.                              “Affiliate”
of an entity means any other entity that, directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common control
with such first entity. For purposes of this definition only, “control” (and,
with correlative

 

1

 

meanings, the terms “controlled
by” and “under common control with”) means the possession of the actual power
to direct the management or policies of an entity, whether through the
ownership of voting securities or by contract relating to voting rights or
corporate governance.  In addition, [***]
will not be considered an Affiliate of Isis.

 

1.5.                              “apoB”
means apolipoprotein B.

 

1.6.                              “Bankruptcy
Code” has the meaning set forth in Section 8.14 (Rights in
Bankruptcy).

 

1.7.                              “Confidential
Information” has the meaning set forth in Section 8.1.1
(Non-Disclosure).

 

1.8.                              “Control”
or “Controlled” means, with respect to any Know-How, Patent or other
intellectual property right or Regulatory Materials, possession by a Party
(including its Affiliates) of the right (whether by ownership, license or
otherwise) to grant to the other Party a license or a sublicense under such
Know-How, Patent or other intellectual property right or access to Regulatory
Materials without violating the terms of any agreement or other arrangement
with any Third Party.

 

1.9.                              “Diligence
Period” means the period beginning on the Execution Date and ending on the
earlier of (a) the date that is [***] after the Execution Date or (b) the
date the Parties enter into the More Detailed Product Agreement.  The Parties’ goal is to conclude diligence
and enter into the More Detailed Product Agreement by [***].

 

1.10.                        “Disclosure
Schedule” means the schedule (dated as of the Execution Date and updated
pursuant to Section 5.4 (Right to Update Disclosure Schedule
Prior to Effective Date)) delivered by Isis to Genzyme that includes
exceptions to Isis’ representations and warranties in Section 5.2
(Product Representations and Warranties) and Section 5.3 (Research
Representations and Warranties) hereof.

 

1.11.                        “Dispute”
has the meaning set forth in Section 6.1.1 (Escalation).

 

1.12.                        “Effective
Date” has the meaning set forth in Section 7.1.2 (Effective
Date).

 

1.13.                        “Encumbered
Follow-On Product” has the meaning set forth in Section 2.2
(Follow-On Product).

 

1.14.                        “Executives”
has the meaning set forth in Section 6.1.1 (Escalation).

 

1.15.                        “Follow-On
Product” means all pharmaceutical compositions, formulations, dosage forms,
delivery systems and presentations that contain [***] (alone or with other
active ingredients) other than Mipomersen.

 

1.16.                        “Follow-On
Product Encumbrances” has the meaning set forth in Section 2.2.2.

 

1.17.                        “General
Representations and Warranties” has the meaning set forth in Section 5.1
(Representations and Warranties of Both Parties).

 

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

 

2

 

1.19.                        “In-Licensed
Third Party IP” means Patents or Know-How Controlled by Isis that are
in-licensed by Isis pursuant to a Third Party Agreement.

 

1.20.                        “Isis Core
Technology Patents” means all Patents, other than the Product-Specific
Patents or Isis Manufacturing and Analytical Patents, Controlled by
Isis or any of its Affiliates as of the Execution Date hereof or during the
term of the Product License that are necessary or useful for the
development and commercialization of Product, including the Patents identified
on Schedule 1.20.

 

1.21.                        “Isis
Manufacturing and Analytical Know-How” means Know-How other than Product
Know-How Controlled by Isis or its Affiliates as of the Execution Date hereof
or during the term of the Product License that relates to the
synthesis or analysis of Products independent of sequence or chemical
modification.

 

1.22.                        “Isis
Manufacturing and Analytical Patents” means Patents Controlled by Isis or
its Affiliates as of the Execution Date hereof or during the term of the
Product License that claim methods and materials
used in the synthesis or analysis of Products independent of sequence or
chemical modification, including the Patents identified on  Schedule
1.22.  Isis Manufacturing and
Analytical Patents do not include the Product-Specific Patents and the Isis
Core Technology Patents.

 

1.23.                        “Isis
Manufacturing and Analytical Technology” means the Isis Manufacturing and
Analytical Know-How and Isis Manufacturing and Analytical Patents solely to the
extent necessary or useful to manufacture a Product.(1)

 

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

 

1.25.                        “Licensed IP”
means the Licensed Patents, the Product Know-How and the Isis Manufacturing and
Analytical Know-How; provided, however,
that (a) for any such Know-How or Patent that becomes Controlled by Isis
after the Execution Date pursuant to an Additional Third Party Agreement, the
provisions of Section 2.1.6 (Additional Rights after Effective
Date) will govern whether such Know-How or Patent will be

 

(1) As
part of its collaboration with other pharmaceutical partners, Isis has an
arrangement where Isis can share manufacturing technology improvements made by
such pharmaceutical partners with other Third Parties so long as such Third
Parties similarly agree to share their manufacturing technology
improvements.  Genzyme may decide to
participate in this arrangement if Genzyme wishes.

 

3

 

included as Licensed IP, and
(b) with respect to any Follow-On Product, the provisions of Section 2.2
(Follow-On Product) will govern the extent to which In-Licensed Third Party IP
will be included in Licensed IP.

 

1.26.                        “Licensed
Patent(s)” means the Product-Specific Patents, Isis Core Technology Patents
and the Isis Manufacturing and Analytical Patents.

 

1.27.                        “Mipomersen”
means mipomersen sodium, formerly known as ISIS 301012.

 

1.28.                        “More
Detailed Product Agreement” has the meaning set forth in Section 2.1.2
(More Detailed Product Agreement).

 

1.29.                        “More
Detailed Research Agreement” has the meaning set forth in Section 2.3
(Research Option Agreement).

 

1.30.                        “Patent(s)”
means (a) patents and patent applications in any country or jurisdiction, (b) all
priority applications, divisionals, continuations, substitutions, and
continuations-in-part of any of the foregoing, and (c) all patents issuing
on any of the foregoing patent applications, together with all registrations,
reissues, renewals, re-examinations, confirmations, supplementary protection
certificates, and extensions of any of (a), (b) or (c).

 

1.31.                        “Permitted
Licenses” means licenses granted by Isis after the Execution Date to any
Third Party under the Isis Core Technology Patents or the Isis Manufacturing
and Analytical Technology (but not under the Product-Specific Patents or for
use of [***] to (a) use oligonucleotides (or supply oligonucleotides to
end users) in quantities not to exceed [***](2) per oligonucleotide per
end user solely to conduct Pre-Clinical Research, or (b) enable such Third
Party to [***], where such Third Party is primarily engaged in providing
contract manufacturing or services and is not engaged in drug discovery,
development or commercialization. 
Notwithstanding the foregoing, Permitted Licenses do not include any
licenses that allow (i) a Third Party to make, use or sell an
oligonucleotide having the same [***] as a Product or Isis’ preferred [***], (ii) a
Third Party to manufacture any nucleic acid that [***] apoB that will be
incorporated into a therapeutic product for use in human clinical trials or for
commercial sale or (iii) Isis to directly supply to a Third Party any
[***] apoB.

 

1.32.                        “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

 

(2) Quantity
subject to confirmation by the Parties during the Diligence Period.

 

4

 

required to meet the
regulations for filing an IND, clinical development and commercialization.

 

1.33.                        “Product”
means all pharmaceutical compositions, formulations, dosage forms, delivery
systems and presentations that contain Mipomersen or any Follow-On Product,
including all pharmaceutically acceptable salts, solvates, hydrates,
hemihydrates, metabolites, pro-drug forms, stereoisomers, enantiomers,
racemates and all optically active forms thereof.

 

1.34.                        “Product
Know-How” means Know-How Controlled by Isis on the Execution Date or during the term
of the Product License relating to or otherwise necessary for the
development and commercialization of Product. 
Product Know-How does not include the Isis Manufacturing and Analytical
Know How.

 

1.35.                        “Product
License” has the meaning set forth in Section 2.1 (Grant).

 

1.36.                        “Product
Representations and Warranties” has the meaning set forth in Section 5.2
(Product Representations and Warranties).

 

1.37.                        “Product-Specific
Patents” means Patents Controlled by Isis or any of its Affiliates
as of the Execution Date and during the term of the Product License claiming or
covering (a) [***] apoB; (b) the sequence of apoB; (c) the
specific composition of matter of a Product; and (d) methods of using
Product as a therapeutic, methods of using Product to modulate apoB, and
methods of using the product to inhibit expression of apoB, including the
Patents identified on Schedule 1.37; provided, however,
that if a Patent satisfies the criteria set forth above but also applies to
gene targets other than apoB, such Patent will be considered an Isis Core
Technology Patent.

 

1.38.                        “Product
Term Sheet” means the term sheet attached hereto as Exhibit B.

 

1.39.                        “Regulatory
Materials” means any regulatory submissions, notifications, registrations,
approvals and/or other filings and correspondence made to or with a regulatory
authority in any country or jurisdiction in the Territory, and any other
records required to be maintained for possible audit by a regulatory authority
that may be necessary or useful to develop, manufacture, market, sell or
otherwise commercialize Product in the Territory.

 

1.40.                        “Research
Option Agreement” has the meaning set forth in Section 2.3
(Research OptionAgreement).

 

1.41.                        “Research
Term Sheet” means the term sheet attached hereto as Exhibit C.

 

1.42.                        “SEC”
means Securities and Exchange
Commission.

 

1.43.                        “Shares”
means the shares of Isis’ Common Stock purchased by Genzyme pursuant to the
Stock Purchase Agreement.

 

1.44.                        “Territory”
means worldwide.

 

1.45.                        “Third Party”
means a person or entity other than the Parties and their respective

 

5

 

Affiliates.

 

1.46.                        “Third Party
Agreement” means any agreements pursuant to which Isis obtains rights
applicable to the development or commercialization of Product or Follow-On
Product.

 

ARTICLE
2.

LICENSE AND RESEARCH AGREEMENTS

 

2.1.                              Product License.

 

2.1.1.                     Grant.  Isis hereby grants to Genzyme an exclusive
license, (with the limited right to sublicense as set forth in Section 2.1.3
(Limited Right to Sublicense)), under the Licensed IP to research, develop,
make, have made, use, sell, offer for sale, have sold, import and export
Products in the Territory for therapeutic purposes on the terms and conditions
set forth in the Product Term Sheet and this Agreement (the “Product License”).  Notwithstanding the foregoing, (a) the
exclusive license to the Isis Core Technology Patents will be subject to the
licenses granted by Isis to Third Parties identified on Schedule 2.1.1
and Isis’ right to grant Permitted Licenses, and (b) with respect to any
Follow-On Product, the provisions of Section 2.2 (Follow-On
Product) will govern the extent to which In-Licensed Third Party IP is included
within Licensed IP.

 

2.1.2.                     More Detailed
Product Agreement.  The Parties
agree that the Product Term Sheet and this Agreement contain all material terms
of the Product License and will form a legally binding and enforceable license
and co-development agreement without need for execution of further documentation
or any further action by any Party.  The
Parties also recognize that it may be desirable to agree upon other more
detailed customary terms and conditions with respect to the Product License.  Accordingly, as soon as reasonably
practicable after the Effective Date, the Parties will negotiate and enter into
a more detailed written license and co-development agreement that will include
the terms set forth in the Product Term Sheet and any additional terms and
conditions that are customary and reasonable for agreements of this type that
may be agreed to by the Parties, including provisions relating to intellectual
property ownership, prosecution and enforcement, regulatory interactions and
approvals, term and termination, indemnification and confidentiality (the “More
Detailed Product Agreement”).

 

2.1.3.                     Limited Right
to Sublicense.

 

(a)                                  The licenses
granted to Genzyme under the Licensed IP are sublicensable only in connection
with a sublicense of a Product to any Affiliate of Genzyme or to any Third Party,
in each case for the continued research, development or commercialization of
such Product in accordance with the terms of the Product License.

 

(b)                                 Notwithstanding
the foregoing, the licenses granted to Genzyme under the Isis Manufacturing and
Analytical Technology are sublicensable to a Third Party [***] only upon the
mutual agreement of the Parties.

 

6

 

2.1.4.                     Upfront License
Fee.  Provided that this Agreement
and the Product License have become effective and neither has not been
terminated, Genzyme will pay to Isis the upfront license fee specified in the
Product Term Sheet upon five (5) business days after the earlier of (a) expiration
of the Diligence Period or (b) the Parties enter into the More Detailed
Product Agreement.

 

2.1.5.                     Access.  Isis will afford to Genzyme and its
representatives reasonable access to and copies of all information (including
reasonable access to knowledgeable employees and representatives of Isis to
discuss such information) within the possession or control of Isis or any of
its Affiliates pertaining to the development of the Product and the Licensed
IP, including all Regulatory Materials related to the Product.

 

2.1.6.                     Additional
Rights after Effective Date.  After the Execution Date, Isis may wish to
in-license or acquire rights to Know-How or Patents Controlled by Third Parties
(such a Third Party in-license or acquisition agreement being an “Additional
Third Party Agreement”) which, if so licensed or acquired, may be included
in the Licensed IP licensed to Genzyme under Section 2.1.1.  In such event (and to the extent permitted by
Isis’ confidentiality agreement with the applicable Third Party), Isis will
notify Genzyme regarding the nature of the technology and status of
negotiations related to the Additional Third Party Agreement through the
JDC.  Once Isis has executed such
Additional Third Party Agreement, Isis will offer such Third Party Patents or
Know-How to Genzyme (which offer will include a description of the payments paid
or potentially payable by Isis thereunder). 
At such time, if Genzyme wishes to include such Third Party Patents or
Know-How under the licenses granted under Section 2.1.1, Genzyme
will notify Isis of its desire to do so and the Parties will fairly and in good
faith allocate upfront payments or ongoing payment obligations between Products
and compounds that are not Products and other Isis licensees, if
appropriate.  As part of this allocation
process, Isis will share with Genzyme, in reasonable detail, the assumptions
and methodology Isis used to create the proposed allocation.  If Genzyme does not agree to reimburse Isis
for the amount of any upfront or similar acquisition payments fairly allocated
to Product, and to be responsible for the payment of its share of any upfront,
milestone and royalty payments, then the Know-How or Patents acquired or in
licensed by Isis under the Additional Third Party Agreement will not be
considered Licensed IP licensed to Genzyme under the Product License.  When Genzyme pays its share of any upfront,
milestone and royalty payments assumed by Genzyme under this Section 2.1.6,
such payments will be considered Program Costs for the applicable Product.

 

2.2.                              Follow-On
Product.  The Parties contemplate that
after the Effective Date Genzyme, either on its own or in collaboration with
Isis, may wish to research, develop and commercialize Follow-On Products.  The scope of the In-Licensed Third Party IP
included in Licensed IP under the Product License with respect to such
Follow-On Products will be determined in accordance with the procedures set
forth in this Section 2.2. 
At the time Genzyme intends to designate a Follow-On Product as a
development candidate, Genzyme will notify Isis in writing of such intention
and will describe in

 

7

 

reasonable detail the
applicable Follow-On Product.  Subject to
Section 2.1.6 (Additional Rights after Effective Date), if a
Follow-On Product utilizes any In-Licensed Third Party IP (an “Encumbered
Follow-On Product”), such In-Licensed Third Party IP will be included in
Licensed IP only to the extent set forth below:

 

2.2.1.                     If the applicable Third
Party Agreement contains a contractual obligation that would preclude Isis from
including such In-Licensed Third Party IP in Licensed IP  with respect to such Encumbered Follow-On
Product, then the In-Licensed Third Party IP that is the subject of such Third
Party Agreement will not be included in Licensed IP.

 

2.2.2.                     If the applicable Third
Party Agreement contains any potential encumbrances known by Isis and related
to the potential Follow-On Product, including field or territory restrictions,
covenants, or milestones, royalty, sublicense revenue or other payments (“Follow-On
Product Encumbrances”), Isis will fully disclose to Genzyme such Follow-On
Product Encumbrances and, if Genzyme agrees in writing to assume the Follow-On
Product Encumbrances (with any payments being included in Program Costs for
such Encumbered Follow-On Product), then the In-Licensed Third Party IP that is
the subject of such Third Party Agreement will be included in Licensed IP.

 

2.2.3.                     If the applicable Third
Party Agreement does not contain the obligations or encumbrances described in Sections
2.2.1 and 2.2.2 above, the In-Licensed Third Party IP that is the
subject of such Third Party Agreement will automatically be included in
Licensed IP.

 

2.2.4.                     If the applicable Third
Party Agreement is or was also applicable to Mipomersen, then the In-Licensed
Third Party IP that is the subject of such Third Party Agreement will
automatically be included in the Licensed IP to the extent that (a) the
terms of such Third Party Agreement do not preclude Isis from including it and (b) Genzyme
agrees in writing to assume any applicable Follow-On Product Encumbrances
associated with such Third Party Agreement.

 

2.2.5.                     Each time the Parties
complete the process set forth above, Isis will update the schedules relating
to Licensed Patents and Third Party Agreements, and Schedule 2.1.1 as
appropriate.

 

2.3.                              Research Option
Agreement.  Isis and
Genzyme hereby enter into a research agreement under which Isis will perform
research on the terms and conditions set forth in the Research Term Sheet (the “Research
Option Agreement”).  The Parties
agree that the Research Term Sheet and this Agreement contain all material
terms of the Research Option Agreement and will form a legally binding and
enforceable research agreement, without need for execution of further
documentation or any further action by any Party.  The Parties also recognize that it may be
desirable to agree upon other more detailed customary terms and conditions with
respect to the Research Option Agreement. 
Accordingly, as quickly as practicable following the Effective Date, the
Parties will negotiate and enter into a more detailed research agreement that
will include the terms set

 

8

 

forth in the Research Term
Sheet and any additional terms and conditions that are customary and reasonable
for agreements of this type that may be agreed to by the Parties, including
provisions relating to intellectual property ownership, prosecution and
enforcement, regulatory matters, term and termination, indemnification and
confidentiality (the “More Detailed Research Agreement”).

 

ARTICLE
3.

NON-COMPETE

 

3.1.                              Product.  During the term of the Product License, Isis and its
Affiliates will not, directly or indirectly, and will not collaborate with,
license or otherwise authorize any Third Party to, research, develop or
commercialize any [***] apoB, except pursuant to (a) the agreements
identified on Schedule 2.1.1, as they exist on the Execution Date, (b) Permitted
Licenses, or (c) this Agreement, including the Product License, and the
More Detailed Product Agreement.

 

ARTICLE
4.

[RESERVED]

 

ARTICLE
5.

REPRESENTATIONS AND WARRANTIES

 

5.1.                              Representations
and Warranties of Both Parties.  Each Party hereby represents and warrants to
the other Party as of both the Execution Date and Effective Date (collectively,
the “General Representations and Warranties”) that:

 

5.1.1.                     it is a duly organized and
validly existing corporation under the laws of its jurisdiction of
incorporation;

 

5.1.2.                     it has the power and
authority and the legal right to enter into this Agreement and perform its
obligations hereunder, and that it has taken all necessary action on its part
required to authorize the execution and delivery of this Agreement and the
performance of its obligations hereunder;

 

5.1.3.                     the execution and delivery
of this Agreement, the Product License and the Research Option Agreement and
the performance of such Party’s obligations hereunder do not conflict with or
violate any requirement of applicable law or any provision of its articles of
incorporation or similar organizational documents, its bylaws, or the terms or
provisions of any agreement or other instrument to which it is a party or by
which it is bound, or any order, award, judgment or decree to which it is a
party or by which it is bound; and

 

5.1.4.                     this Agreement has been duly
executed and delivered on behalf of such Party and constitutes a legal, valid
and binding obligation of such Party and is enforceable against it in
accordance with its terms subject to the effects of bankruptcy, insolvency or
other laws of general application affecting the enforcement of creditor rights
and judicial principles affecting the availability of specific performance and
general principles of equity, whether enforceability is considered

 

9

 

a proceeding at law or
equity.

 

5.2.                              Product
Representations and Warranties.  Isis represents and warrants to Genzyme that
the statements contained in this Section 5.2 (the “Product Representations
and Warranties”) are true and correct as of the Execution Date and will be
true as of the Effective Date, as though made as of the Effective Date, with
each such representation and warranty subject only to such exceptions, if any,
as are set forth in the particular section in the Disclosure Schedule attached
hereto as Exhibit D that corresponds to the particular section
number in this Agreement:

 

5.2.1.                     Schedule 1.20,  Schedule
1.22, and Schedule 1.37 set forth true, correct and complete lists
of all Isis Core Technology Patents, Isis Manufacturing and Analytical Patents,
and Product-Specific Patents, respectively, and all Licensed Patents used in
the development or commercialization of Mipomersen and existing as of the
Execution Date 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.

 

5.2.2.                     A true, correct and complete
list of any Third Party Agreements related to Mipomersen is set forth on Schedule
5.2.2.

 

5.2.3.                     With respect to all
Product-Specific Patents, and all Licensed IP used in the development or
commercialization of Mipomersen, Isis has the sufficient legal and/or
beneficial title and ownership or rights to grant the Product License to
Genzyme and the grant of the Product License to Genzyme does not violate the
terms of any Third Party Agreement or any other agreement Isis has with a Third
Party.

 

5.2.4.                     Each of the Product-Specific
Patents, and each of the Licensed Patents used in the development or
commercialization of Mipomersen properly identifies each and every inventor of
the claims thereof as determined in accordance with the laws of the
jurisdiction in which such Patent is issued or such application is pending.

 

5.2.5.                     With respect to all
Product-Specific Patents owned by Isis, and all Licensed Patents owned by Isis
and used in the development or commercialization of Mipomersen, (a) each
person who has or has had any rights in or to each of such Patents has executed
an agreement assigning his, her or its entire right, title and interest in and
to such Patents to Isis and (b) to the best of Isis’ knowledge, each such
inventor has complied in all material respects with all applicable duties of
candor and good faith in dealing with any patent office, including the duty to
disclose to any applicable patent office all information known to be material
to patentability.

 

5.2.6.                     To the best of Isis’
knowledge, no circumstances or grounds exist that would invalidate, reduce or
eliminate, in whole or in part, the enforceability, validity or scope of any
Product-Specific Patent or any Licensed Patent used in the development or
commercialization of Mipomersen.

 

10

 

 

5.2.7.    Isis is not aware of any
Patents owned or Controlled by a Third Party that would be infringed by Genzyme
during the development or commercialization of Mipomersen in its current form.

 

5.2.8.    To the best of Isis’
knowledge, no actions, suits, claims, disputes or proceedings concerning the
Licensed Patents are currently pending or are threatened, that if determined
adversely to Isis would have a material adverse effect on or would impair
Genzyme’s rights under the Product License.

 

5.2.9.    Isis is not subject to any
agreement with any Third Party or to any outstanding order, judgment or decree
of any court or administrative agency that restricts it in any way from
granting to Genzyme the Product License.

 

5.2.10.            Isis has not
granted, or permitted to be attached, and it will not grant or permit to be
attached, any lien, security interest or other encumbrance with respect to any
Product-Specific Patent, or any Licensed IP used in the development or
commercialization of Mipomersen which would adversely affect the rights granted
to Genzyme hereunder.

 

5.2.11.            Each Third
Party Agreement related to Mipomersen is in full force and effect, and Isis,
and to the best of Isis’ knowledge, each counterparty thereto, is in compliance
in all material respects with all such Third Party Agreements and no
circumstances or grounds exist that would reasonably be expected to give rise
to a claim of material breach or right of rescission, termination, revision or
amendment of such Third Party Agreements.

 

5.2.12.            Isis has not
assigned, licensed, sublicensed, granted any interest in or options to, or
entered into an agreement with respect to the Licensed IP with a Third Party
that would adversely impair Genzyme’s exclusive rights under this Agreement,
except for the agreements identified on Schedule 2.1.1.

 

5.2.13.            Isis has not
received any claim alleging that Isis’ development of Mipomersen or use of any
Product-Specific Patent or any Licensed IP used in the development or
commercialization of Mipomersen interferes with, infringes, or misappropriates
any intellectual property rights of any Third Party (including any claim that
Isis must license or refrain from using any intellectual property rights of any
Third Party in order to develop, make, use, sell or offer for sale any product
or technology using or incorporating the Licensed IP), and to the best of Isis’
knowledge, the development and commercialization of Mipomersen and the use of
any Product-Specific Patent or any Licensed IP used in the development or
commercialization of Mipomersen will not interfere with, infringe or
misappropriate the intellectual property rights of any Third Party.  To the best of Isis’ knowledge, no Third
Party has interfered with, infringed upon or misappropriated the Licensed IP in
the making, using or selling of a lipid lowering product.

 

5.2.14.            Isis holds, and
is operating in material compliance with, such exceptions, permits, 

 

11

 

licenses, franchises,
authorizations and clearances of any governmental entity required in connection
with the current development of Mipomersen. 
Isis has not received any warning letters or written correspondence from
any governmental entity requiring the termination, suspension or modification
of any clinical or pre-clinical studies or tests with respect to
Mipomersen.  Isis has conducted and
required its contractors to conduct all clinical studies related to Mipomersen
in accordance with cGCP, cGLP and applicable law.

 

5.2.15.            As of the
Execution Date, Isis has prepared, maintained and retained all Regulatory
Materials required to be maintained or reported pursuant to and in accordance
with applicable laws and the Regulatory Materials do not contain any materially
false or misleading statements.

 

5.2.16.            Except for the
agreements identified on Schedule 2.1.1, Isis has not granted to any
Third Party rights under the Licensed Patents to research, develop or
commercialize any nucleic acid that hybridizes to a nucleic acid molecule
encoding apoB.

 

5.3.      Research Representations and
Warranties.   Isis represents and warrants to Genzyme that
the statements contained in this Section 5.3 are true and correct
as of the Execution Date and will be true as of the Effective Date, as though
made as of the Effective Date, with each such representation and warranty
subject only to such exceptions, if any, as are set forth in the particular
section in the Disclosure Schedule attached hereto as Exhibit D
that corresponds to the particular section number in this Agreement:

 

5.3.1.    To the best of Isis’
knowledge, no actions, suits, claims, disputes or proceedings are currently
pending or are threatened, that if determined adversely to Isis would have a
material adverse effect on or impair Isis’ ability to perform its obligations
under the Research Option Agreement.

 

5.3.2.    Isis is not subject to any
agreement with any Third Party or to any outstanding order, judgment or decree
of any court or administrative agency that materially restricts Isis from
performing its obligations under the Research Option Agreement.

 

5.3.3.    Isis has sufficient
resources to perform the activities contemplated under the Research Option
Agreement and the Isis personnel or permitted contractors performing such
activities will be skilled, appropriately credentialed, licensed and qualified
to provide the specific research services they are providing.

 

5.4.      Right to Update Disclosure
Schedule Prior to Effective Date.  On or before the Effective Date, Isis may
deliver to Genzyme an updated Disclosure Schedule reflecting any exceptions to
the representations and warranties made by Isis as of the Effective Date.

 

5.5.      Isis Covenants.

 

5.5.1.    Third Party Agreements.  Isis covenants that it will not, without
Genzyme’s prior written consent, agree, consent or acquiesce to any amendment,
supplement or 

 

12

 

other modification to any
Third Party Agreement or take any action under such Third Party Agreement or
with respect to the intellectual property licensed thereunder that would adversely
affect the rights granted to Genzyme under this Agreement, including under the
Product License.

 

5.5.2.    Sublicense Survival.  Isis covenants that it will use good faith
and commercially reasonable efforts to enter into any necessary amendments or
side agreements to its Third Party Agreements to ensure that (a) sublicenses
under each Third Party Agreement will survive termination of such Third Party
Agreement or (b) Genzyme will receive a direct license from the
counterparty to each Third Party Agreement upon termination of such Third Party
Agreement.

 

5.5.3.    Notice of Developments.  During the Diligence Period, Isis will give
Genzyme prompt written notice upon becoming aware of any development, event or
circumstance that could reasonably be expected to result in a breach of or
inaccuracy in any of the General Representations and Warranties and Product
Representations and Warranties.

 

ARTICLE
6.

DISPUTE RESOLUTION

 

6.1.      Escalation.

 

6.1.1.    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 Chief Executive
Officer of Genzyme and the Chief Executive Officer of Isis (the “Executives”)
for resolution at the request of either Party.

 

6.1.2.    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:

 

(a)       if the Dispute relates to
the Parties’ failure to reach agreement with respect to the interpretation of
this Agreement, the Product Term Sheet or Research Term Sheet or with respect
to any term or condition to be included in the More Detailed Product Agreement
or More Detailed Research Agreement, then either Party’s sole recourse is to
submit such Dispute to binding arbitration pursuant to Section 6.2
(Binding Arbitration with Respect to Agreement Terms) after providing written
notice to the other Party; and

 

(b)       if the Dispute relates to
any other matter, either Party may pursue a legal remedy in accordance with Section 6.3
(Jurisdiction, Venue, Service of Process).

 

13

 

6.2.      Binding Arbitration With Respect
to Agreement Terms.

 

6.2.1.    If the Parties fail to reach
agreement with respect to the interpretation of this Agreement, the Product
Term Sheet or Research Term Sheet or with respect to any term or condition to
be included in the More Detailed Product Agreement or More Detailed Research
Agreement and the Dispute is not resolved informally through negotiation
between the Parties or the Executives, then the Dispute will be submitted to
binding arbitration.  The Parties will
select a mutually agreeable arbitrator experienced in matters regarding
contracts of a similar nature who (a) is a lawyer with at least fifteen
(15) years experience who has extensive experience negotiating and drafting
license, research and collaboration agreements among biotechnology and
pharmaceutical companies and (b) has no affiliation or pre-existing
relationship with either Genzyme or Isis or their respective Affiliates.  If the Parties are unable to agree on an
arbitrator within a thirty (30) day period, then each Party will select an
arbitrator satisfying the criteria described in the immediately preceding
sentence within five (5) business days, the two (2) designated
arbitrators will select a mutually agreeable third arbitrator satisfying the
criteria described in the immediately preceding sentence within five (5) business
days and all three (3) arbitrators will hear the Dispute as a panel and
render a decision upon the determination of the majority of the panel.  In each case, the arbitrator(s) will
render their decision by supplying the term or condition upon which the Parties
failed to agree.

 

6.2.2.    The arbitration will be
conducted in accordance with the rules of, and under the auspices of, the
American Arbitration Association (the “AAA”).  The decisions rendered by the arbitrators
will be final and binding, and the Parties will not have any right of appeal to
any court on the merits of the Dispute.  Judgment upon the award rendered
in any such arbitration may be entered in any court having jurisdiction
thereof.  The location of the arbitration
will be Chicago, Illinois.  This
Agreement and the Product License and Research Option Agreement will remain in
effect pending completion of the proceedings brought under this Section 6.2.  Each Party will bear its own costs and expenses
with respect to any such arbitration, including one-half of the fees and
expenses of the arbitrator.

 

6.3.      Jurisdiction; Venue; Service
of Process.

 

6.3.1.    Jurisdiction.  Each Party by its execution hereof, (a) hereby
irrevocably submits to the exclusive jurisdiction of the United States District
Court located in Chicago, Illinois for the purpose of any Dispute arising
between the Parties in connection with this Agreement, other than those
Disputes that must be resolved by binding arbitration pursuant to Section 6.2
(Binding Arbitration With Respect to Agreement Terms) (each, an “Action”),
and (b) hereby waives to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of the
above-named court, that its property is exempt or immune from attachment or
execution, that any such Action brought in the above-named court should be
dismissed on grounds of forum non conveniens, 

 

14

 

should be transferred or
removed to any court other than the above-named court, or should be stayed by
reason of the pendency of some other proceeding in any other court other than
the above-named court, or that this Agreement or the subject matter hereof may
not be enforced in or by such court and (c) hereby agrees not to commence
any such Action other than before the above-named court.  Notwithstanding the previous sentence a Party
may commence any Action in a court other than the above-named court solely for
the purpose of enforcing an order or judgment issued by the above-named court.

 

6.3.2.    Venue.  Each Party agrees that for any Action between
the Parties arising in whole or in part under or in connection with this
Agreement, such Party bring Actions only in the federal courts of the United
States of America located in Chicago, Illinois and any appellate court having
jurisdiction over appeals from such courts. 
Each Party further waives any claim and will not assert that venue
should properly lie in any other location within the selected jurisdiction.

 

6.3.3.    Service of Process.  Each Party hereby agrees that service of
process made by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 8.5 (Notices), will
constitute good and valid service of process in any such Action and (c) waives
and agrees not to assert (by way of motion, as a defense, or otherwise) in any
such Action any claim that service of process made in accordance with clause (a) or
(b) does not constitute good and valid service of process.

 

ARTICLE
7.

CONDITIONS PRECEDENT AND TERMINATION

 

7.1.      Conditions Precedent.

 

7.1.1.    HSR Compliance.

 

(a)       Each Party will use
commercially reasonable efforts to satisfy any applicable requirements under
the HSR, and the regulations promulgated thereunder, including by making an
initial HSR filing no later than five (5) days after the Execution Date or
upon such other timing as mutually agreed by the Parties.

 

(b)       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 government agency in connection with any filings under
HSR.  Each Party will bear its own costs
with respect thereto (except the filing fees for HSR, which will be paid by
Genzyme).

 

7.1.2.    Effective Date.  This Agreement will not be effective until
the date (the “Effective Date”) the requirements described in Section 7.1.1
have been satisfied and all applicable waiting periods (including any
extensions thereof) under HSR have 

 

15

 

expired or been
terminated.  All obligations, rights,
duties and liabilities under this Agreement (except those contained in this Section 7.1
(Conditions Precedent), Article 3 (Non-Compete), Article 5
(Representations and Warranties) and Article 8 (Miscellaneous) of
this Agreement) are subject to such date.

 

7.1.3.    Party’s Termination Right.  If the Effective Date has not occurred within
ninety (90) days after the Execution Date, notwithstanding that each Party has
fulfilled its obligations under this Section 7.1, either Party has
the right to terminate this Agreement without liability to the other Party by
notice in writing with immediate effect; provided, however,
that if the Parties receive a request for more information from a government
agency in connection with the HSR filing, the Parties will mutually agree to
extend the ninety (90) day period for a reasonable period of time.

 

7.2.      Isis’ Right to Terminate.  If either (a) after the satisfaction or
waiver of the closing conditions set forth in Section 5.2 of the Stock
Purchase Agreement, Genzyme has not paid Isis the Purchase Price for the Shares
by the Closing Date (as required by and defined in the Stock Purchase
Agreement) or (b) Genzyme fails to pay the upfront license fee when due
under Section 2.1.4 (Upfront License Fee), Isis has the right to
terminate this Agreement without liability to Genzyme by notice in writing with
immediate effect if Genzyme has failed to cure such non-payment within a
reasonable period of time after receiving written notice from Isis of such
failure to pay.

 

7.3.      Termination by Genzyme.  The Parties have negotiated and entered into
this Agreement (but not the Stock Purchase Agreement) on an abbreviated
schedule that has not permitted Genzyme to complete a customary due diligence
review and analysis of the Product’s clinical data, regulatory history,
relevant Isis and Third Party intellectual property, and relevant Third Party
Agreements, and intend for Genzyme to conduct and complete such a due diligence
review and analysis during the Diligence Period.  Therefore, Genzyme may terminate the Product
License with immediate effect by providing written notice to Isis at any time
during the Diligence Period if, based on its due diligence review and analysis,
Genzyme concludes in good faith that the value of the Product License is
significantly reduced.  For purposes of
clarification, this Section 7.3 does not give Genzyme the right to
terminate the Stock Purchase Agreement.

 

16

 

ARTICLE 8.

MISCELLANEOUS

 

8.1.      Confidentiality.

 

8.1.1.    Non-Disclosure.  Genzyme and Isis agree that all information
relating to the Licensed IP, the terms and conditions of this Agreement
(including the Product Term Sheet and Research Term Sheet), or any activities
conducted in connection with or pursuant to this Agreement and disclosed by
either Party in accordance with this Agreement (“Confidential Information”)
will be used and disclosed by the receiving Party only to perform its
obligations and exercise its rights under this Agreement.  Information relating to the development of
the Product, the Licensed IP and the terms and conditions of this Agreement
will be considered the Confidential Information of both Parties under the
Agreement, as if both Parties were receiving Parties.  Notwithstanding the foregoing, “Confidential
Information” will not include information that the receiving Party can
establish:

 

(a)       was already known by the
receiving Party (other than under an obligation of confidentiality) at the time
of disclosure by the disclosing Party;

 

(b)       was generally available to
the public or otherwise part of the public domain at the time of its disclosure
to the receiving Party;

 

(c)       became generally available
to the public or otherwise part of the public domain after its disclosure or
development, as the case may be, other than through any act or omission of the
receiving Party or any of its Affiliates;

 

(d)       was disclosed to the
receiving Party, other than under an obligation of confidentiality, by a Third
Party who had no obligation to the disclosing Party not to disclose such
information to others; or

 

(e)       was independently discovered
or developed by or on behalf of the receiving Party without the use of any
Confidential Information belonging to the disclosing Party.

 

8.1.2.    Authorized Disclosure and
Use.  Notwithstanding the foregoing
provisions of Section 8.1.1, each Party may disclose Confidential
Information belonging to the other Party to the extent such disclosure is
reasonably necessary to:

 

(a)       prosecute or defend
litigation,

 

(b)       comply with applicable
governmental laws and regulations (including the rules and regulations of
the SEC); or

 

(c)       make filings and submissions
to, or correspond or communicate with, any government authority.

 

In the event a Party deems it reasonably necessary
to disclose Confidential 

 

17

 

Information belonging to the other Party pursuant to
clauses (a), (b) and (c) of this Section 8.1.2, the
disclosing Party will to the extent possible give reasonable advance notice of
such disclosure to the other Party and take reasonable measures to ensure
confidential treatment of such information.

 

8.2.      Specific Performance.  Each Party acknowledges and agrees that, in
the event of any breach of this Agreement by such Party or any of its
Affiliates, the non-breaching Party may be irreparably and immediately harmed
and may not be able to be made whole by monetary damages.  Without prejudice to any rights and remedies
otherwise available, the non-breaching Party will be entitled to seek equitable
relief by way of injunction, specific performance or otherwise if the breaching
Party or any of its Affiliates breaches any provision of this Agreement.

 

8.3.      Governing Law.  This Agreement will be governed by and
interpreted in accordance with the laws of the State of New York without
reference to its choice of laws or conflicts of laws provisions.

 

8.4.      Waiver.  The failure by either Party to take any
action or assert any right hereunder will in no way be construed to be a waiver
of such right, nor in any way be deemed to affect the validity of this
Agreement or any part hereof, or the right of a Party to thereafter enforce
each and every provision of this Agreement.

 

8.5.      Notices.  Any consent or notice required or permitted
to be given or made under this Agreement by one of the Parties hereto to the
other will be in writing and delivered by hand or sent by nationally recognized
overnight delivery service, prepaid registered or certified air mail, or by
facsimile confirmed by prepaid, registered or certified mail letter, and will
be deemed to have been properly served to the addressee upon receipt of such
written communication, in any event to the following addresses (or any updated
address provided to the notifying Party in writing in accordance with this Section 8.5):

 

	
  If to Genzyme:

  	
  Genzyme Corporation

  
	
   

  	
  500 Kendall Street

  
	
   

  	
  Cambridge, Massachusetts
  02142

  
	
   

  	
  Attn:

  	
  General Manager,

  
	
   

  	
   

  	
  Cardiovascular Business
  Unit

  
	
   

  	
  Fax: (617) 252-7553

  

 

	
  with a copy to:

  	
  Genzyme Corporation

  
	
   

  	
  500 Kendall Street

  
	
   

  	
  Cambridge, Massachusetts
  02142

  
	
   

  	
  Attn:

  	
  General Counsel

  
	
   

  	
  Fax:  (617) 252-7553

  

 

	
  If to Isis:

  	
  Isis Pharmaceuticals, Inc.

  
	
   

  	
  1896 Rutherford Road

  
	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
  Attn:

  	
  COO and CFO

  

 

18

 

	
   

  	
  Fax:  (760) 603-4650

  

 

 

	
  with a copy to:

  	
  Isis Pharmaceuticals, Inc.

  
	
   

  	
  1896 Rutherford Road

  
	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
  Attn:

  	
  General Counsel

  
	
   

  	
  Fax:  (760) 268-4922

  

 

8.6.      Entire Agreement.  This Agreement and all Exhibits and Schedules
attached hereto (the terms of which are incorporated herein by reference) sets
forth all the covenants, promises, agreements, warranties, representations,
conditions and understandings between the Parties hereto with respect to the
subject matter hereof and supersedes and terminates all prior agreements
(including the Confidential Disclosure and Standstill Agreement dated September 19,
2007 between the Parties) and understandings between the Parties and
constitutes the entire agreement between the Parties with respect to the
subject matter hereof.  All Exhibits and
Schedules referred to herein and other attachments hereto are intended to be,
and hereby are, specifically incorporated herein and made a part of this Agreement.  No subsequent alteration, amendment or
modification to this Agreement will be binding upon the Parties unless in
writing and duly executed by authorized representatives of both Parties.

 

8.7.      Binding Effect; Assignment.  This Agreement will inure to the benefit of
and be binding upon the Parties and their respective successors and permitted
assigns.  Neither Party will assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other Party; provided, however,
that Genzyme  may assign this Agreement
or its rights or obligations hereunder to any of its Affiliates.

 

8.8.      Press Releases.  Except as required by applicable law, neither
Party will give notice to any Third Party or otherwise make any public
statement or releases concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written consent of the other
Party to this Agreement as to the contents and manner of presentation and
publication thereof, which consent will not be unreasonably withheld, delayed or
conditioned.

 

8.9.      Severability.  If any term, covenant or condition of this
Agreement or the application thereof to any Party or circumstance, to any
extent, is invalid or unenforceable, then (a) the remainder of this
Agreement, or the application of such term, covenant or condition to Parties or
circumstances other than those as to which it is invalid or unenforceable, will
not be affected thereby and each term, covenant or condition of this Agreement
will be valid and be enforced to the fullest extent permitted by law; and (b) the
Parties hereto covenant and agree to renegotiate any such term, covenant or
application thereof in good faith in order to provide a reasonably acceptable
alternative to the term, covenant or condition of this Agreement or the
application thereof that is invalid or unenforceable, it being the intent of
the Parties that the basic purposes of this Agreement are to be effectuated.

 

8.10.     Further Assurances.  Each Party will execute such other
instruments, give such further 

 

19

 

assurances and perform such
acts which are or may become necessary or appropriate to effectuate and carry
out the provisions and intent of this Agreement.

 

8.11.     Independent Contractors.  The status of the Parties under this
Agreement will be that of independent contractors.  No Party will have the right to enter into
any agreements on behalf of the other Party, nor will it represent to any Third
Party that it has any such right or authority. 
Nothing in this Agreement will be construed as establishing a
partnership or joint venture relationship between the Parties hereto.

 

8.12.     Interpretation.  The article and section headings herein are
for reference purposes only and will not affect the meaning or interpretation
hereof.  The term “including” (or any
variation thereof such as “include”) will be without limitation.

 

8.13.     Counterparts.  This Agreement may be executed in one or more
counterpart copies, and by facsimile signature, each of which will be deemed an
original and all of which taken together will be deemed to constitute one and
the same instrument.

 

8.14.     Rights in Bankruptcy.  All rights and licenses now or hereafter
granted under or pursuant to this Agreement, the Product Term Sheet and the
Research Term Sheet, including Section 2.1 of this Agreement, are
rights to “intellectual property” (as defined in Section 101(35A) of Title
11 of the United States Code, as amended (such Title 11, the “Bankruptcy
Code”)).  Isis hereby grants to
Genzyme and all Affiliates of Genzyme a right of access and to obtain
possession of and to benefit from (a) copies of research data, (b) laboratory
samples, (c)  samples of Product, (d) formulas, (e) laboratory
notes and notebooks, (f) data and results related to clinical trials, (g) regulatory
filings and approvals, (h) rights of reference in respect of regulatory
filings and approvals, (i) pre-clinical research data and results, and (j) marketing,
advertising and promotional materials, all of which constitute “embodiments” of
intellectual property pursuant to Section 365(n) of the Bankruptcy
Code, and (k) all other embodiments of such intellectual property, in each
case, solely in connection with Genzyme’s rights under the Product License and
the Research Option Agreement, whether any of the foregoing are in Isis’
possession or control or in the possession and control of Third Parties.  Isis agrees not to interfere with Genzyme’s
and its Affiliates’ exercise of rights and licenses to intellectual property
licensed hereunder and embodiments thereof in accordance with this Agreement
and agrees to use commercially reasonable efforts to assist Genzyme and its
Affiliates to obtain such intellectual property and embodiments thereof in the
possession or control of Third Parties as reasonably necessary or desirable for
Genzyme or its Affiliates to exercise such rights and licenses in accordance
with this Agreement.  The Parties hereto
acknowledge and agree that all payments by Genzyme to Isis in the Product Term
Sheet, other than the Profit Sharing and Sales Milestones referred to in the
Product Term Sheet, do not constitute “royalties” within the meaning of
Bankruptcy Code §365(n) or relate to licenses of intellectual property
hereunder.

 

[remainder of page intentionally
left blank]

 

20

 

IN WITNESS WHEREOF, the
Parties have caused this License and Research Agreement to be executed by their
officers thereunto duly authorized as of the date first written above.

 

 

	
   

  	
  Genzyme Corporation

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Earl M. Collier, Jr.

  
	
   

  	
  Name:

  	
  Earl M. Collier, Jr.

  
	
   

  	
  Title:

  	
  EVP

  

 

 

	
   

  	
  Isis Pharmaceuticals, Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ B. Lynne Parshall

  	 

	
   

  	
  Name:

  	
  B. Lynne Parshall

  
	
   

  	
  Title:

  	
  COO &
  CFO

  	 

 

 

SCHEDULE 1.20

 

ISIS CORE TECHNOLOGY PATENTS

[***]

 

 

SCHEDULE 1.22

 

ISIS MANUFACTURING & ANALYTICAL PATENTS

[***]

 

 

SCHEDULE 1.37

 

PRODUCT-SPECIFIC PATENTS

[***]

 

 

Schedule
2.1.1

 

Licenses
to Third Parties

[***]

 

2

 

Schedule 5.2.2

 

Third Party Agreements

[***]

 

 

Exhibit A

 

Stock
Purchase Agreement

 

 

Execution Version

 

STOCK
PURCHASE AGREEMENT

 

THIS STOCK PURCHASE AGREEMENT (“Agreement”) is entered into as of January 7,
2008, by and between GENZYME CORPORATION,
a Massachusetts corporation ( “Genzyme”),
and ISIS PHARMACEUTICALS, INC., a Delaware
corporation (“Isis”).

 

RECITALS

 

A.                  Isis has agreed to sell, and
Genzyme has agreed to purchase, shares of Isis’ common stock (the “Common Stock”) subject to and in
accordance with the terms and provisions hereof.

 

B.                  Isis
and Genzyme are entering into a License and Research Agreement, dated the same
date hereof (the “License and Research Agreement”).

 

C.                  The capitalized terms used
herein and not otherwise defined have the meanings given to them in Appendix 1.

 

AGREEMENT

 

For good and valuable consideration, the
Parties agree as follows:

 

SECTION 1.    SALE AND
PURCHASE OF STOCK

 

1.1          Purchase
of Stock.  Subject to
the terms and conditions of this Agreement, at the Closing, Isis will issue and
sell to Genzyme, and Genzyme will purchase from Isis, 5,000,000 shares of
Common Stock (the “Shares”) for an aggregate
purchase price of $150,000,000 (the “Purchase Price”).

 

1.2          Payment.  At the Closing, Genzyme will pay the Purchase
Price by wire transfer of immediately available funds in accordance with wire
instructions provided by Isis to Genzyme prior to the Closing, and Isis will
deliver a stock certificate representing the Shares to Genzyme.

 

1.3          Closing.
The closing of the transactions contemplated by this Section 1
(the “Closing”) will be held at the
offices of Isis within three Business Days after the conditions to closing set
forth in Section 5 are satisfied or waived (other than those conditions
that by their nature are to be satisfied or waived at the Closing) or at such
other place, time and/or date as may be jointly designated by Genzyme and Isis
(the “Closing Date”).

 

SECTION 2.    REPRESENTATIONS
AND WARRANTIES OF ISIS

 

Except as otherwise specifically contemplated by this
Agreement, Isis hereby represents and warrants to Genzyme that:

 

2.1          Organization
and Qualification. 
Isis is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and authority to
conduct its business as currently conducted as disclosed in the SEC
Documents.  Isis is duly qualified to do
business and is in good standing in every jurisdiction in which the nature of
the 

 

 

business conducted by it or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, would not reasonably be expected to have a
Material Adverse Effect.

 

2.2          Authorization;
Enforcement.  Isis has
all requisite corporate power and authority to enter into and to perform its
obligations under this Agreement, to consummate the transactions contemplated
hereby and to issue the Shares in accordance with the terms hereof.  The execution, delivery and performance of
this Agreement by Isis and the consummation by it of the transactions contemplated
hereby (including the issuance of the Shares) have been duly authorized by Isis’
Board of Directors (the “Board”)
and no further consent or authorization of Isis, the Board, or its stockholders
is required.  This Agreement has been
duly executed by Isis and constitutes a legal, valid and binding obligation of
Isis enforceable against Isis in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, or moratorium or similar laws affecting creditors’ and
contracting parties’ rights generally and except as enforceability may be
subject to general principles of equity and except as rights to indemnity and
contribution may be limited by state or federal securities laws or public
policy underlying such laws.

 

2.3          Capitalization.  The
authorized capital stock of Isis, consists of 200,000,000 shares of Common
Stock and 15,000,000 shares of Preferred Stock, of which 87,317,938 shares of Common Stock and no shares of Preferred Stock are issued and outstanding
as of January 2, 2008.  All of the
issued and outstanding shares of Common Stock have been duly authorized,
validly issued, fully paid, and nonassessable.  
Except as disclosed in the SEC Documents or issued pursuant to
equity incentive plans identified in the SEC Documents, Isis does not have
outstanding any options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible
into, or any contracts or commitments to issue or sell, shares of its capital
stock or any such options, rights, convertible securities or obligations.  Isis’ Restated Certificate of Incorporation
(the “Certificate of Incorporation”), as
in effect on the date hereof, and Isis’ Bylaws (the “Bylaws”) as in effect
on the date hereof, are each filed as exhibits to the SEC Documents.

 

2.4          Issuance
of Shares.  The Shares
are duly authorized and, upon issuance in accordance with the terms of this
Agreement, will be validly issued, fully paid and non-assessable and will not
be subject to preemptive rights or other similar rights of stockholders of
Isis.

 

2.5          No
Conflicts; Government Consents and Permits.

 

(a)           The execution
delivery and performance of this Agreement by Isis and the consummation by Isis
of the transactions contemplated hereby (including the issuance of the Shares)
will not (i) conflict with or result in a violation of any provision of
Isis’ Certificate of Incorporation or Bylaws, (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default under,
any agreement, indenture, or instrument to which Isis is a party, or (iii) result
in a violation of any law, rule, regulation, order, judgment or decree
(including United States federal and state securities laws and regulations and
regulations of any self-regulatory organizations) applicable to Isis, except in
the case of clauses (ii) and (iii) only, for such conflicts,
breaches, defaults, and violations as would not reasonably be expected to have
a 

 

2

 

Material Adverse Effect
or result in a liability for Genzyme. There is no control share acquisition,
business combination, rights agreement or other anti-takeover provision
contemplated by the Isis organizational documents or Delaware law that will
become applicable to Genzyme as a result of the purchase of the Shares.

 

(b)           Isis is not
required to obtain any consent, authorization or order of, or make any filing
or registration with, any court or governmental agency or any regulatory or
self regulatory agency in order for it to execute, deliver or perform any of
its obligations under this Agreement in accordance with the terms hereof, or to
issue and sell the Shares in accordance with the terms hereof other than such
as have been made or obtained, and except for (i) the registration of the
Shares under the Securities Act pursuant to Section 6 hereof, (ii) any
post-closing filings required to be made under federal or state securities
laws, (iii) any required filings or notifications regarding the issuance
or listing of additional shares with Nasdaq, and (iv) any consent required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”).

 

(c)           Isis has all
franchises, permits, licenses, and any similar authority necessary for the
conduct of its business as now being conducted by it and as currently proposed
to be conducted as disclosed in the SEC Documents, except for such franchise,
permit, license or similar authority, the lack of which would not reasonably be
expected to have a Material Adverse Effect. Isis has not received any actual
notice of any proceeding relating to revocation or modification of any such
franchise, permit, license, or similar authority except where such revocation
or modification would not reasonably be expected to have a Material Adverse
Effect.

 

2.6          SEC Documents, Financial Statements.  Isis has timely filed all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
for the three years prior to the date of this Agreement, pursuant to the
reporting requirements of the Exchange Act (all of the foregoing filed at least
two Business Days prior to the date hereof, including all exhibits included
therein and financial statements and schedules thereto and documents (other
than exhibits) incorporated by reference therein, being hereinafter referred to
herein as the “SEC Documents”). As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.  As of their respective dates, the Financial
Statements and the related notes complied as to form and substance in all
material respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. 
The Financial Statements and the related notes have been prepared in
accordance with accounting principles generally accepted in the United States,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in the Financial Statements or the notes thereto, or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes, may be condensed or summary statements or may conform to the SEC’s rules and
instructions for Reports on Form 10-Q) and fairly present in all material
respects the consolidated financial position of Isis as of the dates thereof
and the consolidated results of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal and
recurring year-end audit 

 

3

 

adjustments). Neither Isis not any of its subsidiaries has any material
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
other than liabilities adequately reflected or reserved against on the balance
sheet dated September 30, 2007, included in the Form 10-Q filed by
Isis for the quarter ended September 30, 2007, or incurred since September 30,
2007 in the ordinary course of business, consistent with past practice. All material agreements filed as exhibits to the SEC
Documents under Item 601 of Regulation S-K (collectively, the “Material Agreements”) are valid and
enforceable against Isis in accordance with their respective terms,
except for Material Agreements that have expired in accordance with their terms
or as otherwise set forth in the SEC documents, and (i) as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, or
moratorium or similar laws affecting creditors’ and contracting parties’ rights
generally, and (ii) as enforceability may be subject to general principles
of equity and except as rights to indemnity and contribution may be limited by
state or federal securities laws or public policy underlying such laws.  Isis is not in breach of or default under any of the Material
Agreements, and to Isis’ knowledge, no other party to a Material Agreement is
in breach of or default under such Material Agreement, except in each case, for
such breaches or defaults as would not reasonably be expected to have a
Material Adverse Effect.  Isis has not
received a notice of termination nor is Isis otherwise aware of any threats to
terminate any of the Material Agreements. 
Since September 30, 2007, the business and operations of Isis and
its subsidiaries have been conducted in the ordinary course consistent with
past practice, and there have been and are no events or conditions that have
resulted, or are reasonably expected to result, individually or collectively,
in a Material Adverse Effect.

 

2.7          Investment
Company.  Isis is not
and, after giving effect to the offering and sale of the Shares, will not be an
“investment company” as such
term is defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”).  Isis will conduct its business in a manner so
that it will not become subject to the Investment Company Act.

 

2.8          Nasdaq Global Market.  The Common Stock is listed on Nasdaq, and, to
Isis’ knowledge, there are no proceedings to revoke or suspend such listing or
the listing of the Shares.  Isis is in
compliance with the requirements of Nasdaq for continued listing of the Common
Stock thereon and any other Nasdaq listing and maintenance requirements.

 

2.9          Private
Placement.  Neither
Isis nor any person acting on its behalf, has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under any circumstances that would require registration of the Shares under the
Securities Act. Subject to the accuracy of the representations made by Genzyme
in Section 3, the Shares will be issued and sold to Genzyme in compliance
with applicable exemptions from the registration and prospectus delivery
requirements of the Securities Act and the registration and qualification
requirements of all applicable securities laws of the states of the United
States. Isis has not engaged any brokers, finders or agents, or incurred, or
will incur, directly or indirectly, any liability for brokerage or finder’s
fees or agents’ commissions or any similar charges in connection with this
Agreement and the transactions contemplated hereby.

 

SECTION 3.    REPRESENTATIONS
AND WARRANTIES OF GENZYME

 

Except as otherwise specifically contemplated
by this Agreement, Genzyme hereby represents and warrants to Isis that:

 

4

 

3.1          Investment
Purpose.  Genzyme is
purchasing the Shares for its own account and not with a present view toward
the public distribution thereof and has no arrangement or understanding with
any other persons regarding the distribution of such Shares except as would not
result in a violation of the Securities Act. 
Genzyme will not, directly or indirectly, offer, sell, pledge, transfer
or otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares except in accordance with the
provisions of Section 6 or pursuant to and in accordance with the
Securities Act.

 

3.2          Reliance
on Exemptions.  Genzyme
understands that Isis intends for the Shares to be offered and sold to it in
reliance upon specific exemptions from the registration requirements of United
States federal and state securities laws and that Isis is relying upon the
truth and accuracy of, and Genzyme’s compliance with, the representations,
warranties, agreements, acknowledgments and understandings of Genzyme set forth
herein in order to determine the availability of such exemptions and the
eligibility of Genzyme to acquire the Shares.

 

3.3          Accredited
Investor; Access to Information. 
Genzyme is an “accredited investor” as defined in Regulation D under the
Securities Act and is knowledgeable, sophisticated and experienced in making,
and is qualified to make decisions with respect to investments in shares
presenting an investment decision like that involved in the purchase of the
Shares.  Genzyme has been furnished with
materials relating to the offer and sale of the Shares, that have been
requested by Genzyme, including, without limitation, Isis’ SEC Documents, and
Genzyme has had the opportunity to review the SEC Documents.  Genzyme has been afforded the opportunity to
ask questions of Isis.  Neither such
inquiries nor any other investigation conducted by or on behalf of Genzyme or
its representatives or counsel will modify, amend or affect Genzyme’s right to
rely on the truth, accuracy and completeness of the SEC Documents and Isis’
representations and warranties contained in this Agreement. Genzyme has, with respect to all matters relating to this Agreement and
the offer and sale of the Shares, not relied upon counsel to Isis except for
the legal opinion to be delivered to Genzyme pursuant to Section 5.2(g).

 

3.4          Governmental
Review.  Genzyme
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Shares or an investment therein.

 

3.5          Transfer
or Resale.  Genzyme
understands that:

 

(a)          the Shares have not
been and are not being registered under the Securities Act (other than as
contemplated in Section 6) or any applicable state securities laws and,
consequently, Genzyme may have to bear the risk of owning the Shares for an
indefinite period of time because the Shares may not be transferred unless (i) the
resale of the Shares is registered pursuant to an effective registration
statement under the Securities Act, as contemplated in Section 6; (ii) Genzyme
has delivered to Isis an opinion of counsel (in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect
that the Shares to be sold or transferred may be sold or transferred pursuant
to an exemption from such registration; or (iii) the Shares are sold or
transferred pursuant to Rule 144;

 

5

 

(b)           any sale of the Shares made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and, if Rule 144
is not applicable, any resale of the Shares under circumstances in which the
seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and

 

(c)           except as set forth in Section 6, neither Isis
nor any other person is under any obligation to register the resale of the
Shares under the Securities Act or any state securities laws or to comply with
the terms and conditions of any exemption thereunder.

 

3.6          Legends. Genzyme understands the certificates
representing the Shares will bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of the
certificates for such Shares):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THE SECURITIES MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
LAWS, OR UNLESS OFFERED, SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED PURSUANT TO
AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS. ISIS
PHARMACEUTICALS, INC., A DELAWARE CORPORATION (“ISIS”) WILL BE ENTITLED TO
REQUIRE AN OPINION OF COUNSEL SATISFACTORY TO ISIS THAT SUCH REGISTRATION IS
NOT REQUIRED TO THE EXTENT THAT SUCH OPINION IS REQUIRED PURSUANT TO THAT
CERTAIN STOCK PURCHASE AGREEMENT UNDER WHICH THE SECURITIES WERE ISSUED.

 

Genzyme may request that Isis remove, and Isis agrees
to authorize and instruct (including by causing any required legal opinion to
be provided) the removal of any legend from the Shares promptly (i) following
any sale of the Shares pursuant to an effective Registration Statement or Rule 144,
(ii) if the Shares are eligible for sale under Rule 144 without
reference to volume or manner of sale limitations, or (iii) after the
Registration Statement becomes effective. 
Any fees associated with the removal of the legend shall be borne by
Isis; provided, however, Genzyme shall be responsible for fees incurred
directly by Genzyme.

 

3.7          Authorization; Enforcement. Genzyme has the requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. 
Genzyme has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement.  Upon the execution and delivery of this
Agreement, this Agreement will constitute a valid and binding obligation of
Genzyme enforceable in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors’ and contracting parties’ rights generally and
except as enforceability may be subject to general principles of equity and
except as rights to indemnity and contribution may be limited by state or
federal securities laws or public policy underlying such laws.

 

6

 

SECTION 4.    COVENANTS OF THE PARTIES

 

4.1          Reporting Status. 
Isis’ Common Stock is registered under Section 12 of the Exchange
Act. During the Registration Period, Isis will timely file all documents
required to be filed with the SEC, and Isis will not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would permit such termination.

 

4.2          Expenses. 
Isis and Genzyme are each liable for, and will pay, their own expenses
incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement, including, without limitation, attorneys’ and
consultants’ fees and expenses.

 

4.3          Standstill and Holding Requirements.  Genzyme agrees to comply with the restrictions and
requirements set forth in Appendix 2.

 

SECTION 5.    CONDITIONS TO CLOSING

 

5.1          Conditions to Obligations of Isis. 
Isis’ obligation to complete the purchase and sale of the Shares and
deliver such stock certificate(s) to Genzyme is subject to the fulfillment
or waiver of the following conditions at or prior to the Closing:

 

(a)           Receipt of Funds. 
Isis will have received immediately available funds in the full amount
of the Purchase Price for the Shares being purchased hereunder.

 

(b)           Representations and Warranties.  The representations and warranties made by
Genzyme in Section 3 will be true and correct in all material respects as
of the Closing Date, except to the extent such representations and warranties are
made as of another date, in which case such representations and warranties
shall be true and correct in all material respects as of such other date.

 

(c)           Covenants.  All
covenants, agreements and conditions contained in this Agreement to be
performed by Genzyme on or prior to the Closing Date will have been performed
or complied with in all material respects.

 

(d)           Absence of Litigation. 
No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or materially delay
the Closing, will have been instituted or be pending before any court,
arbitrator, governmental body, agency or official.

 

(e)           No Governmental Prohibition.  The sale of the Shares by Isis will not be
prohibited by the HSR Act, and will not be prohibited by any other law or
governmental order or regulation.

 

5.2          Conditions to Purchase’s Obligations
at the Closing.  Genzyme’s obligation to complete the purchase
and sale of the Shares is subject to the fulfillment or waiver of the following
conditions at or before the Closing:

 

7

 

(a)           Representations and Warranties.  The representations and warranties made by
Isis in Section 2 will be true and correct as of the Closing Date, except
to the extent such representations and warranties are made as of another date,
in which case such representations and warranties shall be true and correct as
of such other date.

 

(b)           Covenants.  All
covenants, agreements and conditions contained in this Agreement to be
performed by Isis on or prior to the Closing Date will have been performed or
complied with in all material respects.

 

(c)           Transfer Agent Instructions.  Isis will have delivered to its transfer
agent irrevocable written instructions to issue the Shares to Genzyme and
deliver a certificate representing such Shares.

 

(d)           Nasdaq Qualification. 
The Shares will be duly authorized for listing by Nasdaq, subject to
official notice of issuance, to the extent required by the rules of
Nasdaq.

 

(e)           Absence of Litigation. 
No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or delay the
Closing, will have been instituted or be pending before any court, arbitrator,
governmental body, agency or official.

 

(f)            No Governmental Prohibition.  Any applicable waiting periods under the HSR
Act shall have expired or terminated and 
any clearances, permits, authorizations, consents or approvals sought by
Genzyme under any other applicable laws or regulations shall have been
obtained. No statute, rule, regulation, executive order, decree, ruling,
injunction, action, proceeding or interpretation shall have been enacted,
entered, promulgated, endorsed or adopted by any court or governmental
authority of competent jurisdiction or any self-regulatory organization or the
staff of any of the foregoing, having authority over the matters contemplated
hereby, which questions the validity of, or challenges or prohibits the
consummation of, any of the transactions contemplated by this Agreement.

 

(g)           Isis will have delivered to Genzyme a certificate
signed by its Chief Executive Officer certifying that the conditions specified
in the Section 5.2 with respect to Isis have been fulfilled. Isis shall
have delivered to Genzyme (i) a copy of a certificate executed by the
Secretary of Isis attaching and certifying to the truth and correctness of the
Certificate of Incorporation, the Bylaws and the resolutions adopted by the
Board in connection with the transactions contemplated by this Agreement, (ii) a
good standing certificate dated as of a recent date, and (iii) an opinion
from the general counsel of Isis regarding the matters in Sections 2.1, 2.2,
the first sentence of 2.3, 2.4, 2.5, 2.7, and the second sentence of 2.9.

 

SECTION 6.    REGISTRATION RIGHTS

 

6.1          As soon as reasonably practicable, but in no event
later than 30  days after the Closing Date (the “Filing
Date”), Isis will file a registration statement covering the
resale of the Registrable Securities on a registration statement (the “Registration Statement”) with the
SEC and effect the registration, qualifications or compliances (including,
without limitation, the execution of any required undertaking to file
post-effective amendments) as promptly as possible after the filing thereof,
but in any event prior to the date (the “Effectiveness Date”)
which is (i) 

 

8

 

90 days after the Closing
Date if the Registration Statement is not reviewed by the SEC, or (ii) 120
days after the Closing Date, if the Registration Statement is reviewed by the
SEC.

 

6.2          All Registration Expenses incurred in connection with
any registration, qualification, exemption or compliance pursuant to Section 6.1
will be borne by Isis.  All Selling
Expenses relating to the sale of Registrable Securities by or on behalf of
Genzyme will be borne by Genzyme.

 

6.3          In the case of the registration, qualification,
exemption or compliance effected by Isis pursuant to this Agreement, Isis will,
upon reasonable request, inform Genzyme as to the status of such registration,
qualification, exemption and compliance. 
At its expense Isis will:

 

(a)           except for such times as Isis is permitted hereunder
to suspend the use of the prospectus forming part of the Registration Statement,
use its commercially reasonable efforts to keep such registration, and any
required qualification, exemption or compliance under state securities laws,
continuously effective with respect to Genzyme and its permitted assignees, and
to keep such Registration Statement free of any material misstatements or
omissions, until the date all Shares held by Genzyme may be sold during any 90
day period under Rule 144 and any contractual agreements with Isis.  The period of time during which Isis is
required hereunder to keep the Registration Statement effective is referred to
herein as the
“Registration
Period.”

 

(b)           advise Genzyme promptly (and, in any event, within one
Business Day):

 

(i)            when the Registration Statement or any amendment
thereto has been filed with the SEC and when the Registration Statement or any
post-effective amendment thereto has become effective;

 

(ii)           of the receipt by Isis of any notification from the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for such purpose;

 

(iii)         of the receipt by Isis of any notification with
respect to the suspension of the qualification of the Registrable Securities
included therein for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose; and

 

(iv)          of the occurrence of any event that requires the
making of any changes in the Registration Statement or the prospectus so that,
as of such date, the statements therein are not misleading and do not omit to state
a material fact required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in the light of the
circumstances under which they were made) not misleading;

 

(c)           use its commercially reasonable efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement as soon as reasonably practicable;

 

(d)           if Genzyme so requests in writing, promptly furnish to
Genzyme, without charge, at least one copy of such Registration Statement and
any post-effective amendment 

 

9

 

thereto, including
financial statements and schedules, and, if explicitly requested, all exhibits
in the form filed with the SEC;

 

(e)           during the Registration Period, promptly deliver to
Genzyme, without charge, at least one copy of the prospectus included in such
Registration Statement and any amendment or supplement thereto and as many
additional copies as Genzyme may reasonably request; and Isis consents to the
use, consistent with the provisions hereof, of the prospectus or any amendment
or supplement thereto by Genzyme in connection with the offering and sale of
the Registrable Securities covered by the prospectus or any amendment or
supplement thereto;

 

(f)            during the Registration Period, if Genzyme so requests
in writing, deliver to Genzyme, without charge, (i) one copy of the
following documents, other than those documents available via EDGAR (and
excluding, in each case, exhibits thereto): (A) its annual report to its
stockholders, if any (which annual report will contain financial statements
audited in accordance with generally accepted accounting principles in the
United States of America by a firm of certified public accountants of
recognized standing), (B) if not included in substance in its annual
report to stockholders, its annual report on Form 10-K (or similar form), (C) its
definitive proxy statement with respect to its annual meeting of stockholders, (D) each
of its quarterly reports to its stockholders, and, if not included in substance
in its quarterly reports to stockholders, its quarterly report on Form 10-Q
(or similar form), and (E) a copy of the Registration Statement; and (ii) if
explicitly requested, any exhibits filed with respect to the foregoing;

 

(g)           upon the occurrence of any event contemplated by Section 6.3(b)(v) above,
except for such times as Isis is permitted hereunder to suspend the use of the
prospectus forming part of the Registration Statement, Isis will use its
commercially reasonable efforts to as soon as reasonably practicable prepare a
post-effective amendment to the Registration Statement or a supplement to the
related prospectus, or file any other required document so that, as thereafter
delivered to Genzyme, the prospectus will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

 

(h)           otherwise use its commercially reasonable efforts to
comply in all material respects with all applicable rules and regulations
of the SEC which could affect the sale of the Registrable Securities;

 

(i)            use its commercially reasonable efforts to cause all
Registrable Securities to be listed on each securities exchange or market, if
any, on which equity securities issued by Isis have been listed;

 

(j)            use its commercially reasonable efforts to take all
other steps necessary to effect the registration of the Registrable Securities
contemplated hereby and to enable Genzyme to sell Registrable Securities under Rule 144;
and

 

(k)           permit a single counsel for Genzyme to review the
Registration Statement and all amendments and supplements thereto, within two
Business Days prior to the filing thereof with the Commission;

 

10

 

provided that, in the case of clause (k) above, Isis will
not be required to delay the filing of the Registration Statement or any
amendment or supplement thereto to incorporate any comments to the Registration
Statement or any amendment or supplement thereto by or on behalf of Genzyme if
such comments would require a delay in the filing of such Registration
Statement, amendment or supplement, as the case may be.

 

If at any time during the Registration Period there is
not an effective Registration Statement covering all of the Registrable
Securities and Isis shall determine to prepare and file with the SEC a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of a business or equity
securities issuable in connection with stock option or other employee or
director benefit plans, then Isis shall send to Genzyme written notice of such
determination and, if within ten Business Days after receipt of such notice, Genzyme
shall so request in writing, Isis shall include in such registration statement
all or any part of such Registrable Securities Genzyme requests to be
registered, subject
to customary underwriter cutbacks applicable to all holders of registration
rights on a pro rata basis (along with other holders of piggyback registration
rights with respect to Isis); provided, that (i) if at any time after
giving written notice of its intention to register any securities and prior to
the effective date of the registration statement filed in connection with such
registration, Isis shall determine for any reason not to register or to delay
registration of such securities, Isis may, at its election, give written notice
of such determination to Genzyme and, thereupon, (A) in the case of a
determination not to register, shall be relieved of its obligation to register
any Registrable Securities to this paragraph in connection with such
registration (but not from its obligation to pay expenses in accordance with
this Agreement, and (B) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities
being registered pursuant to this paragraph for the same period as the delay in
registering such other securities and (ii) if such registration involves
an underwritten public offering, a condition to having any Registrable
Securities included in such registration shall be Genzyme or its permitted
assignees entering into an underwriting agreement in customary form and
agreeing to sell such Registrable Securities to the underwriters on the same
terms and conditions as Isis (provided, however, that in no event shall Genzyme
or any permitted transferee be required to provide any indemnification or
contribution in favor of any underwriters on terms more favorable than the
terms set forth in this Agreement).

 

6.4          Genzyme will have no right to take any action to
restrain, enjoin or otherwise delay any registration pursuant to Section 6.1
hereof as a result of any controversy that may arise with respect to the
interpretation or implementation of this Agreement.

 

6.5          (a)  To the extent permitted by law, Isis
will indemnify and hold harmless Genzyme, each Genzyme director and officer and
each person controlling Genzyme within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, with respect to which
any registration that has been effected pursuant to this Agreement, against all
claims, losses, damages, penalties, fines, charges and liabilities (or action
in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened (subject to Section 6.5(c) below),
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in the Registration Statement, prospectus, any
amendment 

 

11

 

or supplement thereof, or
other document incident to any such registration, qualification or compliance
or based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in light of the circumstances in which they were made, and will
reimburse Genzyme and each director, officer and person controlling Genzyme,
for reasonable legal and other out-of-pocket expenses incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action as incurred; provided that Isis will not be liable in any such case to
the extent that any untrue statement or omission or allegation thereof is made
in reliance upon and in conformity with written information furnished to Isis
by or on behalf of Genzyme specifically for use in such Registration Statement,
prospectus, amendment or supplement; provided further
that Isis will not be liable in any such case where the claim, loss, damage or
liability arises solely out of the failure of Genzyme to comply with Section 6.6
of this Agreement respecting sales of Registrable Securities, and except that
the foregoing indemnity agreement is subject to the condition that, insofar as
it relates to any such untrue statement or alleged untrue statement or omission
or alleged omission made in the preliminary prospectus but eliminated in the
amended prospectus on file with the SEC at the time the Registration Statement
becomes effective or in the amended prospectus filed with the SEC pursuant to Rule 424(b) of
the Securities Act, which meets the requirements of Section 10(a) of
the Securities Act (the “Final Prospectus”),
such indemnity will not inure to the benefit of Genzyme or any such controlling
person, if a copy of the Final Prospectus had been furnished by Isis to Genzyme
for delivery was not furnished to the person or entity asserting the loss,
liability, claim or damage prior to the time such furnishing was required by
the Securities Act and the Final Prospectus would have cured all defects giving
rise to such loss, liability, claim or damage.

 

(b)           Genzyme will severally, and not jointly, indemnify
Isis, each of its directors and officers, and each person who controls Isis
within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened (subject to Section 6.5(c) below), to the
extent arising out of or based on any untrue statement of a material fact
contained in the Registration Statement, prospectus, or any amendment or
supplement thereof, incident to any such registration, or based on any omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in light of the circumstances in
which they were made, and will reimburse Isis, such directors and officers, and
each person controlling Isis for reasonable legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action as incurred, in each case to the
extent, but only to the extent, that such untrue statement or omission or
allegation thereof is made in reliance upon and in conformity with written
information furnished to Isis by or on behalf of Genzyme specifically for use
in the Registration Statement, prospectus, amendment or supplement.  Notwithstanding the foregoing, Genzyme’s
aggregate liability pursuant to this subsection (b) and subsection (d) will
be limited to the net amount received by Genzyme from the sale of the
Registrable Securities.

 

(c)           Each party entitled to indemnification under this Section 6.5
(the “Indemnified Party”) will give
notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and will permit the Indemnifying Party (at its expense) to
assume the defense of any such claim or any litigation resulting therefrom,
provided 

 

12

 

that counsel for the
Indemnifying Party, who will conduct the defense of such claim or litigation,
will be approved by the Indemnified Party (whose approval will not unreasonably
be withheld), and the Indemnified Party may participate in such defense at such
Indemnified Party’s expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein will not relieve the
Indemnifying Party of its obligations under this Agreement, except to the
extent such failure is materially prejudicial to the Indemnifying Party in
defending such claim or litigation, provided, however, that the Indemnified
Parties shall each have the right to retain their own counsel with the fees and
expenses of not more than one counsel for the Indemnified Parties as a group to
be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by an Indemnified Party, the representation by separate counsel of all
the Indemnified Parties and the indemnifying party would be inappropriate due
to actual or potential conflicting interests between any Indemnified Party and
any other party represented by such counsel in such proceeding.  An Indemnifying Party will not be liable for
any settlement of an action or claim effected without its written consent (which
consent will not be unreasonably withheld). 
No Indemnifying Party, in its defense of any such claim or litigation,
will, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.  The indemnifying party shall
keep each Indemnified Party apprised as to the status of the defense or any
settlement negotiations with respect thereto. 
No indemnifying party shall, without the prior written consent of an
Indemnified Party, consent to entry of any judgment or enter into any settlement
or other compromise which requires any admission of wrongdoing by such
Indemnified Party or obligates or requires an Indemnified Party to take, or
refrain from taking, any action.

 

(d)           If the indemnification provided for in this Section 6.5
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any loss, liability, claim, damage or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, will contribute to the amount paid or payable by
such Indemnified Party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the
other in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other relevant
equitable considerations.  The relative
fault of the Indemnifying Party and of the Indemnified Party will be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Indemnifying Party or by the Indemnified Party
and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

 

6.6          (a)  Genzyme agrees that, within one Business
Day following receipt of any written notice from Isis specifically stating that
there has occurred the happening of an event requiring the preparation of a
supplement or amendment to a prospectus relating to Registrable Securities so
that, as thereafter delivered to Genzyme, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, Genzyme will discontinue disposition of Registrable Securities
pursuant to the Registration Statement and prospectus contemplated by Section 6.1
until its receipt of copies of the supplemented or amended prospectus from Isis
and, 

 

13

 

if so directed in writing
by Isis, Genzyme will deliver to Isis or destroy all copies, other than
permanent file copies then in Genzyme’s possession, of the prospectus covering
such Registrable Securities at the time of receipt of such notice.

 

(b)           Genzyme will be obligated to suspend, upon request of
Isis pursuant to Section 6.6(a), any disposition of Registrable Securities
pursuant to the Registration Statement and prospectus contemplated by Section 6.1
during no more than two periods of no more than 30 calendar days each during
any 12-month period and only to the extent that Genzyme has received notice
from Isis specifically stating that the Board has determined in good faith that
the sale of Registrable Securities under the Registration Statement would be
reasonably likely to cause a violation of the Securities Act or Exchange Act.

 

(c)           As a condition to the inclusion of its Registrable
Securities, Genzyme will furnish to Isis such information regarding Genzyme and
the distribution proposed by Genzyme as Isis may reasonably request in writing,
including completing a Registration Statement questionnaire in customary form.

 

(d)           Genzyme hereby covenants with Isis (i) not to
make any sale of the Registrable Securities without effectively causing any
applicable prospectus delivery requirements under the Securities Act to be
satisfied, and (ii) if such Registrable Securities are to be sold by any
method or in any transaction other than on a national securities exchange,
Nasdaq or in the over-the-counter market, in privately negotiated transactions,
or in a combination of such methods, to notify Isis at least five Business Days
prior to the date on which Genzyme first offers to sell any such Registrable
Securities.

 

(e)           [Intentionally omitted]

 

(f)            Genzyme agrees not to take any action with respect to
any distribution deemed to be made pursuant to such Registration Statement
which would constitute a violation of Regulation M under the Exchange Act or
any other applicable rule, regulation or law.

 

(g)           At the end of the Registration Period Genzyme will
discontinue sales of shares pursuant to such Registration Statement upon
receipt of notice from Isis of its intention to remove from registration the
shares covered by such Registration Statement which remain unsold, and Genzyme
will notify Isis of the number of shares registered which remain unsold within
five Business Days after receipt of such notice from Isis.

 

6.7          The rights of Genzyme under any provision of this Section 6
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely) or amended by an instrument in writing signed by Genzyme.

 

SECTION 7.    GOVERNING LAW; MISCELLANEOUS.

 

7.1          Governing Law; Jurisdiction. 
This Agreement will be governed by and interpreted in accordance with
the laws of the State of Delaware without regard to the principles of conflict
of laws.

 

14

 

7.2          Counterparts; Signatures by Facsimile. 
This Agreement may be executed in two counterparts, both of which are
considered one and the same agreement and will become effective when the
counterparts have been signed by each party and delivered to the other party
hereto.  This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.

 

7.3          Headings. 
The headings of this Agreement are for convenience of reference only,
are not part of this Agreement and do not affect its interpretation.

 

7.4          Severability.  If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision will be deemed modified in order to conform with such statute or rule of
law.  Any provision hereof that may prove
invalid or unenforceable under any law will not affect the validity or
enforceability of any other provision hereof.

 

7.5          Entire Agreement; Amendments. 
This Agreement (including any schedules and exhibits hereto) and the
License and Research Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein.  This Agreement supersedes all
prior agreements and understandings among the parties hereto with respect to
the subject matter hereof.  No provision
of this Agreement may be waived or amended other than by an instrument in
writing signed by the party to be charged with enforcement.  Any amendment or waiver effected in accordance
with this Section 7.5 will be binding upon Genzyme and Isis.

 

7.6          Notices. 
All notices required or permitted hereunder will be in writing and will
be deemed effectively given: (a) upon personal delivery to the party to be
notified, (b) when sent by confirmed email or facsimile if sent during
normal business hours of the recipient, if not, then on the next Business Day,
or (c) one Business Day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt.  The addresses for such
communications are:

 

15

 

	
  If to Isis:

  	
   

  	
  Isis Pharmaceuticals

  
	
   

  	
   

  	
  1896 Rutherford Road

  
	
   

  	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
   

  	
  Attn: COO

  
	
   

  	
   

  	
  Facsimile: 760-603-2700

  

 

	
  With a copy to:

  	
   

  	
  ISIS GENERAL COUNSEL

  
	
   

  	
   

  	
  Facsimile: 760-268-4922

  

 

	
  If to Genzyme:

  	
   

  	
  Genzyme Corporation

  
	
   

  	
   

  	
  500 Kendall Street

  
	
   

  	
   

  	
  Cambridge, MA 02142

  
	
   

  	
   

  	
  Attn: General Counsel

  
	
   

  	
   

  	
  Facsimile: 617-252-7600

  

 

7.7          Successors and Assigns. 
This Agreement is binding upon and inures to the benefit of the parties
and their successors and assigns.  Isis
will not assign this Agreement or any rights or obligations hereunder without
the prior written consent of Genzyme, and Genzyme will not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Isis; provided, however, that Genzyme may assign this Agreement
together with all of the Shares it then owns (in accordance with the terms of
Sections 3.5 and 3.6) to any wholly-owned subsidiary and any such assignee may
assign the Agreement together with all of the Shares it then owns (in
accordance with the terms of Sections 3.5 and 3.6) to Genzyme or any other
subsidiary wholly-owned by Genzyme, in any such case, without such consent
provided that the assignee agrees to assume Genzyme’s obligations under
Appendix 2 of this Agreement.

 

7.8          Third Party Beneficiaries. 
This Agreement is intended for the benefit of the parties hereto, their
respective permitted successors and assigns, and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.

 

7.9          Further Assurances. 
Each party will do and perform, or cause to be done and performed, all
such further acts and things, and will execute and deliver all other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.

 

7.10        No  Strict Construction.  The language used in this
Agreement is deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
a party.

 

7.11        Equitable Relief. 
Isis recognizes that, if it fails to perform or discharge any of its
obligations under this Agreement, any remedy at law may prove to be inadequate
relief to Genzyme. Isis therefore agrees that Genzyme are entitled to seek
temporary and permanent injunctive relief in any such case. Genzyme also
recognizes that, if it fails to perform or discharge any of its obligations
under this Agreement, any remedy at law may prove to be 

 

16

 

inadequate relief to
Isis.  Genzyme therefore agrees that Isis
is entitled to seek temporary and permanent injunctive relief in any such case.

 

7.12        Survival of Representations and
Warranties.  Notwithstanding any investigation made by
a party to this Agreement, all representations and warranties made by Isis and
Genzyme herein will survive for a period of one year following the date hereof.

 

17

 

IN WITNESS WHEREOF, Genzyme and Isis have caused
this Stock Purchase Agreement to be duly executed as of the date first above
written.

 

 

	
   

  	
  GENZYME
  CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Earl M. Collier, Jr.

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  EVP

  

 

 

	
   

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  B. Lynne Parshall

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  COO &
  CFO

  

 

 

APPENDIX
1

 

DEFINED
TERMS

 

“Business Day” means a day Monday through Friday on
which banks are generally open for business in the State of California.

 

“Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

“Financial
Statements”  means the financial statements of Isis included in the
SEC Documents.

 

“Material Adverse Effect” means a material adverse effect on (a) the
business, operations, assets or financial condition of Isis, taken as a whole,
or (b) the ability of Isis to perform its obligations pursuant to the
transactions contemplated by this Agreement.

 

“Nasdaq” means The Nasdaq Global Market.

 

“Person” means any person, individual,
corporation, limited liability company, partnership, trust or other
nongovernmental entity or any governmental agency, court, authority or other
body (whether foreign, federal, state, local or otherwise).

 

The terms “register,”
“registered” and “registration” refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

 

“Registrable Securities” means the Shares; provided,
however, that securities will only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to a registration statement declared effective by the SEC and (B) have
not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale.

 

“Registration Expenses” means all expenses incurred by Isis in
complying with Section 6.1 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and expenses of counsel for Isis (but excluding the Selling Expenses).

 

“Rule 144” means Rule 144 promulgated under
the Securities Act, or any successor rule.

 

“SEC” means the United States Securities and
Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute.

 

“Selling Expenses” means all selling commissions applicable
to the sale of Registrable Securities and all fees and expenses of legal
counsel for Genzyme.

 

 

“Trading Market” means Nasdaq or any national securities
exchange, market or trading or quotation facility on which the Common Stock is
then listed or quoted.

 

 

APPENDIX
2

 

STANDSTILL AND HOLDING REQUIREMENTS

 

 

1.             Restrictions.  Prior to the earlier of (a) the ten-year
anniversary of the effective date of the License and Research Agreement or (b) the
date on which Genzyme holds less than 2% of Isis’ outstanding Common Stock on
an issued and outstanding basis without giving effect to any convertible
securities, except as contemplated by this Stock Purchase Agreement, Genzyme
and its Affiliates will not, directly or indirectly:

 

(i)            acquire, agree to acquire, or
publicly offer to acquire beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of any Isis voting securities;

 

(ii)           participate in any “solicitation” of “proxies”
to vote (as such terms are used in the proxy rules of the SEC promulgated
pursuant to Section 14 of the Exchange Act) with respect to any Isis
voting securities;

 

(iii)          form, join or in any way participate
in a “group” within the meaning of Section 13(d)(3) of the Exchange
Act with respect to any Isis voting securities;

 

(iv)          publicly propose any business
combination, restructuring, recapitalization or similar transaction involving
Isis or any of its subsidiaries; nominate any person as a director of Isis who
is not nominated by the then incumbent directors or a committee thereof; or
propose any matter to be voted upon by the stockholders of Isis that relates to
a business combination, restructuring, recapitalization or similar transaction
involving Isis;

 

(v)           bring any legal action contesting or
otherwise challenge in a legal proceeding the validity of this Section 1
of Appendix 2; or

 

(vi)          enter into any agreement with a third
party to do any of the actions prohibited under (i), (ii), (iii) (iv) or
(v) above.

 

2.             Termination
of Limitations.  The limitations
provided in Section 1 of this Appendix 2 will terminate:

 

(a)                                  following the commencement by any Third Party of a
tender or exchange offer seeking to acquire beneficial ownership of fifty
percent (50%) or more of the outstanding shares of Isis Common Stock;

 

(b)                                 following the public announcement of the execution of
an agreement which, if consummated, would result in either (i) the
beneficial owners of Isis Common Stock beforehand owning less than 50% of the
voting securities or voting power of the surviving company in the transaction
or (ii) the sale of all or substantially all of the assets of Isis;

 

 

(c)                                  upon the filing of a preliminary or final proxy
statement by any Third Party with respect to the commencement of a proxy or
consent solicitation subject to Section 14 of the Exchange Act to elect or
remove a majority of the directors of Isis;

 

(d)                                 upon the adoption of a plan of liquidation or
dissolution with respect to Isis; or

 

(e)                                  upon written consent from Isis.

 

3.             Agreement
to Hold Shares.  Genzyme agrees that
it will hold and will not sell the Shares (or otherwise make any short sale of,
grant any option for the purchase of, or enter into any hedging or similar
transaction with the same economic effect as a sale of the Shares) until the
earlier of (a) the 4-year anniversary of the effective date of the License
and Research Agreement, (b) the first commercial sale of a Product under the
License and Research Agreement or (c) termination or reversion of the
product license granted to Genzyme under the License and Research Agreement
(the “Holding Period”).  In
addition, after the expiration of the Holding Period, Genzyme will not sell more
than 500,000 Shares in any thirty (30) day period.

 

4.             Affiliate.  For the purposes of this Appendix 2, “Affiliate”
of an entity means any other entity that, directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with such first entity. 
For purposes of this definition only, “control” (and, with correlative
meanings, the terms “controlled by” and “under common control with”) means the
possession of the actual power to direct the management or policies of an
entity, whether through the ownership of voting securities or by contract
relating to voting rights or corporate governance.  In addition, Regulus Therapeutics, LLC will
not be considered an Affiliate of Isis.

 

 

Exhibit B

 

Product
Term Sheet

 

 

EXHIBIT B

 

Collaboration
and License Agreement

Isis
Pharmaceuticals and Genzyme

Product
Term Sheet

 

January 7, 2008

 

Capitalized terms used but not defined in this Product Term Sheet are
used with the meanings given to them in the License and Research Agreement.

 

	
  Scope:

  	
   

  	
  Genzyme will exclusively
  license the apoB program, for therapeutic purposes. Genzyme will be
  responsible for the continued development and commercialization of the
  Product, subject to profit sharing and milestone payments paid to Isis.

  
	
   

  	
   

  	
   

  
	
  Isis Grants:

  	
   

  	
  As described in License
  and Research Agreement.

  
	
   

  	
   

  	
   

  
	
  Product

  	
   

  	
  As described in License
  and Research Agreement.

  
	
   

  	
   

  	
   

  
	
  Restrictions
  on Cross Use of Product and Non-Competition:

  	
   

  	
  As
  described in License and Research Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Cross-License

  	
   

  	
  Genzyme will grant Isis a
  first option to negotiate a license to practice any technology Genzyme
  discovers or develops as part of its program to develop or commercialize the
  Product that would be relevant to antisense therapeutics as a whole,
  including but not limited to manufacturing, formulation and delivery
  technologies, with appropriate consideration to be negotiated in good faith
  by the parties.

  
	
   

  	
   

  	
   

  
	
  License Fee and Up-Front
  Payments:

  	
   

  	
  Genzyme will pay to Isis
  an up-front, non-refundable, non-creditable license fee in the amount of US
  $175M payable as described in the License and Research Agreement.

  
	
   

  	
   

  	
   

  
	
  Milestones:

  	
   

  	
  Genzyme will pay Isis the
  following cash payments for the achievement of the following milestones of
  the Product by Genzyme or a sublicensee.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mipomersen in familial
  hypercholesterolemia (FH):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Event

  	
   

  	
  Milestone

  	
   

  
	
   

  	
   

  	
  U.S. NDA Filing

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  U.S. NDA Approval HoFH

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  U.S. NDA Approval HeFH

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  MAA Approval for FH

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mipomersen in first non-FH
  indication:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Event

  	
   

  	
  Milestone

  	
   

  
	
   

  	
   

  	
  U.S. NDA Approval

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  MAA Approval

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  JNDA Approval

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Follow-On Product:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Event

  	
   

  	
  Milestone

  	
   

  
	
   

  	
   

  	
  Aggregate Milestones

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  The parties will mutually
  agree on development and  regulatory
  strategy and allocation of milestones based on various regulatory approvals.

  

 

1

 

	
   

  	
   

  	
  Sales milestones for annual
  sales of Products

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Event (must reach level for two consecutive
  years)

  	
   

  	
  Milestone

  	
   

  
	
   

  	
   

  	
  Achievement of US$ 3B in
  total annual sales

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  Achievement of US$ 4B in
  total annual sales

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
  Achievement of US$ 5B in
  total annual sales

  	
   

  	
  US$ [***]

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sales milestones are
  achieved one time only, regardless of Product.

  
	
   

  	
   

  	
   

  
	
  Development and Commercialization Roles and
  Responsibilities:

  	
   

  	
  Development Plan:

   

  As part of the More Detailed Product Agreement, the parties will
  agree to a Development Plan for the Product. The Development Plan will
  include a detailed budget of development costs and will be managed by a Joint
  Development Committee (“JDC”) comprised of equal members from both Parties
  for the initial [***] years following the Effective Date [***]. The JDC will
  act by unanimous consent, with each party having a single vote. Disputes that
  cannot be resolved by the JDC will be referred initially to designated senior
  officers of Isis and Genzyme and then, if necessary, to mediation.

   

  Roles and Responsibilities:

   

  ·      Isis will transfer to Genzyme all requested preclinical pharmacology
  and safety data, clinical data, and other information related to the Product.

  ·      Attachment
  B sets forth Isis’ recommendations regarding which trials in 2008 Isis will
  conduct, which trials Genzyme will conduct, and which trials Isis will
  transition to Genzyme over the first half of the year pursuant to a mutually
  agreed upon plan.

  ·      Except
  as otherwise determined by the JDC, Genzyme will conduct all clinical trials
  and all preclinical work initiated in 2009 and thereafter, and will be
  responsible for worldwide regulatory support for the Product including NDA
  preparation and submission.

  ·      Isis
  will fund the studies described as Isis-funded in Attachment B plus the first
  $75 million of the remaining external development expense for the Product
  (calculated beginning January 1, 2008) including, without limitation,
  clinical trial expense for the remaining studies in Attachment B (non
  Isis-funded) and future studies, toxicology (except for Isis-funded studies)
  and PK studies, API and drug product, (including packaging and distribution),
  SAB and DSMB expense, etc. Beginning when the initial $75 million in external
  development expense has been funded by Isis, all development costs (internal
  and external) except the costs for the studies described as Isis funded in
  Attachment B if such studies are still ongoing will be treated as Program
  Costs.

  ·      Genzyme
  will be responsible for all of Genzyme’s internal labor costs and for all
  Program Costs after the first $75 million of external expenditure funded by
  Isis until the Program achieves profitability (provided, however, that before
  the Program achieves profitability, Isis internal labor will not be
  reimbursed by Genzyme).

  ·      Except
  for the specific tasks assigned to Isis above, Genzyme (subject to JDC
  oversight) shall be responsible for all other aspects of the development and
  commercialization of the Product, the costs for which, except as otherwise
  described above, shall be deemed to be Program Costs.

  ·      Genzyme
  will provide to Isis, at Isis’ request, any and all data from clinical or
  preclinical studies with Product(s).

  

 

2

 

	
   

  	
   

  	
  “Program Costs” means all costs and expenses incurred by Genzyme or
  Isis in connection with the commercial manufacture, promotion and sale of the
  Product, including all royalties, milestones and license fees payable to
  third-parties (including those currently owed to [***] and [***]), the costs
  of all clinical trials  and preclinical
  studies, the costs to produce and maintain a CMC document to support product
  manufacturing including, without limitation, stability studies, and other validation
  activities, and costs associated with obtaining and maintaining regulatory
  approvals for the Product.  Program
  Costs specifically will not include the purchase price for the Shares, the
  license fee or milestones payable to Isis. 
  Program Costs will also not include the costs to prosecute and
  maintain Patents which will be dealt with as described later in this term
  sheet.  The Parties will agree on a
  chart of accounts to determine Program Costs relying in general on the
  principles attached as Attachment A.

  
	
   

  	
   

  	
   

  
	
  Profit Sharing

  	
   

  	
  In lieu of royalties on Product sales, the Parties will share the
  profits from sales of all Product beginning in any year in which such Product
  generates Net Profits.  The Parties
  will then divide Net Profits pursuant to an allocation as follows:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  For
  Annual Net Revenues

  	
   

  	
  Genzyme Profit %

  	
   

  
	
   

  	
   

  	
   

  	
  $1 - <$200 M

  	
   

  	
  70%

  	
   

  
	
   

  	
   

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  >$2 B

  	
   

  	
  50%

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  In any year in which Program Costs for such year exceed Net Revenue
  for such year, Genzyme’s share of Net Revenue will be 100% and Genzyme will
  be solely responsible for all Program Costs.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding the foregoing, in any year in which Net Profits are
  generated in an amount greater than or equal to [***] of Net Revenue, Isis’
  share of Net Profits shall not fall below an amount equal to [***] of Net
  Revenue.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the purposes of this Term Sheet, “Net Profit” for any calendar
  year in which Net Revenue exceeds Program Costs is defined as all Net Revenue
  derived from sales or license of Product in such year, minus all Program
  Costs borne by the parties during such year (which, for items that need to be
  mutually agreed to, are within a mutually agreed budget).  “Net Revenue” means the gross invoiced
  sales amount of Product billed by Genzyme and its affiliates for the sale of
  Product during the applicable year, minus standard deductions taken in
  accordance with standard allocation procedures and accounting methods or any
  revenue received by Genzyme in connection with the license of a Product or
  grant of any other rights to a product such as distribution rights.

  
	
   

  	
   

  	
   

  
	
  Licensed Patents:

  	
   

  	
  The Licensed Patents are defined in the License and Research
  Agreement.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Following the signing of the More Detailed Product Agreement, Isis
  will assign the Product-Specific Patents to Genzyme, and Genzyme will be
  responsible at its own expense for prosecuting and maintaining such patents
  and any future Product-Specific Patents. Isis will be responsible for all
  costs of prosecuting and maintaining Isis Core Technology Patents and the Isis
  Manufacturing and Analytical Patents. 
  Even though [***] is a Product-Specific Patent, Isis will not assign
  such [***] to Genzyme, but Genzyme will have the first right to prosecute,
  maintain and enforce the [***] at Genzyme’s expense.

  

 

3

 

	
   

  	
   

  	
  Joint Patent Review Meetings.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  At least once a quarter, Isis and Genzyme patent professionals will
  meet to discuss prosecution strategy for the Licensed Patents in so far as
  relevant to maintaining the broadest coverage for the Products.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The patent professionals will also discuss any potential third party
  infringement of patents that might affect the Products, and any third party
  licenses that might be necessary or useful to maximize the value of the
  Products.  The expenses associated with
  any licensing or action to pursue an infringer that is mutually agreed
  between the Parties will be included in Program Costs. Similarly, any
  recoveries made by a Party in enforcing a Licensed Patent that is mutually
  agreed to be enforced will be included in Net Revenues.

  
	
   

  	
   

  	
   

  
	
  Research Support

  	
   

  	
  The parties will agree on a research program that may include, but is
  not limited to, the following research topics;

       [***]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Isis will fund research expenses, for these programs in [***].  Genzyme will fund the research expenses,
  for these programs in [***], and the cost of such research programs will not
  be included in Program Costs.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The nature and scope of this research program will be determined by
  JDC.

  
	
   

  	
   

  	
   

  
	
  [***] Technology:

  	
   

  	
  Without first obtaining Genzyme’s written consent (such consent not
  to be unreasonably withheld), Isis will not license to a Third Party any
  technology that (i) is specifically useful in [***], but is not broadly
  applicable to other [***], and (ii) was invented by Isis while
  performing the research or development plan funded by Genzyme under the
  Product License.

  
	
   

  	
   

  	
   

  
	
  Safety Database:

  	
   

  	
  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, Genzyme will cooperate in connection with populating the Isis
  Database.  In accordance with
  Applicable Law and any applicable informed consents or other Third Party
  obligations, Genzyme will provide Isis with copies of toxicology,
  pharmacokinetic and serious adverse event final reports related to each
  Product plus any supporting data reasonably requested by Isis.

  
	
   

  	
   

  	
   

  
	
  Term:

  	
   

  	
  The term of the Product License will be perpetual subject to
  termination and reversion rights.

  
	
   

  	
   

  	
   

  
	
  Reversion Rights:

  	
   

  	
  Should Genzyme not advance the Product using commercially reasonable
  efforts or discontinue development or commercialization of the Product, then
  all rights to the Product will revert back to Isis (the “Reversion”),
  including a license to or reassignment of all patent claims and transfer of
  all data and regulatory filings controlled by Genzyme that are necessary to
  develop and commercialize the Product solely for such purpose.  The license will be sublicensable.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Notwithstanding the foregoing, in the event that the approved label
  for the Product [***] that are not currently anticipated by the parties, the
  parties will discuss in good faith the extent to which such [***] changes the
  [***] for the Product.

  

 

4

 

	
   

  	
   

  	
  In consideration for the Reversion, Genzyme would receive a royalty
  on Net Revenue.  Genzyme’s royalty
  would be (i) [***] of Net Revenue if the Reversion occurred prior to the
  approval of the Product in an FH indication, (ii) [***] of Net Revenue
  if the Reversion occurred prior to the approval of the Product for a non-FH
  indication, and (iii) [***] of Net Revenue if the Reversion occurred at
  the time of or after the approval of the Product for a non-FH
  indication.  Notwithstanding the
  foregoing in no event will the total royalty payable to Genzyme exceed the
  aggregate amount of Program Costs that Genzyme has contributed to the
  Product, with interest thereon at [***] per year, net of any amounts paid for
  by Isis or covered by Product Revenue.

  
	
   

  	
   

  	
   

  
	
  Manufacture of Product

  	
   

  	
  Isis will supply the API for the Product for the Phase 2 clinical
  trials at the cost that Isis calculates on an annual basis as its
  fully-burdened cost.  Further, Isis
  agrees to supply the Pivotal Trial and initial launch supply of API for the Product
  at its fully burdened cost, as calculate on an annual basis, which costs will
  be included in Program Costs and the calculation of Net Profit.  The parties will enter into a supply
  agreement for Isis’ supply of the API for the Product which will contain
  mutually agreeable terms and conditions.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Parties anticipate that Genzyme will build manufacturing
  capability to manufacture API for commercial supply, however, Genzyme and
  Isis will mutually agree on the use of third parties to manufacture the
  Product.

  
	
   

  	
   

  	
   

  
	
  Indemnity

  	
   

  	
  Each Party will indemnify the other Party, from and against any third
  party claims to the extent occurring as a result of the negligence or willful
  misconduct of the indemnifying party; except to the extent such claims result
  from the gross negligence or willful misconduct of any party seeking
  indemnification.

  
	
   

  	
   

  	
   

  
	
  Change of Control

  	
   

  	
  In the event of a Change of Control of Isis, Genzyme shall have the
  right to (i) purchase Isis’ interest in the Product at the
  then-applicable fair market value (as determined by a mutually agreeable
  third party) and/or (ii) terminate (a) the participation of the
  successor to Isis in any ongoing research and development programs and
  Genzyme’s funding obligations associated therewith, and (b) the right of
  the successor to Isis to sit on the JDC or otherwise exercise any control
  over the development or commercialization of the apoB program.  In the event that Genzyme elects option (ii) above,
  such actions would not affect any of the economic rights that the successor
  to Isis would otherwise hold.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the purposes of this Term Sheet, a Change of Control shall mean (a) the
  acquisition by any person or group of Control of Isis or (b) any direct
  or indirect sale, lease, exchange, or other transfer by Isis of substantially
  all of the assets to which this Term Sheet relate (but not including any
  financial factoring agreement). 
  Control means the ownership of, directly or indirectly, at least 50%
  of the shares of such equity entitled to vote on the election of directors.

  

 

5

 

Attachment A

Definition of Program Costs

 

“Program Costs” means all costs and expenses incurred by Genzyme or Isis in connection with the development, manufacture, promotion and sale of the Product, including internal and external costs, as described in more detail below. All Program Costs will be based on each Party’s accounting records as maintained in accordance with U.S. GAAP consistently applied.
 
The following items will be excluded from Program Costs:
 
·                  the first $75 million of external development expenses that Isis will fund as described under “Development and Commercialization Roles and Responsibilities” in the term sheet
·                  the purchase price for the Shares, license fee or milestones payable to Isis
·                  the costs of the mutually agreed to research program described under “Research Support” in the term sheet
·                  the costs to prosecute and maintain Patents
·                  costs associated with stock-based compensation expenses or other pro forma adjustments to either Party’s GAAP financials
·                  Isis’ internal costs for any year in which Program Costs exceed Net Program Revenues (to the extent of such excess).
 
Program Costs are grouped into the categories described below. Each of the categories below includes both internal and external costs unless specifically stated otherwise. The calculation for internal costs is described in the section titled “Internal Costs”. In addition, each category includes the allocation of indirect costs as described in the section titled “Indirect Costs”. The following is a brief explanation of each of these categories.
 
Indirect Costs
 
Indirect costs are the costs for facilities, utilities, insurance, facility and equipment depreciation/amortization and other fixed costs directly related to the conduct of the activities described in each of the categories below and allocated based upon the proportion of such costs directly attributable to the performance of the activities described under each category below or by such other cost allocation method as may be mutually agreed to by the Parties.
 
Internal Costs
 
Internal costs consist of the base salary plus a factor for reasonable and customary employee benefits and payroll taxes for those employees directly responsible for performing the activities described in each of the categories below. In the case of commissioned sales personnel performing activities under Sales and Marketing expenses below, internal costs will include the commissions paid to such personnel.
 
Cost of Goods Sold (COGS)
 
COGS consists of those standard manufacturing costs routinely included in COGS as defined by U.S. GAAP, including the cost of raw materials, manufacturing labor and related manufacturing overhead. COGS also includes manufacturing variances typically included in COGS under U.S. GAAP. Additionally, COGS includes costs, such as royalties, milestones and license fees, paid to third parties including those currently owed to [***] and [***]. In calculating COGS, the Parties shall use the same assumptions, allocations and calculations as each uses in preparing its publicly reported financial statements and shall allocate to cost categories in a manner consistent across all pharmaceutical product lines without discrimination against Isis products versus Genzyme and its Affiliates’ internal products or other products licensed from Third Parties. Notwithstanding the foregoing, COGS does not include costs that are applicable to manufacturing buildings, space or equipment that will not be used to support the manufacturing process during the Firm Order period or that are projected to be underutilized in the manufacturing process due to lower planned capacity versus normal plant capacity. Additionally, COGS does not include the cost of worn-out facilities or equipment, previously used in manufacturing but no longer in operation, or the cost of scrapping and abandoning such assets. Expense items related to the manufacturing operations that are of a non-recurring nature such as equipment or facility design changes, alterations, disassembly, moving, reinstallation and reassembly of machinery and equipment will be included in the cost of capital projects and amortized into COGS according to the Parties amortization practices under U.S. GAAP. Further, the Parties anticipate that Genzyme will build manufacturing capability to manufacture API for commercial supply.  If Genzyme does

 

 

not do so, and a third party is required to manufacture API the portions of API cost reasonably calculated to represent profit and amortization of facility and equipment will not be included in Program Costs. To the extent that Isis manufactures API for the initial launch of the Product, COGS will be Isis’ fully burdened cost, as calculated on an annual basis and described in the term sheet under “Manufacture of Product”.
 
Sales & Marketing Expenses (S&M)
 
S&M expenses include costs necessary to market, distribute and sell the Product. This category includes costs such as those for advertising, marketing collateral, samples, promotional materials, distributor fees, contract sales organization payments, field marketing programs, market research, outside educational programs, printing, publishing, speaker programs, medical education programs, trade shows and exhibits, sales training meetings and seminars, reasonable travel and entertainment costs, translations, reimbursement services, reasonable patient support services, website development and maintenance, call center costs, toll-free phone costs and product liability insurance costs.
 
Development Expenses
 
Development expenses include the costs of all clinical trials and preclinical studies, including post-marketing trials, as detailed in the budget attached to the Development Plan. The types of expenses included in this category are investigator grants, laboratory services, clinical PK assays, CRO services and pass-throughs, 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 & DP), investigator meetings, monitoring, SAB costs, DSMB costs, key opinion leader costs, program specific travel, metabolomics assays, courier services and clinical trial liability insurance costs. Development expenses include Quality Assurance costs for auditing clinical trial activities and preclinical studies support (report reviews and CMC review). To the extent that Isis manufactures API for clinical trials or preclinical studies of the Product, the cost of the API will be Isis’ fully burdened cost, as calculated on an annual basis and described in the term sheet under “Manufacture of Product”.
 
Regulatory Expenses
 
Regulatory expenses include those costs associated with obtaining and maintaining regulatory approvals for the Product. They include costs such as regulatory consulting, filing fees, eCTD costs and other publishing costs. They also include costs associated with safety reporting and pharmacovigilance.
 
Non-COGS Manufacturing Expenses (Non-COGS Mfg)
 
Non-COGS manufacturing expenses include costs such as those for ongoing stability testing, drug substance and drug product registration stability testing, transfer of API and drug product release and in-process methods, validation of analytical methods, regulatory support and photostability testing. Additionally, this category includes costs incurred for NDA supporting studies such as pH rate profile, pH solubility profile, freeze and thaw stability, terminal sterilization and shipping studies. Non-COGS manufacturing expenses also include process justification work for API and DP to support regulatory filings, costs associated with writing development history documents, costs incurred to add additional supply chain vendors as demands increase and tech transfer for API and drug product to Genzyme. Non-COGS manufacturing costs also include any other costs necessary to produce and maintain a CMC document to support product manufacturing.
 

Other Expenses

 

Other expenses include costs
such as those associated with licensing or actions to pursue an infringer that
are mutually agreed to by the Parties. Program Costs will not include the costs
to prosecute and maintain Patents. To the extent that there are royalties,
milestones and/or license fees owed to third parties that cannot be included in
COGS under U.S. GAAP, they will be included in Program Costs within this
category. This category would also include foreign currency gains/losses. This
category also includes costs specifically identifiable to the Product, which do
not fit in any other category.

 

 

Attachment B

 

[***]

 

 

Exhibit C

 

Research
Term Sheet

 

 

CONFIDENTIAL

 

EXHIBIT C

 

Research
Term Sheet

 

Isis Pharmaceuticals and
Genzyme

 

January 7, 2008

 

This term sheet outlines
principal business terms for an agreement (the “Research Option Agreement”)
between Isis and Genzyme whereby Genzyme will be granted the option to license
certain Isis drugs. Genzyme will have the exclusive right to license drugs that
become Development Candidates in Isis’ neuro-degenerative and rare disease
programs for the next two years.

 

Capitalized terms used but
not defined in this Research Term Sheet are used with the meanings given to
them in the License and Research Agreement.

 

Overview
of Isis-Genzyme Research Relationship:

 

·                  Isis has or will
establish research programs in the Exclusive Therapeutic Areas which are
described in the attached Exclusive Research Program description.  During the Research Period, Isis will
continue these programs for the purpose of discovery of Compounds suitable for
development and commercialization for human therapeutic uses.

 

·                  Genzyme will
have the right to recommend specific targets for the Exclusive Research
Programs and to contribute to the research strategy as appropriate.  In addition, Genzyme will provide Isis access
to certain animal models for use in Exclusive Therapeutic Areas. The Exclusive
Research Program will be reviewed every [***] months on a formal basis with
Genzyme and it is anticipated that it will be discussed on an informal basis
more frequently.

 

·                  For a [***]
period from the Effective Date of the License and Research Agreement, Genzyme
will have the option to fund development of any Development Candidate arising
out of the Exclusive Research Programs and to license any such Funded
Development Candidates after clinical proof-of-concept study(ies) have been completed.
Terms for any such licenses will be negotiated in good faith using the basic
principles articulated in this term sheet. After licensing a Funded Development
Candidate, Genzyme will be solely responsible for the further development and
commercialization worldwide.

 

·                  Isis currently
has two advanced programs in neuro-degenerative disease for [***] and [***].
Genzyme’s decision to fund each of these programs will be deferred to the time
the current funding is exhausted (end of initial Phase 1 clinical study for
[***] and completion of IND supporting toxicology studies for [***] [***]) and
any licenses for such programs will reflect the advanced status of these
programs and the independent funding thereof.

 

1

 

·                  At the end of
the Research Period , Genzyme will have the right, but not the obligation, to
extend the Research Period for up to three years by agreeing to fund a
continued Exclusive Research Program agreed upon by both parties at Isis’ fully
burdened cost.

 

Joint Research Committee

 

·                  A joint research
committee will be formed to meet on a regular basis to review the work
conducted in the Exclusive Research Program.

 

Exclusive
Research Programs:

 

·                  Isis will
conduct the Exclusive Research Program at Isis’ expenseduring the Research
Period which will include activities up to the designation of a Development
Candidate (a Compound ready for the initiation of IND-supporting studies for
all programs except [***] and [***] [***] which now include activities that are
currently covered by outside funding).

 

·                  At the time
Development Candidate status is attained, Genzyme will have [***] to determine
if it would like to advance this Development Candidate forward through clinical
proof-of-concept trials. If Genzyme determines that it wants to advance the
Development Candidate, it will fund all development work through clinical
proof-of-concept (criteria to be mutually defined by Isis and Genzyme prior to
initiation of development work), unless otherwise agreed upon by the Parties.  These development activities may be conducted
by Genzyme or Genzyme may contract with Isis to conduct the work at Isis’
fully-burdened cost. After achievement of the pre-determined clinical
proof-of-concept, Genzyme will have [***] to determine if it would like to
exercise its option to license the Funded Development Candidate.

 

·                  The terms for
any license will be negotiated in good faith at whatever time Genzyme requests
which can be as early as the funding decision at Development Candidate
status.  Any Compound that either reaches
Development Candidate status and Genzyme decides not to fund or that reaches
clinical proof-of-concept and Genzyme does not license, will belong to Isis
with no further obligations to Genzyme. 
The scope of any such license would be similar to the scope of the
Product License for mipomersen, including the components of the licensed
intellectual property.

 

·                  The research
relationship is focused on delineated Exclusive Therapeutic Areas.  Nevertheless, Genzyme’s license to any drugs
arising there from will not be limited to the Exclusive Therapeutic Areas.  Similarly Isis and its partners conduct
research programs which, during any period of Genzyme’s exclusivity under the
terms of this agreement will not be directed to the Genzyme Exclusive
Therapeutic Areas but drugs arising out of those programs may similarly be
developed and commercialized for any indication.

 

·                  As part of the
Exclusive Research Program, the [***] Isis development program is being
included in the neuro-degenerative disease area. It should be noted that the
advanced stage of this program will require Genzyme to make a decision as to
whether to fund 

 

2

 

early clinical development so as to fit in
the option process described above and that any licensing terms will take into
account the advanced stage of the drug and Isis’ funding thereof.

 

·                  Similarly, Isis
will be including its [***] program into the Exclusive Research Program. The
advanced stage of this program will require Genzyme to make a development
funding decision prior to initiation of Phase 1 studies.

 

Exclusive
License:

 

·                  Unless
otherwise agreed upon by the Parties, upon granting of a license to any Funded
Development Candidate that Genzyme has an option to license, Genzyme will be
solely responsible, including responsibility for all funding, resourcing and
decision-making, all further clinical development, manufacturing (with Isis
providing the initial clinical supply), regulatory and commercialization
activities for Licensed Compounds and Licensed Products.  Upon request by Genzyme, Isis would provide
consulting and technical support relating to the Licensed Compounds and
Licensed Products.

 

(i)             Manufacturing

 

·                  Genzyme will
have the option to manufacture Licensed Compounds and Licensed Products; At
Genzyme’s request, Isis will manufacture and sell to Genzyme pre-clinical and
clinical API for each Funded Development Candidate through clinical
proof-of-concept trial at the standard rate and upon standard terms Isis
charges its other partners, which represents a good faith estimate of
fully-burdened cost determined annually. Genzyme will be responsible for DP
manufacturing.

 

·                  In the case
where Isis is unable or for any reason otherwise fails to supply API to
Genzyme, upon written request by Genzyme, Isis shall transfer to Genzyme all
documentation and information, and permit Genzyme to reference and use any
regulatory filings, and otherwise fully cooperate with Genzyme to enable
Genzyme to make or have made API for use by Genzyme.

 

Intellectual Property

 

·                  Following license of a
Compound to Genzyme, Isis will assign to Genzyme all Isis Product Specific
Patents relating to Licensed Products and their gene targets.  Isis will be responsible for filing and
prosecuting all Core Technology Patents and any other patents owned or
controlled by Isis.

 

·                  Isis will agree to consult
with Genzyme on prosecution and filing decisions after Genzyme opts to fund
work following Development Candidate status on patents relating to such
Development Candidate.

 

3

 

·                  The Parties will cooperate
to obtain new licenses under any third party patents that are necessary for the
development, manufacture and commercialization of the Licensed Product.

 

·                  Inventions
conceived solely by Isis shall be documented, processed and owned by Isis.

 

·                  Inventions
conceived solely by Genzyme shall be documented, processed and owned by
Genzyme.

 

·                  Inventions
conceived jointly, as deemed by the U.S. laws of inventorship, by Genzyme and
Isis shall be documented, processed and owned equally by both organization.

 

·                 In the event that
a third party is interested in licensing an invention that was developed
jointly under this agreement and is applicable only in the Exclusive
Therapeutic Area, both Genzyme and Isis must agree to the terms of the license.

 

Certain
Definitions:

 

“Compound” means any oligonucleotide acting by [***] that arises
from the Exclusive Research Program during the Research Period.

 

“Development Candidate” means any Compound that has been deemed
by Isis ready to start IND-enabling toxicology studies in accordance with its
standard process.

 

“Effective Date” has the meaning given to it in the License and
Research Agreement.

 

“Exclusive Therapeutic Area” means the therapeutic areas of
neuro-degenerative and certain rare diseases to be mutually agreed upon by the
Parties.

 

“Exclusive Research Program” means the research program being
performed by Isis pursuant to the Research Plan to identify Development
Candidates in the Genzyme Exclusive Therapeutic Areas.

 

“Funded Development Candidate” means any Development Candidate
that has been funded by Genzyme for preclinical toxicology and early clinical
studies.

 

“Research Period” means the two year period in which Isis will
conduct the Exclusive Research Program.

 

4

 

Genzyme-Isis Drug Discovery Exclusive
Research Program Description

 

January 7, 2008

[***]

 

1

 

Exhibit D

 

Disclosure Schedule

 

[***]

 

2Exhibit 10.2

 

	
  CONFIDENTIAL TREATMENT REQUESTED

  	
   

  	
  EXECUTION VERSION (02/08/08)

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

  	
   

  	
   

  

 

AMENDED AND RESTATED COLLABORATION AND LICENSE AGREEMENT

 

This
Amended and Restated Collaboration and License Agreement (the “Agreement”) between ISIS PHARMACEUTICALS,
INC. of 1896 Rutherford Road, Carlsbad, CA 92008, USA (“ISIS”) and ANTISENSE THERAPEUTICS
LTD., ACN 095 060 745 of Level 1, 10 Wallace Avenue, Toorak,
Victoria 3142, AUSTRALIA (“ATL”) is
entered into and made effective as of February 8, 2008 (the “Amendment Date”).

 

INTRODUCTION AND OVERVIEW

 

ISIS
and ATL are parties to that certain Collaboration and License Agreement
effective as of December 21, 2001 (the “Effective
Date”), as amended (the “Original Agreement”),
pursuant to which, among other things, the parties agreed to collaborate to
enable ATL to develop and commercialize antisense drugs, including, without
limitation, the Antisense Inhibitor known as ATL 1102 (formerly known as
ISIS 107248), VLA4 Compounds and Other VLA4 Compounds.

 

ATL
proposes to enter into a sublicense agreement with Teva Pharmaceutical
Industries Ltd. (“Teva”) in the
form provided to ISIS on the Amendment Date (the “Teva
Sublicense”), pursuant to which ATL would grant to Teva an
exclusive, worldwide sublicense to develop and commercialize ATL 1102,
VLA4 Compounds and Other VLA4 Compounds, and VLA4 Products, subject to the
terms and conditions set forth therein.

 

As
a condition to Teva’s willingness to enter into the Teva Sublicense, Teva has
requested that ATL and ISIS implement certain amendments to the Original
Agreement.

 

In
order to facilitate ATL’s entry into the Teva Sublicense, the parties wish to
amend and restate the Original Agreement as set forth in this Agreement,
effective as of the Amendment Date.

 

Therefore,
in consideration of the foregoing premises and the mutual covenants herein
contained, the parties hereby agree as follows.

 

AGREEMENT

 

ARTICLE 1

 

DEFINITIONS

 

                Capitalized terms used in this Agreement have
the meanings set forth in Exhibit 1.

 

1

 

ARTICLE 2

 

DRUG DEVELOPMENT PROGRAM

 

2.1          General.

 

Under
the Drug Development Program, ATL will develop and commercialize antisense
drugs arising out of the Collaborative Research Program conducted hereunder, as
well as ATL1102 (a Collaboration Compound discovered by ISIS), VLA4 Compounds
and Other VLA4 Compounds and VLA4 Products. 
In general, ATL will be responsible for all development and commercialization
activities for Collaboration Compounds. 
ISIS has performed, and, pursuant to the Teva/ISIS Agreements, may
continue to perform, certain activities in support of the development of
ATL1102, VLA4 Compounds and Other VLA4 Compounds, but it is the intent of the
parties that ATL will assume responsibility for all preclinical and
IND-enabling activities with respect to other Collaboration Compounds, as more
specifically provided in this Agreement. 
ATL will be responsible for all costs of development and commercialization
of Collaboration Compounds including, without limitation, the reimbursement of
ISIS’ expenses as provided herein.

 

2.2          Development
of VLA4 Compounds and Other VLA4
Compounds.

 

(a)           General.  ATL will use commercially reasonable efforts
to develop at least one VLA4 Compound to maximize its commercial value.  ATL will conduct the development of VLA4
Compounds and  VLA4 Products in a good
scientific manner and in compliance in all material respects with all
requirements of applicable laws, rules and regulations to achieve the
objective specified in the first sentence of this subsection (a) efficiently
and expeditiously.  ATL will proceed
diligently with the development of VLA4 Compounds  and VLA4 Products using commercially
reasonable efforts to provide sufficient time, effort, equipment, facilities
and skilled personnel.

 

(b)           VLA4
Compound Development Diligence.

 

(i)            During Term of Teva
Sublicense.  The parties agree that,
during the term of the Teva Sublicense: (A) no Development Milestones will
be applicable to ATL 1102, VLA4 Compounds, Other VLA4 Compounds or VLA4
Products; (B) the only diligence obligations applicable to the development
of ATL 1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products will be
those set forth in Section 2.2(a) above; and (C) notwithstanding
the definition of Active Program set forth in Exhibit 1 hereto, compliance
with the diligence obligations set forth in Section 2.2(a) will
satisfy the “Active Program” and “Active Development” criteria with respect to
ATL 1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products.

 

(ii)           After Term of Teva
Sublicense.  In the event of
termination or expiration of the Teva Sublicense prior to Marketing Approval of
a VLA4 Product in each of the Major Markets (and prior to the termination or
expiration of this Agreement), then ATL and ISIS will, as promptly as
practicable, mutually agree in writing upon

 

2

 

Development Milestones
for ATL 1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products that ATL
will commit to reach, in which event the parties agree as follows with respect
to such Development Milestones.  If a
Development Milestone is not met, [***] extension on such Development
Milestone, provided that ATL (x) gives the JDC members at least [***]
prior written notice that it is unlikely to achieve the relevant milestone on
the date specified above, and (y) demonstrates to the JDC that [***]
agreed upon by the parties.  If the JDC
cannot agree on this issue, the matter will be referred to the designated officers
of ATL and ISIS for resolution, consistent with the provisions of Section 16.6(a).

 

2.3          Development
of Collaboration Compounds Other Than VLA4 Compounds.

 

(a)           General.  The provisions of this Section 2.3 will
apply solely to Collaboration Compounds other than ATL 1102, VLA4 Compounds or
Other VLA4 Compounds.

 

(i)            As provided herein,
during the term of this Agreement, ATL will advance additional Collaboration
Compounds through the various stages of an Active Program hereunder, i.e., from
the research phase through preclinical and IND-enabling studies to human
clinical studies and commercialization. 
To maintain any Collaboration Compound in Active Development status, ATL
must meet the Development Milestones for each such Collaboration Compound.

 

(ii)           The terms under which
ISIS and ATL will collaborate to develop such additional Collaboration
Compounds will be in accordance with the terms set forth herein.  Within 60 days of ATL’s providing
written notice to ISIS that ATL has initiated IND enabling studies on a
Collaboration Compound, ATL will prepare a mutually-agreed-upon Development
Plan for that Collaboration Compound, with ISIS’ assistance, consistent with
the terms of this Agreement.

 

(b)           [***] Studies.  While it is the intent of the parties that
ATL will assume responsibility for all [***] activities with respect to
Collaboration Compounds other than ATL 1102, VLA4 Compounds or Other VLA4
Compounds, ISIS will be available to assist with [***] other than ATL 1102,
VLA4 Compounds and Other VLA4 Compounds, if requested to do so by ATL.  Should ATL request ISIS’ assistance in this
regard, the parties will agree on terms pertaining to ISIS’ participation,
which terms will be included in the Development Plan referenced in (a).  With the possible exception of an [***]
Collaboration Compound, ISIS will not be requested to participate in the [***].

 

2.4          Annual
Reports.

 

ATL will provide ISIS
with an annual written report describing all activities performed by the
parties and the results achieved during the relevant year with respect to each
Collaboration Compound in Active Development hereunder including, without
limitation, ATL 1102, VLA4 Compounds and Other VLA4 Compounds.  Each such report will include details
regarding the stage of development a Collaboration Compound has reached within
an Active Program including, without limitation, what Development Milestones
(if applicable) have been achieved.

 

3

 

To the extent that it is
feasible to do so, ATL will also include the projected goals and Development
Milestones it anticipates achieving during the coming year with respect to such
Collaboration Compound in each such report. 
Notwithstanding the foregoing, ISIS acknowledges that ATL will not
necessarily have access to all information regarding activities conducted by
Teva and that this Section 2.4 only obligates ATL to report to ISIS with
respect to information known to ATL.

 

2.5          Commercialization.

 

(a)           General.  ATL will use commercially reasonable efforts
to bring Products into commercial use as quickly as is reasonably possible, in
a manner designed to maximize the commercial potential of such Products
worldwide.  ATL will use commercially
reasonable efforts to Manufacture, market, promote, distribute, and sell the Product
on a worldwide basis.  ATL will provide
resources and expend funds in connection with such activities in a manner and
to an extent comparable to the efforts of similar companies that manufacture,
market, and sell pharmaceutical products of similar commercial potential at a
similar stage of the product life cycle.

 

(b)           Product
Plan.

 

(i)            ATL.  Except as set forth in subsection (ii) below,
prior to the launch of any Product, ATL will prepare a global integrated
Product plan outlining the key aspects of market launch and commercialization
(the “Integrated Product Plan” or “IPP”).  Each IPP will
be updated annually in accordance with ATL’s internal planning and budgeting
process.  ATL will provide ISIS a copy of
the final draft of each IPP (original and updates) for each Major Market.  Each IPP will also include appropriate
milestones and the dates upon which such milestones must be met by ATL.

 

(ii)           Teva and Other
Sublicensees.  If a Sublicensee of
ATL (including Teva) bears primary responsibility for commercialization of any
Product in one or more Major Markets, then ATL need not prepare an IPP covering
such Product in such Major Market(s) and any other territory in which such
Sublicensee has primary commercialization responsibility (collectively, the “Sublicensee Market”); provided, however,
that:

 

(A)          the sublicense agreement
between ATL and such Sublicensee will require that, prior to the launch of any
Product, such Sublicensee will prepare a written plan outlining the key aspects
of market launch and commercialization of such Product in the Sublicensee
Market (a “Sublicensee Product Plan” or “SPP”), which will be updated at least annually;

 

(B)           ATL will provide ISIS
with true and complete copies of each SPP and update thereto that ATL receives,
whether in draft or final form, promptly following receipt thereof from the
Sublicensee; and

 

4

 

(C)           the sublicense
agreement between ATL and such Sublicensee will expressly provide that (1) ATL
is permitted to transmit copies of all SPPs and updates thereto to ISIS; (2) [***]
(3) such Sublicensee will [***]

 

(c)           Commercialization by
Sublicensees.  If a Sublicensee of
ATL bears primary responsibility for commercialization of any Product in the
applicable Sublicensee Market, the sublicense agreement will require that such
Sublicensee will use commercially reasonable efforts to Manufacture, market,
promote, distribute, and sell the Product in such Sublicensee Market and will
require that the Sublicensee provide resources and expend funds in connection
with such activities in a manner and to an extent comparable to the efforts of
similar companies that manufacture, market, and sell pharmaceutical products of
similar commercial potential at a similar stage of the product life cycle.  Consistent with Section 4.3 below, if
ATL elects to meet any of its responsibilities and obligations under this Section via
sublicense agreements, ATL will ensure that such agreements are subject to and
will be consistent with the terms and conditions of this Agreement including,
without limitation, the provisions of this Section.

 

(d)           Failure to Meet
Diligence Obligations.  If ATL or a
Sublicensee of ATL anticipates any difficulty in meeting its commercialization
obligations under this Section including, without limitation, the
milestones set forth in the IPP, ATL or its Sublicensee will provide ISIS with
prompt notice thereof, in order that the parties may endeavor to work out an
appropriate and acceptable resolution prior to pursuing other remedies
hereunder.

 

(e)           Acknowledgment
Regarding Teva Sublicense.  ISIS
acknowledges and agrees that the Teva Sublicense, in the form provided to ISIS
on the Amendment Date, satisfies the requirements of this Section 2.5
applicable to sublicense agreements between ATL and Sublicensees.

 

2.6          Effect
of Change of Control and Competing Products

 

(a)           Change of Control of
ATL: ISIS acknowledges and agrees that, notwithstanding anything else in
this Agreement, if a Change of Control of ATL in which the Third Party acquiring
control of ATL or its assets relating to VLA4 Products is a [***], then:

 

(i)            ATL will procure that
Teva’s reports regarding any development plan, commercialization plan or SPP
relating to VLA4 Products will be provided by Teva directly to ISIS; and

 

(ii)           for so long as Teva
provides such reports, ATL will not be required to separately provide to ISIS
annual reports and other information relating to the development and
commercialization of VLA4 Products.

 

(b)           Change of Control of
ISIS.  Notwithstanding anything
contained herein to the contrary, in the event of a Change of Control of ISIS
in which [***] then:

 

(i)            ISIS (or the successor
entity) will not be allowed to [***] and

 

5

 

(ii)           ATL will not be required
to provide to ISIS (or the successor entity) with any [***], other than (A) reports
and information required to be made available under Sections 5.6 and 5.8
of this Agreement and (B) summary annual reports regarding Teva’s
development and commercialization activities with respect to VLA4 Products in
sufficient detail to allow ISIS to ascertain ATL’s compliance with its
diligence obligations under this Agreement.

 

(c)           Competing products:  ISIS acknowledges and agrees that if ATL
Exploits a product that is [***], then:

 

(i)            ATL will procure that
Teva’s reports regarding any development plan, commercialization plan or SPP
relating to VLA4 Products will be provided by Teva directly to ISIS; and

 

(ii)           for so long as Teva
provides such reports, ATL will not be required to separately provide to ISIS
annual reports and other information relating to the development and
commercialization of VLA4 Products.

 

ARTICLE 3

 

COLLABORATIVE RESEARCH PROGRAM

 

3.1          General;
Collaboration Term.

 

(a)           ATL and ISIS will work
together under the Collaborative Research Program described herein and as
further detailed in the Collaborative Research Plan, as described in Section 3.2,
to discover and develop antisense therapeutics. 
The parties will collaborate to assess Research Targets that may be
important in the prevention or treatment of a disease or condition, consistent
with Sections 3.2 - 3.5.  If
contracted by ATL, ISIS will discover and design antisense oligonucleotides to
modulate the Research Targets as provided in Section 3.6 and will provide
them to ATL.  Also, if contracted by ATL,
ISIS will evaluate the antisense oligonucleotides in various functional
assays.  ATL will perform in vitro and in vivo studies
utilizing the antisense oligonucleotides provided by ISIS.  It is the intent of the parties that
Collaboration Compounds will be identified during the Collaboration Term and
that pursuant to Active Programs hereunder, such Collaboration Compounds will
progress through research and preclinical development, meeting the relevant
Development Milestones (see Exhibit 1, Section 1.2), and will each
become the focus of a Development Plan hereunder, except as expressly set forth
in Section 2.2(b) hereof.

 

(b)           The Collaboration Term
will begin on the Effective Date and will continue until December 21,
2008, unless earlier terminated due to termination of the Agreement under
Sections 12.2 or 12.3, or unless terminated or extended upon mutual
agreement of the parties.

 

6

 

3.2          Joint
Research Committee.

 

(a)           The parties have
established a Joint Research Committee of 4 people, consisting of
2 representatives nominated by each party, to facilitate the research
collaboration called for herein.  Each
party will designate a representative as a project leader to serve as the
principal contact person for that party. 
The parties may agree to add additional members to the JRC, as long as
equal representation is maintained.  As
ISIS’ participation will largely be to [***] will designate one of its representatives
as chairman of the JRC. In the event of a tied vote, [***] will have the
tie-breaking vote.

 

(b)           During the
Collaboration Term, the JRC will be the primary vehicle for interaction between
the parties with respect to the collaborative research conducted
hereunder.  The JRC will be responsible
for preparing an annual budget and plan for the collaborative research
activities to be conducted during each year of the Collaborative Research
Program (the “Collaborative Research Plan”) and for managing that program.  The JRC will be responsible for updating the
Collaborative Research Plan as needed and will also be responsible for
prioritizing work contracted to ISIS under Section 3.6.

 

(c)           The JRC will meet as
needed during the Collaboration Term. 
Meetings will be via teleconference or videoconference, or as the
parties may otherwise agree.  The JRC
will review the progress of the activities carried out under the Collaborative
Research Program and will consider and decide on proposed modifications to the
strategy and goals of that program.  The
frequency, dates and times of all meetings will be mutually agreed upon by the
parties.  At its first meeting the JRC
will determine such procedures as it will reasonably require to conduct its
business.

 

3.3          Research
Targets: General.

 

As
noted above, ATL and ISIS will collaborate to assess Research Targets that may
be important in the prevention or treatment of a disease or condition.

 

3.4          Research
Targets: Designation.

 

(a)           The collaborative
research hereunder will be focused on specific gene targets thought to be
attractive for the development of antisense drugs.  ATL will choose targets in accordance with
the provisions of this Section 3.4 as the basis for its antisense drug
discovery efforts.  ATL commits to use
commercially reasonable efforts to conduct research and drug discovery
activities with respect to each Research Target to maximize its commercial
value.

 

(b)           Exhibit 3.4 hereto
contains a list of the targets that are the object of Licenses to Research as
of the Amendment Date (the “Research Targets”),
as well as [***] Research Targets listed on Exhibit 3.4 that are [***]
Targets are listed in Section B, and all other Research Targets are listed
in Section A of Exhibit 3.4. 
During the Collaboration Term, targets may be added to and removed from Exhibit 3.4
in accordance with the terms of this Section and Section 3.5.

 

7

 

3.5          Research
Targets: Selection, Removal, Replacement and Approval Process.

 

(a)           Exhibit 3.4 lists
the Research Targets agreed upon by the parties as of the Amendment Date.  ATL warrants and represents that if it has
not provided ISIS with the nucleic acid sequences for the corresponding human
genes for any of the Research Targets listed in Exhibit 3.4 by the
Amendment Date, it will do so promptly thereafter.  Consistent with the terms of this Agreement,
ISIS will have no obligation to conduct any activities with respect to such
Research Targets until the required materials, information and/or payments (if
applicable) have been submitted to ISIS by ATL. 
The addition of new Research Targets to the list in Exhibit 3.4 is
at ISIS’ sole discretion.

 

(b)           If ATL wishes to
designate a new Research Target, it will provide ISIS with written notice of the
target it wishes to add to the list set forth in Exhibit 3.4.  Such written notice will include the gene
name, the NCBI accession number or nucleic acid sequence, and one or more
mammalian cell lines that express the Research Target.  ISIS will not, and is not required to, accept
a proposed Research Target without such information.  In addition, ATL will inform ISIS of whether
or not to the best of ATL’s knowledge the proposed target is in the public
domain or is proprietary to a Third Party.

 

(i)            ATL will not propose a
target for consideration as a possible Research Target if [***].

 

(ii)           If ATL proposes a
target that is [***], but ATL is able to provide ISIS with [***] the proposed
target, ATL will also provide ISIS with a copy of any [***]  ATL also warrants that any [***] required to
be made to a Third Party in order to [***] activities in support of the
Collaborative Research Program will be the sole responsibility of ATL. For the
purpose of this Section, Third Party restrictions do not include [***].

 

(iii)          If a target proposed by
ATL is subject to an ISIS drug discovery and development program or a
contractual obligation of ISIS to a Third Party with respect to that target,
then the proposed target will not be approved as a Research Target hereunder.

 

(c)           Within [***] days
after receipt of the ATL notice under subsection (b), ISIS will notify
ATL, in writing, of its decision either to approve or to reject a proposed
target.

 

(i)            If a proposed target
is not approved as a Research Target, the notice provided by ISIS will advise
ATL of the reason(s) the target was not approved, and ATL will be invited
to submit a different proposed target for consideration.

 

(ii)           If a proposed target is
approved as a Research Target, ISIS’ notice to ATL will indicate this and will
also indicate whether or not the new Research Target is a [***] Target.  ISIS will add the Research Target to the list
in Exhibit 3.4 (as well as the nucleic acid sequence of the gene) and will
provide ATL with an amended copy of Exhibit 3.4.  If ISIS has [***], ISIS will add that
information to Exhibit 3.4 and will provide ATL with a copy of the amended
exhibit.

 

8

 

(iii)          Upon receipt of written
notice from ISIS that a proposed target has been approved as a Research Target
and added to Exhibit 3.4, ATL will begin Active Development of such
Research Target, consistent with the terms of this Agreement.

 

(d)           After the Effective
Date, Research Targets may be removed from the list in Exhibit 3.4 as
follows.

 

(i)            If ATL wishes to
remove a Research Target from the approved list in Exhibit 3.4, it will
provide ISIS with prompt written notice of its election to do so.  Upon ISIS’ receipt of such notice, it will
remove the Research Target from the list.

 

(ii)           Upon receipt of notice
at any time during the term of this Agreement that a Research Target is no
longer in Active Development, ISIS will remove the target from the list set
forth in Exhibit 3.4 and will provide ATL with prompt written notice of
same.

 

(iii)          The License to Research
or License to Exploit applicable to any Research Target removed pursuant to (i) or
(ii) herein (each an “Abandoned Research Target”) will immediately
terminate, consistent with the provisions of Sections 4.1 or 4.2, as
applicable.  Notwithstanding the
foregoing, an Abandoned Research Target may still bear royalty or other payment
obligations, as described in Sections 5.1 – 5.3 herein.

 

(iv)          Once a target has been
removed from the list of Research Targets, Exhibit 3.4 will be amended to
delete such target and a copy of amended Exhibit 3.4 will be sent to ATL
by ISIS.

 

(v)           Upon termination of a
License to Research or a License to Exploit for any reason, a Research Target
will be automatically removed from Exhibit 3.4 and will thereafter be
considered an Abandoned Research Target.

 

(e)           At no time during the
term of this Agreement or the Collaboration Term will there be any more than
[***] designated Research Targets. 
ATL may not substitute more than [***] Research Targets in any year
during the Collaboration Term.

 

3.6          Discovery
and Evaluation of Antisense Inhibitors.

 

(a)           Research Services.  During the Collaboration Term, ATL may
request from time to time that ISIS perform Research Services with respect to
one or more Research Targets.  If ISIS
agrees to provide any requested Research Services to ATL, such Research
Services will be described in a written work plan to be negotiated in good
faith by the parties, which would include the compensation to be made by ATL
for such Research Services.  ATL will be
responsible for conducting further in in vitro and in vivo studies of Antisense Inhibitors provided by ISIS as
a result of such Research Services.  The
number, quantity and price of Antisense Inhibitors to be provided by ISIS to
ATL for use in such studies will be set forth in the applicable work plan.  If ATL requests additional quantities of any
such Antisense Inhibitor, the terms of supply will be mutually agreed upon by
the parties

 

9

 

in writing.  The ownership and use of all materials,
including Antisense Inhibitors, and of all data and information generated as a
result of services provided to ATL by ISIS pursuant to this Agreement is
governed by the provisions of Article 6. 
There will be no minimum or maximum amount of Research Services that ATL
is obligated or entitled to request or ISIS is obligated or entitled to
provide.

 

(b)           Project Coordinators.  ATL and ISIS will each select one employee to
serve as the Project Coordinator for that party, with respect to services to be
performed under Section 3.6(a).  The
Project Coordinators will facilitate the selection, prioritization, removal and
replacement of Research Targets.  The
Project Coordinators will each have appropriate technical credentials,
knowledge and ongoing familiarity with the foregoing activities.  The Project Coordinators will meet on an
as-needed basis via teleconference or videoconference, at times mutually agreed
upon by the parties.  Decisions of the
Project Coordinators will be unanimous. 
If the Project Coordinators cannot agree on an issue, the issue will be
submitted to the JRC for resolution.

 

3.7          Other
Collaborative Research Program-Related Activities.

 

(a)           During the
Collaboration Term, ISIS will provide ATL with reasonable amounts of
preclinical and research advice free of charge (phone consultation or visit at
ISIS only) in support of any Active Program hereunder that involves a
Collaboration Compound made using ISIS Standard Chemistry for which a License
to Research exists.

 

(b)           If ATL requests
additional amounts or types of consulting support or training not specified
above in this Article 3 and if ISIS agrees to provide such support or
training, the parties will negotiate appropriate terms including, without limitation,
the scope, timing, duration and cost of such support or training, in good
faith.

 

ARTICLE 4

 

LICENSE GRANTS AND OTHER RIGHTS

 

4.0          License
Term.  As used herein, “License Term”
means the term beginning on the Effective Date and ending on the date on which
all obligations to pay royalties hereunder have expired.

 

4.1          Licenses to Research.  A License to Research is a license to perform
research and development activities relating to a Research Target until the
filing of an NDA or non-US equivalent on a Product that modulates such Research
Target.

 

(a)           License
Grant.

 

(i)            For each Research
Target, ISIS will grant to ATL and its Affiliates when ATL takes a License to
Research, an exclusive, worldwide license under the ISIS Core Technology Patent
Rights, the ISIS Formulation Patent Rights, the Manufacturing Patent Rights,
the Research Target Patent Rights and the Third Party Patent Rights solely to
conduct research and clinical development for all human indications for
Collaboration Compounds that modulate such Research Target.

 

10

 

For Collaboration
Compounds that modulate Dermatology Targets, the license is limited to topical
dermatological indications only.  These
rights will only be sublicensable as explicitly provided in Section 4.3.  The license grant described hereunder will
commence automatically on grant of the License to Research and will terminate
upon termination of the corresponding License to Research.

 

(ii)           For each Research
Target, ISIS will grant to ATL and its Affiliates when ATL takes a License to
Research, a nonexclusive, worldwide license under the Research Target Patent
Rights, the ISIS C5-Propyne Patent Rights, and the ISIS Formulation Patent
Rights solely to conduct research and clinical development for all therapeutic
and cosmetic applications for Research Target Compounds that modulate such
Research Target.  For Research Target
Compounds that modulate Dermatology Targets, the license is limited to topical
dermatological indications only.  These
rights will only be sublicensable as explicitly provided in Section 4.3.  The license granted hereunder will commence
automatically on grant of the License to Research and will not terminate upon
termination of the corresponding License to Research.

 

(b)           As of the Amendment
Date, ISIS grants to ATL a License to Research with respect to each Research
Target listed in Exhibit 3.4.  ATL
will receive additional Licenses to Research with respect to Research Targets
when added to Exhibit 3.4.  Licenses
to Research may only be obtained during the Collaboration Term.  No License to Research will be granted to ATL
on any Research Target after the Collaboration Term ends.

 

(c)           [***].

 

(d)           ATL may terminate a
License to Research with respect to a Research Target for any reason, at any
time during the term of this Agreement, by providing ISIS with written notice
that the Research Target is being removed from Exhibit 3.4.

 

(e)           With the exception of
the License to Research applicable to ATL 1102, VLA4 Compounds and Other VLA4
Compounds, which is governed by the provisions of subsections (f) and
(g) below, if a Research Target is no longer part of an Active Program,
ISIS may terminate the License to Research applicable to that Research Target
at any time during the term of this Agreement upon written notice to ATL.

 

(f)            Once ATL has elected
and obtained [***] Licenses to Exploit pursuant to Section 4.2, all
remaining Licenses to Research will immediately terminate, and all rights to
the remaining Research Targets licensed to ATL will revert to ISIS; provided,
however, that the licenses granted pursuant to Section 4.1(a)(ii) will
remain in effect.

 

(g)           ISIS will provide ATL
with a semiannual report summarizing the status of Research Target Patent
Rights subject to a License to Research hereunder and will include updates to
any Exhibits that are affected.

 

4.2          Licenses to Exploit.  A License to Exploit is a license to perform
research, development and commercialization activities on, and otherwise
Exploit, Products that modulate a Research Target.

 

11

 

(a)           ISIS grants ATL the
option to convert any active License to Research hereunder into a License to
Exploit, as set out below. 
Notwithstanding the foregoing, ATL may convert not more than [***]
Licenses to Research into Licenses to Exploit, and each License to Exploit must
be requested by ATL prior to the filing of an NDA (or non-US equivalent) for
the relevant Research Target.  The option
to convert Licenses to Research to Licenses to Exploit expires [***] years
after the end of the Collaboration Term.

 

(b)           If ATL elects to
convert a License to Research into a License to Exploit, ATL will provide ISIS
with written notice effecting the exercise of the option, which will identify
the particular Research Target to which the License to Research applies and
will include written verification that all applicable milestones and
obligations of ATL with respect to that Research Target have been timely met.  Upon ISIS’ receipt of such written notice,
ISIS will have [***] days to object if it believes that ATL has not timely
met all applicable milestones and obligations with respect to that Research
Target.  At the end of such [***]-day
period, the License to Exploit will be granted with respect to the relevant
Research Target if ISIS has not objected. 
[***].

 

(c)           License
Grants and Assignments.

 

(i)            VLA4
Compounds and Other VLA4 Compounds.

 

(A)          Subject to the terms and
conditions of this Agreement, effective as of the Amendment Date, ISIS hereby
grants to ATL an exclusive, worldwide license under the ISIS Core Technology
Patent Rights, the ISIS Formulation Patent Rights, the Manufacturing Patent
Rights, the Research Target Patent Rights (other than the VLA4 Compound Patent
Rights, which are covered by Section 4.2(c)(i)(C) below) and the
Third Party Patent Rights solely to 
Exploit ATL 1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products
for all human indications.  These rights
will only be sublicensable as explicitly provided in Section 4.3.  This license will terminate only in
accordance with Section 12.2 hereof.

 

(B)           Subject to the terms
and conditions of this Agreement, effective as of the Amendment Date, ISIS
hereby grants to ATL a nonexclusive worldwide license under the ISIS [***] and
the ISIS Formulation Patent Rights  to
Exploit ATL1102, Other VLA4 Compounds and VLA4 Products for all human
indications.  These rights will only be
sublicensable as explicitly provided in Section 4.3.  This license will terminate only in accordance
with Section 12.2 hereof.

 

(C)           Subject to the terms
and conditions of this Agreement (including, without limitation, Section 4.8(c) hereof),
effective as of the Amendment Date, ISIS hereby assigns to ATL all of ISIS’
right, title and interest in and to the VLA4 Compound Patent Rights.  ISIS agrees to execute all assignment and
other documents, testify and take all other actions reasonably necessary or
appropriate to transfer, effect, confirm, perfect, record, preserve, protect
and enforce ATL’s right, title and interest in the  VLA4

 

12

 

Compound
Patent Rights throughout the world, at the reasonable request and
expense (to the extent of any out-of-pocket costs incurred by ISIS) of
ATL.  ATL covenants not to sell, transfer
or assign any of the  VLA4 Compound
Patent Rights to any Affiliate or Third Party, except in connection with a
permitted assignment by ATL of this Agreement and ATL’s rights and obligations
hereunder to an Affiliate or Third Party in accordance with Section 16.2.

 

(D)          Isis
hereby covenants that for so long as the licenses granted in
Sections 4.2(c)(i)(A) and 4.2(c)(i)(B) above remain in effect,
Isis will not [***] with respect to [***] however, if a VLA4 Product has not
[***] (or such later date as is mutually agreed by the parties), then [***]
will terminate as of such date.

 

(ii)           Other
Research Targets and Collaboration Compounds.

 

(A)          For each Research Target
(other than CD49d) for which a License to Exploit is granted ISIS will grant to
ATL an exclusive, worldwide license under the ISIS Core Technology Patent
Rights, the ISIS Formulation Patent Rights, the Manufacturing Patent Rights,
the Research Target Patent Rights and the Third Party Patent Rights solely to
develop, make, have made, use, sell, have sold, offer for sale and import
Collaboration Compound Products that modulate such Research Target for all
therapeutic and cosmetic applications. 
For Collaboration Compound Products that modulate [***], the license is
limited to [***] only.  These rights will
only be sublicensable as explicitly provided in Section 4.3.  This license will commence automatically on
grant of the corresponding License to Exploit and will terminate upon
termination of the corresponding License to Exploit.

 

(B)           For each Research
Target (other than CD49d) for which a License to Exploit is granted ISIS will
grant to ATL a nonexclusive worldwide license under the [***] and the [***]
solely to develop, make, have made, use, sell, have sold, offer for sale and
import Research Target Compound Products for all therapeutic and cosmetic
applications.  For Research Target
Compound Products that modulate [***], the license is limited to [***]
only.  These rights will only be
sublicensable as explicitly provided in Section 4.3.  This license will commence automatically on
grant of the corresponding License to Exploit and will not terminate upon
termination of the corresponding License to Exploit.

 

(d)           No substitutions may be
made on Licenses to Exploit.  Once a
License to Exploit has been taken with respect to a Research Target, a
different Research Target may not be substituted thereunder.

 

13

 

(e)           Subject to the terms
and conditions of the Teva Sublicense, ATL may terminate a License to Exploit
with respect to a Research Target, for any reason, at any time during the term
of this Agreement, by providing ISIS with written notice.

 

(f)            The party bearing
primary responsibility for the prosecution, maintenance and defense of any
Research Target Patent Rights pursuant to Article 8 herein will provide
the other party hereto with a semiannual report summarizing the status of
Research Target Patent Rights subject to a License to Exploit hereunder for
which such party is responsible and will include updates to any Exhibits
listing rights in any Patents licensed hereunder that are affected, if
appropriate.

 

4.3          Sublicenses
Under ISIS Patent Rights and Third Party Patent Rights.

 

(a)           Any sublicense granted
by ATL and its Affiliates under this Agreement is subject to and will be
consistent with the terms and conditions of this Agreement and with the terms
of the agreements pursuant to which ISIS obtained its rights in Third Party
Patent Rights.  The grant of any such
sublicense hereunder will not relieve ATL or its Affiliates of its obligations
under this Agreement.  ATL will promptly
provide ISIS with copies of all sublicenses granted by ATL or its Affiliates
(including, without limitation, the Teva Sublicense), as well as Sublicensee
contact information.

 

(b)           Subject to the terms
and conditions of this Agreement and during the License Term, ATL and its
Affiliates will have the right to grant sublicenses (each an “ATL Sublicense”) under the licenses from ISIS set forth in
Sections 4.1 and 4.2 to Third Parties as follows.

 

(i)            Teva
Sublicense.

 

(A)          ATL may enter into the
Teva Sublicense, in the form provided to ISIS on the Amendment Date.

 

(1)           ATL hereby covenants
that, except with ISIS’ prior written consent, ATL will not amend the Teva
Sublicense in any manner that would (a) conflict with this Agreement, (b) expand
the scope of the sublicense granted to Teva under ATL’s rights hereunder to
include any compound or product other than ATL 1102, VLA4 Compounds, Other VLA4
Compounds and VLA4 Products; (c) diminish any rights of ATL thereunder
that would result in any direct or indirect diminution of ISIS’ rights under
this Agreement, or (d) diminish any rights expressly conferred upon ISIS
under the Teva Sublicense.  ATL will
obtain the written covenant of Teva not to amend the Teva Sublicense in any of
the foregoing ways.

 

(2)           Each party to this
Agreement hereby covenants that, except with Teva’s prior written consent, such
party will not amend this Agreement in any manner that would (a) diminish
any rights of ATL hereunder that would result in any direct or indirect
diminution of Teva’s rights under the Teva Sublicense, (b) diminish any
rights expressly conferred upon Teva under this

 

14

 

Agreement, or (c) directly
or indirectly impose any additional financial or other obligations upon Teva
beyond those specified in the Teva Sublicense.

 

(B)           ATL and its Affiliates
acknowledge and agree that: (1) the sublicense granted to Teva under the
ISIS Core Technology Patent Rights, the ISIS Formulation Patent Rights, the
Manufacturing Patent Rights, and the Third Party Patent Rights may be practiced
solely for  Exploiting the ATL 1102, VLA4
Compounds, Other VLA4 Compounds and VLA4 Products for all human indications;
and (2) any further sublicense granted by Teva (or any of its
sublicensees) to another Third Party under any of the foregoing Patent Rights
will be subject to the restriction set forth in the preceding
clause (1).  ATL will obtain the
foregoing written acknowledgment and agreement from each Sublicensee (including
Teva).

 

(C)           In the event of a
material default by Teva under the Teva Sublicense, ATL will promptly inform
ISIS in writing and take commercially reasonable efforts to cause Teva to cure
the default.  Alternatively, ATL will
have the right to cure such default on Teva’s behalf.  If ATL elects to cure such default on Teva’s
behalf, ATL will promptly provide to ISIS a written plan outlining the steps
ATL will undertake in order to cure such default, including ATL’s good faith
estimate of the period of time for ATL to do so.  If Teva does not timely cure such material
default and ATL does not elect to cure such default on Teva’s behalf (or elects
to cure such default but does not timely comply with the written cure plan
described above), ATL will terminate the Teva Sublicense.

 

(D)          In the event of a
material default by ATL under this Agreement that relates to CD49d, ATL 1102 or
any VLA4 Compounds, Other VLA4 Compounds or 
VLA4 Product (including, without limitation, any fundamental breach of
this Agreement by ATL with respect to which ISIS provides written notice to ATL
under Section 12.2), ISIS will promptly inform Teva in writing (in
accordance with the notice provisions of the Teva/ISIS Agreements), and the parties
agree that Teva will have the right to cure such default on ATL’s behalf.

 

(E)           If Teva wishes to have
ISIS generate any Other VLA4 Compound, ISIS will be not obligated to generate
any such Other VLA4 Compound unless and until Teva and ISIS mutually agree in
writing upon a research plan specifically describing the activities to be
undertaken by ISIS, including the amounts to be reimbursed by Teva to ISIS for
performing such activities.  In addition,
to the extent that ATL has the right to develop and commercialize any Other
VLA4 Compound, ATL may request that ISIS generate such Other VLA4 Compound in
accordance with Section 3.6 hereof.

 

15

 

(F)           ATL acknowledges and
agrees that this Agreement does not grant to ATL any license or right under
ISIS Patent Rights to develop, make, have made, use, sell, have sold, offer for
sale or import any [***].  ATL further
acknowledges and agrees that if Teva wishes to have ISIS generate any [***],
ISIS will be not obligated to generate any such [***] Compound unless and
until: (i) Teva and ISIS mutually agree in writing upon a research plan
specifically describing the activities to be undertaken by ISIS, including the
amounts to be reimbursed by Teva to ISIS for performing such activities; (ii) TEVA
and ISIS mutually agree in writing upon license terms [***] with respect to
products utilizing the [***]; and (iii) only if and to the extent such
[***](s) is(are) within the scope of the license(s) granted by ISIS
to ATL hereunder, ATL and ISIS mutually agree in writing upon the [***] would
be payable by ISIS to ATL with respect to products developed utilizing such
[***].

 

(ii)           Other
ATL Sublicenses.

 

(A)          In addition to ATL’s
right to grant the Teva Sublicense, ATL and its Affiliates may grant an ATL
Sublicense to a Third Party collaborator under the Research Target Patent
Rights solely for the purpose of enabling such Third Party to collaborate with
ATL on bona fide research, development and commercialization work on a Research
Target Compound and, after such collaborative work, to make, have made, use,
offer for sale and sell a Product containing such Research Target Compound.

 

(B)           ATL and its Affiliates
may grant an ATL Sublicense to a Third Party collaborator under the ISIS Core
Technology Patent Rights, the ISIS Formulation Patent Rights, the Manufacturing
Patent Rights, the Research Target Patent Rights and the Third Party Patent
Rights solely for the purpose of making, developing or using a Collaboration
Compound or making, having made, using, developing, offering for sale or
selling a Collaboration Compound Product.

 

(C)           In the event of a
material default by any Sublicensee under an ATL Sublicense, ATL will inform
ISIS and take commercially reasonable efforts to cause the Sublicensee to cure
the default or will terminate the ATL Sublicense.  ATL will specifically state that ISIS is a
third party beneficiary in any ATL Sublicense(s) hereunder.

 

4.4          Maximum
Number of Licenses.

 

Not
more than [***] Licenses to Research or Licenses to Exploit (including
such licenses with respect to CD49d) may be in existence at any time during the
term of this Agreement.  Each such
license is to a discrete Research Target.

 

16

 

4.5          Right
of First Refusal.

 

(a)           During the term of this
Agreement, if ATL is approached by a Third Party regarding, or elects to offer
to a Third Party, the opportunity to collaborate on the development of a
compound that modulates a Research Target other than IGF-1R, ATL will provide
written notice of same to ISIS. Such notice will include information identical
to that presented by ATL to a Third Party including, at a minimum, (i) information
possessed and disclosable by ATL that supports the development of such a
compound and is reasonably necessary for ISIS to assess the commercial
potential of such compound; and (ii) a proposal that ATL would be prepared
to accept.  Within [***] days of
receipt of such notice, ISIS will provide written notice to ATL indicating
whether it is interested in negotiating with ATL to obtain the rights to
develop and commercialize such compound with ATL.

 

(b)           If ISIS fails to
respond to ATL’s notification within [***] days or indicates that it is
not interested in developing and commercializing such compound with ATL, ATL
will thereafter be free to enter into discussions with one or more Third
Parties regarding the development and commercialization of such compound.

 

(c)           If ISIS timely
indicates its interest in obtaining such rights to develop and commercialize
such compound with ATL, the parties will negotiate in good faith the terms of a
separate development and commercialization agreement, which terms will be
commercially reasonable, including without limitation license fees, milestone
payments, and royalties, during the period up to [***] days following
receipt of ISIS’ notice.  If the parties
are unable to execute such an agreement within such time period, despite good
faith negotiations by each party, ATL will thereafter be free to develop and
commercialize such compound with one or more Third Parties, provided that the
terms offered to such Third Party include financial terms that are no more
favorable than those offered to ISIS.

 

(d)           Notwithstanding the
foregoing, this Section 4.5 will not apply to the Teva Sublicense.

 

4.6          Rights
Retained by ISIS.

 

ISIS
will retain the right to practice under all patent rights licensed to ATL
hereunder as necessary to carry out ISIS’ obligations under this Agreement and
the Teva/ISIS Agreements, and for any purpose other than  Exploiting the Collaboration Compound
Products, except as provided otherwise herein. 
ATL will not practice any of the patent rights licensed to ATL hereunder
other than as expressly licensed in this Article 4.

 

4.7          Access
to Additional Technology.

 

(a)           If, after the Effective
Date and during the Collaboration Term, ISIS comes to own, or acquires a
license with the right to grant sublicenses thereunder, any new or additional
ISIS Core Technology Patent Rights or Manufacturing Patent Rights, and ATL
desires access to such rights, ISIS agrees to negotiate in good faith with ATL
regarding such access, provided that any licenses or sublicenses from ISIS to
ATL under such Patents pursuant to Sections 4.1 and 4.2 are conditioned on
ATL’s agreement (i) to pay, on a flow-through basis, any royalties,
milestones or other financial obligations owed to ISIS’

 

17

 

licensor arising from a
license or sublicense grant to ATL and the practice under such license or
sublicense by ATL, its Affiliates or Sublicensees; and (ii) to abide by
all terms of the agreement under which a Third Party license is granted to
ISIS.

 

(b)           If, after the Effective
Date and during the Collaboration Term, a change in the manufacturing process
as a result of a change in the master batch records for ATL 1102 requires
access of ATL to Manufacturing Patent Rights that were not practiced in the
manufacture of the ATL 1102 API prior to such change, and if ISIS has obtained
ownership or control of such Manufacturing Patent Rights by way of a license
from or via collaboration with a Third Party, then any license or sublicense
granted to ATL under such Manufacturing Patent Rights is conditioned on the
prior agreement to be negotiated in good faith by the parties regarding (i) the
assumption by ATL of all financial obligations owed to such Third Party arising
from the grant of a license or sublicense to ATL and the practice under such
license or sublicense by ATL, its Affiliates or Sublicensees; (ii) the
payment to ISIS of an equitable portion of acquisition costs incurred by ISIS;
and (iii) an agreement by ATL to abide by all terms of the agreement under
which such Manufacturing Patent Rights were acquired, if applicable.

 

4.8          Effect
of Termination of Licenses to Research and Licenses to Exploit.

 

(a)           Return of
ISIS-Provided Information.  Upon
termination of any License to Research or License to Exploit applicable to a
Collaboration Compound or Collaboration Compound Product (including, without
limitation, ATL 1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products),
ATL will promptly return to ISIS, at no cost to ISIS, all information and
materials provided to ATL by ISIS relating to such Collaboration Compound or Collaboration
Compound Product.

 

(b)           Return of API.  Upon termination of any License to Research
or License to Exploit applicable to a Collaboration Compound or Collaboration
Compound Product (including, without limitation, ATL 1102, VLA4 Compounds,
Other VLA4 Compounds and VLA4 Products), ATL will promptly, subject [***] to
ISIS all quantities of such Collaboration Compound API provided by ISIS that
have not been used.

 

(c)           Assignment Back to
ISIS of VLA4 Compound Patent Rights. 
Upon termination of the License to Exploit ATL 1102, VLA4 Compounds,
Other VLA4 Compounds and VLA4 Products, ATL will promptly assign to ISIS all of
ATL’s right, title and interest in and to the VLA4 Compound Patent Rights.  In connection therewith, ATL agrees to
promptly execute all assignment and other documents, testify and take all other
actions reasonably necessary or appropriate to transfer, effect, confirm,
perfect, record, preserve, protect and enforce ISIS’ right, title and interest
in the VLA4 Compound Patent Rights throughout the world, at the reasonable
request and expense (to the extent of any out-of-pocket costs incurred by ATL)
of ISIS.

 

(d)           Transition Plan for
Research Targets Other Than CD49d. 
If a License to Research or License to Exploit, other than any such
license with respect to ATL 1102, VLA4 Compounds and Other VLA4 Compounds and
VLA4 Products, is terminated for any reason, promptly upon any such
termination, the parties will prepare a transition plan to

 

18

 

ensure the seamless
transition of any clinical studies and distribution and sales activities
relating to any Antisense Inhibitor, Collaboration Compound, and/or
Collaboration Compound Product from ATL to ISIS.  In addition, ATL will provide ISIS with any
and all data relating to such Antisense Inhibitor, Collaboration Compound,
Product using ISIS Standard Chemistry and/or to any ISIS Patent Rights relating
to any Research Target that are in ATL’s possession or control.

 

(e)           Independently-Generated
Information.  Upon termination of any
License to Research or License to Exploit applicable to a Collaboration
Compound or Collaboration Compound Product (including, without limitation,
ATL1102, VLA4 Compound, Other VLA4 Compounds and VLA4 Products), ATL will
promptly assign and transfer to ISIS all information and materials (including,
without limitation, preclinical and clinical data, regulatory submissions and
Patents) relating to such Collaboration Compound or Collaboration Compound
Product that were independently generated by ATL or any of its Affiliates,
contractors and Sublicensees (collectively, “Independently-Generated
Information”), excluding any such information independently
generated by a Sublicensee (including Teva) that ATL is prohibited from
providing to ISIS.  ATL will obtain the
written agreement of each Sublicensee (including Teva) to comply with the
provisions of this Section 4.8(e). 
With respect to Independently-Generated Information provided to ISIS in
the event of termination of a License to Research or License to Exploit, ISIS
will compensate ATL as follows:

 

(1)           If such termination
occurs before the [***] of the Collaboration Compound or Collaboration Compound
Product to which such Independently-Generated Information relates, ISIS or its
Sublicensees will pay to ATL [***] using such Independently-Generated
Information, for [***].

 

(2)           If such termination
occurs after the [***] of the Collaboration Compound or Collaboration Compound
Product to which such Independently-Generated Information relates, ISIS or its
Sublicensees will pay to ATL a [***] using such Independently-Generated
Information, for [***].

 

(3)           Any reasonable
out-of-pocket costs payable by ATL to Third Parties (excluding any Sublicensee
or any further sublicensee of a Sublicensee) associated with the physical
transfer of Independently-Generated Information to ISIS pursuant to this Section 4.8(e) (e.g., copying, shipping) will be borne by ISIS.

 

ARTICLE 5

 

ROYALTIES AND PAYMENTS

 

5.1          Minimum
Royalties Payable to ISIS by ATL on Sales of Products by ATL or its Affiliates.

 

Subject
to the terms and conditions of, and during the term of, this Agreement, ATL
will pay to ISIS royalties on sales of Products by ATL or its Affiliates,
according to the terms set forth below.

 

19

 

(a)           The minimum royalty
payable to ISIS by ATL for sales of any VLA4 Product by ATL or its Affiliates
is [***] of Net Sales for as long as there are issued and unexpired claims
within the patent rights applicable to such VLA4 Product (including, without
limitation, the VLA4 Compound Patent Rights) and [***] of Net Sales thereafter
for the life of such VLA4 Product.

 

(b)           There is [***]for sales
of any Product that contains a compound that modulates IGF-1R[***].

 

(c)           Except as otherwise
provided above, the minimum royalty payable to ISIS for sales of any Product by
ATL or its Affiliates comprising a compound that modulates a Research Target or
Abandoned Research Target for which ISIS has not established efficacy in an
animal model and has not conducted preclinical toxicology studies is [***] of
Net Sales.  Such minimum royalty is due
and payable for the life of the Product.

 

(d)           Except
as otherwise provided above, the minimum royalty payable to ISIS by ATL for
sales of any Product by ATL or its Affiliates for which ISIS has established
efficacy in an animal model or has conducted preclinical toxicity studies will
be negotiated in good faith by the parties on a case-by-case basis, but will
not be less than [***] of Net Sales.

 

(e)           For Products under (a) or
(c), in addition to any minimum royalties due under (a) or (c), the
royalty payable to ISIS by ATL for sales of any Product by ATL or its
Affiliates, the manufacture, use, sale, or importation of which would, but for
the licenses granted hereunder, infringe an issued and unexpired claim under
the ISIS Formulation Patent Rights is [***]

 

(f)            The minimum royalties
payable as described in Sections 5.1 (a)-(e) are in addition to any
royalties payable to ISIS for Third Party Patent Rights as set forth in Section 5.3
below.

 

5.2          Sublicense
Income Payable to ISIS by ATL or its Affiliates on Products sold by
Sublicensee(s).

 

Subject
to the terms and conditions of, and during the term of, this Agreement, ATL or
its Affiliates will pay to ISIS certain shares of Sublicense Income received by
ATL or its Affiliates, according to the terms set forth hereinbelow.

 

(a)           The share of Sublicense
Income payable to ISIS by ATL or its Affiliates on Sublicensee sales of a VLA4
Product is [***]

 

(b)           [***].

 

(c)           Except for VLA4
Products and products containing a compound that modulates IGF-1R, ATL will pay
ISIS a [***] royalty on Net Sales of any Product by Sublicensee and [***] of
Sublicense Income exclusive of royalties. 
Such amounts are due and payable for the life of the Product.

 

(d)           In addition to amounts
payable under (a) or (c), ATL will pay ISIS [***] of Sublicense Income for
sales of Products by Sublicensees containing compounds that modulate a

 

20

 

Research Target other
than IGF-1R and that that would, but for the licenses granted hereunder,
infringe the ISIS Formulation Patent Rights. 
Such amounts are due and payable for the term of issued and unexpired
claims within the ISIS Formulation Patent Rights.

 

(e)           Except as otherwise
provided above, the share of Sublicense Income payable to ISIS by ATL or its
Affiliates for the license of rights to and/or sale of a Product for which ISIS
has established efficacy in an animal model or has conducted preclinical studies
will be negotiated in good faith by the parties, but will not be less than
[***] of the Sublicense Income.

 

5.3          Royalties
payable to ISIS for Third Party Patent Rights.

 

(a)           In addition to the
royalties and other payments set forth in Sections 5.1 and 5.2, as of the
Amendment Date, the following royalties (percentages of Net Sales) are payable
to ISIS by ATL for sales of Products (including Products that modulate IGF-1R),
whether sold by ATL, its Affiliates, or Sublicensees, the manufacture, use,
sale, or import of which would, but for the licenses granted hereunder,
infringe an issued and unexpired claim of the following patent rights on a
Product by Product basis:

 

[***]

 

(b)           In addition to (a), for
Collaboration Compound Products, including those that modulate IGF-1R, the
manufacture, use, sale, or importation of which would, but for the licenses
granted hereunder, [***].

 

(c)           [***] Third Party
Royalty Obligations.  If, after the
Amendment Date during the Collaboration Term, ISIS is successful in eliminating
or reducing the requirement to pay a royalty under the Third Party license
under which ISIS has obtained access to the [***], ISIS will so notify ATL.
Thereafter, the royalty rate payable by ATL hereunder for the [***] will be
[***]

 

5.4          Royalty
Cap.

 

(a)           Should the royalty
payable by ATL to ISIS pursuant to Sections 5.1 and 5.3 with respect to
sales of a VLA4 Product exceed [***] of Net Sales, the total royalty ATL must
pay ISIS for such VLA4 Product will be [***] of Net Sales.

 

(b)           Should the royalty
payable by ATL to ISIS pursuant to Sections 5.1 and 5.3 with respect to
sales of a Product other than a Product comprising a CD49d-modulating compound,
exceed [***] of Net Sales, the total royalty ATL must pay ISIS for such Product
will be [***] of Net Sales.

 

(c)           The foregoing royalty
caps apply only to the royalty rates set forth in Sections 5.1 and 5.3 and
thus do not apply to any new technology or patent rights acquired or accessed
by ISIS after the Effective Date, as described in Sections 4.7 and 8.4 or
to the royalties owed pursuant to Section 5.2.

 

21

 

5.5          Examples.

 

(a)           Example
of Calculation of Royalty Rate for Sales of VLA4 Products by ATL or its
Affiliates:

 

The
royalty payable to ISIS for sales of VLA4 Product by ATL or its Affiliates (as
a percentage of Net Sales) comprising non-topically-administered formulations
of ATL 1102 is calculated as follows (assuming all relevant patent rights
are issued and unexpired):

 

[***]

 

(b)           Example
of Royalties and Sublicense Income Payable to ISIS by ATL or its Affiliates on
Sales of VLA4 Products by Sublicensees:

 

[***]

 

5.6          Payment
of Royalties and Income; Reports.

 

ATL
will make royalty payments to ISIS for each Product sold during a Calendar
Quarter within [***] days after the last day of that Calendar
Quarter.  Each royalty payment will be
preceded by a written report for that Calendar Quarter showing the calculation
of Net Sales of the Product sold by ATL, its Affiliates and its Sublicensees
worldwide during the quarterly reporting period and the calculation of the
royalties and Sublicense Income payable under this Agreement, all on a
country-by-country and Product-by-Product basis, which report will be delivered
within 15 days of the last day of that Calendar Quarter.

 

5.7          Payment
Modalities; Foreign Currency Conversion; Late Payment Charges.

 

(a)           Payments.  All payments to ISIS under this Agreement
will be made in United States Dollars by bank wire transfer in next day
available funds to such bank account in the United States designated in writing
by ISIS from time to time.  All amounts
payable to ISIS hereunder are noncreditable and nonrefundable.

 

(b)           Late Payments;
Collections.  In the event that any
payment, including royalty, milestone or research payments, due hereunder is
not made when due, the payment will bear interest from the date due at the
lesser of (i) [***] per month, compounded monthly, or (ii) the
highest rate permitted by law; provided, however, that in no event will such
rate exceed the maximum legal annual interest rate.  If ATL disputes the amount of an invoice
presented by ISIS within [***] days of receipt of such invoice, the late
fees will only apply to the correct amount as later determined or agreed.  The payment of such interest will not limit a
party from exercising any other rights it may have as a consequence of the
lateness of any payment.  In addition,
ATL agrees to pay all costs of collection, including reasonable attorneys’
fees, incurred by ISIS in enforcing the payment obligations of ATL after a due
date has passed under this Agreement.

 

(c)           Currency Conversion.  Net Sales outside the
United States will first be determined in the currency of the country in which
they are earned and must then be converted into an

 

22

 

amount in United States
dollars based on the average relevant rate of exchange throughout the then
Calendar Quarter as reported in the Wall Street Journal
(or if the Wall Street Journal ceases to be
published, a comparable alternate publication agreed by the Parties).

 

5.8          Audits
Requested by ISIS.

 

(a)           Upon the written
request of ISIS, and not more than once in each calendar year, ATL will permit
ISIS’ independent certified public accountant to have access during normal
business hours to such of the records of ATL as may be reasonably necessary to
verify the accuracy of the royalty reports hereunder for the current year and
the preceding 2 years prior to the date of such request.  The accounting firm will disclose to ISIS
only whether the royalty reports are correct or incorrect, the specific details
concerning any discrepancies, and the corrected amount of Net Sales and
Sublicense Income.  No other information
will be provided to ISIS.

 

(b)           At the request of ISIS,
ATL will direct its Affiliates to permit audits of the Affiliates’ records in
accordance with the provisions of subsection (a) above.  Further, ATL will include in each sublicense
granted by it pursuant to this Agreement a provision requiring the Sublicensee
to submit reports to ATL, to keep and maintain records of sales made pursuant
to such sublicense and to grant access to such records by ISIS’ independent
accounting firm, to the same extent required of ATL hereunder.  ISIS’ independent accounting firm will also
be granted access to such reports in ATL’s possession as part of the audit
referenced in subsection (a) above.

 

(c)           If such accounting firm
concludes that additional royalties were owed during such period, ATL will pay
the additional royalties within [***] days of the date ISIS delivers to
ATL such accounting firm’s written report. 
The fees charged by such accounting firm will be paid by ISIS unless the
additional royalties, milestones or other payments owed by ATL exceed [***] of
the royalties, milestones or other payments paid for the time period subject to
the audit, in which case ATL will pay the reasonable fees and expenses charged
by the accounting firm.

 

(d)           ISIS will treat all
financial information subject to review under this Section 5.8 or under
any sublicense agreement in accordance with the confidentiality provisions of Article 9,
and will cause its accounting firm to enter into an acceptable confidentiality
agreement with ATL and its Sublicensees obligating such firm to retain all such
financial information in confidence pursuant to such confidentiality agreement.

 

5.9          Audits
Requested by ATL.

 

(a)           Upon the written
request of ATL, and not more than once in each calendar year, ISIS will permit
ATL’s independent certified public accountant to have access during normal
business hours to such of the records of ISIS as may be reasonably necessary to
verify the accuracy of the invoices submitted to ATL hereunder for the 12
months preceding the date of such request. 
The accounting firm will disclose to ATL only whether the invoiced
amounts are correct or incorrect, the specific details concerning the basis for
the

 

23

 

invoiced amounts, and the
corrected amount, if applicable.  No
other information will be provided to ATL.

 

(b)           If such accounting firm
concludes that any amounts invoiced were in error during such period and ATL is
entitled to a refund of such amounts, ISIS will refund to ATL the amounts
overcharged within [***] days of the date ATL delivers to ISIS such
accounting firm’s written report.  The
fees charged by such accounting firm will be paid by ATL unless the additional
refunded amounts owed by ISIS exceed [***] of the total amount for which ATL
was invoiced during the time period subject to the audit, in which case ISIS
will pay the reasonable fees and expenses charged by the accounting firm.

 

(c)           ATL will treat all
financial information subject to review under this Section 5.9 in
accordance with the confidentiality provisions of Article 9 and will cause
its accounting firm to enter into an acceptable confidentiality agreement with
ISIS obligating such firm to retain all such financial information in
confidence pursuant to such confidentiality agreement.

 

5.10        Taxes.

 

If
laws, rules or regulations require withholding of income taxes or other
taxes imposed upon payments set forth in this Article 5, ATL will make
such withholding payments as required and subtract such withholding payments
from the payments set forth in this Article 5.  ATL will submit appropriate proof of payment
of the withholding taxes to ISIS within a reasonable period of time.

 

ARTICLE 6

 

USE OF MATERIALS, DATA AND INFORMATION

 

6.1          Unless provided
otherwise herein, all Antisense Inhibitors and any related research materials
delivered to ATL under this Agreement will be used only in furtherance of a
Development Program or Collaborative Research Program, will not be used or
delivered to or for the benefit of any Third Party (other than Teva) without
the prior written consent of ISIS, and will not be used in research or testing
involving human subjects.  The Antisense
Inhibitors and any related research materials supplied under this Agreement
must be used with prudence and appropriate caution in any experimental work,
since not all of their characteristics may be known.  ATL agrees to comply with all applicable
laws, rules and regulations in connection with its use of Antisense
Inhibitors and related research materials provided hereunder.

 

6.2          All Antisense
Inhibitors and related research materials provided to ATL hereunder are
proprietary to ISIS.

 

6.3          ATL may use data and
information provided to ATL by ISIS hereunder for internal drug discovery
purposes only, consistent with the terms of this Agreement.  Except as provided otherwise herein, all data
and information provided to ATL by ISIS pursuant to

 

24

 

this Agreement is
confidential and proprietary to ISIS and will not be disclosed to Third
Parties, consistent with the provisions of Article 9 herein.  ISIS acknowledges that ATL may wish to
provide such data and/or information to a Third Party in connection with ATL’s
bona fide development, commercialization or partnering activities under this
Agreement; ISIS will not unreasonably withhold its consent to such a transfer
of data and information, provided that the receiving party is advised of the
confidentiality provisions hereunder and agrees to be bound thereby.  Notwithstanding the foregoing, ISIS reserves
the absolute right to withhold consent if ATL wishes to transfer such data or
information to an antisense company or other competitor of ISIS.

 

6.4          Notwithstanding Section 6.3,
ISIS acknowledges and agrees that ATL may disclose to TEVA any data,
information and know-how provided to ATL by ISIS under this Agreement that are
relevant to ATL1102, VLA4 Compounds, Other VLA4 Compounds and VLA4 Products
without any requirement to obtain the further consent of ISIS, provided that
all such data, information and know-how will remain subject to the provisions
of this Article 6 and Article 9 hereof.

 

6.5          Consistent with the
foregoing provisions, if ATL conducts studies comparing ISIS Standard Chemistry
with the chemistry of a Third Party, all data and information incorporating or
relating to ISIS Standard Chemistry that result from such studies is
confidential and proprietary to ISIS and will not be disclosed to Third
Parties, consistent with the provisions of Article 9 herein.

 

ARTICLE 7

 

FUNDING PROVISIONS

 

7.1          Funding
for Development Activities.

 

(a)           ATL will pay for all
development activities that ISIS performs on ATL’s behalf [***] including any
such development activities with respect to VLA4 Compounds and Other VLA4
Compounds (except to the extent Teva is obligated to pay for such activities
under the Teva/ISIS Agreements) and any such development activities described
in any Development Plan hereunder or approved by the JDC in the course of any
Development Program.  Labor will be
billed [***].  Materials and out of
pocket expenses incurred by ISIS will be passed through to ATL at cost.

 

(b)           ISIS will submit an
invoice for such expenditures to ATL after each Calendar Quarter, and ATL will
submit payment to ISIS within [***] days from the date of invoice,
consistent with the provisions of Section 5.7.

 

7.2          Funding
for Collaborative Research Program Activities.

 

(a)           Except as specifically
provided otherwise herein, as of the Effective Date, ATL will pay for all
activities performed by ISIS in the course of the Collaborative Research
Program hereunder [***].  Labor will
[***].  Materials and out of pocket
expenses incurred by ISIS will be [***]

 

25

 

(b)           ISIS will submit an
invoice for such expenditures to ATL after each Calendar Quarter, and ATL will
submit payment to ISIS within [***] days from the date of invoice,
consistent with the provisions of Section 5.7.

 

7.3          Funding
for Other ATL Activities.

 

ATL
will also pay for any other activities ATL deems necessary to research, develop
or commercialize a Collaboration Compound or Product, or which are otherwise
required for ATL to fulfill its obligations hereunder, [***].  Labor will [***].  Materials and out of pocket expenses incurred
by ISIS will be [***].

 

ARTICLE 8

 

INTELLECTUAL PROPERTY

 

8.1          Ownership
of Inventions.

 

(a)           Neither party hereto
will be deemed by this Agreement to have been granted any license or other
rights to the other party’s rights in any inventions, technology, discoveries,
or other proprietary property (collectively, “Inventions”), except as expressly
provided herein.  Without limiting the
generality of the foregoing, as between the parties, ISIS will at all times
remain the sole and exclusive owner of the ISIS Patent Rights.

 

(b)           Except as provided
otherwise herein, each party will solely own all Inventions that are made (as
determined by U.S. rules of inventorship) solely by employees of or
Consultants to that party pursuant to the Collaborative Research Program or any
Development Program under this Agreement. 
Such an Invention will be an “ISIS Invention” or an “ATL Invention,” as
the case may be, and Patents claiming such Inventions will be “ISIS Patents” or
“ATL Patents,” respectively.

 

(c)           ISIS agrees to assign
to ATL its rights in any ISIS Inventions or Joint Inventions claiming Antisense
Inhibitors that modulate IGF-1R and methods of using same, provided that a
License to Research or License to Exploit for IGF-1R exists.  If ATL does not convert the License to
Research for IGF-1R into a License to Exploit IGF-1R, or if the License to
Research or License to Exploit applicable to IGF-1R is terminated for any
reason, ATL will assign back to ISIS the latter’s rights in any such ISIS
Inventions and Joint Inventions, as well as ISIS’ rights in any Patents filed
on such Inventions.  Notwithstanding the
foregoing, if such assignment of rights back to ISIS would interfere with ATL’s
ability to practice any ATL Inventions or ATL Patent Rights pertaining to
IGF-1R, ISIS agrees to sublicense, in favor of ATL, only that portion of any
such Invention or Patent, and only for that time period, as is required for ATL
to practice an ATL Invention or ATL Patent that would otherwise infringe the
ISIS Invention or ISIS Patent, on a nonexclusive, mutually agreeable basis that
is consistent with the royalties set out in this Agreement, provided that ISIS
is not otherwise precluded from doing so.

 

(d)           Except as provided
otherwise herein, ISIS and ATL will jointly hold title to all Inventions,
whether or not patentable, that are made (as determined by the U.S. rules of
inventorship) jointly by employees of or Consultants to ISIS and ATL pursuant
to the

 

26

 

Collaborative Research
Program or any Development Program under this Agreement, as well as to Patents
filed thereon.  Such Inventions will be “Joint
Inventions,” and Patents claiming such Joint Inventions will be “Joint Patents.”
ISIS and ATL will promptly provide each other with notice whenever a Joint
Invention is made.  The parties agree and
acknowledge that, except insofar as this Agreement provides otherwise, the
default rights conferred on joint owners under US patent law, including the
right of each party to independently practice, license and use a Joint Patent,
will apply in relation to the Joint Patents throughout the world as though US
patent law applied worldwide.

 

(e)           The parties understand
that if ATL or a Third Party collaborator of ATL provides a proprietary gene
sequence or utility not known to ISIS, the discovery of inhibitors of that sequence
may be a Joint Invention.  Similarly, the
parties understand that the discovery of a method of treating human disease by
inhibiting a particular gene product, where ISIS’ Antisense Inhibitor data is
used to support the claims of the Patent, may be a Joint Invention.

 

(f)            The parties agree,
upon reasonable request, to execute any documents reasonably necessary to
effect and perfect each other’s ownership of any Invention.

 

8.2          Filing,
Prosecution, Maintenance, Enforcement and Defense of Patents Owned or
Controlled by ISIS and of Certain Joint Patents.

 

(a)           Except as provided
otherwise herein, ISIS will have the sole and exclusive right to file,
prosecute, maintain, enforce and defend any Research Target Patent Rights and
any ISIS Patents or Joint Patents filed on Inventions claiming an Antisense
Inhibitor to a Research Target or a method of treatment using an antisense
molecule that modulates a Research Target subject to a License to Research or
License to Exploit hereunder, regardless of inventorship.  ISIS will consider ATL’s input with respect
to the prosecution, maintenance, enforcement and defense of any such
Patents.  ISIS will also consider any
supporting information provided by ATL that relates to the Research Target and
its uses, as well as any supporting in vivo or in vitro efficacy data generated from experiments performed
by ATL or its collaborators.  As used
herein, Patent prosecution includes, without limitation, the handling of
interference proceedings, oppositions, reexaminations and reissues.

 

(b)           In the event ATL
proposes the filing of a Joint Patent pursuant to subsection (a) and
ISIS does not wish to file and prosecute such Joint Patent, ATL will have the
right to file, prosecute, maintain, enforce and defend such Joint Patent.  ATL will consider ISIS’ input with respect to
the prosecution, maintenance, enforcement and defense of any such Joint
Patents.

 

(c)           ISIS will also have the
sole and exclusive right, in its sole discretion, to file, prosecute, maintain,
enforce and defend any Patents within the ISIS Core Technology Patent Rights,
the Manufacturing Patent Rights, and the ISIS Formulation Patent Rights.

 

(d)           ISIS will pay for its
own labor costs incurred in the filing, prosecution, maintenance, enforcement
and defense of any Patents for which ISIS is responsible hereunder.

 

27

 

(e)           ATL will reimburse ISIS
for reasonable materials and out of pocket expenses incurred in connection with
the activities recited in subsections (a), (c) and (d).  As used herein, materials and out of pocket
expenses means costs, other than ISIS’ labor costs, [***].  ISIS will invoice ATL on a quarterly basis
and ATL will submit payment to ISIS consistent with the provisions of Article 7
herein.

 

(f)            Should ATL elect not
to pay expenses relating to Patent protection in a particular country, ATL will
provide ISIS with written notice of same, and ATL’s payment obligations with
respect to that country will cease once ISIS has received such notice, provided
that all noncancelable costs and expenses incurred by ISIS prior to such date
will nevertheless be reimbursed by ATL. Immediately upon ISIS’ receipt of such
written notice from ATL, the applicable License to Research or License to
Exploit will be terminated with respect to such country.

 

(g)           With respect to any
ISIS Patent Rights exclusively licensed to ATL under a License to Exploit, ISIS
will promptly advise ATL if ISIS becomes aware of any suspected or actual
infringement of such ISIS Patent Rights by any person.  Similarly, ATL will promptly advise ISIS if
ATL becomes aware of any suspected or actual infringement of such ISIS Patent
Rights by any person.

 

(h)           If ISIS fails to
initiate proceedings against any actual or suspected infringement of the ISIS
Patent Rights where such infringing activity involves an Antisense Inhibitor of
a Research Target that ATL has a License to Exploit, or to defend any claim of
infringement against the parties pertaining to such rights, within
[***] days of receipt of a notice from ATL asking ISIS to do so, ATL will
be entitled to initiate those proceedings at ATL’s expense.

 

(i)            Except as provided
otherwise herein, ISIS will endeavor to take all action necessary to ensure
that the ISIS Patent Rights that are or become subject to a License to Research
or License to Exploit are maintained and diligently prosecuted.

 

8.3          Filing,
Prosecution, Maintenance, Enforcement and Defense of Patents Owned or
Controlled by ATL.

 

(a)           ATL will have the sole
and exclusive right and responsibility, in its sole discretion, to file,
prosecute, maintain, enforce and defend (including the exclusive right to sue
and exclude others from infringing) any Patents filed on Inventions made solely
by ATL (i.e., ATL Patents) and VLA4 Compound Patent Rights.  ATL will provide ISIS with a semiannual
report summarizing the status of any such ATL Patents and VLA4 Compound Patent
Rights.  ATL hereby grants ISIS a
worldwide, royalty-free, sublicensable, perpetual, nonexclusive license to
practice under ATL’s rights to any such ATL Patents and  VLA4 Compound Patent Rights to carry out the
activities contemplated by this Agreement and to make, have made, use, import,
offer for sale and sell products other than a Product, provided that ATL is not
contractually prohibited from doing so. 
If ATL decides to discontinue the maintenance, enforcement or defense of
any such patent entirely, or in a particular country, it will notify ISIS in
writing of that decision in sufficient time for ISIS to assume those
responsibilities with respect to the relevant

 

28

 

patents (at ISIS’ sole
option), and will, on request by ISIS, transfer the relevant patent files to
ISIS or a third party nominated by ISIS. 
ATL agrees not to narrow the scope of any existing VLA4 Compound Patent
Rights unless agreed with ISIS in writing.

 

(b)           If a License to Exploit
is granted to ATL with respect to a Research Target or Collaboration Compound
hereunder, ISIS will promptly thereafter transfer to ATL the sole and exclusive
right to file, prosecute, maintain, enforce and defend any Patents owned,
controlled by ISIS or to which ISIS has prosecution rights that are within the
Research Target Patent Rights.  ATL will
consider ISIS’ input with respect to the prosecution, maintenance, enforcement
and defense of any such Patents.  If ATL
decides to discontinue the filing, prosecution, maintenance, enforcement or
defense of any such Patent entirely or in a particular country, it will inform
ISIS thereof with sufficient time for ISIS to assume those responsibilities
with respect to such Patent and will thereafter transfer the relevant Patent
files to ISIS or its designee.

 

8.4          Infringement
of Third Party Patents.

 

If
either party receives notice that a Product infringes a Third Party Patent, and
the parties hereto agree to settle with and pay royalties to such Third Party,
the additional royalty burden will be allocated as follows.

 

(a)           If the alleged
infringement is due to ATL’s practice of ISIS Core Technology Patent Rights,
Manufacturing Patent Rights, or VLA4 Compound Patent Rights, [***].

 

(b)           If the alleged
infringement is due to ATL’s practice of any other Patent Rights licensed
hereunder, [***].

 

8.5          Patent
Coordinators.

 

(a)           Within 30 days of
the Effective Date, the parties will each select a Patent Coordinator (“PC”) to
facilitate and coordinate the preparation, filing, prosecution and maintenance
of Patents pursuant to this Agreement. 
The parties may agree to name additional Patent Coordinators, as long as
equal representation is maintained.

 

(b)           During the
Collaboration Term, the PCs will be the primary contacts for interaction
between the parties with respect to the activities referenced in (a).

 

(c)           The PCs will meet as
needed during the Collaboration Term. 
Meetings will be via teleconference or videoconference, or as the
parties may otherwise agree.  The
frequency, dates and times of all meetings will be mutually agreed upon by the
parties.  At their first meeting, the PCs
will determine such procedures as they will reasonably require to conduct their
activities.

 

(d)           The parties further
agree that to facilitate the activities described in this Section, ATL’s Patent
Coordinator may, upon prior written notice to ISIS’ Patent Coordinator and at
such times as are mutually agreed upon by the Patent Coordinators, obtain
access to and make copies of Patent file documents that are relevant to filing,
prosecution, maintenance, enforcement and defense of Patents licensed to ATL
hereunder.  Any and all such documents
will be maintained by ATL in confidence, pursuant to the provisions of Article 9
below.

 

29

 

ARTICLE 9

 

CONFIDENTIALITY

 

9.1          Nondisclosure
Obligation.

 

All
Confidential Information disclosed by one party to the other party hereunder
will be maintained in confidence by the receiving party and will not be
disclosed to a Third Party or Affiliate or used for any purpose except as set
forth below.

 

9.2          Permitted
Disclosures.

 

Except
as otherwise provided herein, a party may disclose Confidential Information
received from the other party:

 

(a)           to governmental or
other regulatory agencies in order to obtain Patents or approval to conduct
clinical trials, or to gain Marketing Approval; provided that such disclosure
may be made only to the extent reasonably necessary to obtain such patents or
approvals;

 

(b)           to Affiliates,
Sublicensees (including Teva), agents, consultants, and/or other Third Parties
to allow the Exploitation of Products (or for such parties to determine their
interest in performing such activities) in accordance with this Agreement on
the condition that such Affiliates and Third Parties agree to be bound by
confidentiality obligations no less stringent than those contained in this
Agreement, provided the term of confidentiality for such Affiliates and Third
Parties will be no less than 7 years; or

 

(c)           if such disclosure is
required by law or court order, provided that notice is promptly delivered to
the other party in order to provide an opportunity to challenge or limit the
disclosure obligations.

 

ARTICLE 10

 

PUBLICATION AND PUBLICITY

 

10.1        Publication.

 

(a)           The parties agree that
it is customary in the industry to publish results obtained from clinical
trials and other studies of a Collaboration Compound or Product, and that each
party may publish such information obtained by such party in the performance of
the Development Program, subject to the provisions of this Section.

 

(b)           Except as provided
otherwise herein, the parties will be entitled to publish or present on the
results of any Development Program or other development activities hereunder,
including, without limitation, the development of any ATL1102, VLA4 Compound,
Other VLA4 Compound or other Collaboration Compound, or any Product, provided
that

 

30

 

the party seeking to
publish will deliver to the other party for its review a copy of any proposed
publication or an abstract of any oral presentation of clinical results at
scientific meetings involving any ATL1102, VLA4 Compound or Other VLA4 Compound
or other Collaboration Compound, or any Product hereunder, or the Proprietary
Information of the other party, at least 30 days prior to submission of
scientific publications or abstracts of oral presentations.  The reviewing party will have the absolute
right to request that any of its Proprietary Information be deleted from such
publication or presentation, and the disclosing party will comply with that
request.  If the disclosing party does
not receive any feedback from the reviewing party within that 30-day period,
the disclosing party will be free to proceed with the publication or
presentation, with the following limitations:

 

(i)            ISIS will be permitted
to publish on matters relating to  ATL1102 or any VLA4 Compound or Other
VLA4 Compound or other Collaboration Compound, or any Product developed by ATL
hereunder during the term of this Agreement only upon the prior written
approval of ATL, which may be reasonably withheld by ATL.

 

(ii)           ATL will be permitted
to publish on matters relating to any Manufacturing Technology or Manufacturing
Technology Improvements relating to a specific Collaboration Compound or
Product developed hereunder during the term of this Agreement only upon the
prior written approval of ISIS, which may be given at ISIS’ sole discretion.

 

(c)           For the avoidance of
doubt, the provisions of this Section 10.1 will apply to Sublicensees
(including Teva) to the same extent as they apply to ATL.

 

(d)           Notwithstanding
anything in this Section 10 ISIS acknowledges and agrees that, other than
in respect of the ATL1102 Phase IIa Trial, ISIS does not have the right to publish information obtained in the performance of
development activities conducted by or on behalf of Teva relating to ATL1102, VLA4
Compounds and Other VLA4 Compounds.

 

10.2        Publicity.

 

(a)           The parties will issue
a joint press release regarding the execution of this Agreement.

 

(b)           Except as otherwise
provided herein or required by law, neither party will originate any
publication, news release or other public announcement, written or oral,
whether in the public press, or stockholders’ reports, or otherwise, relating
to this Agreement, and neither party will use the name, trademark, trade name,
logo or likeness of the other party or its employees in any publicity, news
release or disclosure relating to this Agreement, or its subject matter,
without the prior express written permission of the other party.

 

(c)           ATL will inform ISIS of
any press releases relating to a Product permitted hereunder or required to be
made by law in advance of general release to the public.

 

(d)           For the avoidance of
doubt, the provisions of this Section 10.2 will apply to Sublicensees
(including Teva) to the same extent as they apply to ATL.

 

31

 

ARTICLE 11

 

INDEMNIFICATION

 

11.1        Indemnification
by ATL.

 

ATL
will indemnify, defend and hold ISIS and its agents, employees, officers and
directors (the “ISIS Indemnitees”) harmless from and against any and all
liability, damage, loss, cost or expense (including reasonable attorneys’ fees)
arising out of Third Party claims or suits related to (a) ATL’s
performance of its obligations under this Agreement; (b) breach by ATL of
its representations and warranties set forth in Article 13; (c) patent
infringement allegations or claims asserted by a Third Party against ISIS
arising out of ISIS’ performance of activities for ATL pursuant to this
Agreement; (d) ATL’s choice of Research Targets pursuant to Section 3.4
or 3.5; or (e) the development, manufacture, use, handling, storage, sale
or other disposition of any Collaboration Compound or Product by ATL or any of
its Affiliates, contractors or Sublicensees (including Teva); provided, however, that ATL’s obligations pursuant to this Section 11.1
will not apply to the extent such claims or suits result from the gross
negligence or willful misconduct of any of the ISIS Indemnitees.  Notwithstanding the foregoing, ATL will have
no obligation to indemnify the ISIS Indemnitees with respect to claims arising
out of breach by ISIS of its representations and warranties set forth in Section 13.1.

 

11.2        Indemnification
by ISIS.

 

ISIS
will indemnify, defend and hold ATL and its Affiliates and each of their
respective agents, employees, officers and directors (the “ATL Indemnitees”)
harmless from and against any and all liability, damage, loss, cost or expense
(including reasonable attorney’s fees) arising out of Third Party claims or
suits related to (a) ISIS’ performance of its obligations under this
Agreement; or (b) breach by ISIS of its representations and warranties set
forth in Article 13; provided however,
that ISIS’ obligations pursuant to this Section 11.2 will not apply to the
extent that such claims or suits result from the gross negligence or willful
misconduct of any of the ATL Indemnitees. 
Notwithstanding the foregoing, ISIS will have no obligation to indemnify
the ATL Indemnitees with respect to claims arising out of (i) a breach by
ATL of its representations and warranties set forth in Sections 3.5(b)(i) and
13.1, or (ii) ISIS’ performance of development or other activities with
respect to ATL 1102 on behalf of ATL or Teva in accordance with ATL’s or
Teva’s instructions or specifications.

 

11.3        Notification
of Claims; Conditions to Indemnification Obligations.

 

As
a condition to a party’s right to receive indemnification under this Article 11,
it will (i) promptly notify the other party as soon as it becomes aware of
a claim or action for which indemnification may be sought pursuant hereto, (ii) cooperate
with the indemnifying party in the defense of such claim or suit, and (iii) permit
the indemnifying party to control the defense of such claim or suit, including
without limitation the right to select defense counsel.  In no event, however, may the indemnifying
party compromise or settle any claim or suit in a manner which admits fault or
negligence on the part of the indemnified party without the prior written
consent of the indemnified party.  The
indemnifying party will have no liability under this Article 11 with
respect to claims or suits settled or compromised without its prior written
consent.

 

32

 

ARTICLE 12

 

TERM AND TERMINATION OF AGREEMENT

 

12.1        Term
and Termination of Agreement.

 

This
Agreement will be effective as of the Effective Date and unless terminated
earlier pursuant to Sections 12.2 below, the term of this Agreement will
continue in effect until expiration of the License Term.

 

12.2        Termination
upon Fundamental Breach.

 

(a)           General.  Subject to subsections (b) and (c) below,
this Agreement may be terminated upon written notice by either party to the
other at any time during the term of this Agreement if the other party is in
fundamental breach of its obligations hereunder (i.e., a breach which goes to
the heart of the Agreement) and has not cured such breach within 90 days
after written notice requesting cure of the breach; providing, however, that in
the event of a good faith dispute with respect to the existence of such a
fundamental breach, the 90-day cure period will be stayed until such time as
the dispute is resolved pursuant to Section 16.6 hereof.  Material breaches that are not fundamental
give rise solely to a right of damages but not a right to terminate the
Agreement.

 

(b)           Fundamental Breach
by ATL.

 

(i)            Relating
to CD49d.  If ATL commits a
fundamental breach of this Agreement that relates to CD49d, ATL 1102 or any
VLA4 Compounds, Other VLA4 Compounds or VLA4 Product for which ISIS provides
written notice under Section 12.2(a), ISIS will concurrently provide a
copy of such notice to Teva in accordance with the notice provisions of the
Teva/ISIS Agreements, and Teva will have the right to cure such breach on ATL’s
behalf.

 

(ii)           Not
Relating to CD49d.  Notwithstanding
the provisions of Section 12.2(a), if ATL commits a fundamental breach of
this Agreement unrelated to CD49d, ATL 1102 or any VLA4 Compounds, Other VLA4
Compounds or VLA4 Product for which ISIS provides written notice under Section 12.2(a),
ISIS will concurrently provide a copy of such notice to Teva in accordance with
the notice provisions of the Teva/ISIS Agreements, and if such breach is not
timely cured in accordance with Section 12.2(a), this Agreement will: (A) terminate
as it relates to Research Targets other than CD49d, ATL1102 and Collaboration
Compounds other than VLA4 Compounds and Other VLA4 Compounds; and (B) remain
in full force and effect in accordance with its terms (including, without
limitation, this Section 12.2) as it relates to CD49d, ATL 1102, VLA4
Compounds and Other VLA4 Compounds.

 

33

 

(c)           Fundamental Breach
by ISIS.  If ISIS commits a
fundamental breach of this Agreement for which ATL provides written notice
under Section 12.2(a), and such breach is not timely cured in accordance
with Section 12.2(a), ATL may, at its option, terminate this Agreement
either: (i) in its entirety; or (ii) solely as it relates to Research
Targets other than CD49d, ATL 1102 and Collaboration Compounds other than VLA4
Compounds and Other VLA4 Compounds, in which event this Agreement will remain
in full force and effect in accordance with its terms (including, without limitation,
this Section 12.2) as it relates to CD49d, ATL 1102, VLA4 Compounds and
Other VLA4 Compounds.  ATL’s notice under
Section 12.2(a) will specify which of the foregoing termination
options ATL elects.

 

12.3        Rights
in Bankruptcy.

 

All
rights and licenses granted under or pursuant to this Agreement by ISIS or ATL
are, and will otherwise be deemed to be, for purposes of Section 365(n) of
the U.S. Bankruptcy Code, licenses of right to “intellectual property” as
defined under Section 101 of the U.S. Bankruptcy Code.  The parties agree that the parties, as
licensees of such rights under this Agreement, will retain and may fully
exercise all of their rights and elections under the U.S. Bankruptcy Code.  The parties further agree that, in the event
of the commencement of a bankruptcy proceeding-by or against either party under
the U.S. Bankruptcy Code, the party hereto which is not a party to such
proceeding will be entitled to a complete duplicate of (or complete access to,
as appropriate) any such intellectual property and all embodiments of such
intellectual property, and same, if not already in their possession, will be
promptly delivered to them (i) upon any such commencement of a bankruptcy
proceeding upon their written request therefor, unless the party subject to
such proceeding elects to continue to perform all of its obligations under this
Agreement, or (ii) if not delivered under (i) above, following the
rejection of this Agreement by or on behalf of the party subject to such
proceeding upon written request therefor by the non-subject party.

 

12.4        Accrued
Rights and Surviving Obligations.

 

Expiration
or termination of the Agreement will not relieve the parties of any obligation
accruing prior to such expiration or termination.  Sections 4.8, 12.4 and 16.7, and
Articles 5-9, 11 and 13-15 will survive expiration or termination of the
Agreement.  Provisions concerning
reporting requirements will continue in effect in accordance with any
applicable timetables set forth herein. 
Any expiration or early termination of this Agreement will be without
prejudice to the rights of either party against the other accrued or accruing
under this Agreement prior to termination, including the obligation to pay
royalties for Product sold prior to such termination.

 

ARTICLE 13

REPRESENTATIONS AND WARRANTIES; DISCLAIMER

 

13.1        Representations
and Warranties of the parties.

 

Each
party represents and warrants to the other party that, as of the Amendment
Date:

 

34

 

(a)           Such party is duly
organized and validly existing under the laws of the state of its incorporation
and has full corporate power and authority to enter into this Agreement and to
carry out the provisions hereof;

 

(b)           Such party has taken
all corporate action necessary to authorize the execution and delivery of this
Agreement and the performance its obligations under this Agreement;

 

(c)           This Agreement is a
legal and valid obligation of such party, binding upon such party and
enforceable against such party in accordance with the terms of this Agreement
The execution, delivery and performance of this Agreement by such party does
not conflict with any agreement, instrument or understanding, oral or written,
to which such party is a party or by which such party may be bound, and does
not violate any law or regulation of any court, governmental body or
administrative or other agency having authority over such party.  All consents, approvals and authorizations
from all governmental authorities or other Third Parties required to be
obtained by such party in connection with this Agreement have been obtained;

 

(d)           Such party has the full
and exclusive right, power and authority to enter into this Agreement, to
perform the Development Program, the Collaborative Research Program and to
grant the licenses granted hereunder;

 

(e)           There are no agreements
between such party and any Third Parties which would preclude or otherwise
limit such party’s ability to conduct its tasks and obligations under the
Development Plan, the Collaborative Research Program or otherwise fulfill its
obligations under this Agreement; and

 

(f)            All
individuals who will perform any activities on such party’s behalf in
connection with the Development Program and/or the Collaborative Research
Program have assigned to such party or its Affiliates the whole of their rights
in any intellectual property conceived or reduced to practice by them as a
result of either program.

 

13.2        Representations
and Warranties by ATL.

 

ATL
warrants and represents that to the best of its knowledge, none of the Research
Targets listed on Exhibit 3.4 as of the Amendment Date are encumbered by
any Third Party rights including, without limitation, intellectual property
rights, that would interfere with ISIS’ ability to carry out the activities
contemplated by the parties hereunder. 
ATL further warrants and represents that, to the best of its knowledge
as of the Amendment Date, if ISIS makes an Antisense Inhibitor to any of the
Research Targets, it will not constitute an infringement of any Third Party
rights and that ATL will indemnify ISIS, as set forth in Section 11.1
herein, should a subsequent determination be made that Third Party rights were
infringed.

 

13.3        Representations
and Warranties by ISIS.

 

ISIS
warrants and represents that, to the best of its knowledge as of the Amendment
Date, the practice of the technology claimed in the ISIS Core Technology Patent
Rights and the Manufacturing Patent Rights will not infringe any Third Party
patents.

 

35

 

ISIS
further warrants and represents, as of the Amendment Date, that: (a) the
VLA4 Compound Patent Rights set out in Exhibit 1.16(A) are
enforceable, including that all assignments and maintenance fees have been
timely filed and paid with respect to the VLA4 Compound Patent Rights; and (b) to
the best of ISIS’ knowledge as of the Amendment Date, without reference to a
specific development plan and without any investigation, the ISIS Core
Technology Patent Rights, ISIS Formulation Patent Rights, Manufacturing Patent
Rights, Research Target Patent Rights and VLA4 Compound Patent Rights,
considered together, constitute all of the Patents controlled by ISIS that are
necessary for ATL to develop and commercialize ATL 1102, the VLA4 Compounds and Other VLA4 Compounds using the ISIS Standard Chemistry.

 

13.4        Disclaimers.

 

THE
ANTISENSE INHIBITORS BEING PROVIDED TO ATL HEREUNDER ARE PROVIDED “AS IS” AND
WITHOUT ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR OF FITNESS FOR ANY
PARTICULAR PURPOSE OR ANY WARRANTY THAT THE USE OF THE MATERIALS WILL NOT
INFRINGE OR VIOLATE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY.

 

THE
PARTIES EXPRESSLY DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE, OR NON-INFRINGEMENT OF THIRD PARTY RIGHTS, UNLESS OTHERWISE EXPRESSLY
PROVIDED IN THIS AGREEMENT.

 

ARTICLE 14

NOTICE

 

14.1        Notice.

 

All
notices which are required or permitted hereunder will be in writing and
sufficient if delivered personally, sent by facsimile (and promptly confirmed
by personal delivery, registered or certified mail or overnight courier), sent
by nationally-recognized overnight courier or sent by registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:

 

	
  if to ISIS, to:

  	
  Isis
  Pharmaceuticals, Inc.

  
	
   

  	
  1896 Rutherford Road

  
	
   

  	
  Carlsbad, CA 92008

  
	
   

  	
  USA

  
	
   

  	
  Attention: Chief Operating
  Officer

  
	
   

  	
  Fax No.:+1 (760) 931-9639

  
	
   

  	
   

  
	
  with a copy to:

  	
  Attention: General Counsel

  
	
   

  	
  Fax
  No.:+1 (760) 268-4922

  

 

36

 

	
  if to ATL, to:

  	
  Antisense Therapeutics,
  Limited

  
	
   

  	
  ACN 095 060 745 of Level 1

  
	
   

  	
  10 Wallace Avenue, Toorak

  
	
   

  	
  Victoria 3142, AUSTRALIA

  
	
   

  	
  Attention: CEO

  
	
   

  	
  Fax No.: +61 (3) 9826 4399

  
	
   

  	
   

  
	
  with a copy to:

  	
  Attention: General Counsel

  
	
   

  	
  Fax
  No.: +61 (3) 9826 4399

  

 

or
to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith.  Any such notice will be deemed to have been
given when delivered if personally delivered or sent by facsimile on a Business
Day, on the Business Day after dispatch if sent by nationally-recognized
overnight courier and on the third Business Day following the date of mailing
if sent by mail.

 

ARTICLE 15

RECORDS

 

15.1        Records.

 

Each
party will maintain records, in sufficient detail and in good scientific
manner, which will fully and properly reflect all work done and results
achieved in the development of any VLA4 Compounds, Other VLA4 Compounds or
other Collaboration Compound, or any Product, hereunder and in the performance
of its responsibilities under each Development Plan hereunder.  Each party will have the right, during normal
business hours and upon reasonable prior notice, to inspect and copy those
records of the other party referred to herein that are necessary or useful to
the inspecting party for the purposes of making any required filings with
Regulatory Authorities in order to obtain manufacturing approvals and/or
Marketing Approvals.  Each party will
maintain such records and the information disclosed therein in confidence in
accordance with Article 9.  ISIS
acknowledges and agrees that ISIS’ right of inspection under this clause 15.1
does not extend to allowing ISIS to inspect any records held by Teva under the
Teva Sublicense.

 

ARTICLE 16

MISCELLANEOUS PROVISIONS

 

16.1        Relationship
of the parties.

 

It
is expressly agreed that ISIS and ATL will be independent contractors and that
the relationship between the two parties will not constitute a partnership,
joint venture or agency.  Neither ISIS
nor ATL will have the authority to make any statements, representations or
commitments of any kind, or to take any action, which will be binding on the
other, without the prior consent of the other party.

 

37

 

16.2        Successors
and Assigns.

 

Neither
this Agreement nor any interest hereunder may be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred by either party without the
prior written consent of the other party; provided, however, that either party
may, without such consent, assign the Agreement and its rights and obligations
hereunder to an Affiliate or in connection with the transfer or sale of all or
substantially all of its assets, or in the event of its merger or consolidation
or change in control or similar transaction. 
Any permitted assignee will assume all obligations of its assignor under
the Agreement, except that no intellectual property of any Third Party acquirer
of ATL or ISIS will be included in the licenses granted hereunder.  This Agreement will be binding upon the
successors and permitted assigns of the parties.  Any attempted assignment not in accordance
with this Section 16.2 will be void.

 

16.3        Entire
Agreement; Amendments.

 

This
Agreement contains the entire understanding between ATL and ISIS with respect
to the license, development and commercialization of antisense APIs
hereunder.  All express or implied
agreements and understandings, either oral or written, heretofore made by ATL
and ISIS on the same subject matter (including, without limitation, the
Original Agreement) are expressly superseded by this Agreement.  The Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties
hereto.

 

16.4        Force
majeure.

 

Neither
party will be held liable or responsible to the other party nor be deemed to
have defaulted under or breached the Agreement for failure or delay in
fulfilling or performing any term of the Agreement when such failure or delay
is caused by or results from causes beyond the reasonable control of the
affected party including, without limitation, embargoes, acts of war (whether
war be declared or not), insurrections, riots, civil commotions, strikes,
lockouts or other labor disturbances, or acts of God.  The affected party will notify the other
party of such force majeure circumstances as soon as reasonably practical and
will make every reasonable effort to mitigate the effects of such force majeure
circumstances.

 

16.5        Applicable
law

 

The
Agreement will be governed by and construed in accordance with the laws of the
State of Delaware without reference to any rules of conflict of laws.

 

16.6        Dispute
resolution

 

(a)           The parties recognize
that disputes may from time to time arise between the parties during the term
of this Agreement.  In the event of such
a dispute, either party, by written notice to the other party, may have such
dispute referred to the parties’ respective executive officers designated below
or their successors, for attempted resolution by good faith negotiations within
30 days after such notice is received. 
Said designated officers are as follows:

 

	
   

  	
  For ISIS:

  	
  Chief Operating Officer

  
	
   

  	
  For
  ATL:

  	
  CEO

  

 

38

 

(b)           In the event the
designated executive officers are not able to resolve such dispute after such
30-day period, each party may pursue its rights and remedies in law or equity
in any court of competent jurisdiction.

 

16.7        No
consequential damages

 

IN
NO EVENT WILL EITHER PARTY OR ANY OF ITS RESPECTIVE AFFILIATES BE LIABLE TO THE
OTHER PARTY OR ANY OF ITS AFFILIATES FOR SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT, WARRANTY, TORT, NEGLIGENCE, STRICT
LIABILITY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS OR
REVENUE, OR CLAIMS OF CUSTOMERS OF ANY OF THEM OR OTHER THIRD PARTIES FOR SUCH
OR OTHER DAMAGES.

 

16.8        Third
party beneficiary

 

The
parties hereby acknowledge and agree that Teva is an intended third party
beneficiary of this Agreement solely as it relates to CD49d, ATL1102, VLA4
Compounds, Other VLA4 Compounds and VLA4 Products.

 

16.9        Captions

 

The
captions to the several Articles and Sections hereof are not a part
of the Agreement, but are merely a convenience to assist in locating and
reading the several Articles and Sections hereof.

 

16.10      Waiver

 

The
waiver by either party hereto of any right hereunder, or the failure to
perform, or a breach by the other party will not be deemed a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise.

 

16.11      Compliance
with law

 

Nothing
in this Agreement will be deemed to permit a party to export, re-export or
otherwise transfer any Licensed Product sold under this Agreement without
compliance with applicable laws.

 

16.12      Severability.

 

In
the event any one or more of the provisions contained in this Agreement should
be held invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein will
not in any way be affected or impaired thereby, unless the absence of the
invalidated provision(s) adversely affect the substantive rights of the
parties.  The parties will in such an
instance use their best efforts to replace the invalid, illegal or unenforceable
provision(s) with valid, legal and enforceable provision(s) which,
insofar as practical, maintains the balance of the rights and obligations of
the parties under this Agreement.

 

39

 

16.13      Waiver
of Rule of Construction.

 

Each
party has had the opportunity to consult with counsel in connection with the
review, drafting and negotiation of this Agreement.  Accordingly, the rule of construction
that any ambiguity in this Agreement will be construed against the drafting
party will not apply.

 

16.14      Counterparts.

 

The
Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument.

 

40

 

IN
WITNESS WHEREOF, the
parties have executed this Agreement as of the Amendment Date.

 

	
  ANTISENSE
  THERAPEUTICS, LIMITED

  	
   

  	
  ISIS
  PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Mark Diamond

  	
   

  	
  By:

  	
  /s/
  B. Lynne Parshall

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  Mark
  Diamond

  	
   

  	
  Name:

  	
   

  	
  B.
  Lynne Parshall

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  MD &
  CEO

  	
   

  	
  Title:

  	
   

  	
  COO &
  CFO

  
														

 

41

 

	
  CONFIDENTIAL TREATMENT REQUESTED

  	
   

  	
  EXECUTION VERSION (02/08/08)

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

  	
   

  	
   

  

 

EXHIBIT 1

 

DEFINITIONS

 

1.1          “Abandoned
Research Target” has the meaning set forth in Section 3.5(d) herein.

 

1.2          “Active Program” in
relation to a Collaboration Compound or Product means an ongoing program for
optimizing, developing and commercializing such Collaboration Compound or
Product, including preclinical studies, human clinical studies, development
activities aimed at obtaining registration for marketing, and marketing and
selling activities.  Except as set forth
in Section 2.2(b), an Active Program includes the following specific “Development Milestones” that must be met in order for the
Collaboration Compound or Product to achieve and maintain “Active
Development” status:

 

(a)           initiation of
phenotypic or functional assays by ATL within 12 months of ATL’s receipt of
reasonably sufficient quantities of the Antisense Inhibitors directed to a
Research Target and corresponding control oligonucleotides;

 

(b)           initiation of
IND-enabling toxicology studies by ATL within 18 months of ATL’s receipt of an
Antisense Inhibitor directed to a Research Target;

 

(c)           filing of an IND not
later than 6 months after the completion of IND-enabling studies;

 

(d)           initiation of Phase I
studies not later than 6 months after the filing of the IND;

 

(e)           initiation of Phase IIa
studies not later than 24 months after the initiation of Phase I studies;

 

(f)            initiation of Phase
III studies not later than 3 years after the initiation of Phase IIa studies;

 

(g)           filing of an NDA not
later than 18 months after the successful completion of a pivotal trial; and

 

(h)           the use of commercially
reasonable efforts by ATL to bring each Product to market and to maximize the
commercial value of each such Product worldwide.

 

If
ATL will not be able to meet a Development Milestone set forth above for [***],
ATL will be granted a [***]month extension on any of the milestones identified
in above, provided that ATL (i) gives the JDC members at least [***]
months’ prior written notice that it is [***], and (ii) demonstrates to
the JDC that it has [***].  If the JDC
cannot agree on this issue, the matter will be referred to the designated
officers of ATL and ISIS for resolution, consistent with the provisions of Section 16.6(a).

 

Except
as set forth in Section 2.2(b)(i) herein, a compound that is in “Active
Development” is one that is in an Active Program, as defined above.

 

42

 

1.3          “Affiliate” with
respect to any person, organization, corporation or other business entity
(collectively, “Person”), means any other Person controlling, controlled by, or
under common control with such Person. 
For purposes of this definition, “control” refers to the possession,
directly or indirectly, of the power to direct the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, of a Person.

 

1.4          “Amendment Date” has
the meaning set forth in the first paragraph of this Agreement.

 

1.5          “Antisense Inhibitor”
means an oligonucleotide or analog thereof that inhibits protein synthesis at
the nucleic acid level by specifically binding to the sequence of a selected
messenger or viral ribonucleic acid (RNA) by base-pairing, thus causing a
selective inhibition of gene expression.

 

1.6          “Antisense Technology”
means the selective modulation of protein synthesis at the nucleic acid level
caused by the binding of an oligonucleotide or an analog thereof to a
complementary sequence.

 

1.7          “ATL 1102”
means the Antisense Inhibitor (also known as ISIS 107248) that inhibits
production of CD49d and comprises the sequence claimed as [***] and ISIS
Standard Chemistry as set forth in Exhibit 1.7.

 

1.8          “ATL Invention” has
the meaning set forth in Section 8.1(b).

 

1.9          “ATL Patent” has the
meaning set forth in Section 8.1(b).

 

1.10        “ATL Sublicense” has
the meaning set forth in Section 4.3(b).

 

1.11        “Australian Approval”
means approval of a Product for marketing in Australia by the Therapeutic Goods
Administration (“TGA”), without the requirement for price having been
approved.  If a Product can be sold in
Australia without TGA approval, Australian Approval will be deemed to have been
obtained on the first sale of a Product in Australia.

 

1.12        “Business Day” means
any calendar day, except that if an activity to be performed or an event to
occur (including, without limitation, the receiving of a notice under Article 14  and other communications) falls on a Friday, Saturday,
Sunday, or a recognized public or bank holiday (as determined in the place of
performance of the applicable activity or occurrence of the applicable event),
then the activity may be performed or the event may occur on the next day that is not a
Saturday, Sunday, or a public or bank holiday.

 

1.13        “Calendar Quarter”
means the respective periods of 3 consecutive calendar months ending on March 31,
June 30, September 30 and December 31.

 

1.14        “Calendar Year” means
each successive period of 12 months commencing on January 1 and ending on December 31.

 

43

 

1.15        “Change of Control” means the consummation, after the
Amendment Date, of a transaction or a related series of transactions in which: (a) any
Third Party becomes the beneficial owner, directly or indirectly, of more than
50% of the total voting power of ATL’s or ISIS’ (as applicable) stock then
outstanding normally entitled to vote in elections of directors; (b) ATL
or ISIS (as applicable) consolidates with or merges into a Third Party, or any
Third Party consolidates with or merges into ATL or ISIS, in either event
pursuant to a transaction in which more than 50% of the total voting power of
the stock outstanding of the surviving entity normally entitled to vote in
elections of directors is not held by Persons holding at least 50% of the
outstanding voting stock of ATL or ISIS preceding such consolidation or merger;
or (c) ATL or ISIS conveys, transfers or leases all or a substantial
portion of its assets relating to ATL 1102, VLA4 Compounds, Other VLA4
Compounds or VLA4 Products to a Third Party.

 

1.16        “CD49d” means the
target that is modulated by ATL 1102, which is known as CD49d and is a
Research Target hereunder.

 

1.17        “Collaboration” has
the meaning set forth in Section 2.1.

 

1.18        “Collaboration Compound”
means an Antisense Inhibitor of a Research Target that is discovered or
developed by ISIS that (i) incorporates Antisense Technology; (ii) incorporates
ISIS Standard Chemistry; (iii) is subject to a License to Research or
License to Exploit hereunder; and (iv) is in Active Development,
consistent with Section 1.2 herein.

 

1.19        “Collaboration Compound
Product” means a product containing a Collaboration Compound.

 

1.20        “Collaboration Term”
means the term of the Collaborative Research Program as set forth in Section 3.1.

 

1.21        “Collaborative Research
Plan” has the meaning set forth in Section 3.1, as further detailed in
Exhibit 3.1.

 

1.22        “Collaborative Research
Program” means the research program described in Article 3, as
modified from time to time by the parties (e.g., via the JRC).

 

1.23        “Confidential Information”
means information which is (a) of a confidential and proprietary nature; (b) designated
by either party as Confidential Information or Proprietary Information; and (c) not
readily available to that party’s competitors and which, if known by a
competitor of that party, might lessen any competitive advantage of that party
or give such competitor a competitive advantage. Confidential Information which
is disclosed in oral, written, graphic, electronic or any other form by one
party to the other party that is clearly marked as “confidential” or “proprietary.”
Oral information must be reduced to writing and designated as “confidential”
within 30 days of disclosure.

 

44

 

For
the purposes of this Agreement, “Confidential Information” includes, without
limitation, (a) information that is proprietary or confidential or which
is treated by that party as confidential and which relates either directly or
indirectly to the business of that party regardless of the form in which that
information is constituted, and which is not lawfully in the public domain; and
(b) any confidential information in relation to Patents, technology,
know-how, or any improvements owned or controlled by a party hereto.

 

“Confidential
Information” will not include any information that the receiving party can
establish by written records:

 

(i)            was known by it prior
to the receipt of Confidential Information from the disclosing party;

 

(ii)           was disclosed to the
receiving party by a Third Party having the right to do so;

 

(iii)          was, or subsequently
became, in the public domain through no fault of the receiving party, its
officers, directors, employees or agents;

 

(iv)          was concurrently or
subsequently developed by personnel of the receiving party without having had
access to the disclosing party’s Confidential Information;

 

(v)           as disclosed with the
prior written consent of the disclosing party; or

 

(vi)          was disclosed by the
receiving party pursuant to any judicial or governmental request, requirement
or order, so long as the receiving party provides the disclosing party with
sufficient prior notice in order to allow the disclosing party to contest such
request, requirement or order.

 

1.24        “Consultant” means an
individual who is not an employee of either party hereto, but who has been
engaged by a party hereto in order to perform certain activities, wherein that
individual has an obligation to assign to the engaging party, at the time an
Invention is made, all rights that individual may have in such Invention.

 

1.25        “[***] Targets” means
those Research Targets designated as [***] Targets, as listed in Section A
of Exhibit 3.4.

 

1.26        “Development Milestones”
means the Development Milestones set forth in Section 1.2 hereinabove.

 

1.27        “Development Plan”
means the plan for the development of any Antisense Inhibitor or Collaboration
Compound hereunder.

 

1.28        “EC/EMEA Approval”
means approval of a Product for marketing in the European Commission (EC), or if ATL seeks approval through
mutual recognition in the European Union, by the Ministry of Health of the
United Kingdom, France, Germany, Italy or Spain (each a “Major European Country”),
without the requirement for price having been approved.  If a Product can be legally sold in a Major
European Country without EC or Ministry of Health approval, EC/EMEA Approval
will be deemed to have been obtained on the first sale of a Product in a Major
European Country.

 

45

 

1.29        “Effective Date” has
the meaning provided in the “Introduction and Overview” set forth on the first page of
this Agreement.

 

1.30        “Exploit” means to
research, develop, test, import, export, make, have made, use, market,
manufacture, sell, offer for sale, register, record, have sold, sublicense,
commercialize, distribute and otherwise exploit.

 

1.31        [***].

 

1.32        [***].

 

1.33        “IND” means an Investigational
New Drug Application or similar application or submission for approval to
conduct human clinical investigations filed with or submitted to a Regulatory
Authority or hospital ethics committee in conformity with applicable Regulatory
Authority regulations.

 

1.34        “Independently-Generated
Information” has the meaning set forth in Section 4.8(e) herein.

 

1.35        “IND-Enabling Studies”
means, at a minimum, the pharmacokinetic and toxicology studies required to
meet the safety regulations for filing an IND, as well as any additional
studies required by a Regulatory Authority or hospital ethics committee as a
prerequisite to filing an IND.

 

1.36        “Integrated Product Plan”
or “IPP” means a plan for the development,
commercialization and marketing of a Collaboration Compound hereunder.  The IPP will include Product charter,
strategic intent, a market analysis (event maps - demographics, market
dynamics), label need and wants (based on the applicable Development Plan),
Product life overview, geographic overview, and financial overview.  In addition, a global marketing plan will be
developed and incorporated into the IPP which includes analysis of market
(disease overview, Product profile, archetype, patient segmentation), strategic
ends (strategic intent, product positioning, brand character, core messages,
critical success factors, marketing objectives) strategic means (global
Product, place, price, promotion, launch, market research programs),
operational plan (implementation plan, marketing activities) and budget for the
execution of the plan.  Each IPP will
also include appropriate milestones and the dates upon which such milestones
must be met by ATL, as agreed upon by the parties hereto.

 

1.37        “Invention” has the
meaning set forth in Section 8.1 herein.

 

1.38        [***] means all
Patents owned by ISIS as of the Effective Date or during the Collaboration Term
that claim any of [***].

 

46

 

1.39        “ISIS Core Technology
Patent Rights” means the Patents owned by ISIS as of the Effective Date or
during the Collaboration Term that claim ISIS Standard Chemistry, the cellular
mechanisms of action by which phosphorothioate antisense oligonucleotides
incorporating the ISIS Standard Chemistry exert their effect, or to methods of
treatment using such oligonucleotides. 
ISIS Core Technology Patent Rights also include the [***].  The ISIS Core Technology Patent Rights as of
the Amendment Date are the Patents listed in Exhibit 1.39.  Upon ATL’s written request no more than once
per year, ISIS will update Exhibit 1.39 and provide such updated exhibit
to ATL.

 

1.40        “ISIS Formulation Patent
Rights” means the Patents owned by ISIS as of the Effective Date or during
the Collaboration Term that claim topical formulations incorporating antisense oligonucleotides
made using ISIS Standard Chemistry, methods of making formulations containing
such oligonucleotides for topical administration, or methods of treatment using
such topical formulations.  The ISIS Formulation
Patent Rights as of the Amendment Date are the Patents listed in Exhibit 1.40.

 

1.41        “ISIS FTE Rate” means
the compensatory rate to be paid per FTE at ISIS for all activities under this
Agreement.  As used herein, “FTE” means the equivalent of the scientific or technical
work of at least a total of [***] on or directly related to the Collaborative
Research Program or a Development Program hereunder, carried out by a qualified
employee or consultant.  Scientific or
technical work can include, but is not limited to, [***]  The ISIS FTE Rate is [***] for any of the
following activities: [***].

 

1.42        “ISIS Invention” has
the meaning set forth in Section 8.1(b).

 

1.43        “ISIS Net Royalty”
means [***].

 

1.44        “ISIS Patent” has the
meaning set forth in Section 8.1(b).

 

1.45        “ISIS Patent
Rights” means all rights in Patents owned by ISIS that are within
the ISIS Core Technology Patent Rights, the Manufacturing Patent Rights, the
ISIS Formulation Patent Rights, or the Research Target Patent Rights.

 

1.46        “ISIS Standard Chemistry”
means the technology, whether or not subject to a Patent, that is owned,
acquired or controlled by ISIS as of the Effective Date or during the
Collaboration Term that claims or covers linkages and sugar units in an
antisense oligonucleotide, wherein such linkages include phosphorothioate
linkages and such sugar units include a combination of deoxy sugar units and 2’-O-[methoxyethyl]
(MOE) modified sugar units with natural and methyl substituted heterocycle
bases (“MOE Gapmer Technology”).  ISIS
Standard Chemistry also includes the technology owned, acquired or controlled
by ISIS as of the Effective Date that claims or covers the cellular mechanisms
of action by which MOE Gapmer Technology antisense oligonucleotides exert their
effect.  ISIS Standard Chemistry does not
include any target gene-specific technology.

 

47

 

1.47        “Japanese Approval”
means the approval of a Product for marketing in Japan by the Japanese Ministry
of Health and Welfare (or any future equivalent process), together with any
other approval necessary to make and sell Product commercially in Japan without
the requirement for price having been approved. 
If a Product can be sold in Japan without Ministry of Health and Welfare
approval, Japanese Approval will be deemed to have been obtained on the first
sale of a Product in Japan.

 

1.48        “License to Exploit”
has the meaning set forth in Section 4.2.

 

1.49        “License to Research”
has the meaning set forth in Section 4.1.

 

1.50        “License Term” has the
meaning set forth in Section 4.0.

 

1.51        “Major Market” means
any one of the following countries: the United States, Australia, Japan, the
United Kingdom, France, Germany, Italy or Spain, except that [***] and [***]
will not be considered Major Markets for the purposes of the License to Exploit
the ATL 1102, VLA4 Compounds, Other VLA4 Compound and VLA4 Products.

 

1.52        “Manufacture” or “Manufacturing” or “Manufactured”
means all operations involved in the manufacturing, quality control testing
(including in-process, release and stability testing, if applicable),
releasing, and shipping a Product.

 

1.53        “Manufacturing Patent
Rights” means the Patents owned by ISIS as of the Effective Date or during
the Collaboration Term that claim the Manufacturing Technology.  The Manufacturing Patent Rights as of the
Amendment Date are the Patents listed in Exhibit 1.53.

 

1.54        “Manufacturing Process”
means the process steps set forth in master batch records for ATL 1102 in
the version existing as of the Effective Date, including reasonable minor variants
and extensions of process steps thereof.

 

1.55        “Manufacturing Technology”
means any and all scientific and technical data and information including
without limitation formulas, methods, techniques, protocols, and processes
owned or controlled by ISIS as of the Effective Date or during the
Collaboration Term which are necessary or useful for performing the
Manufacturing Process.

 

1.56        “Marketing Approval”
means the act of a Regulatory Authority necessary for the marketing and sale of
the Product in a country or regulatory jurisdiction, including, without
limitation, the approval of the NDA by the FDA, Australian Approval, EC/EMEA
Approval, and Japanese Approval.

 

1.57        “NDA” means New Drug
Application or similar application or submission for approval to market and
sell a new pharmaceutical product filed with or submitted to a Regulatory
Authority in conformity with applicable Regulatory Authority regulations.

 

48

 

1.58        “Net Sales” means,
with respect to a Product, the gross amount invoiced by ATL or ISIS, as
appropriate, or by their Affiliates or sublicensees, to unrelated Third Parties
for the Product, less:

 

(a)           Trade, quantity and
cash discounts allowed;

 

(b)           Commissions, discounts,
refunds, rebates, chargebacks, retroactive price adjustments, and any other
allowances which effectively reduce the net selling price;

 

(c)           Credits for actual
Product returns;

 

(d)           Any tax imposed on the
production, sale, delivery or use of the Product, including, without
limitation, sales, use, excise or value added taxes;

 

(e)           Allowance for
distribution expenses at levels customary in the industry; and

 

(f)            Any other similar and
customary deductions.

 

“Net Sales” excludes:

 

(i)            The transfer of
reasonable and customary quantities of free samples of Product(s) and the
transfer of Product(s) as clinical trial materials, other than for
subsequent resale;

 

(ii)           Sales or transfers of
Product(s) among ATL and its Affiliates, unless the receiving party is the
consumer or user of the Product; and

 

(iii)          Use by ATL or its
Affiliates or sublicensees of Product for any use connected with the securing
of regulatory approval or validating of a manufacturing process or the
obtaining of other necessary Marketing Approvals for Product (unless such
Product is subsequently sold).

 

1.59        [***] means an
Antisense Inhibitor, or other antisense inhibitor that [***].

 

1.60        [***].

 

1.61        “Original Agreement”
has the meaning provided in the “Introduction and Overview” set forth on the
first page of this Agreement.

 

1.62        “Other VL4A Compound” means an Antisense
Inhibitor, or other antisense inhibitor that incorporates other Antisense
Technology, discovered by ISIS that
(i) acts predominantly by hybridizing to CD49d or CD29 mRNA or pre-mRNA or
that is designed to act by hybridizing to CD49d or CD29 mRNA or pre-mRNA, in
each case to inhibit production of VLA4, and that incorporates ISIS Standard Chemistry,
(ii) does not exist as of the Amendment Date and (iii) is not a VLA4
Compound.

 

49

 

1.63        “Patent” or “Patents” means (a) patent applications (including
provisional applications and applications for certificates of invention); (b) any
patents issuing from such patent applications (including certificates of
invention); (c) all patents and patent applications worldwide based on,
corresponding to, or claiming the priority date(s) of any of the
foregoing; (d) any reissues, substitutions, confirmations, registrations,
validations, re-examinations, additions, continuations, continued prosecution
applications, continuations-in-part, requests for continued examination, or
divisions of or to any of the foregoing; and (e) term extension or other
governmental action which provide exclusive rights to a Product beyond the
original patent expiration date.

 

1.64        “Product” means a VLA4
Product, any other Collaboration Compound Product or a Research Target Compound
Product.

 

1.65        “Regulatory Authority”
means any applicable government regulatory authority involved in granting
approvals for the marketing and/or pricing of a Product worldwide including,
without limitation, the United States Food and Drug Administration (“FDA”) and
any successor government authority having substantially the same function, and
foreign equivalents thereof.

 

1.66        “Research Services”
means discovery and design of Antisense Inhibitors of one or more Research
Targets, supply of such Antisense Inhibitors to ATL, and/or evaluation of such
Antisense Inhibitors in various functional assays.

 

1.67        “Research Target”
means a gene product – usually, a protein – that may be modulated by another
molecule, such as an antisense drug. 
Modulation of a Research Target may be accomplished in a variety of ways
including, without limitation, the modulation of the synthesis, function or
degradation of a Research Target, or the expression of the corresponding gene.

 

1.68        “Research Target Compound”
means a compound that modulates a Research Target or Abandoned Research Target
that was discovered by ATL alone or as part of a bona fide drug discovery
collaboration with a Third Party in which ATL played a significant role.

 

1.69        “Research Target Compound
Product” means a product containing a Research Target Compound.

 

1.70        “Research Target Patent
Rights” means the Patents owned by ISIS as of the Effective Date or during
the Collaboration Term that claim antisense oligonucleotides that modulate a
Research Target, methods of making such oligonucleotides, or methods of
treatment using such oligonucleotides. 
The Research Target Patent Rights thus include the VLA4 Compound Patent
Rights set out in Exhibit 1.16.  The
Research Target Patent Rights will be updated from time to time as new Patents
are added.

 

1.71        “Sublicensee” means
any Third Party (including a distributor) to which ATL or any of its Affiliates
grants any right to make, use, market, or import and sell a Product.

 

50

 

A Third Party who is granted only the right to import
and sell a Product (such as a wholesaler) will not be considered a
Sublicensee.  Without limiting the
generality of the foregoing, during the term of the Teva Sublicense, Teva will
be considered a Sublicensee.

 

1.72        “Sublicensee Market”
has the meaning set forth in Section 2.5(b)(ii) herein.

 

1.73        “Sublicensee Product Plan”
or “SPP” has the meaning set forth in Section 2.5(b)(ii)(A) herein.

 

1.74        “Sublicense Income”
means all consideration paid to ATL from Sublicensees pursuant to a sublicense
by ATL or an Affiliate of ATL including, without limitation, up-front license
fees, milestones, and royalties.  If
non-monetary consideration is received from Sublicensees by ATL or its
Affiliates, then a commercially reasonable monetary value will be assigned for
purposes of calculating Sublicense Income.

 

1.75        “Technology” means
inventions (whether or not patentable), know-how, trade secrets, research
tools, materials, and technical information, including but not limited to
information in the form of research data, databases, experimental procedures,
designs, formulas, and process information.

 

1.76        “Teva” has the meaning
provided in the “Introduction and Overview” set forth on the first page of
this Agreement.

 

1.77        [***].

 

1.78        “Teva/ISIS Agreements”
means that certain VLA4 Partner Support Agreement between ISIS and Teva and
that certain Drug Supply, Manufacture and Technology Transfer Agreement between
ISIS and Teva, each dated as of the Amendment Date.

 

1.79        “Teva Sublicense” has
the meaning specified in the “Introduction and Overview” set forth on the first
page of this Agreement.

 

1.80        “Third Party” means
any party other than ISIS or ATL and their respective Affiliates.

 

1.81        “Third Party Intellectual
Property” means any intellectual property owned by a Third Party.

 

1.82        “Third Party Patent Rights”
means the [***].

 

1.83        [***].

 

1.84        “VLA4” means the biological target known as
[***].

 

1.85        “VLA4 Compounds” means Antisense Inhibitors, whether or not
including ATL1102, discovered by ISIS that (i) are covered by any claim
within the VLA4 Compound Patent Rights (including any Antisense Inhibitor
targeting CD49d or CD29) and incorporate ISIS Standard Chemistry and (ii) exist
as of the Amendment Date.

 

51

 

1.86        “VLA4 Compound Patent
Rights” means the Research Target Patent Rights owned by ISIS as of the
Amendment Date that claim ATL 1102, methods of making ATL 1102 for
therapeutic use, or methods of
using ATL 1102 for therapeutic applications, as listed in Exhibit 1.16
hereto.

 

1.87        “VLA4 Product” means a
product containing ATL1102, a VLA4 Compound or Other VLA4 Compound as an active
ingredient.

 

52

 

EXHIBIT 1.7

 

ANTISENSE INHIBITOR

 

ATL 1102

 

[***]

 

53

 

EXHIBIT 1.16

 

VLA4 Compound Patent
Rights

 

[***]

 

54

 

EXHIBIT 1.31

 

[***]

 

55

 

EXHIBIT 1.32

 

[***]

 

56

 

EXHIBIT 1.39

 

[***]

 

57

 

EXHIBIT 1.40

 

[***]

 

58

 

EXHIBIT 1.53

 

[***]

 

59

 

EXHIBIT 1.59

 

[***]

 

EXHIBIT 1.80

 

[***]

 

60

 

EXHIBIT 3.4

RESEARCH TARGETS

 

[***]

 

61

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