Document:

exv10w55

 

EXHIBIT 10.55

February 24, 2006

Aventis Pharmaceuticals Inc.

300 Somerset Corporate Blvd.

Bridgewater, New Jersey 08807

			
	Re:	 	Registration Rights Agreement dated as of June 20, 2001, by and among Introgen Therapeutics,
Inc. (“Introgen”), Aventis Pharmaceuticals Inc. (“Aventis”) and Rhône-Poulenc Rorer International
(Holdings), Inc. (the “Registration Rights Agreement”)

Gentlemen:

This letter sets forth our agreement with respect to Introgen’s obligations under Section 4.1(a) of
the Registration Rights Agreement in connection with the registration of 4,322,369 shares (the
“Shares”) of Common Stock of Introgen held by Aventis pursuant to a Registration Statement on Form
S-3 (Registration No. 333-129687) (the “Registration Statement”) as requested by Aventis under the
Registration Rights Agreement. Defined terms used herein but not otherwise defined shall have the
meaning given such terms in the Registration Rights Agreement. In connection with the registration
of the Shares, Introgen is required to keep the Registration Statement effective for a period of
ninety (90) days or any lesser period of time in the event the distribution described in the
Registration Statement has been fully completed. After such ninety (90) day period has expired and
in the event Aventis still owns any of the Shares, Introgen shall use its commercially reasonable
efforts to keep the Registration Statement effective until the earlier of (i) the first anniversary
of the date that the Registration Statement becomes effective and (ii) the date that Aventis no
longer owns any of the Shares. In consideration of the foregoing, during the time that the
Registration Statement is effective, Aventis agrees that it shall notify Introgen in writing (i)
within 10 business days of the end of each calendar quarter, the number of Shares sold by Aventis
during such calendar quarter and (ii) within 10 business days of the date that it no longer owns
any of the Shares. Except as amended by this letter agreement, all provisions of the Registration
Rights Agreement shall remain in full force and effect. This letter agreement shall be governed in
all respects by and in accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of law thereof. This letter agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which together shall constitute
one and the same instrument.

Please acknowledge your agreement with the foregoing by executing this letter agreement below.

	 	 	 	 	 
	 	Sincerely,

INTROGEN THERAPEUTICS, INC.

 	 
	 	By:  	/s/ David G. Nance
 	 
	 	 	David G. Nance, Chief Executive Officer 	 
	 	 	 	 
	 

Agreed and acknowledged:

AVENTIS PHARMACEUTICALS INC.

	 	 	 	 	 	 	 
	By:
	 	/s/ Joseph F. Haggerty

	 	By:
	 	/s/ Gregory Irace
	 	 	 

	 	 	 	 
	Name:
	 	Joseph F. Haggerty

	 	Name:
	 	Gregory Irace
	 	 	 

	 	 	 	 
	Title:
	 	Vice President and General Counsel

	 	Title:
	 	Chief Financial Officer<PAGE>

                                                                    Exhibit 10.1

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          Confidential Materials omitted and filed separately with the
        Securities and Exchange Commission. Asterisks denote omissions.
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                         ADDENDUM RE: INFLUENZA PROGRAM

                                       TO

                  RESEARCH COLLABORATION AND LICENSE AGREEMENT

       This ADDENDUM RE: INFLUENZA PROGRAM TO RESEARCH COLLABORATION AND LICENSE
AGREEMENT (this "Addendum"), effective as of December 13, 2005 (the "Addendum
Effective Date"), by and between Novartis Institutes for BioMedical Research,
Inc., a corporation organized and existing under the laws of Delaware, with its
principal place of business at 250 Massachusetts Avenue, Cambridge,
Massachusetts 02139 ("Novartis"), and Alnylam Pharmaceuticals, Inc., a
corporation organized and existing under the laws of Delaware, with its
principal place of business at 300 Third Street, 3rd Floor, Cambridge,
Massachusetts 02142 ("Alnylam"), supplements and, only as specifically provided
herein, supersedes in relevant part the Research Collaboration and License
Agreement dated as of October 12, 2005 between Novartis and Alnylam (the
"Agreement"). For the purposes of this Addendum, capitalized terms, whether used
in the singular or plural form, shall have the respective meanings ascribed to
such terms in the Agreement, unless defined herein.

                                    RECITALS:

       WHEREAS, the Parties entered into the Agreement, which provides for the
Parties to establish and carry out a research collaboration, upon the terms and
conditions set forth in the Agreement, to identify and optimize RNAi Compounds
directed against Selected Targets;

       WHEREAS, Alnylam has engaged in Discovery with respect to RNAi Compounds
and RNAi Products targeting Influenza (as defined below) and the Parties desire
to collaborate with respect to the Discovery, Development, Manufacture and
Commercialization of RNAi Compounds and RNAi Products targeting Pandemic Flu
Virus (as defined below), and with respect to the Discovery and Development of
RNAi Compounds and RNAi Products targeting Seasonal Flu Virus (as defined
below), all on the terms and conditions of the Agreement, except as otherwise
provided herein.

       NOW, THEREFORE, in consideration of the respective covenants and
agreements contained herein, and for other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, Alnylam and Novartis agree as
follows:

<PAGE>

                                   ARTICLE I

                                   DEFINITIONS

       For the purpose of this Addendum, the following terms, whether used in
singular or plural form, shall have the respective meanings set forth below:

       "Addendum Effective Date" has the meaning assigned to it in the preamble
to this Addendum.

       "CDC" shall mean the Centers for Disease Control and Prevention.

       "Complete Costs" shall have the meaning set forth in Schedule A hereto.

       "DARPA" shall mean the Defense Advanced Research Projects Agency.

       "DHHS" shall mean the United States Department of Health and Human
Services.

       "DHS" shall mean the United States Department of Homeland Security.

       "DoD" shall mean the United States Department of Defense.

       "DTRA" shall mean the Defense Threat Reduction Agency.

       "Influenza" shall mean Pandemic Flu Virus and Seasonal Flu Virus.

       "Influenza Program" shall mean the Pandemic Flu Program and the Seasonal
Flu Program.

       "Influenza Target" shall mean the entire genome of Influenza Virus.

       "Influenza Virus" shall mean (a) the Influenza A virus as represented in
the databases of the National Center for Biotechnology Information ("NCBI")
under NCBI Taxonomy ID #11320, and also known as influenza virus type A, FLUAV,
and influenza A virus INF A, (b) the Influenza B virus as represented in the
databases of the NCBI under NCBI Taxonomy ID #11520, and also known as influenza
virus type B, and FLUBV, and (c) the Influenza C virus as represented in the
databases of the NCBI under NCBI Taxonomy ID #11552, and also known as influenza
virus type C, FLUCV, and influenza C virus.

       "Net Profits" and "Net Losses" shall have the meaning, and be calculated,
as set forth in Schedule A hereto.

       "NIH" shall mean the National Institutes of Health, including the
National Institute of Allergy and Infectious Disease.

       "Pandemic Flu Joint Steering Committee" has the meaning assigned to it in
Section 3.01(a) of this Addendum.

                                       2
<PAGE>

       "Pandemic Flu Program" shall mean an Active Program under the Agreement
intended to Discover, Develop, Manufacture and Commercialize RNAi Compounds and
RNAi Products targeting Pandemic Flu Virus, including both prophylaxis and
treatment thereof.

       "Pandemic Flu Term" has the meaning assigned to it in Section 3.01(c) of
this Addendum.

       "Pandemic Flu Termination" has the meaning assigned to it in Section 4.03
of this Addendum.

       "Pandemic Flu Virus" shall mean any and all Influenza Viruses with the
potential to cause outbreaks of serious disease over a wide geographic area
affecting a large proportion of the population, including the avian influenza
virus (H5N1).

       "Pandemic Product" shall mean any RNAi Product targeting Pandemic Flu
Virus Discovered and Developed by the Parties under the Pandemic Flu Program.

       "Program Plan" has the meaning assigned to it in Section 3.01(b) of this
Addendum.

       "Recoupment Date" has the meaning assigned to it in Section 4.04(a)(i) of
this Addendum.

       "Seasonal Flu Program" shall mean an Active Program under the Agreement
intended to Discover and Develop RNAi Compounds and RNAi Products targeting
Seasonal Flu Virus, including both prophylaxis and treatment thereof.

       "Seasonal Flu Virus" shall mean any and all Influenza Viruses which are
not a Pandemic Flu Virus.

       "USG" shall mean the United States Government.

                                   ARTICLE II

                                INFLUENZA PROGRAM

       Section 2.01

              (a)    Active Programs. Subject to the terms and conditions hereof
and of the Agreement as modified hereby, the Parties will collaborate on the
Discovery and Development of RNAi Compounds and RNAi Products targeting the
Influenza Target and the Manufacture and Commercialization of Pandemic Products.
Except as provided in this Addendum, for all purposes of the Agreement, the
Pandemic Flu Program and the Seasonal Flu Program will each be an Active
Program, the Influenza Target will be a Selected Target, any RNAi Compound
directed to the Influenza Target will be a Discovered RNAi Compound, and any
RNAi Product targeting the Influenza Target will be a Collaboration Product.
Notwithstanding the foregoing, the Influenza

                                       3
<PAGE>

Target will not be treated as a Selected Target in determining the Selected
Target Threshold, the Influenza Program shall not be treated as an Active
Program with respect to Novartis' obligations under Section 2.4 of the
Agreement, and any FTEs allocated to the Influenza Program shall not be treated
as FTEs with respect to Novartis' obligations under Section 2.4 of the
Agreement. No Pre-Existing Alliance Party has or will have any rights with
respect to any Alnylam Intellectual Property for use in connection with the
Influenza Target, other than Target identification and Target validation rights.
The Parties acknowledge that, as of the Addendum Effective Date, Alnylam has
entered into agreements with the following Research Institutions with respect to
the Influenza Program: University of Georgia Research Foundation, Inc. and St.
Jude Children's Research Hospital, which Alnylam represents are Research
Institutions. The Parties agree that no activities undertaken pursuant to the
terms of such agreements as in effect as of the Addendum Effective Date shall be
considered a breach of Alnylam's obligations under the Agreement. Following the
Addendum Effective Date, no agreements shall be entered into by either Party
with a Third Party with respect to the Influenza Program except to the extent
agreed upon by the Pandemic Flu Joint Steering Committee.

              (b)    Pandemic Flu Program. In the case of the Pandemic Flu
Program, in lieu of the provisions of Article IV of the Agreement regarding
funding, payments and other financial matters, the provisions of Article IV of
this Addendum will apply instead, except for the provisions of Section 4.8
through 4.12 of the Agreement, as appropriate. The Pandemic Flu Program will
include Discovery, Development, Manufacture and Commercialization as set forth
herein, any licenses granted by a Party to the other with respect to the
Pandemic Flu Program shall be co-exclusive, any references in the Agreement to
the "Research Term" or the "Selection Term" shall mean the "Pandemic Flu Term"
solely with respect to the Pandemic Flu Program, and the provisions of Sections
4.3(b) and (c) shall apply during the Pandemic Flu Term.

              (c)    Seasonal Flu Program. In the case of the Seasonal Flu
Program, notwithstanding its status as an Active Program, the provisions of
Sections 2.4(a) and 4.3 (b) and (c) of the Agreement will not apply, unless
Novartis gives notice to the Pandemic Flu Joint Steering Committee of its
intention to activate such Program, which notice may be given at any time
between the Addendum Effective Date and the third anniversary thereof. If no
such notice is given within such time period, then the Seasonal Flu Program will
be an Abandoned Program. When and if such notice is given, the Seasonal Flu
Program will not constitute an Active Program for purposes of clause (i) or (ii)
of the second sentence of Section 2.4(a) of the Agreement, and Novartis will (A)
commence prospectively making the payments described in Sections 4.3(b) and (c)
of the Agreement, and (B) make any payments under Section 4.4(a) which would
previously have been payable had such notice been given on the Addendum
Effective Date.

       Section 2.02   Commercialization of Pandemic Products. The Parties will
Commercialize Pandemic Products on the financial terms set forth in Section 4.04
below. Such Commercialization, including sales to the USG or an agency thereof,
will be led by Novartis worldwide and shall be overseen by the Pandemic Flu
Joint Steering Committee; provided, however, that the Parties agree that Alnylam
shall be actively involved in such Commercialization in the United States and
may take the lead in

                                       4
<PAGE>

certain aspects of such Commercialization in the United States if it is in the
best interests of the Pandemic Flu Program as approved by the Pandemic Flu Joint
Steering Committee.

       Section 2.03    Consequences of Abandonment. If the Seasonal Flu Program
and/or Pandemic Flu Program become(s) an Abandoned Program, the Parties shall
negotiate in good faith the extent to which any Discovered RNAi Compounds or
Collaboration Products from either or both such Programs can be further
Developed, Manufactured and/or Commercialized by Alnylam and the extent to which
Alnylam may Discover, Develop, Manufacture and Commercialize new RNAi Compounds
and RNAi Products directed to the Influenza Target.

                                  ARTICLE III

                      PANDEMIC FLU JOINT STEERING COMMITTEE

       Section 3.01    Governance in General.

              (a)    The Parties will establish a Pandemic Flu Joint Steering
Committee (the "Pandemic Flu Joint Steering Committee"), which will be
constituted in the same manner, operate under the same principles and have the
same powers under the Agreement, as the Joint Steering Committee, except as
provided in this Addendum. Each Party shall make its designation of its
representatives to the Pandemic Flu Joint Steering Committee not later than
thirty (30) days after the Addendum Effective Date.

              (b)    The Pandemic Flu Joint Steering Committee shall be
responsible for overseeing, managing and auditing the Pandemic Flu Program,
including, without limitation, (i) performing such responsibilities as are
described in Sections 2.2(b)(i) through (vii) and 2.2(b)(ix) of the Agreement,
solely with respect to the Pandemic Flu Program, (ii) selecting the RNAi
Product(s) targeting the Influenza Target for Pandemic Flu for which one or more
IND(s) will be filed, (iii) designing clinical trials with respect thereto, and
(iv) arranging for such clinical trials. In addition, the Pandemic Flu Joint
Steering Committee will be responsible for arrangements relating to the
Development, Commercialization and Manufacture of Pandemic Products, taking into
account any pre-existing Manufacturing relationships as set forth on Schedule B
hereto. With respect to the Pandemic Flu Program, all references to "Research
Plan" in the Agreement shall mean "Program Plan," such that a "Program Plan" is
a plan setting forth the Parties' respective obligations with respect to the
Pandemic Flu Program, including workflow, deliverables, timelines and budgets.
The Pandemic Flu Joint Steering Committee will establish a project team and
mandate a Program Plan for the Pandemic Flu Program.

              (c)    The Pandemic Flu Joint Steering Committee shall remain in
existence until the earliest of (i) the last sale of any Pandemic Product
anywhere in the world, (ii) the date on which the Pandemic Flu Program becomes
an Abandoned Program, or (iii) the date of Pandemic Flu Termination (such
period, the "Pandemic Flu Term"). Each of the Joint Steering Committee and the
Pandemic Flu Joint Steering

                                       5
<PAGE>
Committee will be independent of the other, and the Joint Steering Committee
shall have no authority over the Pandemic Flu Program.

              (d)    The Pandemic Flu Joint Steering Committee shall make
decisions unanimously, as described in the first two (2) sentences of Section
2.2(e) of the Agreement; provided, however, that if the matter is not resolved
by the Pandemic Flu Joint Steering Committee within thirty (30) days after
referral to the Pandemic Flu Joint Steering Committee, then such matter shall be
referred to the Executive Officers for resolution. If such matter is not
resolved by the Executive Officers within fifteen (15) days after referral to
the Executive Officers, then, if such failure to reach agreement relates to a
matter identified in Section 3.01(b) of this Addendum, Novartis shall have the
right to decide the matter, unless such matter relates to the choice of Novartis
or one of its Affiliates to Manufacture the Pandemic Product and [**]. With
respect to any matter to be so decided by Novartis pursuant to the foregoing,
Novartis shall consult with Alnylam, and solicit input from Alnylam, and give
due consideration to such input and Alnylam's interests regarding all such
matters.

                                   ARTICLE IV

                              FINANCIAL PROVISIONS

       Section 4.01   Seasonal Flu Program. Subject to the provisions of
Sections 2.01(c) and 3.01 above, all financial and other provisions of the
Agreement relating to Active Programs will be applicable to the Seasonal Flu
Program.

       Section 4.02   USG Funding for Pandemic Flu Program. Alnylam will have
primary responsibility for seeking, and will use Commercially Reasonable Efforts
to obtain, funding for the Influenza Program directly or indirectly from
available USG sources, including DARPA, DHS, DHHS, NIH, CDC, DoD and DTRA, on
the best available terms for the Parties regarding financial matters,
intellectual property rights and other material terms with any such USG source
(or any intermediary with respect to such funding), which terms must be approved
by Novartis (such approval not to be unreasonably withheld). Novartis shall
cooperate and afford reasonable assistance to Alnylam in the foregoing funding
effort. All such funding will be applied as provided in the Program Plan
approved by the Pandemic Flu Joint Steering Committee for the Pandemic Flu
Program. The Parties acknowledge that Alnylam has entered into Agreement number
HR0011-06-2-0002 with DARPA, effective as of November 28, 2005, with respect to
the Influenza Program. The Parties agree that neither Party will claim that any
activities undertaken pursuant to the terms of such agreement as in effect as of
the Addendum Effective Date are a breach of Alnylam's obligations under the
Agreement.

       Section 4.03   Novartis Funding for Pandemic Flu Program. Without
limiting the Parties' obligations as set forth in Section 4.02 above, Novartis
will make the funding payments with respect to the Pandemic Flu Program
described in this Section 4.03. Commencing with the Addendum Effective Date,
Novartis will provide funding for the Pandemic Flu Program in the amounts
provided in the Program Plan

                                       6
<PAGE>

(which shall include funding starting on the Addendum Effective Date for
activities conducted under the Pandemic Flu Program), which funding is to be
applied as provided in the Program Plan approved by the Pandemic Flu Joint
Steering Committee for the Pandemic Flu Program for a period of [**], which
shall automatically extend for successive periods of [**] each, unless Novartis
gives [**] written notice of termination prior to the end of any such period.
Such funding payments will be covered by the provisions of Section 4.7(d) of the
Agreement. Notwithstanding the foregoing, Novartis may terminate the funding
provided in this Section 4.03 upon no less than [**] prior written notice to
Alnylam, if, in Novartis' reasonable business judgment, such payments are [**]
(such termination or a termination as provided in this Section 4.03 above, the
"Pandemic Flu Termination").

       Section 4.04    Other Financial Terms.

              (a)    United States. Net Profits, if any, from Commercialization
of a Pandemic Product in the United States shall be distributed as follows
(subject to Section 4.04(c)):

                     (i)    [**] percent ([**]%) to Novartis and [**] percent
([**]%) to Alnylam until all amounts funded by Novartis in connection with the
Development of such Pandemic Product (other than such amounts solely expended to
Develop the Pandemic Products for sale outside the United States), including
those amounts set forth in Section 4.03 above, have been repaid (the "Recoupment
Date"); and thereafter

                     (ii)   [**] to [**] Novartis [**] Alnylam.

                     (iii)  Subject to Section 4.04(c), if there are Net Losses
in any period in connection with the Commercialization of a Pandemic Product,
after the Recoupment Date has occurred, future Net Profits shall be distributed
[**]percent ([**]%) to Novartis and [**] percent ([**]%) to Alnylam until
Alnylam's share of Net Losses have been repaid to Novartis; and thereafter, [**]
to [**] Novartis [**] Alnylam. In no instance will Alnylam be responsible for
making a cash payment to Novartis to satisfy Alnylam's share of Net Losses.

              (b)    Rest of the World. Net Profits, if any, from
Commercialization of a Pandemic Product outside the United States shall be
distributed [**] percent ([**]%) to Novartis and [**] percent ([**]%) to Alnylam
(subject to Section 4.04(c)).

              (c)    Negotiated Payment. If Novartis desires or intends to sell
a Pandemic Product in the United States or outside the United States, [**] with
respect to such Pandemic Product in such region, the Parties shall negotiate in
good faith the compensation to Alnylam with respect thereto.

              (d)    The provisions of Section 4.7(c) of the Agreement shall
apply to Net Profits and amounts payable to Alnylam hereunder as they apply to
Net Sales and royalties payable to Alnylam.

                                       7
<PAGE>

                                   ARTICLE V

                                 REVIEW OF TERMS

       Section 5.01   Required Renegotiation in Certain Circumstances. In
addition to the Parties' respective rights to terminate the Agreement or
discontinue the Influenza Program as an Active Program in accordance with the
Agreement, Novartis may, upon written notice to Alnylam, request that the
Parties in good faith [**], in the event that, in the reasonable business
judgment of Novartis, [**] with respect to [**] Pandemic Flu prophylaxis or
treatment.

                                   ARTICLE VI

                                  MISCELLANEOUS

       Section 6.01   Integration. This Addendum, the Agreement, the CRT
Sublicense Agreement and the Stock Purchase Agreement constitute the entire
agreement between the Parties with respect to the subject matter thereof and
hereof and supersede all previous agreements, whether written or oral. This
Addendum may be amended only in writing signed by properly authorized
representatives of each of the Parties. Except as modified by the provisions of
this Addendum, the Agreement remains in full force and effect. In case of
conflict between the provisions of the Agreement and this Addendum, the
provisions of this Addendum shall control.

       Section 6.02   Execution in Counterparts; Facsimile Signatures. This
Addendum may be executed in counterparts, each of which counterparts, when so
executed and delivered, shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument even
if both Parties have not executed the same counterpart. Signatures provided by
facsimile transmission shall be deemed to be original signatures.

                  [Remainder of Page Intentionally Left Blank]

                                       8
<PAGE>

       IN WITNESS WHEREOF, Alnylam and Novartis have caused this Addendum to be
duly executed by their authorized representatives, as of the date first written
above.

                                          ALNYLAM PHARMACEUTICALS, INC.

                                          By: /s/ John M. Maraganore
                                              ----------------------------------
                                              Name: John M. Maraganore
                                              Title: President and CEO

                                          NOVARTIS INSTITUTES FOR
                                          BIOMEDICAL RESEARCH, INC.

                                          By: /s/ Mark C. Fishman
                                              ----------------------------------
                                              Name: Mark C. Fishman
                                              Title: President and CEO

<PAGE>

                                   SCHEDULE A

                                   Net Profits

       "Net Profits" or "Net Losses" shall mean, with respect to a Pandemic
Product, Net Sales of such Pandemic Product less Complete Costs with respect to
such Pandemic Product, which, if such calculation results in a positive amount,
shall be Net Profits and, if such calculation results in a negative amount,
shall be Net Losses. In calculating Net Profits and Net Losses, each deduction
from the gross amount invoiced by or on behalf of Novartis or any Novartis
Affiliate, licensee or sublicensee for such Pandemic Product sold to Third
Parties (other than licensees or sublicensees) in bona fide, arm's-length
transactions (i) shall be determined in accordance with Novartis's standard
accounting methods and with International Financial Reporting Standards (IFRS)
as generally and consistently applied by Novartis, (ii) shall be made only once
with respect to a Pandemic Product (whether such deduction is applied as a
result of the definition of Net Sales and/or of Complete Costs) and (iii) shall
be made only to the extent that such deduction specifically relates to such
Pandemic Product.

       "Complete Costs" shall mean the total of COGS, Marketing Expense and G&A
appropriate under IFRS as consistently applied by Novartis.

       "Cost of Goods" (or "COGS") shall mean the total of Standard Costs of
Goods, Variance Costs, Inventory Re-/Devaluation Costs, Non-Product Related
Production Costs, Write-Offs and Third Party Royalties.

       "Standard Costs of Goods" shall mean the total of Material Costs and
Processing Costs that is determined to be standard for the Manufacture of a
Pandemic Product, or if such Manufacture is conducted by a Third Party, the
amounts invoiced by such Third Party with respect to such Manufacture (which, if
such amounts are paid by Alnylam, shall be reimbursed to Alnylam by Novartis).

       "Material Costs" shall mean costs of raw materials, intermediates and/or
active pharmaceutical ingredients needed for the Manufacturing of the relevant
Pandemic Product and costs of packaging material for these raw materials,
intermediates and/or active pharmaceutical ingredients, as invoiced by the Third
Party supplier (which, if paid by Alnylam, shall be reimbursed to Alnylam by
Novartis).

       "Processing Costs" shall mean costs for direct labor in Manufacturing the
relevant Pandemic Product, Equipment Costs, Production Area Overhead Costs,
Quality Assurance Costs, Materials Handling Overhead Costs, General Factory
Overhead Costs, Utility Costs and Ecology Costs, each of which shall be
established on a regular, standard basis (except that, if any Manufacturing
activities with respect to the relevant Pandemic Product are conducted by a
Third Party, then the amounts invoiced by such Third Party with respect to such
activities shall instead be included and, if such amounts are paid by Alnylam,
shall be reimbursed to Alnylam by Novartis), but specifically excluding idle
capacity costs.

<PAGE>

       "Equipment Costs" shall mean costs of depreciation or rent of the
building accommodating equipment plus repair and maintenance for the building,
and costs for equipment depreciation, and other equipment costs such as costs
for repair and maintenance. The building costs shall be allocated to the
equipment using an appropriate key such as space occupied by the equipment.
Equipment Costs shall be based on the planned utilization of equipment.

       "Production Area Overhead Costs" shall mean costs for production
personnel, typically including a controlling and supervisory function, costs of
indirect space such as costs for a break room, costs of in-process control,
costs of microbiological monitoring of production environment, costs of training
of process personnel, costs for utilities and ecology, costs for auxiliary and
consumables, costs of shop floor control systems, costs for cleaning of
production buildings, and costs of working clothes.

       "Quality Assurance Costs" shall mean costs of identifying and analyzing
the raw materials and intermediates needed for the manufacturing process, costs
of finished product control, costs of production support, costs of cleaning
validation, costs of electronic data processing for the quality
assurance/quality control ("QA/QC") department, costs of microbiology
department, costs of laboratory infrastructure, costs of quality systems support
and compliance, costs of overheads within the QA/QC department.

       "Materials Handling Overhead Costs" shall mean costs for warehousing and
internal transportation of raw material and semi-finished goods, and costs of
quality control of raw and packaging material, costs of the purchasing
department.

       "General Factory Overhead Costs" (or "GFO") shall mean costs of plant and
production management, costs for ensuring sufficient levels of safety, health
and environment (such as fire brigade, medical services and documentation for
transportation of hazardous goods), costs for the scheduling of production,
costs of the maintenance of the bills of materials, costs for the technical
support, expenses of the plant administration and general services, costs of
information technology ("IT") for non-dedicated IT systems such as SAP.

       "Utility Costs" shall mean costs associated with the consumption of
supportive media such as electricity, water, nitrogen, steam, and air.

       "Ecology Costs" shall mean costs associated with the deposition of solid
or liquid waste, purification of effluent water, and purification of waste air.

       "Variance Costs" shall mean any deviations (whether positive or negative)
from the Standard Cost of Goods actually incurred during the Manufacture of the
relevant Pandemic Product including the difference (whether positive or
negative) between planned and actual Equipment Costs.

       "Inventory Re-/Devaluation Costs" shall mean the gain or loss as a result
of the inventory value adjustment due to changes in the standard costs.

<PAGE>

       "Non-Product Related Production Costs" shall mean all production
overhead, supply chain, validation and other production-related costs not
already included in Standard Cost of Goods.

       "Write-Offs" shall mean costs captured for the destruction of products
that cannot be used anymore due to expiration of shelf-life, spoilage in the
production process, and transportation mishaps.

       "Third Party Royalties" shall mean all amounts payable by Novartis or its
Affiliates under Third Party agreements, including Listed Alnylam Third Party
Payments (which, if paid by Alnylam, shall be reimbursed to Alnylam by
Novartis), Unblocking Amounts and payments made in respect of Blocking RNAi
Intellectual Property, that grant intellectual property rights that the Pandemic
Flu Joint Steering Committee reasonably determines are necessary or advisable
for Discovery, Development, Commercialization or Manufacture of the relevant
Pandemic Product. If any Third Party Payment is applicable to more than one
Pandemic Product, the Third Party Payment will be allocated to each such
Pandemic Product by reasonably pro-rating the Third Party Payment among such
Pandemic Products.

       "Marketing Expense" shall mean all costs associated with the promotion,
sale and distribution of the relevant Pandemic Product, including sales force,
market research, technical and support areas such as customer service, samples,
product management and promotion of the product trials or demonstrations for
marketing purposes, and commissions to agents and independent representatives
where the commissions are not reductions in sales value.

       "General & Administrative Expenses" (or "G&A") shall mean non-COGS and
non-Marketing Expenses, including costs incurred in support of the relevant
Pandemic Product from the following administrative functions: finance, human
resources, legal, and information technology.

<PAGE>

                                   SCHEDULE B

                    Pre-Existing Manufacturing Relationships

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