Preview | Collaboration Agreement |

THIS COLLABORATION AGREEMENT (Agreement) is made and entered into effective as of October 15, 2003 (the Effective Date), by and between AVALON PHARMACEUTICALS, INC., having principal offices at 20358 Seneca Meadows Parkway, MD 20876 (Avalon) and MEDAREX, INC., having principal offices at 707 State Road, Princeton, New Jersey 08540-1437, on behalf of itself and its wholly owned subsidiary, GENPHARM INTERNATIONAL, INC., with principal offices at 521 Cottonwood Drive, Milpitas, California 95035 (collectively, Medarex). Avalon and Medarex each may be referred to herein individually as a Party, or collectively as the Parties.

WHEREAS, Medarex and Avalon desire to enter into a definitive agreement to collaborate to produce fully human antibodies to antigen targets in order to develop and commercialize genomics-derived, Antibody-Based Products on the terms set forth below;

NOW, THEREFORE, in consideration of the foregoing premises and the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows;

Section 1.1 Scope of Collaboration. The Parties have entered into this collaboration (such collective enterprise, the Collaboration) to jointly research, develop and commercialize Collaboration Products with respect to Collaboration Targets throughout the Territory as set forth in this Agreement. Any capitalized terra used in this Agreement not otherwise defined herein shall have the meaning set forth on Appendix A.

1.2.1 General. Under the direction and supervision of the Steering Committee, the Parties shall use Commercially Reasonable Efforts to conduct their respective research activities in accordance with this Agreement, each Project Plan and each Project Budget.

1.2.2 Identification of Collaboration Targets. The list of Antigens attached hereto as Appendix C sets forth the initial list of Collaboration Targets (the Initial Collaboration Targets). Such list may be amended pursuant to Section 1.7 or 5.1.2, by the express written agreement of Medarex and Avalon or as follows:

(a) Within the sole discretion of and as selected by Avalon, during the Target Entry Period (as defined in Section 1.2.2(e)), Avalon may identify to Medarex Antigens for consideration by Medarex, with it being expressly understood that Avalon is not under any obligation to do so. In conjunction with identification of any such Antigen, Avalon shall promptly provide to Medarex the following information and materials (Antigun Evaluation Materials):

(i) a written description of the applicable Antigen, including DNA and amino acid sequences thereof, when available;

(ii) the human tissue and/or cell type expression profile for such Antigen;

(iii) all other scientific data in the possession of Avalon or its Affiliates relating to such Antigen;

(iv) all information regarding (A) the proprietary status of such Antigen, (B) the intellectual property rights Controlled by Avalon and its Affiliates with respect to such Antigen, (C) any Patent, know-how, intellectual property or other rights assigned, transferred, granted or conveyed by Avalon or its Affiliates to any Third Parties that is inconsistent with rights to be granted under this Agreement with respect to an Antibody Product against said Antigen, (D) any agreements by or among Avalon or its Affiliates and any Third Parties that is inconsistent with rights to be granted under this Agreement with respect to an Antibody Product against said Antigen, (E) any potential restrictions (contractual, patent or otherwise) that would limit or otherwise affect the Parties right to fully Exploit any Collaboration Products with respect thereto, and (F) the extent known, any potential Third-Party Payments that would be owed in connection with the Exploitation of Antibody Products with respect to such Antigen under this Agreement or a Unilateral Development and Commercialization Agreement;

(v) existing and available models for preclinical validation of Antibody Products against such Antigen;

(vi) a list of expected indications for Antibody Products against such Antigen,

(vii) the commercial and scientific rationale for why Avalon believes such Antigen is a promising target for the development of Antibody-Based Products; and

(viii) all other relevant information in Avalons or its Affiliates possession with respect to such Antigen,

(b) Beginning on the day that either (i) Medarex notifies Avalon in writing that Medarex is in receipt of the complete Antigen Evaluation Materials with respect to an Antigen or (ii) Avalon notifies Medarex in writing that, to the best of its knowledge, Avalon has delivered all of the Antigen Evaluation Materials that is in its possession with respect to an Antigen, and * days thereafter, (the Evaluation Period), Medarex shall have the exclusive right to determine whether such Antigen shall become a Collaboration Target under this Agreement and shall notify Avalon of its determination with respect to such Antigen. In the event Medarex receives Antigen Evaluation Materials for a given Antigen pursuant to Section 1.2.2(a), but does not believe such materials are sufficiently complete to enable Medarex * whether to accept or decline such Antigen pursuant to the preceding sentence, the Parties shall * additional analyses to be performed by Avalon in order to complete the Antigen Evaluation

* The asterisk denotes that confidential portions of this exhibit have been omitted in reliance on Rule 24b-2 of the Securities Exchange Act of 1934. The confidential portions have been submitted separately to the Securities and Exchange Commission.

Materials, but Avalon shall not be obligated to perform such additional analyses. At any time prior to the commencement of the Evaluation Period with respect to an Antigen, Avalon shall have the right to withdraw such Antigen from consideration and such Antigen shall be a Reversion Target subject to the obligations of Section 1.7.

(i) In -the event Medarex accepts such Antigen into the Collaboration as a Collaboration Target, Appendix C shall be deemed to be amended accordingly and the Parties shall * to develop a preliminary Project Plan and Project Budget for the discovery and development of Antibody Products with respect to such Antigen in the form attached hereto as Appendix E; * .

(ii) In the event Medarex does not accept such Antigen within the applicable Evaluation Period, such Antigen shall not be deemed to be a Collaboration Target and Medarex shall have no further rights with respect thereto under this Agreement and Avalon shall have no further obligations with respect thereto under this Agreement.

(iii) *

(c) Upon designation of an Antigen as a Collaboration Target pursuant to Section 1.2.2(b), the Parties shall * a written description of such Antigen, including the name of the Collaboration Target and its complete DNA sequence end GenBank accession number, which descriptions shall be included on Appendix C.

(d) As the Parties gain greater understanding of each Collaboration Target and the potential utility of Antibody Products thereto, they shall update the description of such Collaboration Target on Appendix C to more accurately reflect what Antigens, or portions thereof, are included in the Collaboration.

(e) The Target Entry Period shall commence on the Effective Date and shall continue until * unless (i) earlier terminated by (A) the unanimous agreement of the Parties, or (B) either Party pursuant to Article 8; or (ii) extended by unanimous agreement of the Parties. The termination or expiration of the Target Entry Period shall not constitute a termination of this Agreement.

1.2.3 Identification of Applicable Assays and Success Criteria. As part of the Project Plan for a given Collaboration Target, the Steering Committee will:

(a) identify the Immunogen(s) (each, an Immunogen) to be used to enable Medarex to perform its activities pursuant to Section 1.2.5;

(b) * ;

(c) develop an experimental plan to identify a set of assays (each, an Assay) for screening Assay Candidates against such Collaboration Target;

(d) determine which Party will be responsible for delivering the Assays to the Collaboration; and

(e) develop guidelines that will allow the establishment of criteria (the Assay Success Criteria) for determining, subject to Section 1.2.6, whether an Assay Candidate should become a Collaboration Antibody,

The Steering Committee may elect to use a Third Party to provide one or more Immunogen(s) to the Collaboration. In addition, the Steering Committee may elect to have a Third Party develop and/or perform one or more of the Assays.

1.2.4 Allocation of Costs. * , all costs associated with identifying Collaboration Targets, preparing and furnishing to Medarex complete Antigen Evaluation Materials with respect thereto, and creating and delivering the Immunogen(s) to Medarex (the Avalon Research Activities) shall be borne * , but Avalon shall have no obligation to provide any Antigen Evaluation Materials. With respect to the Collaboration Targets that exist as of the Effective Date, all costs associated with immunizing the HuMAb Mice and raising a panel of different Antibodies to the applicable Collaboration Target pursuant to the last sentence of Section 1.2.5 (the Medarex Research Activities) shall be borne * . * . All other costs and expenses incurred by the Parties in performing their activities under this Section 1.2 shall be governed by Section 4.1.2.

1.2.5 Raising of Antibodies by Medarex. * shall provide to Medarex sufficient Immunogen for each Collaboration Target to enable Medarex to perform its activities pursuant to this Section 1.2.5. Upon the delivery of such Immunogen, Medarex shall * to immunize the HuMAb Mice to raise a panel of different Antibodies to the applicable Collaboration Target.

1.2.6 Selection of Assay Candidates; Assay Screening; Selection of Collaboration Antibodies.

(a) Medarex shall select a subset of the Antibodies raised pursuant to Section 1.2.5 to become Assay Candidates. As set forth under the applicable Project Plan, the Parties shall run each Assay Candidate through the applicable Assays. Upon completion of the Assay screening for a given Assay Candidate, each Party will be provided with the results of such screening (including the raw data underlying such results). The Steering Committee will then determine whether the Assay Candidate has met the applicable Assay Success Criteria. Subject to Section 1.2.6(b), each Assay Candidate that meets the applicable Assay Success Criteria shall be deemed to be a Collaboration Antibody; provided, however, the Steering Committee may, in its sole discretion (i) decide that an Assay Candidate that meets the Assay Success Criteria shall nonetheless not be deemed to be a Collaboration Antibody, or (ii) decide that an Assay Candidate that does not meet the Assay Success Criteria shall nonetheless be deemed to be a Collaboration Antibody.

(b) The Parties shall determine the amino acid sequence of at least one heavy chain variable region corresponding to a contiguous portion spanning CDR 1 through CDR3 and defining a complete antibody-heavy chain Antigen binding domain (a Binding Sequence) for each Assay Candidate that is selected pursuant to Section 1.2.6(a) to be a Collaboration Antibody and shall provide such sequence information to Medarex.

Notwithstanding Section 1.2.6(a), Medarex shall have the right to veto any such Assay Candidate on written notice to Avalon within * days of its receipt of the correct sequence data for any such Assay Candidate, if Medarex (i) is researching or developing, or has researched or developed, ether, alone or in collaboration with a Third Party, any such Assay Candidate, or (ii) has previously granted a Third Party rights with respect to any Antibody that has the same Binding Sequence as such Assay Candidate, whereupon such Assay Candidate shall not become a Collaboration Antibody and all amounts of such Assay Candidate (and any cell lines expressing such Assay Candidate and other Mice Materials with respect to such Assay Candidate) produced pursuant to this Agreement will be destroyed.

1.2.7 Effect of Designation of Collaboration, Antibodies.. Any Antibody that is designated a Collaboration Antibody in accordance with Section 1.2.6 shall be exclusive to the Collaboration. Except as otherwise provided in this Agreement, once an Antibody is designated a Collaboration Antibody^, all costs associated with the research, development, manufacturing and commercialization of such Collaboration Antibody shall * , as more fully described in Section 4.1. Any Antibodieswith respect to a Collaboration Target (and any cell lines expressing such Antibodies and other Mice Materials with respect to such Antibodies) produced under this Agreement that are not designated as Collaboration Antibodies or back-up Collaboration Antibodies by the Steering Committee shall be destroyed by Medarex, unless the Parties agree otherwise,

1.2.8 Lead Collaboration Antibodies. Out of the pool of Collaboration Antibodies against a given CollaborationTarget, the Steering Committee will select the Collaboration Antibody that it believes to be most promising for development and commercialization and it will then move such Collaboration Antibody into Production Process Development. Each Collaboration Antibody that is put into Production Process Development shall be deemed to be a Lead Collaboration Antibody. It is understood that the Steering Committee may, over time, select more than one Lead Collaboration Antibody against a given Collaboration Target, or substitute one Lead Collaboration Antibody for another. Upon designation of each Lead Collaboration Antibody, * of the cost of Production Process Development for such Lead Collaboration Antibody. With respect to each Lead Collaboration Antibody, the Steering Committee shall solicit bids from suppliers to perform the Production Process Development. Each Party shall have the right to submit a bid on such terms as it desires. The Steering Committee shall use * to enter into a development agreement with the supplier that is best able to meet the Parties requirements, taking into consideration such factors as price, quality, capacity, quantity, reliability and reputation. In the event the Steering Committee selects a Party to perform Production Process Development pursuant to this Section 1.2.8, the price and other terms and conditions of such Production Process Development shall be based on arms length negotiations with the Steering Committee.

1.2.9 Identification of Restrictions on Exploitation of Collaboration Products. Upon the designation of the first Collaboration Antibody with respect to a Collaboration Target, unless otherwise agreed by the Steering Committee, the Collaboration shall solicit a formal patent review and opinion regarding such Collaboration Target, and Antibody Products with respect thereto, from an outside law firm selected by the Steering Committee. The costs of such formal opinion shall be * .

Section 1.3 Project Plan and Project Budget. Upon designation of a given Antigen as a Collaboration Target pursuant to Section 1.2.2, the Parties shall jointly develop and implement a project plan (each a Project Plan) and a project budget (each a Project Budget) for the research, development, manufacture and commercialization of Collaboration Products against such Collaboration Target. It is understood that each such respective Project Plan and Project Budget initially will cover the early-stage research and development of Collaboration Products with respect to such respective Collaboration Target, but that the components of each Project Plan and Project Budget will evolve as the applicable Collaboration Products move through the research, development, manufacture and commercialization life cycle. The Parties, through the Steering Committee, shall endeavor to review and update each Project Plan and Project Budget at least annually.

Section 1.4 Performance Standards. Each Party shall perform, or cause to be performed, its respective activities hereunder in good scientific manner, and in compliance in all material respects with all Applicable Law and * to (a) research, develop, file for Regulatory Approval and commercialize one or more Collaboration Products with respect to each Lead Collaboration Antibody, and (b) achieve the objectives of each Project Plan in accordance with each Project Budget, in each case, efficiently and expeditiously by allocating sufficient time, effort, equipment and skilled personnel to complete^- such activities successfully and promptly.

Section 1.5 Product Trademarks. The Parties shall develop Product Trademarks for each Collaboration Product that will be commercialized. Such Product Trademarks shall not be confusingly similar to, misleading or deceptive with respect to, or dilute any of the Trademarks owned or Controlled by either of the Parties, or any part of such Trademarks. No Party or any of its Affiliates or sublicensees shall commercialize a Collaboration Product under any Trademark other than the ^-Product Trade marks. No Party or any of its Affiliates or sublicensees shall use in its business any Trademark that is confusingly similar to, misleading or deceptive with respect to, or dilutes any of the Product Trademarks or any other Trademarks used to identify or distinguish a Collaboration Product, or any part of the foregoing. The Steering Committee shall oversee the filing, prosecution and maintenance of all Product Trademark registrations. * in the costs and expenses of such filing, prosecution and maintenance. Subject to Applicable Law, the label of any Collaboration Products shall include, at Avalons sole discretion, the name of Avalon and, at Medarexs sole discretion, the name of Medarex.

Section 1.6 Supply of Collaboration Products. With respect to clinical and commercial supplies of Collaboration Products, the Steering Committee shall solicit bids from suppliers to supply the Parties requirements thereof. Each Party shall have the right to submit a bid on such terms as it desires. The Steering Committee shall use Commercially Reasonable Efforts to enter into a supply agreement with the supplier that is best able to meet the Parties requirements, taking into consideration such factors as price, quality, capacity, quantity, reliability and reputation. In the event the Steering Committee selects a Party to produce clinical and/or commercial supplies pursuant to this Section 1.6, the price and other terms and conditions of such supply shall be based on arms length negotiations with the Steering Committee.

Section 1.7 Reversion of Collaboration Targets. If, notwithstanding the Commercially Reasonable Efforts of the Parties, no Collaboration Antibodies have been

designated with respect to a Collaboration Target pursuant to Section 1.2.6 within * , or such other period as the Parties may agree, after the immunization of the HuMAb Mice with respect to such Collaboration Target pursuant to Section 1.2.5, * , then (a) such Antigen shall cease to be a Collaboration Target (such Antigen, a Reversion Target), and Appendix C shall be amended accordingly, (b) any Antibodies with respect thereto shall not become Collaboration Antibodies, (c) any Antibody Products with respect thereto shall not become Collaboration Products, and (d) any licenses granted pursuant to Article 3, with respect to such Antigen, Antibody or Antibody Product shall terminate, and, subject to Section 7.1.5, Medarex shall have no further rights under this Agreement with respect to such Antigen. Promptly upon such designation, the Parties shall destroy all Antibody Products, Antibodies, Mice Materials, Immunogens and other Biological Materials created under this Agreement with respect to such a Reversion Target.

ARTICLE 2 -
OPERATION OF THE COLLABORATION

Section 2.1 Steering Committee.

2.1.1 Formation of Steering Committee. The Parties shall establish a joint committee (the Steering Committee), which -shall oversee the research, development and commercialization activities hereunder. Each of Avalon and Medarex shall appoint an equal number of representatives with the requisite experience and seniority to enable them to make decisions on behalf of the Parties with respect to the Collaboration. From time to time, Avalon and Medarex each may substitute any of its representatives to the Steering Committee.

2.1.2 Responsibilities. The Steering Committee shall, in addition to its other responsibilities described in this Agreement: (a) prioritize the research, development, manufacturing and commercialization activities with respect to Collaboration Targets, Collaboration Antibodies and Collaboration Products; (b) subject to Section 1.3, allocate responsibility for such activities between Avalon and Medarex taking into consideration their relevant expertise and available resources; (c) develop and implement a strategy for researching, developing, manufacturing, obtaining and maintaining Regulatory Approvals for, and commercializing, the Collaboration Products; (d) determine whether to enter into any agreements pursuant to Section 7.4 or otherwise that would give rise to Third-Party Payments; (e)establish such subcommittees as deemed appropriate by the Steering Committee; and (f) take such other actions as are set forth in this Article 2 or as the Parties may unanimously agree. The Steering Committee may evaluate additional technologies that may be necessary or beneficial to the Collaboration and may recommend the acquisition or in-licensing of these technologies to the Parties.

2.1.3 Procedural Rules for the Steering Committee.

(a) Generally. Except as explicitly set forth in this Section 2.1.3, the Steering Committee shall establish its own procedural rules for its operation.

(b) Voting. The Steering Committee shall take action by unanimous consent of Avalon and Medarex, with each such Party having a single vote, irrespective of the number of representatives actually in attendance at a meeting, or by a written resolution signed

by the designated representatives of each of Avalon and Medarex. A quorum shall be established only if at least one member appointed by Avalon and at least one member appointed by Medarex is in attendance.

Section 2.2 Progress Reports. Within * after * , or as otherwise required by the Steering Committee, each Part shall provide to the other Party a written progress report, which shall (a) describe any research, development or commercialization activities with respect to Collaboration Targets or Collaboration Products and any other work relating to the Collaboration Targets and Collaboration Products that it has performed, or caused to be performed, since the last such report, (b) evaluate the work performed in relation to the goals of this Agreement and the applicable Project Plan, and (c) provide such other information as may be required by this Agreement and the applicable Project Plan or reasonably requested by the other Party relating to such activities. In addition to the progress reports provided hereunder, it is contemplated that the Parties will maintain informal communications through the Steering Committee and their day-to-day activities under this Agreement.

Section 2.3 Disputes; Dispute Resolution.

2.3.1 Referral to Steering Committee. Any dispute that may arise relating to the terms of this Agreement or the activities of the Parties hereunder shall be brought to the attention of the Steering Committee, which shall attempt in good faith to achieve a resolution. Either Party may convene a special meeting of the Steering Committee for the purpose of resolving disputes.

2.3.2 Referral to Chief Executive Officers of the Parties. If the Steering Committee is unable to resolve such a dispute within * of the first presentation of such dispute to the Steering Committee, and with respect to all other disputes, including the failure to obtain a unanimous vote in the Steering Committee, such dispute shall be referred to the Chief Executive Officers of each of the Parties (or their respective designees) who shall use their good faith efforts to mutually agree upon the proper course of action to resolve the dispute.

2.3.3 Referral to Chief Executive Officer of Medarex. Any disputes arising with respect to Mice-Related Technology shall be resolved conclusively by the Chief Executive Officer of Medarex (or his or her designee), who shall * to the comments of the Chief Executive Officer of Avalon (or his or her designee) in resolving such matter.

2.3.4 Unresolved Disputes. If any dispute bother than those provided for in Section 2.3.3) is not resolved by the Chief Executive Officers of the Parties (or their designees) within * after such dispute is referred to them, or such longer period as the Chief Executive Officers (or their respective designees) may collectively agree, then either Party shall have the right (a) if such dispute relates to * to refer such dispute to an Expert for expedited arbitration as set forth in Section 2.3.5, or (b) with respect to any other dispute, including with respect to a Partys interpretation of, or any allegation of breach of, this Agreement, to litigate such dispute in accordance with Section 11.5 or to pursue such other dispute resolution mechanism as the Parties may agree, except that disputes under Section 7.3.1(a) shall be resolved in accordance with Section 7.3.1(a).

2.3.5 Expedited Arbitration.

(a) With respect to disputes under Section 2.3.4 above that are not resolved by the Chief Executive Officers of the Parties (or their designees) pursuant to Section 2.3.2, upon written request by either party to the other Party, the Parties shall promptly negotiate in good faith to appoint a mutually acceptable disinterested, conflict-free individual got affiliated with either Party, with scientific, technical and regulatory experience with respect to the development of Antibody-Based Products necessary to resolve such dispute (an Expert). If the Parties are not able to agree within * after the receipt by a Party of the written request in the immediately preceding sentence, the CPR Institute for Dispute Resolution, or such other similar entity as the Parties may agree, shall be responsible for selecting an Expert within * of being approached by a Party. The fees and costs of the Expert and the CPR Institute for Dispute Resolutions (or such other entity) shall * .

(b) Within * after the designation of the Expert, the Parties shall each simultaneously submit to the Expert and one another a written statement of their respective positions on such disagreement. Each Party shall have * from receipt of the other Partys submission to submit a written response thereto, which shall include any scientific and technical information in support thereof. The Expert shall have the right to meet with the Parties, either alone or together, as necessary to make a determination.

(c) No later than * after the designation of the Expert, the Expert shall make a determination by selecting the resolution proposed by one of the Parties that as a whole is the most fair and reasonable to the Parties in light of the totality of the circumstances and shall provide the Parties with a written statement setting forth the basis of the determination in connection therewith. The decision of the Expert shall be final and conclusive, absent manifest error.

ARTICLE 3 -
GRANT OF RIGHT

Section 3.1 License Grants for Collaboration Activities.

3.1.1 Medarex Grant. Subject to Section 3.3 and the other terms and conditions of this Agreement, Medarex hereby grants to Avalon and its Affiliates a co-exclusive (with Medarex and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Sections 3.3.5 and 3.4, under the Medarex Technology and the Collaboration Technology, in each case to perform Avalons activities under Section 1.2, and (b) jointly Exploit the Collaboration Products in accordance with this Agreement.

3.1.2 Avalon Grant. Subject to the terms and conditions of this Agreement, Avalon hereby grants to Medarex and its Affiliates a co-exclusive (with Avalon and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, under the Avalon Technology and the Collaboration Technology, in each case to (a) perform Medarexs activities under Section 1.2, and (b) jointly Exploit the Collaboration Products in accordance with this Agreement.

Section 3.2 Product Trademarks^, for Collaboration Products.

3.2.1 Medarex Grant. Subject to the terms and conditions of this Agreement, Medarex hereby grants to Avalon and its Affiliates a co-exclusive (with Medarex and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

3.2.2 Avalon Grant. Subject to the terms and conditions of this Agreement, Avalon hereby grants to Medarex and its Affiliates a co-exclusive (with Avalon and its Affiliates), fully-paid, royalty-free license, with the right to sublicense solely as provided in Section 3.4, to use the Product Trademarks to Exploit the Collaboration Products in accordance with this Agreement.

Section 3.3 Exclusivity, Reserved Rights and Pre-Existing Grants.

3.3.1 Antigen Exclusivity. Subject to Sections 3.3.2, 3.3.3 and 3.3.4, the Parties acknowledge and agree that no Party shall engage, directly or indirectly, on behalf of itself or any other party, in the research, development, commercialization or other Exploitation of Antibody-Based Products with respect to any Collaboration Target other than the Collaboration Products and Unilateral Products as provided in this Agreement and any related agreements between the Parties.

3.3.2 Research and Commercialization Agreements. Medarex shall have the right to (a) grant licenses and other rights to other parties, under the Medarex Technology for such parties to Exploit Antibody Products (but not Collaboration Products) with respect to Antigens, including Collaboration Targets, (b) transfer Medarex Know-How to such parties in connection therewith, including by providing instruction with respect to the use and immunization of HuMAb Mice, and assistance with respect to the Mice-Related Technology, (c) develop production processes for, and manufacture, such Antibody Products, and (d) receive license fees, milestone payments, royalties and other remuneration in connection therewith, but, in connection with clause (a), (b), (c) or (d) above, * (each agreement with respect to the foregoing, a Research and Commercialization Agreement). For the avoidance of doubt, Medarex shall not disclose or transfer any Avalon Technology or, subject to Section 7.1.5, Collaboration Technology to any Third Party in connection with a Research and Commercialization Agreement.

3.3.3 Retained Rights. Notwithstanding anything in this Agreement to the contrary, Medarex does hereby retain the right to (a) enter into collaborations or other agreements with, and to grant licenses and other rights under the Medarex Technology to, Third Parties to Exploit Antibody Products with respect to Antigens other than Collaboration Targets, and/or (b) independently Exploit Antibody Products with respect to Antigens other than Collaboration Targets.

3.3.4 Existing Grants. The Parties further acknowledge and agree that (a) pursuant to the Cross-License Agreement, Medarex has granted a non-exclusive license under certain Medarex Patents to exploit Antibody Products, including Collaboration Products, with

respect to Antigens, including the Collaboration Targets, in the Territory; and (b) pursuant to certain existing agreements with Third Parties, Medarex has granted exclusive rights under the Medarex Technology to Exploit Antibody Products with respect to Antigens other than Collaboration Targets, which Antibody Products could be the same as Collaboration Products.

3.3.5 Cross-License Agreement. * .

(a) * .

(b) * .

(c) * .

Section 3.4 Sublicenses. Subject to Section 3.3.5, each Party shall have the right to grant sublicenses under the licenses granted in Sections 3.1 and 3.2 to (a) Affiliates without the approval of the applicable licensor, provided that any such sublicensor shall remain jointly and severally liable for the performance or non-performance of any such Affiliate sublicensee, and (b) Third Parties pursuant to Section 5.2 or as necessary to perform the commercialization activities assigned to such Party under a Project Plan, with the prior approval of the applicable licensor, not to be unreasonably withheld or delayed, which approval shall be deemed to be granted with respect to a sublicense if the licensor fails, within twenty (20) business days of its receipt of a written notice from the sublicensing Party setting forth in reasonable detail the nature of such sublicense and the identity of the sublicensee, to notify such sublicensing Party that it withholds its consent to such sublicense and the reasons therefor. Notwithstanding the previous sentence, the grant of any such sublicense shall not relieve the sublicensing Party of its obligations under this Agreement.

Section 3.5 License Limitations. Each Party hereby covenants to the other Party that neither such first Party nor any of its Affiliates, licensees or sublicensees shall use or practice the Technology of such other Party (other than the Collaboration Technology, which shall be governed by Section 7.1.5), directly or indirectly, on behalf of itself or any other party, for any purpose other than as permitted under Section 3.1 and in particular, but without limiting the generality of the foregoing, for any research, development, commercialization or other Exploitation of an Antibody Product or any other product or method, other than, a Collaboration Product or a Unilateral Product as provided hereunder or in the applicable Unilateral Development and Commercialization Agreement.

Section 3.6 No Other Rights. For the avoidance of doubt, Medarex and its Affiliates shall have no right, express or implied, with respect to the Avalon Technology and Avalon and its Affiliates shall have no right, express or implied, with respect to the Medarex Technology, in each case except as expressly provided in Section 3.1.

Section 3.7 Additional Mice. * .

ARTICLE 4 -
FINANCIAL PROVISIONS

Section 4.1 Profit and Expense Allocation with Respect To Collaboration Products.

4.1.1 Operating Profits and Operating Losses. Except as otherwise provided in this Agreement, the Parties shall * in the Operating profits and Operating Losses, as applicable, with respect to the collaboration Products, as set forth in this Section. Within * after the end of * in which Operating Profits or Operating Losses are recognized with respect to a Collaboration Product, each party shall provide the other Party with a statement detailing its Operating Profits or Operating Losses for such Collaboration Product for such calendar quarter on a country-by-country basis, which statement shall set forth in reasonable detail any Net Sales by such Party or its Affiliates, any Commercialization Expenses and any Other Operating (Income)/Expense, including a detailed breakdown of the components of the foregoing, with respect to such Collaboration Product, * (Authorized Commercialization Expenses). Within * after the end of each calendar quarter, the Parties shall -make payments to one another so that * the Operating Profits or Operating Losses, as applicable, for such calendar quarter for each Collaboration Product.

4.1.2 Research and Development Expenses. Except as otherwise provided in this Agreement, * in the cost and expense of all Authorized R&D Expenses (as defined below) incurred by or on behalf of the Parties in connection with their activities other than the Avalon Research Activities and the Medarex Research Activities, Within * after the end of * , each Party shall furnish the Steering Committee with a statement (a) detailing the costs and expenses actually incurred in connection with the research and development activities (including phase IV studies and any other post-Regulatory Approval research and development activities) performed by or on behalf of such Party during such calendar quarter, * (the Authorized R&D Expenses) and (b) comparing such expenses to date with the projections set forth in the Project Budget. Within * days after the end of each calendar quarter, Medarex and Avalon shall make payments to one another so that * for such calendar quarter . For the avoidance of doubt, neither Party shall be reimbursed for any of its internal costs of Production Process Development for clinical or commercial (but not preclinical) supplies of Collaboration Products unless such costs are expressly agreed to by the Parties in a project Budget or incurred under a separate agreement, entered into pursuant to Section 1.2.8 or 1.6.

Section 4.2 Payment Method. All amounts due by one Party hereunder shall be paid in U.S. dollars by wire transfer in immediately available funds to an account designated by the receiving Party. Any payments or portions thereof due hereunder which are not paid on the date such payments are due under this Agreement shall bear interest at a rate equal to * , calculated on the number of days such payment is delinquent, * .

Section 4.3 Currency; Foreign Payments. If any currency conversion shall be required in connection with any payment hereunder, such conversion shall be made by using the arithmetic mean of the exchange rates for the purchase of U S. dollars as published in The Wall Street Journal, Eastern Edition, on the last business day of each month in the calendar quarter to

which such payments relate. If at any time legal restrictions prevent the prompt remittance of any Operating Profits with respect to Net Sales in any jurisdiction, the applicable Party may notify the other and make such payments by depositing the amount thereof in local currency in a bank account or other depository in such country in the name of the receiving Party or its designee, and such Party shall have no further obligations under this Agreement with respect thereto.

Section 4.4 Taxes. A Party may deduct from any amounts it is required to pay pursuant to this Agreement an amount equal to that withheld for or due on account of any taxes (other than taxes imposed on or measured by net income) or similar governmental charge imposed by a jurisdiction other than the United States (Withholding Taxes). At the receiving Partys request, the paying Party shall provide the receiving Party a certificate evidencing payment of any Withholding Taxes hereunder and shall reasonably assist the receiving Party, at the receiving Partys expense, to obtain the benefit of any applicable tax treaty.

Section 4.5 Records Retention; Audit.

4.5.1 Record Retention. Each Party shall maintain (and shall ensure that its Affiliates and sublicensees shall maintain) complete and accurate books, records and accounts that fairly reflect their respective (a) Authorized R&D Expenses, Authorized Commercialization Expenses, Other Operating (Income)/Expenses, any costs and expenses reimbursable under Article 7, and any other costs and expenses reimbursable or otherwise shared by the Parties hereunder (collectively, the Collaboration Expenses), and (b) Net Sales of Collaboration Products and operating Profits and Operating Losses with respect to Collaboration Products, in each case in sufficient detail to confirm the accuracy of any payments required hereunder and in accordance with GAAP, which books, records and accounts shall be retained by such Party until * .

4.5.2 Audit. Each Party shall have the right to have an independent certified public accounting arm of nationally recognized standing, reasonably acceptable to the audited Party, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of the other Party (and its Affiliates and sublicensees) as may be reasonably necessary to verify the accuracy of such Collaboration Expenses, Net Sales, or Operating Profits or operating Losses, as applicable, for any * ending not more than * prior to the date of such request; provided, however, that neither Party shall have the right to conduct more than * such audit in any * . The accounting firm shall disclose to each Party whether such Collaboration Expenses, Net Sales, or Operating Profits or Operating Losses, as applicable, are correct or incorrect and the specific details concerning any discrepancies, No other information shall be provided to the requesting party. * . The results of such accounting firm shall be final, absent manifest error.

4.5.3 Payment of Additional Amounts. If, based on, the results of such audit, additional payments are owed by a Party under this Agreement, such Party shall make such additional payments, * , within * after the date on which such accounting firms written report is delivered to such Party,

4.5.4 Confidentiality. The auditing Party shall treat all information subject to review under this section 4.5 in accordance with the confidentiality Provisions of Article 6 and shall cause its accounting firm to enter into a reasonably acceptable confidentiality agreement with the audited Party obligating such firm to maintain all such financial information in confidence pursuant to such confidentiality agreement.

ARTICLE 5 -
UNILATERAL AND THIRD PARTY DEVELOPMENT AND
COMMERCIALIZATION

Section 5.1 Unilateral Development and Commercialization.

5.1.1 Opting-Out by a Party. Each Party (i.e., Medarex, on the one hand, and Avalon, on the other hand) (the Opting-Out Party) shall have the right, on * written notice to the other (an Opt-Out Notice), to elect not to proceed with the research, development and commercialization (Opt-Out) of all Collaboration Products with respect to a given Collaboration Target at any time, provided that such Party shall be responsible for all budgeted costs and expenses associated with the research and development activities with respect to such Collaboration Product(s) that such Party has committed to in the applicable Project Budget as necessary to complete that phase of research and development (e.g., toxicology studies in support of an IND or phase I, phase II or phase III studies) that was under way when such Party Opted-Out. By way of clarification, if a Party Opts-Out of a Collaboration Product with respect to a collaboration Target, such Party will be deemed to have Opted-Out with respect to all Antibody Products with respect to the same Collaboration Target.

5.1.2 Rights and Obligations of Parties with Respect To Unilateral Products.

(a) Unilateral Development and Commercialization. Upon receipt by a Party of an Opt-Out Notice, the receiving Party shall have the right, on written notice to the Opting-Out Party within * following receipt of the Opt-Out notice (an Election Notice), to proceed unilaterally with the research, development and commercialization of all Collaboration Antibodies and Collaboration Products to the applicable Collaboration Target (each such antibody and product, a Unilateral Product) pursuant to the separate agreement with the Opting-Out Party attached hereto as Appendix D-1 or Appendix D-2, as applicable (each, a Unilateral Development and Commercialization Agreement). Upon receipt by Avalon of an Election Notice from Medarex with respect to a Collaboration Target, the Unilateral Development and Commercialization Agreement set forth in Appendix D-1 shall be automatically amended to include such Collaboration Target and any Antibody Products with respect thereto. Upon receipt by Medarex of an Election Notice from Avalon with respect to a Collaboration Target, the Unilateral Development and Commercialization Agreement set forth in Appendix D-2 shall be automatically amended to include such Collaboration Target and any Antibody Products with respect thereto. Upon such amendment of a Unilateral Development and Commercialization Agreement pursuant to this Section 5.1.2, the applicable Antigen shall cease to be a Collaboration Target and Appendix C shall be amended accordingly, all Antibodies and all Antibody Products with respect to such former Collaboration Target shall cease to be

Collaboration Antibodies or Collaboration Products, as applicable, and any licenses granted pursuant to Article 3, with respect to such Antigen and any Antibodies and Antibody Products with respect thereto, shall terminate. The Parties shall work together to ensure a smooth and orderly transition of the Unilateral Products to the non-Opting-Out Party, including the assignment of any contracts with respect to the Exploitation of such Unilateral Products to the non-Opting-Out Party, and the assumption by the non-Opting-Out Party of any obligations thereunder. Except for the obligations provided for in Section 5.1.1, the Opting-Out Party shall have (x) no further financial obligation to support or otherwise fund any additional efforts in respect of such Unilateral Products, and (y) no obligation, responsibility, or authority regarding such additional efforts in respect of such Unilateral Products. In the event that neither Party elects to proceed with the research, development or commercialization of any Collaboration Product with respect to a Collaboration Target, the rights and obligations of the Parties with respect to such Collaboration Target shall be governed by Sections 5.2 and 5.3.

(b) Opt-Out of Unilateral Products. If, at any time, the non-Opting Out Party elects to Opt-Out of all Unilateral Products with respect to a Unilateral Target (as defined in the applicable Unilateral Development and Commercialization Agreement) pursuant to such Unilateral Development and Commercialization Agreement and the other Party does not elect to proceed unilaterally with the research, development and commercialization of such Unilateral Products, such Unilateral Target shall become a Collaboration Target and all such Unilateral Products shall become Dormant Products pursuant to Section 5.3 and the non-Opting Out Party shall, without any additional consideration, assign * of its right, title and interest in and to any product Trademark and all Regulatory Documentation with respect to such Unilateral Products, including any Regulatory Approvals and applications therefor (but excluding any Regulatory Documentation comprising Production Process Technology, including any drug master file), to the other Party. In the event the Parties elect to proceed jointly with the research, development and commercialization of such Dormant Product as a Collaboration Product pursuant to Section 5.3 or to sublicense such Dormant Product to a Third Party pursuant to Section 5 (whereupon such Dormant Product shall become a Collaboration Product), all milestone payments that were paid by the non-Opting-Out Party to the Opting-Out Party with respect to such Dormant Product under the applicable Unilateral Development and Commercialization Agreement shall be refunded by the Opting-Out Party and the Opting-Out Party shall reimburse the non-Opting-Out Party for * of its Unilateral Expenses (as defined in the applicable Unilateral Development and Commercialization Agreement) in connection with the Exploitation of such Dormant Product under the applicable Unilateral Development and Commercialization Agreement.

Section 5.2 Third-Party Development and Commercialization of Collaboration Products. If both Parties do not elect to proceed with the development and commercialization of a Collaboration Product in one or more countries in the Territory, the Parties shall have the right, at any time, to license rights to such Collaboration Product to Third Parties in one or more such countries on such terms and conditions as the Parties may mutually agree; provided that (a) any such sublicense with respect to the Medarex Technology shall be governed by the procedures set forth in Sections 3.3.5 and 3.4 and any such sublicense with respect to any other Technology of a Party shall be governed by the procedures set forth in Section 3.4; and (b) if there is any dispute between the Parties as to whether or not to grant such a license, no such license shall be granted

and such dispute shall not be subject to litigation or any other Third Party dispute resolution mechanism.

Section 5.3 Dormant Products. If both Parties do not elect to proceed with the development and commercialization of a particular Collaboration Product with respect to a Collaboration Target, and the Parties have not licensed rights to such Collaboration Product to a Third Party pursuant to Section 5.2 that would be inconsistent therewith, (each such Collaboration Product with respect to a Collaboration Target may also be referred to as a Dormant Product) either Party shall have the right at any time, subject to Section 3.3, to bring such Dormant Product to the Steering Committee to discuss whether to initiate or reinitiate the research, development or commercialization of such Dormant Product. The initiating Party shall specify the reasons for proposing to initiate or reinitiate such research, development or commercialization. If, within thirty (30) days after the receipt of such notice, the other Party fails to notify the interested Party in writing that it wishes to participate in the research, development or commercialization of such Dormant Product, then the interested Party shall have the fight to pursue research, development or commercialization of such Dormant Product as a Unilateral Product pursuant to Section 5.1, provided that no Collaboration Product or Unilateral Product with respect to the same Collaboration Target or Unilateral Target as such Dormant Product is being Exploited under this Agreement or by the other Party under a Unilateral Development and Commercialization Agreement.

ARTICLE 6 -
CONFIDENTIALITY

Section 6.1 Definition Confidential Information of a Party shall mean all information and know-how and any tangible embodiments thereof provided by or on behalf of such Party to the other Party either in connection with the discussions and negotiations pertaining to, or in the course of performing, this Agreement or the Unilateral Development and Commercialization Agreements, including the terms of this Agreement and the Unilateral Development and Commercialization Agreements; data; knowledge; practices; processes; ideas; research plans; engineering designs and drawings; research data; manufacturing processes and techniques; scientific, manufacturing, marketing and business plans; and financial and personnel matters relating to the disclosing Party or to its present or future products, sales, suppliers, customers, employees, investors or business. For purposes of this Agreement, notwithstanding the Party that disclosed such information or know-how, all Avalon Know-How and all information or know-how with respect thereto, shall be Confidential Information of Avalon and all Medarex know-how, including all Mice-Related Know-How, and all information and know-how with respect thereto, shall be Confidential Information of Medarex. For the avoidance of doubt, Avalon shall be the receiving Party with respect to the Mice-Related Technology irrespective of the Party that developed or disclosed such Technology. For purposes of this Agreement, subject to section 7.1.5, Collaboration Technology, with respect to confidentiality and non-use obligations of Medarex, shall be Confidential Information of Avalon, and Medarex shall be the receiving Party, and, with respect to confidentiality and non-use obligations of Avalon, shall be Confidential Information of Medarex, and Avalon shall be the receiving Party.

Section 6.2 Exclusions. Notwithstanding the foregoing, information or know-how of a Party shall not be deemed Confidential Information with respect to a receiving Party for purposes of this Agreement, if such information or know-how:

(a) was already known to the receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, at the time of disclosure to such receiving Party;

(b) was generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or was otherwise part of the public domain, at the time of its disclosure to such receiving Party;

(c) became generally available or known to parties reasonably skilled in the field to which such information or know-how pertains, or otherwise became part of the public domain, after its disclosure to such receiving Party through no fault of a Party other than the party that Controls such information and know-how;

(d) was disclosed to such receiving Party or its Affiliates, other than under an obligation of confidentiality or non-use, by a Third Party who had no obligation to the Party that Controls such information and know-how not to disclose such information or know-how to others; or

(e) was independently discovered or developed by such receiving Party or its Affiliates, as evidenced by their written records, without the use of Confidential Information belonging to the Party that Controls such information and know-how, except with respect to the Mice-Related Know-How, which shall be and remain Confidential Information of Medarex.

Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of a Party merely because the Confidential Information is embraced by more general information in the public domain or in the possession of such Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of a Party merely because individual elements of such Confidential Information are in the public domain or in the possession of such Party unless the combination and its principles are in the public domain or in the possession of such Party.

Section 6.3 Disclosure and Use Restriction. Except as expressly provided herein, the Parties agree that, for the Term and for * thereafter, each Party and its Affiliates and sublicensees shall keep completely confidential and shall not publish or otherwise disclose and shill not use for any purpose except for the purposes contemplated by this Agreement any Confidential Information of the other Party, its Affiliates or sublicensees.

Section 6.4 Authorized Disclosure. Each Party may disclose Confidential Information of the other Party to the extent that such disclosure is:

6.4.1 Required by Governmental Order. Made in response to a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state,

provincial or local governmental or regulatory body of competent jurisdiction;provided, however, that such Party shall first have given notice to such other Party and given such other Party a reasonable opportunity to quash such order and to obtain a protective order requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or agency or, if disclosed, be used only for the purposes for which the order was issued; and provided further that if a disclosure order is not quashed or a protective order is not obtained, the Confidential Information disclosed in response to such court or governmental order shall be limited to that information which is legally required to be disclosed in response to such court or governmental order;

6.4.2 Required by Law. Otherwise required by law; provided, however, that the disclosing Party shall (a) provide the other Party with reasonable advance notice of and an opportunity to comment on any such required disclosure, (b) if requested by such other Party, seek confidential treatment with respect to any such disclosure to the extent available, and (c) use good faith efforts to incorporate the comments of such other Party in any such disclosure or request for confidential treatment;

6.4.3 Required by Regulatory Authority. Made by such Party to the Regulatory Authorities as required in connection with any filing, application or request for Regulatory Approval; provided, however, that reasonable measures shall be taken to assure confidential treatment of such information.

6.4.4 Required by Agreement. Made by such Party, in connection with the performance of this Agreement to Affiliates, permitted sublicensees, research parties, employees, consultants, representatives or agents, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6; or

6.4.5 Required by Certain Third Parties. Made by such Party to existing or potential acquirers or meager candidates; existing or potential pharmaceutical collaborators (to the extent contemplated hereunder); investment bankers; existing or potential investors, venture capital films or other financial institutions or investors for purposes of obtaining financing; or Affiliates, each of whom prior to disclosure must be bound by obligations of confidentiality and non-use at least equivalent in scope to those set forth in this Article 6. Notwithstanding this Section 6.4.5, Avalon shall not disclose any item of Medarexs Confidential Information to any existing or potential acquirer, merger partner or collaborator that is substantially involved in the Exploitation of Antibodies or Antibody Products without first providing Medarex with reasonable advance written notice of each such disclosure.

Section 6.5 Use of Name. Each Party may use the name, insignia, symbol, trademark, trade name or logotype of the other Party only (a) in connection with announcements and other permitted disclosures relating to this Agreement and the activities contemplated hereby, (b) as required by Applicable Law, and (c) otherwise as agreed in writing by such other Party.

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