CLINICAL TRIAL SPONSORED RESEARCH AGREEMENT

CONFIDENTIAL TREATMENT REQUEST

CLINICAL TRIAL SPONSORED RESEARCH AGREEMENT

This CLINICAL TRIAL SPONSORED RESEARCH AGREEMENT (this “ Agreement ”) is made effective as of December 5, 2008 (the “ Effective Date ”), by and between PALATIN TECHNOLOGIES, INC., a Delaware corporation having an address of Cedar Brook Corporate Center, 4C Cedar Brook Drive, Cranbury, New Jersey 08512 (“ Palatin ”) and ASTRAZENECA AB, a company incorporated in Sweden under no. 556011-7482 with offices at S-151 85 Södertälje, Sweden (“ AstraZeneca ”).

Recitals

(A)     WHEREAS, AstraZeneca and Palatin are parties to that certain Research Collaboration and License Agreement effective as of January 30, 2007 and amended effective as of June 27, 2008 (collectively, the “ License Agreement ”);

(B)     WHEREAS, as part of the License Agreement, Palatin inter alia granted to AstraZeneca a license to the Licensed Patents and Additional Licensed Patents and a License to certain Compounds and Additional Compounds for use within the Licensed Field (all as capitalized terms are defined in the License Agreement);

(C)     WHEREAS, Palatin is ***;

(D)     WHEREAS, AstraZeneca has determined that it is in its best interests to have ***; and

(E)     WHEREAS, the Parties, in view of the above, wish to enter into the Agreement on the terms set forth herein.

INFORMATION MARKED “***” IS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER RULE 24b-2 Agreement

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1       Definitions

Unless otherwise specifically provided in this Agreement, the following terms shall have the following meanings:

1.1      “ Affiliate ” means, with respect to a Person, any Person that Controls, is Controlled by or is under common Control with such first Person. For purposes of this definition only, “ Control ” means (a) to possess, directly or indirectly, the power to direct the management or policies of a Person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) to own, directly or indirectly, more than fifty percent (50%) of the outstanding voting securities or other ownership interest of such Person.

1.2      “ Agreement ” has the meaning set forth in the preamble of this Agreement.

1.3      “ Applicable Law ” means the federal state and local laws, rules and regulations (as may be amended from time to time) applicable to the conduct of the Study, including without limitation (i) the United States Food, Drug and Cosmetic Act, as amended, and any rules and regulations promulgated thereunder, (ii) Title 21 Code of Federal Regulations ( “CFR” ) Parts 50, 54, 56 and 312, and (iii) all other applicable United States Food and Drug Administration ( “FDA” ) regulations and guidance (including without limitation, those with respect to standards of Good Clinical Practice (GCP) and adverse event reporting).

1.4      *** and any product in a form suitable for applications for human use that contains the compound as the sole active ingredient.

1.5      “ Calendar Quarter ” means each successive period of three (3) calendar months commencing on 1st January, 1st April, 1st July and 1st October.

1.6      “ Calendar Year ” means each successive period of twelve (12) calendar months commencing on 1st January.

1.7      “ Completion Date ” means the date of acceptance of the Final Study Report by AstraZeneca. The Final Study Report *** unless AstraZeneca prior to such date advises Palatin in writing of specific objections to or deficiencies in the Final Study Report, in which event ***.

1.8      “ Effective Date ” means the date as set forth in the preamble to this Agreement.

1.9      “ Existing Clinical Data ” means pre-clinical and clinical data relating to *** the Effective Date.

1.10      “ Existing CMC Data ” means chemistry, manufacturing and controls protocols and data *** the Effective Date.

1.11      “ FDA ” means the United States Food and Drug Administration and any successor agency thereto.

1.12      “ Final Study Report ” means the final report in respect of the Study written by or on behalf of Palatin and summarising the results of the Study as more particularly described in Schedule 1.12

1.13      “ FTE ” means the equivalent of one (1) professional staff member being at least a graduate or a similarly qualified employee or contract employee of Palatin having the requisite skills to fulfil Palatin’s obligations under this Agreement and devoting the equivalent hours of a full time employee. For purposes of this Agreement, “full time” shall mean *** as determined in accordance with Palatin’s regular project hour reporting system. An FTE shall be ***.

1.14      “ FTE Rate ” means the price of one (1) FTE per single Calendar Year. The FTE Rate shall ***. The FTE Rate reflects the fully burdened costs for an FTE. AstraZeneca shall not be responsible for any Palatin *** incurred in pursuit of the Study and services rendered by Palatin under this Agreement, above and beyond the FTE Rate, or for *** but shall be responsible for ***.

1.15      “ Good Clinical Practice ” or “ GCP ” shall have the meaning defined by the ICH Harmonised Tripartite Guideline for Good Clinical Practice, at all times in its most recent version, and in 21 CFR Parts 50, 54, 56, and 312.

1.16      “ Good Manufacturing Practice ” or “ GMP ” means the principle of good manufacturing practice in respect of medicinal products for human use and investigational medicinal products for human use as required by Applicable Law.

1.17      “ Health Authority ” means the FDA and any applicable supra-national, federal, national, regional, state, provincial or local regulatory agency, department, bureau, commission, council or other government entity regulating or otherwise exercising authority with respect to *** or otherwise has power to regulate the conduct of the Study at a Study site or to inspect a Study site.

1.18      “ IND ” means an investigational new drug application filed with the FDA for authorisation to commence human clinical trials in the U.S. as defined in 21 CFR Part 312.

1.19      “ Indirect Taxes ” means value added taxes, sales taxes, consumption taxes and other similar taxes.

1.20      “ Informed Consent ” has the meaning set forth in 21 CFR Part 56.

1.21      “ Informed Consent Materials ” means the information to be provided to potential Subjects in the Study to secure their Informed Consent, including information about any compensation being provided to Subjects for their participation in the Study, pursuant to 21 CFR Part 56.

1.22      “ Institutional Review Board ” or “ IRB ” means an independent body, institutional, regional, national or supranational committee or review board as defined in 21 US CFR Part 56, whose responsibility it is to ensure the protection of rights, safety and well-being of human subjects in a clinical study and responsible for, among other things, reviewing and approving/providing opinion on, the Study Protocol and amendments, subject recruitment materials, methods and Informed Consent Materials.

1.23      “ Investigational Product ” means ***, which is studied or tested in the Study.

1.24      “ Investigator ” shall have the meaning set forth in Section 7.1.

1.25      “ Investigator’s Brochure ” means the compilation of all relevant clinical and non-clinical information and data on the Investigational Product.

1.26      “ JPT ” shall have the meaning set forth in Section 5.1.

1.27      “ License Agreement ” has the meaning set forth in the recitals of this Agreement.

1.28      “ Palatin Clinical Staff ” shall have the meaning set forth in Section 2.3.

1.29      “ Parties ” means AstraZeneca and Palatin and “Party” means either of AstraZeneca or Palatin.

1.30      “ Payments ” has the meaning set forth in Section 10.1.

1.31      “ Person ” means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, incorporated association, joint venture or similar entity or organization, including a government or political subdivision, department or agency of a government.

1.32      “ Regulatory Documentation ” means all protocols, including the Study Protocol, applications, registrations, licenses, authorisations and approvals, all correspondence submitted to or received from FDA or other Health Authorities (including minutes and official contact reports relating to any communications with FDA or other Health Authorities) and all supporting documents and all clinical results and tests, relating to use of Investigational Product in the Study.

1.33      “ Researchers ” shall mean all researchers, experts and other staff engaged by Palatin in the conduct of the Study, including the Palatin Clinical Staff and the Investigators.

1.34      “ Results ” means inventions, discoveries, know-how, data, documentation, reports, materials, writings, techniques and other information, recorded in any form, that are discovered, conceived or otherwise generated through the Study by Palatin or any of the Researchers (other than AstraZeneca).

1.35      “ Site ” shall have the meaning set forth in Section 7.1.

1.36      “ SMC ” shall have the meaning set forth in Section 6.1.

1.37      “ Study ” means ***, all as described in the Study Plan.

1.38      “ Study Documentation ” means all records, accounts, notes, reports and data, collected, generated or used in connection with the Study, whether in written, electronic, optical or other form, including all recorded original observations and notations of clinical activities such as case report forms and all other reports and records necessary for the evaluation and reconstruction of the Study.

1.39      “ Study Efficacy Data ” means Results from the Study relating to ***.

1.40      “ Study Plan ” means the plan attached hereto as Schedule 1.40 , outlining the Study and each Party’s undertakings and obligations, including the allocation of FTEs by Palatin and Third Party subcontracts in relation thereto as the same may be amended from time to time in accordance with Section 6.2.

1.41      “ Study Plan Budget ” shall mean the budget for the Study attached hereto as Schedule 1.41 , as it may be amended from time to time by written agreement of both Parties.

1.42      “ Study Protocol ” means the definitive protocol for the Study included within an IND or other Regulatory Documentation (including but not limited to in the event that the study is initiated by filing a protocol or other Regulatory Documentation under an existing IND held by Palatin) submitted by Palatin to the FDA to commence the Study, provided that such submission shall be made only following written approval of the SMC by authorized representatives of both Parties, it being understood that Sections 6.4.1. and 6.4.2. do not apply to such approval by the SMC.

1.43      “ Study Results ” means all Study Safety Data, all Study Efficacy Data and all other Results, collectively.

1.44      “ Study Safety Data ” means Results from the Study relating *** or any reportable experience pursuant to 21 CFR § 312.32 but excluding ***.

1.45      “ Study Year ” means each successive period of twelve (12) calendar months ending on the last day of each successive anniversary of the Calendar Quarter which includes the Effective Date, it being understood that the initial Study Year may be less than twelve (12) calendar months.

1.46      “ Subject ” means a person recruited to participate in the Study.

1.47      “ Term ” means the period beginning on the Effective Date and continuing until the Agreement terminates in accordance with Article 11

1.48      “ Third Party ” means any Person not including the Parties or the Parties’ respective Affiliates.

1.49      “ U.S. ” means the United States of America, including its territories, possessions and Puerto Rico.

2      ***

2.1       Sponsorship. Palatin shall be ***. Any reference to “sponsor” in this Agreement or a Schedule shall be ***.

2.2       Conduct of Study. Palatin will conduct the Study in the U.S. in accordance with this Agreement, the Study Plan, the Study Protocol and the Investigator’s Brochure, in good scientific manner and in compliance with all Applicable Law, including good laboratory practices, Good Manufacturing Practices and Good Clinical Practices, as well as any condition required by a Health Authority or an IRB. Palatin shall accomplish its responsibilities under this Agreement efficiently and expeditiously and, in particular, conduct the Study within agreed time schedules.

2.3       Facilities and Key Personnel . Palatin shall provide facilities, equipment and manpower that are reasonably necessary to carry out the work undertaken by Palatin under this Agreement at the Sites and such other facilities as may be set out in the Study Plan. The clinical staff designated by Palatin listed on Schedule 2.3 hereto (the “ Palatin Clinical Staff ”) shall be responsible for all Study activities undertaken by Palatin and shall supervise the work of all personnel and Third Party subcontractors engaged by Palatin in the Study. The Palatin Clinical Staff shall serve as the primary contact for AstraZeneca on all matters related to the Study, Study Plan and Study Protocol.

2.4       Subcontracting . Palatin shall, as between the Parties, be solely responsible for the conduct of the Study and completion of the activities set forth in the Study Plan. To the extent set forth in the Study Plan or otherwise explicitly approved by AstraZeneca in writing, Palatin will engage a Third Party contract research organization (“ CRO ”) or other Third Party subcontractors to carry out a portion of Study activities. For the avoidance of doubt, Palatin shall, when using such Third Party subcontractor, ensure that such Third Party subcontractor complies with the provisions of Articles 2 and 3, Sections 4.3., 4.4. and 4.5. and Article 7 (as applicable) and, notwithstanding anything else set forth herein, Palatin shall ***. Any permitted Third Party subcontract shall be subject to the applicable terms and conditions of this Agreement. Any fees or costs due to any Third Party subcontractor ***. AstraZeneca shall reimburse Palatin for such fees or costs to ***. Palatin shall invoice and AstraZeneca shall pay such reimbursement as provided in Section 4.6.

3       Reports and Inspection Rights

3.1      In addition to providing AstraZeneca with the Study Results in accordance with Section 8.1., Palatin shall submit written progress reports to AstraZeneca *** during the conduct of the Study, which reports shall include, but shall not be limited to, a summary of all work done and Study Results achieved during the relevant period.

3.2      Palatin shall submit ***, as *** is specified in the Study Plan, upon Palatin’s receipt thereof ***, it being understood that Sections 6.4.1. and 6.4.2. do not apply to such approval by the SMC. Notwithstanding anything else set forth herein, Palatin shall diligently undertake to have *** Date, provided that such *** may be extended by unanimous decision of the SMC, it being understood that Sections 6.4.1. and 6.4.2. do not apply to such approval by the SMC.

3.3      Palatin shall submit ***, it being understood that Sections 6.4.1. and 6.4.2. do not apply to such approval by the SMC.

3.4      Palatin shall submit the ***, it being understood that Sections 6.4.1. and 6.4.2. do not apply to such approval by the SMC.

3.5      Palatin shall, during the conduct of the Study and for *** after the Agreement terminates in accordance with Article 11, ensure that *** are entitled, during regular business hours, to: (a) monitor the conduct of the Study and inspect the premises where any part of the Study is being, will be or has been conducted, (b) review and audit all Study Documentation and any other books, records and data relating to the Study, and (c) interview any Researchers, provided that ***, and Palatin shall have the right to have its authorized representatives present during any inspection, review, audit or interview. Palatin shall, and shall cause the Researchers to, cooperate with any such activities. Palatin shall promptly inform AstraZeneca of any inspections and the like by authorities that may affect or relate to the Study and shall provide AstraZeneca with a copy of any reports from such inspections.

3.6      Without prejudice to any of its other obligations hereunder, Palatin shall, during the Term, at AstraZeneca’s reasonable request ***. Such assistance shall include providing ***.

4       Study Materials, Funding and Consideration

4.1       Supply *** . Palatin will supply GMP quantities *** (“ API ”) suitable for use in the Study ***.

4.2       Reference to *** . Palatin will, in any Regulatory Documentation required or reasonably necessary to be filed with FDA or otherwise utilized in furtherance of the Study or Study Plan, including but not limited to the Study Protocol, provide ***. To the extent that it is required or reasonably necessary to revise, reformat or otherwise modify *** Palatin shall as promptly as possible notify AstraZeneca thereof in writing and, following AstraZeneca’s written approval, ***.

4.3       Supply *** . Palatin will manufacture or cause to be manufactured, in accordance with GMP and through one or more Third Party subcontractors, *** . Third Party subcontract expenses *** as provided in the Study Plan Budget and Section 4.6.

4.4       Clinical Trial, Laboratory Services, Monitoring, Data Analysis and Related Costs . Palatin shall, either directly or through one or more Third Party subcontractors (subject to Section 2.4.), provide clinical trial sites, clinical investigators, laboratory services, monitoring services, data analysis and other required clinical services in furtherance of the Study, Study Plan and Study Protocol, *** as provided in the Study Plan Budget and Section 4.6. Third Party subcontract expenses, *** as provided in the Study Plan Budget and Section 4.6.

4.5       Regulatory Costs . Palatin shall, either directly or (subject to Section 2.4.) through one or more Third Party subcontractors, provide regulatory services in furtherance of the Study, Study Plan and Study Protocol, and pay all costs and fees required by the FDA, any IRB, or other cost or fee required or reasonably necessary in furtherance of the Study, Study Plan and Study Protocol, *** as provided in the Study Plan Budget and Section 4.6. Third Party subcontract expenses, *** as provided in the Study Plan Budget and Section 4.6.

4.6       Reimbursement of Palatin Direct and Third Party Subcontract Expenses .

4.6.1       AstraZeneca shall *** after Palatin’s submission of an invoice – such invoice to be submitted by Palatin promptly after the Effective Date – pay Palatin for amounts due to Palatin from AstraZeneca pursuant to *** . AstraZeneca shall thereafter, *** after Palatin’s submission of an invoice following the end of each successive Calendar Quarter, pay Palatin for amounts due to Palatin from AstraZeneca pursuant to *** , provided that AstraZeneca will withhold an amount equal to *** pending submission by Palatin of a Final Study Report, and further provided that any payment otherwise due may, in the discretion of AstraZeneca, be delayed during any period when ***.

4.6.2       AstraZeneca shall within *** after submission of the Final Study Report as provided in Section 3.4., pay Palatin for all remaining amounts relating to ***, provided , however , that any such amounts may be permanently withheld by AstraZeneca ***.

4.6.3      Palatin’s invoice shall be sent to AstraZeneca AB, AstraZeneca R&D Mölndal, Finance / Accounting, SE-431 83 Mölndal, Sweden with the attention of *** or such other individual that AstraZeneca may designate by providing Palatin written notice (provided, however, that the attention of *** or such other individual designated by AstraZeneca should not be included in the address section of the invoice) and shall be accompanied by a report from Palatin’s time reporting system on FTE effort and Third Party costs actually spent in relation to Study. Palatin’s invoice shall be payable to Palatin *** after receipt by AstraZeneca at the address set forth above of a correct invoice with the supporting documentation set out above. Payment shall be made to such bank account as Palatin shall have notified AstraZeneca in writing. No later than *** after the Completion Date Palatin shall send a report relating to the FTEs provided by Palatin and budgeted and approved Third Party costs paid by Palatin to the Study during the Term. Without prejudice to any other remedy available to AstraZeneca, any amount paid by AstraZeneca for which Palatin has not verified that it has provided the corresponding number of FTEs or paid budgeted and approved Third Party costs during the Term shall be *** following AstraZeneca’s written request or, at AstraZeneca’s option, deducted by AstraZeneca from subsequent payments to be made by AstraZeneca to Palatin under this Agreement or otherwise, including amounts payable under Section 4.8. of this Agreement.

4.7       Records Retention; Audit.

4.7.1      Palatin shall keep or cause to be kept accurate records or books of account in accordance with applicable generally accepted accounting principles that, in reasonable detail, fairly reflect the reimbursable FTEs. Such books and records shall include attendance records (specifically including name and hours for each attendee), records of the allocation of FTEs to the Study, and the accomplishment of activities measured against the Study Plan, and shall be maintained by Palatin *** following the end of the Calendar Year to which they pertain or such longer period of time required by Applicable Law.

4.7.2      Upon the written request of AstraZeneca during the Term and *** thereafter, Palatin shall permit a certified public accountant or a person possessing similar professional status and associated with an independent accounting firm reasonably acceptable to the Parties to inspect during regular business hours and no more than once per Calendar Year all or any part of Palatin’s records and books necessary to verify such invoices and reports. The accounting firm shall enter into appropriate obligations with Palatin to treat all information it receives during its inspection in confidence. The accounting firm shall disclose to Palatin and AstraZeneca only whether such invoices and reports are correct and details concerning any discrepancies, but no other information shall be disclosed to AstraZeneca. The charges of the accounting firm shall be paid by AstraZeneca, except that if the FTEs allocated were ***.

4.8       Milestone Payments . In consideration of the licenses and other rights granted by Palatin to AstraZeneca herein and subject to the terms and conditions of this Agreement, AstraZeneca shall make the following payments to Palatin.

Within *** of achievement of each respective milestone as described below in this Section 4.8., AstraZeneca shall, after receipt of an invoice, in each case, make the corresponding payment to Palatin.

4.8.1      Two million five hundred thousand U.S. Dollars ($2,500,000) upon ***; and

4.8.2      Two million five hundred thousand U.S. Dollars ($2,500,000) upon ***.

For the sake of clarity, each milestone payment shall be made only once, for an aggregate maximum amount of U.S. $5,000,000 under this Section 4.8.

4.9       Total Obligation . The milestone payments payable by AstraZeneca to Palatin pursuant to Section 4.8., together with the funding to be provided by AstraZeneca to Palatin pursuant to Sections 4.2. through 4.5., inclusive, represent all of AstraZeneca’s financial obligations to Palatin hereunder and Palatin shall not be entitled to any additional compensation or remuneration from AstraZeneca under this Agreement.

4.10       Offset Against Obligations under License Agreement . Each of the amounts payable as milestone payments pursuant to Section 4.8., when and if paid or due, shall constitute an offset against and credit for such amounts as may be payable, at any time, by AstraZeneca to Palatin pursuant to *** the License Agreement. For the avoidance of doubt, if the aggregate maximum amount of U.S. $5,000,000 is paid by AstraZeneca under Section 4.8. of this Agreement, then in the event that Palatin becomes eligible for any payment under *** of the License Agreement, the amount of U.S. $5,000,000 paid by AstraZeneca under Section 4.8. of this Agreement shall be credited against amounts otherwise due under *** of the License Agreement, such that by way of example and not limitation if Palatin were eligible for payments pursuant to *** of the License Agreement, then Palatin would receive a total milestone payment of *** after crediting the U.S. $5,000,000 paid by AstraZeneca under Section 4.8. of this Agreement instead of the *** otherwise payable under the License Agreement. For the purpose of ***. of the License Agreement, any amount paid or due under Section 4.8. of this Agreement shall be deemed as a milestone payment under *** of the License Agreement, such that in the example referred to in the foregoing sentence, the milestone payment set forth under ***, shall be reduced with a total ***, i.e. the aggregate of the amount received under Section 4.8. of this Agreement *** and the amount received under ***.

5       Joint Project Team

5.