COLLABORATION AGREEMENT

1.1

“Affiliate” means (a) a business entity which owns, directly or indirectly, more than fifty percent (50%) of the voting shares or other means of control of a Party; or (b) a business entity in which more than fifty percent (50%) of the voting shares or other means of control are owned by a Party, either directly or indirectly; or (c) a business entity, the majority ownership of which is directly or indirectly common to the majority ownership of a Party. Anything to the contrary in this paragraph notwithstanding, [***], a [***] corporation (“[***]”), and [***], a [***] corporation (“[***]”), shall not be deemed an Affiliate of Roche until the existing [***] agreements pursuant to which Roche has relinquished [***] rights in [***] and [***], respectively, expire or are earlier terminated or otherwise are in relevant part no longer of force or effect or earlier if Roche provides written notice to Pharmasset of its intent to have [***] and/or [***] treated as an Affiliate under this Agreement.

1.2

“Agreement Term” means the term of this Agreement, as more fully described in Section 17.1.

1.3

“API” means active pharmaceutical ingredient.

1.4

“Bundled Product” means Product(s) sold to a Third Party for use with one or more other products or services, wherein the Product(s) and the other product or services are sold for one unit price, even though packaged separately.

1.5

“Claim” shall have the meaning given in Section 19.1(a).

1.6

“CMC Derisking Activities” shall have the meaning given in Schedule 8.

1.7

“CMC Subcommittee” shall have the meaning given in Section 8.1(e).

1.8

“Collaboration” means discovery and development by the Parties of Primary Compounds and Potential Licensed Compounds during the Collaboration Period, and thereafter development and commercialization of Licensed Compounds by Roche and Pharmasset, in each case pursuant to this Agreement.

1.9

“Collaboration Period” means the period of time commencing January 1, 2005 and ending [***], unless extended by Roche as per Section 4.4.

1.10

“Combination Product” means any co-formulated product containing both a pharmaceutically active agent that causes it to be considered a Product and one or more other pharmaceutically active agents that are not Licensed Compounds.

1.11

“Compound Claim” shall mean, for a given Product, a claim in a Pharmasset Patent Right, Joint Patent Right or Roche Patent Right Covering the molecule per se of a Licensed Compound that is contained, in whole or as a component thereof, as an active ingredient of such Product.

1.12

“Control” or “Controlled” means, with respect to any intellectual property right, possession by a Party of the ability (whether by ownership, license or otherwise) to grant access, a license or a sublicense to such intellectual property right without violating the terms of any agreement or other arrangement with any Third Party.

1.13

“Cost of Goods” means the manufacturing [***] of either (a) [***], or (b) [***], provided that such [***]. Cost of Goods shall include [***] and [***]. Notwithstanding the foregoing, in the event that [***]. For clarity, “Cost of Goods” shall be [***].

1.14

“Cover” (including the variations such as “Covered”, “Coverage” or “Covering”) means that the selling of a given compound or product would infringe a Patent Right (including pending claims that, if issued, would be infringed so long as the pendency of the patent application and any parent applications to which such patent application claim priority have not been pending for more than ten (10)

years) in the absence of a license under such Patent Right. The determination of whether a compound or product is Covered by a particular Patent Right shall be made on a country-by-country basis.

1.15

“Development Plan” means the plan of development for a Licensed Compound developed by the Parties, outlining the global development of such Licensed Compound through Regulatory Approval. The initial Development Plan for the Primary Compound is attached as Schedule 1. The Parties may amend each Development Plan from time to time through the Joint Development and Marketing Committee in accordance with Section 9.3.

1.16

“Dispute” shall have the meaning given in Section 18.2.

1.17

“Effective Date” shall have the meaning given in the first paragraph hereof.

1.18

“End of Phase 1” means, for a given Potential Licensed Compound, the completion of all the criteria listed in Schedule 5 during the Collaboration Period.

1.19

“EU MAA Filing” means an application for marketing authorization filed in any country in the European Union or Switzerland for a given Product.

1.20

“European Approval” means all Regulatory Approvals necessary for selling and marketing a Product in an European Major Market Country.

1.21

“European Major Market Country” means the [***].

1.22

“European Union” means the countries comprising the European Union as of the Effective Date.

1.23

“Executives” shall have the meaning given in Section 8.1(c).

1.24

“Expiration Date” shall have the meaning given in Section 17.1.

1.25

“FDA” means the US Food and Drug Administration.

1.26

“Field” means human healthcare for all indications, including the HCV Indication.

1.27

“GLP Tox Completion” means, for a given Potential Licensed Compound, the transmittal to Roche of all of the data from all of the studies and activities criteria listed in Schedule 4, in the form of a final report, including statistical analysis of such data.

1.28

“HCV Indication” means treatment or prevention of hepatitis C virus infection in humans.

1.29

“HCV Target Screening Patent License” means any license to a Patent Right Covering an assay, technology platform or research tool for screening drug

candidates that inhibit HCV polymerase, but shall not include any Pre-existing Pharmasset Third Party License.

1.30

“IND” means an Investigational New Drug Application filed with the FDA, or the foreign equivalent, for human clinical testing of a drug.

1.31

“Initiation of Phase 1” means the date that a patient is first dosed with a Product in a Phase 1 clinical trial.

1.32

“Initiation of Phase 2” means the date that a patient is first dosed with a Product in a Phase 2 clinical trial whose interim assessment, as decided by the Joint Development and Marketing Committee, will be used to support a Phase 3 clinical trial.

1.33

“Initiation of Phase 3” means the date that a patient is first dosed with a Product in a Phase 3 clinical trial. In the event a Phase 2 clinical trial and a Phase 3 clinical trial constitute component parts of a combined trial, “Initiation of Phase 3” means the formal commencement date pursuant to the applicable protocol of the Phase 3 clinical trial component part.

1.34

“Japan Approval” means all Regulatory Approvals necessary for selling and marketing a Product in Japan.

1.35

“Japan NDA Filing” means an application for marketing authorization filed in Japan for a given Product.

1.36

“JDMC” shall have the meaning given in Section 8.1.

1.37

“Joint Inventions shall have the meaning given in Section 14.1(a).

1.38

“Joint Patent Rights” shall have the meaning given in Section 14.1(c).

1.39

“JRC” shall have the meaning given in Section 8.2.

1.40

“Know-How” means data, knowledge and information, including materials, samples, chemical manufacturing data, toxicological data, pharmacological data, preclinical data, assays, platforms, formulations, specifications, quality control testing data, that are necessary or useful for the discovery, manufacture, development or commercialization of Licensed Compounds or Products.

1.41

“Launch” means, with respect to a Product in a country, the date of the first commercial sale to a Third Party of the given Product following Regulatory Approval in the given country.

1.42

“Licensed Collaboration Compound” means a Licensed Compound other than a Primary Compound.

1.43

“Licensed Compound” means Primary Compound, and if Roche exercises its Option for a given Potential Licensed Compound, then also the given Potential Licensed Compound and its pro-drugs.

1.44

“Major Market Countries” means the [***] and any European Major Market Country.

1.45

“Option” shall have the meaning given in Section 2.1(c).

1.46

“Option Exercise Period” means the period commencing on the Effective Date and ending ninety (90) days after the end of the Collaboration Period.

1.47

“Party” means Roche or Pharmasset, and “Parties” means Roche and Pharmasset.

1.48

“Patent” means any patent or patent application, in any country, including any patents issuing on such patent application, and further including any substitution, extension or supplementary protection certificate, reissue, reexamination, renewal, division, continuation or continuation-in-part of any of the foregoing and any independently patentable improvements to any of the foregoing.

1.49

“Patent Rights” means all rights under any Patent.

1.50

“Pharmasset Adjusted Gross Sales” means the amount of [***] of (i) [***], (ii) [***], (iii) [***], (iv) [***] and (v) [***]. [***] will be [***]. For the avoidance of doubt, the [***]. The calculation for Pharmasset Adjusted Gross Sales shall be consistently applied and made in accordance with financial and accounting standards used by Pharmasset in preparing its audited financial statements.

1.51

“Pharmasset Indemnified Parties” shall have the meaning given in Section 19.1(a).

1.52

“Pharmasset Inventions” shall have the meaning given in Section 14.1(b).

1.53

“Pharmasset Know-How” means all Know-How that Pharmasset owns, or otherwise has the right to grant rights to use, during the Agreement Term.

1.54

“Pharmasset Net Sales” means Pharmasset Adjusted Gross Sales [***] of [***] on a [***] (e.g. [***]). The calculation for Pharmasset Net Sales shall be consistently applied and made in accordance with financial and accounting standards used by Pharmasset in preparing its audited financial statements.

1.55

“Pharmasset Patents” means Patents included in the Pharmasset Patent Rights.

1.56

“Pharmasset Patent Rights” means all Patent Rights that are necessary or useful for the discovery, manufacture, development or commercialization of Licensed Compounds or Products, that Pharmasset owns or otherwise Controls, and has the right to grant rights under, during the Agreement Term, including without limitation, those Patent Rights arising from Pharmasset Inventions.

1.57

“Pharmasset Territory” means Latin America (i.e., Mexico, the Caribbean, and Central and South America) and the Korean peninsula (i.e., North Korea and South Korea).

1.58

“Phase 1” means the first phase of human clinical trials of a drug required by the FDA or other equivalent regulatory authority to gain evidence of safety in enrollees, as described in 21 C.F.R. Part 312, as it may be amended.

1.59

“Phase 2” means the second phase of human clinical trials of a drug required by the FDA or other equivalent regulatory authority to gain evidence of efficacy in the target population, determine optimal dosage, and obtain expanded evidence of safety for Product(s), as described in 21 C.F.R. Part 312, as it may be amended.

1.60

“Phase 3” means the third phase of human clinical trials of a drug required by the FDA or other equivalent regulatory authority to gain evidence of efficacy in the target population and obtain expanded evidence of safety for Product(s), as described in 21 C.F.R. Part 312, as it may be amended.

1.61

“POC Study” means a [***] Phase 1 study designed to show clinical proof of concept in a multiple-ascending-dose study.

1.62

“Potential Licensed Compound” means any [***] (excluding any [***]) owned or Controlled by Pharmasset, other than a Primary Compound, which has been screened for HCV polymerase inhibition and has been shown to have activity against HCV polymerase, in accordance with Schedule 1.62. Potential Licensed Compound shall not include Gemcitibine or derivatives or pro-drugs thereof. For clarity, no [***] shall, at any time [***], be deemed [***].

1.63

“Pre-Existing Pharmasset Third Party Licenses” means the Third-Party licenses obtained by Pharmasset on or before the Effective Date of this Agreement listed in Schedule 7A hereto.

1.64

“Pre-Existing Roche Third Party Licenses” means the Third-Party licenses obtained by Roche on or before the Effective Date of this Agreement listed in Schedule 7B hereto.

1.65

“Primary Compound” means the compound known as PSI-6130 and its pro-drugs.

1.66

“Primary Product” means any and all products that include, in whole or as a component thereof, Primary Compound.

1.67

“Product” means any and all products that include, in whole or as a component thereof, Licensed Compound or Licensed Collaboration Compound.

1.68

“Reasonable Diligence” means the [***] standard of effort as used by such Party, or in any [***], for the activities to be undertaken pursuant to this Agreement for [***]. It is understood that such [***]. The Parties acknowledge that [***] do not always

[***]. Whether [***] has exercised Reasonable Diligence (i) with respect to [***], (ii) with respect to [***].

1.69

“Regulatory Approval” means any approvals (including pricing and reimbursement approvals), licenses, registrations or authorizations of any national or international or local regulatory authority, department, bureau or other governmental entity, necessary for the manufacture, marketing and sale of a Product in a regulatory jurisdiction in the Territory.

1.70

“Relinquished Compound” means a Potential Licensed Compound for which Roche has relinquished rights in accordance with Sections 2.1(h), 4.2(a)(iii) or 4.2(b)(ii).

1.71

“Relinquished Product” shall have the meaning given in Section 2.1(h).

1.72

“Research Plan” means the plan of research attached as Schedule 2, developed by the Parties, outlining the work expected to be performed with respect to a Potential Licensed Compound or a pro-drug of the Primary Compound as part of the Collaboration, as such plan may be updated from time to time as provided in this Agreement.

1.73

“Rights” shall have the meaning given in Section 2.1(h).

1.74

“Roche Adjusted Gross Sales” means the amount of [***], of (i) [***], (ii) [***], (iii) [***], (iv) [***], and (v) [***]. [***] will be [***]. For the avoidance of doubt, [***].

1.75

“Roche Indemnified Parties” shall have the meaning given in Section 19.1(b).

1.76

“Roche Inventions” shall have the meaning given in Section 14.1(a).

1.77

“Roche Know-How” means all Know-How that Roche owns, or otherwise has the right to grant rights to use, during the Agreement Term.

1.78

“Roche Net Sales” means Roche Adjusted Gross Sales [***] of (i) [***], or (ii) [***] on a [***] (e.g. [***]). [***].

1.79

“Roche Patents” means Patents included within the Roche Patent Rights.

1.80

“Roche Patent Rights” means all Patent Rights that are necessary or useful for the discovery, manufacture, development or commercialization of Licensed Compounds or Products, that Roche owns or otherwise Controls, and has the right

to grant rights under, during the Agreement Term, including without limitation, those Patent Rights arising from Roche Inventions.

1.81

“Roche Territory” means all countries and territories in the world other than the Pharmasset Territory.

1.82

“Third Party” means a person or entity other than (i) Pharmasset or any of its Affiliates or (ii) Roche or any of its Affiliates.

1.83

“US” means the United States of America and its possessions and territories.

1.84

“US Launch” means Launch in the US.

1.85

“US NDA Filing” means a New Drug Application filed with the FDA for a Product.

1.86

“Valid Claim” means a claim in a Patent that Covers a Product and (i) has not been held permanently revoked, unenforceable or invalid by a final unappealable decision of a court or government agency of competent jurisdiction over such claim, (ii) has not been admitted to be invalid or unenforceable through disclaimers, consent decrees or otherwise or (iii) in the case of a patent application, has not been pending for more than [***] ([***]) years after the filing of its first priority application.

1.87

“Valid Compound Claim” means a Valid Claim that is a Compound Claim.

2.1

License Grants; Option.

(a)

Subject to the terms and conditions of this Agreement, Pharmasset hereby grants to Roche, with respect to Primary Compound, an exclusive license, including the right to grant sublicenses in accordance with Section 2.3, under the Pharmasset Patent Rights, and to use the Pharmasset Know-How, solely to make, use, offer for sale, sell and import such Products containing a Primary Compound in the Roche Territory.

(b)

Subject to the terms and conditions of this Agreement, Roche hereby grants to Pharmasset, with respect to each Licensed Compound, an exclusive license, including the right to grant sublicenses in accordance with Section 2.3, under the Roche Patent Rights, and to use the Roche Know-How, solely to make, use, offer for sale, sell and import Products containing such Licensed Compounds in the Pharmasset Territory.

(c)

Subject to the terms and conditions of this Agreement, commencing on the Effective Date and ending at the conclusion of the Option Exercise Period, Pharmasset hereby grants to Roche, with respect to each Potential Licensed Compound, the right to exercise an option (“Option”) to obtain an exclusive license, including the right to grant sublicenses in

accordance with Section 2.3, under the Pharmasset Patent Rights, and to use the Pharmasset Know-How, in each case solely to make, use, offer for sale, sell and import Products containing such Potential Licensed Compound in the Roche Territory.

(d)

If Roche has exercised its Option for a particular Potential Licensed Compound, then, subject to the terms and conditions of this Agreement, Roche shall thereby have, with respect to such designated Potential Licensed Compound, an exclusive license, including the right to grant sublicenses in accordance with Section 2.3, under the Pharmasset Patent Rights, and to use the Pharmasset Know-How, in each case solely to make, use, offer for sale, sell and import Products containing Potential Licensed Compound in the Roche Territory.

(e)

Notwithstanding anything else contained herein to the contrary, Pharmasset at all times reserves such rights in the Pharmasset Patents and the Pharmasset Know-How as is necessary to allow Pharmasset to research and develop Potential Licensed Compounds, and manufacture Licensed Compounds and Products, anywhere in the world.

(f)

Roche may exercise its Option for a given Potential Licensed Compound by giving Pharmasset written notice to such effect prior to the conclusion of the Option Exercise Period, and by (i) making payment to Pharmasset of either (A) the payment specified in Section 4.2(a)(i) or (B) the payment specified in Section 4.2(a)(ii), or (ii) taking such other actions to exercise its Option as provided in Sections 3.1(d), 4.2(c), or 4.2(d).

(g)

Prior to [***] but after [***], Pharmasset may, [***].

(h)

If Roche declines to exercise its Option pursuant to Section 2.1(c) for a given Potential Licensed Compound, either pursuant to Section 4.2, or in response to Pharmasset’s request pursuant to Section 2.1(g), Roche shall relinquish its right to license that particular Potential Licensed Compound and any Products containing such Potential Licensed Compound as a Licensed Compound; and any such relinquished Potential Licensed Compound shall be deemed a Relinquished Compound. During the [***] if Pharmasset wishes to [***], then the following procedures must be followed and the following conditions must be satisfied before Pharmasset may [***]:

(i)

[***];

(ii)

[***];

(iii)

[***]. Nothing in this Section 2.1(h)(iii) shall require [***]; and

(iv)

[***].

2.2

Pharmasset’s Rights to Grant Licenses to Third Parties. Pharmasset shall not, without Roche’s prior written consent, grant a right or license to any Third Party, under any Pharmasset Patent Right, in the Roche Territory, to make, use, offer for sale, sell or import any [***] (excluding any [***]) for an HCV Indication, except as otherwise provided in Section 2.1(h). Pharmasset may, without Roche’s prior consent, grant a right or license to any Third Party under any Pharmasset Patent Right, to make, use, offer for sale, sell or import any [***], which is not a Licensed Compound or Potential Licensed Compound, for any other indication, except as provided in Section 2.1(h).

2.3

Sublicense Rights.

(a)

Subject to the restriction set forth in Section 2.3(b) below, the rights and licenses granted to Roche shall include the right of Roche to grant sublicenses to its Affiliates and Third Parties to make, use, offer for sale, sell or import Products in the Territory for use in the Field. If Roche grants such a sublicense, Roche shall ensure that all of the applicable terms and conditions of this Agreement shall apply to the Affiliate or Third Party sublicensee to the same extent as they apply to Roche for all purposes. Roche assumes full responsibility for the performance of all obligations and observance of all terms so imposed on such Affiliate or Third Party sublicensee and shall itself account to Pharmasset for all payments due under this Agreement by reason of such sublicense.

(b)

Notwithstanding Section 2.3(a), [***].

2.4

Pharmasset Co-Promotion Right. Pharmasset shall have the right to co-promote any Product in the US, as specified in this Section 2.4. For purposes of this Agreement, “co-promote” and “co-promotion” shall mean the marketing, promotion, detailing and advertisement of Product by or on behalf of Pharmasset, or any of its Affiliates, under the relevant Regulatory Approvals and the then existing trademarks. “Co-promote” and “co-promotion” shall not mean the sale or distribution of a Product. Pharmasset may exercise its co-promotion right with regard to a Product by giving written notice thereof to Roche at any time during the period commencing upon NDA Filing in the US for such Product and ending three (3) months following such date, provided that at the time of such exercise Pharmasset has an established sales force in the US directed to sales to HIV treatment providers. Upon Pharmasset’s exercise of its co-promotion right, the Parties shall negotiate in good faith and enter into a written co-promotion agreement (the “Co-Promotion Agreement”) to be executed reasonably prior to the anticipated first Launch of such Product. In addition to any other terms agreed to by the Parties, the Co-Promotion Agreement shall contain the terms set forth in Schedule 3 hereto.

3.1

Diligence.

(a)

Pharmasset shall use Reasonable Diligence in proceeding with the discovery and development of the Potential Licensed Compounds, except that Pharmasset’s obligation hereunder shall expire upon the expiration of the Option Exercise Period.

(b)

From and after (i) the Effective Date with regard to the Primary Compound, and (ii) the effective date of Roche’s exercise of its Option with regard to a given Potential Licensed Compound,[***] shall [***], or [***], as the case may be, including [***].

(c)

[***] shall [***], as applicable.

(d)

If Pharmasset fails to use Reasonable Diligence in the performance of GLP Tox Completion activities for a Potential Licensed Compound (unless the JRC determines that such activities are not necessary for development of such Potential Licensed Compound), then Roche shall have the right to exercise its Option for such Potential Licensed Compound at no cost to Roche. If Roche fails to use Reasonable Diligence in the performance of the Development Plan with respect to a Licensed Compound (including, in the case of early exercise of an Option, any remaining GLP Tox Completion activities to the extent that the JDMC determines that such activities are necessary for development of such Potential Licensed Compound), then Pharmasset shall have the right to reversion of such Licensed Compound in accordance with the provisions of Section 17.4.