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EXHIBIT 10.22

*** TEXT OMITTED AND FILED SEPARATELY

PURSUANT TO A CONFIDENTIAL TREATMENT REQUEST

UNDER 17 C.F.R. SECTION 200.80(b)(4)

AND RULE 406 UNDER THE SECURITIES

ACT OF 1933, AS AMENDED

 

COLLABORATION AGREEMENT

THIS COLLABORATION AGREEMENT (the "AGREEMENT") is made and entered into as

of August 20, 2004 (the "SIGNING DATE") by and between STRUCTURAL GENOMIX, INC.

located at 10505 Roselle Street, San Diego, CA 92121 ("SGX"), and F. HOFFMANN-LA

ROCHE LTD, located at Grenzacherstrasse 124, 4070 Basel, Switzerland, and

HOFFMANN-LA ROCHE INC., located at 340 Kingsland Street, Nutley, New Jersey

07110, USA ( "ROCHE"). SGX and Roche may be referred to herein individually as a

"Party" and collectively as the "Parties."

BACKGROUND

WHEREAS, SGX is in the business of structure directed drug discovery;

WHEREAS, Roche is in the business of discovering, developing,

manufacturing and commercializing pharmaceuticals;

WHEREAS, SGX and Roche wish to enter into a collaborative research program

to identify and generate lead compounds against certain targets; and

NOW, THEREFORE, in consideration of the foregoing and the covenants and

promises contained in this Agreement, the Parties hereby agree as follows:

1. DEFINITIONS

1.1 "Affiliate" means

(a) an organization, which directly or indirectly controls a party

to this Agreement;

(b) an organization, which is directly or indirectly controlled by

a party to this Agreement;

(c) an organization, which is controlled, directly or indirectly,

by the ultimate parent company of a party.

Control as per 1.1 (a) to 1.1(c) is defined as owning more than fifty percent of

the voting stock of a company or having otherwise the power to govern the

financial and the operating policies or to appoint the management of an

organization. With respect to Roche the term "Affiliate" shall not include

Genentech, Inc., 1 DNA Way, South San Francisco, California 94080-4990, U.S.A.

("Genentech") or Chugai Pharmaceutical Co., Ltd, 1-9, Kyobashi 2-chome, Chuo-ku,

Tokyo, 104-8301, Japan ("Chugai"), respectively,

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unless Roche opts for such inclusion of Genentech and/or Chugai by giving

written notice to SGX.

1.2 "Clinical Candidate Selection" means the first dose in an animal GLP

toxicology study.

1.3 "Collaboration" means the activities conducted by the Parties in

connection with the Collaboration Plan.

1.4 "Collaboration Plan" means the plan of research attached as Exhibit

A to this Agreement, as may be amended from time to time by the JSC in

accordance with Section 2.6.

1.5 "Collaboration Product" means any product that comprises or contains

or is developed or manufactured based on a Licensed Compound.

1.6 "Collaboration Target" means the protein target known as

[...***...], or the additional target selected pursuant to Section 2.4. D).

1.7 "Commercially Reasonable Efforts" mean efforts consistent with those

generally utilized by companies of a similar size for their own internally

developed pharmaceutical products of similar market potential, at a similar

stage of their product life taking into account the existence of other

competitive products in the market place or under development, the proprietary

position of the product, the regulatory structure involved, the anticipated

profitability of the product and other relevant factors. With respect to Roche,

it is understood that such Product potential may change from time to time based

upon changing scientific, business and marketing and return on investment

considerations. Notwithstanding the foregoing, the Parties also acknowledge that

Roche (and its Affiliates) do not always seek to market its own products in

every such country or seek to obtain regulatory approval in every such country

or for every potential indication. As a result, the exercise by Roche of

Commercially Reasonable Efforts is to be determined by judging its efforts taken

as a whole.

1.8 "Controls" or "Controlled" means possession of the ability to grant

the licenses or sublicenses as provided for herein, without violating the terms

of any agreement or other arrangement with a Third Party.

1.9 "Derived Compound" means an analog, homolog, isomer, isostere or

other derivative that Roche makes from, derives from or bases upon any compound

within the Early Lead Series by one or more modifications that results in a

compound having a superior profile against an [...***...] target, in one or more

respects, as a candidate for further development than the compound within the

Early Lead Series from which it is derived and which is identified, by or on

behalf of Roche or any of its Affiliates or sub-licensEeS during the Term of the

Collaboration or within [...***...] ([...***...]) years after the Term of the

Collaboration ends. The term "Derivative" shall not include any derivatives made

by Roche or any of its Affiliates or sub-licensees without the use of SGX

BackgroUnD Technology.

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1.10 "Development Event" means any of the events described in Section

3.3.

1.11 "Early Lead Series" means the collection of compounds within a

single chemical series identified in the course of the Collaboration either: (a)

(i) which contains compounds that satisfy the criteria described in Part 1 of

Exhibit B, (ii) in which each of the criteria in Part 2 of Exhibit B are covered

by compounds within the series taken as a whole (but not necessarily by any one

compound), and (iii) is designated by the JSC as an "Early Lead Series" under

Section 2.4(a); or (b) which is designated by the JSC as an "Early Lead Series"

under Section 2.4(b).

1.12 "Effective Date" means October 1, 2004.

1.13 "First Commercial Sale" means the first sale of a Collaboration

Product to a Third Party following the receipt of any Regulatory Approval

required for the sale of Collaboration Product.

1.14 "Fragment" means a compound used in the SGX FAST(TM) screen.

1.15 "Initiation" means the first dosing of the first patient in the

applicable clinical study.

1.16 "JSC" has the meaning ascribed such term in Section 2.6.

1.17 "Know-How" means all ideas, inventions, instructions, designs,

processes, formulas, software, materials, methods, processes, techniques, and

data and all intellectual property rights therein. 1.18 "Licensed Compound"

means a compound within an Early Lead Series or a Derived Compound.

1.19 "Net Sales" "Adjusted Gross Sales" means the amount of gross sales

of the Product invoiced by Roche, its Affiliates and its sub-licensees to

independent third parties less deductions of returns (including allowances

actually given for spoiled, damaged, out-dated, rejected, returned Product sold,

withdrawals and recalls) and return reserves, rebates (price reductions, rebates

to social and welfare systems, charge backs and charge back reserves, government

mandated rebates and similar types of rebates e.g., P.P .R.S, Medicaid), cash

discounts, volume (quantity) discounts granted at the time of invoice, taxes

(value added or sales taxes, government mandated exceptional taxes and other

taxes directly linked to the gross sales amount). "Net Sales" means the amount

calculated by subtracting from the amount of Adjusted Gross Sales a lump sum

deduction of [...***...] percent ([...***...]%) of Adjusted Gross Sales in lieu

of those sales related deductions which are not accounted for on a product by

product basis (e.g. outward freights, postage charges, transportation insurance,

packaging materials for dispatch of goods, custom duties, bad debt, discounts

granted later than at the time of invoicing). Notwithstanding the foregoing,

amounts received by Roche, its Affiliates and sub-licensees for the sale of

Product among Roche, its Affiliates or sub-licensees for resale shall not be

included in the computation of Adjusted Gross Sales and Net Sales.

 

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1.20 "Patent Rights" means patent applications filed in any country

worldwide, including provisionals, utilities, continuations (in whole or in

part), divisionals, reissues, reexaminations, and foreign counterparts thereof,

any patents issued on such applications and any extensions of term,

registrations or confirmations of such patents. 1.21 "Phase 1", "Phase 2" and

"Phase 3" means Phase 1, Phase 2 and Phase 3 clinical trials, respectively, in

each case as prescribed by the U.S. Food and Drug Administration or any

successor entity (the "FDA"), and agencies of other governments of other

countries having similar jurisdiction over the development, manufacturing and

marketing of pharmaceuticals.

1.22 "Regulatory Approval" means the approval of the U.S. Food and Drug

Administration or any regulatory body with similar regulatory authority in any

other jurisdiction in the world, necessary for the marketing and sale of a

pharmaceutical or biotechnology product in the United States, one or more

countries in the European Union or Japan 1.23 "Roche Background Technology"

means Patent Rights and Know-How which are owned or Controlled by Roche on the

Effective Date or during the Term of the Collaboration and are necessary for the

conduct of the Collaboration, including without limitation, Roche Materials.

1.24 "Roche Materials" means all biological and chemical materials,

including but not limited to the biological and chemical materials embodying the

Collaboration Target, any protein, clone or vector used to express the

Collaboration Target, assay protocols and materials, and any compounds provided

by Roche to SGX for the purpose of performing the Collaboration Plan.

1.25 "Royalty Term" means the obligation of Roche to pay royalties under

Section 3.4 shall continue for each Collaboration Product on a Collaboration

Product-by-Collaboration Product and country-by-country basis, until the later

of (i) the expiry of the last Valid Claim in such country claiming such

Collaboration Product and (ii) [...***...] years after the First Commercial Sale

of such Collaboration Product. With regard to the calculation of the [...***...]

year period, the EU shall be considered as one country.

1.26 "SGX Background Technology" means Patent Rights and Know-How which

are owned or Controlled by SGX on the Effective Date or during the Term of the

Collaboration and are necessary for the conduct of the Collaboration or the

exercise of Roche's license rights under Section 4.1(a), including without

limitation compounds within Early Lead Series, but excluding any methods or

technologies comprising SGX's fragment based FAST(TM) lead discovery

technologies, other than synthetic protocols required for the synthesis of

compounds contained within Early Lead Series.

1.27 "SGX Materials" means (1) the biological and chemical materials

embodying compounds within an Early Lead Series or a structure of the

Collaboration Target; and (2) any protein, clone, or vector used to express the

Collaboration Target;

 

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in each case which are developed by SGX in the course of the Collaboration for

the purpose of performing the Collaboration Plan.

1.28 "Term of the Collaboration" means the period commencing on the

Effective Date, and terminating on the [...***...] anniversary of the Effective

Date, which period may be extended by up to [...***...] ([...***...]) months at

Roche's discretion, upon writteN NOTICE.

1.29 "Third Party or Third Parties" means any entity other than Roche or

SGX or their respective Affiliates.

1.30 "Valid Claim" means a claim in any (i) unexpired and issued Patent

Right owned or Controlled by SGX or Roche claiming composition of matter of

compounds that has not been (x) held permanently revoked, unenforceable or

invalid by a final unappealable decision of a court or government agency of

competent jurisdiction over such claim or (y) admitted to be invalid or

unenforceable through disclaimers, consent decrees or otherwise, or (ii) pending

patent application that is a Patent Right owned or Controlled by SGX or Roche

claiming composition of matter of compounds.

2. COLLABORATION.

2.1 Collaboration. Subject to the terms and conditions of this Agreement

Roche and SGX will use commercially reasonable efforts to conduct the

Collaboration in accordance with the Collaboration Plan.

2.2 Provision of Roche Background Technology. Promptly following the

Signing Date and during the Term of the Collaboration, Roche will provide SGX

with reasonable quantities of such Roche Materials and other Roche Background

Technology as agreed to by Roche that are necessary for the conduct of the

Collaboration by SGX.

2.3 Provision of SGX Background Technology. During the Term of the

Collaboration, SGX will provide Roche with reasonable quantities of available

SGX Materials and other SGX Background Technology as agreed by the JSC necessary

for Roche to conduct the Collaboration and exercise its applicable rights under

Article 4.1(a).

2.4 Early Lead Series.

(a) During the Term of the Collaboration, in accordance with the

Collaboration Plan, SGX will provide the JSC with details (and materials for

testing by Roche) of any collection of compounds identified in the Collaboration

which SGX believes to meet the criteria for an Early Lead Series in Section

1.10(a)(i) and (ii). Within thirty (30) days following review of the data by the

JSC, the JSC will formally designate any such collection of compounds as an

Early Lead Series if the collection meets the required criteria in Section

1.10(a)(i) and (ii) and if such collection of compounds is patentably distinct

from any previously designated Early Lead Series.

 

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Upon designation by the JSC of any such Early Lead Series, SGX will provide

Roche with any information or materials, generated under the Collaboration

concerning such Early Lead Series, including but not limited to X-ray

diffraction data, protocols for chemical synthesis, and all assay data, which

has not already been provided.

(b) In the event that a collection of compounds does not meet all

of the criteria in Part B of Exhibit B, upon the request of SGX, the JSC may

designate such collection as an Early Lead Series, notwithstanding that all of

the criteria have not been met.

(c) Roche shall have the right, but not the obligation to accept

more than three Early Lead Series under the Collaboration.

(d) If by the start of the [...***...] month, SGX has not

commenced Fragment elaboration for the Collaboration Target, Roche has the right

to nominate a substitute target in consultation with SGX. Upon acceptance of

such substitute target bY the JSC, such target shall be deemed a Collaboration

Target.

2.5 Records; Reports. At least quarterly during the Term of the

Collaboration SGX will have the obligation to prepare and provide to the JSC a

detailed written report summarizing the progress of the work performed by SGX in

the course of the Collaboration during the preceding quarter. Promptly upon

expiry of the Term of the Collaboration, SGX shall provide a final written

report summarizing its activities during the Collaboration and the results

thereof. Upon the written request of Roche and not more than once in each

calendar year, SGX will permit Roche, at Roche's expense, to have access during

normal business hours to those records of SGX that may be necessary to verify

the basis for any other payments hereunder.

2.6 Joint Steering Committee.

(a) Formation. SGX and Roche will establish a joint steering

committee ("JSC") to oversee the Collaboration.

(b) Membership. The JSC shall be comprised of three (3)

representatives from Roche and three (3) representatives from SGX, designated by

the Parties promptly following the Effective Date. Each Party may replace its

JSC representatives at any time, with written notice to the other Party. The JSC

may name additional members to the JSC from time to time so long as each Party

has an equal number of members. In addition, with prior mutual approval, either

Party may invite non-voting employees, consultants or scientific advisors to

attend meetings of the JSC. One of the three Roche representatives shall be the

appointed Roche Global Alliance Director. The Global Alliance Director will act

as the primary contact person for all non-scientific matters including payment,

third party license and patent related matters.

(c) Decisions. Each Party shall have one vote on the JSC. All

decisions of the JSC shall be made by unanimous vote. Any matter which the JSC

is unable to agree upon shall be submitted to the Chief Executive Officer of SGX

and the

 

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Head of Pharma Partnering of Roche for resolution. All decisions that cannot be

agreed upon by the SGX CEO and the Roche Head of Pharma Partnering shall be made

by [...***...] reasonably taking into consideration the position of [...***...],

excluding decisions relating to the activities carried out by [...***...] under

the Collaboration Plan, which will be made by [...***...] reasonably taking into

consideration the position of [...***...].

(d) Project Team. The JSC shall establish a project team (the

"Project Team") comprising at least three (3) representatives from Roche and

three (3) representatives from SGX, designated by the Parties promptly following

the Effective Date. The JSC may expand the size of the Project Team, in its sole

discretion, provided that the Project Team shall always comprise an equal number

of representatives from Roche and SGX. Each Party may replace its Project Team

representatives at any time, with written notice to the other Party. The Project

Team will direct the performance of the Collaboration and shall meet to

discharge its responsibilities via videoconference, teleconference or in person

on an at least bi-weekly basis, or as the Project Team may agree. Meetings of

the Project Team may be held only if a quorum of at least one (1) representative

of each Party participates. Within thirty (30) days of the end of each calendar

quarter the Project Team shall submit a quarterly report to the JSC describing

the performance of the Collaboration during such calendar quarter. Each Party

will be responsible for paying its own expenses in connection with participating

in the meetings of the Project Team.

(e) Responsibilities. The JSC will review, and monitor the

performance of the Collaboration. The JSC will be responsible for (i)

supervising the Project Team, (ii) modifying or amending the Collaboration Plan

as appropriate subject to the final sentence of this Section 2.6(e); (iii)

confirming the achievement of the event in Section 3.2(a) and designating

compound collections as Early Lead Series in accordance with Section 2.4. Any

amendments to the Collaboration Plan which alter the financial terms or

materially alter the nature or scope of the Collaboration must be agreed in

writing by the Parties.

(f) Meetings. The JSC shall meet at least quarterly. The Parties

shall mutually agree upon times and places for such meetings (alternating

between San Diego, CA and Palo Alto, CA, or as the JSC may otherwise agree), to

discharge its responsibilities. If mutually agreed by the Parties, such meeting

may be held via videoconference or teleconference. Each Party will be

responsible for paying its own expenses in connection with participating in the

meetings of the JSC. The JSC shall prepare written minutes of each meeting and a

written record of all JSC decisions, whether made at a JSC meeting or otherwise.

2.8 Permitted Activities.

(a) By SGX. SGX agrees that SGX will not use any Confidential

Information of Roche to replicate any Roche Material for any purpose other than

as provided herein and shall destroy all proprietary Roche Materials after

expiry of the Term of the Collaboration.

 

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(b) By Roche. After the expiry of the Collaboration, Roche shall

destroy all chemical materials within the SGX Materials received from SGX and

not designated as Early Lead Series under this Agreement.

3. CONSIDERATION

3.1 Research Fees.

(a) Within thirty (30) days after the Effective Date Roche will

pay to SGX a non-refundable, non-creditable upfront fee of $[...***...].

(b) During the Term of the Collaboration, Roche will pay to SGX

research payments of $[...***...] per calendar quarter, payable on the first day

of each calendar quarter, commencing on the Effective Date.

3.2 Research Events. Within thirty (30) days of the date of achievement

of the applicable research event described below during the Term of the

Collaboration, Roche will pay, to SGX the following non-refundable and

non-creditable event payments:

(a) The first crystal structure that reveals density of

a Fragment bound to the Collaboration Target

with at least [...***...] A resolution, where data

completeness in the final resolution shell is

greater than or equal to [...***...]%, and the fragment

position and orientation is clearly interpretable $[...***...]

(b) upon designation by the JSC of the first

Early Lead Series $[...***...]

(c) upon designation by the JSC of each subsequent

Early Lead Series $[...***...]

per series

3.3 Development Events. Within thirty (30) days of the date of

achievement of the applicable Development Event described below, Roche will pay

to SGX the following non-refundable event payments on a Collaboration

Product-by-Collaboration Product basis:

(a) Clinical Candidate Selection $[...***...]

(b) Initiation of Phase 1 $[...***...]

(c) Initiation of Phase 2 $[...***...]

 

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(d) Initiation of Phase 3 $[...***...]

(e) Receipt of first Regulatory Approval $[...***...]

Roche shall make each of such payments only once for the first occurrence of the

requisite event for the Collaboration Product regardless of how many times the

event may be subsequently achieved with the particular Collaboration Product.

Roche shall make each of such payments for the first Collaboration Product to

achieve the applicable event, provided that (i) if Roche ceases all development

of a particular Collaboration Product after having made one or more payments

with respect to such Collaboration Product under this Section 3.3 following

accomplishment of any Development Event, there shall be no payment due upon the

accomplishment of that same Development Event with respect to a subsequent

Collaboration Product; and (ii) if Roche has received Regulatory Approval for a

Collaboration Product and continues development of an additional Collaboration

Product ("Subsequent Product"), payments will be due under this Section 3.3 for

the achievement of Development Events by the Subsequent Product (including those

Development Events which may have been achieved by the Subsequent Product prior

to such receipt of Regulatory Approval).

3.4 Royalties. Roche will pay to SGX during the Royalty Term the

following royalties on Net Sales of Collaboration Products by or on behalf of

Roche or its Affiliates or Sublicensees on a Collaboration

Product-by-Collaboration Product basis on the following tiers:

Net Sales up to US $[...***...] [...***...]%

Net Sales from US $[...***...] to US $[...***...] [...***...]%

Net Sales over US $[...***...] [...***...]%

3.5 Combination Products. In the event the Collaboration Product is sold

as part of a combination product containing a Licensed Compound and one or more

other pharmaceutically active ingredients, the Net Sales of the Collaboration

Product shall be determined by multiplying the Net Sales (as determined in the

manner described above) of the combination product by the fraction A/B, where A

is the weighted average sale price of the Collaboration Product containing the

Licensed Compound alone as a pharmaceutically active ingredient (in the same

strength as contained in the combination product) when sold separately in

finished form, and B is the weighted average sale price of the Collaboration

Product sold as part of a combination product when sold separately in finished

form. In the event that such average sale price cannot be determined for the

Collaboration Product containing the Licensed Compound alone as a

pharmaceutically active ingredient, Net Sales shall be mutually agreed by the

parties based on the relative value contributed by each pharmaceutically active

ingredient contained in such Collaboration Product, and such agreement shall not

be unreasonably withheld.

3.6 Third Party Royalties. In the event that Roche, is required to pay

royalties to a Third Party for licenses to composition of matter patents

claiming compounds within an Early Lead Series, Roche may offset up to

[...***...] percent ([...***...]%) of such amounts due

 

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Third Parties against payments due SGX under Section 3.4 above; PROVIDED,

HOWEVER, that Roche may not offset these amounts against more than [...***...]

percent ([...***...]%) of the royalties otherwise due SGX in any calendar

quarter. Any amount that has not been so offset may be offset against royalties

due in subsequent calendar quarters, subject to the limitation set forth in the

previous sentence.

3.7 Withholding Taxes. All amounts due under this Agreement shall be

paid without deduction, set-off or counterclaim and shall be made in full

without deduction of income, value added or other taxes, charges or duties that

may be imposed. If any payment due under this Agreement is or will be subject to

any tax, including withholding tax, Roche shall pay to SGX the amount that will

ensure SGX receives and retains a net sum equal to the payment it would have

received had the payment not been subject to such tax.

3.8 Reports; Payments. The royalties due under Section 3.4 shall be paid

quarterly within forty-five (45) days after the close of each calendar quarter,

or earlier if practicable, immediately following each quarterly period in which

such royalties are earned. With each such quarterly payment, Roche shall furnish

SGX a royalty statement setting forth in reasonable detail Collaboration

Product-by- Collaboration Product basis: (i) Adjusted Gross Sales; (ii) Net

Sales; and (iii) the royalties due SGX in such quarter.

3.9 Currency Conversion. All amounts required to be paid under this

Agreement shall be paid in United States dollars. Whenever calculation of Net

Sales requires conversion from any foreign currency, Roche shall convert the

amount of Net Sales in foreign currencies as computed in the Roche's central

Swiss Francs Sales Statistics for the countries concerned. Roche shall first

convert the amount of Net Sales into Swiss Francs and then into United States

dollars, using the YTD average exchange rate, in accordance with Roche's then

current standard practices.

3.10 Late Payments. Any payments or portions thereof due hereunder which

are not paid on the date such payments are due, shall bear interest at the rate

equal to the lesser of the prime rate as reported by the Chase Manhattan Bank,

New York, New York, plus [...***...] percent ([...***...]%) or the maximum

amount permitted by law, compounded monthly. This Section 3.10 shall in no way

limit any other remedies available to SGX.

3.11 Audits. Roche shall maintain accurate books and records which enable

the calculation of royalties payable under this Agreement to be verified. Roche

shall maintain the books and records for each quarterly period for three (3)

years after the submission of the corresponding report under Section 3.8. Upon

thirty (30) days prior notice to Roche, Roche's independent accountants,

reasonably acceptable to SGX, may have access to Roche's books and records after

executing a reasonable confidentiality agreement, during Roche's normal business

hours at mutually agreed times to conduct a review or audit no more than once

per calendar year, and no more than once with respect to any time period, for

the sole purpose of verifying the accuracy of Roche's payments and compliance

with this Agreement. The accounting firm shall report to SGX only whether there

has been a royalty underpayment and, if so, the extent thereof. Any such

inspection shall be at SGX's expense, however, in the event that an inspection

reveals

 

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underpayment of 5% or more in any audit period, Roche shall pay the costs of the

inspection. Roche shall promptly pay to SGX any underpayment identified in such

audit, with interest from the date such amount(s) were due at the prime rate

reported by the Chase Manhattan Bank, New York, New York plus [...***...]

percent ([...***...]%). The failure of SGX to request verification of any

payment calculation during which corresponding records are required to be

retained under this Section 3.11 shall be considered acceptance of such

reporting by SGX.

4. LICENSES

4.1 Licenses to Roche. Subject to the terms and conditions of this

Agreement, SGX hereby grants to Roche, the following licenses:

(A) [...***...], [...***...], [...***...] license (with the right

to grant sublicenses in accordance with Section 4.3 below) under SGX's Patent

Rights and Know-How in Early Lead Series, to make, have made, use, import, offer

for sale and sell Collaboration Products.

(B) [...***...], [...***...], [...***...] license (with the right

to grant sublicenses in accordance with Section 4.3 below) under SGX's interest

in SGX Background Technology relating to Early Lead Series, to use and modify

such SGX Background Technology solely as necessary for Roche to exercise its

rights under Section 4.1(a) above.

4.2 Cross Licenses. Each Party hereby grants to the other, a

non-exclusive, non-transferable, royalty-free license to use and practice Roche

Background Technology and SGX Background Technology, solely to conduct the

Collaboration.

4.3. Sublicenses. Roche may sublicense the rights granted in Section 4.1

to its Affiliates and to Third Parties who are bona fide collaborators of Roche

with respect to the Early Lead Series for which rights are being sublicensed.

Each such sublicense granted by Roche shall be consistent with all of the terms

and conditions of this Agreement. Roche as the sublicensor, shall remain

responsible for all of each such sublicensee's obligations under this Agreement.

4.4 Product Development. During the term of this Agreement, Roche will

keep SGX informed of its activities in connection with the development of Early

Lead Series' and Collaboration Products, including without limitation, the

achievement of events under Section 3.3. On a half-yearly basis up to Initiation

of Phase 1 trials, and on a yearly basis thereafter during the term of the

Agreement, Roche will provide SGX with a written summary report detailing such

events and activities. When a registration package requesting approval for

commercial sale of any Collaboration Product is first filed in any country, and

when approval is received, Roche will immediately notify SGX in writing.

 

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4.5 Diligence. Roche will use Commercially Reasonable Efforts to

discover and develop Early Lead Series and commercialize Collaboration Products

including using Commercially Reasonable Efforts to bring at least one

Collaboration Product to the market, to obtain Regulatory Approval to market

such Collaboration Product, to launch and market such Collaboration Product and

promote and meet the market demand therefor. Notwithstanding the above, Roche

will have the right at its sole discretion to discontinue development of an

Early Lead Series and/or commercialization of a Collaboration Product in any

country on written notice to SGX, subject to Section 4.6.

4.6 Lack of Diligence. In the event that Roche fails to use or continue

to use diligent efforts to actively develop at least one Early Lead Series or at

least one Collaboration Product in accordance with Section 4.5 above, or

notifies SGX that it will not conduct further development or commercialization

with respect to a at least one Early Lead Series or at least one Collaboration

Product, then SGX may terminate Roche's rights under this Agreement with respect

to Early Lead Series upon written notice to Roche, provided that Roche will have

a period of [...***...] ([...***...]) months following receipt of such notice to

demonstrate to SGX's reasonable satisfaction that it has not failed to use or

continue to use diligent efforts in accordance with Section 4.5 or to initiate

diligent efforts in accordance with Section 4.5. In the event that Roche's

rights terminate pursuant to this Section 4.6, the Parties will negotiate in

good faith for a period of [...***...] days, immediately following the

termination of Roche's rights by SGX, (i) at Roche's option, an agreement under

which SGX would receive compensation from Roche and would not develop and

commercialize an Early Lead Series or Collaboration Products developed

therefrom, or (ii) the appropriate consideration for a license grant (as

described below) from Roche to SGX. In the event that the Parties do not reach

an agreement under subsection (i) above, SGX will thereafter have the exclusive

right to develop and commercialize Early Lead Series and corresponding

Collaboration Products alone or with Third Parties. and Roche shall grant