DEVELOPMENT AGREEMENT

1.1

“Affiliate” shall mean any person or entity which directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, a Party. As used in this definition of “Affiliate”, control means, with respect to an entity, the legal or beneficial ownership of 50% or more of the voting or equity interests of the entity or the power or right to direct the management and affairs of the entity.

1.2

“cGMP” shall mean current good manufacturing practices related to diagnostic pharmaceutical products under applicable laws, rules and regulations in all relevant jurisdictions, including without limitation the guidelines of good manufacturing practices determined by the FDA and the equivalent European regulatory body.

1.3

“Collaboration Agreements” shall mean this Agreement and the Manufacturing and Distribution Agreement by and between PBM and NANOGEN of even date herewith.

1.4

“Development Product” shall mean a Product or New Assay that is jointly developed by the Parties under this Agreement.

1.5

“Development Product Specifications” shall mean the specifications for a specific Development Product determined as provided in Section 2.2 a).

1.6

“FDA” shall mean the United States Food and Drug Administration, or any successor entity thereto.

1.7

“FD & C Act” shall mean the United States Federal Food, Drug & Cosmetic Act, as amended.

1.8

“NANOGEN Reagent” shall mean natural or recombinant antigen controls and/or antibodies, which can be polyclonal or monoclonal, to NT-proBNP, selected by NANOGEN and accepted by PBM or, if applicable, previously selected by SYNX under the PBM/SYNX Agreement, for use by PBM in the development and manufacture of the Development Products.

1.9

“NANOGEN Reagent Specifications” shall mean the specifications for a NANOGEN Reagent as provided in Section 2.1 e).

1.10

“New Assay” shall mean a human in vitro diagnostic assay for an analyte (i) which the Parties undertake to develop under this Agreement and (ii) the performance criteria and specifications of which assay meet or exceed specifications and criteria therefore, to which both parties agree in writing and set forth in Exhibit C.

1.11

“New Product” shall mean a Product that is not read upon by a claim in a PBM Patent.

1.12

“Party” shall mean either PBM or NANOGEN and ‘Parties” shall mean PBM and NANOGEN.

1.13

“PBM Patent” shall mean an issued patent in any country of the world owned or licensed to and by PBM which is listed on, or which issues from a patent application listed on Exhibit A hereto, including any reissue patent, reexamined patent, and patents issuing on continuation, continuation-in-part and divisional applications of any listed patent application and foreign equivalents of any of the listed patents and patent applications.

1.14

“PBM Reagents” shall mean all reagents other than NANOGEN Reagents used in Development Products.

1.15

“Product” shall mean a human in vitro diagnostic assay for NT-proBNP alone (i) for use restricted to Point of Care market segments, whereby Point of Care means analysis conducted in an instrument or in a system which is designed for a throughput of less than [***] specimens per hour; and (ii) the performance criteria of which assay meets or exceeds the Standard Criteria and Specifications in Exhibit B attached hereto.

1.16

“Reader” shall mean a reasonably priced quantitative reader for use with Development Products to determine the amount of a target analyte present in a patient sample.

1.17

“Regulatory Approval” shall mean, with respect to any country or jurisdiction, all governmental and regulatory registrations and approvals (including, but not limited to, approvals of all Product and Quantitative Reader labeling and packaging) required for the marketing, distribution and sale of Products and the Quantitative Reader in such country or jurisdiction.

1.18

“Roche Agreements” shall mean collectively that certain Settlement Agreement among SYN-X Pharma, Inc. et al and Roche Diagnostics GmbH et al having an effective date of July 17, 2003 and that certain Cross License Agreement between SYN-X Pharma, Inc. and Roche Diagnostics GmbH having an effective date of July 17, 2003.

2.1

NANOGEN Development Obligations and Responsibilities.

a)

NANOGEN will use commercially reasonable efforts to develop and produce NANOGEN Reagents which meet specifications and in quantities reasonably sufficient for use by PBM in PBM’s development activities for Development Products and for the production of Development Products for use in clinical trials and other studies required for Regulatory Approval and for any other developmental purpose to which the Parties mutually agree. Notwithstanding anything to the contrary in this Agreement, NANOGEN will not be obliged to provide NANOGEN Reagents to PBM for use in any Development Product that (i) does not fall within the “SYN-X Licensed Field” as that term is defined in the Roche Agreements, (ii) is not intended to meet or exceed requirements of the Standard Performance Criteria and Specifications in Exhibit B hereto and (iii) is not manufactured for or licensed to NANOGEN and/or SYN.X. NANOGEN shall also provide PBM with internal controls for use in the development of Development Products.

b)

NANOGEN will take such measures as it deems necessary and appropriate in the exercise of its sole discretion with respect to obtaining and maintaining patent protection for Development Products and NANOGEN Reagents.

c)

NANOGEN will take such measures as it deems appropriate in its sole discretion to develop scientific interest in the Development Products and NANOGEN Reagents, through obtaining publication of research and other and other articles in scientific journals and trade publications, giving papers and other similar measures. PBM will assist Nanogen with test product supply for such a study and two parties shall work together in selection study sites and providing study protocols if needed.

d)

NANOGEN will conduct, or contract with SYNX or third parties to conduct, all such clinical trials and other testing of Development Products and NANOGEN Reagents as is reasonably required in order to obtain Regulatory Approval for the marketing and sale of Development Products from the governmental or other authority in any jurisdiction in which the Parties desire that Development Products be marketed and sold. The data will be provided to PBM for review and comment. The Parties will use their best efforts, in consultation with each other to obtain Regulatory Approval for the marketing and sale of Development Products in the United States and other jurisdictions determined by NANOGEN or reasonably requested by PBM after consultation with NANOGEN. The Regulatory Approval for a Development Product which is an assay for NT-proBNP shall be owned by NANOGEN.

e)

NANOGEN, in consultation with PBM, shall be responsible for the development of manufacturing and other specifications to be met by each batch of a NANOGEN Reagent to be supplied by NANOGEN to PBM for the development and commercial production of Development Products.

f)

NANOGEN will fund [***]% of the development cost of the Reader, up to a maximum of $[***] (U.S.), less any amounts already paid for development of the Reader by SYNX following the receipt by NANOGEN from PBM of an invoice for its share of the costs and a summary schedule detailing such development costs. Development costs of the Reader are to include materials, actual engineering salaries marked up at PBM’s standard overhead rates, and travel related to development of the Reader. NANOGEN shall have the right to audit PBM’s costs incurred for development of the Reader, which audit must be requested within 30 days of receipt of the summary schedule detailing the direct development costs. The audit will be conducted at PBM’s facility in Monmouth Junction, New Jersey on a date and at a time proposed by NANOGEN and reasonably acceptable to PBM. For purposes of the audit, detailed costs on the summary schedule shall be supported by invoices, labor schedules, time cards of non-exempt employees and like documentation. If the result of the audit is not acceptable to NANOGEN, the Parties shall each appoint a person who will negotiate in good faith to resolve issues raised by NANOGEN. At the request of PBM, the designated individuals shall meet in person at least one day in Monmouth Junction. If after 30 days of the initiation of the negotiations, the Parties have not reached an agreement on the issues raised by NANOGEN, the Parties shall select an independent certified accountant reasonably acceptable to both and submit the issue with a written explanation of its position on the amount of direct costs incurred by PBM to the independent accountant. NANOGEN shall

g)

NANOGEN will fund [***]% of the actual development cost for and actual cost of equipment that will print a test identification, lot number, and/or patient identification on the cartridge used in the Development Product, up to a maximum of US $[***], within thirty (30) days following the receipt by NANOGEN from PBM of an invoice for its share of the costs and a summary schedule detailing such development and equipment costs. Development costs of the equipment are to include materials, actual engineering salaries marked up at PBM’s standard overhead rates, and travel related to development of the equipment. The equipment cost shall be the cost of procuring and setting up the equipment and the ancillary materials needed to produce and apply the labels to the cartridge. NANOGEN shall have the right to audit PBM’s development and equipment costs incurred for development of the equipment, which audit must be requested within 30 days of receipt of the summary schedule detailing the costs.

h)

NANOGEN, in addition to the obligations and responsibilities set forth above in this Section 2.1, will provide such other assistance to PBM as reasonably required to support PBM in the discharge of its obligations and responsibilities to develop Development Products as provided in Section 2.2. All activities conducted by NANOGEN under this Section 2.1 shall be at NANOGEN’s sole cost and expense.

2.2

PBM Development Obligations and Responsibilities.

a)

PBM will cooperate with NANOGEN in determining the specifications for NANOGEN Reagents to be included in Development Products and PBM will be responsible, in consultation with NANOGEN, for determining the specifications for PBM Reagents and Development Products (Development Product Specifications) in order to incorporate into the Development Products proprietary technology of PBM. PBM will also be responsible for determining the specifications for the Reader.

b)

PBM will conduct such research and development as is reasonably required to optimize NANOGEN Reagents for commercial use and to develop and produce PBM Reagents and Development Products, in each case utilizing NANOGEN Reagents supplied by NANOGEN.

c)

PBM will supply NANOGEN with sufficient quantities of developmental stage Development Products as is reasonably necessary for NANOGEN to carry out its responsibilities and obligations set forth in Section 2.1.

d)

Each of the Parties will cooperate in sharing information including clinical, and validation data with the other Party to facilitate the preparation of applications for Regulatory Approval of Development Products.

e)

PBM will use commercially reasonable best efforts to promptly complete, on its own or using a subcontractor, the development of a Reader and to obtain Regulatory Approval for the Reader meeting specifications reasonably acceptable to NANOGEN in the United States and other jurisdictions reasonably requested by NANOGEN. The Regulatory Approvals for the Reader shall be owned by PBM.

f)

PBM shall provide NANOGEN a report not later than January 15 and July 15 of each year summarizing the status of the development of Development Products during the prior six month period and the report shall include the expected date of the first sale of a Development Product in each of the United States, Japan and Germany in order for NANOGEN to comply with provisions of Section 6.3 of the Cross License Agreement of the Roche Agreements.

g)

Not later than the receipt of the first Regulatory Approval for a Development Product, PBM and NANOGEN together shall compile a written summary of the protocols of all tests used to demonstrate that that Development Product meets the Standard Performance Criteria and Specifications set forth in the Roche Agreements and test data accumulated under those protocols that would prove that the Development Product meets the Standard Performance Criteria and Specifications as required under Section 6.3 of the Cross License Agreement of the Roche Agreements.

h)

PBM, in addition to the obligations and responsibilities set forth above in this Section 2.2, will provide such other assistance to NANOGEN as reasonably required to support NANOGEN in carrying out its responsibilities and obligations under Section 2.1. All activities carried out by PBM under this Section 2.2 shall be at PBM’s sole cost and expense.

3.1

New Products.

3.2

Other Products.

4.1

Intellectual Property.