DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

Exhibit 10.1

EXECUTION VERSION

CONFIDENTIAL TREATMENT REQUESTED

Redacted Portions are indicated by [****]

DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

THIS DEVELOPMENT AND COMMERCIALIZATION AGREEMENT (“ Agreement ”) dated as of January 4, 2009 (“ Effective Date ”), is entered into between La Jolla Pharmaceutical Company, a Delaware corporation having its principal place of business at 6455 Nancy Ridge Drive, San Diego, California 92121 (“ La Jolla ”) and BioMarin CF Limited, an Irish corporation having its registered place of business at 2 Earlsfort Terrace, Dublin 2, Ireland (“ BioMarin CF ”).

BACKGROUND

A. La Jolla is developing a formulation of abetimus sodium (as further defined below, a “ Product ”) for the treatment of lupus nephritis and systemic lupus erythematosus (“ SLE ”). La Jolla owns or controls certain patents, know-how and other intellectual property relating to such Products.

B. BioMarin CF, through its Affiliates, is an established biopharmaceutical company which focuses its experience and expertise in the development and commercialization of products for the treatment of rare diseases.

C. BioMarin CF desires to obtain a right to participate fully in the co-development and co-commercialization of Products in the United States, and exclusive rights in the development and commercialization of Products in all other countries except for the countries in the Asia-Pacific region.

D. La Jolla is willing to grant to BioMarin CF such rights on the terms and conditions set forth in this Agreement.

E. Concurrently with this Agreement, the Parties or their respective Affiliates are entering into a Securities Purchase Agreement under which La Jolla shall issue to an Affiliate of BioMarin CF shares of capital stock of La Jolla, all as set forth in such Securities Purchase Agreement (as further defined below, the “ Securities Purchase Agreement ”).

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1 “ Adverse Event ” or “ AE ” shall mean any untoward medical occurrence in a patient or clinical investigation subject administered a pharmaceutical product and which does not necessarily have a causal relationship with administration of a Product. AEs include, without limitation, any unfavorable and unintended sign (including an abnormal laboratory finding), symptom, or disease temporally associated with the use of a medicinal (investigational) product, whether or not related to the medicinal (investigational) product.

1.2 “ Affiliate ” of a Party shall mean any person, corporation or other entity that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Party, as the case may be, for as long as such control exists. As used in this Section 1.2, “ control ” shall mean: (a) to possess, directly or indirectly, the power to affirmatively direct the management and policies of such person, corporation or other entity, whether through ownership of voting stock or by contract relating to voting rights or corporate governance; or (b) direct or indirect beneficial ownership of at least fifty percent (50%) (or such lesser percentage that is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting stock or other ownership interest in such person, corporation or other entity. A “ Controlled Affiliate ” is an Affiliate that is controlled by a Party, or if such Party is Controlled by another entity as of the Effective Date, an Affiliate that is Controlled by the ultimate parent entity that Controls such Party as of the Effective Date.

1.3 “ Annual Net Sales ” shall mean total Net Sales of Products sold by BioMarin CF, BioMarin CF’s Affiliates or Sublicensees in the Territory in a particular calendar year. For such purposes, units of the Product shall be considered sold when the revenue from such sale is recognized by the seller for financial reporting purposes.

1.4 “ Asia-Pacific Territory ” shall mean the Asia-Pacific countries listed on Exhibit 1.4 .

1.5 “ ASPEN Study ” shall mean the 90-14 Phase III clinical trial and the 90-18 QT study for the Product ongoing as of the Effective Date, each as further described on Exhibit 1.5 .

1.6 “ BioMarin CF ” shall mean BioMarin CF and its respective Affiliates performing its obligations, exercising its rights or otherwise conducting activities hereunder, except to the extent specifically indicated otherwise.

1.7 “ BioMarin CF Know-How ” shall mean all scientific, medical, technical, marketing, regulatory, manufacturing and other information relating to the Compound and/or any Product (including Data), which are both: (i) developed, acquired or used by BioMarin CF in the performance of this Agreement, and (ii) needed by La Jolla to perform the Operating Plan/Budget, exercise its rights under this Agreement or manufacture or secure Marketing Approval for the Products for sale outside the Territory.

1.8 “ Commercial Life ” [****]

1.9 “ Compound ” shall mean that certain compound known as abetimus sodium, the structure of which is set forth on Exhibit 1.9 , and any other nucleic acid based molecule that binds to or targets anti-double stranded DNA antibodies.

1.10 “ Control ” (including any variations such as “ Controlled ” and “ Controlling ”), in the context of intellectual property rights of a Party, shall mean that such Party or its Controlled Affiliate owns or possesses rights to intellectual property sufficient to grant the applicable license under this Agreement, without violating the terms of an agreement with a Third Party or as a result of obtaining a prior written consent from a Third Party.

1.11 “ CTA ” shall mean a clinical trial application (including any amendments thereto) as provided for in Directive 2001/20/EC and the regulations promulgated thereunder for initiating clinical trials in the European Union.

1.12 “ Data ” shall mean: (a) any and all research data, pharmacology data, preclinical data, and clinical data for the Compound and/or Products; (b) all regulatory documentation, information, filings and submissions pertaining to, or made in association with an IND, Marketing Application, Marketing Approval or the like, for a Product; and/or (c) any other data relating to the Compound and/or Products.

1.13 “ Dosing Study ” shall mean a clinical study evaluating dsDNA antibodies while administering the Product monthly at 300mg or 900mg, with the exact study protocol to be mutually agreed by the Parties, which may include an induction regimen of weekly dosing for up to twelve (12) weeks and which shall include at least one arm having monthly dosing of such Product. The Dosing Study (a) may also include measurement of proteinuria, and (b) will not be run for the purpose of changing the label for the Product.

1.14 “ EMEA ” shall mean the European Medicines Evaluation Agency, or any successor entity thereto performing similar functions.

1.15 “ Existing In-License ” shall mean the license agreement listed on Exhibit 1.15 between La Jolla and the Third Party identified on such exhibit in effect as of the Effective Date.

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

1.17 “ Financial Appendix ” shall mean Appendix A to this Agreement.

1.18 “ FTE ” means a full-time equivalent person year (consisting of a total of at least 1,760 hours per year) from an employee of a Party or one of its Affiliates assigned to perform specific work, as specified in the Operating Plan/Budget.

1.19 “ Full Participation Point ” shall mean the date that BioMarin CF exercises its full license rights pursuant to Section 2.1(b) by paying to La Jolla (subject to any reduction provided by Section 7.18):

(a) Forty-Seven Million Five Hundred Thousand Dollars ($47,500,000), inclusive of the equity purchase, pursuant to Section 7.2(c);

(b) Fifty-Five Million Dollars ($55,000,000), inclusive of the equity purchase, pursuant to Section 7.3(a)(i);

(c) Fifteen Million Dollars ($15,000,000), inclusive of the equity purchase, pursuant to Section 7.3(a)(ii)(y);

(d) Fifty-Five Million Dollars ($55,000,000), inclusive of the equity purchase, pursuant to Section 7.4(b); or

(e) Fifty-Five Million Dollars ($55,000,000) less amounts paid under Section 7.13(a), inclusive of the equity purchase pursuant to Section 7.13(b).

The Full Participation Point shall occur at such time as any amount set forth in this definition is paid in full by BioMarin CF and does not depend on any further or other payment by BioMarin CF; provided that if BioMarin CF exercises its right to pay a portion of any such payment by purchasing shares of common stock of La Jolla pursuant to the Securities Purchase Agreement and as contemplated by Section 7.5 and thereafter due to the default, breach of a representation or failure of La Jolla to satisfy a condition to closing thereunder, BioMarin CF is not able to purchase such shares, the Full Participation Point shall nonetheless be deemed to have occurred notwithstanding that BioMarin CF has not paid to La Jolla that portion of the payment due that is attributable to the purchase of such shares.

1.20 “ IND ” shall mean any Investigational New Drug Application (including any amendments thereto) filed with the FDA pursuant to 21 C.F.R. § 312 before the commencement of clinical trials of a Product, or any comparable filings with any Regulatory Authority in any other jurisdiction, including any CTA.

1.21 “ Interim Efficacy Analysis ” shall mean individually, the First Interim Efficacy Analysis or the Second Interim Efficacy Analysis, each as defined in this Section 1.21; and “ Interim Efficacy Analyses ” shall mean the First Interim Efficacy Analysis and the Second Interim Efficacy Analysis, collectively.

(a) “ First Interim Efficacy Analysis ” shall mean the receipt by La Jolla of the Data Monitoring Board’s recommendation with respect to the continued conduct of the 90-14 portion of the ASPEN Study based upon the interim efficacy analysis conducted when ninety-two (92) renal flare events adjudicated as SLE-related are accrued in the ASPEN Study.

(b) “ Second Interim Efficacy Analysis ” shall mean the receipt by La Jolla of the Data Monitoring Board’s recommendation with respect to the continued conduct of the 90-14 portion of the ASPEN Study based upon the interim efficacy analysis conducted when one hundred and nine (109) renal flare events adjudicated as SLE-related have been accrued in the ASPEN Study.

For the purposes of this Section 1.21, renal flare events will be deemed to be SLE-related and to have accrued in the ASPEN Study if so determined by the Renal Events Committee.

1.22 “ Joint Patent ” shall mean any Patent with respect to an invention that is jointly owned pursuant to Section 11.1(a) within or outside the Territory.

1.23 “ Know-How ” shall mean La Jolla Know-How or BioMarin CF Know-How, as the context requires.

1.24 “ La Jolla Know-How ” shall mean all scientific, medical, technical, marketing regulatory, manufacturing, and other information, in each case relating to the Compound and/or any Product (including Data), that is (a) existing as of the Effective Date or that is developed, acquired or used by La Jolla in the performance of the Operating Plan/Budget, and (b) needed by BioMarin CF to perform the Operating Plan/Budget or exercise its rights under this Agreement.

1.25 “ La Jolla Patents ” shall mean (a) the Patents listed on Exhibit 1.25 ; (b) any other Patents in the Territory that are related to or otherwise necessary or reasonably useful to develop, manufacture, or commercialize a Compound and/or Product(s) in accordance with the Operating Plan/Budget that are or were developed, acquired or used by La Jolla; (c) any Patents based on any invention conceived or created solely by La Jolla personnel in connection with this Agreement pursuant to Section 11.1(a); and (d) all additions, divisions, continuations, continuations-in-part, substitutions, reissues, re-examinations, extensions, registrations, patent term extensions, supplemental protection certificates and renewals of any of the foregoing.

1.26 “ La Jolla’s Knowledge ” shall mean the actual knowledge of the members of La Jolla’s senior management team (as defined in Exhibit 1.26 ) after reasonable inquiry sufficient to express an informed view concerning the matters to which such representation or warranty relates.

1.27 “ Major Market ” [****].

1.28 “ Marketing Approval ” shall mean, with respect to each country or jurisdiction, approval of the Marketing Application filed in such country by the Regulatory Authority in such country or jurisdiction.

1.29 “ Marketing Application ” shall mean an NDA (or its equivalent) submitted to the FDA in the United States, an MAA (or its equivalent) submitted to the EMEA in the European Union, or a corresponding application that has been submitted to a Regulatory Authority in any other jurisdiction.

1.30 “ MAA ” shall mean a Marketing Authorization Application (including any amendments thereto) filed with the EMEA for approval to market and sell a Product within the European Union.

1.31 “ NDA ” shall mean a New Drug Application (including any supplements and amendments thereto) filed with the FDA pursuant to 21 U.S.C. Section 353(b)(1), or any equivalent application filed with the FDA for approval to market and sell a Product within the United States.

1.32 “ Party ” shall mean La Jolla or BioMarin CF individually, and “ Parties ” shall mean La Jolla and BioMarin CF collectively.

1.33 “ Patent(s) ” shall mean any patents and patent applications, together with all additions, divisions, continuations, continuations-in-part, substitutions, reissues, re-examinations, extensions, registrations, patent term extensions, supplemental protection certificates and renewals of any of the foregoing.

1.34 “ Positive Dosing Study ” shall mean a Dosing Study that demonstrates a reduction in dsDNA antibodies that, in monthly dosing of the Product, is approximately equivalent to the reduction observed in the control population in the Dosing Study receiving the Product weekly, and need not include achievement of any endpoint pertaining to proteinuria.

1.35 “ Product ” shall mean any product containing the Compound, alone or in combination with one or more other active pharmaceutical ingredients, in any dosage form or formulation.

1.36 “ Product Trademarks ” shall mean: (a) the trademarks owned by La Jolla and designated by La Jolla for use with a Product within the Territory, as reflected in Exhibit 1.36 hereto; or (b) any other trademarks mutually agreed upon by La Jolla and BioMarin CF for use with a Product within the Territory.

1.37 “ PV Procedures ” shall mean the pharmacovigilance procedures to be determined by BioMarin CF from time to time that are generally applicable to BioMarin CF’s distributors and marketing agents and are acknowledged by La Jolla.

1.38 “ Regulatory Authority ” shall mean the FDA, the EMEA, or a regulatory body with similar regulatory authority in any other jurisdiction within the Territory.

1.39 “ Sales Representative ” shall mean a professional pharmaceutical sales representative engaged or employed by either Party or one of its Affiliates to conduct sales activities and other promotional efforts with respect to a Product and the first line direct supervisors of those individuals.

1.40 “ SOP ” shall mean a standard operating procedure.

1.41 “ Securities Purchase Agreement ” shall mean the form of securities purchase agreement attached to this Agreement as Exhibit 1.41 .

1.42 “ Sublicensee ” shall mean an entity to whom BioMarin CF has granted a right to manufacture, sell, market, distribute and/or promote a Product within the Territory pursuant to Section 2.2; and “ Sublicense ” shall mean an agreement or arrangement between BioMarin CF and a Sublicensee granting such rights.

1.43 “ Territory ” shall mean worldwide, except for the Asia-Pacific Territory.

1.44 “ Third Party ” shall mean any person, corporation, joint venture or other entity, other than La Jolla, BioMarin CF and their respective Affiliates.

1.45 “ United States ” shall mean the United States of America, including its territories and possessions.

1.46 Additional Definitions . In addition, each of the following terms shall have the meaning described in the corresponding section in the body of this Agreement or in the Financial Appendix referenced below:

ARTICLE II
GRANT OF LICENSE

2.1 License .

(a) Subject to the terms and conditions of this Agreement, La Jolla hereby grants to BioMarin CF a co-exclusive license during the term of this Agreement under the La Jolla Patents, Joint Patents, and La Jolla Know-How: (i) to develop, use, offer for sale, sell, import, export, market, distribute and promote the Compound as incorporated into any Product in the Territory in any and all fields, including the treatment and/or prevention of any disease or health condition in humans or animals in accordance with this Agreement; and (ii) to make or have made the Compound or any component of the Compound anywhere in the world provided that if it is made outside of the Territory it will only be sold in the Territory pursuant to the terms of this Agreement.

(b) The rights and license granted by La Jolla to BioMarin CF in Section 2.1(a) shall commence on the Effective Date, but BioMarin CF agrees not to exercise such rights or license unless and until BioMarin CF has effected the Full Participation Point in accordance with Sections 7.2, 7.3, 7.4 or 7.13(b) below, except that until the Full Participation Point BioMarin CF shall be able to exercise such rights as are necessary for manufacturing of the Product and/or Compound. As used in this Section 2.1, the term “co-exclusive” means that the rights and licenses granted: (i) under Section 2.1(a)(i) shall be exclusive even as to La Jolla, except with respect to: (A) La Jolla’s rights to co-develop Products in accordance with Article 4; and (B) La Jolla’s rights to co-commercialize, but expressly excluding the right to sell, Products solely in the United States in accordance with Article 6; and (ii) under Section 2.1(a)(ii) shall be exclusive, except with respect to the rights of La Jolla and its contractors to manufacture, pursuant to Article 9 below, Compounds and Products for sale by BioMarin CF pursuant to this Agreement and for La Jolla, an Asia-Pacific Licensee and/or their respective contractors to make, the Compound or Product or any component thereof, within or outside of the Territory for use and sale outside the Territory in every case subject to Section 2.3.

2.2 Sublicensees . After BioMarin CF has effected the Full Participation Point in accordance with Sections 7.2, 7.3, 7.4 or 7.13(b) below, BioMarin CF shall have the right to grant sublicenses under Section 2.1(a) to any of its Affiliates or to any Third Party in any country of the Territory; provided that any Sublicense to a Third Party that includes the right to substantially all of the sale, marketing and distribution of Products in any Major Market shall be subject to La Jolla’s prior written consent, which may be granted or withheld in La Jolla’s sole and absolute discretion. In any event, BioMarin CF shall ensure that each of its Sublicensees is bound by a written agreement containing provisions at least as protective of La Jolla as this Agreement; and BioMarin CF shall remain responsible to La Jolla for all activities of its Affiliates and Sublicensees to the same extent as if such activities had been undertaken by BioMarin CF itself. Promptly following the execution of each Sublicense, BioMarin CF shall inform La Jolla of the scope and territory of each Sublicense and the name and address of each Sublicensee.

2.3 Unauthorized Activities; Activities Outside the Territory.

(a)  BioMarin CF Rights Limited . BioMarin CF agrees that neither it, nor any of its Affiliates, will develop, file for Marketing Approval with respect to, make, have made, use, market, offer for sale, sell, import, export, distribute or promote a Product anywhere in the world, except in the Territory and, within the Territory, only in accordance with this Agreement. BioMarin CF agrees that neither it, nor any of its Affiliates, will use or otherwise exploit, except as expressly licensed under this Agreement, any La Jolla Patents, La Jolla Know-How and/or Product Trademarks, or their counterparts in any country. Notwithstanding whether or not La Jolla has complied with Section 2.3(b)(i), in the event that any Product, other than Product that is manufactured for sale by BioMarin CF pursuant to this Agreement, is sold or distributed in the Territory other than by or through BioMarin CF or its Sublicensees, La Jolla shall pay to BioMarin CF an amount equal to three (3) times the Net Sales value of the Product so sold or distributed within five (5) business days of the date BioMarin CF provides evidence demonstrating such sale or distribution in the Territory.

(b) Territorial Integrity .

(i) [****]

(ii) [****]

(iii) It is understood that nothing in this Section 2.3(b) shall be deemed to prevent La Jolla or its designee from making the Compound and Products within or outside the Territory for supply to BioMarin CF in accordance with Article 9 below or for use or sale in the Asia-Pacific Territory.

2.4 Asia-Pacific Matching Right .

(a) [****] .

(b) [****] .

(c) [****]

(d) [****] .

(e) [****]

(f)  No Implied Obligations . The only obligations of BioMarin CF and La Jolla under this Section 2.4 are as expressly stated herein, and there are no further implied obligations relating to the matters contemplated therein. Without limiting the foregoing, it is understood that: (A) La Jolla is not at any time obligated to disclose the identity of a Third Party with whom it is discussing a Third Party agreement; (B) this Section 2.4 shall not be deemed to apply to a transaction by which a Third Party acquires substantially all of the business or assets of La Jolla so long as such acquiror remains bound by all of the terms and conditions hereof, nor any transaction pursuant to which La Jolla grants a license to a Third Party in the Asia-Pacific Territory solely for the purposes of acting a contract manufacturer to supply Compound or Product (or intermediate materials for either of the foregoing) to La Jolla; and (C) if La Jolla enters into a transaction with a Third Party, after making an offer to BioMarin CF that complies with this Section 2.4 (other than Section 2.4(e), which will continue to apply), that includes the grant by La Jolla of an option or other contingent right to acquire the right to market and/or distribute any Product in the Asia-Pacific Territory, or any portion thereof (a “ Contingent Right ”), then the grant of rights by La Jolla upon a Third Party’s exercise of such Contingent Right shall not be subject to this Section 2.4 so long as the grant of such Contingent Right was made in a transaction entered into with the Third Party in compliance with this Section 2.4.

(g)  Audit Rights . If BioMarin CF does not enter into an Asia-Pacific License with La Jolla and La Jolla thereafter enters into an Asia-Pacific License with an Asia-Pacific Licensee, BioMarin CF shall have the right to have an accounting firm of its designation compare the Asia-Pacific License entered into by La Jolla to the final form of license agreement offered to BioMarin CF to determine if La Jolla has complied with Section 2.4(b) and all payments to be received by La Jolla through the date of such audit have been paid to La Jolla.

(h)  Right to Share Information . Nothing contained in this Section 2.4 shall prohibit La Jolla from providing to an Asia-Pacific Licensee (or a prospective Asia-Pacific Licensee) the information permitted to be shared as specified in Section 4.3(a) (so long as La Jolla protects such information under an appropriate non-disclosure agreement and limits its use to the Proposed Territory as required by this Agreement).

ARTICLE III
GOVERNANCE

3.1 Joint Steering Committee .

(a)  Establishment . Within thirty (30) days following the Effective Date, La Jolla and BioMarin CF shall establish a joint steering committee (“ Joint Steering Committee ” or “ JSC ”) to oversee, review and coordinate the activities of the Parties under this Agreement as provided in this Section 3.1, including, the development of Products for registration, and the marketing and distribution of Products, within the Territory, and the manufacture of the Compound and Products for use and sale in the Territory, all subject to the provisions of this Article 3.

(b) Duties . The JSC shall:

(i) Review and approve changes to each Operating Plan/Budget in accordance with this Agreement;

(ii) Provide a forum for the Parties to exchange information and coordinate their respective activities with respect to matters pertaining to the development, manufacture, and commercialization of the Products in the Territory, and matters pertaining to the registration of Products in the Territory;

(iii) Coordinate the overall activities and integration of the Working Group and functional sub-working groups and resolve matters specifically assigned to be decided by the Working Group in this Agreement that the Working Group is unable to resolve; and

(iv) Perform such other duties as are specifically assigned to the JSC in this Agreement or the Financial Appendix.

3.2 Establishment of Working Group . The JSC shall establish, and to the extent it deems appropriate, delegate duties to a working group to plan and coordinate particular projects or activities (the “ Working Group ”), including but not limited to: (i) plan and coordinate the conduct of the development activities and regulatory matters for the Products within the Territory, (ii) coordinate the manufacturing and supply of the Products for use or sale within the Territory or as otherwise contemplated in Article 9, and (iii) coordinate the conduct of the commercialization, marketing and promotion activities for the Products in the Territory and to plan and coordinate any joint promotion activities in the United States, if applicable. The Working Group and its activities shall be subject to the oversight, review and approval of, and shall report to, the JSC. The Working Group shall be composed of an equal number of representatives from each Party, selected by such Party, and the total number of members of the Working Group will be determined by the JSC, but in no event shall be less than three (3) representatives from each Party. The Working Group shall meet at such times as directed by the JSC or more frequently as determined by the Working Group, but in no event less than once each calendar quarter. The Working Group meetings may be conducted by telephone, video-conference or in-person as determined by the Working Group; provided, however, that the Working Group shall meet in-person at least once each calendar quarter and, unless otherwise agreed by the Parties, all in-person meetings of the Working Group shall be held on an alternating basis between La Jolla’s facilities and BioMarin CF’s facilities, in each event except as unanimously agreed by the JSC. In no event shall the authority of the Working Group exceed that specifically delegated to it by the JSC. The Working Group may establish subordinate committees to oversee or handle different aspects of the Working Group’s responsibilities.

3.3 JSC Membership . The JSC shall be composed of an equal number of representatives from each of BioMarin CF and La Jolla, selected by such Party. Unless the Parties otherwise agree, the exact number of representatives for each of BioMarin CF and La Jolla shall be three (3) representatives, with each representative at the Vice President (or its equivalent) level or above. Each Party shall designate a co-chair for the meetings of the JSC (each, a “ Co-Chair ”). The Co-Chairs shall: (i) coordinate and prepare the agenda for, and ensure the orderly conduct of, the JSC’s meetings; and (ii) within ten (10) business days after the JSC’s meeting, prepare and circulate the minutes of such meeting accurately reflecting the discussions and decisions of the JSC. Such minutes from the JSC’s meeting shall not be finalized until the applicable Co-Chair from each Party has reviewed and confirmed the accuracy of such minutes in writing. Either Party may replace its respective Co-Chairs and other representatives at any time with prior written notice to the other Party; provided that the criteria for composition of the JSC set forth above continues to be satisfied following any such replacement of a Party’s representative on the JSC. In the event the Co-Chair of the JSC from either Party is unable to attend or participate in a particular JSC meeting, such Party may designate a substitute Co-Chair for the meeting.

3.4 JSC Meetings . The JSC shall meet at least once each calendar quarter, or more or less often as otherwise agreed to by the Parties. The JSC meetings may be conducted by telephone, video-conference or in-person as agreed to by the Parties; provided, however, that the JSC shall meet in-person at least once each calendar quarter. Unless otherwise agreed by the Parties, all in-person meetings for the JSC shall be held on an alternating basis between La Jolla’s facilities and BioMarin CF’s facilities. Each Party shall bear its own personnel and travel costs and expenses relating to the JSC meetings. With the consent of the Parties (not to be unreasonably withheld or delayed), other employee representatives of the Parties may attend the JSC meeting as non-voting observers.

3.5 Decision-Making . Decisions of the JSC, as well as the decisions or recommendations of the Working Group, shall be made by unanimous vote, with at least one (1) representative from each Party participating in any vote. In the event that the Working Group or the JSC fails to reach unanimous agreement with respect to a particular matter within its authority, then such matter shall be resolved under the procedures set forth in Section 17.1.

3.6 Scope of Governance . Notwithstanding the creation of the JSC and the Working Group, each Party shall retain the rights, powers and discretion granted to it under this Agreement, and the JSC and the Working Group shall not be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided in this Agreement, or the Parties expressly so agree in writing. Neither the JSC, nor the Working Group, shall have the power to amend or modify this Agreement, and no decision of the JSC, nor any decision or recommendation of the Working Group, shall be in contravention of any terms and conditions of this Agreement. It is understood and agreed that issues to be formally decided by the JSC, or to the extent applicable, by the Working Group, are only those specific issues that are expressly provided in this Agreement to be decided by the JSC or, to the extent applicable, the Working Group.

ARTICLE IV
DEVELOPMENT; OPERATING PLAN BUDGET

4.1 Overall Efforts in Development .

(a) Prior to the Full Participation Point, La Jolla shall use its best efforts to prepare for the filing and prosecution and to maintain the NDA for the Product in the United States and the MAA in the European Union and shall otherwise conduct all development activities with respect to Products for the Territory in accordance with the Operating Plan/Budget, subject to the oversight of the JSC and the Working Group; provided that La Jolla is not hereby guaranteeing that the FDA will issue the NDA or that the EMEA will issue the MAA. Unless otherwise agreed by the Parties, BioMarin CF will not perform any development activities under the Operating Plan/Budget other than manufacturing related activities prior to the Full Participation Point. Prior to the Full Participation Point, La Jolla shall use diligent efforts to implement the Operating Plan/Budget in a prompt and expeditious manner and in a manner designed to obtain Marketing Approvals for the existing Product in the United States and the European Union; and La Jolla shall use diligent efforts to ensure that the Operating Plan/Budget provides at all times for adequate activities, resources and funding to achieve such results in an expeditious and efficient manner. Notwithstanding the foregoing prior to the Full Participation Point, such obligations shall not require La Jolla to initiate or conduct an efficacy trial in humans other than the ASPEN Study. The foregoing diligence obligations shall not apply if there is a Futile Determination or, if based upon receipt of the 128 Flare Topline Data, the ASPEN Study does not result in a P-Value Achievement. The Parties acknowledge that the up front payments to be, and such additional payments as are described in Sections 7.2-7.4 and 7.13(b) as may be, paid by BioMarin CF are in support of La Jolla’s conduct of the ASPEN Study and other research and development activities with respect to the Compound and Products and accordingly, prior to the Full Participation Point, La Jolla agrees that it shall not fund the development of any product, other than the Compound and Products if such funding causes La Jolla’s remaining net available cash to be less than one hundred ten percent (110%) of the amount reasonably necessary to fund the Operating Plan/Budget through receipt of the 128 Flare Topline Data. For clarity, subject to the preceding sentence, La Jolla may conduct research and development activities for any other programs or products.

(b) After the Full Participation Point, La Jolla and BioMarin CF shall each use diligent efforts to implement the Operating Plan/Budget in a prompt and expeditious manner, and in a manner designed to obtain Marketing Approvals for Products in each Major Market and for such other countries within the Territory as may be commercially reasonable and to commercialize the Products in such countries. The Parties shall use diligent efforts to ensure that the Operating Plan/Budget provides at all times for adequate activities, resources and funding to achieve such results, in an expeditious and efficient manner. Without limiting the foregoing, subject to Section 4.1(b) below, it is understood that after the Full Participation Point, the Operating Plan/Budget will at all times provide for both Parties to have significant roles in the development activities for Products within the Territory. In the case of La Jolla, such role in development activities for the Products shall included, at a minimum: (i) conducting Phase IV Studies (as defined in Exhibit 4.2E) for the existing Product in the United States; and the allocation of La Jolla FTEs for the performance of such Phase IV Studies; and (ii) reasonable consideration shall be given to La Jolla’s existing expertise in developing Products and, where appropriate, as determined by the JSC, such expertise will be utilized in the ongoing research and development and life cycle management of Products. Neither La Jolla nor BioMarin CF shall have an obligation to use diligent efforts to execute with respect to a Product in any country after the Commercial Life of such Product in such country.

(c)  ASPEN Study . Unless the Parties otherwise mutually agree, La Jolla shall be responsible for the conduct and management of the ASPEN Study, both prior to and after the Full Participation Point, provided that BioMarin CF will be informed of the status of the ASPEN Study on a regular basis and will have complete access to all Data generated from the ASPEN Study at all times. Unless expressly agreed by both La Jolla and BioMarin CF, no Operating Plan/Budget will materially alter the conduct of the ASPEN Study as set forth in the protocol submitted to the FDA prior to the Effective Date.

(d)  Development Costs . The costs of performing all development and regulatory activities pursuant to the Operating Plan/Budget prior to the Full Participation Point (including the performance of the ASPEN Study up to the Full Participation Point), shall be at La Jolla’s sole expense. After the Full Participation Point, the costs of implementing all development and regulatory activities pursuant to the Operating Plan/Budget (including the remaining portion of the ASPEN Study, if applicable) shall be shared equally by the Parties in accordance with Section 7.12 and the Financial Appendix, except as provided in Section 4.2(d)(ii) below.

(e) Dosing Study . [****]

4.2 Operating Plan/Budget .

(a)  General . With the assistance of the Working Group, the JSC shall establish a rolling three (3) calendar year plan and budget for (i) the cooperative development of, and regulatory activities for, the Products, (ii) the manufacturing activities for the Products, including without limitation process development, and (iii) the marketing, promotion and commercialization of the Products within the Territory under this Agreement (as such plan and budget may be amended from time to time in accordance with this Agreement, and as approved by the JSC, the “ Operating Plan/Budget ”). The Operating Plan/Budget will be established in such a way as to incorporate the business objectives described in Section 4.1(b) and 6.1(a). [****] The Operating Plan/Budget will include sufficient funding for the Dosing Study. It is understood that the JSC will modify and update the Operating Forecast annually in connection with the procedure for amending and updating the Operating Plan/Budget under Sections 4.2(c) and 4.2(d) below.

(b)  Initial Operating Plan/Budget . An initial Operating Plan/Budget for Products within the Territory is attached to this Agreement as Exhibit 4.2B (“ Initial Operating Plan/Budget ”). The Initial Operating Plan/Budget shall be deemed to be the Operating Plan/Budget for all purposes of this Agreement until such Initial Operating Plan/Budget is updated in accordance with Section 4.2(d) below.

(c)  Amendments . The JSC shall review the Operating Plan/Budget on an ongoing basis, and in no event less frequently than once each calendar year (as set forth in Section 4.2(d) below), or more frequently as needed to take into account completion, commencement or cessation of activities not contemplated by the then-current Operating Plan/Budget. The Working Group shall submit to the JSC as a proposal an amendment to the Operating Plan/Budget in advance of implementation of such amendment, including any amendment that effects a material change in the budget or timeline in effect for the current year of such Operating Plan/Budget.

(d) Timing and Process for Annual Amendments .

(i) No later than [****] of each calendar year after the Effective Date commencing in 2009, the Working Group shall present to the JSC for its review and approval its plans and budget for its respective area to be included in the overall Operating Plan/Budget for the next three (3) calendar years in the form described in Section 4.2(a) above. If an Operating Plan/Budget is not approved by the JSC by [****] of a calendar year, then, until such time as an Operating Plan/Budget is either approved by the JSC or established pursuant to the dispute resolution procedure set forth in Section 17.1 below: (i) the preceding Operating Plan/Budget (including the Operating Forecast for the applicable period) shall continue to govern the Parties’ activities under this Agreement, (ii) each Party shall be permitted to conduct activities allocated to such Party in such preceding Operating Plan/Budget and incur costs consistent with such preceding Operating Plan/Budget, which costs shall be shared equally by the Parties in accordance with Section 7.12 below and the Financial Appendix, and (iii) in any case, without limiting the foregoing, each Party may continue any on-going trials initiated by such Party in accordance with such preceding Operating Plan/Budget, and the reasonable costs incurred by such Party in connection with such trials shall continue to be shared equally by the Parties in accordance with Section 7.12 below and the Financial Appendix; in each case, as if such costs were set forth in an approved Plan/Budget. [****]

(ii) [****]

(e) Operating Plan/Budget Content .

(i) In addition to the information described in Section 4.2(a) above, each Operating Plan/Budget shall designate responsibility and a reasonable timeline for completion for such activities.

(ii) The Operating Plan/Budget shall address: [****]

(iii) In addition, after receipt of the first Marketing Approval for a Product in the Territory, the Operating Plan/Budget shall include the requirements set out in Exhibit 4.2E hereto.

4.3 Exchange of Data and Know-How .

(a)  By Either Party . During the term of this Agreement, each Party shall provide to the other Party all such Party’s Know-How ( i.e. , in case of La Jolla, La Jolla Know-How, and in the case of BioMarin CF, all BioMarin CF Know-How) that has not previously been provided hereunder, in each case promptly upon request by the other Party. The Party providing such Know-How shall provide the same in electronic form (to the extent the same exists in electronic form), and shall provide copies as reasonably requested and/or an opportunity for the other Party or its designee to inspect (and copy) all other materials comprising such Know-How (including for example, original patient report forms and other original source data). The Parties will cooperate and reasonably agree upon formats and procedures to facilitate the orderly and efficient exchange of the La Jolla Know-How and the BioMarin CF Know-How. Except as specifically provided in this Agreement, La Jolla may not provide, disclose or sublicense any BioMarin CF Know-How to any Third Party, and may not use, any BioMarin CF Know-How for any purpose other than to perform its obligations and exercise its rights under this Agreement. For avoidance of doubt, La Jolla may not provide or sublicense any BioMarin CF Know-How to the Asia-Pacific Licensee in the Asia-Pacific Territory or use any BioMarin CF Know-How to develop and/or commercialize the Products in the Asia-Pacific Territory; provided, however, that the Parties agree that La Jolla shall have the right to provide the NDA, all correspondence with the FDA relating to the NDA, the MAA and all correspondence with the EMEA relating to the MAA, in each case relating to the Product being used in the ASPEN Study and/or any modifications to such Product included in such NDA and/or MAA, as approved by the FDA or EMEA, and/or any supplements to the foregoing (such Product including modifications thereto, the “ Initial Product ”), any other filings with the FDA or EMEA associated with the Initial Product, all manufacturing information, and all clinical, preclinical and technical Data relating to the Initial Product and all pharmacovigilance and safety information relating to the Initial Product to any Affiliate or Third Party partner for the Asia-Pacific Territory for purposes of manufacturing, developing and commercializing the Compound and Product in the Asia-Pacific Territory. Additionally, upon BioMarin CF’s prior written consent, which may be granted or withheld in BioMarin CF’s sole and absolute discretion, La Jolla may disclose other BioMarin CF Know-How or other information that would otherwise be restricted by this Agreement to an Asia-Pacific Licensee in the Asia-Pacific Territory. Except as specifically provided in this Agreement, BioMarin CF may not provide or disclose any La Jolla Know-How to any Third Party, and may not use any La Jolla Know-How for any purpose other than to perform its obligations and exercise its rights under this Agreement.

(b)  Provision of Data to JSC . Upon request by the JSC, each Party shall promptly provide the JSC with summaries in reasonable detail of all Data generated or obtained in the course of such Party’s performance of activities under the Operating Plan/Budget.

4.4 Term of Ongoing Obligations . The Parties’ obligations under Sections 4.1, 4.3 and 6.2, La Jolla’s obligation to perform activities under the Operating Plan/Budget, and La Jolla’s supply and manufacturing obligations under Article 9 and Section 5.3 below, any further right of La Jolla to have FTEs included in any Operating Plan/Budget pursuant to Section 4.1(b), 6.1, 6.2 or any other provision of this Agreement, and any right of La Jolla to manufacture or supply Product to BioMarin CF for sale in the Territory pursuant to any provision of this Agreement, shall terminate eighteen (18) years after the Effective Date, unless La Jolla requests to extend such period in writing at least two (2) years prior to such date. Upon termination of such obligations, the Working Group and the JSC will terminate. However, each Party will continue to have an approval right with respect to matters specified to be decided by the JSC under this Agreement. In such event, if the Parties are unable to reach agreement on a matter specified in this Agreement to have been decided by the JSC, the matter shall be resolved as if it were a dispute of the JSC in accordance with Article 17 below.

ARTICLE V
REGULATORY MATTERS

5.1 Regulatory Responsibilities . Unless otherwise agreed by the Parties:

(a)  ASPEN Study and Dosing Study . La Jolla shall be responsible for filing, prosecuting, obtaining and maintaining, in its own name, all INDs, CTAs, and other regulatory filings with respect to the ASPEN Study and the Dosing Study.

(b)  NDA Regulatory Responsibilities . La Jolla will make all necessary regulatory filings (including by way of amendment) for, and seek to obtain, an NDA for the Product currently under development, including filing a new NDA if agreed by the JSC or required by the FDA, in the United States in its own name. Promptly following the Full Participation Point and within thirty (30) days after such NDA is approved, La Jolla shall assign to BioMarin CF all of its rights, title and interest in and to such NDA. Notwithstanding the foregoing, BioMarin CF will have a co-lead role in connection with any negotiations with the FDA regarding labeling of the Products. Prior to the assignment of the NDA, La Jolla shall maintain the same and shall take such actions as are reasonably necessary to make available to BioMarin CF the benefits of such NDA to the extent required in connection with BioMarin CF’s activities under this Agreement. After the assignment, BioMarin CF will be responsible for any further regulatory matters involving the Products, and La Jolla will fully support and cooperate with BioMarin CF in connection with such activities.

(c)  Other Regulatory Responsibilities . From and after the Full Participation Point, except as expressly provided in Section 5.1(a) and (b), BioMarin CF shall be responsible for filing, obtaining and maintaining, in its own name, all other INDs, Marketing Applications, Marketing Approvals and other regulatory filings related to the development and commercialization of Products within the Territory, provided that La Jolla will fully support and cooperate with BioMarin CF in connection with such activities to the extent requested by BioMarin CF. BioMarin CF shall also obtain any export approvals required by the FDA to import or export Products to any country within the Territory outside the United States. All such filings will be in the name of BioMarin CF, except where otherwise required by local law.

(d)  Costs . Prior to the Full Participation Point, responsibility for the costs of preparing, filing, obtaining and maintaining regulatory filings and approvals, including INDs, the NDA, the MAA, and other Marketing Approvals, for Products within the Territory shall be paid by La Jolla. From and after the Full Participation Point, responsibility for the costs of filing, obtaining and maintaining regulatory filings and approvals, including INDs, NDAs, MAAs, and other Marketing Approvals, for Products within the Territory shall be shared equally by the Parties as provided in Section 7.12 and the Financial Appendix.

5.2 Filings and Meetings with Regulatory Authorities .

(a)  Regulatory Filings and Correspondence . The Party with responsibility for regulatory matters in a Major Market country (as described in Section 5.1(a), (b) and (c) above) shall provide the other Party’s representatives on the JSC with copies of all material regulatory filings (including Marketing Approvals) and all minutes of any material meetings, telephone conferences and/or discussions with the Regulatory Authority of such Major Market country, and shall promptly notify the other Party’s representatives on the JSC with respect to any material changes or material matters that may arise in connection with such regulatory filings, including Marketing Approvals, of a Product within such Major Market country. Each Party will provide the other Party with translations of such documents into English to the extent prepared or obtained for its own use.

(b) Regulatory Interactions . [****]

(c)  Role of JSC . The JSC shall approve the overall strategy and positioning of all material meetings, submissions and filings for Products with FDA, EMEA and Regulatory Authorities of other Major Market countries prior to their conduct, submission or filing, based upon reasonably detailed reports and summaries of such meetings, submissions and filings presented to the JSC by the Party with primary responsibility for such meeting, submission or filing (as described in Sections 5.1(a), (b) and (c) above), and all such meetings, submissions and filings shall conform with the strategy approved by the JSC. In connection with such review, such Party shall promptly provide to the JSC such additional information regarding a proposed meeting, submission or filing as the other Party may reasonably request.

(d)  Other Regulatory Matters . Each Party will promptly provide the other Party with copies of all material documents, information and correspondence received from a Regulatory Authority (including a written summary of any material communications in which such other Party did not participate) pertaining to Products within the Territory and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority within the Territory relating to a Product or activities under this Agreement.

5.3 Regulatory Inspections . [****]

5.4 Audit Rights . Each Party shall have the right, during normal business hours, and no more than once per calendar year, with more frequent audits upon agreement of the Parties (such agreement not to be withheld unreasonably), to inspect and audit: (a) those portions of the facilities of each Party, or any of its Affiliates, Sublicensees, subcontractors and investigator sites used in the performance of the Operating Plan/Budget, the manufacturing of Product to be supplied pursuant to this Agreement, and/or commercialization activities within the Territory, to ascertain compliance with applicable laws and Marketing Approvals, including current Good Laboratory Practices, Good Clinical Practices and Good Manufacturing Practices (“ GMP ”), and conformance with the applicable specifications and quality assurance standards, provided that the inspecting Party shall on such occasions be accompanied by a representative of the other Party (and such other Party must reasonably cooperate in making its representative available for such purpose); and (b) any of the other Party’s documentation or its Affiliates’, Sublicensees’, subcontractors’ or investigators’ documentation relating to the Operating Plan/Budget, the manufacturing of Product to be supplied pursuant to this Agreement, and/or commercialization activities within the Territory, including, to the extent permitted by law and any applicable privacy policies, the medical records of any patient participating in any clinical study under the Operating Plan/Budget. Notwithstanding the foregoing, in the event that BioMarin CF’s GMP compliance group determines that an audit is appropriate due to any issue relating to manufacturing, testing or other aspects of GMP compliance then BioMarin CF shall have the right to require additional audits of La Jolla, its Affiliates, Sublicensees, subcontractor and investigation sites until all such issues have been resolved. In addition, a Party’s audit right shall be limited by bona fide Third Party agreements or confidentiality obligations, provided, however, that each Party shall use its reasonable efforts to: (i) obtain audit rights for the other Party under such agreements; but (ii) cannot guarantee such other Party is granted audit rights to the same extent which a Party has audit rights in any agreements executed after the Effective Date; and if a Party is unable to obtain such audit rights for the other Party, then upon request it shall exercise its own rights with respect to such an audit for the benefit of the other Party.

5.5 Adverse Event Management .

(a) [****]

(b) [****].

(c) [****]

(d) [****]

ARTICLE VI
COMMERCIALIZATION AND PROMOTION

6.1 Commercialization .

(a)  General . From and after the Full Participation Point, La Jolla and BioMarin CF shall each use diligent efforts to implement the commercialization activities under the Operating Plan/Budget described below with respect to each Product in a prompt and expeditious manner, and in a manner designed to achieve commercial success of such Products in each Major Market and for such other countries within the Territory as may be commercially reasonable.

(b)  Territorial Allocation . In the United States, the Parties will jointly commercialize the Products as more fully described below, and in other countries of the Territory, BioMarin CF will be exclusively responsible for commercialization of the Products; in each case in accordance with the Operating Plan/Budget then in effect and subject to the oversight of the JSC.

(i)  United States . In the United States, the Parties will be jointly responsible for the marketing activities outlined on Exhibit 6.1B hereto, and La Jolla shall have the right to provide fifty percent (50%) of the total number of FTEs allocated to the performance of such activities in the Operating Plan/Budget. In addition, La Jolla will have the right to deploy Sales Representatives detailing Products pursuant to Section 6.2 below and shall be afforded the opportunity to have input on the other major elements relating to marketing the Product. Subject to the foregoing, BioMarin CF shall have primary responsibility for other aspects of marketing and commercializing Products in the United States.

(ii)  Countries of the Territory Outside the Unites States . In countries of the Territory outside the United States, BioMarin CF shall be exclusively responsible for performing all activities for the marketing, promotion, distribution and other commercialization of the Products, except as the JSC may otherwise determine is in the best interests of a Product, in accordance with the Operating Plan/Budget and the terms of this Agreement.

(iii) Promotion of the Products . [****]

(iv)  Activities Prior to Full Participation Point . Notwithstanding the foregoing, prior to the Full Participation Point, except as the Parties may otherwise agree, La Jolla shall conduct any commercialization activities to be conducted with respect to the Products for all or any portion of the Territory at La Jolla’s sole expense.

6.2 La Jolla’s Sales Force Deployment Option .

(a)  Exercise of Option . La Jolla shall have the right to deploy a portion of the total number of Sales Representatives for the Products in the United States (“ Sales Force Deployment Option ”) in accordance with this Section 6.2. To exercise the Sales Force Deployment Option, La Jolla shall notify BioMarin CF in writing no later than [****] after La Jolla’s receipt of the 128 Flare Topline Data as described in Section 7.6(e) below or earlier completion of the efficacy portion of the ASPEN Study. La Jolla shall only have the right to exercise the Sales Force Deployment Option once.

(i)  La Jolla FTEs . If La Jolla exercises the Sales Force Deployment Option, La Jolla shall have the right to deploy up to [****]. Following La Jolla’s exercise of the Sales Force Deployment Option, La Jolla shall have the right and obligation to deploy toward the promotion of the Products in the United States the number of Sales Representatives specified in its notice of exercise. If La Jolla exercises its Sales Force Deployment Option within the time period specified in subparagraph (a), and the JSC determines to increase the total number of Sales Representatives that will promote Products in the United States from the number of such Sales Representatives allocated to such activities in the Operating Plan/Budget for the initial launch, La Jolla may increase the number of Sales Representatives that will promote the Products in the United States to maintain the same percentage of deployment as established through the exercise of the Sales Deployment Option by providing a notice to BioMarin CF in writing no later than thirty (30) days after such JSC determination. In the event that the JSC determines to reduce the total number of Sales Representatives that will promote the Products in the United States, such reduction shall be made proportionally between BioMarin CF and La Jolla Sales Representatives. For purposes of this Section 6.2(a)(i), [****]

(ii)  Sales Activities . It is understood that the Sales Representatives to be deployed by La Jolla shall be deployed in a manner to ensure geographic dispersion of, and reasonable access to major metropolitan areas by such La Jolla Sales Representatives. Other than the personnel to be so deployed and details to be performed by La Jolla, BioMarin CF shall be responsible for the remaining promotional effort for the Products in the United States in accordance with the Joint Promotion Plan established in accordance with Section 6.2(c) below.

(b)  Role of the Joint Steering Committee . The JSC shall be responsible for coordinating the joint promotional activities of the Parties within the United States in the event La Jolla exercises the Sales Force Deployment Option.

(c)  Joint Promotion Plan . After La Jolla has exercised the Sales Force Deployment Option and promptly following request by either Party, the Working Group shall prepare an operating plan for joint promotion of the Products in the United States (“ Joint Promotion Plan ”), which shall be reviewed and approved by the JSC. The Joint Promotion Plan shall set out in reasonable detail: (i) overall strategies with respect to promoting and marketing the Products in the U.S.; (ii) the activities to be conducted and the responsibilities of each Party in connection with the promotion of the Products in the U.S.; (iii) the reach, frequency, deployment and call plan for the Sales Representatives promoting the Products in the U.S.; and (iv) a fair and reasonable allocation between BioMarin CF and La Jolla of activities under such Joint Promotion Plan in the U.S., consistent with Section 6.2(a) above, including a reasonable allocation of promotion responsibilities for channels and key opinion leaders. Further, the Joint Promotion Plan shall provide at all times for an equivalent allocation of resources between the Sales Representatives of each of BioMarin CF and La Jolla, including with respect to marketing tools, programs, corporate accounts and medical affairs support, and shall provide for reasonable consistency from period to period in the responsibilities allocated to each Party. After establishment of the initial Joint Promotion Plan, the JSC shall review the Joint Promotion Plan on an ongoing basis and in no event less frequently than once each calendar half-year. The Working Group may propose revisions to the then-current Joint Promotion Plan to the JSC; provided however that that Joint Promotion Plan in effect for any year shall not be materially modified except as approved by the JSC.

(d)  Performance Standards . BioMarin CF, and to the extent La Jolla has exercised the Sales Force Deployment Option, La Jolla will promote, market, and sell the Products in accordance with any requirements of the Regulatory Authorities and the reasonable requirements and instructions of the JSC and BioMarin CF, consistent with the Joint Promotion Plan, as such may be amended from time to time. Each Party will use commercially reasonable efforts to promote, maintain, and extend the sale of the Products in the U.S. that will reflect favorably on the other Party’s name, the Product Trademarks, and the quality of the Products. Neither Party will make any representations, nor give any warranty or guarantee to any Third Party in relation to the Products other than as approved by the JSC in writing. At all times, each Party will conduct its business in an ethical and business-like manner and in such a way as to uphold the good name and reputation of the other Party and the Products. Each Party will ensure that all regulations and requirements relating to the distribution, sale, and commercialization of the Products in the U.S. are complied with, as they relate to such Party’s activities hereunder.

(e)  BioMarin CF Practices and Procedures . After La Jolla has exercised the Sales Force Deployment Option, La Jolla agrees to comply promptly with the reasonable policies and directives with regard to the promotion of the Products in the United States issued by BioMarin CF from time to time; provided that such policies and procedures are equally applicable to BioMarin CF and its Sales Representatives and do not otherwise conflict with the terms of this Agreement. BioMarin CF shall notify La Jolla of such policies or directives and any changes thereto in writing a reasonable period prior to the implementation of such policies or directives, or any changes thereto. If La Jolla exercises the Sales Force Deployment Option, La Jolla shall, as an essential part of its commitment under this Agreement, use diligent efforts to cause its Sales Representatives to perform such tasks or activities for the promotion of the Products in the United States as specified in any Operating Plan/Budget.

(f) Sales Efforts; Costs .

(i)  Sales Efforts of the Parties . The Joint Promotion Plan for each calendar year shall specify the number of Sales Representatives to be deployed by each Party for such calendar year, consistent with the parameters set forth in Section 6.2(a)(i) above.

(ii)  Costs . If La Jolla exercises its Sales Force Deployment Option, then for purposes of Section 7.12 below and the Financial Appendix, the costs of the Parties’ Sales Representatives promoting the Products in the United States shall be determined on a modified FTE basis, as follows: [****]

(iii) Sales Representative Compensation Weighting . [****]

(g)  Timing . La Jolla and BioMarin CF shall cooperate to have the Sales Representatives of both Parties hired and trained prior to the commencement of their joint promotion activities. To the extent that either Party hires and trains additional Sales Representatives for such purposes, it is understood that reimbursement of such Sales Representatives in accordance with the Financial Appendix will commence as of such Sales Representative’s date of hire. The timing of hiring the Sales Representatives shall be determined by the JSC and, to the extent practical, shall be done in order to have the Sales Representatives of each Party hired and trained prior to the launch of the first Product in the United States and such hiring and training of Sales Representatives shall be conducted by BioMarin CF and La Jolla in parallel ( i.e. , at approximately the same time prior to launch).

6.3 Right to Seek to Change Structure to Royalties on Net Sales . [****]

6.4 Booking Sales . It is understood that, during the term of this Agreement, as between the Parties, BioMarin CF will book all sales for Product in each country of the Territory.

6.5 Commercialization Activities Outside the Territory . La Jolla shall keep the JSC reasonably informed as to the progress of its launch and commercialization activities relating to the Product in the Asia-Pacific Territory, to the extent La Jolla has the right to do so, including with respect to pricing, by way of updates to the JSC at least annually and as otherwise reasonably requested by the JSC.

ARTICLE VII
PAYMENTS

7.1 Commencement Payments .

(a) Within fifteen (15) days following the Effective Date:

(i) BioMarin CF shall pay to La Jolla Seven Million Five Hundred Thousand Dollars ($7,500,000); and

(ii) BioMarin CF shall purchase Seven Million Five Hundred Thousand Dollars ($7,500,000) worth of Series B Preferred Stock of La Jolla pursuant to the terms of the Securities Purchase Agreement at a price per common share equivalent (based on the conversion ratio provided for in the Certificate of Designations attached as an exhibit to the Securities Purchase Agreement) that represents a twenty percent (20%) premium over the average closing price of the Common Stock of La Jolla, as reported on the NASDAQ stock market, for the twenty (20) trading days ending on the day prior to the Effective Date.

7.2 Payments in Connection with First Interim Efficacy Analysis .

(a) Upon BioMarin CF’s receipt of a Completion Notice of the occurrence of the First Interim Efficacy Analysis and a Non-Futile Determination, BioMarin CF shall pay to La Jolla Fifteen Million Dollars ($15,000,000) within thirty (30) days.

(b) If the Completion Notice with respect to the occurrence of the First Interim Efficacy Analysis is accompanied by notice of a Futile Determination, then BioMarin CF shall have no further payment obligation to La Jolla under Sections 7.2, 7.3 and 7.4 and Section 7.13 shall thereafter apply to the continuing rights and obligations of the Parties under this Agreement.

(c) If the Completion Notice with respect to the occurrence of the First Interim Efficacy Analysis is accompanied by a notice of a P-Value Achievement, subject to Section 7.18, BioMarin CF shall have thirty (30) days to pay to La Jolla Forty-Seven Million Five Hundred Thousand Dollars ($47,500,000), Seven Million Five Hundred Thousand Dollars ($7,500,000) of which may be paid at BioMarin CF’s election in the form of an equity investment in La Jolla in accordance with Section 7.5.

7.3 Payments in Connection with Second Interim Efficacy Analysis .

(a) If BioMarin CF maintained its right to effect the Full Participation Point after the occurrence of the First Interim Efficacy Analysis by paying to La Jolla Fifteen Million Dollars ($15,000,000) in accordance with Section 7.2(a) of this Agreement, then within thirty (30) days of BioMarin CF’s receipt of a Completion Notice of the occurrence of the Second Interim Efficacy Analysis and:

(i) a P-Value Achievement, subject to Section 7.18, BioMarin CF shall pay to La Jolla Fifty-Five Million Dollars ($55,000,000), up to Ten Million Dollars ($10,000,000) of which may be paid at BioMarin CF’s election in the form of an equity investment in La Jolla in accordance with Section 7.5; or

(ii) a Non-Futile Determination, subject to Section 7.18, BioMarin CF may (x) maintain its right to effect the Full Participation Point by paying to La Jolla Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000), up to Five Million Dollars ($5,000,000) of which may be paid at BioMarin CF’s election in the form of any equity investment in La Jolla in accordance with Section 7.5, or (y) effect the Full Participation Point by paying to La Jolla Fifteen Million Dollars ($15,000,000), up to Five Million Dollars ($5,000,000) of which may be paid at BioMarin CF’s election in the form of an equity investment in La Jolla in accordance with Section 7.5.

(b) If the Completion Notice with respect to the occurrence of the Second Interim Efficacy Analysis is accompanied by a Futile Determination, then BioMarin CF shall have no further payment obligation to La Jolla under Sections 7.3 and 7.4 and Section 7.13 shall thereafter apply to the continuing rights and obligations of the Parties under this Agreement.

7.4 Payment in Connection with 128 Flare Topline Data .

(a) If BioMarin CF effected the Full Participation Point after the occurrence of the Second Interim Efficacy Analysis in accordance with Section 7.3(b)(ii)(y) of this Agreement, then within thirty (30) days of BioMarin CF’s receipt of the Completion Notice relating to La Jolla’s receipt of the 128 Flare Topline Data and a P-Value Achievement, BioMarin CF shall pay to La Jolla Thirty Million Dollars ($30,000,000).

(b) If BioMarin CF maintained its right to effect the Full Participation Point after the occurrence of both the First Interim Efficacy Analysis in accordance with Section 7.2(a) and the Second Interim Efficacy Analysis in accordance with Section 7.3(a)(ii)(x) of this Agreement, then within thirty (30) days of BioMarin CF’s receipt of the Completion Notice relating to La Jolla’s receipt of the 128 Flare Topline Data and a P-Value Achievement, subject to Section 7.18, BioMarin CF shall pay to La Jolla Fifty-Five Million Dollars ($55,000,000), up to Fifteen Million Dollars ($15,000,000) of which may be paid at BioMarin CF’s election in the form of an equity investment in La Jolla in accordance with Section 7.5.

(c) If the Completion Notice provided to BioMarin CF with respect to the 128 Flare Topline Data indicates that the P-Value Achievement has not occurred, then BioMarin CF shall have no further payment obligation to La Jolla under Section 7.4 and Section 7.13 shall thereafter apply to the continuing rights and obligations of the Parties under this Agreement.

7.5 Partial Payments in Equity . To the extent that BioMarin CF elects to make a portion of any payments due to La Jolla in the form of an equity purchase as permitted under Sections 7.2, 7.3, or 7.4, then such equity investment shall be made pursuant to the terms of the Securities Purchase Agreement at a price per common share equivalent (based on the conversion ratio provided for in the Certificate of Designations attached as an exhibit to the Securities Purchase Agreement) equal to one hundred ten percent (110%) of the average closing price of the Common Stock of La Jolla, as reported on the NASDAQ stock market or such other reporting service as the stock is then quoted if not then quoted on NASDAQ (and if not then traded at the value determined by an investment bank selected consistent with the provisions of Section 14.3), for the ten (10) trading days commencing five (5) trading days immediately prior to the date La Jolla has publicly announced the event that triggered such payment ( i.e. , the P-Value Achievement, or in the case of such payment where there is no P-Value Achievement, La Jolla’s first public announcement of the results of the Second Interim Efficacy Analysis or the first public announcement of the approval of an NDA for the Product under Section 7.13). To effect the election to make such payments in the form of equity, BioMarin CF shall so notify La Jolla in writing within fifteen (15) days after receiving the Completion Notice that triggered such payment, specifying the amount of the payment relating to the Full Participation Point that BioMarin CF so elects to make in the form of such equity purchase (“ Equity Election Notice ”). All equity purchases pursuant to this Section 7.5 shall be subject to the provisions of Section 7.18.

7.6 Certain Terms . For purposes of the payments under this Section 7:

(a) “ Data Monitoring Board ” shall mean the expert advisory group appointed for the 90-14 portion of the ASPEN Study in accordance with the charter for such advisory group and which is charged with the responsibility, among other matters, of reviewing the results of the Interim Efficacy Analyses and making a recommendation in accordance with the protocol for the ASPEN Study based on the safety profile and the outcome of each Interim Efficacy Analysis as to whether La Jolla should continue to conduct the 90-14 portion of the ASPEN Study.

(b) “ Non-Futile Determination ” shall mean a recommendation by the Data Monitoring Board following the First Interim Efficacy Analysis or the Second Interim Efficacy Analysis, as applicable, as to the continuation of the 90-14 portion of the ASPEN Study other than (i) a recommendation that such continuation “may be futile” (as specified in Par