LICENSE, DEVELOPMENT, AND COMMERCIALIZATION AGREEMENT

Exhibit 10.18

LICENSE, DEVELOPMENT, AND COMMERCIALIZATION AGREEMENT

        This License, Development, and Commercialization Agreement is entered into as of the Execution Date by and between Anacor Pharmaceuticals, Inc., a Delaware corporation having offices at 1060 East Meadow Circle, Palo Alto, CA 94303-4230 ( "Anacor" ), and Schering Corporation, a New Jersey corporation having offices at 2000 Galloping Hill Road, Kenilworth, New Jersey 07033 ( "Licensee" ).

RECITALS

         WHEREAS, Anacor possesses intellectual property relating to a proprietary compound known as AN2690;

         WHEREAS , Licensee is engaged in the research, development and commercialization of pharmaceutical products; and

         WHEREAS , Anacor and Licensee desire to enter into a collaboration under which Licensee will obtain a worldwide exclusive license to develop and commercialize products containing AN2690, and Anacor will have an option to co-promote such products to dermatologists and certain other entities in the United States, all under the terms and conditions set forth below.

         NOW THEREFORE , the Parties agree as follows:

ARTICLE 1
DEFINITIONS

        1.1    "Affiliate" means, with respect to any Person, any other Person which directly or indirectly controls, is controlled by or is under common control with such Person. A Person shall be deemed to control another Person if such Person possesses the power to direct or cause the direction of the management, business and policies of such Person, whether through the ownership of fifty percent (50%) or more of the voting securities of such Person, by contract or otherwise. For the avoidance of doubt, each of MSP Singapore Company, LLC, MSP Technology (US) Company, LLC, MSP Distribution Services (C) LLC, and MSP Marketing Services (C) LLC (each an MSP Company and collectively, the " MSP Companies "), and any other Person controlled by the MSP Companies, shall be deemed not to be an Affiliate of Licensee unless Licensee acquires such MSP Company.

        1.2    "Anacor Background Know-How" means any Know-How Controlled by Anacor or its Affiliates that is generated prior to the Effective Date or other than in performance of, activities conducted under this Agreement.

THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

EXHIBITS AND SCHEDULES TO THIS AGREEMENT ARE OMITTED FROM THIS FILING. ANACOR PHARMACEUTICALS, INC. UNDERTAKES TO PROVIDE COPIES OF THE OMITTED EXHIBITS AND SCHEDULES TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST OF THE COMMISSION.

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        1.3    "Anacor Background Patents" means any and all Patents that are Controlled by Anacor or any of its Affiliates that claim discoveries, inventions, developments or innovations made by or on behalf of Anacor either prior to the Effective Date and/or other than in performance of activities conducted under this Agreement, including, without limitation, the Anacor Background Patents described in Schedule A .

        1.4    "Anacor IP" means the Anacor Background Know-How, Anacor Background Patents, Anacor Program Know-How, Anacor Program Patents, and Anacor's rights to the Joint Program Patents and Joint Program Know-How.

        1.5    "Anacor Program Know-How" means any Program Know-How (other than Joint Program Know-How) Controlled by Anacor or any of its Affiliates.

        1.6    "Anacor Program Patents" means any Program Patents (other than Joint Program Patents) Controlled by Anacor or any of its Affiliates, including, without limitation, the Anacor Program Patents described in Schedule A .

        1.7    "Business Day" means a day on which banking institutions in New York, New York, United States are open for business.

        1.8    "Commercialization" means, with respect to Licensed Product, any and all activities directed to the marketing, promotion, distribution, offering for sale and selling such product, importing and exporting such product for sale, and interacting with Regulatory Authorities regarding the foregoing. Commercialization shall also include Commercialization Studies. "Commercialize" has a correlative meaning.

        1.9    "Commercialization Studies" means a study or data collection effort for the Product that is initiated in the Territory after receipt of Regulatory Approval for the Licensed Product and is principally intended to support the Commercialization of the Licensed Product in the Territory; provided, that such study or data collection effort is not principally to support or maintain a Regulatory Approval or obtain a label change or maintain a label.

        1.10    "Commercially Reasonable Efforts" means such efforts and resources as are commonly used in the pharmaceutical industry for an ethical drug of similar commercial potential at a similar stage in its lifecycle, taking into consideration its safety and efficacy, the cost to Develop and Commercialize the product, the risks inherent in the Development and Commercialization of the product, its competitiveness compared to alternative products, the proprietary position of the product, the scope, timing and likelihood of Regulatory Approvals; provided, however, Licensee shall not disadvantage the Licensed Product to the advantage of other Licensee onochomycosis products, to the extent such products exist.

        1.11    "Confidential Information" means, with respect to each of the Parties, any and all proprietary data, information or materials disclosed or otherwise made available by a Party or its Affiliates to the other Party or any of its Affiliates, including, without limitation, any such data, information or materials related to substances, formulations, devices (and/or any components thereof), techniques, technology, regulatory requirements and strategies, equipment, study results, reports, know-how, sources for manufacture and supply, patent position and business plans.

        1.12    "Controlled" shall mean, with respect to a Person, that such Person (or any of its Affiliates) has the legal authority to grant a license or sublicense of intellectual property rights to another Person (other than pursuant to this Agreement) without breaching the terms of any agreement with a Third Party.

        1.13    "Co-Promotion Agreement" has the meaning set forth in Section 6.2(a).

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        1.14    "Co-Promotion Notice" has the meaning set forth in Section 6.2(b).

        1.15    "Co-Promotion Option" has the meaning set forth in Section 6.2(a).

        1.16    "Co-Promotion Target Audience" means dermatologists in the United States.

        1.17    "Development" or "Develop" means research activities and non-clinical (including without limitation pre-clinical) and clinical drug development activities, including, among other things: drug discovery, toxicology, statistical analysis and report writing, conducting clinical trials for the purpose of obtaining and maintaining Regulatory Approval (including without limitation, post-marketing studies), and regulatory affairs related to all of the foregoing. Development shall include all clinical studies (including Phase III-B) that are primarily intended to support or maintain a Regulatory Approval, maintain a label or obtain any label change, but shall exclude Commercialization Studies.

        1.18    "Development Cost" means, [***]

        1.19    "Development Plan" has the meaning set forth in Section 4.2(a).

        1.20    "Dollars" or "$" means the legal tender of the United States.

        1.21    "Drug Approval Application" means (a) the single application or set of applications for approval and/or pre-market approval to make and sell commercially a pharmaceutical therapeutic product or delivery systems or device filed with the FDA, including without limitation all information included in Drug Master Files related to such application(s), and any related registrations with or notifications to the FDA, and (b) any counterparts to such applications filed with any other national or supranational Regulatory Authority in the Territory, and (c) all supplements and amendments that may be filed with respect to any of the foregoing.

        1.22    "Effective Date" has the meaning set forth in Section 15.1.

        1.23    "EMEA" means the European Medicines Agency or any successor agency thereof.

        1.24    "EU" means all of the European Union member states as of the applicable time during the Term.

        1.25    "Execution Date" means February 2, 2007, the date upon which this Agreement has been executed and delivered by both Parties.

        1.26    "Executive Officer" means, in the case of Anacor, the Chief Executive Officer of Anacor, and in the case of Licensee, [***] of Schering-Plough Research Institute.

        1.27    "FDA" means the United States Food and Drug Administration or any successor agency thereto.

        1.28    "Field" means all therapeutic and prophylactic uses in humans and animals.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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        1.29    "First Commercial Sale" means, with respect to a country in the Territory, the first shipment of commercial quantities to a Third Party of a Licensed Product sold in such country to a Third Party on arm's length terms by Licensee, its Affiliate or sublicensee for use in the Field after the receipt of Regulatory Approval in such country. Sales for test marketing, sampling and promotional uses, clinical trial purposes or compassionate or similar use shall not be considered to constitute a First Commercial Sale.

        1.30    "Formulation" means any pharmaceutical composition developed by or on behalf of the Parties pursuant to this Agreement that contains the Licensed Compound as an active ingredient.

        1.31    "FTE" means a full time equivalent person year of professional scientific and/or technical work, or support to perform the Transitional Development Efforts. An FTE shall consist of a total of 1,760 hours per year, with any portion of an FTE calculated based upon hours worked divided by such annual total.

        1.32    "FTE Cost" means for any period, the product of: (i) the actual total FTEs during such period; and (ii) the FTE Rate.

        1.33    "FTE Rate" means [***]

        1.34    "Generic Product" means, with respect to a particular Licensed Product, any and all products (other than the Licensed Product) containing the same active ingredients as the Licensed Product delivered by a mode of administration substantially similar to that of the Licensed Product.

        1.35    "Governmental Authority" means any court, agency, authority, department, regulatory body or other instrumentality of any government or country or of any national, federal, state, provincial, regional, county, city or other political subdivision of any such government or any supranational organization of which any such country is a member.

        1.36    "IND" means (a) (i) an Investigational New Drug Application, as defined in the United States Federal Food, Drug, and Cosmetic Act, as amended from time to time, and the regulations promulgated thereunder, that is required to be filed with the FDA before beginning clinical testing of a Licensed Product in human subjects, or any successor application or procedure, and (ii) any counterpart of a United States Investigational New Drug Application in any other country in the Territory, and (b) all supplements and amendments that may be filed with respect to any filings described in the preceding clause (a).

        1.37    "Infringement Claim" means a claim or assertion by a Third Party against Anacor, Licensee or any of their respective Affiliates that the Development, Manufacture, use, import, export, distribution, marketing, promotion, offering for sale or sale of the Licensed Product infringes or otherwise violates a patent or other intellectual property rights owned or controlled by such Third Party.

        1.38    "Joint Program Know-How" means any and all Program Know-How that is jointly Controlled by Licensee (or any of its Affiliates) and Anacor (or any of its Affiliates).

        1.39    "Joint Program Patents" means any and all Program Patents that are jointly Controlled by Licensee (or any of its Affiliates) and Anacor (or any of its Affiliates).

        1.40    "JSC" has the meaning set forth in Section 3.1.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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        1.41    "Know-How" means any and all proprietary data, information and materials (whether patentable or not) necessary or useful to Licensed Compound, Formulations, the Licensed Product, any Licensed Product Improvement, or the Manufacture or use of any of the foregoing, including, without limitation (a) ideas, discoveries, inventions, improvements, technology or trade secrets, (b) pharmaceutical, chemical and biological materials, products, components or compositions, (c) tests, assays, techniques, regulatory requirements and strategies, data (including non-clinical and clinical data), methods, procedures, formulas or processes, (d) technical and non-technical data and other information relating to any of the foregoing, (e) drawings, plans, designs, diagrams, sketches, specifications or other documents containing or relating to such information or materials, and (f) business processes, price data and information, marketing data and information, sales data and information, marketing plans and market research.

        1.42    "Lead Indication" means treatment and/or prevention of onychomycosis.

        1.43    "Lead Indication Commercialization Plan" has the meaning set forth in Section 6.2(d).

        1.44    "Licensed Compound" means that certain Anacor compound currently known as AN2690 with the chemical structure described on Exhibit 1.44 .

        1.45    "Licensed Product" means any pharmaceutical product that contains the Licensed Compound, either alone or in combination with one or more other active pharmaceutical ingredients, including all Formulations, line extensions and modes of administration thereof.

        1.46    "Licensed Product Improvement" shall mean any enhancement to any Licensed Product or Formulation, including, without limitation, any inactive ingredient, preparation, presentation, means of delivery, dosage, packaging or manufacture.

        1.47    "Licensee Background Know-How" means any Know-How that is Controlled by Licensee or its Affiliates that is generated prior to the Effective Date and/or other than in performance of activities conducted under this Agreement.

        1.48    "Licensee Background Patents" means any and all Patents that are Controlled by Licensee or any of its Affiliates that claim discoveries, inventions, developments or innovations made by or on behalf of Licensee prior to the Effective Date and/or other than in performance of activities conducted under this Agreement.

        1.49    "Licensee IP" means the Licensee Background Know-How, Licensee Background Patents, Licensee Program Know-How, Licensee Program Patents and Licensee's rights to the Joint Program Patents and Joint Program Know-How.

        1.50    "Licensee Program Know-How" means any Program Know-How (other than Joint Program Know-How) Controlled by Licensee or any of its Affiliates.

        1.51    "Licensee Program Patents" means any Program Patents (other than Joint Program Patents) Controlled by Licensee or any of its Affiliates.

        1.52    "Major EU Country" means [***]

        1.53    "Major ROW Country" means any of the following countries: [***]

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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        1.54    "Manufacture" means all activities related to the manufacturing of a pharmaceutical product, or any ingredient thereof, including but not limited to test method development and stability testing, formulation, process development, manufacturing scale-up, manufacturing Licensed Compound or Licensed Product quality assurance/quality control development, quality control testing (including in-process release and stability testing), packaging, release of product or any component or ingredient thereof, quality assurance activities related to manufacturing and release of product, and regulatory activities related to all of the foregoing.

        1.55    "Marks" has the meaning set forth in Section 11.8.

        1.56    "Net Sales" means the aggregate gross amount invoiced by Licensee on all sales of Licensed Product in the Territory to a Third Party, less the following deductions from such gross amounts:

•         (a)    bad debts actually written off which are directly attributable or allocable to sales of the Licensed Product;

          (b)    credits or allowances for damaged goods, returns or rejections or recalls of Licensed Product and shelf stock and other retroactive price adjustments;

          (c)    normal and customary trade, cash, quantity and volume based discounts, allowances and credits;

          (d)    sales or similar taxes (other than income taxes);

          (e)    freight, postage, shipping, insurance charges;

          (f)     chargebacks and rebates to managed healthcare organizations or to federal, state and local governments, their agencies, or to trade customers, including without limitation, wholesalers, hospital buying groups and chain pharmacy buying groups;

          (g)    inventory management, distribution, warehousing, and related services fees;

          (h)    and any other reduction or specifically identifiable amounts included in the invoice price that should be credited for any reasons substantially equivalent to those listed above.

Each of the deductions set forth above shall be reasonable and customary, and shall be determined on an accrual basis in accordance with United States Generally Accepted Accounting Principles (GAAP). To the extent that any discounts or other similar deductions that are based on sales to the customer of multiple products are included in determining Net Sales of Licensed Products, such discounts or deductions shall be allocated to Licensed Products and the other relevant products on a pro rata basis based on the invoiced prices for such multiple products, which allocation in any event shall not disproportionately be applied to the Licensed Product.

It is understood that in certain countries in the Territory outside of the United States, Major EU Countries, and Japan (e.g., in Africa and the Middle East, etc.), Licensee may Commercialize Licensed Products through a Third Party distributor or agent. Under the terms of such arrangements, Licensee transfers product to such Third Party distributor or agent at a fixed price which is not necessarily related to the final selling price that the distributor or agent charges its customer. To the extent that such Third Party distributors or agents would be considered sublicensees of Licensee, the Parties agree that the sales prices for the sale of the Licensed Product by Licensee or its Affiliates to such Third Party distributors or agents shall nevertheless be the price to be used for purposes of computing Net Sales in such countries.

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In the event that a Licensed Product contains the Licensed Compound and one or more pharmaceutically active ingredients in addition to the Licensed Compound (a " Combination Product "), the Net Sales of such Combination Product, for the purposes of determining royalty payments in a particular country, shall be calculated as follows. The Net Sales from any Combination Product shall be determined by [***]

        1.57    "Party" means Anacor or Licensee individually, and "Parties" means Anacor and Licensee collectively.

        1.58    "Patents" means any and all issued patents and pending patent applications (including without limitation any provisional applications, continuations, divisionals, continuations-in-part, re-examinations, reissues, substitutions, confirmations, registrations, re-validations, patents of addition, patent term extensions, supplementary protection certificates and the like, as well as any foreign counterparts of any of the foregoing) that claim the Licensed Compound, Formulations, the Licensed Products or the manufacture or use of any of the foregoing.

        1.59    "Person" shall mean any individual, partnership, joint venture, limited liability company, corporation, firm, trust, association, unincorporated organization, governmental authority or agency, or any other entity not specifically listed herein.

        1.60    "Phase II Study" shall mean a controlled dose ranging clinical study in humans of a pharmaceutical product to evaluate further the efficacy and safety in the targeted patient population and to attempt to define an appropriate dosing regimen.

        1.61    "Phase III Study" means a large scale, pivotal clinical study performed after evidence suggesting effectiveness and safety of the drug and establishing a dose has been obtained in Phase II and adequacy of Phase II data has been confirmed by the applicable Regulatory Authority in a successful end of Phase II meeting. Phase III Studies are intended to evaluate the therapeutic efficacy and safety of the Licensed Product for the particular indication in question for purposes of submission to a Governmental Authority to obtain Regulatory Approval of the Licensed Product. Phase III Studies have a sufficient number of patients needed to evaluate the overall benefit-risk relationship of the Licensed Product, to provide an adequate basis for extrapolating the results to the general population, and to transmit that information in physician labeling.

        1.62    "Price Approvals" means in countries in the Territory where Governmental Authorities may approve or determine pricing or pricing reimbursement for pharmaceutical products, such approval or determination.

        1.63    "Program IP" means any Program Know-How and Program Patents, collectively.

        1.64    "Program Know-How" means any Know-How that is generated by or on behalf of one or more of the Parties and/or their respective Affiliates in performance of activities conducted under this Agreement.

        1.65    "Program Patents" means any Patent that claims discoveries, inventions, developments and/or innovations made by or on behalf of one or more of the Parties and/or their respective Affiliates in performance of activities conducted under this Agreement.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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        1.66    "Project Data" means any and all verified data, information and results generated in performance of any tests, assays, analyses and other related work conducted in connection with any Development activities under this Agreement. Project Data shall include, without limitation, any such data, information and results related to the Licensed Product.

        1.67    "Prosecute" shall mean in relation to any Patent, (a) prepare and file patent applications, including re-examinations or re-issues thereof, and represent applicant(s) or assignee(s) before relevant patent offices or other relevant authorities during examination, re-examination and re-issue thereof, in appeal processes and interferences, or any equivalent proceedings, (b) to defend all such applications against Third Party oppositions, (c) to secure the grant of any Patents arising from such patent application, (d) to maintain in force any issued Patent (including through payment of any relevant maintenance fees), and (e) to make all decisions with regard to any of the foregoing activities. "Prosecution" has a corresponding meaning.

        1.68    "Regulatory Approval" means any and all approvals (including Price Approvals), licenses, registrations, or authorizations of any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity necessary for the Manufacture, use, storage, import, export, transport, promotion, marketing or sale of a Licensed Product in a country.

        1.69    "Regulatory Authority" means any governmental regulatory authority involved in granting Regulatory Approvals of any Licensed Product, including, without limitation, the FDA and the European Commission.

        1.70    "Royalty Term" shall have the meaning set forth in Section 9.5.

        1.71    "Territory" means the entire world.

        1.72    "Third Party" means any person or entity other than a Party or its Affiliates.

        1.73    "Transitional Development Efforts" has the meaning set forth in Section 4.4(a).

        1.74    "United States" means the United States of America, its territories and possessions as they may exist from time to time during the Term.

        1.75    "Valid Claim" means (a) a then existing claim of an issued and unexpired Anacor Background Patent, Anacor Program Patent or Joint Program Patent that has not been held invalid, unpatentable or unenforceable by a decision of a governmental body or court of competent jurisdiction (which decision is unappealable or unappealed within the time allowed for appeal), and that has not been rendered unenforceable through disclaimer or otherwise; and (b) a claim included in a pending patent application that is being actively Prosecuted in accordance with this Agreement that that has not been canceled, withdrawn from consideration, finally determined to be unallowable by the applicable Governmental Authority (from which no appeal is or can be taken), or abandoned or disclaimed. Notwithstanding the foregoing clause (b), in the event that a pending claim in a pending patent application is rejected or is allowed and is the subject of an interference proceeding and does not issue in an allowed Patent within seven (7) years after the earliest priority date for such claim anywhere in the world (e.g., through a priority patent), such a pending claim will not be a Valid Claim unless and until such pending claim subsequently issues in an issued Patent, at which time such claim may again be a Valid Claim as of the date of issuance of such Patent, if such claim also meets the requirements of this Section 1.75.

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ARTICLE 2
LICENSES

         2.1     License Grant.     Subject to the terms and conditions of this Agreement, Anacor hereby grants to Licensee, under the Anacor IP, an exclusive (even as to Anacor, but subject to the performance of the Transitional Development Efforts pursuant to Section 4.4), sublicensable (subject to the restrictions set forth below) royalty-bearing license to Develop, make, have made, use, import, export, Commercialize, sell, offer for sale, and market the Licensed Product in the Field in the Territory. Licensee may grant sublicenses of the rights granted to it under this Section 2.1 without Anacor's consent; provided, however, that Licensee may not grant a sublicense of all the rights granted to it under this license in the United States in the Field to a Third Party (not including Affiliates) without obtaining the prior written consent of Anacor, such consent not to be unreasonably withheld, conditioned or delayed.

         2.2     Retained Rights; Covenants.     Anacor retains any and all other rights under the Anacor IP that are outside the scope of the licenses granted under Section 2.1. Anacor shall not grant licenses to any rights under the Anacor IP to any Third Parties that are inconsistent with the license granted to Licensee pursuant to Section 2.1. Licensee shall not use any Anacor IP, nor grant any Third Party any license or right under any Anacor IP, other than as expressly permitted in this Agreement.

         2.3     Jointly Owned IP.     Each of Licensee and Anacor shall have the right to use the Joint Program Patents and Joint Program Know-How without any obligation to account to or obtain any approvals from the other Party; provided, however, that such joint ownership shall otherwise be subject to the terms and conditions of this Agreement, including without limitation the exclusive license granted under Section 2.1.

         2.4     Sublicense Agreements.     Licensee shall, in each agreement under which it grants a sublicense under the license set forth in Section 2.1 (each, a "Sublicense Agreement" ), require the sublicensee to transfer to Anacor if this Agreement terminates and to Licensee if only such sublicense terminates (a) all INDs and/or other Drug Approval Applications, Regulatory Approvals, or regulatory filings (including, without limitation, Drug Master Files) held, possessed or controlled by such sublicensee and (b) all Patents and Know-How Controlled by such sublicensee (which Patents and Know-How shall be transferred either by assignment or by a freely sublicensable exclusive license). Any Sublicense Agreement shall be consistent with the terms and conditions of this Agreement. Licensee shall (i) use reasonable efforts to procure the performance by any sublicensee of the terms of each such Sublicense Agreement, and (ii) be responsible for any breach of this Agreement that is caused (directly or indirectly) by the performance (or failures to perform) of its sublicense. The grant of any such sublicense will not relieve Licensee of its obligations under this Agreement, except to the extent they are satisfactorily performed by such Affiliate or sublicensee.

         2.5     Third Party Agreements.     Licensee shall be solely responsible for obtaining, at its sole expense and discretion, any agreements with Third Parties required in order to lawfully perform any activities under this Agreement. Without limiting the generality of the foregoing, Licensee, its Affiliates, and its sublicensees shall not be permitted to credit against amounts due under this Agreement any costs and expenses that they incur under or as a result of such Third Party agreements. Licensee shall ensure that each Third Party clinical trial, contract manufacturing, or service agreement entered into by Licensee or its Affiliates with respect to the Licensed Product contains provisions obligating such Third Party contractor to assign any rights to Program IP to Licensee so that Licensee can assign and/or convey such rights to Anacor as necessary under the terms and conditions of this Agreement, including without limitation Section 15.8.

         2.6     Disclosure of Anacor Background Know-How.     Subject to all applicable provisions of this Agreement, Anacor shall, promptly following the Effective Date, disclose to Licensee all Anacor Background Know-How existing as of the Effective Date except to the extent that such Anacor

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Background Know-How has been previously disclosed to Licensee. All such Anacor Background Know-How shall be delivered in electronic format, where available, and shall be in English. Anacor will make its and its Affiliates' employees and consultants available to Licensee for consultation as reasonably required by Licensee in order to ensure an orderly transition to Licensee of all such Anacor Background Know-How. In furtherance of and without limiting Anacor's obligations pursuant to this Section 2.6, Anacor shall support the transfer to Licensee of all Anacor Background Know-How related to the Manufacture of Licensed Compound and Licensed Product, including without limitation all Manufacturing know-how, data, procedures, assays and relevant provisions of Standard Operating Procedures. Each Party shall bear its own costs in performing any activities pursuant to this Section 2.6.

         2.7     Section 365(n) of the Bankruptcy Code.     All rights and licenses granted under or pursuant to any section of this Agreement are, and shall otherwise be deemed to be, for purposes of Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to "intellectual property" as defined under Section 101(35A) of the Bankruptcy Code. Each Party shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code or equivalent legislation in any other jurisdiction. Upon the bankruptcy of either Party, the other Party shall further be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property, and such, if not already in its possession, shall be promptly delivered to such other Party, unless the Party in bankruptcy elects to continue, and continues, to perform all of its obligations under this Agreement..

         2.8     Right of First Negotiation.     For a period of [***] from the Effective Date, if Anacor completes a Phase II Study on a product that contains a compound having the same mechanism of action as the Licensed Compound (other than the Licensed Product) claimed by Anacor Background Patents in the Lead Indication ( "Competing Product" ), Anacor shall grant to Licensee a right of first negotiation to Develop, Manufacture and Commercialize such Competing Product at such time as the Phase II Data Set (as defined below) is completed. Anacor shall provide the Phase II Data Set to Licensee for its review and consideration. Licensee shall provide written notice to Anacor within sixty (60) days of receipt of the Phase II Data Set of its decision either to enter into negotiations with Anacor for such Competing Product or to forego such negotiations. If Licensee elects to enter into such negotiations, then the Parties will negotiate regarding such license for a period of up to ninety (90) days, such period of time may be extended if agreed by the Parties. Following the earlier of the expiration of such ninety (90) day period (or any agreed upon extended period) or the date Licensee notifies Anacor that it does not wish to proceed with such negotiations, Anacor shall be free to negotiate with Third Parties and shall have no further obligations to Licensee under this Section 2.8 with respect to that Competing Product. For purposes of this Section 2.8, "Phase II Data Set" means a package of preclinical and clinical data related to the Competing Product generated by or on behalf of Anacor, including without limitation, as available, the data and results of all phase I clinical studies, Phase II Studies, and all available toxicology and pharmacokinetic data.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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ARTICLE 3
JOINT STEERING COMMITTEE

         3.1     Joint Steering Committee.     The Parties shall share information and provide updates on the status of the Development of the Licensed Product in the Field in the Territory through a joint steering committee ( "JSC" ).

•          (a)     JSC Formation.     The Parties hereby form the JSC consisting of three (3) representatives from Anacor and three (3) representatives from Licensee as set forth on Exhibit 3.1 . Each Party may replace its JSC representatives at any time upon prior written notice to the other Party. The JSC shall include representatives from regulatory, project management, clinical development or manufacturing.

           (b)     Meetings of the JSC.     The JSC shall meet at least four (4) times, at least two (2) meetings shall be in person, prior to the earlier of (i) the first anniversary of the Effective Date, or (ii) initiation of Phase III Studies for the Licensed Product in the Lead Indication. The meetings shall occur on such dates and at such times and places as agreed to by Licensee and Anacor. Thereafter, the JSC shall meet at least semi-annually. Meetings of the JSC may be held in person or by means of telecommunication (telephone, video or web conferences). Each Party may include a reasonable number of employees, consultants, representatives or advisors who are not JSC members in JSC meetings as observers; provided, that such persons are bound by obligations of confidentiality no less stringent than those set forth in Article 13. Each Party shall be responsible for its own expenses for participating in the JSC. Meetings of the JSC shall be effective only if at least one representative of each Party is present or participating.

           (c)     Chairperson.     The Licensee shall appoint a chairperson of the JSC from among its members. The chairperson shall be responsible for calling meetings of the JSC and for leading the meetings. The secretary of the meeting, as designated by the chairperson, shall prepare and distribute to all members of the JSC minutes of the meeting within six (6) weeks of the meeting. Minutes of each JSC meeting shall be approved or disapproved, and revised as necessary, at the next meeting. Final minutes of each meeting shall be distributed to the members of the JSC by the chairperson.

         3.2     Responsibilities of the JSC.     The JSC shall have the responsibility and authority to:

•          (a)    Review the results of Development of the Licensed Product in the Field in the Territory, discussing the overall strategy for Development of the Licensed Product in the Field in the Territory;

           (b)    Monitor the Development of the Licensed Product in the Field in the Territory against the Development Plan, including any proposed updates or amendments to the Development Plan;

           (c)    Review the status of Regulatory Approvals for the Licensed Product in the US, the Major EU Countries and Japan; and

           (d)    Perform such other functions as the Parties may agree in writing.

         3.3     JSC Conduct.     

•          (a)     Consensus.     The Parties will endeavor to reach consensus on all matters within the scope of the JSC.

           (b)     End of Phase II FDA Meeting.     If the end of Phase II meeting with the FDA results in a decision by Licensee to materially revise the Development Plan, then the JSC shall review and consider the amendment. If Anacor believes that the material revision would significantly negatively impact the Development, the Development timelines or the potential for success of the Licensed Product, then Anacor shall have the right to provide input on the proposed revisions by

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  Licensee, which input shall be considered in good faith by Licensee. [***] If the Executive Officers are unable to reach consensus, then Licensee shall make the final determination in its sole discretion.

           (c)     EU Development.     If Licensee decides, based on feedback received from the initial meeting with the EMEA, to materially revise the Development Plan with respect to Development of the Licensed Product in the EU and such revision would significantly negatively impact the timelines for the Development of the Licensed Product in the EU, then Anacor shall have the right to provide input on the proposed revisions by Licensee, which input shall be considered in good faith by Licensee. [***] If the Executive Officers are unable to reach consensus, then Licensee shall make the final determination in its sole discretion.

           (d)     Other Dispute Resolution.     If the JSC is unable to reach unanimous agreement on any issue within its purview, other than as provided in Section 3.3(b) and (c), such issue shall be determined by Licensee in its sole discretion. In making such determination, Licensee agrees to consider in good faith the views and suggestions of Anacor. It is understood, however, that Licensee shall have sole and final responsibility and discretion for all decisions relating to the Development of Licensed Products in the Field in the Territory. For the avoidance of doubt, disputes of the JSC (other than disputes related to compliance with this Agreement or the validity, breach, termination or interpretation of this Agreement) shall not be subject to any other dispute resolution mechanism or procedure, except as expressly set forth in this Section 3.3.

         3.4     Disbanding of JSC.     The JSC shall be disbanded upon completion of Development in the United States and the Major EU Countries or after Regulatory Approval in the United States and the Major EU Countries, whichever is earlier. In addition, Anacor shall have the right to disband the JSC upon thirty (30) days written notice at any time after the commercial launch of the Licensed Product the United States.

         3.5     Alliance Manager.     Within thirty (30) days of the Effective Date, each Party will appoint a representative to facilitate the reasonable and appropriate flow of information and communication between the Parties pursuant to this Agreement (the "Alliance Manager" ).

ARTICLE 4
DEVELOPMENT; TRANSITIONAL DEVELOPMENT EFFORTS

         4.1     Overview.     As of the Effective Date, Licensee shall be solely responsible for the Development of the Licensed Product in the Field in the Territory, subject to the provisions of this Article 4. Licensee shall perform all of its Development activities in accordance with the INDs for the Licensed Products, and with all applicable laws, rules and regulations. Without limiting the generality of the foregoing, Licensee shall be responsible for: (a) determining which indications Licensed Product will be Developed for in the Field; (b) determining the Development strategy for all indications in the Field in the Territory; (c) developing protocols for future pre-clinical and clinical studies to be conducted in the Territory in the Field; and (d) conducting any pre-clinical and clinical studies in the Territory in the Field.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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         4.2     Development Plan.     

•          (a)     Initial Development Plan.     Not later than the Effective Date, the Parties shall have agreed on the initial development plan and budget for the Licensed Product in the Lead Indication in the United States and Major EU Countries, which shall be incorporated as part of this Agreement as Exhibit 4.2 (as may be amended in accordance with this Agreement, the "Development Plan" ).

           (b)     Annual Development Plan.     Not later than thirty (30) days after December 31 of each calendar year, Licensee shall submit to Anacor an updated Development Plan for the pending calendar year. Such update shall take into account completion, commencement, changes in or cessation of Development activities not contemplated by the then-current Development Plan.

           (c)     Performance.     Licensee shall perform, and shall ensure that its Affiliates, sublicensees, and Third Party contractors perform, the activities described in the Development Plan in a professional manner and in compliance with Good Laboratory Practices, Good Clinical Practices and/or Good Manufacturing Practices, to the extent applicable and in compliance with all other applicable laws, rules, and regulations.

         4.3     Development Expenses.     Licensee shall be responsible for all costs related to the Development of Licensed Product in the Territory following January 1, 2007; provided, that Licensee's responsibility for such costs accrued during the period of January 1, 2007 to the Effective Date shall not exceed the amount and shall be consistent with the activities set forth on Exhibit 4.3 . Licensee shall have audit rights related to the above costs in accordance with the provisions of Section 4.5. For the avoidance of doubt, Anacor shall be responsible for all costs and expenses accrued in the Development of Licensed Product in the Territory (i) prior to January 1, 2007, or (ii) between January 1, 2007 and the Effective Date, to the extent such costs and expenses exceed the amount set forth on Exhibit 4.3 . The payments to Anacor by Licensee for the above costs are intended to compensate Anacor and Anacor will not separately bill Licensee, for the costs of materials, utilization of facilities, equipment and infrastructure, support and administrative services, utilities and energy costs, travel, food and lodging, and any other costs and expenses that may be incurred by or on behalf of Anacor in connection with the above activities.

         4.4     Transitional Development.     

•          (a)    Not later than the Effective Date, the Parties shall have agreed on the transitional development activities for the Licensed Product to be performed by Anacor under this Section 4.4 and the associated budget for such activities, which shall be incorporated as part of this Agreement as Exhibit 4.4 (the "Transitional Development Efforts" ).

           (b)    Anacor shall complete, at Licensee's expense, the Transitional Development Efforts. Licensee shall assume responsibility for all such Development Costs and shall be invoiced monthly for Anacor's Development Costs incurred in conducting the Transitional Development Efforts. Anacor may not exceed the budget set forth in Exhibit 4.4 without receiving prior approval from Licensee. Anacor shall perform, and shall ensure that its Affiliates, sublicensees, and Third Party contractors perform, the Transitional Development Efforts in a professional manner and in compliance with Good Laboratory Practices, Good Clinical Practices and/or Good Manufacturing Practices, to the extent applicable, and in compliance with all other applicable laws, rules, and regulations. Such compliance shall include providing Governmental Authorities with access, to the extent required by applicable law, during regular business hours, (a) to examine and inspect Anacor's facilities used by it in the performance of the Transitional Development Efforts and (b) to inspect all data, documentation and work product relating to the activities performed by it, in each case generated pursuant to its Transitional Development Efforts. Anacor shall not use, in any capacity or any way in connection with any Transitional Development Efforts, any person who

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  has been debarred pursuant to the Federal Food, Drug and Cosmetic Act or excluded from any federal healthcare program.

           (c)    Within thirty (30) days following the end of each month during the period in which Anacor is performing Transitional Development Efforts, Anacor shall submit to Licensee a written report setting forth in reasonable detail, all Development Costs incurred by Anacor during such month for which Licensee is obligated to reimburse Anacor pursuant to this Section 4.4. Licensee shall pay the amount specified in such report within forty-five (45) days following delivery of such report. Licensee shall have audit rights related to the Development Costs claimed by Anacor in such reports in accordance with the provisions of Section 4.5. The payments to Anacor by Licensee for Transitional Development Efforts are intended to compensate Anacor and Anacor will not separately bill Licensee, for the costs of materials, utilization of facilities, equipment and infrastructure, support and administrative services, utilities and energy costs, travel, food and lodging, and any other costs and expenses that may be incurred by or on behalf of Anacor in the performance of the Transitional Development Efforts.

           (d)    Anacor shall use Commercially Reasonable Efforts to comply with all reasonable requests by Licensee to prepare any and all relevant documents and reports related to the Transitional Development Efforts, including that any such documents and reports be prepared in a way and made available in formats acceptable to the Governmental Authorities in both the Major EU Countries and the United States.

           (e)    Anacor may not use Third Party subcontractors to perform Transitional Development Efforts unless it obtains Licensee's prior written consent; provided, that such consent is hereby granted with respect to the subcontractors identified on Exhibit 4.4(e) , which, not later than the Effective Date, shall be attached hereto and hereby incorporated by reference. In any event, Anacor's use of Third Party subcontractors shall be subject to the following: (i) Anacor shall notify Licensee in writing of such contracting arrangement (including the scope and nature of the subcontracted work) prior to entering into such Third Party subcontracting arrangement and (ii) Anacor shall remain fully responsible under this Agreement for the performance of each such Third Party subcontractor.

         4.5     Audit Rights Pertaining to Transitional Development Efforts.     Anacor shall ensure that Licensee's authorized representatives may, during regular business hours and upon not less than forty-eight (48) hours prior written notice, (a) examine and inspect the facilities and systems of Anacor, its Affiliates and/or subcontractors used in the performance of the Transitional Development Efforts and the Development activities conducted by Anacor in connection with Licensed Product as of January 1, 2007, (b) subject to applicable law, examine, inspect and copy all data, documentation and work product relating to such Transitional Development Efforts to the extent necessary or useful to support the Development, Manufacture or Commercialization of Licensed Product, and (c) examine, inspect and copy all data, documentation and work products relating to the Development of Licensed Product prior to the Effective Date, including, without limitation, any case report forms regarding any patient participating in any clinical study involving Licensed Product initiated prior to the Effective Date. The obligations set forth in this Section 4.5 shall survive for such periods as the applicable documents, data and work products are required to be retained by all applicable laws in the Territory.

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ARTICLE 5
REGULATORY

         5.1     Materials and Regulatory Filings Transfer.     

•          (a)    Promptly following the Effective Date of this Agreement, Anacor shall transfer to Licensee, in a mutually agreed manner, all Licensed Compound and Licensed Product in Anacor's inventory, along with a certificate of analysis for each lot, as set forth with specificity in Exhibit 4.4 . [***] Licensee shall provide to Anacor, on consignment, reasonable quantities of Licensed Compound and/or Licensed Product to enable Anacor to perform Transitional Development Efforts.

           (b)    Within thirty (30) days after the Effective Date (or such other date as may be mutually agreed by the Parties), Anacor shall transfer to Licensee all existing INDs and other Drug Approval Applications covering the Licensed Product. All further submissions to any Governmental Authorities relating to such Drug Approval Applications and/or INDs or any other Drug Approval Applications covering the Licensed Product shall be filed in the name of and owned by Licensee or its Affiliates. Licensee or its Affiliates shall hold all Regulatory Approvals for Licensed Product throughout the Territory.

           (c)    Within thirty (30) days after the Effective Date (or such other date as mutually agreed by the Parties), Anacor shall transfer to Licensee one copy of all documents and records that have been generated by or on behalf of Anacor with respect to any existing INDs and other Drug Approval Applications covering the Licensed Product in the Territory, as well as any correspondence between Anacor and Governmental Authorities related to Licensed Products.

           (d)    Licensee shall oversee, monitor and coordinate all regulatory actions, communications and filings with, and submissions to, the FDA and other Governmental Authorities in the Territory with respect to all Licensed Product.

           (e)    Licensee shall be solely responsible for interfacing, corresponding and meeting with the FDA and other Governmental Authorities throughout the Territory with respect to Licensed Product. Licensee shall provide Anacor with copies of any non-routine material correspondence with FDA or other Governmental Authorities in the United States, the Major EU Countries, and Japan relating to approval of Licensed Product, and respond to all reasonable inquiries by Anacor with respect thereto. Licensee shall also provide Anacor in a timely manner with meeting minutes from any material meetings with Regulatory Authorities in the United States, the Major EU Countries, and Japan concerning the approval of Licensed Product. Licensee will grant Anacor "observer" status so that Anacor may attend the end of Phase II meeting with FDA. Licensee will involve Anacor in Licensee's preparation for the end of Phase II meeting with FDA to the extent practicable and reasonable.

           (f)     Licensee shall provide to Anacor a table report on an annual basis that contains the status of Regulatory Approvals for the Licensed Product in the Territory.

         5.2     Transfer of Information Regarding Licensed Products.     Anacor shall, as soon as practicable following the Effective Date, provide Licensee with (a) access to and transfer its right in a database containing all data collected from clinical trials that have been conducted prior to the Effective Date by or on behalf of Anacor, or any of its Affiliates, with respect to Licensed Product in the Field in the Territory, and (b) all documents and reports that have been prepared by or on behalf of Anacor, or any of its Affiliates, in connection with such studies, including without limitation trial master files, protocols, investigators brochures and case report forms. In connection with the transfer of the

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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database pursuant to this Section 5.2, Anacor shall provide the software programs used to calculate the fields contained in such database and the audit trails for any changes that have been made to the database, together with a list of the standard conventions and coding utilized in preparing such database, and any other explanatory documentation. In addition, Anacor shall also provide Licensee with copies of any audit or similar reports that have been prepared by or on behalf of Anacor, of any of its Affiliates, prior to the Effective Date with respect to any Development or manufacturing activities related to Licensed Product

         5.3     Pharmacovigilance.     

•          (a)    Following the transfer of any INDs related to Licensed Product from Anacor to Licensee, Licensee shall be solely responsible for the collection, review, assessment, tracking and filing of information related to adverse events (" AEs ") associated with Licensed Product, in accordance with 21 United States Code of Federal Regulations (" CFR ") 312.32, 314.80 and comparable regulations, guidance, directives and the like governing AEs associated with Licensed Product that are applicable outside of the United States.

           (b)    As soon as is practicable following the Effective Date, Anacor will provide Licensee with all AEs reports, copies of all study reports of completed studies (including copies of the protocols), and copies of all interim study analysis of all ongoing studies for Licensed Product (including copies of protocols) to the extent not previously provided to Licensee. In furtherance of the foregoing, Anacor shall transfer to Licensee a database that is consistent with industry standards and contains all relevant information regarding adverse events that have been observed during any clinical trials conducted with respect to Licensed Product prior to the Effective Date.

           (c)    Within a reasonable period of time following receipt of all such information described in this Section 5.3, Licensee shall assume responsibility for maintaining a global safety database for Licensed Product consistent with industry practices.

ARTICLE 6
COMMERCIALIZATION

         6.1     General.     Subject to the rights of Anacor under this Article 6, Licensee shall have sole responsibility and decision-making authority for Commercialization activities related to the Licensed Product, and Licensee shall be responsible for all costs and expenses associated with the Commercialization activities related to the Licensed Product (subject to the Co-Promotion Agreement if Anacor exercises its Co-Promotion Option), in each case in the Field in the Territory.

         6.2     Option to Co-Promote.     

•          (a)    Licensee hereby grants to Anacor an option (a "Co-Promotion Option" ) to co-promote the Licensed Product in the Lead Indication in the United States to the Co-Promotion Target Audience in accordance with a co-promotion agreement (a "Co-Promotion Agreement" ) to be negotiated by the Parties. The Co-Promotion Agreement will include the material terms described on Exhibit 6.2.

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•          (b)    Licensee shall give Anacor prompt written notice of the first filing of a Drug Approval Application in the United States for the Licensed Product in the Lead Indication and shall further provide Anacor with its current Commercialization Plan for the Licensed Product in the Lead Indication in the United States ( "Lead Indication Commercialization Plan" ) to permit Anacor to make a decision regarding whether it will exercise its Co-Promotion Option (collectively, the "Co-Promotion Notice" ). The Lead Indication Commercialization Plan shall in any event include the anticipated date of First Commercial Sale of the Licensed Product in the Lead Indication in the United States. Anacor may exercise its Co-Promotion Option by written notice to Licensee within sixty (60) days after Anacor receives the Co-Promotion Notice. Such written notice shall specify the level of its sales efforts; provided, that Anacor shall perform no less than [***] and no more than [***] of the sales efforts for the Co-Promotion Target Audience. Following the exercise of such Co-Promotion Option, the Parties shall negotiate in good faith a Co-Promotion Agreement having the material terms described on Exhibit 6.2 , using reasonable efforts to enter into such agreement as soon as practicable.

           (c)    Notwithstanding Anacor's exercise of the Co-Promotion Option, Licensee shall retain control over all Commercialization decisions in the Field in the Territory, including pricing, marketing strategy, and sales tactics.

           (d)     Lead Indication Commercialization Plan. No later than six (6) months prior to the anticipated submission of the Drug Approval Application for the Licensed Product in the Lead Indication in the United States, Licensee will meet with Anacor to discuss Licensee's then existing commercialization plan for the Lead Indication in the United States. No later than thirty (30) days following submission of the Drug Approval Application for Licensed Product in the Lead Indication in the United States, Licensee shall deliver to Anacor for its review and comment a draft commercialization plan setting forth anticipated commercialization activities to be performed and related budget with respect to Licensed Product in the Lead Indication in the United States for Licensee or on its behalf (which may include, without limitation, market studies, launch plans, detailing and promotional plans), as well as projected timelines for such activities (the "Lead Indication Commercialization Plan" ). The Lead Indication Commercialization Plan shall include, without limitation, the following information to the extent possessed by Licensee: [***]; provided, however, that Licensee shall only be obligated to use reasonable efforts to obtain such information from the responsible commercial organization within Licensee. Licensee shall cooperate with Anacor in good faith to provide it with appropriate information concerning Commercialization of the Licensed Product in the Lead Indication in the United States to enable Anacor determine whether it will exercise its Co-Promotion Option.

           (e)     Joint Commercialization Committee. The Co-Promotion Agreement will include a Joint Commercialization Committee to provide for the sharing of information, facilitation of communications, and cooperation of the Parties concerning the Commercialization of the Licensed Product in the Lead Indication in the United States.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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•          (f)      Co-Promotion in Indications Other than the Lead Indication. In the event Licensee Develops and Commercializes the Licensed Product in indications other than the Lead Indication and the Licensee determines that such product would be suitable for promotion to the Co-Promotion Target Audience, Licensee shall promptly notify Anacor and Anacor may request that Licensee grant it the right to co-promote the Licensed Product in such other indications, which request the Licensee shall consider in good faith.

         6.3     Recalls.     

•          (a)    Each Party shall promptly notify the other Party in writing if it determines that any event, incident or circumstance has occurred which may result in the need for a "recall" or "market withdrawal" (as such terms are defined in 21 CFR 7.3 or other similar national, state or local law or regulation) (hereinafter referred to as a " Recall ") of a Licensed Product or any lot(s) thereof.

           (b)    Licensee shall be responsible for determining whether and upon what terms and conditions Licensed Product shall be Recalled or otherwise withdrawn from sale to Third Parties within any country in the Territory. Licensee shall be responsible for discussions with Regulatory Authorities within the applicable country regarding all aspects of the Recall decision and the execution thereof.

           (c)    If at any time (i) any Governmental Authority in the Territory issues a request, directive or order for a Recall of a Licensed Product in the Territory or (ii) a court of competent jurisdiction orders a Recall of a Licensed Product in the Territory, then Licensee shall be responsible for implementing such Recall. The expenses arising from such Recall shall be the responsibility of Licensee.

ARTICLE 7
DILIGENCE

         7.1     Generally .    Licensee shall use Commercially Reasonable Efforts to Develop the Licensed Product in accordance with the Development Plan, as updated from time to time, and to Commercialize the Licensed Product in the Field in the United States, the Major EU Countries, Japan, and the Major ROW Countries for the Lead Indication and each additional indication, if any.

         7.2      Specific Obligations .    Without limiting the generality of Section 7.1, Licensee shall, within twelve (12) months after the Effective Date, submit to Anacor for review and consideration an update to the Development Plan proposing activities for the Development of the [***].

         7.3      Failure .    Any failure by Licensee to comply with the obligations set forth in this Article 7 in [***] shall be deemed to be a material breach for which Anacor may exercise its termination rights under Article 15 and any other available remedies at law or in equity. For clarity, only a material breach [***] shall constitute a breach of this Agreement in its entirety, otherwise such material breaches are subject to county-by-country termination.

[***] THE SYMBOL [***] IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTION.

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ARTICLE 8
MANUFACTURING

         8.1     Manufacturing Responsibility .    Licensee will be responsible for the manufacturing of the Licensed Product for use by Licensee, its Affiliates, and its sublicensees in the Field in the Territory. Anacor shall, if requested by Licensee, reasonably cooperate in the transfer or assignment of any existing Third Party manufacturing agreements to Licensee, including all those listed on Exhibit 8.1 .

         8.2     Transfer of Manufacturing Technology.     

•          (a)    As soon as reasonably practicable after the Effective Date, Anacor shall transfer or cause to be transferred to Licensee or a Third Party manufacturer all information Controlled by Anacor as of the Effective Date to enable Licensee or such Third Party manufacturer (as appropriate) to replicate the process employed by or on behalf of Anacor to manufacture Licensed Product in the Field as of the Effective Date.

           (b)    Licensee