DISTRIBUTION AND LICENSE AGREEMENT

E xhibit 10.27

      Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

DISTRIBUTION AND LICENSE AGREEMENT

     This Distribution and License Agreement (hereinafter, “ Agreement ”), is entered into and made effective as of the 1 ^st day of December, 2005 (“ Effective Date ”), between XenoPort, Inc., a Delaware corporation having a place of business at 3410 Central Expressway, Santa Clara, CA 95051, United States of America (“ XenoPort ”), and Astellas Pharma Inc., a Japanese corporation having a place of business at 3-11, Nihonbashi-Honcho 2-chome, Chuo-ku, Tokyo, 103-8411, Japan (“ Astellas ”). Each of XenoPort and Astellas shall be a “ Party ,” and together the “ Parties .”

RECITALS

     A. XenoPort is developing a Transported Prodrug™ of gabapentin (as further defined below, the “ Product ”) in the United States, for the treatment of restless legs syndrome (“ RLS ”) and the management of neuropathic pain;

     B. Astellas desires to further develop and commercialize the Product in Japan and certain other countries (as further described below, the “ Territory ”), and XenoPort desires to have the Product developed and commercialized in the Territory by Astellas, in accordance with this Agreement; and

     C. Astellas desires to obtain from XenoPort certain exclusive distribution and license rights for the Product in the Territory, and XenoPort is willing to grant to Astellas such rights on the terms and conditions set forth below.

AGREEMENT

      1.  DEFINITIONS

          1.1 “ Affiliates ” shall mean, in the case of a subject entity, another entity that controls, is controlled by or is under common control with the subject entity, for so long as such control exists. For purposes of this definition only, “control” shall mean beneficial ownership (direct or indirect) of at least fifty percent (50%) of the shares of the subject entity entitled to vote in the election of directors (or, in the case of an entity that is not a corporation, in the election of the corresponding managing authority). “ Subsidiaries ” of a subject entity shall mean Affiliates that are controlled by such entity.

          1.2 “ Astellas Know-How ” shall mean any and all scientific, medical, technical and/or regulatory information relating to the Compound and/or the Product and Data, which are owned or Controlled by Astellas as of the Effective Date or during the term of this Agreement, which are needed by or reasonably useful to XenoPort in order to develop and/or commercialize the Product outside the Territory. Astellas Know-How shall include any developments and improvements relating to the Compound and/or the Product made by Astellas during the term of this Agreement.

          1.3 “ Competitive Compound ” shall mean any compound having as a primary mechanism of action [... * ...] , other than the Compound. For avoidance of doubt, Competitive Compound shall not include any compound that has a mechanism of action [... * ...] ; provided, however, that such compound [... * ...] by either Party, including without limitation RLS and painful diabetic neuropathy.

          1.4 “ Compound ” shall mean that certain compound, referred to internally at XenoPort as XP13512, the structure of which is set forth in Exhibit A, and all isomers and/or mixtures of isomers thereof.

          1.5 “ Control ” shall mean possession of the ability to grant a license or sublicense, of or within the scope set forth in this Agreement, without violating the terms of any agreement or other arrangement with any Third Party.

          1.6 “ Cost of Goods ” shall mean the [... * ...] meeting the specifications mutually agreed by the Parties, [... * ...] for calculating cost of goods, which shall include [... * ...] . Cost of Goods shall not include [... * ... ] . It is understood that the [... * ...] . In addition, the [... * ...] . As used in this Section 1.6, [... * ...] in Sections 8.2 and 8.3 below.

          1.7 “ Data ” shall mean all preclinical data, clinical data, clinical pharmacology data and all regulatory filings and approvals submitted or obtained, together with its supporting data and regulatory correspondence and rights to reference the same, in each case pertaining to the Compound and/or the Product, which are Controlled by each Party as of the Effective Date or during the term of this Agreement.

          1.8 “ Diligent Efforts ” shall mean the level of efforts required to carry out a particular task or obligation in a sustained manner, consistent with the efforts generally used by a Party with respect to its own compounds, with the same level of peak sales potential, for which Marketing Approval is being sought as expeditiously as practicable or for which Marketing Approval has been obtained, as the case may be.

          1.9 “ First Commercial Sale ” shall mean the first bona fide , arm’s length sale of a Product in a country following receipt of Marketing Approval of such Product in such country; provided that where such a first sale has occurred in a country for which government pricing or government reimbursement approval is needed and Astellas chooses to apply for such approval, then such sales shall not be deemed a First Commercial Sale until such pricing or reimbursement approval has been obtained.

          1.10 “ Field ” shall mean any and all indications for human use.

          1.11 “ GAAP ” shall mean United States generally accepted accounting principles as in effect from time to time, consistently applied by a Party across its entire business.

          1.12 “ IND ” shall mean an Investigational New Drug application filed with the U.S. Food and Drug Administration (“ FDA ”), or a comparable filing in the Territory.

          1.13 “ MAA ” shall mean a New Drug Application filed with the FDA (or, in the Territory, a marketing authorization application comparable to such New Drug Application), including all supporting documentation and data required for such application to be accepted for review, filed with the FDA or counterpart health regulatory agency, requesting approval for commercialization of a product for a particular indication in such country.

          1.14 “ Marketing Approval ” shall mean, with respect to the United States or in the Territory, approval by the health regulatory agency in such country that is the counterpart of the FDA of the MAA for a product filed in such country. It is understood that, as used herein, Marketing Approval does not include pricing or reimbursement approval.

          1.15 “ Net Sales ” shall mean the gross amounts invoiced or otherwise received for sales of the Product by Astellas, its Affiliates and Subdistributors to Third Parties (but not including sales among Astellas, its Affiliates and their respective Subdistributors) less deductions for: (a) customary trade, quantity and cash discounts allowed and actually taken; (b) credits to customers on account of return of Product; (c) [... * ...] of such gross amount to cover outbound transportation charges, including insurance, freight and packaging; and (d) sales and excise taxes and duties and any other similar governmental charges imposed upon the sale of Product to the customer. Notwithstanding the foregoing, the amounts described in (c) and (d) above shall be deducted only to the extent they are stated separately on the invoice and included within gross amounts received from sales of the Product. If a Product is sold for consideration other than solely cash, the monetary value of such other consideration shall be included in the calculation of Net Sales.

          1.16 “ Phase III Trial ” shall mean human clinical trial(s), the principal purpose of which is to establish safety and efficacy of the Product against the disease being studied as required in 21 C.F.R. §312.21(c) or a similar clinical study in a country other than the United States. For clarity, a Phase III Trial shall also include any other human clinical trial intended as a pivotal trial for filing an MAA, whether or not such trial is a traditional Phase III Trial.

          1.17 “ Product ” shall mean (a) the pharmaceutical product containing the Compound that is the subject of IND Nos. 68,341 and 71,352 (the “ Existing Product ”), and (b) any changes to the formulation, dosage form or other aspects of the Existing Product established by the Parties pursuant to Section 4.3 or otherwise, provided that the result remains a pharmaceutical product containing the Compound, alone or in combination with other active ingredients.

          1.18 “ Product Trademark ” shall mean the trademark identified by XenoPort for the Product in the Territory, or another mutually agreed trademark for the Product.

          1.19 “ Regulatory Authority ” shall mean any national (e.g., the FDA or MHLW), supra-national (e.g., the European Commission, the Council of the European Union or the EMEA),

or other governmental entity in any jurisdiction of the world involved in the granting of Marketing Approval for pharmaceutical products.

          1.20 “ Subdistributor ” shall mean an entity to whom Astellas has granted directly or indirectly the right to market, distribute and/or promote, a Product in the Territory in accordance with Section 2.3. For avoidance of doubt, “Subdistributor” shall not include a wholesaler who is not primarily responsible for marketing and promoting the Product for its respective territory or customer group.

          1.21 “ Territory ” shall mean Indonesia, Japan, Korea, Philippines, Taiwan and Thailand.

          1.22 “ Third Party ” shall mean any person or entity other than Astellas, XenoPort and their Affiliates.

          1.23 “ Valid Claim ” means (a) a claim of any issued, unexpired patent rights which has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for appeal, and which has not been disclaimed, denied or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise; and (b) a claim in any patent application pending with an administrative patent authority unless the application has been (i) abandoned, or (ii) rejected by the relevant patent authority and all options for appeal to the relevant administrative patent authority for further prosecution of such claim have been exhausted.

          1.24 “ XenoPort Patent Rights ” shall mean all issued, unexpired patents and all reissues, renewals, re-examinations and extensions thereof, and patent applications therefor, and any divisions or continuations, in whole or in part, thereof, including those patents and applications set forth in Exhibit B, which would, but for the license granted hereunder, be infringed by use, development, formulation, packaging, import, sale, distribution, promotion or marketing of the Compound and/or the Product by Astellas, any of its Affiliates or Subdistributors in the Territory (and countries outside the Territory, to the extent the Compound and/or the Product is formulated or packaged pursuant to Section 2.2 in such countries, or where Astellas conducts or, requests XenoPort to conduct, development activities in such countries pursuant to Section 4.7), to the extent Controlled by XenoPort as of the Effective Date or during the term of this Agreement.

          1.25 “ XenoPort Know-How ” shall mean any and all scientific, medical, technical and/or regulatory information relating to the Compound and/or the Product and Data, which are owned or Controlled by XenoPort as of the Effective Date or during the term of this Agreement, which are needed by or reasonably useful to Astellas in order for Astellas to perform its obligations under this Agreement. XenoPort Know-How shall include any developments and improvements relating to the Compound and/or the Product made by XenoPort during the term of this Agreement.

          In addition, the following terms shall have the meaning described in the corresponding section of this Agreement. Other terms may be defined throughout the Agreement.

      2.  GRANT OF DISTRIBUTION RIGHTS AND LICENSE

          2.1 Appointment . During the term of this Agreement, XenoPort appoints Astellas, and Astellas hereby accepts such appointment, as the exclusive (even as to XenoPort) distributor and marketer of the Product in the Territory.

          2.2 License . Subject to the terms and conditions of this Agreement, XenoPort hereby grants to Astellas an exclusive (even as to XenoPort) license during the term of this Agreement under the XenoPort Patent Rights and XenoPort Know-How to: (a) formulate, have formulated, package and have packaged the Product using the Compound supplied by XenoPort (if Compound is supplied); (b) package and have packaged the Product supplied by XenoPort (if Existing Product is supplied, or if Product is supplied upon mutual agreement pursuant to Section 8.1); and (c) use, develop, market, import, export, sell, distribute and promote the Compound and the Product; in each case for use in the Field. Such license shall be limited solely to the Territory, except

that Astellas has the non-exclusive right to formulate or have formulated the Compound and package and have packaged Product outside the Territory, in each case solely for sale of the resulting Product within the Territory. It is understood and agreed that the licenses set forth in this Section 2.2 exclude the right to make or have made Compounds.

          2.3 Subdistributors . Astellas shall have the right to engage its Subsidiaries as Subdistributors of the Product, and may grant sublicenses under Section 2.2 to such Subsidiaries solely for such purposes, solely for as long as such entity remains a Subsidiary. Astellas may otherwise engage Subdistributors and grant sublicenses only upon the approval of XenoPort, which approval shall not be unreasonably withheld or delayed. In any event, Astellas shall ensure that all of its Subdistributors are bound by a written agreement containing provisions as protective of the Product and XenoPort as this Agreement. Without limiting the foregoing, in the event that Products supplied by Astellas to a Subdistributor are being directly or indirectly sold or used outside the Territory, Astellas agrees that, upon becoming aware of such sale or use or otherwise upon the request of XenoPort, it shall not supply further quantities of Products to such Subdistributor.

          2.4 No Conflict .

               2.4.1 Competitive Compounds . In the event that Astellas and its Affiliates shall, by themselves or through any Third Party(ies): (a) [... * ...] (b) [... * ...] , prior to [... * ...] anywhere in the world [... * ...] regarding a product containing Competitive Compound(s), [... * ...] with the Product, [... * ...] XenoPort under this Section 2.4.1 and XenoPort shall [... * ...] .

               2.4.2 Notice of M&A Acquired Product . In the event of a Change of Control or Acquisition, whereby [... * ...] prior to such Change of Control [... * ...] and whether Astellas or its Affiliate [... * ...] above. In the event Astellas [... * ...] as the case may be, shall not apply with respect to [... * ...] . However, in such event, unless XenoPort and Astellas [... * ...] upon written notice, which shall be [... * ...] and XenoPort shall [... * ...] . In the event Astellas [... * ...] fully apply with respect to [... * ...] . As used herein, “ Change of Control ” means (a) a merger involving Astellas, in which the shareholders of Astellas immediately prior to such merger cease to control (as defined in Section 1.1) Astellas after such merger, (b) a sale of all or substantially all of the assets of Astellas to an acquiring entity or (c) a sale of a controlling (as defined in Section 1.1) interest of Astellas to an acquiring entity. As used herein, “ Acquisition ” means (a) a merger involving Astellas, in which the shareholders of Astellas immediately prior to such merger does not cease to control (as defined in Section 1.1) Astellas after such merger, or a merger involving an Affiliate of Astellas in which the resulting entity remains an Affiliate of Astellas after such merger, (b) an acquisition of all or substantially all of the assets of an acquired entity by Astellas or an Affiliate or (c) a sale of a controlling (as defined in Section 1.1) interest of an acquired entity to Astellas or an Affiliate.

               2.4.3 Ex-Territory; No Exploitation except as Licensed . Neither Astellas nor its Affiliates will develop, file for Marketing Approval with respect to, use, market, import, export, distribute, promote or sell the Product anywhere in the world, except in the Territory (provided that Astellas may formulate or have formulated the Compound and package and have packaged Product outside the Territory, solely for sale of the resulting Product within the Territory), and, within the Territory, only in accordance with and under this Agreement. Astellas agrees that it and its Affiliates shall not use nor otherwise exploit XenoPort Patent Rights, XenoPort Know-How and the Product Trademark, except as licensed in this Agreement.

               2.4.4 Sale of Compounds Only as Part of Products . Astellas agrees that it shall not, and shall ensure that its Affiliates and Subdistributors do not, sell or otherwise make commercially available the Compound, other than as part of a Product. This Section 2.4.4 shall not, however, prohibit sales of Compounds among Astellas, its Affiliates and/or Subdistributors, provided that such Compounds will be incorporated into Products for resale by such entities, nor prohibit Astellas, its Affiliates and/or Subdistributors from exercising their rights under Section 2.2 to “have” formulated or “have” packaged the Compound.

               2.4.5 Wind-down Period . For avoidance of doubt, Sections 2.4.1 and 2.4.2 shall not apply during the Wind-down Period with respect to the Affected Area.

               2.5 XenoPort IP Acquired after the Effective Date . If, after the Effective Date, XenoPort acquires from a Third Party subject matter within the XenoPort Patent Rights and XenoPort Know-How (“ Third Party IP ”) that is subject to royalty or other payment obligations to such Third Party, then the following shall apply. The licenses granted under Section 2.2 above with respect to such Third Party IP shall be subject to Astellas promptly reimbursing XenoPort for any milestones, royalties or other amounts that become owing to such third party by reason of Astellas’ exercise of rights granted in this Agreement with respect to the Third Party IP. Upon request by Astellas, XenoPort shall disclose to Astellas a true, complete and correct written description of such payment obligations, and Astellas’ obligation to reimburse such amounts following such request shall be limited to those payment obligations as so disclosed by XenoPort. In the event Astellas does not promptly reimburse XenoPort for such amounts upon request, then such Third Party IP shall thereafter be deemed excluded from the XenoPort Patent Rights and XenoPort Know-How hereunder. The reimbursement made by Astellas to XenoPort under this Section 2.5 may then be treated by Astellas as Third Party Royalty payments under Section 7.3.1 below.

               2.6 No Other Rights; No License to Other Therapeutically Active Components . Except for the rights and licenses expressly granted in this Agreement, each Party retains all rights under its intellectual property, and no additional rights shall be deemed granted to the other Party by implication, estoppel or otherwise. The licenses and rights granted in this Agreement shall not be construed to convey any licenses or rights under the XenoPort Patent Rights with respect to any active ingredients other than the Compound.

      3.  GOVERNANCE

          3.1 Joint Steering Committee . The Parties shall establish a committee (the “ Joint Steering Committee ” or “ JSC ”) to oversee the Party’s collaboration relating to the Product in the Territory. The JSC will consist of two (2) representatives from each Party, each of whom shall be a senior executive of a Party. In case a representative of a Party is unavailable for a scheduled JSC meeting, upon reasonable notice to the other Party, such Party may substitute in place of such representative for such meeting, a competent person who is authorized by such Party to act on matters that will be presented to the JSC at such meeting.

               3.1.1 Meetings . The JSC shall meet at least once annually during the term of this Agreement, unless otherwise agreed by the Parties. Such meeting(s) shall be in person at least once per year, alternating between the facilities of each Party unless otherwise mutually agreed, and the other meetings may be through telephone or video conference or other mutually agreeable means. At the discretion of each Party, other representatives of XenoPort or Astellas may attend JSC meetings as non-voting observers. Each Party shall bear its own personnel and travel costs and expenses relating to JSC meetings.

               3.1.2 Responsibility . The JSC will (a) serve as a forum for keeping each Party informed as to material matters in connection with the development and commercialization of the Product in and outside of the Territory, (b) provide strategic direction to the JDC, (c) resolve any disputed matters submitted to the JSC by the JDC under Section 3.2.3 below, (d) review and discuss the Commercialization Plan, any updates, modifications and additions thereto submitted to the JSC pursuant to Section 5.1.1 below, and the progress of Astellas thereunder and (e) undertake and/or approve such other matters as are provided for the JSC under this Agreement, or otherwise agreed by the Parties.

               3.1.3 Decisions . The objective of the JSC shall be [... * ...] on the JSC. If the JSC cannot reach agreement on any determination or decision for which it is responsible within [... * ... ] after the date such matter was initially referred to the JSC, the dispute shall be referred to [... * ...] to resolve the dispute. If, [... * ...] deciding vote with respect to [... * ...] , unless the matter (a) would materially adversely affect [... * ...] , (b) would change [... * ...] , (c) would involve [... * ... ] or [... * ...] , or (d) involves [... * ...] for the Compound and/or Product in the Territory. It is understood that the JSC shall [... * ...] . If the Parties are unable to resolve a dispute with respect to matters described in Sections 3.1.3(a), (b), (c) or (d), the Parties shall [... * ...] and until such resolution, neither Party shall proceed with a course of action that is claimed to fall within Sections 3.1.3(a) through (d) above.

          3.2 Joint Development Committee . The Parties shall establish a committee (the “ Joint Development Committee ” or “ JDC ”) to oversee the development efforts relating to the Product in the Territory. The JDC will consist of three (3) representatives from each Party, at least

one of whom shall be a senior executive of each Party. In case a representative of a Party is unavailable for a scheduled JDC meeting, upon reasonable notice to the other Party, such Party may substitute in place of such representative for such meeting, a competent person who is authorized by such Party to act on matters that will be presented to the JDC at such meeting.

               3.2.1 Meetings . The JDC shall meet once each calendar quarter until the first filing of MAA with respect to the Product in the Territory, and twice annually thereafter, during the term of this Agreement, unless otherwise agreed by the Parties. Such meetings shall be in person at least twice per year until the first filing of MAA with respect to the Product in the Territory, alternating between the facilities of each Party unless otherwise mutually agreed, and the other meetings may be through telephone or video conference or other mutually agreeable means. With the consent of the JDC members, other representatives of XenoPort or Astellas may attend JDC meetings as non-voting observers. Each Party shall bear its own personnel and travel costs and expenses relating to JDC meetings.

               3.2.2 Responsibility . The JDC will (a) review and approve the Astellas Development Plan, including the initial Astellas Development Plan pursuant to Section 4.2.2 and any updates, modifications or additions thereto submitted to the JDC pursuant to Section 4.2.3 below, (b) oversee the implementation of the Astellas Development Plan, (c) review and approve protocols for any clinical trials of Product in the Territory, (d) review and approve the translated summaries of any regulatory filings for Products in the Territory (including the precise wording of the label), which shall be provided by Astellas to the JDC in the English language, (e) facilitate the exchange of Data and other information and/or materials between the Parties and (f) undertake and/or approve such other matters as are provided for the JDC under this Agreement or otherwise agreed by the Parties.

               3.2.3 Decisions . Decisions of the JDC shall be by unanimous approval of its members, with at least one (1) representative of each of Astellas and XenoPort voting on the matter; provided, however, if the JDC cannot reach agreement on a matter within [... * ...] after the date such matter was initially referred to the JDC, the dispute shall be referred to the JSC who shall meet promptly and negotiate in good faith to resolve the dispute in accordance with Section 3.1.3 above.

          3.3 Limited Authority . Notwithstanding the creation of the JSC and JDC, each Party shall retain the rights, powers and discretion granted to it hereunder, and the JSC and JDC shall not be delegated or vested with such rights, powers or discretion unless such delegation or vesting is expressly provided herein or the Parties expressly so agree in writing. The JSC and JDC shall not have the power to amend or modify this Agreement, and its decisions shall not 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 and JDC are only those specific issues that are expressly provided in this Agreement to be decided by the JSC and JDC.

      4.  DEVELOPMENT

          4.1 Development .

               4.1.1 Subject to oversight by the JDC, Astellas shall be responsible for conducting, and shall use Diligent Efforts to conduct, such clinical trials and to obtain such regulatory approvals, including Marketing Approvals and pricing and/or reimbursement approval, as may be necessary to commercialize the Product in each country in the Territory, in accordance with the Astellas Development Plan. Without limiting the foregoing, Astellas agrees to use Diligent Efforts to conduct such clinical trials and to obtain, as soon as practical, Marketing Approval of the Product for RLS and painful diabetic neuropathy in the Territory. Astellas agrees to keep XenoPort reasonably informed as to the progress of its clinical development and regulatory activities relating to the Product in the Territory, including its correspondence and meetings with regulatory agencies, by way of updates to the JDC at its meetings and as otherwise reasonably requested by XenoPort. Astellas agrees to reasonably consider and promptly respond to any comments provided by XenoPort with respect to such clinical development and regulatory activities. It is understood and agreed that all development efforts for the Product in the Territory shall be at the sole cost and expense of Astellas, and shall be conducted in accordance with the Astellas Development Plan described below.

               4.1.2 XenoPort or its licensee(s) shall be responsible for all development and regulatory activities of the Product outside the Territory. XenoPort agrees to keep Astellas reasonably informed as to the progress of its and/or [... * ...] its other licensees’ clinical development and regulatory activities relating to the Product outside the Territory, including their correspondence and meetings with regulatory agencies, by way of updates to the JDC at its meetings and as otherwise reasonably requested by Astellas. XenoPort agrees to reasonably consider and promptly respond to any comments provided by Astellas with respect to such clinical development and regulatory activities. It is understood and agreed that all development efforts for Product outside the Territory shall be at the sole cost and expense of XenoPort, its Affiliates or its other licensee(s), provided that any development efforts conducted for the Territory requested by Astellas pursuant to Section 4.7 shall be at the sole cost and expense of Astellas.

          4.2 Astellas Development Plan .

               4.2.1 An initial, preliminary development plan for Astellas’ development of the Product in the Territory is set forth in Exhibit C. For avoidance of doubt, such initial, preliminary development plan is not intended to create or constitute any legally binding obligation among the Parties.

               4.2.2 Within [... * ... ] after the Effective Date, the JDC shall discuss and approve the plan for Astellas’ development of the Product in the Territory (the “ Astellas Development Plan ”). Astellas acknowledges and agrees that each Party desires that Astellas commit to conduct development of the Compound and/or Product in the Territory for both the RLS and painful diabetic neuropathy indications, in a manner to be described by the JDC in the Astellas

Development Plan; and the JDC shall, during the discussion of such development, take into account an expected selling price of the Product, expected launch time for respective indications, communications with the Regulatory Authority in the Territory, advice of the experts in the Territory, possibility of bridging use of the Data obtained by XenoPort from its pre-clinical studies and/or clinical trials of the Product outside the Territory for development in the Territory and any other relevant regulatory and business matters.

               4.2.3 Astellas agrees to provide to the JDC for its review and approval, which approval shall not be unreasonably withheld or delayed, updated versions of the Astellas Development Plan at least annually, and any modification or addition to the Astellas Development Plan within a reasonable period of time prior to adoption and implementation thereof.

          4.3 Change in Formulation . Before modifying or creating a new formulation or dosage form of the Product, or developing the Compound in combination with another active ingredient, Astellas shall discuss the proposed modifications or development with XenoPort at the JSC and obtain the approval of the JSC, which approval shall not be unreasonably withheld or delayed. Subject to Section 3.1.3(b), XenoPort agrees that Astellas may conduct formulation studies on the Compound that were so discussed and approved by the JSC for the purpose of developing and commercializing pharmaceutical formulations of the Compound as a sole active ingredient.

          4.4 Exchange of Data and Know-How . Promptly after the Effective Date, XenoPort shall provide Astellas with any and all XenoPort Know-How that XenoPort considers as necessary or reasonably useful for Astellas to develop and/or commercialize the Product in the Territory, including but not limited to, any and all Data from any and all clinical trials and preclinical studies of the Compound and/or Product that are completed as of the Effective Date. During the term of this Agreement, each Party shall provide to the other Party all Data (and, in case of XenoPort, any and all additional XenoPort Know-How, and in the case of Astellas, any and all Astellas Know-How) Controlled by such Party, (a) that such Party considers as necessary or reasonably useful for the other Party to develop and/or commercialize the Product in the Territory (in the case of Astellas) or outside the Territory (in the case of XenoPort), in a timely fashion and as promptly as possible or (b) upon the reasonable request of the other Party; in each case, for use by such other Party in accordance with this Section 4.4.

               4.4.1 Use; Disclosure . Astellas will use and disclose Data and XenoPort Know-How to its Affiliates or Third Parties only as required to obtain Marketing Approval for the Product in the Territory and/or as may be necessary in performing its obligations and exercising its rights under this Agreement (including but not limited to the use of such Data or XenoPort Know-How to design development activities outside the Territory for Section 4.7), in each case solely to the extent necessary for development and commercialization of the Product in the Territory and under reasonable and customary confidentiality restrictions. Astellas may not use any Data and XenoPort Know-How (or permit any Affiliates or Third Party to use Data or XenoPort Know-How) outside the

Territory (other than for Section 4.7), nor for any products other than the Product. XenoPort may only use, and disclose to Affiliates and Third Parties, Data and Astellas Know-How provided by Astellas as is reasonably necessary or useful for development and/or commercialization of the Product outside the Territory, including for cross-referencing drug master files or other regulatory filings by XenoPort, its Affiliates or Third Parties, provided that the disclosure of such Data and Astellas Know-How to a non-governmental Third Party is made under reasonable and customary confidentiality restrictions, and complies with Section 4.4.2 below.

               4.4.2 Other Licensee(s) . XenoPort shall [... * ... ] under this Section 4.4 [... * ...] to the extent that [... * ...] . It is understood that [... * ...] , shall not be [... * ...] . However, XenoPort agrees [... * ...] except to the extent [... * ...] .

          4.5 Regulatory Matters . Subject to Section 16.2.2 below, all regulatory filings for the Product, including the MAA and Marketing Approvals, in the Territory shall be in the name of Astellas in Japan, or its Affiliate(s) or Subdistributor(s) in countries other than Japan. Astellas shall, or shall cause its Affiliate(s) or its Subdistributor(s) to, be responsible for the filing thereof, the payment of fees and all other associated costs, for monitoring clinical experiences and filing associated reports and fulfilling all of its regulatory obligations throughout the development and commercialization of the Product in the Territory. Notwithstanding the foregoing, XenoPort may, and if elected by XenoPort shall be responsible to, file and keep a Drug Master File (“ DMF ”) in the Territory at its expense in its own name or in the name of its suppliers with respect to the bulk supply of the Compound and shall permit Astellas, its Affiliates and its Subdistributors to cross-reference such DMF in their regulatory filings for the Product in the Territory.

          4.6 Development within the Territory . Astellas shall commence, promptly after the Effective Date, its development of the Product in Japan in accordance with this Section 4. The Parties recognize, however, that Astellas’ development and commercialization of the Product in countries of the Territory other than Japan may not be achieved, if ever, until a later date as is customary for pharmaceutical launches in Asia, and may depend upon (a) whether the Data obtained by XenoPort and/or by Astellas from their respective pre-clinical studies and/or clinical trials of the Product may be used for obtaining Marketing Approval of the Product in such country(ies) and (b) whether commercialization of the Product in such country(ies) would be commercially feasible under the terms and conditions of this Agreement. Subject to the foregoing, a decision by Astellas not to develop and/or commercialize a Product in a country of the Territory other the Japan shall not by itself be deemed a breach of its obligations to use Diligent Efforts under this Agreement with respect to such country, provided that Astellas can and does promptly terminate this Agreement with respect to such country pursuant to Section 15.2 below.

          4.7 Cooperation in Development . The Parties acknowledge that, from time to time, Astellas may or, may request XenoPort to, conduct activities outside the Territory (for example, to conduct certain clinical trials in the United States on Japanese subjects) for use in

obtaining Marketing Approval of the Product in the Territory. Any activities outside the Territory conducted or requested by Astellas pursuant to this Section 4.7 shall be subject to the consent of XenoPort, which consent shall not be unreasonably withheld or delayed. Subject to such consent, XenoPort shall cooperate as mutually agreed to perform such activities, the cost of which shall be reimbursed by Astellas (including without limitation payment of the supply price of the clinical supplies used in such activities, in accordance with the Supply Agreement).

          4.8 Astellas Know-How . All results, data, information, know-how and technology obtained by Astellas or its Affiliates in the course of development activities with respect to the Compound and/or the Product conducted by Astellas or any of its Affiliates shall be solely owned by Astellas or such Affiliates. Subject to Section 4.4 and 10.1,Astellas shall solely own or Control all right, title and interest in and to the know-how and technology owned or Controlled by Astellas which Astellas may decide to use for modifying or creating a new formulation or dosage form of the Product in accordance with Section 4.3.

      5.  COMMERCIALIZATION

          5.1 Commercialization .

               5.1.1 Subject to oversight by the JSC, Astellas shall be responsible for launching and commercializing, and shall use Diligent Efforts to launch and commercialize, the Product in each country in the Territory in accordance with a commercialization plan submitted by Astellas to the JSC (“ Commercialization Plan ”). Without limiting the foregoing, Astellas agrees to use Diligent Efforts to launch the Product as soon as practicable in the Territory, and thereafter to market, promote and sell such Product and to maximize the Net Sales of the Product in the Territory. Astellas agrees to provide to the JSC updated versions of the Commercialization Plan at least annually, and any material modification or addition to the Commercialization Plan within a reasonable period of time prior to adoption and implementation thereof. Astellas shall keep XenoPort reasonably informed as to the progress of its launch and commercialization activities relating to the Product in the Territory, by way of updates to the JSC at its meetings and as otherwise reasonably requested by XenoPort. It is understood and agreed that, subject to oversight by the JSC, and consistent with the other provisions of this Agreement, all commercialization efforts for the Product in the Territory shall be at the sole discretion and expense of Astellas, its Affiliates or Subdistributors.

               5.1.2 XenoPort or its licensee(s) shall be responsible for launching and commercializing the Product outside the Territory. XenoPort shall keep Astellas reasonably informed as to the progress of its and/or [... * ...] its other licensees’ launch and commercialization activities relating to Product outside the Territory, by way of updates to the JSC at its meetings and as otherwise reasonably requested by Astellas but no more often than once annually other than at the JSC meeting. It is understood and agreed that all commercialization efforts for the Product outside

the Territory shall be at the sole discretion and expense of XenoPort, its Affiliates or its other licensees.

          5.2 Marketing Materials . Any marketing and promotional materials created or used by Astellas, its Affiliates and Subdistributors for the Product shall be appropriate to the Marketing Approval for the Product in the respective country and consistent with XenoPort’s worldwide profile for the Product, provided that XenoPort shall respect local marketing needs in the Territory regarding such materials (e.g., the size of letters in such materials). In addition, it is understood that any claim, message or other material part of promotional materials, samples, advertising and materials for training sales representatives with respect to Product shall be consistent with Marketing Approval and comply with applicable laws.

          5.3 Reporting Adverse Drug Reactions/Experiences . Promptly following the Effective Date, the Parties will prepare a standard operating procedure governing the collection, investigation, reporting and exchange of information concerning adverse drug reactions, Product quality and Product complaints, sufficient to permit each Party to comply with its legal obligations. The standard operating procedure will be promptly updated if required by changes in legal requirements. Each Party shall keep the other Party informed about any adverse drug reactions of which such Party becomes aware or is informed regarding the use of a Product in or outside the Territory. As between the Parties, Astellas shall be responsible for reporting all adverse drug reactions/experiences to the appropriate regulatory authorities in countries in the Territory, and XenoPort shall be responsible for reporting all adverse drug reactions/experiences to the appropriate regulatory authorities in countries outside the Territory, in accordance with the appropriate laws and regulations of the relevant countries and authorities. Astellas shall ensure that its Affiliates and Subdistributors comply with such reporting obligations in the Territory, and XenoPort shall ensure that its Affiliates and licensees (other than Astellas, its Affiliates and Subdistributors) comply with such reporting obligations outside the Territory. These reporting obligations shall apply to non-serious adverse events as well, which shall mean adverse events occurring from Product overdose or from Product withdrawal, as well as any toxicity, sensitivity, failure of expected pharmacological action or laboratory abnormality that is, or is thought by the reporter to be, serious or associated with relevant clinical signs or symptoms. Each Party will designate a regulatory affairs liaison to be responsible for communicating with the other Party regarding the reporting of adverse drug reactions/experiences. The details of such exchange shall be separately discussed and agreed upon in writing by and between such regulatory affairs liaisons within a reasonable period after execution of this Agreement.

      6.  INITIAL PAYMENT AND MILESTONES

          6.1 Initial Payment . In partial consideration of the costs incurred by XenoPort in connection with the research and development of the Product and in exchange for the exclusive

rights granted herein, Astellas shall pay XenoPort Twenty Five Million Dollars (US $25,000,000) within [... * ...] after execution of this Agreement.

          6.2 Milestones . In further consideration of the costs incurred by XenoPort in connection with the research and development of the Product and in exchange for the exclusive rights granted herein:

               6.2.1 Initiation of U.S. Phase III Trial . Upon the first dosing of a human patient in a Phase III Trial of the Compound and/or Product in the United States by or under authority of XenoPort, the date of which XenoPort shall inform Astellas in writing, Astellas shall pay XenoPort Ten Million Dollars (US $10,000,000).

               6.2.2 Completion of U.S. Phase III Trial . Upon the first completion of a Phase III trial of the Compound and/or Product in the United States by or under authority of XenoPort, Astellas shall pay XenoPort Five Million Dollars (US $5,000,000). As used herein, “completion” of a Phase III trial shall be deemed to occur upon the earliest of (a) receipt by XenoPort of the final report for such Phase III trial, (b) filing of an MAA for the Product or (c) first issuance of a press release by XenoPort or its licensee announcing completion of a Phase III trial of the Compound and/or Product in the United States, the date of which XenoPort shall inform Astellas in writing.

               6.2.3 MAA Filing in the United States . Upon first acceptance of a filing of an MAA for the Compound and/or Product in the United States by or under authority of XenoPort, the date of which XenoPort shall inform Astellas in writing, Astellas shall pay XenoPort [... * ...] . As used herein, an MAA shall be deemed “accepted” upon the earlier of: (a) the expiration of the period specified in applicable regulations for any notice by the FDA that such MAA will not be accepted for review, without XenoPort or its designee having received such notice from such agency; or (b) the receipt by XenoPort or its designee from such agency that the MAA will be accepted for review; provided that in any case, if no such period or acceptance is provided for in the applicable regulations, then the MAA shall be deemed “accepted” on the date such MAA was filed.

               6.2.4 MAA Filing in Japan . Upon first acceptance of a filing of an MAA for the Compound and/or Product in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... * ... ] .

               6.2.5 Marketing Approval in the United States . Upon obtaining the first Marketing Approval of the Compound and/or Product for the first indication in the United States by or under authority of XenoPort, the date of which XenoPort shall inform Astellas in writing, Astellas shall pay XenoPort [... * ...] .

               6.2.6 Marketing Approval in Japan . Upon obtaining the first Marketing Approval of the Compound and/or Product in Japan for the first indication by or under authority of Astellas, Astellas shall pay XenoPort [... * ...] .

               6.2.7 Additional Indications .

                    (a)  Second Indication . Upon first acceptance of a filing of an MAA for the Compound and/or Product for a second indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... * ...] . Upon obtaining the first Marketing Approval of the Compound and/or Product for a second indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... * ...] . As used herein, a “second indication” shall mean any indication for which Marketing Approval is obtained, other than the indication triggering payment under Section 6.2.6 above.

                    (b)  Third Indication . Upon first acceptance of a filing of an MAA for the Compound and/or Product for a third indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... * ...] . Upon obtaining the first Marketing Approval of the Compound and/or Product for a third indication in Japan by or under authority of Astellas, Astellas shall pay XenoPort [... * ...] . As used herein, a “third indication” shall mean any indication for which Marketing Approval is obtained, other than the indications triggering payment under Section 6.2.6 and 6.2.7(a) above.

                    (c)  Subsequent Indications . Astellas shall not be obligated to make any milestone payments with respect to Marketing Approval for the fourth and subsequent indications of the Compound and/or Product. It is understood that, for purposes of this Section 6.2.7, a single MAA or Marketing Approval may include more than one indication, e.g. both the first and second indications, or the second and third indications, as the case may be.

               6.2.8 Timing of Payment . Each payment provided in Sections 6.2.4, 6.2.6 and 6.2.7 above shall be due within thirty (30) days following the occurrence of each event triggering such payment, and each payment provided in Sections 6.2.1, 6.2.2, 6.2.3 and 6.2.5 shall be due within thirty (30) days following XenoPort’s notice to Astellas of the event triggering such payment.

      7.  ROYALTY

          7.1 Royalty . In consideration for Products supplied by XenoPort hereunder and also for the exclusive rights granted herein, during the term of this Agreement, Astellas shall, subject to the reduction of royalty rate pursuant to Section 7.2 or 7.3 below, pay to XenoPort the following running royalties on the Net Sales of the Product in the Territory:

As used herein, “ Annual Net Sales ” of the Product shall mean the Net Sales of Product(s) sold in the Territory by or under authority of Astellas in each calendar year.

In the event that the Product [... * ...] , for the purposes of determining royalty payments, shall be [... * ...] In the event that [... * ...] , such agreement not to be unreasonably withheld or delayed.

          7.2 Royalty Plus Supply Price . In the event the total royalty calculated under Section 7.1 above (without taking into account Section 7.3) plus the supply price calculated under the Supply Agreement per unit of Product exceeds [... * ...] of the Net Sales from the sale of such unit of Product, XenoPort agrees that Astellas may deduct [... * ...] of such ex