AVALONRX® LICENSE AGREEMENT

Exhibit 10.4

AVALONRX ^® LICENSE AGREEMENT

           This AvalonRx ^® License Agreement ( “Agreement” ) is made as of October 27, 2008 (the “Effective Date”) by and between Avalon Pharmaceuticals, inc. , a Delaware corporation ( “AVRX” ), having an office at 20358 Seneca Meadows Parkway, Germantown, Maryland 20876, and Clinical Data, Inc. , a Delaware corporation ( “CLDA” ), having an office at One Gateway Center, Suite 702, Newton, Massachusetts 02458. AVRX and CLDA may each be referred to herein individually as a “Party” and collectively as the “Parties.”

Witnesseth:

      Whereas , AVRX has developed AvalonRx ^® , a proprietary platform that uses polymerase chain reaction (PCR), microarray technology, robotics and bioinformatics to enable fast, fully-automated, large-scale analysis of gene expression and its application to the discovery and development of drugs (“AvalonRx”);

      Whereas , CLDA is a company engaged in the development and commercialization of targeted therapeutics and predictive tests from a portfolio of proprietary biomarkers;

      Whereas , AVRX and CLDA wish to enter into this Agreement to provide CLDA with perpetual, irrevocable, and exclusive access to AvalonRx and AvalonRx Technology (defined below), as more fully described herein; and

      Whereas, CLDA will be entitled to retain all results it generates from use of AvalonRx, subject to the terms and conditions of this Agreement.

      Now, Therefore , in consideration of the foregoing premises and the mutual promises, covenants and conditions contained herein, AVRX and CLDA agree as follows:

1. Definitions

     The following capitalized terms shall have the meanings indicated for purposes of this Agreement:

      1.1 “Affiliate” shall mean any corporation, association or other entity that directly or indirectly controls, is controlled by or is under common control with the Party in question. As used in this definition of “Affiliate,” the term “control” shall mean having the power to direct or cause the direction of the management and policies of an entity, whether through direct or indirect beneficial ownership of more than 50% of the voting or income interest in such corporation or other business entity. Notwithstanding the foregoing, for purposes of this Agreement, the term “Affiliate” shall not include subsidiaries in which a Party or its Affiliates owns a majority of the ordinary voting power to elect a majority of the board of directors but is restricted from electing such majority by contract or otherwise, until such time such restrictions are no longer in effect.

      1.2 “AvalonRx Technology” shall mean: (a) all discoveries, inventions, information, data, know-how, and trade secrets (whether or not patentable) that are owned or in-licensed by AVRX as of the Effective Date or thereafter and are used or useful with or necessary to operate AvalonRx, including without limitation (i) used or useful with or necessary for use of any and all methods and devices comprising AvalonRx, (ii) used or useful with or necessary for use of any hardware related to the “High-throughput Integrated Transcriptional Screen” system; (iii) used or useful with or necessary for use of any hardware related to the “Rapid Assessment of Compound Efficacy, Transcriptional Change and Kinetics” system; and (iv) used or useful with or necessary for use of any hardware related to the “Transcriptional Structure-Activity-Relationship” system, and (b) all data and information owned or in-licensed by AVRX as of the Effective Date or thereafter and generated by or through the use of AvalonRx or any other AvalonRx Technology, except data and information as to which a Third Party has exclusive rights under an agreement of Schedule A (as such agreement exists on the Effective Date) and/or data and information with respect to the Excluded Field that has no reasonable relevance outside the Excluded Field, and (c) the Licensed Software system, and (d) any AVRX Improvements; and (e) all Patent Rights or other intellectual property rights owned or in-licensed by AVRX as of the Effective Date or thereafter, to the extent they cover any of the foregoing. Notwithstanding the foregoing, any discoveries, inventions, information, data, know-how, trade secrets, Patent Rights, or other intellectual property that is licensed to AVRX by a Third Party (“ In-Licensed IP ”) shall be excluded from AvalonRx Technology if (A) the applicable license agreement granting AVRX rights in such In-Licensed IP imposes sublicensee obligations that are not included in this Agreement, and (B) AVRX notifies CLDA in writing of such obligations (which notification shall specifically reference this Section 1.2), and (C) CLDA does not agree to be bound by such obligations within thirty (30) days after CLDA receives such written notification.

      1.3 “AVRX Improvements” has the meaning set forth in Section 2.3.

      1.4 “CLDA Improvements” has the meaning set forth in Section 2.4.

      1.5 “CLDA Results” shall mean any results, data or other information related to and/or generated by or for CLDA or its Affiliates after the Effective Date through the use of AvalonRx and AvalonRx Technology, including, but not limited to biomarker signatures, small molecule library content, gene expression data and information (whether or not in the form of a database), pathway data and information, compound profiles, analog synthesis data and information, disease models and quantitative data and information.

      1.6 “Control” shall mean possession of the ability to grant the licenses or sublicenses or to make the assignments as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.

      1.7 “Effective Date” shall mean the date of this Agreement first written above.

      1.8 “Excluded Field” has the meaning set forth in Section 3.3(a).

      1.9 “Improvement” shall mean any enhancement or improvement (whether or not patentable) to AvalonRx and/or the AvalonRx Technology that is made by either Party or both Parties using AvalonRx or the Licensed Software.

      1.10 “Licensed Software” shall mean all software used or useful with AvalonRx or necessary to operate AvalonRx Technology, including, but not limited to, the High-throughput Integrated Transcriptional Screen (HITS), all compound profiling toolkits, all software required to operate the Rapid Assessment of Compound Efficacy, Transcriptional Change and Kinetics (RACETraCK) system, any software necessary to conduct Transcriptional structure-activity-relationships system (TSAR), to the extent that such software is Controlled by AVRX as of the Effective Date.

      1.11 “Patent Rights” shall mean all rights associated with all United States and foreign patents (including all reissues, extensions, confirmations, registrations, re-examinations, and inventor’s certificates) and patent applications (including, without limitation, all substitutions, continuations, continuations-in-part and divisionals thereof).

      1.12 “Territory” shall mean all countries in the world.

      1.13 “Third Party” shall mean any party other than CLDA, AVRX or their respective Affiliates.

2. Development; Commercialization; Intellectual Property Rights

      2.1 Development and Commercialization. Following the Effective Date, subject to AVRX’s retained rights under Section 3.3(a) and the excluded rights under Section 3.3(b), CLDA shall have full control, authority, and discretion over the research, development, and commercialization of the AvalonRx and the AvalonRx Technology licensed to CLDA under this Agreement.

      2.2 Ownership of CLDA Results. CLDA shall solely own all CLDA Results. CLDA shall have no obligation to disclose to AVRX any CLDA Results or to provide AVRX with notice of CLDA’s intent to file patent applications thereon.

      2.3 AVRX Improvements. Subject to the licenses granted herein, AVRX shall own all rights to the AvalonRx Technology and Improvements thereto conceived or made by AVRX employees pursuant to the excluded rights and AVRX’s retained rights set forth in Section 3.3 (“ AVRX Improvements ”). AVRX shall be responsible, in its sole discretion and at its sole cost, for the filing, prosecution and maintenance of Patent Rights, copyrights and other proprietary rights claiming or directed to AvalonRx Technology and AVRX Improvements thereto.

      2.4 CLDA Improvements. To the extent that any Improvements to the AvalonRx Technology are made by employees or agents of CLDA (“ CLDA Improvements ”), CLDA shall own all right, title and interest in and to such CLDA Improvements. CLDA shall be responsible, in its sole discretion and at its sole cost, for the filing, prosecution and maintenance of Patent Rights, copyrights and other proprietary rights claiming or directed to CLDA Improvements.

3. Licenses; Technology Transfer

      3.1 AvalonRx License to CLDA. Subject to the terms and conditions of this Agreement, including, without limitation, payment under Section 4.1, and subject to the rights retained by AVRX under Section 3.3(a) and the excluded rights under Section 3.3(b) AVRX

hereby grants to CLDA a royalty-free, fully-paid, worldwide, perpetual, irrevocable, sublicensable, exclusive (even as to AVRX) license, under the AvalonRx Technology, to use and exploit AvalonRx and the AvalonRx Technology for any and all purposes. The licenses granted herein under In-Licensed IP (as defined in Section 1.2) are limited to the rights and licenses that are granted to AVRX and that can be granted by AVRX to CLDA pursuant to the terms of such in-licenses.

      3.2 Sublicensing by CLDA. CLDA shall have the right to grant sublicenses through multiple tiers under any or all of the rights provided in Section 3.1 to its Affiliates and to Third Parties, and CLDA shall not be required to obtain AVRX’s consent to any such sublicenses. Each such sublicense shall be consistent with the terms of this Agreement.

      3.3 Retained and Excluded Rights. (a) Notwithstanding the exclusive license granted in Section 3.1, AVRX retains the non-exclusive, non-sublicensable right under the AvalonRx Technology to use and exploit AvalonRx and the AvalonRx Technology for the sole purpose of (a) performing its obligations under the agreements listed in Schedule A (as such agreements exist on the Effective Date) and (b) continuing development of AVN 944 and its existing development programs directed against the following targets (without any material change in focus or direction): beta-catenin, PLK3, myc, and survivin (the “Excluded Field”).

     (b) The Parties acknowledge and agree that AVRX has may have granted or may be obligated to grant a license to one or more Third Parties under the AvalonRx Technology pursuant to the agreements listed in Schedule A (as such agreements exist on the Effective Date) (collectively, “ Existing Third Party Licenses ”). Nothing in Section 3.1 is intended to limit or otherwise modify such Existing Third Party Licenses or to grant a license to CLDA that is inconsistent with the licenses granted or that AVRX is obligated to grant under such Existing Third Party Licenses, and the rights under the AvalonRx Technology granted to CLDA under Section 3.1 shall be construed in such a manner so as to preserve the scope and validity of such Existing Third Party Licenses.

      3.4 Third Party Licenses . AVRX shall be solely responsible for all costs and expenses of any licenses between a Third Party and AVRX or its Affiliates related to the AvalonRx Technology, whether such licenses exist on the Effective Date or AVRX or its Affiliates enter into such licenses after the Effective Date.

      3.5 Technology Transfer. AVRX shall cooperate with CLDA and shall in a timely manner provide access and provide to CLDA or any CLDA Affiliate designated by CLDA any AvalonRx Technology licensed to CLDA that is reasonably requested by CLDA, to the extent such AvalonRx Technology is not already in CLDA’s possession. All costs and expenses of any such cooperation and transfer by AVRX shall be borne by AVRX. During the term of this Agreement, at no additional cost to CLDA, AVRX shall provide CLDA with reasonable access by teleconference or in person at AVRX’s facilities (subject to AVRX’s customary rules and restrictions with respect to site visits by non-AVRX personnel) to AVRX personnel having pertinent knowledge for consulting advice with respect to AvalonRx and the AvalonRx Technology.

4. Payments

      4.1 AvalonRx Access Fee. In consideration of the licenses granted to CLDA pursuant to Section 3.1, CLDA shall pay to AVRX a one-time access fee of One Million U.S. Dollars (US$1,000,000) simultaneously with the execution hereof.

      4.2 Method of Payment. All payments to be made under this Agreement to AVRX shall be made in United States dollars in the United States to a bank account designated by AVRX by wire transfer pursuant to the instructions set forth on Schedule B .

5. Patents

      5.1 Patent Prosecution .

           (a) AVRX shall be responsible for, at its sole expense, the prosecution and maintenance of all Patent Rights included in the AvalonRx Technology (the “ Licensed Patents ”). AVRX shall deliver to CLDA copies of all documents materially related to such prosecution or maintenance within a reasonable period of time after such documents are prepared by or received by AVRX, and in any event a reasonable amount of time before any such document is filed with or submitted to the applicable patent office or agency by AVRX. AVRX shall consult with CLDA regarding the prosecution of any patent applications in the Licensed Patents relating to the Territory, and shall incorporate any and all reasonable comments or suggestions made by CLDA with respect to such prosecution.

           (b) If, at any time during the term of this Agreement, AVRX no longer wishes to file, prosecute, or maintain any Patent Rights in the Licensed Patents in the Territory, it shall notify CLDA in writing of such decision. AVRX shall provide such notice at least ninety (90) days prior to abandonment or lapse of such Patent Rights, to the extent practicable in light of the timing of any notice relating to such patent or patent application. Thereafter, AVRX shall, if requested in writing by CLDA, assign its ownership interest in such patent or patent application in such applicable country or jurisdiction to CLDA for no additional consideration. Upon such assignment, CLDA shall assume the sole and exclusive responsibility, at its discretion, for the filing, prosecution, and/or maintenance (as the case may be) of such patent or patent application solely at its own expense.

      5.2 Infringement by Third Parties .

           (a) Notice. If either Party becomes aware of any actual or threatened infringement of a Licensed Patent in the Territory, such Party shall promptly notify the other Party in writing (the “ Notice ”) and the Parties shall confer in good faith regarding the most appropriate action to take with respect to such infringement. Both Parties shall use their reasonable efforts in cooperating with each other to terminate such infringement without litigation.

           (b) Enforcement. Unless the Parties otherwise agree, CLDA shall have the first right, but not the obligation, to take appropriate action in its own name and under its sole control against activities allegedly infringing any Patent Right in the Licensed Patents, to the extent such activities fall within the scope of CLDA’s license in Section 3.1 (an “Infringing

Activity”). If CLDA does not take any action against an Infringing Activity within one hundred eighty (180) days after delivery of the Notice, then AVRX may, upon thirty (30) days’ notice to CLDA and provided that CLDA has not provided a commercially reasonable rationale for not taking any action as to such an Infringing Activity, take appropriate action against such an Infringing Activity in its own name and under its sole control.

           (c) Cooperation; Settlement . Regardless of which Party brings the action (the “ Initiating Party ”), the other Party (the “ Non-Initiating Party ”) hereby agrees to cooperate reasonably in any such effort, all at the Initiating Party’s expense, and the Parties shall reasonably cooperate to address new facts or circumstances that come to light during the course of any action relating to the