DOCOSANOL LICENSE AGREEMENT

EXHIBIT 10.3

CONFIDENTIAL TREATMENT REQUESTED

DOCOSANOL LICENSE AGREEMENT

     THIS DOCOSANOL LICENSE AGREEMENT is made and entered into as of January 5, 2006, between Avanir Pharmaceuticals, a California corporation (“ Avanir ”) and Kobayashi Pharmaceutical Co., Ltd, a Japanese corporation (“ Licensee ”).

BACKGROUND

     A. Avanir is the owner of certain patent rights, know-how, trade secrets, confidential information, inventions, technology, and other proprietary rights which Licensee does not presently possess and that (i) pertain to a pharmaceutical grade chemical known as “docosanol,” (ii) relate to use of docosanol in the treatment of viral infections and inflammations of skin and mucous membranes in humans, and other medicinal uses and (iii) include certain medicinal formulations and manufacturing methods of docosanol.

     B. The United States Food and Drug Administration (“ FDA ”) has approved Avanir’s New Drug Application in the United States of America (“ USA ”) relating to products incorporating docosanol for topical, human use for the treatment of herpes labialis.

     C. Licensee is interested in obtaining from Avanir a license to Avanir’s proprietary rights relating to the use of docosanol and access to Avanir’s proprietary know-how in order to establish OTC business in Japan, and Avanir is willing to grant such license and access on the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the monetary consideration set forth in this Agreement and of the terms, conditions and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Avanir and Licensee hereby agree as follows:

      1. DEFINITIONS .

     Words and phrases used in this Agreement which are not otherwise defined will be interpreted in accordance with the common usage for such term in English. Technical terms unless otherwise defined will be interpreted consistent with their common usage in the relevant scientific field. Some terms are defined in this Agreement parenthetically, and such terms will have the meanings apparent from the context in which such terms are parenthetically defined. When used in this Agreement, each of the following defined terms will have the meanings set forth in this Section.

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     1.1 “ Active Ingredient ” means (a) docosanol ^*** , (b) any other ^*** or (c) such specification for docosanol as an active ingredient that is curative of episodic outbreaks of herpes simplex or herpes labialis. Provided however, it always means that the foregoing description of Active Ingredients must be approved by the Ministry of Health, Labor, and Welfare (“MHLW”) in Japan as an active ingredient that is curative of episodic outbreaks of herpes simplex or herpes labialis ( ^*** ).

     1.2 “ Additional Studies ” means any additional pre-clinical, clinical or non-clinical studies required to be conducted solely to obtain or to maintain in effect Territory Registrations of the Products in the Territory.

     1.3 “ Affiliate(s) ” means, with respect to each party, any organization, corporation, company, firm, or other entity that controls, is controlled by, or is under common control with such party. A company will be deemed to have control of another if it owns directly or indirectly at least fifty-percent (50%) of the voting shares of or is entitled directly or indirectly to appoint at least one half of the directors of the other company; provided however, Kobashou Co., Ltd. does not fall within the scope of Affiliates in this Agreement.

     1.4 “ Best Efforts ” means the taking of all prompt, substantial and persistent efforts to effect a result as expeditiously as possible, but does not require taking any extraordinary or unusual actions that would not be financially reasonable in the particular circumstances.

     1.5 “ Bulk Docosanol ” means a pharmaceutical grade bulk form of the Active Ingredient.

     1.6 “ Competing Products ” means other medicinal or therapeutic products that are curative of episodic outbreaks of herpes simplex or herpes labialis ( ^*** ) containing the Active Ingredient.

     1.7 “ Confidential Information ” means all information which is of a confidential and proprietary nature, including without limitation, trade secrets and unpatented Know-How and Improvements relating to the Active Ingredient or the Products and any and all formulations thereof or manufacturing methods thereof, and any and all material information either of the parties to this Agreement may acquire concerning the financial, business and marketing goals and plans of the other, including the terms of this Agreement. Notwithstanding anything in this Agreement to the contrary, the defined term “ Confidential Information ” and the obligations of nondisclosure, non-use and confidentiality relating thereto will, without granting any right or license, not include any information or data which: (a) is or becomes known to the general public through no action or fault of the receiving party; (b) was already known to the receiving party prior to the date of disclosure pursuant to this Agreement, as evidenced by the written records of that party, without any obligation of confidentiality; (c) is or becomes known to the receiving party without any obligation of confidentiality from a Third Party having the right to disclose the same, and not having a confidential relationship with the disclosing party with respect thereto; or (d) is necessary for the receiving party or its Affiliates to disclose to a

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governmental authority or any agency thereof on a non-confidential basis, in order to pursue Territory Registration or other purposes.

     1.8 “ Cost ” means all purchase, labor, material and overhead costs and expenses incurred in connection with the procurement, manufacture and testing of Products as determined in accordance with generally accepted accounting principles.

     1.9 “ Field ” means all non-ophthalmic, topical, medicinal, therapeutic applications of the Products to skin, mucous membranes, and surrounding tissue in humans sold for the treatment of herpes simplex or herpes labialis via prescription (Rx), behind the counter or over the counter (“OTC”).

     1.10 “ First Commercial Sale ” means the first commercial sale in the Territory following Territory Registration, where sale means delivery, billing out or invoicing, whichever comes first, of a Product by Licensee, its Affiliates or sublicensees to any person or entity other than Licensee, its Affiliates or sublicensees.

     1.11 “ Gross Sales ” means the gross sales of the Products invoiced by Licensee, its Affiliates or sublicensees to distributors, resellers or other Third Parties as expressed in Japanese Yen. For the sake of clarity, the Gross Sales does not include ^*** . (The currency conversion rate employed for calculation of Gross Sales will be that published in the Nihon Keizai Shinbun’s “Foreign Currency Exchange Rates” on the last business day of the calendar quarter.).

     1.12 “ Improvements ” means any and all inventions, developments and improvements and any other new Know-How relating to the Active Ingredient or the Products, including, without limitation, any new indications, compositions, concentrations, derivatives, formulations, preparations, processes, specifications, administrations, combinations or dosage strengths and sizes or applications thereof, which are developed by or for Avanir or Licensee during the term of this Agreement.

     1.13 “ Know-How ” means any data, results, know-how, manufacturing methods and processes of the Bulk Docosanol to the extent available and information which Avanir owns, controls or has a license (with a right to sublicense) and relating to the Active Ingredient or that is necessary or useful to the manufacture, use or sale of Products, including, without limitation, data or information incorporated either in Avanir’s approved New Drug Application in the USA or in regulatory filing submitted to other regulatory authorities, if any.

     1.14 “ Licensed Patents ” means all (a) the Territory patents and patent applications listed in Schedule 1.14 or covering any Avanir Owned Improvements, as long as Licensee agrees; (b) any divisionals and patent applications; and (c) all patent term extensions of the foregoing patents.

     1.15 “ Post Marketing Surveillance Period ” means a certain period of post-marketing surveillance in the Territory, in other words, a certain period for surveillance, imposed by the Ministry of Health, Labor and Welfare in Japan upon marketing approval of the Product in the Territory, with regard to quality, efficacy and safety for clinical usage of the Product. In the

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event the Japanese government introduces a new proprietary, exclusivity period, the PMS Period will be deemed to include the exclusivity period for the purpose of this Agreement.

     1.16 “ Products ” means any finished or semi-finished medicinal product that is curative of episodic outbreaks of herpes simplex or herpes labialis ( ^*** ) that contains a therapeutic concentration of the Active Ingredient either as the sole ingredient or in combination with any other ingredient, substance or compound, in any and all concentrations, formulations, preparations, administrations, combinations or dosage strengths.

     1.17 “ Reasonable Efforts ” means efforts and resources commonly used in the research-based pharmaceutical industry for the research, development and commercialization of a product at a similar stage in its product life, a similar market potential and a similar profitability ratio.

     1.18 “ Territory ” means the territories and possessions of Japan.

     1.19 “ Territory Registration ” means satisfaction of any related applicable registration (including any duplicate marketing authorizations) and notification requirements and approvals, licenses, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other government entity, necessary for the manufacture, use, storage, import, transport or sale of Products or the equivalent from the appropriate governmental agency in the Territory.

     1.20 “ Third Party ” or “ Third Parties ” means any person, organization, corporation, company, firm, or other entity that is not a party hereto or an Affiliate of either party.

     1.21 “ Trademark ” means a trademark or trademarks for use in connection with the sale of the Products in the Territory, together with any registrations or pending registration applications filings therefore by Licensee at the Japan Patent Office. It is expressly understood that the Trademark does not include the trademarks “Avanir” or “Abreva” or any variations thereof even if such trademarks are used in association or combination with the Trademark.

     1.22 “ Supply Agreement ” means the separate agreement for the supply of Bulk Docosanol to be entered into between Licensee and Avanir.

      2. LICENSES.

     2.1 Grant. Subject to all the terms and limitations of this Agreement, Avanir hereby grants to Licensee an exclusive license, possibly including a Senyo Jisshiken under Japanese Patent Law, under its Licensed Patents and to the Know-How to make, have made, use, and offer to sell and to sell and import Products in the Territory and only in or for the Field. Licensee will register the aforesaid exclusive license as the exclusive license, with the cooperation of Avanir but at Licensee’s expense, possibly including Senyo Jisshiken of the Japanese Patent Law. Such license does not include the right to manufacture Bulk Docosanol. For the avoidance of doubt,

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the license to manufacture described in the foregoing sentence of this Section 2.1 is limited to rights to manufacture for Licensee’s Products. Subject to price, terms and conditions yet to be mutually agreed in the Supply Agreement, Avanir will be fully obligated to supply Bulk Docosanol to Licensee so long as this Agreement is effective or until such time as Licensee has notified Avanir that Licensee has entered into a separate supply agreement for Bulk Docosanol with a Third Party. Licensee will use all commercially reasonable efforts to obtain, as soon as practicable, either a direct source of supply of Bulk Docosanol from Avanir’s supplier or a second source of supply of Bulk Docosanol. Upon Licensee’s request, Avanir will cooperate with Licensee to establish the manufacturing process of the Bulk Docosanol of Licensee and/or its designee and to obtain the required permits from the MHLW regarding any change in such manufacturing process; provided, however, that Licensee and/or its designee will not proceed to produce the Bulk Docosanol unless, within ^*** months from Avanir’s receipt of the firm order for Bulk Docosanol from Licensee, Avanir nevertheless fails to fill such order as provided by the Supply Agreement regarding the Bulk Docosanol. In case of the above mentioned Bulk Docosanol production by Licensee and/or its designee(s), Licensee or its designee(s) will retain the right to manufacture Bulk Docosanol without any limitation. In that case, Avanir will disclose to Licensee and/or its designee(s) any Know-How that Avanir owns or controls, conditioned upon payment of a commercially reasonable fee by Licensee.

     2.2 Restrictions on Licensee . To the extent not otherwise prohibited by law, Licensee will not directly or indirectly for the term of this Agreement, (a) promote, market, distribute or sell the Products outside the Field; (b) actively or passively sell the Products outside the Territory, (c) sell or distribute the Products to any Third Party whom Licensee has reasonable grounds to believe is likely to sell outside the Field or export the Products outside the Territory. If any person sells, markets or exports the Products sold to it by Licensee contrary to the above restrictions, Licensee will make Best Efforts to take actions within its legal rights and powers to cause such persons to cease such sale, marketing or exportation. For purposes of the foregoing restrictions, (1) “actively sell” in a territory means engaging in advertising, marketing or promotion specifically aimed to such territory or establishing any branch or distribution operations for the purpose of distributing Products in such territory and (2) “passively sell” means responding to unsolicited customer orders while not engaging in any advertising, marketing or promotion.

     2.3 Restrictions on Avanir . To the extent not otherwise prohibited by law, Avanir will not sell the Products or Bulk Docosanol inside the Territory and inside the Field or to any party who Avanir has reasonable grounds to believe is likely to export the Products or Bulk Docosanol into the Territory for sale in the Field. If any person sells or exports the Products or Bulk Docosanol acquired from Avanir to customers inside the Territory for use in the Field without Avanir’s authorization, Avanir will make Best Efforts to start to take action within six months from Avanir’s awareness of the above-mentioned situation, within its legal rights and powers to cause such persons to cease such sale or exportation.

     2.4 Sublicenses . Licensee may not sublicense its rights under this Agreement without Avanir’s prior written consent, which Avanir may grant or withhold in its sole discretion . For the sake of clarity, sublicenses do not include manufacturing of finished Product by a third party or subcontracts for commercializing the Product by Licensee. Upon the prior written consent of

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Avanir, Licensee will only have the right to grant sublicenses within the Territory and Field under Section 2.1 under the terms and conditions of this Agreement and only for the expressly limited purpose of co-promotion and co-marketing Products where and when (i) Licensee is and remains the single registration holder for the Product; (ii) Licensee is and remains the single person responsible for the manufacture of Product and (iii) only the Trademark is used in connection with the Product. In all cases (a) such sublicensees will be at least the equivalent of Licensee with respect to fitness to perform in accordance with the terms of this Agreement, (b) the prospective sublicensees may not distribute in the Territory a Competing Product ; (c) such sublicensees will have entered into a Sublicense Agreement; and (d) Licensee agrees in writing with Avanir to remain obligated in all respects to comply with the provisions of this Agreement and to indemnify Avanir for any costs, expenses or damages that may result from sublicensee’s breach of any provision of the Sublicense Agreement . Upon request of Avanir, Licensee will make reasonable inquiries of any proposed sublicensee to determine whether such proposed sublicensee is developing, making, marketing or selling Competing Products. Except as specifically provided above, Licensee will have no rights to sublicense all or any part of the license granted to Licensee pursuant to this Agreement. Any transfer or extension of rights under the license granted under this Agreement, in whole or in part, by Licensee to any Third Party will be deemed and considered to be a sublicense subject to the requirements of this Section, even if not so designated or described in the relevant legal agreements, instruments or documents.

     2.5 Improvements .

     (a) Avanir Owned Improvements . Avanir will solely own any Improvements that Avanir invents, develops, discovers or creates (“ Avanir Owned Improvements ”). Avanir retains the ownership of and sole right and discretion to file, prosecute and maintain any Territory, U.S. or foreign patent applications covering any Avanir Owned Improvements. Any Avanir Owned Improvements and related patents or patent applications will be included in the scope of the licenses granted under Section 2.1 , as long as Licensee agrees.

     (b) Licensee Owned Improvements . Licensee will solely own any Improvements that Licensee invents, develops, discovers or creates that are not Avanir Owned Improvements (“ Licensee Owned Improvements ”). Licensee retains ownership of and sole right and discretion to file, prosecute and maintain any Territory, U.S. or foreign patent applications covering any Licensee Owned Improvements.

     2.6 Patent Prosecution a nd Maintenance .

     (a) Consultations . Each party will promptly inform, consult with and assist the other, as to all matters that come to its attention that may affect the preparation, filing, prosecution, or maintenance of the patents relating to the Products that each such party owns, including, without limitation, the discovery or invention of any Improvements that such party owns and permit each other to provide comments and suggestions with respect to such activities, which comments and suggestions will be reasonably considered by the other party. If Avanir files a patent application(s) relating to Improvements, including without limitation the anti-herpes compositions and therapy with the Japan Patent Office or obtains a patent(s) relating to the same in the Territory, Avanir will promptly notify the Licensee by priority, and provide exclusive license of the patent to the Licensee, as long as Licensee agrees .

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     (b) Assistance. Upon receipt of any Territory Registration, Licensee will provide assistance to Avanir in obtaining patent extensions, supplementary protection certificates, and the like for the Licensed Patents to the extent the laws of the Territory provide it. If Licensee needs necessary cost for its reasonable personnel’s time and expenses, Licensee will consult with and obtain an approval in advance from Avanir before Licensee charge that to Avanir.

     (c) Abandonment of Licensed Patents . Avanir will make Best Efforts to maintain Licensed Patents in the Territory. However, if Avanir has irresistible reason to surrender or abandon Licensed Patents, Avanir will provide Licensee with at least 60-days prior written notice before surrendering or abandoning any Licensed Patents. To the extent that Licensee desires to continue maintenance and/or prosecution of such Licensed Patents in such countries which Avanir has elected to surrender rights, Avanir will assign such Licensed Patents to Licensee, cooperate fully with Licensee, its attorneys, and agents in assuming such responsibilities and provide Licensee with complete copies of any and all documents or other materials that Avanir deems necessary to undertake such responsibilities. Licensee will assume responsibility for all costs associated with the Licensed Patents for which it elects to assume responsibility, including costs associated with transferring patent prosecution responsibilities to an attorney or agent of Licensee’s choice.

      3. REGULATORY MATTERS .

     3.1 Delivery of Know-How by Avanir.

     (a) Data and Applications . In consideration for the fee to be paid by Licensee pursuant to Section 5.1 , Avanir will provide, no later than 30 days after the date of this Agreement, all available data used in the USA, in Sweden and in other countries’ regulatory submissions for 10% docosanol cream in the treatment of herpes simplex or herpes labialis and pre-clinical data and post marketing surveys (to the extent available and possible under existing confidentiality agreements), including, without limitation, copies of all clinical data, documents, papers, protocols, results and analyses as well as currently available information including that concerning adverse effects and products complaints (to the extent the information is available to Avanir), in each case that relates to or would be useful in connection with the import, marketing, manufacturing, and/or registration of the Products in the Field in the Territory.

     (b) Access to Drug Master File . As soon as practicable after the date of this Agreement, (and supplemented as reasonably needed by Licensee as soon as reasonably practicable thereafter during the term of this Agreement) Avanir will use its Best Efforts to make available to Licensee the drug master file for Bulk Docosanol on file at MHLW for the purpose of Licensee’s Territory registration for the curative of episodic outbreaks of herpes simplex or herpes labialis (subject to the confidentiality obligations of Article 8 ), if required by Licensee. In any such event, Licensee will reimburse Avanir’s reasonable out–of-pocket expenses incurred as a result of rendering such access.

     3.2 Additional Studies .

     (a) Licensee’s Responsibility . With respect to Additional Studies, Licensee will be responsible for conducting any Additional Studies which Licensee

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concludes Licensee’s needs to conduct and for all costs and expenses associated therewith.

     (b) Conduct of Additional Studies . Such Additional Studies will be conducted by Licensee in accordance with applicable law and current Good Clinical Practices (“GCPs”). Licensee will provide Avanir with summaries of all protocols in respect of Additional Studies concerning the Products to be conducted by Licensee and information indicating whether Licensee desires to publish the results of such Additional Studies. Licensee will provide such summaries to Avanir for Avanir’s review and comment within a month before such Additional Studies are undertaken. Licensee will give such comments due and careful consideration in the light of its obligations under this Agreement. However, it is not necessary for Licensee to produce any English translation of the Japanese original documents. During any time when Additional Studies are being conducted, Licensee will also deliver to Avanir a status report every calendar quarter with respect to such Additional Studies.

     (c) Third Party Collaborators . Avanir and Licensee each acknowledge and agree that, with respect to any Additional Studies, (i) Licensee’s arrangements made with the Third Party providers of services will in all cases require that such Third Party providers grant sole ownership of (and publication rights with respect to) the information, data, clinical trial results and other know-how resulting from such Additional Studies to Licensee and (ii) as between Licensee and Avanir, such information, data, clinical trial results and other know-how resulting from such Additional Studies will belong solely to Licensee as Licensee Owned Improvements.

     3.3 Territory Registrations .

     (a) Licensee’s Responsibilities . Licensee will directly bear all costs and expenses and use its Best Efforts to complete all necessary studies to obtain Territory Registrations and will be solely responsible for and will prepare (using the data and files provided by Avanir pursuant to Section 3.1(a) ) and submit an application for the Territory Registration with the Territory health care authorities in the Territory as soon as possible but no later than ^*** months after the date of satisfactory conclusion of clinical trials and other tests. Provided however, this time limit of ^*** months will not apply if the MHLW changes the procedure of clinical trials and other tests, or a very special demand for information is made by the Ministry. In connection with the foregoing, Licensee may utilize other agents or consultants to assist in obtaining Territory Registrations, but may not share Know-How with such agents or consultants without entering into an appropriate confidentiality agreement. Licensee will also be responsible for any other registration, regulatory and pricing matters concerning the Products in the Territory.

     (b)  Assistance . Avanir will assist Licensee in regulatory matters as appropriate and reasonably requested by Licensee. If Licensee requests assistance from Avanir, Avanir will consult with and obtain approval in advance from Licensee if Avanir desires to be reimbursed for its reasonable costs of personnel time and expenses plus ^*** %.

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     (c) Ownership of Territory Registrations . Licensee will register and keep any such Territory Registrations in Licensee’s own name. Licensee may assign ownership of the Territory Registrations to Avanir in exchange for reimbursement of its appropriate amount, including but not limited to the costs of obtaining and maintaining the Registrations, and clinical study costs, in the event of termination of this Agreement by Avanir prior to its expiration according to Section 7.6(c) .

     (d) Post Marketing Surveillance . Licensee will utilize its Best Efforts to obtain any and all advantage derived from the Post Marketing Surveillance in the Territory.

     (e) Improvements of Bulk Docosanol . In the case where modification or improvement of Bulk Docosanol is required for obtaining the Territory Registration and/or promoting the sales of the Products in the Territory, the Licensee may request Avanir to modify or improve the Bulk Docosanol. Avanir will use its Best Efforts to comply with any requests for improvements to Bulk Docosanol. In any such event, Licensee will reimburse Avanir’s reasonable out–of-pocket expenses incurred as a result of rendering such compliance or assistance.

     3.4 Additional Indications. In the event that Avanir makes regulatory filings for the marketing approval of other indications in the Field but outside the Territory during the term of this Agreement, Avanir and Licensee will discuss the appropriate regulatory filing strategy for such indications in the Territory, but any such filings will be solely Licensee’s responsibility and expense.

     3.5 Regulatory Developments and Communications . Each party will notify the other immediately by telephone (with prompt, written follow-up), facsimile or any other electrical method in writing of any inquiry, contact or communication received from any governmental regulatory agency or other official body which adversely relates to or impacts upon the Products or any component or ingredient thereof (including, without limitation, any issuance of any Territory Registration administrative decree relating to a recall of the Products or the imposition of any post marketing surveillance period), and will promptly furnish the other party with copies of all written communications relating thereto sent to or received from such regulatory agency. Licensee will report to Avanir of the status of the Territory Registration efforts on a current basis every three months, and will furnish Avanir, upon Avanir’s reasonable request, copies of all of the documents, data and other information supplied to or received from the government in the Territory or other any approval authority in connection with the Territory Registration without unreasonable delay. Avanir will have the right to be informed of, and upon Licensee’s request, participate in and attend discussions regarding the Territory Registration or any administrative decree. Upon receipt of the Territory Registrations, Licensee will promptly furnish Avanir copies or other satisfactory evidence thereof.

     3.6 Other Governmental Filings or Notices . Licensee will be solely and exclusively responsible for and bear all expenses associated with any permits, licenses or approvals necessary or advisable for the entry into force and performance in the Territory of this Agreement and of the matters contemplated in this Agreement.

      4 .  MANUFACTURE AND COMMERCIALIZATION OF PRODUCTS .

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     4.1 Manufacturing of Products . As between Avanir and Licensee, throughout the term of this Agreement, Licensee will be solely responsible for: (a) manufacturing or having manufactured the Products for distribution and sale in the Territory and any related packaging and branding with Trademark, (b) acquiring or causing to be acquired all manufacturing equipment and licenses, including, without limitation, plant, equipment and facilities licenses and approvals, necessary to enable the manufacture and testing of the Products, (c) obtaining any required importation licenses or approvals for importation of Bulk Docosanol into the Territory, including payment of any related import charges or levies, (d) reporting of matters regarding the manufacture of Products to relevant regulatory authorities and handling and responding to any appropriate governmental agency inspections with respect to manufacturing of Products, all in accordance with applicable laws and regulations. Licensee will provide to Avanir any information requested by any governmental agency in connection with any governmental inspection related to Bulk Docosanol and will notify Avanir of any such matter if significant or serious and promptly furnish complete copies of such reports to Avanir. Licensee also will advise Avanir of any occurrence or information which arises out of Licensee’s or its subcontractors’ manufacturing activities which has materially adverse regulatory compliance and/or reporting consequences concerning the Products. Licensee will use Reasonable Efforts to promptly advise Avanir of any requests by any governmental agency for such inspections with respect to manufacturing of the Products.

     4.2. Product Manufacturing Processes & Quality Control . Licensee will not, and will ensure its manufacturing subcontractors do not, without the consent of Avanir (such consent not to be unreasonably withheld) deviate from or modify the instructions and methods which have been given by Avanir in writing and agreed to by Licensee for the manufacture of the Products as well as the methods supplied by Avanir and agreed to by Licensee for quality control of the Products, subject to any applicable laws, regulations or requirements of any governmental agency in the Territory. For the avoidance of doubt, the deviations and modifications with respect to which Licensee must obtain the consent of Avanir are ones that have a material impact on quality of the Product or affect the obtaining or maintenance of any Territory Registration.

     4.3 Adverse Event Data Exchange .

     (a) In the event that either party, its Affiliates or sublicensees obtains, directly or indirectly, information, data, inquiries, complaints, or reports on any Adverse Events during the development, marketing and distribution of any of the Products, such party will disclose, as soon as reasonably practicable, such information and data to the other party and will collaborate with such other party to respond to or inform any applicable governmental authority. Such information will include an identifiable patient, a suspect medicinal product, an identifiable reporting source and an event or outcome. Follow-up information should be actively sought by the party and submitted within the same time-lines as an initial report. Each party will also send (by fax or electronically) the other party written notice in English of fatal and life-threatening events, which are unexpected and considered possibly related to the Products, within 72 hours of receipt and of all other serious adverse events within ten business days. All other Adverse Events associated with Products will be reported by either party to the other party in summary format at least quarterly. For purposes of the foregoing, an “ Adverse Event ” means any untoward medical occurrence in a patient or clinical investigation subject administered the Product and which does not necessarily have to have a causal relationship with the Products, including, without limitation: (a) with respect to clinical trials, all noxious and unintended responses to the Product and (b) after the First Commercial Sale, any response to the Product which is noxious and unintended and which occurs at doses normally used in man for

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prophylaxis, diagnosis or therapy of disease or for modification of physiological function. The provisions of this section will survive termination of this Agreement so long as either party is marketing Products.

     (b) Licensee will bear the expenses of any recall of a Product in the Territory; provided however, that Avanir will bear the expense of a recall to the extent that such recall directly and exclusively caused by Avanir’s breach of its obligations hereunder or Avanir’s negligence or willful misconduct or intentional omission. Such expenses of recall will include expenses for notification, destruction and return of the recalled Product and any refund to customers of amounts paid for the recalled Product.

     4.4 Commercialization.

     (a) Efforts . Licensee will (a) use its Best Efforts applying its marketing and sales expertise to maximize the sale and the profit from the Products considering market situation in the Territory as soon as reasonably practical but no later than ^*** after the issuance of a Territory Registration; (b) have no right to use the Avanir trade name and trademark, apart from the Products labeling requirements of Section 4.6; and (c) subject to and to the extent permitted by applicable laws, not produce, sell or distribute any Competing Products within the Territory, directly or indirectly, throughout the term of this Agreement and for a period of ^*** after termination of the Agreement by Avanir. Maximizing sale of the Products includes, without limitation, a nation-wide scope test marketing in Japan. If the date of the First Commercial Sale of the Products in the Territory does not occur by the ^*** anniversary of the issuance of the first Territory Registrations in the Territory, the exclusive license for the Territory may immediately convert to a non-exclusive license, but Licensee will have a ^*** -month option to maintain its exclusive license by paying, in advance, due on the first day of the month, a fee of $ ^*** per month until the Product is launched or the ^*** months have expired. For the sake of clarity, First Commercial Sale includes those by the Licensee in maximizing of the sale of the Products.

     (b) Exclusivity . If Avanir considers that the Licensee produces, sells or distributes any Competing Products in violation of the Agreement at any time during the term of this Agreement, Avanir may commence a proceeding under Section 13.5 . If Avanir and the Licensee do not reach a settlement, the license granted by Avanir under Section 2.1 will cease to be exclusive and, notwithstanding any other provision in this Agreement, Avanir will have no obligation to continue to license Improvements to Licensee. Notwithstanding the foregoing, no such termination of exclusivity by Avanir will be effective until completion of the dispute resolution procedures set forth in Section 13.5 .

     4.5 Trademarks .

     (a) Ownership and Registration . Licensee will develop a unique Trademark and will own the Trademark and be solely responsible for its use and registration and all

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