LICENCE AGREEMENT

Exhibit 10.16

****CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT****

LICENCE AGREEMENT

between

LONZA BIOLOGICS PLC

and

LPATH, INC

INDEX

THIS AGREEMENT is made the 8 ^th day of August 2006

BETWEEN

LONZA BIOLOGICS PLC of 228 Bath Road, Slough, Berkshire SL1 4DX, England (hereinafter referred to as “Biologics”), and

Lpath, Inc, of 6335 Ferris Square, Suite A, San Diego, CA 92121, USA, (hereinafter referred to as “Licensee”)

WHEREAS

A.                                    Biologics is the proprietor of the System and has the right to grant certain Intellectual Property rights in relation thereto (all as hereinafter defined), and

B.                                     The Licensee wishes to take a licence under Intellectual Property (as hereinafter defined) of which Biologics is the proprietor to commercially exploit the Product (as hereinafter defined) in the form hereunder.

NOW THEREFORE the parties hereby agree as follows:

1.              Definitions

1.1            “Affiliate” means any company, corporation, limited liability company, partnership, or other entity that directly or indirectly controls, is controlled by or is under common control, directly or indirectly, with the relevant party to this Agreement. “Control” means the ownership of more than fifty percent (50%) of the issued share capital of the party in question or the legal power to direct or cause the direction of the general management and policies of the party in question.

1.2            “Cell Lines” means those cell lines referred to in Clause 2.1.1(b).

1.3            “Competing Contract Manufacturer” shall mean any party who undertakes or performs more than fifty percent (50%) of their business as a third party manufacturer of monoclonal antibodies and/or therapeutic proteins or any product of a similar nature to which this Agreement relates.

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

1.4            “Effective Date” means the date first above written.

1.5            “First Commercial Sale” means the date of the first sale or other disposal of Product for consideration by Licensee or its Affiliates or sublicensees following the final issuance of all required licenses and approvals by the United States Food and Drug Administration (“FDA”) (or equivalent licenses and approvals in a country other than the United States) allowing for the manufacture and sale of a Product for human use.

1.6            “Intellectual Property” means System Know-How and Patent Rights.

1.7            “Know-How” means technical and other information, whether patented or unpatented, including, but without prejudice to the generality of the foregoing, ideas, concepts, trade secrets, know-how, inventions, discoveries, data, formulae, specifications, processes, procedures for experiments and tests and other protocols, results of experimentation and testing, fermentation and purification techniques, and assay protocols.

1.8            “Net Selling Price” means ***:

1.8.1         ***;

1.8.2         ***;

1.8.3         ***; and

1.8.4         ***;

1.8.5         ***;

1.8.6         ***; and

1.8.7         ***.

Upon any sale or other disposal of Product by or on behalf of Licensee or its Affiliates or sublicensees hereunder other than a bona fide arms length transaction exclusively for money or upon any use of the Product for purposes which do not result in a disposal of such Product in consideration of sales revenue customary in the country of use, such sale, other disposal, or use shall be deemed to constitute a sale ***.

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

For the avoidance of doubt, *** shall not be considered in determining Net Sales.

***.

1.9            “Patent Rights” means the patents and applications, short particulars of which are set out in Schedule 1 hereto, and all patents and applications thereof of any kind throughout the world, whether national or regional, including, but without prejudice to the generality of the foregoing, author certificates, inventor certificates, improvement patents, utility certificates and models and certificates of addition, and including any divisions, renewals, continuations, continuations in part, reissues, patent disclosures, improvements and extensions of reissue thereof.

1.10          “Product” means a humanized monoclonal antibody known as Sphingomab™, which targets sphingosine-1-phosphate (S1P), or an S1P-binding fragment thereof, of which Licensee is the proprietor and which is obtained by the expression of any one gene or of any combination of genes by use of the System.

1.11          “Strategic Partner” means a party with whom Licensee has entered into a contractual relationship, to identify a therapeutic target and/or collaborate in the performance of research and development of a Product or a product of which the Strategic Partner is the Proprietor. In no event may any entity that is primarily a Competing Contract Manufacturer be deemed a Strategic Partner for the purposes of this Agreement.

1.12          “System” means Biologics’ glutamine synthetase gene expression system consisting of the Cell Lines, the Vectors, and the System Know-How, whether used individually or in combination with each other. For the avoidance of doubt, any gene proprietary to Licensee inserted into the System for the purposes of producing Product does not form part of the System.

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

1.13          “System Know-How” means Know-How relating directly or indirectly to the System known to Biologics from time to time, of which Biologics is the proprietor.

1.14          “Territory” means world-wide.

1.15          “Valid Claim” means a claim of any unexpired issued patent within the Patent Rights which has not been held unenforceable or invalid by the decision of a court or other governmental agency of competent jurisdiction unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through re-issue or disclaimer or otherwise.

1.16          “Vectors” means those vectors referred to in Clause 2.1.1(a).

2.              Supply of the System and System Know-How

2.1            Unless previously supplied by Biologics under a separate agreement, Biologics shall, *** Licensee the following:

2.1.1         (a)              Vectors

Approximately *** of vector ***.

Approximately *** of vector ***.

Approximately *** of vector ***.

Approximately *** of vector ***.

Notwithstanding the foregoing, upon request by Licensee, Biologics shall supply such additional quantities of vectors listed above as may be reasonably requested by Licensee from time to time during the term of this Agreement. Such supply will be ***.

(b)              Cell Lines

Two *** vials of the Chinese Hamster Ovary cell line ***.

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

Notwithstanding the foregoing, upon request by Licensee, Biologics shall supply such additional quantities of cell lines listed above as may be reasonably requested by Licensee from time to time during the term of this Agreement. Such supply will be ***.

2.1.2         System Know-How

System Know-How contained as at the date hereinabove in (a) manuals of operating procedures for the System, (b) regulatory information on CD-ROM, and (c) Vector nucleotide sequences. During the term of this Agreement, Biologics shall provide to Licensee *** such additional, updated, or revised System Know-How that Biologics decides to make available to licensees of the System generally. Biologics may develop additional, updated, or revised System Know-How for which it intends to charge licensees, and Licensee shall be informed of the availability of such additional, updated, or revised System Know-How.

2.2            Licensee shall use the System only in the expression of Product by insertion of gene(s) coding for Product(s) into the System, and shall not use, cause the use of, or permit to be used the System for any purpose not directly authorised by this Agreement.

3.              Ownership of Property and Intellectual Property

3.1            It is hereby acknowledged and agreed that, as between the parties, any and all property and Intellectual Property in the System is vested in Biologics, and any and all property and Intellectual Property in the Product is vested in Licensee.

3.2            The provisions of this Clause 3 shall survive termination of this Agreement.

4.              Licences

4.1            Biologics hereby grants to Licensee, and Licensee hereby accepts on behalf of Licensee, a world-wide non-exclusive licence (with the right to grant and authorize sublicenses, subject to Clause 4.3, below) under the Intellectual Property to exploit the System make, have made, use, develop, manufacture, market, sell, have sold, offer for sale, distribute, import, and export Product in the Territory.

4.2            Save as expressly provided by Clause 2.2, above, Licensee hereby undertakes not to make any modifications or adaptations to the System during the subsistence of this Agreement.

4.3            Subject to the provisions of this Clause 4.3, Licensee shall be entitled to authorize and grant sublicences to the rights granted by Clause 4.1, above, to any one or more third parties but only for the purpose of any such third party using the System to produce Product, provided always:

4.3.1         Licensee shall ensure any such sublicensee’s use of the System, the Intellectual Property, and the Product is undertaken solely for the purpose of establishing a manufacturing process for Product, or producing Product, for Licensee or its Affiliates or Strategic Partners; and

4.3.2         Any sublicensee shall not, by virtue of this Agreement, be granted any right or licence, either express or implied, under any patent or proprietary right vested in Biologics or otherwise, to use the System, the Intellectual Property, or the Product other than for the purposes of establishing a manufacturing process for Product or producing Product, Licensee shall in no event transfer to a sublicensee (i) a Vector or (ii) a Cell Line that has not been transfected with a Vector encoding at least a portion of the Product, and Licensee agrees to ensure that any such sublicensee shall not assign, transfer, further sublicense or otherwise make over the benefit or the burden of the rights granted to it pursuant to this Agreement other than pursuant to an Agreement subject to the terms of this Agreement; and

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

4.3.3         Any sublicense granted shall be expressly subject and subordinate to the terms of this Agreement, and it shall be Licensee’s responsibility to ensure the strict adherence by any sublicensee hereunder to the terms and conditions of this Agreement;

4.3.4         ***; and

4.3.5         *** Licensee shall provide Biologics a copy of any such sublicense (the financial terms of which Licensee shall have the right to redact) within thirty (30) days after the execution of such sublicense.

4.4            If, on a country-by-country basis, any granted patents that form part of the Patent Rights (including any re-issued patents and unexpired patents), subsequently expire or no longer contain a Valid Claim, such Patent Rights shall automatically fall outside the scope of this Agreement and the provisions of Clauses 4.1 to 4.3, above, shall only apply, with respect to granted patents, to those granted patents which contain a Valid Claim and form part of the Patents Rights for as long as those granted patents remain in force.

4.5            Notwithstanding Clause 4.4, above, on a country-by-country basis, where no Valid Claims within the Patent Rights remain in force, the provisions of Clauses 4.1 to 4.3, above, shall only apply for as long as the System Know-How remains secret and substantial.

5.              Payments

5.1            In consideration of the licence granted to Licensee pursuant to Clause 4.1 above, and in consideration for the right to sublicense the rights granted by Clause 4.1 pursuant to Clause 4.3, above, Licensee shall pay Biologics as follows:

5.1.1         ***;

5.1.2         ***:

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

5.1.2.1      ***; and

5.1.2.2      ***.

5.1.3         ***:

5.1.3.1      ***; and

5.1.3.2      ***.

5.2            [Intentionally left blank]

5.3            If, on a country-by-country basis, the manufacture, use, tender, importation, and/or sale of the Product are not protected by a Valid Claim within the Patent Rights, then in respect of sales in such countries:

(a)            ***;

(b)            ***;

(c)            ***;

(d)            ***.

5.4            ***.

5.5            The following *** shall apply with respect to ***:

(a)            ***. The obligation to pay any *** under this Agreement shall be imposed only once with respect to the same unit of Product, regardless of the number of Valid Claims concerning the same;

(b)            Notwithstanding anything to the contrary herein, Licensee’s obligations to pay royalties hereunder shall in any event expire at the later to occur of (i) expiration of the last to expire patent right within the Intellectual Property or (ii) the ten (10) year anniversary of the First Commercial Sale.

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

6.              Royalty Procedures

6.1            Licensee shall keep true and accurate records and books of account containing all data necessary for the calculation of royalties payable to Biologics. Such records shall be retained by Licensee for *** following the end of the calendar year to which they pertain. Such records and books of account shall, upon reasonable notice having been given by Biologics (which in no event shall be less than *** prior notice), be open at all reasonable times during regular business hours for inspection by an independent certified public accountant selected by Biologics and reasonably acceptable to Licensee. Such independent accountant shall agree to maintain the confidentiality of the information and materials disclosed during any inspection. Any such inspection shall be conducted in a manner that does not interfere unreasonably with the operations of Licensee’s business. Biologics may perform an inspection ***. Each inspection shall begin upon the date specified by Biologics and shall be completed ***. The independent accountant shall agree to be bound by reasonable confidentiality provisions in favor of Licensee. Biologics shall pay the costs of the independent accountant conducting such audit, unless the results of the inspection reveal an underpayment of *** or more by Licensee for the entire period under audit, in which case, Licensee shall pay the reasonable costs of the independent accountant. If an inspection concludes that an overpayment or underpayment has occurred during the audited period, such payment shall be remitted by the party responsible for such payment to the other party within *** after the date of the accountant’s written report identifying the overpayment or underpayment is delivered to the party responsible for such payment.

6.2            Licensee shall prepare a statement in respect of each *** that shall show for the immediately preceding *** details of the sales of Product and the *** due and payable to Biologics thereon.

Such statement shall be submitted to Biologics within *** after the end of the *** to which it relates, together with a remittance for the royalties due to Biologics, provided, however, that with respect to the ***, such statement shall not be due until ***.

6.3            All sums due under this Agreement:

***CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

6.3.1         shall be made in pounds sterling to Biologics. Payments due to Biologics in currencies other than pounds sterling shall first be ***. The rate of exchange shall be ***.

6.3.2         are exclusive of any applicable taxes, levies, imposts, duties, and fees of whatever nature imposed by or under the authority of any government or public authority, and shall be paid by Licensee (other than value added taxes or taxes on Biologics’ income). The parties agree to co-operate in all respects reasonably necessary to take advantage of such double taxation treaties as may be available.

6.4            Where Biologics does not receive payment of any sum by the due date, ***.

7.              Liability and Warranties

7.1            ***, subject to the warranty given in clause 7.2(a) below.

7.2            Biologics warrants that (a) the patents included in the Patent Rights are the only patents that must be licensed from Biologics or its Affiliates in order to operate or otherwise use the System to express Product from the System, (b) it has not received any suit or claim alleging that the practice of the Intellectual Property infringes the intellectual property rights of a third party, (c) that as of the Effective Date, to the best of its knowledge, operation or use of the System does not infringe the intellectual property rights vested in any third party, and (d) the Cell Lines have been properly tested in accordance with the tests set forth in Schedule 2, below, which testing may be updated or modified in writing by Biologics from time to time during the term of this Agreement.

7.3            Licensee hereby acknowledges that in order to exploit the rights contained herein, other than with respect to the System for the purpose of expressing Product from the System, Licensee may require licences under Biologics patent rights other than those herein licensed or under third party patent rights (including those vested in Affiliates of Biologics) that may be infringed by the use by the Licensee of the rights licensed herein, and it is hereby agreed that it shall be the Licensee’s responsibility to satisfy itself as to the need for such

licences and if necessary to obtain such li