RESEARCH, LICENSE AND COMMERCIALIZATION AGREEMENT

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Exhibit 10.11

         Execution version

Confidential Treatment Requested. Confidential portions of this document have
been redacted and have been separately filed with the Commission.

RESEARCH, LICENSE AND COMMERCIALIZATION AGREEMENT

between

GLAXO GROUP LIMITED

and

VERTEX PHARMACEUTICALS INCORPORATED

CONFIDENTIAL TREATMENT REQUESTED

Execution version

RESEARCH, LICENSE AND
COMMERCIALIZATION AGREEMENT

        This RESEARCH, LICENSE AND COMMERCIALIZATION AGREEMENT (this "Agreement") is effective as of December 12, 2005, (the "Effective Date") and is entered into by and between Glaxo Group Limited, a corporation organized under the laws of England, with offices at Glaxo Wellcome House, Berkeley Avenue, Greenford, Middlesex, UB6 0NN, United Kingdom ("GSK"), and Vertex Pharmaceuticals Incorporated, a Massachusetts corporation with corporate offices at 130 Waverly Street, Cambridge, MA 02139-4242, United States of America ("Vertex").

Background:

A.

GSK is interested in developing and commercializing drugs selectively targeting the [***] ion channel.

B.

Vertex has undertaken a broad drug discovery program relating to the [***] ion channel, and has exclusive rights to VX-409, a small-molecule [***] ion channel inhibitor. GSK desires to obtain a license to VX-409 and Vertex is willing to grant such a license, in each case on the terms set out in this Agreement.

C.

Vertex also has an ongoing Back-up Program directed toward the identification of one or more additional [***] ion channel inhibitors as back-ups to VX-409. Vertex is willing to provide GSK with rights to Back-up Compounds generated in that program, on the terms set out in this Agreement.

 

         NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE 1: DEFINITIONS

        Unless specifically set forth to the contrary herein, the following terms, whether used in the singular or plural, shall have the respective meanings set forth below.

1.1

"Affiliate" shall mean, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under direct or indirect common control with, such Person. For purposes of this Section 1.1, the term "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Control of any Person by another Person will be presumed if fifty percent (50%) or more of the securities or other ownership interests representing the equity, the voting stock or general partnership interest of the first Person are owned, controlled or held, directly or indirectly, by the other Person, or by an Affiliate of the other Person.

1.2

"Back-up Compound" means a Compound other than VX-409 that will be the subject of the Back-up Program, all of which are identified in Schedule 1.2 hereto.

1.3

"Back-up Program" means the research activities undertaken by Vertex relative to the Back-up Compounds as set forth in Article 2.

1.4

"Back-up Program Term" means the period commencing on the Effective Date and ending on December 31, 2005, or such other date as may be agreed by the Parties pursuant to Section 2.2.

1.5

"Calendar Year" means each successive period of twelve (12) months commencing on January 1 and ending on December 31.

1.6

"Change of Control" means a transaction or series of related transactions that results in (a) the holders of outstanding voting securities of a Party immediately prior to such transaction ceasing to represent at least fifty percent (50%) of the combined outstanding voting power of the surviving entity immediately after such transaction; (b) any Third Party (other than a trustee or other

fiduciary holding securities under an employee benefit plan) becoming the beneficial owner of fifty percent (50%) or more of the combined voting power of the outstanding securities of a Party; or (c) a sale or other disposition to a Third Party of all or substantially all of a Party's assets or business.

1.7

"Clinical Trial" means a Phase I Clinical Trial, a Phase IIa Clinical Trial, a Phase IIb Clinical Trial or a Phase III Clinical Trial.

1.8

"Combination Product" means a single product that includes one or more therapeutically active ingredients other than a Product Candidate or a Product, in combination with a Product Candidate or Product. All references to Product in this Agreement shall be deemed to include a Combination Product unless otherwise specifically noted.

1.9

"Commercial Failure or Technical Failure" means the suspension or discontinuation of the development or commercialization of a Product Candidate or Product, based on the good faith determination by GSK that development or commercialization of that Product Candidate or Product is no longer commercially reasonable, [***].

1.10

"Commercial Milestone Payment" means a payment required under the provisions of Section 8.5 hereof.

1.11

"Commercially Reasonable Efforts" means efforts and resources, with respect to a particular Party, and with respect to a referenced Product Candidate or Product, that are comparable to those generally used by that Party in the exercise of its reasonable business judgment relating to other prescription pharmaceutical products owned or licensed by it or to which it has exclusive rights, which have market potential and are at a stage of development or product life similar to the referenced Product Candidate or Product, taking into account measures of relative safety and efficacy, product profile, the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the relative profitability of the products, and other relevant factors, including without limitation comparative technical, legal, scientific, and/or medical factors.

1.12.

"Competing Product" shall mean a small molecule chemical compound (other than a Product Candidate or Product) that is either being marketed or is in clinical development [***].

1.13

"Compound" means each of (1) VX-409, (2) the Back-up Compounds and (3) any compounds included in this Agreement as provided in Sections 2.9(b) and 2.9(c), in each case including with respect to any such compound, all of its prodrugs and metabolites, its stereo-isomers and tautomers, and all of its and their esters, salts, hydrates, solvates and polymorphs.

1.14

"Control" or "Controlled by" means the ownership or other legal authority or right of a Party to grant a license or sublicense of intellectual property to another Party without breaching the terms of any agreement with a Third Party, infringing the intellectual property rights of a Third Party, or misappropriating the proprietary or trade secret information of a Third Party.

1.15

"Development Candidate Criteria" means the criteria set out in Schedule 1.15 , as such criteria may subsequently be revised by the Parties as an amendment to this Agreement.

1.16

"Development Milestone Event" is defined in Section 8.4.

1.17

"Development Milestone Payment" is defined in Section 8.4.

1.18

"Development Plan" is described in Section 3.4.1.

1.19

"Development Program" means all activities associated with the clinical and nonclinical development, testing, manufacture and Regulatory Approval of Product Candidates and Products pursuant to a Development Plan.

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

2

1.20

"Exclusivity Period" means the [***] period commencing on the day following the end of the Back-up Program Term.

1.21

"FDA" means the United States Food and Drug Administration, or any successor U.S. governmental agency that is responsible for approving the sale of pharmaceuticals in the United States.

1.22

"Field" means all human therapeutic, prophylactic and diagnostic uses of Product Candidates and Products.

1.23

"Filing" of an NDA means the acceptance of the NDA filing by a Regulatory Authority.

1.24

"Final Back-up Report" is defined in Section 2.5.

1.25

"First Commercial Sale" means, with respect to any Product, the first sale of that Product in a country of the Territory for use or consumption by the general public in such country (rather than, e.g. , in so-called "Phase IV" clinical trials) after Marketing Authorization for such Product has been obtained in such country. For the avoidance of doubt, sales prior to receipt of all marketing approvals necessary to commence regular commercial sales, such as so-called "treatment IND sales", "named patient sales" and "compassionate use sales", shall not be construed as a First Commercial Sale. Such sales shall however constitute Net Sales.

1.26

"GMP" means current good manufacturing practices as required by the FDA under the provisions of 21 C.F.R. parts 210 and 211 (as the same may be amended) and all applicable FDA rules, regulations, orders and guidances.

1.27

"GSK Information and Inventions" means all discoveries, Improvements, processes, methods, protocols, formulas, data, Inventions, know-how and trade secrets, patentable or otherwise, Controlled by GSK or its Affiliates and discovered, created or developed by employees of GSK, or by other persons not employed or retained by Vertex and acting on behalf of GSK, directly related to the research, development, utilization, manufacture or sale of Product Candidates or Products.

1.28

"Improvement" means any enhancement, whether or not patentable, in the formulation, preparation, presentation, means of delivery, or dosage of a Product Candidate or Product, that is discovered or developed by Vertex during the Back-up Program Term, or by GSK or its Related Parties in connection with any activities conducted under this Agreement, relative to a Product Candidate or Product.

1.29

"Indication" means a separate and distinct disease or medical condition in humans (i) that a Product Candidate which is in Clinical Trial(s) is being evaluated to treat or prevent, or (ii) for which a Product has received Marketing Authorization, meaning that the disease or medical condition is contained in the Product's labeling as part of the Marketing Authorization for such Product. [***].

1.30

"Information" means any and all information and data, including all scientific, pre-clinical, clinical, regulatory, manufacturing, marketing, financial and commercial information or data, whether communicated in writing, electronically or orally or by any other method, which is provided by one Party to the other Party in connection with this Agreement.

1.31

"Initiation" means, with respect to a particular Clinical Trial, the administration of the first dose of a Product Candidate or Product to a human in that Clinical Trial.

1.32

"Invention" means any process, method, use, composition of matter, article of manufacture, discovery or finding that is conceived and/or reduced to practice (whether or not patentable) (i) in the course of the Back-up Program, or (ii) during the Development Program with respect to activities conducted under this Agreement, relating to a particular Product Candidate or Product.

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

3

1.33

"Joint Development Team" and "JDT" are defined in Section 3.3.

1.34

"Joint Information and Inventions" means all Information, Improvements and Inventions created, developed or invented jointly by employees of GSK and Vertex, or by others acting on behalf of GSK and Vertex, in the course of activities undertaken under this Agreement.

1.35

"Joint Patent Rights" means all national, regional and international patents and patent applications, certificates of invention and applications for certificates of invention, including divisions, continuations, continuations-in-part, additions, reissues, renewals, extensions, substitutions, re-examinations or restorations, registrations and revalidations, and supplementary protection certificates or the like or any of the foregoing and all foreign equivalents thereof, that, when granted, recite a claim directed to Joint Information and Inventions.

1.36

"Joint Steering Committee" and "JSC" are defined in Section 3.2.

1.37

"Know-How" means Vertex Know-How.

1.38

"Lead Compound" means, at any time, that Product Candidate that is in the most advanced stage of development. VX-409 is the Lead Compound as of the Effective Date. If at any time there is no Product Candidate in development, then the Lead Compound shall mean the next Product Candidate selected for development.

1.39

"Major Market Country" shall mean any one of the following countries: [***].

1.40

"Marketing Authorization" means all approvals from the relevant Regulatory Authority necessary to market and sell a Product in a particular country for the prevention or treatment of any one or more Indications. For countries where governmental approval is required for pricing or reimbursement for the Product, "Marketing Authorization" shall not be deemed to occur until such pricing or reimbursement approval is obtained.

1.41

"[***] Ion Channel" means [***].

1.42

"NDA" means a New Drug Application, Worldwide Marketing Application, Marketing Application Authorization, or similar application or submission for Marketing Authorization of a Product, that is filed with a Regulatory Authority to obtain marketing approval for a pharmaceutical product in a particular country or group of countries.

1.43

"Net Sales" means the gross amount billed or invoiced by GSK or its Related Parties on arms-length sales of a Product to a Third Party, less Permitted Deductions. "Permitted Deductions" includes only the following, and, with the exception of (vii) below, only to the extent specifically related to the gross amount billed or invoiced:

(i)

customary transportation charges relating to the Product, including handling charge and insurance premium relating thereto;

(ii)

sales taxes, excise taxes and duties paid by and not refunded to the selling Party and directly related to sale of the Product, and any other equivalent governmental charges imposed upon the importation, use or sale of the Product, but excluding income and similar taxes;

(iii)

government-mandated and other rebates (such as those in respect of any state or federal Medicare, Medicaid or similar programs);

(iv)

customary trade, quantity and cash discounts allowed on Product;

(v)

allowances or credits to customers on account of retrospective price reductions affecting Product;

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

4

(vi)

customary Product rebates and Product charge backs including those customarily granted to managed care entities; and

[***]

[***]

1.44

"Party" means GSK or Vertex, and "Parties" means GSK and Vertex.

1.45

"Person" means any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof.

1.46

"Phase I Clinical Trial" means a human clinical trial for a Product Candidate or Product, in any country, that would satisfy the requirements of 21 CFR §312.21(a).

1.47

"Phase IIa Clinical Trial" means a human clinical trial in any country that would satisfy the requirements of 21 CFR §312.21(b) and is intended to explore a variety of doses, dose response, and duration of effect, and to generate initial evidence of clinical activity and safety, for a Product Candidate or Product in the target patient population.

1.48

"Phase IIb Clinical Trial" means a human clinical trial in any country that would satisfy the requirements of 21 CFR §312.21(b), and is a controlled dose-ranging study designed to further evaluate the efficacy and safety of a Product Candidate or Product in the target patient population, beyond the scope of any initial Phase II evaluation.

1.49

"Phase III Clinical Trial" means a human clinical trial, performed after preliminary evidence suggesting effectiveness of the Product Candidate or Product has been obtained, conducted for inclusion in (i) that portion of the FDA submission and approval process which provides for the continued trials of a Product Candidate on sufficient numbers of human patients to confirm with statistical significance the safety and efficacy of a Product sufficient to support Marketing Authorization in the proposed Indication, as more fully defined in 21 CFR §312.21(c), or (ii) equivalent Regulatory Agency submissions with similar requirements in a country other than the United States.

1.50

"Product" means any pharmaceutical preparation in final form containing a Product Candidate, for sale by prescription, over-the-counter or any other method, and including without limitation any Combination Product. For purposes of the definition of "Net Sales" hereunder, a "Product" shall include a Compound being used for any human therapeutic, prophylactic or diagnostic purposes.

1.51

"Product Candidate" means a Compound which GSK has the rights, pursuant to Section 2, to include within the Development Program. For the avoidance of doubt, VX-409 shall be deemed to be a Product Candidate.

1.52

"Region" means any one of (a) the United States of America, its territories and/or possessions, and Canada (the "North American Region"); (b) Europe (the "European Region," being the current member countries of the European Union and any additional member countries of the European Union or any successor to the European Union at the relevant date); or (c) Japan.

1.53

"Regulatory Approval" means, with respect to any country or region, all authorizations by the appropriate governmental entity or entities necessary for commercial sale of a Product in that country or region (not including pricing or reimbursement approval). "Regulatory Approval" in the United States shall mean final approval of a new drug application pursuant to 21 CFR §314 (or any successor regulation having the same purpose or effect), permitting marketing of a Product in interstate commerce in the United States. "Regulatory Approval" in the European Union shall mean final approval of a Marketing Authorization Application ("MAA") pursuant to Council

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

5

Directive 75/319/EEC, as amended, or Council Regulation 2309/93/EEC, as amended, or pursuant to any successor regulation having the same purpose or effect.

1.54

"Regulatory Authority" shall mean any applicable government regulatory authority involved in granting approvals for the manufacturing, marketing and sale of a Product in the Territory, including, in the United States, the United States Food and Drug Administration, and any successor governmental authority having substantially the same function.

1.55

"Related Party" shall mean each of GSK's Affiliates and permitted sublicensees.

1.56

"Selectivity Assay" shall mean

[***].

1.57

"Specifications" means the specifications for supplies of VX-409 to be provided pursuant to Section 5.2, as agreed and detailed on Schedule 1.57.

1.58

"Territory" means all of the countries in the world, and their territories and possessions.

1.59

"Third Party" means an entity other than GSK and its Related Parties, and Vertex and its Affiliates.

1.60

"Unit Direct Cost of Goods" is defined on Schedule 1.60.

1.61

"U.S." and "United States" and "United States of America" shall mean the United States of America and its territories and possessions.

1.62

"Valid Patent Claim" means a claim of an issued and unexpired patent included within the Vertex Patent Rights which (a) claims a Product as a composition of matter, or the formulation, method of manufacture or use of the Product and (b) has not been revoked or held unenforceable, unpatentable or invalid by a decision of a court or other governmental agency of competent jurisdiction (which decision is not appealable or has not been appealed within the time allowed for appeal), nor has been disclaimed, denied or admitted to be invalid or unenforceable through reissue, re-examination or disclaimer or otherwise.

1.63

"Valid Safety Issue" is defined in Section 11.2.

1.64

"Vertex Information and Inventions" shall mean all Vertex Know-How and all other discoveries, Improvements, processes, methods, protocols, formulas, data, Inventions and trade secrets, patentable or otherwise, discovered, created or developed, and Controlled by Vertex or its Affiliates as of the Effective Date or generated by Vertex or its Affiliates in the course of Vertex's performance of the Back-up Program under this Agreement, and related to the research, development, utilization, manufacture or sale of any Product Candidate or Product. Notwithstanding the foregoing, the term "Vertex Information and Inventions" shall not apply to Vertex's general drug design technology whether in hardware or software form, tangible or intangible.

1.65

"Vertex Know-How " means all information and materials, including discoveries, Improvements, processes, methods, protocols, formulas, data, inventions and trade secrets, patentable or otherwise, that do not fall within the Vertex Patent Rights and that are Controlled by Vertex or its Affiliates as of the Effective Date or are discovered, developed, used or applied by Vertex or its Affiliates in the course of Vertex's performance of the Back-up Program, and which are useful in the research, development, utilization, manufacture or sale of any Product Candidate or Product; provided, however, that the term "Vertex Know-How" shall not apply to Vertex's general drug design technology whether in hardware or software form, tangible or intangible, including its e-VIPR technology.

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

6

1.66

"Vertex Patent Rights" means all patents and patent applications that are Controlled by Vertex on the Effective Date or during the Back-up Program Term (or, with respect only to any Compounds which fall under this Agreement by reason of Sections 2.9(b) or 2.9(c), during the Exclusivity Period) which generically or specifically claim (i) a Compound, a Product Candidate or a Product; (ii) a process for manufacturing a Compound, a Product Candidate or a Product, or an intermediate used in such process; or (iii) a use of a Compound, a Product Candidate or a Product. Included within the definition of Vertex Patent Rights are all continuations, continuations-in-part, divisions, patents of addition, reissues, renewals or extensions, substitutions, re-examinations or restorations, registrations and revalidations thereof, and all supplementary protection certificates and the like. The current list of patent applications and patents encompassed within Vertex Patent Rights is set forth on Schedule 1.66 attached hereto.

1.67

"VX-409" means the chemical compound, referred to by Vertex as VX-409, having the chemical structure referenced on Schedule 1.67.

ARTICLE 2: BACK-UP PROGRAM

2.1

Back-up Program—General. Vertex will, at its own cost, engage in the Back-up Program upon the terms set out in this Agreement. Vertex's objective in conducting the Back-up Program is to produce, by the end of the Back-up Program Term, Back-up Compounds which meet the Development Candidate Criteria. GSK shall have the exclusive option (as further defined within this Article 2), in its sole discretion, to develop and commercialize each Back-up Compound.

2.2

Back-up Program Term. The initial term of the Back-up Program shall be the period commencing on the Effective Date and ending on December 31, 2005. At any time during the initial period of the Back-up Program, the Parties may mutually agree to extend the Back-up Program beyond the initial period for an additional period not to exceed six (6) months. Any such extension shall only be deemed to be agreed when documented by a written instrument duly executed by authorized representatives of both Parties.

2.3

Conduct of Back-up Program. Vertex shall use Commercially Reasonable Efforts to conduct the Back-up Program in a manner to achieve the objectives of the Back-up Program efficiently and expeditiously. Vertex will conduct the Back-up Program in good scientific manner, and in compliance in all respects with all requirements of applicable laws, rules and regulations and all applicable good laboratory practices.

2.4

GSK Access during Back-up Program. Immediately following the Effective Date, Vertex shall provide GSK with full details of the chemical structures of each of the Back-up Compounds and samples of the Back-up Compounds (if Vertex determines that such quantities are available) to enable GSK to undertake initial evaluation of the Back-up Compounds.

2.5

Final Back-up Report. On or before the end of the Back-up Program Term, Vertex will provide GSK with a final report (the "Final Back-up Report") detailing for each of the Back-up Compounds the data generated in respect of each of the Development Candidate Criteria, and further containing all information and data known to Vertex concerning each of the Back-up Compounds, together with a statement of Vertex's opinion whether any Back-up Compounds satisfy the Development Candidate Criteria as of the last day of the Back-up Program Term.

2.6

Product Candidates [***]. From and after the date of provision of the Final Back-up Report to GSK, each of the Back-up Compounds shall be deemed Product Candidates. [*** ]

2.7

Disputes as to whether the Development Candidate Criteria have been met. GSK shall notify Vertex within [***] after receipt of the Final Back-up Report if GSK disputes whether any

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

7

Back-up Compound satisfies the Development Candidate Criteria (a "Disputed Back-up Compound"), and at such time shall explain why it has given such notification. Within [***] following such notification, the Joint Steering Committee shall meet to consider whether any such Disputed Back-up Compound has met the Development Candidate Criteria.

(a)

[***]

(b)

[***]

(c)

If the Joint Steering Committee is unable to agree on whether the Disputed Back-up Compound has been shown to satisfy the Development Candidate Criteria, the issue shall be referred to the Chief Executive Officer of Vertex (or to the Head of Research or to the Head of Development, as the CEO of Vertex shall determine) and to the Chairman of R&D of GSK (or to such other senior manager of GSK as the Chairman of R&D of GSK shall determine), who shall, as soon as practicable, attempt in good faith to resolve the dispute. If they are unable to resolve the dispute within [***] of referral, the dispute will be referred to an independent expert who will be appointed by agreement of the Parties. The expert shall act as an expert and not an arbitrator and his or her decision shall be final and binding on the Parties. The Parties will comply with any procedure established by the expert for making his or her decision and the expert's costs shall be paid by the party against whom the expert rules. Sections 2.7(a) or (b), as appropriate, shall apply depending on whether the expert determines that the Back-up Compound satisfies the Development Candidate Criteria.

2.8

Back-up Program Information and Inventions. The entire right, title and interest in:

2.8.1

Vertex Information and Inventions and Vertex Patent Rights discovered or developed during the Back-up Program shall be owned solely by Vertex.

2.8.2

Joint Information and Inventions and Joint Patent Rights discovered or developed during the Back-up Program shall be owned jointly by Vertex and GSK. Except as expressly provided in this Agreement, each joint owner may make, use, sell, keep, license, assign, or mortgage such jointly owned inventions, discoveries and know-how, and otherwise undertake all activities a sole owner might undertake (other than assigning or transferring exclusive rights in or exclusive ownership of any such Joint Information and Inventions and Joint Patent Rights), with respect to such inventions, discoveries and know-how, without the consent of and without accounting to the other joint owner.

2.8.3

GSK Information and Inventions discovered or developed during the Back-up Program shall be owned solely by GSK.

Inventorship will be determined in accordance with the United States laws of inventorship.

2.9

Exclusive Efforts.

(a)

During the Exclusivity Period, Vertex and GSK agree that they and their Affiliates will develop (i) Compounds; [***] , exclusively pursuant to the terms of this Agreement, including, but not limited to, Sections 2.9(b) and 2.9(c).

(b)

In the event that during the Exclusivity Period, either Party commences clinical development of any compounds, other than VX-409 or the Back-up Compounds, that fall within the provisions of Section 2.9(a)(ii) above, such compounds shall automatically be deemed Compounds under this Agreement and all of the provisions of this Agreement shall thereafter apply to those compounds as if they were originally Compounds hereunder, irrespective of whether they were invented by Vertex or GSK. With respect to any such Compounds Controlled by Vertex, the scope of the licenses granted pursuant to Sections 6.1.1, 6.1.2 and

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

8

6.1.6 shall automatically be extended to permit GSK to develop, make, have made, use, offer to sell, sell or import such compounds. With respect to any such Compounds Controlled by GSK, the license referenced in Section 11.5(c) shall become applicable to such Compounds under the circumstances outlined in Section 11.5. Any decision as to whether any such additional compound should be developed as a Product Candidate shall be made by the JSC.

(c)

In the event that one or more Back-up Compounds does not meet the Development Candidate Criteria at the end of the Back-up Program, during the Exclusivity Period [***]. GSK shall be entitled during the Exclusivity Period to research and develop such Alternate Compounds with the objective of producing Alternate Compounds meeting the Development Candidate Criteria which could be developed as Product Candidates and Products. [***]. The intellectual property embodied in any Alternate Compound shall belong to Vertex, but may become subject to the licenses provided to GSK hereunder if the compound is substituted for one of the existing Compounds during the Exclusivity Period in accordance with the following paragraph. GSK will inform Vertex of any [***] directed at producing Alternate Compounds, and will provide to Vertex, as soon as practicable, any chemical or biological information generated with respect to any such Alternate Compound. The objective of any modification will be to produce Alternate Compounds meeting the Development Candidate Criteria which could be developed as Product Candidates and Products.

At any time during the Exclusivity Period, by giving written notice to Vertex, GSK may substitute, one-for-one, one or more of the Alternate Compounds which meet the Development Candidate Criteria for VX-409 or any of the Back-up Compounds. From the date of provision of written notice, each substituted Alternate Compound shall be deemed a Compound under this Agreement, and the Compound for which that Alternate Compound was substituted (a "Substituted Compound," being either VX-409 or a Back-up Compound) shall no longer be considered a Compound under this Agreement. The licenses granted under Sections 6.1.1, 6.1.2 and 6.1.3 hereof shall no longer apply to any such Substituted Compound.

ARTICLE 3: DEVELOPMENT

3.1

Commencement of Development Program. GSK shall use Commercially Reasonable Efforts to pursue a Development Program with respect to the Product Candidates in accordance with the provisions of this Agreement. The Development Program shall proceed in accordance with a Development Plan that provides for development of one or more Product Candidates or Products in the Territory. An initial summary Development Plan, currently focused on VX-409, is attached to this Agreement as Schedule 3.1. A completed Development Plan, as described in Section 3.4.1, shall be prepared by GSK and reviewed by the JSC, within [***] after the Effective Date (or such longer period as mutually agreed), and shall be modified and updated by GSK on a regular basis, with input from the JSC and the JDT as provided below.

3.2

Joint Steering Committee. Promptly after the Effective Date, the Parties will establish a Joint Steering Committee (the "Joint Steering Committee" or "JSC"), as more fully described in this Section 3.2, to review and oversee all research, development, manufacture and commercialization activities being conducted by the Parties under this Agreement, including the Back-up Program; provided, however, that the Joint Steering Committee shall have no authority to amend this Agreement. Each Party agrees to keep the Joint Steering Committee reasonably informed of its progress and activities performed under this Agreement.

3.2.1

Membership. The Joint Steering Committee shall be comprised of [***].

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

9

Each Party shall provide the other with a list of its initial members of the Joint Steering Committee within [***] after the Effective Date. Notwithstanding that each Party shall use all reasonable endeavors to maintain the continuity of its representation, each Party may replace or substitute any or all of its representatives and/or appoint a proxy at any time. Each Party may, in its reasonable discretion, invite non-member representatives of such Party to attend meetings of the Joint Steering Committee.

[***]

A meeting shall be quorate (i.e. deemed to have formed a quorum) if [***]. If there are fewer than [***].

3.2.2

Chair. The chair of the Joint Steering Committee shall be designated by GSK.

3.2.3

Meetings. During the Term, the Joint Steering Committee shall meet at least [***] and as otherwise agreed by the Parties, on such dates, and at such places and times, as provided herein or as the Parties shall agree. Meetings of the Joint Steering Committee that are held in person shall alternate between the offices of the Parties, or such other place as the Parties may agree.

3.2.4

Minutes. The chair of the Joint Steering Committee shall be responsible for scheduling each meeting, and issuing appropriate minutes of each meeting of the Joint Steering Committee within [***] of the date of such meeting. The minutes shall be considered as accepted if, within [***] from receipt, no one has objected in a traceable form to the chair.

3.2.5

Responsibilities. The JSC shall oversee the collaborative relationship between GSK and Vertex. To that end, the JSC shall also be responsible, without limitation, for the following:

(a)

coordination and review of Back-up Program activities and interactions between GSK and Vertex;

(b)

review of the Final Back-up Report from Vertex;

(c)

oversight of all development activities; all process development and manufacturing activities undertaken with respect to any Product Candidate or Product hereunder; core commercial activities to be undertaken by GSK; and all other activities contemplated under this Agreement related to the development, manufacture and commercialization of Product Candidates and Products;

(d)

ensuring the exchange of relevant information and materials relating to each activity undertaken or contemplated under this Agreement;

(e)

such other responsibilities as may be assigned to the Joint Steering Committee pursuant to this Agreement or as may be mutually agreed upon by the Parties in writing from time to time.

3.2.6

Decision Making.[***] The members of the JSC will attempt in good faith to reach consensus on all matters brought before the JSC. If agreement cannot be reached after a good faith discussion among the members of the JSC, [***].

3.2.7

Alternatives to meeting. Any decision required or permitted to be taken by the Joint Steering Committee may be taken without a meeting in person taking place, if a consent in writing, setting forth the decision so taken, is signed by all designated members of the JSC.

3.2.8

Expenses. Each Party will be responsible for its representatives' expenses incurred in attending meetings of the JSC.

3.2.9

Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual(s) to act as the alliance manager(s) for such Party (the "Alliance Managers"). Each Alliance Manager

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

10

who is not otherwise a member of the JSC shall thereafter be permitted to attend meetings of the Joint Steering Committee. The Alliance Managers shall be the primary point of contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate all such activities hereunder.

3.3

Joint Development Team. Promptly after the Effective Date, the JSC will establish a Joint Development Team ("JDT"), which shall include, at Vertex's option, [***].

During the course of the Development Program, GSK shall provide the JDT (or Vertex, if Vertex has no representative on the JDT or the JSC) at least every [***] with the planning information listed under "Development" and "CMC" on Schedule 3.3, in GKS's standard format, as and when that information is generated and becomes available within GSK, updated to reflect ongoing activities. GSK will also provide summaries of results of all non-clinical and clinical trials. One purpose of the information is to allow the JDT (or Vertex) to review the progress and anticipated direction of the Development Program, propose amendments, where appropriate, to the Development Plan and provide comments for consideration regarding the future direction of the Development Program. Consequently information will be supplied to the JDT (or Vertex) at a time sufficiently prior to finalization of each Development Plan to accommodate any suggestions and comments by Vertex which are deemed by GSK, in its sole discretion, to be worth incorporating in the planning process for each Product Candidate and Product.

Following any Product Candidate entering into Phase III Clinical Trials, GSK shall provide the JDT at least every [***] with the planning information listed under "Commercialization" on Schedule 3.3, in GSK's standard format, as and when that information is generated and becomes available within GSK, updated to reflect ongoing activities, so that the JDT can review the preparation and implementation of the Global Marketing Plan and where appropriate propose for consideration amendments to it.

For the avoidance of doubt, the JDT shall act in an advisory capacity only and shall have no authority to require any amendments to either the Development Plan or the Global Marketing Plan.

During the Term, the Joint Development Team shall meet quarterly, or as otherwise agreed by the Parties, either in person or by teleconference or by videoconference, on such dates and at times as the Parties shall agree. Meetings of the JDT that are held in person shall alternate between the offices of the Parties, or such other places as the Parties may agree. Each party will be responsible for its representatives' expenses incurred in attending meetings of the JDT.

If at any time, Vertex is not represented at any JDT meeting by at least [***]. GSK may thereafter suspend all meetings of the JDT until such time as Vertex notifies GSK of its intent to ensure representation at future JDT meetings.

3.4

Development.

3.4.1

Development Plan. Subject to the terms of this Agreement, GSK shall promptly prepare and oversee the implementation of an overall Development Plan for the Product Candidates. The Development Plan shall have as a principal objective the development of one or more Product Candidates for commercialization in each Region in the Territory. The Development Plan shall be presented promptly to the JDT and then the JSC, and shall be supplemented, modified and updated regularly by GSK as and when additional relevant data and information become available during the course of the Development Program (but in any event not less frequently than annually). Any such significant supplements, modifications or updates shall be promptly reported to the JDT and then to the JSC. The Development Plan shall, among other things, detail, schedule and fully describe the proposed toxicology and other nonclinical studies, Clinical Trials, regulatory

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

11

plans, manufacturing plans and material requirements and annual budget, and will outline the key elements involved in obtaining Regulatory Approval in each Region in the Territory.

3.4.2

Development Responsibility and Costs. GSK shall have sole responsibility for, and bear the cost of implementing, the Development Program and the Development Plan.

3.4.3

Regulatory Approvals. GSK shall be solely responsible for preparing and submitting registration dossiers for Regulatory Approval of Products and Product Candidates in the Territory. All Regulatory Approvals shall be held by and in the name of GSK, and GSK shall own all submissions in connection therewith. GSK shall have sole discretion as to the regulatory strategy and decision making for any Product Candidate or Product; provided, however, that GSK shall provide Vertex with an opportunity to review GSK's general regulatory strategy at the JSC and JDT.

3.5

Due Diligence. GSK shall use Commercially Reasonable Efforts to develop Product Candidates and Products in accordance with the provisions of the Development Plan, which shall be directed toward obtaining Regulatory Approval for commercial sale of one or more Products in each Region in the Territory. GSK will promptly notify Vertex through the JSC if it should determine that continued development of a Product Candidate or Product is not technically feasible or commercially reasonable, or if it determines that the continued development of a Product Candidate or Product should be suspended for a period of time, specifying the reasons for its decision or determination.

3.6

Reporting. During the Development Program GSK shall, at least every [***] , inform Vertex about the status of the Development Program, and will keep Vertex currently advised as and when any Development Milestone Events, in respect of which payments become due pursuant to Section 8.4, are achieved. For the avoidance of doubt, the obligation hereunder to inform Vertex about the status of the Development Program shall be deemed met if Vertex is attending the JDT during the relevant period, and GSK has met its obligations under Section 3.3.

ARTICLE 4: COMMERCIALIZATION

4.1

Marketing and Promotion. GSK shall have the exclusive right to market, sell and distribute all Products in the Territory (which may include sublicensing marketing rights as set forth in Section 6.2 below) subject to the other provisions of this Article 4. GSK shall bear all costs associated with marketing, sale and distribution of Products.

4.2

Global Marketing Plan. GSK shall have sole responsibility for the preparation and implementation of the Global Marketing Plan for Product Candidates and Products. GSK shall inform Vertex, through the JSC and JDT, about the status of the Global Marketing Plan (including product launches in the USA, Japan and the Major Market Countries) taking in good faith any comments made by Vertex at the JSC and JDT. For the avoidance of doubt, the obligation hereunder to inform Vertex about the status of the Global Marketing Plan shall be deemed met if Vertex is attending the JDT during the relevant period, and GSK has met its obligations under Section 3.3.

4.3

Due Diligence. GSK shall use Commercially Reasonable Efforts to commercialize one or more Products in each Region in the Territory in accordance with the provisions of the Global Marketing Plan. GSK will promptly notify Vertex if it should determine that commercialization of a Product is not technically feasible or commercially reasonable in any particular Region, specifying in detail the reasons for its decision or determination.

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

12

ARTICLE 5: MANUFACTURING AND SUPPLY

5.1

Clinical and Commercial Supply. GSK shall be responsible, at its sole expense, for manufacture and supply of all Product Candidates and Products hereunder for all purposes.

5.2

Purchase of Inventory.

(a)

As soon as reasonably practicable following the Effective Date, and in any event before December 31, 2005, Vertex shall deliver FCA Facility (IncoTerms 2000) to a carrier designated by GSK all of its existing inventory of VX-409 bulk drug substance that in Vertex's opinion meets the Specifications (the "Transferring Inventory"). GSK shall accept and pay for all of such Transferring Inventory which meets the Specifications, has been manufactured to GMP standards, as documented by a corresponding Certificate of Analysis in accordance with ICH Guidance Q7A, Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, and meets the requirements of ICH Guidance Q3C (together, "the Necessary Standard"). GSK shall have no obligation to pay for any inventory which does not meet the Necessary Standard as set out in this Section 5.2(a), though it may, in its sole discretion, waive the requirement to meet the Necessary Standard in respect of all or part of the Transferring Inventory. At Vertex's request GSK shall return to Vertex any inventory that it does not accept, FCA Facility (IncoTerms 2000) to a carrier designated by Vertex.

(b)

Within [***] of receipt of the Transferring Inventory GSK shall notify Vertex if GSK does not accept that all of the Transferring Inventory meets the Necessary Standard. Failure to provide such notification shall be deemed acceptance of the Transferring Inventory. In the event that the Parties disagree as to whether or how much of the Transferring Inventory meets the Necessary Standard, such dispute shall be resolved pursuant to Section 12.7.

(c)

The price payable by GSK for the Transferring Inventory shall be an amount equal to Vertex's Manufacturing Cost multiplied by the percentage of Transferring Inventory which meets the Necessary Standard or has otherwise been accepted by GSK, payable within [***] after receipt of an invoice by GSK detailing the Transferring Inventory and Vertex's Manufacturing Cost. For purposes of this section, "Vertex's Manufacturing Cost" means the [***]. The volume of Transferring Inventory and an estimate of Vertex's Manufacturing Cost thereof is set forth in Schedule 5.2 to this Agreement.

5.3

Technology Transfer. On or before December 31, 2005, Vertex at its own cost shall transfer (or cause to be transferred) to GSK all information and materials Controlled by Vertex (including information from any relevant Third Party contract manufacturer) relating to VX-409 and the Back-up Compounds and/or necessary for the conduct of the Development Program, including any applicable Vertex Know-How and any relevant information and materials listed in Schedule 5.3. Vertex will further provide such technical assistance as GSK may reasonably require in order to effect such technology transfer.

5.4

Use of Vertex Logo. Where not prohibited by law or regulation, and subject to any required Regulatory Approval, which GSK shall use reasonable efforts to obtain, Vertex's name and logo will be carried on all Product packaging, packaging inserts, labels, and containers, and on all printed, electronic and digital material related thereto, with a prominence substantially equivalent to that of GSK's name and logo.

ARTICLE 6: LICENSES; EXCHANGE OF INFORMATION

6.1

License Grants.

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

13

6.1.1

Vertex hereby grants to GSK an exclusive license (even as to Vertex) in the Territory in the Field under Vertex Patent Rights and Vertex's rights under Joint Patent Rights: (i) to discharge GSK's obligations and exercise its rights under this Agreement; and (ii) to make, have made, use, offer to sell, sell and import Product Candidates and Products.

6.1.2

Vertex hereby grants to GSK an exclusive license in the Territory in the Field under all Vertex Know-How insofar as it relates to Product Candidates and Products, solely to: (i) discharge GSK's obligations and exercise its rights under this Agreement; and (ii) make, have made, use, offer to sell, sell and import Product Candidates and Products.

6.1.3

Vertex hereby grants to GSK a sole license in the Territory in the Field under Vertex Patent Rights and all Vertex Know-How insofar as they relate to the Back-up Compounds to undertake research and development activities in relation to the Back-up Compounds during the Back-up Program Term.

6.1.4

Notwithstanding the foregoing, Vertex shall retain rights under the Vertex Patent Rights and the Joint Patent Rights to the extent necessary or useful for the Back-up Program Term, to discharge its obligations and exercise its rights under this Agreement.

6.1.5

GSK hereby grants to Vertex a fully-paid, non-exclusive license, without the right to sub-license, under all GSK Information and Inventions, and GSK's rights under the Joint Patent Rights for the sole purpose of the Back-up Program during the Back-up Program Term, to enable Vertex to discharge Vertex's obligations and exercise its rights under this Agreement. Such license shall terminate upon the termination of the Back-up Program Term and Vertex shall not use such GSK Information and Inventions for any reason whatsoever thereafter except as otherwise provided in this Agreement.

6.1.6

Vertex hereby grants to GSK a non-exclusive license under patents or patent applications Controlled by Vertex that do not constitute Vertex Patent Rights hereunder but which, in the absence of the license provided in this Section 6.1.6, would necessarily be infringed by GSK's practice of the licenses granted in Sections 6.1.1, 6.1.2 and 6.1.3, including but not limited to patents or patent applications encompassing claims to methods of use of any Compound. This non-exclusive license shall apply only to the exercise by GSK of its rights and the discharge by GSK of its obligations under this Agreement with respect to Product Candidates and Products.

6.2

Right to Sublicense. GSK shall have the right to grant sublicenses under the rights and licenses granted to it in this Article 6, provided that any such sublicense obliges the sublicensee to comply with all relevant terms of this Agreement and that GSK remains liable to Vertex for all material acts and omissions of any such sublicensee.

In addition, if GSK wishes to grant a sublicense to a Third Party of its development or commercialization rights in the [***] or in any of the Major Market Countries, [***].

6.3

No Implied Licenses. Except as specifically set forth in this Agreement, neither Party shall acquire any license or other intellectual property interest, by implication or otherwise, in any Information disclosed to it under this Agreement or under any patents or patent applications owned or Controlled by the other Party or its Affiliates.

ARTICLE 7: CONFIDENTIALITY AND PUBLICATION

7.1

Nondisclosure Obligation. All Information disclosed by one Party to the other Party shall be maintained in confidence by the receiving Party and shall not be disclosed to a Third Party or used

Information redacted pursuant to a confidential treatment request. An unredacted version of the
exhibit has been filed separately with the Commission.

14

for any purpose except as set forth herein without the prior written consent of the disclosing Party, except to the extent that such Information:

7.1.1

is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by the receiving Party's contemporaneous business records;

7.1.2

is in the public domain through no breach of this Agreement by the receiving Party;

7.1.3

is subsequently disclosed to the receiving Party by a Third Party who may lawfully do so and is not to the best of the receiving Party's knowledge under an obligation of confidentiality to the disclosing Party;

7.1.4

is developed by the receiving Party independently of Information received from the disclosing Party, as documented by the receiving Party's contemporaneous business records;

7.1.5

is disclosed to governmental or other regulatory agencies to comply with applicable law or regulations, provided the receiving Party provides to the disclosing Party prompt prior written notice of its obligation to make such disclosure and takes reasonable and lawful actions to avoid or minimize the degree of such disclosure; or

7.1.6

is deemed necessary by GSK in the reasonable exercise of its judgment to be disclosed to any Third Party, to the extent GSK deems necessary or advisable, in connection with the research and development, manufacturing and/or marketing of a Product or Product Candidate (or for such entities to determine their interest in performing such activities) in accordance with this Agreement, on the condition that any such Third Parties agree to be bound by confidentiality and non-use obligations that are no less stringent than those confidentiality and non-use provisions contained in this Agreement.

Any combination of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published or available to the general public or in the rightful possession of the receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the receiving Party.

If a Party is required by judicial or administrative process to disclose Information that is subject to the non-disclosure provisions of this Section 7.1, such Party shall promptly inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit the disclosure obligations. Information that is disclosed by judicial or administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Section 7.1, and the receiving Party shall co-operate with any reasonable attempts of the disclosing Party to limit such disclosure required by law, including without limitation by way of obtaining an order of confidentiality, to ensure the continued confidential treatment of such Information.

7.2

Publication.

(a)

GSK and Vertex each acknowledge the other Party's interest in publishing in a scientific journal or a scientific conference or through a similar medium the results of its research in order to obtain recognition within the scientific community and to advance the state of scientific knowledge. Each Party also recognizes the mutual interest in obtaining valid patent protection and in protecting business interests and trade secret information. Consequently, except for disc