Galena Biopharma, Inc. (Form: 10-Q, Received: 05/09/2013 16:37:48)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33958

Galena Biopharma, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-8099512

(State of incorporation)

(I.R.S. Employer

Identification No.)

310 N. State Street, Suite 208, Lake Oswego, OR 97034

(Address of principal executive office) (Zip code)

Registrant’s telephone number: (855) 855-4253

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on it corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ¨ Yes x No

As of May 2, 2013, Galena Biopharma, Inc. had outstanding 83,463,611 shares of common stock, $0.0001 par value per share, exclusive of treasury shares.

GALENA BIOPHARMA, INC.

FORM 10-Q — QUARTER ENDED MARCH 31, 2013

INDEX


Part No.	Item No.	Description	Page No.
I		FINANCIAL INFORMATION

	1	Financial Statements		2

		Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited) and December 31, 2012		2

		Condensed Consolidated Statements of Expenses for the three months ended March 31, 2013 and 2012 and for the period January 1, 2003 (date of inception) to March 31, 2013 (unaudited)		3

		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012 and for the period January 1, 2003 (date of inception) to March 31, 2013 (unaudited)		4

		Notes to Condensed Consolidated Financial Statements (unaudited)		6

	2	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

	3	Quantitative and Qualitative Disclosures About Market Risk		23

	4	Controls and Procedures		23

II		OTHER INFORMATION

	1	Legal Proceedings		24

	1A	Risk Factors		24

	2	Unregistered Sales of Equity Securities and Use of Proceeds		40

	3	Defaults Upon Senior Securities		41

	4	Mine Safety Disclosures		41

	5	Other Information		42

	6	Exhibits		42

Index to Exhibits				42

Signatures
EX-31.1
EX-31.2
EX-32.1

PART I

ITEM 1. FINANCIAL STATEMENTS

GALENA BIOPHARMA, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)


	March 31, 2013 (Unaudited)			December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents	$	17,481		$	32,807
Restricted cash		102			101
Marketable securities		9,709			2,678
Prepaid expenses		210			535


Total current assets		27,502			36,121


Equipment and furnishings, net		27			29
In-process research and development		12,864			12,864
Abstral rights		15,086			—
Goodwill		5,898			5,898
Deposits		74			74


Total assets	$	61,451		$	54,986


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,123		$	1,976
Accrued expense and other current liabilities		7,478			2,038
Current maturities of capital lease obligations		6			6
Fair value of warrants potentially settleable in cash		15,843			10,964
Current contingent purchase price consideration		929			935


Total current liabilities		26,379			15,919
Capital lease obligations, net of current maturities		51			51
Deferred tax liability, non-current		5,053			5,053
Contingent purchase price consideration, net of current portion		6,656			6,207


Total liabilities		38,139			27,230


Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.0001 par value; 125,000,000 shares authorized; 83,759,319 shares issued and 83,084,319 shares outstanding at March 31, 2013; 83,595,837 shares issued and 82,920,837 outstanding at December 31, 2012		8			8
Additional paid-in capital		132,748			132,168
Accumulated other comprehensive income		5,895			1,626
Deficit accumulated during the developmental stage		(111,490	)		(102,197	)
Less treasury shares at cost, 675,000 shares		(3,849	)		(3,849	)


Total stockholders’ equity		23,312			27,756


Total liabilities and stockholders’ equity	$	61,451		$	54,986

See accompanying notes to consolidated financial statements.

GALENA BIOPHARMA, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF EXPENSES AND COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share data)

(Unaudited)


	For the Three Months Ended March 31, 2013			For the Three Months Ended March 31, 2012			Period from January 1, 2003 (Date of Inception) to March 31, 2013
Expenses:
Research and development expense	$	4,968		$	2,423		$	23,978
Research and development employee stock-based compensation expense		91			34			603
Research and development non-employee stock-based compensation expense		22			207			6,291


Total research and development expense		5,081			2,664			30,872


General and administrative expense		1,279			1,269			34,044
General and administrative employee stock-based compensation expense		157			194			10,266
General and administrative non-employee stock-based compensation expense		94			283			3,550


Total general and administrative expense		1,530			1,746			47,820


Operating loss		(6,611	)		(4,410	)		(78,692	)


Other income (expense):

Interest income (expense), net		5			(16	)		594

Other expense		(5,449	)		(19,114	)		(6,535	)


Total other income (expense), net		(5,444	)		(19,130	)		(5,941	)


Pretax loss from continuing operations		(12,055	)		(23,540	)		(84,633	)

Income tax benefit		(2,762	)		—			(3,814	)


Loss from continuing operations		(9,293	)		(23,540	)		(80,819	)

Discontinued operations		—			(1,221	)		(40,712	)


Net loss	$	(9,293	)	$	(24,761	)	$	(121,351	)


Net loss per common share:
Basic and diluted loss per share, continuing operations	$	(0.11	)	$	(0.49	)


Basic and diluted loss per share, discontinued operations	$	—		$	(0.03	)


Basic and diluted net loss per share	$	(0.11	)	$	(0.52	)


Weighted average common shares outstanding: basic and diluted		83,002,323			47,967,499


Comprehensive loss
Net loss	$	(9,293	)	$	(24,761	)	$	(121,351	)
Unrealized gain on marketable securities, net of tax		4,269			—			5,895


Total comprehensive loss	$	(5,024	)	$	(24,761	)	$	(115,456	)

See accompanying notes to consolidated financial statements.

GALENA BIOPHARMA, INC.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)


	For the Three Months Ended March 31, 2013			For the Three Months Ended March 31, 2012			Period from January 1, 2003 (Date of Inception) through March 31, 2013
Cash flows from operating activities:
Net loss	$	(9,293	)	$	(24,761	)	$	(121,531	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		2			42			715
Loss on disposal of equipment		—			—			19
Deferred taxes		(2,762	)		—			(3,814	)
Non-cash rent expense		—			—			29
Accretion and receipt of bond discount		—			—			35
Non-cash stock-based compensation		248			427			20,500
Change in fair value of warrants potentially settleable in cash		—			—			(785	)
Fair value of common stock warrants issued in exchange for services		—			148			2,402
Fair value of common stock issued in exchange for services		116			185			834
Change in fair value of common stock warrants		5,003			18,270			4,606
Fair value of common stock issued in exchange for licensing rights		—			—			3,954
Change in fair value of contingent consideration		443			844			2,704
Changes in operating assets and liabilities:
Prepaid expenses and other assets		325			(14	)		(320	)
Accounts payable		147			426			2,012
Due to former parent		—			—			(207	)
Accrued expenses and other current liabilities		440			(452	)		3,775


Net cash used in operating activities		(5,331	)		(4,885	)		(85,072	)


Cash flows from investing activities:
Change in restricted cash		(1	)		—			(102	)
Cash paid for acquisition of Abstral rights		(10,086	)					(10,086	)
Cash received in NeuVax acquisition		—			—			168
Purchase of short-term investments		—			—			(37,532	)
Maturities of short-term investments		—			—			37,497
Cash paid for purchase of equipment and furnishings		—			—			(739	)
Disposal of equipment and furnishings		—			—			(1	)
Cash paid for lease deposit		—			—			(45	)
Cash transferred with the RXi spin-off		—			—			(87	)


Net cash used in investing activities		(10,087	)		—			(10,927	)


	For the Three Months Ended March 31, 2013			For the Three Months Ended March 31, 2012			Period from January 1, 2003 (Date of Inception) through March 31, 2013
Cash flows from financing activities:
Net proceeds from issuance of common stock		—			385			101,360
Cash paid for repurchase of common stock warrants		—			—			(266	)
Cash paid for repurchase of common stock		—			—			(3,489	)
Net proceeds from exercise of common stock options		—			—			631
Net proceeds from exercise of common stock warrants		54			1,236			5,912
Common stock issued in connection with ESPP		38			39			146
Net proceeds from issuance of convertible notes payable		—			500			1,000
Repayments of capital lease obligations		—			(7	)		(220	)
Cash advances from former parent company, net		—			—			8,766


Net cash provided by financing activities		92			2,153			113,480


Net increase (decrease) in cash and cash equivalents		(15,326	)		(2,732	)		17,481
Cash and cash equivalents at the beginning of period		32,807			11,433			—


Cash and cash equivalents at end of period	$	17,481		$	8,701		$	17,481


Supplemental disclosure of cash flow information:
Cash received during the periods for interest	$	1		$	1		$	727


Cash paid during the periods for interest	$	—		$	1		$	12


Supplemental disclosure of non-cash investing and financing activities:
Future payment for Abstral rights included in accrued expenses	$	5,000		$	—		$	5,000

Settlement of corporate formation expenses in exchange for common stock	$	—		$	—		$	978


Fair value of warrants issued in connection with common stock recorded as cost of equity	$	—		$	—		$	25,324


Issuance of common stock in exchange of outstanding warrants	$	—		$	—		$	3,120


Fair value of shares mandatorily redeemable for cash upon exercise of warrants	$	—		$	—		$	785


Reclassification of warrant liabilities upon exercise	$	124		$	1,659		$	10,967


Net liabilities distributed in the RXi spin-off, excluding cash	$	—		$	—		$	2,246


Common stock issued in settlement of contingent purchase price consideration	$	—		$	—		$	1,579


Allocation of management expenses	$	—		$	—		$	551


Equipment and furnishings exchanged for common stock	$	—		$	—		$	48


Equipment and furnishings acquired through capital lease	$	—		$	—		$	277


Non-cash lease deposit	$	—		$	—		$	50


Value of restricted stock units and common stock issued in lieu of cash bonuses	$	—		$	—		$	634


Change in fair value of marketable securities	$	7,031		$	—		$	9,709


NeuVax Acquisition:
Fair value of shares issued to acquire NeuVax	$	—		$	—		$	6,367
Fair value of contingent purchase price consideration in connection with NeuVax acquisition		—			—			6,460


Net assets acquired excluding cash of $168	$	—		$	—		$	12,827

See accompanying notes to consolidated financial statements.

GALENA BIOPHARMA, INC.

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.	Business and Basis of Presentation

Business

Galena Biopharma, Inc. (“we,” “us,” “our,” “Galena” or the “company”) is a biopharmaceutical company developing innovative, targeted oncology treatments that address major unmet medical needs to advance cancer care.

Developing Immunotherapies to Prevent Cancer Recurrence

Galena is developing peptide vaccine (off-the-shelf) cancer immunotherapies, which address patient populations of cancer survivors to prevent recurrence. These therapies work by harnessing the patient’s own immune system to seek out and attack any residual cancer cells.

Our second product candidate, Folate Binding Protein, or “FBP,” is a peptide that is over-expressed (20-80 fold) in more than 90% of ovarian and endometrial cancers. FBP is a highly immunogenic peptide that can stimulate CTLs to recognize and destroy preclinical FBP-expressing cancer cells. The FBP vaccine consists of the FBP peptide(s) combined with the immune adjuvant, granulocyte macrophage-colony stimulating factor (GM-CSF). Galena’s FBP vaccine is currently in a Phase 1/2 trial in two gynecological cancers: ovarian and endometrial adenocarcinomas.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Building the Breadth, Depth and Pace of our Pipeline

On March 18, 2013, we acquired Abstral ^® (fentanyl) sublingual tablets for sale and distribution in the United States from Orexo AB (ORX.ST), an emerging specialty pharmaceutical company based in Sweden. Abstral has been approved by the FDA and is sold as a transmucosal immediate-release fentanyl (TIRF) product in Europe by ProStraken/Kyowa Hakko Kirin.

Under our agreement with Orexo, we assumed responsibility for the U.S. commercialization of Abstral and for all regulatory and reporting matters in the U.S. We also agreed to establish and maintain from January 1, 2014 through December 31, 2015, which we refer to as the “marketing period,” a specified minimum field sales force to market, sell and distribute Abstral and to use commercially reasonable efforts to reach the specified sales milestones. Orexo is entitled to reacquire the U.S. rights to Abstral from us for no consideration if we breach our obligations to establish and maintain the requisite sales force throughout the marketing period. Galena intends to launch U.S. commercial operations for Abstral in 2013.

In exchange for the U.S. rights to Abstral, (1) we paid Orexo $10 million from our cash on hand, and (2) we agreed to pay to Orexo: (a) $5 million in cash upon the earlier of the approval by the FDA of a specified U.S. manufacturer of Abstral and the first anniversary of the closing; (b) three one-time future cash milestone payments based on our net sales of Abstral; and (c) a low double-digit royalty on future net sales. No further milestone or royalty payments will be due after the date on which all claims of the last remaining licensed patents expire (currently 2019) or become invalidated by a governmental agency.

The $5 million milestone payable no later than the first anniversary of the closing is included in intangible assets and accrued liabilities at March 31, 2013.

In the future, we may pursue selective acquisitions of other cancer treatments to complement or add to our existing cancer product pipeline.

Basis of Presentation and Significant Accounting Policies

The condensed consolidated financial statements included herein have been prepared by Galena pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in our annual consolidated financial statements have been condensed or omitted. The year-end condensed consolidated balance sheet information was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The financial statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Unless the context otherwise indicates, references in this quarterly report to the “company,” “we,” “us” or “our” refer (i) to Galena, any wholly owned subsidiary, Apthera, Inc., or “Apthera,” and our former subsidiary, RXi Pharmaceuticals Corporation, or “RXi,” collectively, prior to our partial spin-off of RXi in April 2012; and (ii) to Galena and Apthera, together, after the partial spin-off.

Uses of Estimates in Preparation of Financial Statements — The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.

Principles of Consolidation — The consolidated financial statements include the accounts of Galena and its wholly owned subsidiaries. All material intercompany accounts have been eliminated in consolidation.

Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no effect on net loss per share.

Cash and Cash Equivalents — The company considers all highly liquid debt instruments with an original maturity of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.

Restricted Cash — Restricted cash consists of certificates of deposit on hand with the company’s financial institutions as collateral for its corporate credit cards.

Marketable Securities — Marketable securities consist of equity securities of publicly traded entities, and are classified as available-for-sale and carried at fair value on the balance sheet. Changes in the fair value of marketable securities are recorded as other comprehensive income.

Fair Value of Financial Instruments — The carrying amounts reported in the balance sheet for cash equivalents, accounts payable, convertible notes payable and capital leases approximate their fair values due to their short-term nature and market rates of interest.

Equipment and Furnishings — Equipment and furnishings are stated at cost and depreciated using the straight-line method based on the estimated useful lives (generally three to five years for equipment and furniture) of the related assets.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Goodwill and Intangible Assets — Goodwill and indefinite-lived intangible assets are not amortized but are tested annually for impairment at the reporting unit level, or more frequently if events and circumstances indicate impairment may have occurred. Factors the company considers important that could trigger an interim review for impairment include, but are not limited to, the following:

•

Significant changes in the manner of its use of acquired assets or the strategy for its overall business;

•

Significant negative industry or economic trends;

•

Significant decline in stock price for a sustained period; and

•

Significant decline in market capitalization relative to net book value.

Goodwill and other intangible assets with indefinite lives are evaluated for impairment first by a qualitative assessment to determine the likelihood of impairment. If it is determined that impairment is more likely than not, the company will then proceed to the two step impairment test. The first step is to compare the fair value of the reporting unit to the carrying amount of the reporting unit (the “First Step”). If the carrying amount exceeds the fair value, a second step must be followed to calculate impairment (the “Second Step”). Otherwise, if the fair value of the reporting unit exceeds the carrying amount, the goodwill is not considered to be impaired as of the measurement date. In its review of the carrying value of the goodwill for its single reporting unit and its indefinite-lived intangible assets, the company determines fair values of its goodwill using the market approach, and its indefinite-lived intangible assets using the income approach.

Intangible assets not considered indefinite-lived are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. The company’s policy is to identify and record impairment losses, if necessary, on intangible product rights when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

The company performed its review for impairment using the qualitative assessment for both goodwill and indefinite-lived intangible assets, and has determined that there has been no impairment to these assets as of March 31, 2013.

Acquisitions and In-Licensing — For all in-licensed products and technologies, we perform an analysis to determine whether we hold a variable interest or interests that give us a controlling financial interest in a variable interest entity. On the basis of our interpretations and conclusions, we determine whether the acquisition falls under the purview of variable interest entity accounting and if so, consider the necessity to consolidate the acquisition. As of March 31, 2013, we determined there were no variable interest entities required to be consolidated.

We also perform an analysis to determine if the inputs and/or processes acquired in an acquisition qualify as a business. On the basis of our interpretations and conclusions, we determine if the in-licensed products qualify as a business and whether to account for such products as a business combination or an asset acquisition. The excess of the purchase price over the fair value of the net assets acquired can only be recognized as goodwill in a business combination.

The Abstral acquisition was deemed to be the acquisition of an asset and license agreement and not a business combination. The purchase price, including transaction costs, is recorded as an intangible asset related to the license and distribution rights acquired in the transaction. No other significant assets were acquired nor liabilities assumed in the transactions. The license and distribution rights will be amortized over 10 years based on the life of the underlying patents, commencing in the period that sales commence. No amortization was recorded related to the Abstral rights as of March 31, 2013. Refer to Note 9 for further information regarding the acquisition of Abstral U.S. rights.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Contingent Consideration — Contingent consideration is recorded at the estimated fair value as of the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period with any adjustments in fair value included in our consolidated statement of expenses.

Patents and Patent Application Costs — Although the company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.

Share-based Compensation — The company follows the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, “ Compensation — Stock Compensation” (“ASC 718”), which requires the measurement and recognition of compensation expense for all stock based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options granted as consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of FASB ASC Topic 505-50 (“ASC 505-50”), “ Equity Based Payments to Non- Employees .” Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period of the underlying stock options. At the end of each financial reporting period prior to vesting, the value of these options, as calculated using the Black-Scholes option-pricing model, will be re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

Derivative Financial Instruments — During the normal course of business, from time to time, the company issues warrants and options to vendors as consideration to perform services. It may also issue warrants as part of a debt or equity financing. The company does not enter into any derivative contracts for speculative purposes.

The company recognizes all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such. In accordance with FASB ASC Topic 815-40, “ Derivatives and Hedging — Contracts in Entity’s Own Stock,” the value of these warrants is required to be recorded as a liability, as the holders have an option to put the warrants back to the company upon the occurrence of certain events set forth in the warrants.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Research and Development Expenses — Research and development costs are expensed as incurred. Included in research and development costs are wages, benefits and other operating costs, facilities, supplies, external services and overhead related to our research and development departments as well as costs to acquire technology licenses and clinical trial expenses.

Clinical trial expenses include expenses associated with clinical research organizations (CRO), as well as set-up and patient related costs from the sites at which are trial is being conducted which are billed to us by our CROs as pass-through costs.

Direct costs associated with our CROs are generally payable both as fixed fees and as certain enrollment and monitoring milestones are achieved. Expense related to milestones is recognized in the period in which the milestone is achieved or in which we determine that it is more likely than not that the milestone will be achieved.

The invoicing from clinical trial sites can lag several months. We accrue these site costs based on our estimate of upfront set-up costs upon the screening of the first patient at each site, and the patient related costs based on our knowledge of patient enrollment status at each site.

Other Income (Expense)

Other income (expense) is summarized as follows (in thousands):


	For the Three Months Ended March 31,
	2013			2012
Change in fair value of warrants potentially settleable in cash	$	(5,003	)	$	(18,270	)
Change in fair value of the contingent purchase price liability		(443	)		(844	)
Miscellaneous other income (expense)		(3	)		—


Total other income (expense)	$	(5,449	)	$	(19,114	)

Income Taxes — The company recognizes liabilities or assets for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements in accordance with FASB ASC 740-10, “ Accounting for Income Taxes” (“ASC 740-10”). These temporary differences will result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. ASC 740-10 requires that a valuation allowance be established when management determines that it is more likely than not that all or a portion of a deferred asset will not be realized. The company evaluates the realizability of its net deferred income tax assets and valuation allowances as necessary, at least on an annual basis. During this evaluation, the company reviews its forecasts of income in conjunction with other positive and negative evidence surrounding the realizability of its deferred income tax assets to determine if a valuation allowance is required. Adjustments to the valuation allowance will increase or decrease the company’s income tax provision or benefit. The recognition and measurement of benefits related to the company’s tax positions requires significant judgment, as uncertainties often exist with respect to new laws, new interpretations of existing laws, and rulings by taxing authorities. Differences between actual results and the company’s assumptions or changes in the company’s assumptions in future periods are recorded in the period they become known.

For the three months ended March 31, 2013, we recognized an income tax benefit of $2,762,000. This benefit offsets the tax impact related to the unrealized gain on our marketable securities, which is presented as other comprehensive income, net of tax, on our condensed consolidated statement of expenses and comprehensive loss. We continue to maintain a full valuation allowance against our net deferred tax assets.

Concentrations of Credit Risk — Financial instruments that potentially subject the company to significant concentrations of credit risk consist principally of cash and cash equivalents. The company maintains cash balances in several accounts with two banks, which at times are in excess of federally insured limits. As of March 31, 2013, the company’s cash equivalents were invested in money market mutual funds. The company’s investment policy does not allow investment in any debt securities rated less than “investment grade” by national ratings services. The company has not experienced any losses on its deposits of cash and cash equivalents. As of March 31, 2013, we had approximately $16,200,000 in interest-bearing accounts above federally insured limits.

Comprehensive Loss — Comprehensive loss consists of our net loss and other comprehensive income related to the unrealized gain on our marketable securities, which are classified as available-for-sale.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

2.	Recently Adopted Accounting Pronouncements

In July 2012, the FASB issued Accounting Standards Update (ASU) No. 2012-02, Intangibles — Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets , a new accounting pronouncement intended to simplify how entities test indefinite-lived intangible assets other than goodwill for impairment. The new standard permits an entity to first assess qualitative factors to determine whether it is “more likely than not” (defined as having a likelihood of more than 50%) that an indefinite-lived intangible asset is impaired, in order to determine whether further impairment testing is necessary. The new standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Adoption of this new standard did not have a material impact on the company’s consolidated financial statements for the three months ended March 31, 2013 or the fiscal year ended December 31, 2012.

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income , a new accounting pronouncement intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The new standard requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The new standards also requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts not required to be reclassified in their entirety in the same reporting period, an entity is required to cross-reference to other disclosures required that provide additional detail about those amounts. The new standard is effective for reporting periods beginning after December 31, 2012. Adoption of this new standard for the three months ended March 31, 2013 did not have a material impact on the company’s consolidated financial statements.

3.	RXi Spin-off

On September 24, 2011, the company entered into a contribution agreement with our former subsidiary, RXi Pharmaceuticals Corporation, or “RXi,” pursuant to which we assigned and contributed to RXi substantially all of the company’s RNAi-related technologies and assets. The contributed assets consist primarily of our novel RNAi compounds and licenses relating to our RNAi technologies, as well as the lease of our Worcester, Massachusetts laboratory facility, fixed assets and other equipment located at the facility and our employment arrangements with certain scientific, corporate and administrative personnel who became employees of RXi. The company also contributed $1.5 million of cash to the capital of RXi.

Pursuant to the contribution agreement, RXi assumed certain accrued expenses of our former RXI-109 development program and all subsequent obligations under the contributed licenses, employment arrangements and other agreements. RXi also has agreed to make future milestone payments to us of up to $45 million, consisting of two one-time payments of $15 million and $30 million, respectively, if RXi achieves annual net sales equal to or greater than $500 million and $1 billion, respectively, of any covered products that may be developed with the contributed RNAi technologies.

The company agreed in the securities purchase agreement to distribute to our stockholders on a share-for-share basis a total of approximately 66,959,894 RXi shares, which distribution was made in April 2012. The company retained 33,476,595 shares of common stock of RXi, which were subject to a one-year lock-up period that expired on April 27, 2013.

The value of RXi shares held by the company at March 31, 2013 was approximately $9,709,000, based on the average of high and low bid prices of RXi of $0.29 per share as reported on the OTC Bulletin Board. The value of our RXi shares will depend on RXi’s success in developing and commercializing products developed based upon its RNAi technologies and other factor that are subject to significant risks and uncertainties described in RXi’s filings with the SEC. There is no assurance, therefore, as to the value we may realize from our RXi shares.

The company classified the RXi activities, including for previously reported periods, as discontinued operations in the accompanying consolidated statements of expenses retroactively for all periods presented. The net assets of RXi were removed from the consolidated balance sheet as of the date of the spin-off, and were recorded as an equity distribution.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

4.	Fair Value Measurements

The company follows ASC 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are as defined as follows:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date.

The company categorized its cash equivalents and marketable securities as Level 1 hierarchy. The valuation for Level 1 was determined based on a “market approach” using quoted prices in active markets for identical assets. Valuations of these assets do not require a significant degree of judgment. The company categorized its warrants potentially settleable in cash as a Level 2 hierarchy. The warrants are measured at market value on a recurring basis and are being marked to market each quarter-end until they are completely settled. The warrants are valued using the Black-Scholes option-pricing model, using assumptions consistent with our application of ASC 718. The contingent purchase price consideration is categorized as a Level 3 hierarchy and is measured at its estimated fair value on a recurring basis and is adjusted at each quarter-end until it is completely settled. The contingent price consideration is valued based on the expected timing of milestones, the expected probability of success for each milestone and the updated discount rates based on a corporate debt interest rate index publicly issued.


Description	March 31, 2013		Quoted Prices In Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	16,485	$	16,485	$	—	$	—
Marketable securities		9,709		9,079		—		—


Total assets	$	26,194	$	26,194	$	—	$	—


Liabilities:
Warrants potentially settleable in cash	$	15,843	$	—	$	15,843	$	—
Contingent purchase price consideration		7,585		—		—		7,585


Total liabilities	$	23,428	$	—	$	15,843	$	7,585


Description	December 31, 2012		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	32,431	$	32,431	$	—	$	—
Marketable securities		2,678		2,678		—		—


Total assets	$	35,109	$	35,109	$	—	$	—


Liabilities:
Warrants potentially settleable in cash	$	10,964	$	—	$	10,946	$	—
Contingent purchase price consideration		7,142		—		—		7,142


Total liabilities	$	118,106	$	—	$	10,964	$	7,142

The company has classified its liabilities for contingent earn-out consideration relating to its acquisitions of Apthera within Level 3 of the fair value hierarchy, because the fair values are determined using significant unobservable inputs, including probability-weighted cash flows.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The company has not transferred any financial instruments into or out of Level 3 classification during the three months ended March 31, 2012 or 2013. A reconciliation of the beginning and ending Level 3 liabilities for the three months ended March 31, 2013 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	(In Thousands)

Balance, January 1, 2013	$	7,142
Change in the estimated fair value of the contingent purchase price consideration		443


Balance at March 31, 2013	$	7,585

The fair value of the contingent purchase price consideration is measured at the end of each reporting period using Level 3 inputs in a probability-weighted, discounted cash-outflow model. The significant unobservable assumptions we use include the determination of the probability achieving each milestone, the date we expect to reach the milestone, and a determination of present value factors used to discount future expected cash outflows.

5.	Stockholders’ Equity

Preferred Stock — The Company has authorized up to 5,000,000 shares of preferred stock, $0.0001 par value per share, for issuance. The preferred stock will have such rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon its issuance. To date, the Company has not issued any preferred shares.

Common Stock — The Company has authorized up to 125,000,000 shares of common stock, $0.0001 par value per share, for issuance. Shares of common stock are reserved as follows (in thousands):


	As of March 31, 2013
Warrants outstanding		13,132
Stock options outstanding		9,350
Options reserved for future issuance under the Company’s 2007 Incentive Plan		2,024
Shares reserved for future issuance under the Employee Stock Purchase Plan		779


Total reserved for future issuance		25,285

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

6.	Warrants

The following is a summary of warrant activity for the three months ended March 31, 2013 (in thousands):


	December 2012 Warrants		April 2011 Warrants			March 2011 Warrants		March 2010 Warrants		August 2009 Warrants		Consultant Warrants		Total

Outstanding, January 1, 2013		7,578		2,846			361		360		978		1,093		13,216
Exercised		—		(84	)		—		—		—		—		(84	)


Outstanding, March 31, 2013		7,578		2,762			361		360		978		1,093		13,132


Expiration		December 2017		April 2017			March 2016		March 2016		August 2014		January 2014

Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants.

Warrants classified as liabilities

Liability-classified warrants consist of warrants issued in connection with equity financings in December 2012, April 2011, March 2011, March 2010 and March 2009. These warrants are potentially settleable in cash and were determined not to be indexed to the company’s own stock.

The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of expenses as other income (expense). The fair value of the warrants is estimated using the Black-Scholes option-pricing model with the following inputs:


	As of March 31, 2013
	December 2012 Warrants		April 2011 Warrants		March 2011 Warrants		March 2010 Warrants		August 2009 Warrants

Strike price	$	1.90	$	0.65	$	0.65	$	2.18	$	4.50
Expected term (years)		4.73		4.06		2.93		2.99		1.34
Volatility %		80.53		71.35		69.00		68.66		69.06
Risk-free rate %		0.71		0.58		0.35		0.36		0.18


	As of December 31, 2012
	December 2012 Warrants		April 2011 Warrants		March 2011 Warrants		March 2010 Warrants		August 2009 Warrants
Strike price	$	1.90	$	0.65	$	0.65	$	2.18	$	4.50
Expected term (years)		4.98		4.30		3.18		3.24		1.59
Volatility %		80.93		82.48		69.90		69.79		74.13
Risk-free rate %		0.72		0.59		0.39		0.40		0.21

The company’s expected volatility is based on a combination of implied volatilities of similar publicly traded entities. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the time of issuance. The dividend yield used in the pricing model is zero, because the company has no present intention to pay cash dividends.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The changes in fair value of the warrant liability for the three months ended March 31, 2013 were as follows (in thousands):


	December 2012 Warrants		April 2011 Warrants			March 2011 Warrants		March 2010 Warrants		August 2009 Warrants		Total

Warrant liability, January 1, 2013	$	6,954	$	3,310		$	378	$	183	$	139	$	10,964
Fair value of warrants exercised		—		(124	)		—		—		—		(124	)
Change in fair value of warrants		3,293		1,306			185		147		72		5,003


Warrant liability, March 31, 2013	$	10,247	$	4,492		$	563	$	330	$	211	$	15,843

Warrants classified as equity

Equity-classified warrants consist of warrants issued in connection with consulting services. These warrants are recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

7.	Stock Based Compensation

Options to Purchase Shares of Common Stock — The company follows the provisions ASC 718, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of ASC 718 is recognized as an expense over the requisite service period.

For stock options granted as consideration for services rendered by non-employees, the company recognizes compensation expense in accordance with the requirements of ASC Topic 505-50. Non-employee option grants that do not vest immediately upon grant are recorded as an expense over the vesting period of the underlying stock options. At the end of each financial reporting period prior to vesting, the value of these options, as calculated using the Black-Scholes option-pricing model, is being re-measured using the fair value of the company’s common stock and the non-cash compensation recognized during the period will be adjusted accordingly. Since the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

The company uses the Black-Scholes option-pricing model to determine the fair value of all its option grants. For options granted during the three months ended March 31, 2013, the following assumptions were used:


	For the Three Months Ended March 31, 2013			For the Three Months Ended March 31, 2012
Risk free interest rate		1.12	%		1.06	%
Volatility		77.49	%		75.69	%
Expected lives (years)		6.25			6.10
Expected dividend yield		0.00	%		0.00	%

The weighted average fair value of options granted during the three months ended March 31, 2013 was $1.16.

The company’s expected common stock price volatility assumption is based upon the volatility of a basket of comparable companies. The expected life assumptions for employee grants were based upon the simplified method provided for under ASC 718-10, which averages the contractual term of the company’s options of ten years with the average vesting term of four years for an average of six years. The expected life assumptions for non-employees were based upon the contractual term of the option. The dividend yield assumption is zero, because the company has never paid cash dividends and presently has no intention of paying cash dividends in the future. The risk-free interest rate used for each grant was also based upon prevailing short-term interest rates. The company has estimated an annualized forfeiture rate of 15% for options granted to its employees, 8% for options granted to senior management and zero for the directors. The company will record additional expense if the actual forfeitures are lower than estimated and will record a recovery of prior expense if the actual forfeiture rates are higher than estimated.

The company recorded approximately $364,000 and $718,000 of stock-based compensation from continuing operations related to employee and non-employee stock options for the three months ended March 31, 2013 and March 31, 2012, respectively. As of March 31, 2013, there was $2,635,674 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the company’s operating expenses over a weighted average period of 3.14 years.

As of March 31, 2013, an aggregate of 12,500,000 shares of common stock were reserved for issuance under the company’s 2007 Incentive Plan, including 9,350,283 shares subject to outstanding common stock options granted under the plan and 2,024,437 shares available for future grants. The administrator of the plan determines the times when an option may become exercisable. Vesting periods of options granted to date have not exceeded four years. The options generally will expire, unless previously exercised, no later than ten years from the grant date. The company is using unissued shares for all shares issued for options and restricted share awards.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

The following table summarizes option activity of the company:


	Total Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at January 1, 2013		7,672,384		$	2.54	$	—
Granted		2,073,000			1.71		808,470
Exercised		—			—		—
Cancelled		(393,101	)		5.00		24,600


Outstanding at March 31, 2013		9,350,283		$	2.26	$	5,653,370


Options exercisable at March 31, 2013		5,571,345		$	2.79	$	3,190,725

The aggregate intrinsic value of outstanding and exercisable options at March 31, 2013 were calculated based on the closing price of the Company’s common stock as reported on The NASDAQ Capital Market on March 28, 2013 of $2.10 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the company’s common stock and the exercise price of the underlying options.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

8.	Net Loss Per Share

The company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260 “ Earnings per Share.” Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding. Potential common shares consist of shares issuable upon the exercise of stock options and warrants. Because the inclusion of potential common shares would be anti-dilutive for all periods presented, diluted net loss per common share is the same as basic net loss per common share.

The following table sets forth the potential common shares excluded from the calculation of net loss per common share because their inclusion would be anti-dilutive:


	Three Months Ended March 31,
	2013		2012
Options to purchase common stock		9,350,283		7,438,137
Warrants to purchase common stock		13,131,576		13,116,698


Total		22,481,859		20,554,835

9.	License Agreements

As part of its business, the company enters into licensing agreements with third parties that often require milestone and royalty payments based on the progress of the asset through development stages. Milestone payments may be required, for example, upon approval of the product for marketing by a regulatory agency. In certain agreements, the company is required to make royalty payments based upon a percentage of net sales. The expenditures required under these arrangements in any period may be material and are likely to fluctuate from period to period.

These arrangements sometimes permit the company to unilaterally terminate development of the product and thereby avoid future contingent payments; however, the company is unlikely to cease development if the compound successfully achieves clinical testing objectives.

In conjunction with the acquisition of NeuVax™, the company acquired rights and assumed obligations under a license agreement among Apthera and The University of Texas M. D. Anderson Cancer Center (“MDACC”) and The Henry M. Jackson Foundation for the Advancement of Military Medicine, Inc. (“HJF”) which grants exclusive worldwide rights to a U.S. patent covering the nelipepimut-S peptide and several U.S. and foreign patents and patent applications covering methods of using the peptide as a vaccine. Under the terms of this license, we are required to pay an annual maintenance fee of $200,000, a milestone payment of $200,000 upon commencing the Phase 3 PRESENT trial of NeuVax and other clinical milestone payments, as well as royalty payments based on sales of NeuVax or other therapeutic products developed from the licensed technologies.

Effective December 3, 2012, we entered into a license and supply agreement with ABIC Marketing Limited, a subsidiary of Teva Pharmaceuticals (“ABIC”), under which we granted ABIC exclusive rights to seek marketing approval in Israel for our NeuVax product candidate for intradermal injection for the treatment of breast cancer following its approval by the FDA or the European Medicines Agency, and to market, sell and distribute NeuVax in Israel assuming such approval is obtained. ABIC’s rights also include a right of first refusal in Israel for all future indications for which NeuVax™ may be approved. Under the license and supply agreement, ABIC will assume responsibility for regulatory registration of NeuVax in Israel, provide financial support for local development, and commercialize the product in the region in exchange for making royalty payments to us based on future sales of NeuVax. ABIC also agrees in the license and supply agreement to purchase from us all supplies of NeuVax at a price determined according to a specified formula.

On March 18, 2013, the company acquired the rights to sell and distribute Abstral ^® (fentanyl) sublingual tablets in the United States from Orexo AB (ORX.ST), an emerging specialty pharmaceutical company based in Sweden. Abstral has been approved by the FDA.

GALENA BIOPHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(Unaudited)

Under our agreement with Orexo, we assumed responsibility for the U.S. commercialization of Abstral and for all regulatory and reporting matters in the U.S. We also agreed to establish and maintain from January 1, 2014 through December 31, 2015, which we refer to as the “marketing period,” a specified minimum field sales force to market, sell and distribute Abstral and to use commercially reasonable efforts to reach the specified sales milestones. Galena intends to launch U.S. commercial operations for Abstral in 2013.

In exchange for the U.S. rights to Abstral, (1) we paid Orexo $10 million in cash from our cash on hand, and (2) we agreed to pay to Orexo: (a) $5 million in cash upon the earlier of (i) the approval by the FDA of a specified U.S. manufacturer of Abstral and(ii) the first anniversary of the closing; (b) three one-time future cash milestone payments based on our net sales of Abstral; and (c) a low double-digit royalty on future net sales. No further milestone or royalty payments will be due after the date on which all claims of the last remaining licensed patents expire (currently 2019), or become invalidated by a governmental agency. The $5 million milestone payable no later than the first anniversary of the closing is included in intangible assets and accrued liabilities at March 31, 2013.

10.

Subsequent Events

The company evaluated all events or transactions that occurred after March 31, 2013 up through the date these financial statements were issued. Other than as disclosed below or elsewhere in the notes to the consolidated financial statements, the company did not have any material recognizable or unrecognizable subsequent events.

Since March 31, 2013, the Company issued 357,000 shares of common stock pursuant to the exercise of outstanding warrants from various holders for total proceeds of $232,750.

Between April 29 and May 6, 2013, we sold approximately 1,200,000 shares of RXi common stock for gross proceeds of approximately $226,000. As of May 6, 2013, we owned 32,278,095 shares of RXi common stock with a market value of $0.21 per share.

On May 8, 2013 we entered into a loan and security agreement with Oxford Finance LLC, as collateral agent, and related lenders under which we may borrow up to $15,000,000 (the “Loan”) in two tranches. We borrowed the first tranche of $10,000,000 on May 8, 2013, and we may borrow the second tranche of $5,000,000 on before May 31, 2014, subject to our achievement of certain operational and financial conditions. There is no assurance these conditions will be achieved. The Loan payments will include 12 months of interest-only payments at the fixed coupon rate of 8.45%, followed by 30 months of amortization of principal and interest until maturity in November 2016. In connection with the Loan, we have paid or will pay the lenders a 1% cash facility fee and a 5.5% cash final payment and have granted to the lenders five-year warrants to purchase up to 182,186 shares of our common stock at an exercise price of $2.47, which was based on a 20-day volume weighted-average market price of our common stock prior to closing.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In this section, “we,” “our,” “ours” and “us” refer to Galena Biopharma, Inc. and its consolidated subsidiary, Apthera, Inc., or “Apthera.”

This management’s discussion and analysis of financial condition as of March 31, 2013 and results of operations for the three months ended March 31, 2013 and 2012, respectively, should be read in conjunction with management’s discussion and analysis of financial condition and results of operations included in our Annual Report on Form 10-K for the year ended December 31, 2012 which was filed with the SEC on March 12, 2013.

The discussion and analysis below includes certain forward-looking statements related to our commercialization of Abstral in the U.S., our future financial condition and results of operations and potential for profitability, the sufficiency of our cash resources, our ability to obtain additional equity or debt financing, possible partnering or other strategic opportunities for the development of our products, as well as other statements related to the progress and timing of product development, present or future licensing, collaborative or financing arrangements or that otherwise relate to future periods, which are all forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements represent, among other things, the expectations, beliefs, plans and objectives of management and/or assumptions underlying or judgments concerning the future financial performance and other matters discussed in this document. The words “may,” “will,” “should,” “plan,” “believe,” “estimate,” “intend,” “anticipate,” “project,” and “expect” and similar expressions are intended to identify forward-looking statements. All forward-looking statements involve certain risks, uncertainties and other factors described in Item 1.A of this report and in our Annual Report on Form 10-K for the year ended December 31, 2012, that could cause our actual Abstral commercialization efforts, results of operations, performance, financial position and business prospects and opportunities for this quarter and the periods that follow to differ materially from those expressed in, or implied by, those forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this report. These statements, like all statements in this report, speak only as of the date of this report (unless another date is indicated) and we undertake no obligation to update or revise forward-looking statements.

Overview

We are a biopharmaceutical company developing innovative, targeted oncology treatments that address major unmet medical needs to advance cancer care.

Developing Novel Immunotherapies to Prevent Cancer Recurrence

While improved diagnostics and targeted therapies have decreased breast cancer mortality in the United States, metastatic breast cancer remains incurable. Up to 25% of resectable node-positive breast cancer patients — having no radiographic evidence of disease following surgery and adjuvant chemo/radiation therapy — still relapse within three years following diagnosis. These cancer patients presumably still had isolated, undetected tumor cells also known as circulating tumor cells (CTCs) which, over time, led to a recurrence of cancer, either in the breast area (local recurrence) or at a remote location (metastatic disease).

Galena is developing peptide vaccine (off-the-shelf) cancer immunotherapies, which address major patient populations of cancer survivors to prevent recurrence. These therapies work by harnessing the patient’s own immune system to seek out and attack any residual cancer cells. Using peptide immunogens has many clinical advantages, including an excellent safety profile, as these drugs lack the toxicities typical of most cancer therapies. They also feature long-lasting protection through immune system activation and convenient delivery.

More than 230,000 women in the United States are diagnosed with breast cancer every year. Approximately 75% of breast cancer patients have tissue test positive for some increased amount of HER2 (IHC 1+, 2+, or 3+). Only 20% to 30% of all breast cancer patients — with HER2 IHC 3+ disease — are eligible for treatment with trastuzumab (Herceptin ^® ; Genentech/Roche). This leaves the majority of women ineligible for trastuzumab therapy and without an effective treatment option to prevent cancer recurrence.

Our lead product candidate, NeuVax™ (nelipepimut-S) was derived from the immunodominant extracellular region of the HER2 receptor, and is combined with the immune adjuvant granulocyte macrophage colony-stimulating factor (GM-CSF) to further bolster the immune response in breast cancer patients. Treatment with NeuVax and GM-CSF stimulates cytotoxic (CD8+) T cells in a highly specific manner to target and kill these undetected cancer cells expressing HER2 before they grow into metastatic tumors. NeuVax is given as an intradermal injection once a month for six months, followed by a booster injection once every six months. Importantly, NeuVax targets the 50% to 60% of patients with tumors that express HER2 in low-to-intermediate (IHC 1+, 2+) amounts, who achieve remission with current standard of care, but have no available HER2 targeted adjuvant treatment options to maintain their disease free status.

Multiple clinical trials have shown NeuVax to be safe and effective at stimulating cytotoxic (CD8+) T cells in a highly specific manner to target HER2 expressing cells. After establishing statistical significance in the prevention of recurrence in 24- and 36-month analyses, the 60-month median follow-up from the Phase 1/2 trial demonstrated a 5.6% recurrence rate with NeuVax versus 25.9% recurrence rate in the control arm, a reduction of 78.4%. NeuVax is the first breast cancer vaccine in Phase 3 clinical trials, and represents a promising approach to deliver an off-the-shelf cancer immunotherapy treatment based on a well-characterized, tumor-associated antigen to prevent recurrence and maintain disease free survival.

Based on Phase 2 results, the U.S. Food and Drug Administration (FDA) granted NeuVax a Special Protocol Assessment for a Phase 3 study which began in 2012. The 700 patient trial, if positive, will lead the company to seek U.S. FDA commercial registration. The study has a primary endpoint of disease-free survival (DFS) at three years, the timeframe within which 10% to 25% of patients relapse. The study will be significant if NeuVax treatment provides a 30% benefit in DFS versus control. An interim analysis will be performed after 70 events.

NeuVax has also demonstrated promising results in combination with trastuzumab in early-stage HER2 1+, 2+ patients. Preclinical studies suggested that trastuzumab can increase antigen presentation by tumor cells by promoting receptor internalization and subsequent proteosomal degradation of the HER2 protein, resulting in efficient recognition and lysing of HER2-expressing cells. A Phase 2a study showed improved efficacy of the combination therapy at 24 months, with no added cardiotoxicity. As a result, a 300 patient Phase 2b study in early-stage HER2 1+ and 2+ patients who have completed their adjuvant chemotherapy and radiation therapy began in March 2013, comparing NeuVax in combination with trastuzumab to trastuzumab alone.

Building the Breadth, Depth and Pace of our Pipeline

On March 18, 2013, we acquired the rights to sell and distribute Abstral ^® (fentanyl) sublingual tablets in the United States from Orexo AB (ORX.ST), an emerging specialty pharmaceutical company based in Sweden. Abstral has been approved by the FDA and is the transmucosal immediate-release fentanyl (TIRF) market leader in Europe by ProStraken/Kyowa Hakko Kirin.

Abstral is an important new treatment option for inadequately controlled breakthrough cancer pain (“BTcP”) in opioid-tolerant cancer patients. The innovative Abstral formulation delivers the analgesic power of fentanyl in a convenient and easy to use sublingual tablet, which dissolves within seconds. Abstral provides rapid relief of BTcP, predictable dosing, and is convenient and easy to use. Under our agreement with Orexo, we assumed responsibility for the U.S. commercialization of Abstral and for all regulatory and reporting matters in the U.S. We also agreed to establish and maintain from January 1, 2014 through December 31, 2015, which we refer to as the “marketing period,” a specified minimum field sales force to market, sell and distribute Abstral and to use commercially reasonable efforts to reach the specified sales milestones. Galena intends to launch U.S. commercial operations for Abstral in 2013.

In the future, we may pursue selective acquisitions of other cancer treatments to complement or add to our existing cancer product pipeline.

Results of Operations for the Three Months Ended March 31, 2013 and March 31, 2012

For the three months ended March 31, 2013, our net loss was approximately $9,293,000 compared with a net loss of $24,761,000 for the three months ended March 31, 2012. The loss decreased by $15,468,000, or approximately 62%. The reasons for the decrease in loss between the quarters are discussed below.

Abstral is our first commercial product. We expect to incur significant additional costs and expenses in connection with our commercialization of Abstral in the U.S. before generating any significant revenues from the sale and distribution of Abstral. For this reason, and as we begin to generate Abstral revenues, our future results of operation may differ materially from our historical results of operations.

Research and Development Expense

Research and development expense consists primarily of clinical trial expenses and compensation-related costs for our employees dedicated to research and development activities and for our Scientific Advisory Board (“SAB”) members, as well as licensing fees and patent prosecution costs. We expect research and development expenses to increase as we continue to enroll patients in our Phase 3 PRESENT Trial of NeuVax and expand our clinical development activities.

Total research and development expenses were approximately $5,081,000 for the three months ended March 31, 2013, compared with $2,664,000 for the three months ended March 31, 2012. The increase of $2,417,000, or 91%, was due to an increase of $2,545,000 related to the ramp-up of our Phase 3 PRESENT clinical trial and an increase of $57,000 related to higher expenses for employee stock based compensation, partially offset by a decrease in non-employee stock based compensation of $185,000 primarily related to timing of grants and changes in our Black-Scholes assumptions.

General and Administrative Expense

General and administrative expense includes compensation-related costs for our employees dedicated to general and administrative activities, legal fees, audit and tax fees, consultants and professional services, and general corporate expenses.

General and administrative expense was $1,530,000 for the three months ended March 31, 2013, compared with $1,746,000 for the three months ended March 31, 2012. The decrease of $216,000, or 12%, was due to a $148,000 decrease related to a warrant issued for business advisory services, a $41,000 decrease in non-cash non-employee share based compensation expense and a $37,000 decrease in employee share based compensation, partially offset by a $10,000 increase in personnel related costs, professional and outside services.

Interest Income/Expense

Interest income (expense) was negligible for each of the three months ended March 31, 2013 and 2012. The key objectives of our investment policy are to preserve principal and ensure sufficient liquidity, so our invested cash may not earn as high a level of income as longer-term or higher risk securities, which generally have less liquidity and more volatility.

Other Income/Expense

Other expense was $5,449,000 for the three months ended March 31, 2013, compared with other expense of $19,114,000 for the three months ended March 31, 2012. The decrease in other expense of $13,665,000 was due to an decrease of $13,222,000 in the change in the fair value of warrants accounted for as liabilities and an increase of $443,000 in non-cash expense related to the change in fair value of contingent purchase price consideration liability.

Income Taxes

Liquidity and Capital Resources

We had cash, cash equivalents, and marketable securities of approximately $27.2 million as of March 31, 2013, compared with $35.6 million as of December 31, 2012. Our marketable securities represent approximately 33,500,000 shares of RXi common stock, with a market value of approximately $9,700,000 and $2,700,000 at March 31, 2013 and December 31, 2012, respectively. On May 8, 2013, we completed a loan of $15,000,000, of which $10,000,000 has been drawn.

The decrease of $15,326,000 in our cash and cash equivalents from December 31, 2012 to March 31, 2013 was attributable primarily to our payment of approximately$10,000,000 to acquire U.S. commercialization rights to Abstral along with cash used by operating activities of approximately $5,300,000.

We have not generated revenue to date, and will not generate product revenue in the foreseeable future, except to the extent we are successful in commercializing Abstral in the U.S. We expect to incur increased operating losses as we undertake to commercialize Abstral in the U.S. and continue to advance our product candidates through the drug development and regulatory process. In addition to increasing research and development expenses, we expect general and administrative costs to increase as we add personnel and other administrative expenses associated with our Abstral commercialization efforts and otherwise. We will need to generate significant revenues to achieve profitability and might never do so. In the absence of product revenues from the commercialization of Abstral or our product candidates, our potential sources of operational funding are expected to be the proceeds from the sale of equity, funded research and development payments and payments received under partnership and collaborative agreements.

We believe that our existing working capital, including the $10 million in initial proceeds from the recent Loan, should be sufficient to fund our operations through at least the second quarter of 2014. In the future, we will be dependent on revenues from the commercialization of Abstral, obtaining funding from third parties, such as proceeds from the sale of equity, funded research and development payments and payments under partnership and collaborative agreements, in order to maintain our operations and meet our obligations to licensors. There is no guarantee that we will generate significant revenues from the sale of Abstral, or that debt, additional equity or other funding will be available to us on acceptable terms, or at all. If we fail to generate adequate revenues or obtain additional funding when needed, we would be forced to scale back, or terminate, our operations or to seek to merge with or to be acquired by another company.

Net Cash Flow from Operating Activities

Net cash used in operating activities was approximately $5,331,000 for the three months ended March 31, 2013, compared with $4,885,000 for the three months ended March 31, 2012. The increase of approximately $446,000 resulted primarily from an increase in research and development activities related to our Phase 3 PRESENT trial.

Net Cash Flow from Investing Activities

Net cash used in investing activities was $10,087,000 for the three months ended March 31, 2013, compared with zero for the three months ended March 31, 2012. The increase was due to cash paid for Abstral rights in the first quarter of 2013.

Net Cash Flow from Financing Activities

Net cash provided by financing activities was $92,000 for the three months ended March 31, 2013, compared with $2,153,000 for the three months ended March 31, 2012. The decrease was primarily due to $54,000 from the exercise of warrants and $38,000 for common stock issued in connection with the ESPP in 2013, compared with $1,236,000 from the exercise of warrants, $500,000 from issuance of convertible notes, $385,000 from net proceeds from the issuance of common stock and $39,000 for common stock issued in connection with the ESPP in 2012.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet financing arrangements other than operating leases.

Critical Accounting Policies and Estimates

In our Annual Report on Form 10-K for the year ended December 31, 2012, we disclosed our critical accounting policies and estimates upon which our financial statements are derived. There have been no changes to these policies since December 31, 2012. Readers are encouraged to review these disclosures in conjunction with the review of this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The primary objective of our investment activities is to preserve capital. We do not utilize hedging contracts or similar instruments.

We are exposed to certain market risks relating primarily to (1) interest rate risk on our investment portfolio, (2) equity price risk on our marketable securities, and (3) risks relating to the financial viability of the institutions which hold our capital and through which we have invested our funds. We manage such risks by investing in short-term, liquid, highly rated instruments.

In addition, we are exposed to foreign currency exchange rate fluctuations relating to payments we make to certain vendors and suppliers and license partners using foreign currencies. We do not hedge against foreign currency risks. Consequently, changes in exchange rates could adversely affect our operating results and stock price. Such losses have not been significant to date.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report on Form 10-Q, our Chief Executive Officer and Principal Financial Officer (the “Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 (the “Exchange Act”), such as this quarterly report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Disclosure controls and procedures are also designed to reasonably assure that such information is accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure. Based on these evaluations, the Certifying Officers have concluded, that, as of the end of the period covered by this quarterly report on Form 10-Q:

(a)

our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and

(b)

our disclosure controls and procedures were effective to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Exchange Act was accumulated and communicated to our management, including the Certifying Officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There has not been any change in our internal control over financial reporting that occurred during the quarterly period ended March 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 1.A RISK FACTORS

You should consider the “Risk Factors” included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012, filed on March 12, 2013 with the SEC.

In addition to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2012, you should consider the following new or updated risk factors:

Risks Related to Our Commercialization of Abstral

We are at an early stage in the commercialization of Abstral ^® , have a history of net losses and negative cash flow from operations and have not sold any other products. We cannot predict if or when we will become profitable.

On March 18, 2013, we acquired from Orexo AB, a specialty pharmaceutical company based in Sweden (“Orexo”), exclusive rights to sell and distribute Abstral ^® (“Abstral”) sublingual tablets in the United States. Although Abstral has been approved for sale by the U.S. Food and Drug Administration (the “FDA”) and is a novel, rapidly-disintegrating, sublingual (under the tongue) formulation of fentanyl, a well-established opioid, we have no commercialization history and have never sold or distributed any other products. As a result, there is no historical basis upon which to assess how we will respond to regulatory, competitive or other challenges to our ability to sell Abstral on a profitable basis, and we are unable to predict the amount of revenues or profits, if any, that we will generate from the sale of Abstral.

We have generated substantial net losses and negative cash flow from operations since our inception. For example, for 2012 and 2011, we incurred net losses of $35.0 million and $11.5 million, respectively, our net cash used in operating activities was $21.0 million and $14.7 million, respectively, and, at December 31, 2012, our accumulated deficit was $102.2 million. Despite our exclusive rights to sell and distribute Abstral in the U.S., our losses and negative cash flow may continue.

Our ability to generate sufficient revenues from Abstral and to transition to profitability and generate positive cash flow will depend on numerous factors described in the following risk factors, and we may continue to incur losses and negative cash flow and may never transition to profitability or positive cash flow. In particular, we expect our operating expenses to continue to increase in the near-term as we seek to commercialize Abstral, and we may not be able to generate sufficient revenues to offset this anticipated increase in expenses. If we are unable to transition to profitability and generate positive cash flow over time, our business, results of operations and financial condition would be materially and adversely affected, which could result in our inability to continue operations.

We are largely dependent on the commercial success of our one approved product, Abstral, and, although we expect to generate revenue from sales of Abstral, we may never become profitable.

Although we are in the process of testing and developing other drug candidates, we anticipate that in the near term our ability to become profitable will depend upon the commercial success of our one approved product, Abstral, which we anticipate launching in the fourth quarter of 2013. To date, we have generated no revenues from the sale of Abstral. In addition to the risks discussed elsewhere in this section, our ability to generate future revenues from the sale of Abstral will depend on a number of factors, including, but not limited to:

•

achievement of broad market acceptance and coverage by third-party payors for Abstral;

•

the effectiveness of our efforts in marketing and selling Abstral;

•

our and our contract manufacturers’ ability to successfully manufacture commercial quantities of Abstral at acceptable cost levels and in compliance with regulatory requirements;

•

our ability to maintain a cost-efficient commercial organization and, to the extent we seek to do so, successfully partner with additional third parties;

•

our ability to successfully expand and maintain intellectual property protection for Abstral;

•

our ability to effectively work with physicians to ensure that patients are treated to an effective dose of Abstral;

•

the efficacy and safety of Abstral; and

•

our ability to comply with regulatory requirements.

Because of the numerous risks and uncertainties associated with our commercialization efforts, we are unable to predict the extent to which we will generate revenues from Abstral or the timing for when or the extent to which we will become profitable, if ever. Even if we do achieve significant revenues from Abstral and become profitable, we may not be able to sustain our revenues or maintain or increase profitability on an ongoing basis.

If Abstral does not achieve broad market acceptance or coverage by third-party payors, the revenues that we generate from that product will be limited.

The commercial success of Abstral will depend upon the acceptance of that product by physicians, patients, healthcare payors and the medical community. Coverage and reimbursement for that product by third-party payors is also necessary for commercial success. The degree of market acceptance of Abstral will depend on a number of factors, including:

•

our ability to provide acceptable evidence of safety and efficacy;

•

acceptance by physicians and patients of the product as a safe and effective treatment;

•

the relative convenience and ease of administration;

•

the prevalence and severity of adverse side effects;

•

limitations or warnings contained in Abstral’s FDA-approved labeling;

•

the clinical indications for which Abstral is approved;

•

availability and perceived advantages of alternative treatments;

•

any negative publicity related to Abstral or our competitors’ products;

•

the effectiveness of our or any current or future collaborators’ sales, marketing and distribution strategies;

•

pricing and cost effectiveness;

•

our ability to obtain sufficient third-party payor coverage and reimbursement;

•

the willingness of patients to pay out of pocket in the absence of third-party payor coverage; and

•

our ability to maintain compliance with regulatory requirements.

For example, while we believe that our sublingual delivery method for Abstral will appeal to patients, some patients may believe that an under the tongue delivery method is ineffective or may otherwise react unfavorably to sublingual delivery. In accordance with the risk evaluation mitigation strategy (“REMS”) protocol for all transmucosal immediate-release fentanyl (“TIRF”) products, physicians are advised to begin patients at the lowest dose available for the applicable TIRF product, which for Abstral is 100 mcg. If patients do not experience pain relief at initial low-dose prescriptions of Abstral, they or their physicians may conclude that Abstral is ineffective in general and may discontinue use of Abstral before titrating to an effective dose. In addition, many third-party payors require usage and failure on cheaper generic versions of fentanyl prior to providing reimbursement for Abstral, which would limit Abstral’s use as a first-line treatment option.

Products used to treat and manage pain, especially in the case of controlled substances, are from time to time subject to negative publicity, including negative publicity relating to illegal use, overdoses, abuse, diversion, serious injury and death. These events have led to heightened regulatory scrutiny. Controlled substances are classified by the U.S. Drug Enforcement Administration (the “DEA”) as Schedule I through V substances, with Schedule I substances being prohibited for sale in the United States, Schedule II substances considered to present the highest risk of abuse and Schedule V substances being considered to present the lowest relative risk of abuse. Abstral contains fentanyl, an opioid, and is regulated as a Schedule II controlled substance. Despite the strict regulations on the marketing, distributing, prescribing and dispensing of such substances, illicit use and abuse of controlled substances is well-documented. Thus, the marketing of Abstral may generate public controversy that may adversely affect market acceptance of Abstral.

Our efforts to educate the medical community and third-party payors on the benefits of Abstral and gain broad market acceptance may require significant resources and may never be successful. If Abstral does not achieve an adequate level of acceptance by physicians, third-party payors and patients, we may not generate sufficient revenue from that product to become or remain profitable.

In addition, fentanyl treatments can be costly to third-party payors and patients. Accordingly, hospitals and physicians may resist prescribing Abstral and third-party payors, and patients may not purchase Abstral due to cost.

If we do not perform the obligations that we owe to Orexo in connection with our acquisition from Orexo of the rights to sell Abstral in the United States, Orexo may become entitled to reacquire those Abstral-related rights for no consideration to us.

There is no assurance that we will be able to perform our obligations to Orexo. If we fail to establish and maintain the specified sales force throughout the marketing period, Orexo may become entitled under our agreement with Orexo to reacquire from us, for no consideration, the U.S. rights to Abstral. Our loss of the U.S. rights to Abstral could have a material, adverse effect on our business, results of operations and financial condition.

We have no internal manufacturing capabilities; we will be dependent on third parties in our supply chain for the commercial supply of Abstral; and if we fail to maintain our supply and manufacturing relationships with these third parties or develop new relationships with other third parties, we may be unable to commercialize Abstral.

We will rely on third parties for the commercial supply of Abstral. Our ability to commercially supply Abstral will depend, in part, on our ability to successfully obtain the active pharmaceutical ingredient (“API”) for Abstral and outsource most, if not all, of the aspects of its manufacturing at competitive costs, in accordance with regulatory requirements and in sufficient quantities for commercialization and clinical testing. If we fail to develop and maintain supply relationships with these third parties, we may be unable to continue to commercialize Abstral.

We will purchase the fentanyl API utilized in connection with Abstral from third parties. Our ability to obtain fentanyl API in sufficient quantities and quality, and on a timely basis, is critical to our commercialization of Abstral. There is no assurance that these suppliers will produce the materials in the quantities and quality and at the times they are needed, if at all. Moreover, the replacement of any of these suppliers could lead to significant delays and increases in our costs.

The manufacture of pharmaceutical products generally requires significant expertise and capital investment, often including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up and validating initial production. These problems can include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Additionally, our manufacturers may experience difficulties due to resource constraints, labor disputes, unstable political environments or natural disasters. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations for any reason, our ability to commercially supply Abstral could be jeopardized. Any delay or interruption in our ability to commercially supply Abstral will result in the loss of potential revenues and could adversely affect the market’s acceptance of that product.

Manufacturers and suppliers are subject to regulatory requirements including current Good Manufacturing Practices (“cGMPs”), which cover, among other things, manufacturing, testing, quality control and recordkeeping relating to Abstral, and are subject to ongoing inspections by FDA, DEA and other regulatory agencies. We do not control the manufacturing processes of third-party manufacturers, and we will be completely dependent on them. If any of our third-party manufacturers cannot successfully manufacture product that conforms to our specifications and the applicable regulatory authorities’ strict regulatory requirements, they will not be able to secure or maintain regulatory approval for the manufacturing facilities. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or any other applicable regulatory authorities do not approve these facilities for the manufacture of Abstral or if they withdraw any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to commercially supply Abstral.

We may not be successful in executing sales and marketing strategies for Abstral. If such sales and marketing strategies are not successful, we may not be able to maintain or obtain FDA approval of a U.S. manufacturer and increase our revenues.

We plan to launch Abstral in the fourth quarter of 2013. In order to do so, we must build a commercial organization including sales, marketing, trade and distribution functions. We do not currently have any commercial organization, and therefore we cannot provide any assurance that we will be able to build an organization that is successful at marketing and selling Abstral. Our competitors currently have sales and marketing organizations and significantly greater experience than we do in selling, marketing and distributing pharmaceuticals, and we may not be able to compete successfully with them.

If our third-party manufacturers or suppliers fail to deliver the required commercial quantities of Abstral and its sub-components and starting materials on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers or suppliers capable of production at a substantially equivalent cost in substantially equivalent volumes and quality, and on a timely basis, the commercialization of Abstral would be impeded, delayed, limited or prevented, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

We face intense competition, including from generic products, and if our competitors market or develop alternative treatments that are demonstrated to be safer or more effective than Abstral, our commercial opportunities will be reduced or eliminated.

The pharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on developing proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as Abstral, such as pharmaceutical companies, including generic drug companies, biotechnology companies, drug delivery companies and academic and research institutions, many of which have greater financial resources, marketing capabilities, including well-established sales forces, manufacturing capabilities, research and development capabilities, experience in obtaining regulatory approvals for product candidates and other resources than we have.

Abstral competes against numerous branded and generic products already being marketed and potentially those which are or will be in development. Many of these competitive products are offered in the United States by large, well-capitalized companies. In the breakthrough cancer pain (“BTcP”) market, physicians often treat BTcP with a variety of short-acting opioid medications, including morphine, morphine and codeine derivatives and fentanyl. Some currently marketed products against which we directly compete include Teva Pharmaceutical Industries Ltd.’s Fentora and Actiq, Archimedes Pharma Ltd.’s Lazanda and BioDelivery Sciences International, Inc.’s Onsolis. Some generic fentanyl products against which Abstral competes are marketed by Mallinckrodt, Inc., Par Pharmaceutical Companies, Inc. and Actavis, Inc. In addition, we are aware of numerous companies developing other treatments and technologies for rapid delivery of opioids to treat BTcP, including transmucosal, transdermal, nasal spray, and inhaled sublingual delivery systems. If these treatments and technologies are successfully developed and approved, they could represent significant additional competition to Abstral. We will also face competition from third parties in obtaining allotments of fentanyl under applicable DEA annual quotas and recruiting and retaining qualified personnel.

If we are unable to achieve and maintain adequate levels of coverage and reimbursement for Abstral, on reasonable pricing terms, its commercial success may be severely hindered.

Successful sales of Abstral depend on the availability of adequate coverage and reimbursement from third-party payors. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming we obtain coverage for Abstral, the resulting reimbursement payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use Abstral unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of Abstral.

In addition, the market for Abstral will depend significantly on access to third-party payors’ drug formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. For example, many third-party payors require usage and failure on cheaper generic versions of Astral prior to providing reimbursement for Abstral and other branded TIRF products, which limits Abstral’s use as a first-line treatment option.

Third-party payors, whether governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of Abstral to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained.

Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions in the United States. Third-party coverage and reimbursement for Abstral may cease to be available or adequate in the United States, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

We anticipate that the majority of our sales of Abstral will be to wholesale pharmaceutical distributors who, in turn, will sell the products to pharmacies, hospitals and other customers. The loss by us of any of these wholesale pharmaceutical distributors’ accounts or a material reduction in their purchases could have a material adverse effect on our business, results of operations, financial condition and prospects.

In addition, these wholesale customers comprise a significant part of the distribution network for pharmaceutical products in the United States. This distribution network has undergone, and may continue to undergo, significant consolidation marked by mergers and acquisitions. As a result, a small number of large wholesale distributors control a significant share of the market. Consolidation of drug wholesalers has increased, and may continue to increase, competitive and pricing pressures on pharmaceutical products. We cannot assure you that we can manage these pricing pressures or that wholesaler purchases will not fluctuate unexpectedly from period to period.

Our sales of Abstral can be greatly affected by the inventory levels our wholesalers carry. We will monitor wholesaler inventory of Abstral using a combination of methods. However, our estimates of wholesaler inventories may differ significantly from actual inventory levels. Significant differences between actual and estimated inventory levels may result in excessive production (requiring us to hold substantial quantities of unsold inventory), inadequate supplies of products in distribution channels, insufficient product available at the retail level, and unexpected increases or decreases in orders from our wholesalers. These changes may cause our revenues to fluctuate significantly from quarter to quarter, and in some cases may cause our operating results for a particular quarter to be below our expectations or the expectations of securities analysts or investors. In addition, at times, wholesaler purchases may exceed customer demand, resulting in reduced wholesaler purchases in later quarters, which may result in substantial fluctuations in our results of operations from period to period. If our financial results are below expectations for a particular period, the market price of our common stock may drop significantly.

We expect to rely on third parties to perform many necessary services for Abstral, including services related to distribution, invoicing, storage and transportation.

We expect to retain third-party service providers to perform a variety of functions related to the sale and distribution of Abstral, key aspects of which will be out of our direct control. For example, we may rely on third parties to provide key services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable management and call center management and, as a result, most of our Abstral inventory may be stored at warehouses maintained by the service providers. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out their contractual duties to us, or encounter physical damage or natural disaster at their facilities, our ability to deliver Abstral to meet commercial demand would be significantly impaired. In addition, we expect to utilize third parties to perform various other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these service providers is insufficient, our ability to continue to market Abstral could be jeopardized or we could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions, and we may not be able to maintain commercial arrangements for these services on reasonable terms.

We will need to increase the size and complexity of our organization in the future, and we may experience difficulties in managing our growth and executing our growth strategy.

Our management and personnel, systems and facilities currently in place may not be adequate to support our business plan and future growth. With the commercialization of Abstral scheduled to begin in the fourth quarter of 2013, we will need to expand our scientific, sales and marketing, managerial, operational, financial and other resources to support our planned development and commercialization activities.

Our need to effectively manage our operations, growth and projects related to Abstral requires that we:

•

continue to improve our operational, financial, management and regulatory compliance controls and reporting systems and procedures;

•

attract and retain sufficient numbers of talented employees;

•

manage our commercialization activities for Abstral effectively and in a cost-effective manner;

•

manage our development efforts effectively while carrying out our contractual obligations to contractors and other third parties; and

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continue to improve our facilities.

In addition, historically, we have utilized and continue to utilize the services of part-time outside consultants to perform a number of tasks for us, including tasks related to accounting and finance, compliance programs, clinical trial management, regulatory affairs, formulation development and other drug development functions. Our growth strategy related to Abstral may also entail expanding our use of consultants to implement these and other tasks going forward. Because we rely on consultants for certain functions of our business, we will need to be able to effectively manage these consultants to ensure that they successfully carry out their contractual obligations and meet expected deadlines. There can be no assurance that we will be able to manage our existing consultants or find other competent outside consultants, as needed, on economically reasonable terms, or at all. If we are not able to effectively expand our organization by hiring new employees and expanding our use of consultants, we may be unable to successfully implement the tasks necessary to effectively execute on our Abstral-related development and commercialization activities and, accordingly, may not achieve our goals.

If we fail to attract and keep management and other key personnel, as well as our board members, we may be unable to successfully commercialize Abstral.

Our ability to compete in the highly competitive biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific, medical and other personnel. We are highly dependent on our management, scientific and medical personnel, as well as our board members. The loss of the services of any of these individuals could impede, delay or prevent the commercialization of Abstral. If we lose the services of any of these individuals, we may not be able to find suitable replacements on a timely basis or at all, and our business would likely be harmed as a result. We do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.

We may not be able to attract or retain qualified management and other key personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses. Our industry has experienced a high rate of turnover of management personnel in recent years. As such, we could have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in our employee recruitment and retention efforts. Many of the other biotechnology and pharmaceutical companies with whom we compete for qualified personnel have greater financial and other resources, different risk profiles and longer histories in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than that which we have to offer. If we are not able to attract and retain the necessary personnel to accomplish our business objectives, we may experience constraints that will impede significantly our ability to implement our business strategy and achieve our business objectives.

In addition, we have scientific and clinical advisors who will assist us in our commercialization strategies for Abstral. These advisors are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, our advisors may have arrangements with other companies to assist those companies in developing products or technologies that may compete with ours.

We face potential product liability exposure relating to Abstral and, if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.

The commercial use of Abstral will expose us to the risk of product liability claims. This risk exists even if a product is approved for commercial sale by the FDA and manufactured in facilities licensed and regulated by the FDA, such as the case with Abstral. Abstral is designed to affect important bodily functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with Abstral could result in injury to a patient or even death. For example, because Abstral is designed to be self-administered by patients, it is possible that a patient could fail to follow instructions and as a result apply a dose in a manner that results in injury. In addition, Abstral is an opioid pain reliever that contains fentanyl, which is regulated as a “controlled substance” under the Controlled Substances Act of 1970 (the “CSA”) and could result in harm to patients relating to its potential for abuse. In addition, a liability claim may be brought against us even if Abstral merely appears to have caused an injury. Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with Abstral. If we cannot successfully defend ourselves against product liability claims we will incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:

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the inability to commercialize Abstral;

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decreased demand for Abstral;

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impairment of our business reputation;

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product recall or withdrawal from the market;

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costs of related litigation;

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distraction of management’s attention from our primary business;

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substantial monetary awards to patients or other claimants; or

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loss of revenues.

We have obtained product liability insurance coverage for commercial product sales with a $5 million per occurrence and a $5 million annual aggregate coverage limit. We also carry excess product liability insurance coverage for commercial product sales with an additional $5 million per occurrence and an additional $5 million annual aggregate coverage limit. Our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our

product liability coverage based on sales of Abstral, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on drugs that had unanticipated side effects, including side effects that are less severe than those of Abstral. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect our business, results of operations, financial condition and prospects.

Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials, including the components of Abstral. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use will be stored at our and our manufacturers’ facilities pending use and disposal. We cannot completely eliminate the risk of contamination, which could cause an interruption of our Abstral commercialization efforts, injury to our employees and others, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we expect that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials will generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this will be the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources. We do not currently carry biological or hazardous waste insurance coverage and our property and casualty and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination.

Abstral will be subject to ongoing and continued regulatory review, which may result in significant expense and limit our ability to commercialize Abstral.

Even after U.S. regulatory approval for a product is obtained as is the case with Abstral, the FDA may still impose significant restrictions on the approved indicated uses for which the product may be marketed or on the conditions of approval. For example, a product’s approval may contain requirements for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor the safety and efficacy of the product. We will also be subject to ongoing FDA obligations and continued regulatory review with respect to the manufacturing, processing, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for Abstral. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs, good clinical practices and good laboratory practices.

In the case of Abstral, we and our contract manufacturers will also be subject to ongoing DEA regulatory obligations, including, among other things, annual registration renewal, security, recordkeeping, theft and loss reporting, periodic inspection and annual quota allotments for the raw material for commercial production of Abstral. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where, or processes by which, the product is manufactured, a regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring product recall, notice to physicians, withdrawal of the product from the market or suspension of manufacturing.

If we, Abstral or the manufacturing facilities for Abstral fail to comply with applicable regulatory requirements, a regulatory agency may:

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impose restrictions on the marketing or manufacturing of Abstral, suspend or withdraw product approvals or revoke necessary licenses;

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issue warning letters, show cause notices or untitled letters describing alleged violations, which may be publicly available;

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commence criminal investigations and prosecutions;

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impose injunctions, suspensions or revocations of necessary approvals or other licenses;

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impose fines or other civil or criminal penalties;

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deny or reduce quota allotments for the raw material for commercial production of Astral;

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suspend or impose restrictions on operations, including costly new manufacturing requirements; or

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seize Abstral or require us to initiate a product recall.

In addition, our product labeling, advertising and promotion are subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, a drug product may not be

promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling, although the FDA does not regulate the prescribing practices of physicians. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

The FDA’s regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could further restrict or regulate post-approval activities relating to Abstral. We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action. If we are not able to achieve and maintain regulatory compliance, we may not be permitted to market Abstral, which would adversely affect our ability to generate revenue and achieve or maintain profitability.

Abstral may cause undesirable side effects or have other unexpected properties that could result in post-approval regulatory action.

If we or others identify undesirable side effects, or other previously unknown problems, caused by Abstral or other products with the same or related active ingredients, a number of potentially significant negative consequences could result, including:

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regulatory authorities may withdraw their approval of Abstral;

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regulatory authorities may require us to recall Abstral;

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regulatory authorities may require the addition of warnings in the product label or narrowing of the indication in the product label;

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we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;

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we may be required to change the way Abstral is administered or modify Abstral in some other way;

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the FDA may require us to conduct additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the product;

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we could be sued and held liable for harm caused to patients; and

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our reputation may suffer.

Any of the above events resulting from undesirable side effects or other previously unknown problems could prevent us from achieving or maintaining market acceptance of Abstral and could substantially increase the costs of commercializing Abstral.

We are subject to numerous complex regulations and failure to comply with these regulations, or the cost of compliance with these regulations, may harm our business.

The research, testing, development, manufacturing, quality control, approval, labeling, packaging, storage, recordkeeping, promotion, advertising, marketing, distribution, possession and use of Abstral are subject to regulation by numerous governmental authorities in the United States. The FDA regulates drugs under the Federal Food, Drug and Cosmetic Act (the “FDCA”) and implementing regulations. Noncompliance with any applicable regulatory requirements can result in refusal to approve products for marketing, warning letters, product recalls or seizure of products, total or partial suspension of production, prohibitions or limitations on the commercial sale of products or refusal to allow the entering into of federal and state supply contracts, fines, civil penalties and/or criminal prosecution. Additionally, the FDA and comparable governmental authorities have the authority to withdraw product approvals that have been previously granted. Moreover, the regulatory requirements relating to Abstral may change from time to time, and it is impossible to predict what the impact of any such changes may be.

Abstral is a controlled substance as defined in the CSA, which establishes, among other things, certain registration, production quotas, security, recordkeeping, reporting, import, export and other requirements administered by the DEA. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have high potential for abuse, no currently accepted medical use in the United States and lack accepted safety for use under medical supervision, and may not be marketed or sold in the United States. Except for research and industrial purposes, a pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative risk of abuse among such substances. Fentanyl is listed by the DEA as a Schedule II substance under the CSA.

The manufacture, shipment, storage, sale and use, among other things, of controlled substances that are pharmaceutical products are subject to a high degree of regulation. For example, generally all Schedule II substance prescriptions, such as prescriptions for fentanyl, must be written and signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

The DEA also conducts periodic inspections of certain registered establishments that handle controlled substances. Facilities that conduct research, manufacture, distribute, import or export controlled substances must be registered to perform these activities and have the

security, control and inventory mechanisms required by the DEA to prevent drug loss and diversion. Failure to maintain compliance, particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results of operations, financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to restrict, suspend or revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

Individual states also have controlled substances laws. Though state controlled substances laws often mirror federal law, because the states are separate jurisdictions, they may separately schedule Abstral. While some states automatically schedule a drug when the DEA does so, other states schedule drugs through rulemaking or a legislative action. State scheduling may delay the commercial sale of Abstral even though we have federal regulatory approval of Abstral, and adverse scheduling could have a material adverse effect on the commercial attractiveness of Abstral. We or our partners must also obtain separate state registrations, permits or licenses in order to be able to obtain, handle, and distribute Abstral for commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions by the states in addition to those from the DEA or otherwise arising under federal law.

Controlled substances are also regulated pursuant to several international drug control treaties. These treaties are enforced by the United Nations Commission on Narcotic Drugs. The United States is a signatory to these treaties and thus must conform its laws and regulations to the international requirements, which generally include licensing, recordkeeping and reporting requirements. Fentanyl is currently classified under the international treaties, and current U.S. controls adequately address international requirements. Any change in the international treaties regarding classification of that product could affect regulation of the substance in the United States.

Annual DEA quotas on the amount of Abstral allowed to be produced in the United States and our specific allocation of fentanyl by the DEA could significantly limit the production or sale of Abstral.

The DEA limits the availability and production of all Schedule II substances through a quota system which includes a national aggregate quota and individual quotas. Because fentanyl is subject to the DEA’s production and procurement quota scheme, the DEA establishes annually an aggregate quota for how much fentanyl may be produced in total in the United States based on the DEA’s estimate of the quantity needed to meet legitimate scientific and medicinal needs. This limited aggregate amount of fentanyl that the DEA allows to be produced in the United States each year is allocated among individual companies, which must submit applications annually to the DEA for individual production and procurement quotas. The DEA requires substantial evidence and documentation of expected legitimate medical and scientific needs before assigning quotas to manufacturers. The DEA may adjust aggregate production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments.

Moreover, we do not know what amounts of fentanyl other companies developing product candidates containing fentanyl may request for future years. The DEA, in assessing factors such as medical need, abuse and diversion potential and other policy considerations, may choose to set the aggregate fentanyl quota lower than the total amount requested by the companies. We are permitted to petition the DEA to increase the annual aggregate quota after it is initially established, but there is no guarantee that the DEA would act favorably upon such a petition. Our production and procurement quota of fentanyl may not be sufficient to meet our commercial demand or clinical development needs. Any delay or refusal by the DEA in establishing the production and/or procurement quota or a reduction in our quota for fentanyl or a failure to increase it over time as we anticipate could delay or stop the commercial sale of Abstral or cause us to fail to achieve our expected operating results, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

Health care reform measures and changes in policies, funding, staffing and leadership at the FDA and other agencies could hinder or prevent the commercial success of Abstral.

In the United States, there have been a number of legislative and regulatory changes to the healthcare system in ways that could affect our future results of operations and the future results of operations of our potential customers. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new Part D prescription drug benefit, which became effective January 1, 2006. Under the prescription drug benefit, Medicare beneficiaries can obtain prescription drug coverage from private sector plans that are permitted to limit the number of prescription drugs that are covered in each therapeutic category and class on their formularies. If Abstral is not widely included on the formularies of these plans, our ability to market Abstral may be adversely affected.

Furthermore, there have been and continue to be a number of initiatives at the federal and state levels that seek to reduce healthcare costs. In March 2010, President Obama signed into law the Patient Protection and Affordable Health Care Act of 2010, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (jointly, the “PPACA”), which includes measures to significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the PPACA of importance to the pharmaceutical industry are the following:

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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs;

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an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23% and 13% of the average manufacturer price for most branded and generic drugs, respectively;

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a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

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extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing both the volume of sales and manufacturers’ Medicaid rebate liability;

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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

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new requirements to report certain financial arrangements with physicians and teaching hospitals, as defined in the PPACA and its implementing regulations, including reporting any “transfer of value” made or distributed to teaching hospitals, prescribers, and other healthcare providers and reporting any ownership and investment interests held by physicians and their immediate family members and applicable group purchasing organizations during the preceding calendar year, with data collection required and reporting to the Centers for Medicare & Medicaid Services (the “CMS”) required by the 90th day of each calendar year;

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a new requirement to annually report drug samples that manufacturers and distributors provide to physicians;

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expansion of health care fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

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a licensure framework for follow-on biologic products;

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;

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creation of the Independent Payment Advisory Board which, beginning in 2014, will have authority to recommend certain changes to the Medicare program that could result in reduced payments for prescription drugs and those recommendations could have the effect of law even if Congress does not act on the recommendations; and

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establishment of a Center for Medicare Innovation at the CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, starting in 2013. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012 (the “ATRA”), which, among other things, delayed for another two months the budget cuts mandated by these sequestration provisions of the Budget Control Act of 2011. The ATRA also reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other health care funding, which could have a material adverse effect on our customers and accordingly, our financial operations.

Additionally, individual states have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and designed to encourage importation from other countries and bulk purchasing. Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This can reduce demand for Abstral or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.

The commercial success of Abstral will depend, in part, upon the availability of coverage and reimbursement from third-party payors at the federal, state and private levels. Third-party payors include governmental programs such as Medicare or Medicaid, private insurance plans and managed care plans. These third-party payors may deny coverage or reimbursement for a product or therapy in whole or in part if they determine that the product or therapy was not medically appropriate or necessary. Also, third-party payors have attempted to control costs by limiting coverage through the use of formularies and other cost-containment mechanisms and the amount of reimbursement for particular procedures or drug treatments.

Additionally, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs and the reform of the Medicare and Medicaid programs. While we cannot predict the full outcome of any such legislation, it may result in decreased reimbursement for prescription drugs, which may further exacerbate industry-wide pressure to reduce prescription drug prices. This could harm our ability to market Abstral and generate revenues. In addition, legislation has been introduced in Congress that, if enacted, would permit more widespread importation or re-importation of pharmaceutical products from foreign countries into the United States, including from countries where the products are sold at lower prices than in the United States. Such legislation, or similar regulatory changes, could lead to a decision to decrease our prices to better compete, which, in turn, could adversely affect our business, results of operations, financial condition and prospects. It is also possible that other legislative proposals having similar effects will be adopted.

Furthermore, regulatory authorities’ assessment of the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects.

If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results of operations, financial condition and prospects could be adversely affected.

As a pharmaceutical company, even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:

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the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

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federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

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the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”), and its implementing regulations, which imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information; and

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state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our business activities could be subject to challenge under one or more of such laws. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in U.S. federal or state health care programs, and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could materially adversely affect our ability to operate our business and our financial results.

The FDA provides guidelines with respect to appropriate promotion and continuing medical and health education activities. Although we endeavor to follow these guidelines, the FDA or the Office of the Inspector General: U.S. Department of Health and Human Services may disagree, and we may be subject to significant liability, including civil and administrative remedies as well as criminal sanctions. In addition, management’s attention could be diverted, and our reputation could be damaged.

Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

We may not be able to obtain and enforce patent rights or other intellectual property rights that cover Abstral and that are of sufficient breadth to prevent third parties from competing against us.

Our success with respect to Abstral will depend in part on our ability to obtain and maintain patent protection in the United States, to preserve our trade secrets, and to prevent third parties from infringing upon our proprietary rights. Fentanyl has been approved for many years and therefore our ability to obtain any patent protection is limited. Composition of matter patents on APIs are a particularly effective form of intellectual property protection for pharmaceutical products as they apply without regard to any method of use. However, we will not be able to obtain composition of matter patents or methods of use patents that cover the APIs in Abstral. As a result, competitors who obtain the requisite regulatory approval can offer products with the same active ingredients as Abstral so long as the competitors do not infringe any formulation patents that we may obtain or license, if any.

In addition, the only patent protection that we can expect will otherwise cover Abstral consists of patents relating to formulations, methods of treatment using certain formulations and methods of manufacturing and packaging. Formulation patents preclude competitors from using a similar formulation. Manufacturing or packaging patents preclude competitors from using the same manufacturing or packaging methods. However, these type of patents do not preclude a competitor from making and marketing the same composition of matter unless they use the same formulation or manufacturing or packaging methods. Any patents that we may obtain may be too narrow in scope and thus easily circumvented by competitors.

We have multiple pending patent applications in the United States directed to formulations for our fentanyl product. We have a number of pending applications and issued patents in the United States that pertain to fentanyl formulations. We can give no assurances that any patents will issue, that if they do issue or have issued, they will provide sufficient protection against competitors, or that they would be valid and enforceable.

Due to legal standards relating to patentability, validity, enforceability and claim scope of patents covering pharmaceutical inventions, our ability to obtain, maintain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any patents we may obtain or license may not provide us with sufficient protection for Abstral to afford a commercial advantage against competitive products or processes, including those from branded and generic pharmaceutical companies. In addition, we cannot guarantee that any patents will issue from any pending or future patent applications owned by or licensed to us. Even if patents have issued or will issue, we cannot guarantee that the claims of these patents are or will be held valid or enforceable by the courts or will provide us with any significant protection against competitive products or otherwise be commercially valuable to us.

Patent applications in the United States are generally maintained in confidence for up to eighteen months after their filing. Similarly, publication of discoveries in scientific or patent literature often lag behind actual discoveries. Consequently, we cannot be certain that we or our licensors were the first to invent, or the first to file patent applications on Abstral. In the event that a third party has also filed an U.S. patent application relating to our drug product or a similar invention, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial and it is possible that our efforts would be unsuccessful, resulting in a loss of our U.S. patent position.

In addition, third parties may challenge our in-licensed patents and any of our own patents that we may obtain, which could result in the invalidation or unenforceability of some or all of the relevant patent claims. Litigation or other proceedings to enforce or defend intellectual property rights is very complex, expensive, and may divert our management’s attention from our core business and may result in unfavorable results that could adversely affect our ability to prevent third parties from competing with us.

The patent positions of pharmaceutical and biotechnology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. Changes in either the patent laws or in the interpretations of patent laws in the United States may diminish the value of our intellectual property. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.

The degree of future protection of our proprietary rights is uncertain. Patent protection may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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we might not have been the first to invent or the first to file the inventions covered by each of our pending patent applications and issued patents;

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others may independently develop similar or alternative technologies or duplicate any of our technologies;

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the patents of others may have an adverse effect on our business;

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it is possible that none of our or our licensors’ pending patent applications will result in issued patents;

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any patents we obtain or our licensors’ issued patents may not encompass commercially viable products, may not provide us with any competitive advantages, or may be challenged by third parties;

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any patents we obtain or our in-licensed issued patents may not be valid or enforceable; or

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we may not develop additional proprietary technologies that are patentable.

If we or our licensors fail to prosecute, maintain and enforce patent protection for Abstral or product candidates, our ability to develop and commercialize Abstral may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products. This failure to properly protect the intellectual property rights relating to Abstral could have a material adverse effect on our business, financial condition and results of operation. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

Proprietary trade secrets and unpatented know-how are also very important to our business. Although we have taken steps to protect our trade secrets and unpatented know-how, by entering into confidentiality agreements with third parties, and proprietary information and invention agreements with certain employees, consultants and advisors, third parties may still obtain this information or we may be unable to protect our rights. We also have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. There can be no assurance that binding agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets and unpatented know-how will not otherwise become known or be independently discovered by our competitors. If trade secrets are independently discovered, we would not be able to prevent their use. Enforcing a claim that a third party illegally obtained and is using our trade secrets or unpatented know-how is expensive and time consuming, and the outcome is unpredictable.

Although we expect all of our employees to assign their inventions to us, and all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how, information or technology to enter into confidential information and invention agreements, we cannot provide any assurances that all such agreements have been duly executed or will be held enforceable.

If we or our collaborators or licensors choose to go to court to stop a third party from using the inventions claimed in our own or in-licensed patents, that third party may ask the court to rule that the patents are invalid and/or should not be enforced against that third party. These lawsuits are expensive and would consume time and other resources even if we or they, as the case may be, were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and that we or they, as the case may be, do not have the right to stop others from using the inventions.

There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the third party on the ground that such third-party’s activities do not infringe our owned or in-licensed patents. In addition, our own or in-licensed patents may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a reexamination or opposition proceeding before a governmental patent agency, or during litigation.

We may also not be able to detect infringement of our own or in-licensed patents, which may be especially difficult for methods of manufacturing or formulation products. While we intend to take actions reasonably necessary to enforce our patent rights, we depend, in part, on our licensors and collaborators to protect a substantial portion of our proprietary rights.

If we are sued for infringing intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell Abstral and use our proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S. issued patents and pending patent applications, which are owned by third parties, exist in the fields relating to Abstral. As the medical device, biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert Abstral infringes their patent rights. Moreover, it is not always clear to industry participants, including us, which patents cover various types of medical devices, drugs, products or their methods of use. Thus, because of the large number of patents issued and patent applications filed in our fields, there may be a risk that third parties may allege they have patent rights encompassing Abstral.

In addition, there may be issued patents of third parties of which we are currently unaware that are infringed or are alleged to be infringed by Abstral. Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States are typically not published until eighteen months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our own and in-licensed issued patents or our pending applications. Our competitors may have filed, and may in the future file, patent applications covering Abstral. Any such patent application may have priority over our own and in-licensed patent applications or patents, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed an U.S. patent application on inventions similar to those owned or in-licensed to us, we or, in the case of in-licensed technology, the licensor may have to participate in an interference proceeding to determine priority of invention.

If another party has reason to assert a substantial new question of patentability against any of our claims in our own and in-licensed U.S. patents, the third party can request that the patent claims be reexamined, which may result in a loss of scope of some claims or a loss of the entire patent. In addition to potential infringement suits and, interference and reexamination proceedings, we may become a party to patent opposition proceedings where either the patentability of the inventions subject of our patents are challenged, or we are challenging the patents of others. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful.

We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property rights alleging that Abstral and/or proprietary technologies infringe their intellectual property rights. These lawsuits are costly and could adversely affect our

results of operations and divert the attention of managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third party’s patents and would order us or our partners to stop the activities covered by the patents. In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other party’s patents.

If a third-party’s patents was found to cover Abstral, proprietary technologies or their uses, we or our collaborators could be enjoined by a court and required to pay damages and could be unable to continue to commercialize Abstral or use our proprietary technologies unless we or they obtained a license to the patent. A license may not be available to us or our collaborators on acceptable terms, if at all. In addition, during litigation, the patent holder could obtain a preliminary injunction or other equitable relief which could prohibit us from making, using or selling Abstral pending a trial on the merits, which could be years away.

There is a substantial amount of litigation involving patent and other intellectual property rights in the device, biotechnology and pharmaceutical industries generally. If a third party claims that we or our collaborators infringe its intellectual property rights, we may face a number of issues, including, but not limited to:

•

infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;

•

substantial damages for infringement, which we may have to pay if a court decides that the product at issue infringes or violates the third party’s rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner’s attorneys’ fees;

•

a court prohibiting us from selling or licensing Abstral unless the third party licenses its product rights to us, which it is not required to do;

•

if a license is available from a third party, we may have to pay substantial royalties, upfront fees and/or grant cross-licenses to intellectual property rights for Abstral; and

•

redesigning Abstral so it does not infringe, which may not be possible or may require substantial monetary expenditures and time.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise additional funds or otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed to us alleged trade secrets of their other clients or former employers. As is common in the biotechnology and pharmaceutical industry, certain of our employees were formerly employed by other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Moreover, we engage the services of consultants to assist us in the development of Abstral, many of whom were previously employed at or may have previously been or are currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that these employees and consultants or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers or their former or current customers. Litigation may be necessary to defend against these types of claims. Even if we are successful in defending against any such claims, any such litigation would likely be protracted, expensive, a distraction to our management team, not viewed favorably by investors and other third parties, and may potentially result in an unfavorable outcome.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements. Periodic maintenance fees on our own and in-licensed patents are due to be paid to the governmental patent agencies over the lifetime of the patents. Future maintenance fees will also need to be paid on other patents which may be issued to us. We have systems in place to remind us to pay these fees, and we employ outside firms to remind us or our licensor to pay annuity fees due to patent agencies on our patents and pending patent applications. The various governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.

Risks Relating to Our Product Development Efforts

We are largely dependent on the success of our two leading drug candidates, neither of which may receive regulatory approval or be successfully commercialized.

Our business prospects depend heavily on successfully developing and commercializing our lead product candidate, NeuVax™. The FDA has agreed in the SPA for our Phase 3 PRESENT clinical trial of NeuVax™ that the design, resulting data, and planned analyses of the Phase 3 study support an acceptable regulatory submission for marketing approval. There is no assurance, however, that the Phase 3 study will be successful, that a single Phase 3 trial will support marketing approval, or that we will be able to obtain marketing approval for NeuVax™ or any other product candidate.

Before they can be marketed, our products in development must be approved by the FDA or similar foreign governmental agencies. The process for obtaining FDA approval is both time-consuming and costly, with no certainty of a successful outcome. Before obtaining regulatory approval for the sale of any drug candidate, we must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our product candidates. Although NeuVax™ has exhibited no serious adverse events (“SAEs”) associated with the drug in the Phase 1/2 clinical trial, SAEs or other unexpected side effects may arising during further testing in our Phase 3. A failure of any preclinical study or clinical trial can occur at any stage of testing. The results of preclinical and initial clinical testing of these products may not necessarily indicate the results that will be obtained from later or more extensive testing. It also is possible to suffer significant setbacks in advanced clinical trials, even after obtaining promising results in earlier trials.

A number of different factors could prevent us from obtaining regulatory approval or commercializing our product candidates on a timely basis, or at all.

We, the FDA or other applicable regulatory authorities, an Independent Data Safety Monitoring Board or “IDSMB” governing the Phase 3 trial, or an institutional review board, or “ IRB ,” which is an independent committee registered with and overseen by the United States Department of Health and Human Services, or “ HHS ,” that functions to approve, monitor and review biomedical and behavioral research involving humans, may suspend clinical trials of a drug candidate at any time for various reasons, including if we or they believe the subjects or patients participating in such trials are being exposed to unacceptable health risks. Among other reasons, adverse side effects of a drug candidate on subjects or patients in a clinical trial could result in the FDA or other regulatory authorities suspending or terminating the trial and refusing to approve a particular drug candidate for any or all indications of use.

Clinical trials of a new drug candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the drug candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, and delays in patient enrollment can result in increased costs and longer development times than we expect at present. For example, breast cancer patients can be enrolled in our Phase 3 PRESENT study of NeuVax as early as the time they are prescribed standard of care treatment, which typically lasts approximately eight to nine months, but under the SPA can be treated in the Phase 3 PRESENT study only after completing standard of care treatment and being screened for HER2 and HLA (haplotype) status. We expect that a significant percentage of patients who are originally enrolled in the study will not be treated with NeuVax, because of differences between their local and central diagnoses on the basis of HER2 status, haplotype or imaging requirements under the SPA, which requires that patients be in remission at the time of initiating the NeuVax inoculation series. Other patients who are enrolled at the outset of their standard of care also may eventually choose for personal reasons not to participate in the study. We also compete for eligible patients with other breast cancer trials underway from time to time, and we may experience delays in patient enrollment due to the pendency of other large trials underway in the same patient population.

Clinical trials also require the review and oversight of IRBs, which approve and continually review clinical investigations to protect the rights and welfare of human subjects. An inability or delay in obtaining IRB approval could prevent or delay the initiation and completion of clinical trials, and the FDA may decide not to consider any data or information derived from a clinical investigation not subject to initial and continuing IRB review and approval.

In addition, cancer vaccines are a relatively new form of therapeutic and a very limited number of such products have received regulatory approval. Therefore, the FDA or other regulatory authority may apply standards for approval of a new cancer vaccine that is different from past experience.

Numerous factors could affect the timing, cost or outcome of our drug development efforts, including the following:

•

difficulties or delays in enrolling patients in our Phase 3 PRESENT study of NeuVax™ or our Phase 1/2 clinical trials of FBP in conformity with required protocols or projected timelines or in our other NeuVax™ clinical trials;

•

conditions imposed on us by the FDA, including the possibility that the FDA would require an additional Phase 3 trial of NeuVax™, or comparable foreign authorities regarding the scope or design of our clinical trials;

•

difficulties or delays in arranging for third parties to conduct clinical trials of our product candidates;

•

problems in engaging IRBs to oversee trials or problems in obtaining or maintaining IRB approval of studies;

•

third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner;

•

our drug candidates having very different chemical and pharmacological properties in humans than in laboratory testing and interacting with human biological systems in unforeseen, ineffective or harmful ways, and the possibility that our previous Phase 2 trials were not indicative of our drug candidates’ performance in larger patient populations;

•

the need to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;

•

insufficient or inadequate supply or quality of our drug candidates or other necessary materials necessary to conduct our clinical trials;

•

effects of our drug candidates not being the desired effects or including undesirable side effects or the drug candidates having other unexpected characteristics;

•

negative or inconclusive results from our clinical trials or the clinical trials of others for drug candidates similar to our own or inability to generate statistically significant data confirming the efficacy of the product being tested;

•

adverse results obtained by other companies developing similar drugs;

•

modification of the drug during testing;

•

changes in the FDA’s requirements for our testing during the course of that testing; and

•

reallocation of our limited financial and other resources to other clinical programs.

It is possible that none of the product candidates that we develop will obtain the appropriate regulatory approvals necessary for us to begin selling them or that any regulatory approval to market a product may be subject to limitations on the indicated uses for which we may market the product. The time required to obtain FDA and other approvals is unpredictable but often can take years following the commencement of clinical trials, depending upon the complexity of the drug candidate. Any analysis we perform of data from clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenue from the particular drug candidate.

We previously experienced interruptions in the supply of a NeuVax™ adjuvant component that delayed patient enrollment in our Phase 3 PRESENT trial of NeuVax™, and we will continue to be dependent upon the sole source of supply of this component.

We do not have the facilities or expertise to manufacture supplies of any of our potential product candidates for clinical trials. Accordingly, we will be dependent upon contract manufacturers for these supplies. There can be no assurance that we will be able to secure needed supply arrangements on attractive terms, or at all. Our failure to secure these arrangements as needed could have a materially adverse effect on our ability to complete the development of our product candidates or, if we obtain regulatory approval for our product candidates, to commercialize them.

Our current plans call for the manufacture of our compounds by contract manufacturers offering research grade, Good Laboratory grade and Good Manufacturing Practices grade materials for preclinical studies (e.g., toxicology studies) and for clinical use. Certain of our product candidates are complex molecules requiring many synthesis steps, which may lead to challenges with purification and scale-up. These challenges could result in increased costs and delays in manufacturing.

NeuVax™ is administered in combination with Leukine ^® , a “ GM-CSF “ available in both liquid and lyopholyzed forms exclusively from Genzyme Corporation, or “ Genzyme ,” a subsidiary of Sanofi-Aventis. In June 2012, Genzyme recalled all liquid Leukine ^® without explanation, and we began incorporating lyopholyzed Leukine ^® as another option in addition to liquid Leukine ^®

in the administration of NeuVax™ at our Phase 3 PRESENT study sites in the U.S. as permitted by the FDA and at non-U.S. sites where we have obtained foreign regulatory approval. We believe our current supply of lyopholyzed GM-CSF is adequate for the completion of our Phase 3 PRESENT trial.

We will continue to be dependent on Genzyme by us for our supply of Leukine ^® in connection with the ongoing NeuVax™ trials and the eventual commercial manufacture of NeuVax™. Any future interruptions in the availability of Leukine ^® , or any determination by us to change the GM-CSF used with NeuVax™, could have a material adverse effect on our NeuVax™ trials and any commercialization of NeuVax™.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

Loan and Security Agreement

The Loan is secured by a security interest in all the company’s assets, excluding intellectual property. We have agreed in the loan and security agreement not to sell, transfer, assign or encumber any of our intellectual property and to other customary negative and affirmative covenants.

Amended Employment Agreement

On May 8, 2013, we entered into an amendment to our employment agreement with Mark J. Ahn, Ph.D., our president and Chief Executive Officer, to extend the expiration date of the employment agreement to December 31, 2016. The employment agreement previously was to expire on March 30, 2014. No other material term or provision of Dr. Ahn’s employment was affected by the amendment.

ITEM 6. EXHIBITS


Exhibit Number		Description

10.1		Amendment No. 1 to Employment Agreement made as of March 11, 2013 between Galena Biopharma, Inc. and Rosemary Mazanet, M.D., Ph.D.(1)*

10.2		Amendment No. 2 to Employment Agreement made as of March 11, 2013 between Galena Biopharma, Inc. and Mark Schwartz, Ph.D.(1)*

10.3		Amendment No. 1 to Employment Agreement made as of May 8, 2013 between Galena Biopharma, Inc. and Mark J. Ahn, Ph.D.*

10.4		Asset Purchase Agreement dated March 15, 2013 between Galena Biopharma, Inc. and Orexo AB.+

10.5		License Agreement dated March 15, 2013 between Galena Biopharma, Inc. and Orexo AB.

10.6		Loan and Security Agreement dated May 8, 2013 among Galena Biopharma, Inc., Apthera, Inc., Oxford Finance LLC and the Lenders listed on Schedule 1.1 thereto.

10.7		Form of warrants granted on May 8, 2013 under the Loan and Security Agreement set forth as Exhibit 10.6.

31.1		Sarbanes-Oxley Act Section 302 Certification of Mark J. Ahn, Ph.D.

31.2		Sarbanes-Oxley Act Section 302 Certification of Ryan M. Dunlap.

32.1		Sarbanes-Oxley Act Section 906 Certification of Mark J. Ahn, Ph.D., and Ryan M. Dunlap.

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema.

101.CAL		XBRL Taxonomy Extension Calculation.

101.DEF		XBRL Taxonomy Extension Definition.

101.LAB		XBRL Taxonomy Extension Label.

101.PRE		XBRL Taxonomy Extension Presentation.

(1)	Previously filed as an Exhibit to the company’s Form 10-K filed on March 12, 2013 (File No. 001-33958) and incorporated by reference herein.

*	Indicates a management contract or compensatory plan or arrangement.

+	This exhibit was filed separately with the Commission pursuant to an application for confidential treatment. The confidential portions of the exhibit have been omitted and have been marked by an asterisk.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


GALENA BIOPHARMA, INC.

By:		/s/ Mark J. Ahn
		Mark J. Ahn, Ph.D.
		President and Chief Executive Officer

		Date: May 9, 2013

By:		/s/ Ryan M. Dunlap
		Ryan M. Dunlap
		Director of Finance (Principal Financial and Accounting Officer)

		Date: May 9, 2013

Exhibit 10.3

AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT

This Amendment No. 1 to Employment Agreement (this “ Amendment ”) is made as of May 8, 2013, by and between Galena Biopharma, Inc. (formerly RXi Pharmaceuticals Corporation), a Delaware corporation (“ Employer ”), and Mark J. Ahn, Ph.D., an individual and resident of the State of Oregon (“ Employee ”), with reference to the following facts:

WHEREAS, Employer and Employee are parties to an Employment Agreement dated as of March 31, 2011 (the “ Employment Agreement ”), pursuant to which Employee serves as Employer’s President and Chief Executive Officer; and

WHEREAS, Employer and Employee wish to amend the Employment Agreement in certain respects as provided in this Amendment.

NOW, THEREFORE, in consideration of the foregoing and other consideration, the receipt and sufficiency of which hereby are acknowledged, Employer and Employee hereby agree as follows:

1. Definitions . Terms not otherwise defined in this Amendment shall have the meanings attributed to such terms in the Employment Agreement. References in the Employment Agreement and this Amendment to this “Agreement” mean the Employment Agreement as amended by this Amendment and as further amended from time to time as provided in the Employment Agreement.

2. Amendments .

(a) References in the Employment Agreement to “RXi Pharmaceuticals Corporation, the “Company” and “Employer” shall mean Galena Biopharma, Inc.

(b) The reference in Section 2 of the Employment Agreement to Employer’s offices in “Worcester, Massachusetts,” is hereby amended to read “Portland, Oregon, or its environs.”

(c) The parties acknowledge and agree that the Minimum 2011 Financing was timely achieved for all purposes of the Employment Agreement.

(d) Section 4 of the Employment Agreement is hereby amended and restated in its entirety as follows:

4. Term . Employee’s employment shall commence on the Effective Date and shall terminate on December 31, 2016 (the “ Term ”), unless sooner terminated in accordance with Section 6. Neither Employer nor Employee shall have any obligation to extend or renew this Agreement.

(e) References in Section 13 of the Employment Agreement to “California” are hereby amended to “California” are hereby amended to read “Oregon.”

3. No Other Changes to the Employment Agreement . Except as expressly amended by this Amendment, all of the terms of the Employment Agreement shall remain in full force and effect.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.

Exhibit 10.4

T EXT M ARKED B Y [* * *] H AS B EEN O MITTED P URSUANT T O A R EQUEST F OR C ONFIDENTIAL T REATMENT A ND W AS F ILED S EPARATELY W ITH T HE S ECURITIES A ND E XCHANGE C OMMISSION .

E XECUTION V ERSION

ASSET PURCHASE AGREEMENT

by and between

OREXO AB

and

GALENA BIOPHARMA, INC.

March 15, 2013

TABLE OF CONTENTS


		Page

ARTICLE I	DEFINITIONS		1

Section 1.01.	Definitions		1

Section 1.02.	Interpretation		7

ARTICLE II	PURCHASE AND SALE OF ACQUIRED ASSETS		8

Section 2.01.	Purchase and Sale		8

Section 2.02.	Assumed Liabilities		10

Section 2.03.	Consents of Third Parties		10

Section 2.04.	First Right to Future Fentanyl Product		11

ARTICLE III	CLOSING		12

Section 3.01.	Closing		12

Section 3.02.	Purchase Price		13

Section 3.03.	Withholding		14

ARTICLE IV	CONDITIONS TO CLOSING		14

Section 4.01.	Conditions to Obligations of Purchaser		14

Section 4.02.	Conditions to Obligation of Seller		15

Section 4.03.	Frustration of Closing Conditions		16

ARTICLE V	REPRESENTATIONS AND WARRANTIES OF SELLER		16

Section 5.01.	Authority		16

Section 5.02.	No Conflicts; Consents		16

Section 5.03.	Acquired Assets		17

Section 5.04.	Product Liability		17

Section 5.05.	Intellectual Property		17

Section 5.06.	Transferred Contracts		18

Section 5.07.	Litigation		18

Section 5.08.	Brokers or Finders		19

ARTICLE VI	COVENANTS OF SELLER		19

Section 6.01.	Access		19

Section 6.02.	Other Covenants		19

Section 6.03.	Exclusive Dealing		19



Section 6.04.	Competing Products	20

Section 6.05.	Financial Accounting Information	20

Section 6.06.	Payment of Indebtedness	20

ARTICLE VII	REPRESENTATIONS AND WARRANTIES OF PURCHASER	21

Section 7.01.	Authority	21

Section 7.02.	No Conflicts; Consents	21

Section 7.03.	Litigation	22

Section 7.04.	Availability of Funds	22

Section 7.05.	Brokers or Finders	22

ARTICLE VIII	COVENANTS OF PURCHASER	22

Section 8.01.	Advise Seller	22

Section 8.02.	Access to Information	23

Section 8.03.	Records	23

Section 8.04.	Efforts	23

Section 8.05.	DISCLAIMER	25

ARTICLE IX	MUTUAL COVENANTS	26

Section 9.01.	Efforts	26

Section 9.02.	Transfer Agreement	27

Section 9.03.	Bulk Transfer Laws	27

Section 9.04.	Transfer Taxes	27

Section 9.05.	Purchase Price Allocation	27

Section 9.06.	Recordation of Transferred Intellectual Property	27

Section 9.07.	Confidentiality and Confidential Information	28

ARTICLE X	INDEMNIFICATION	29

Section 10.01.	Indemnification by Seller	29

Section 10.02.	Indemnification by Purchaser	29

Section 10.03.	Indemnification Procedure	30

Section 10.04.	Procedures Related to Indemnification for Other Claims	31

Section 10.05.	Losses Net of Insurance, Tax Benefits	31

Section 10.06.	Limitation on Indemnification	31

Section 10.07.	Termination of Indemnification	32

Section 10.08.	Tax Treatment of Indemnification Payments	32

Section 10.09.	No Setoff	33



Section 10.10.	No Double Recovery	33

ARTICLE XI	TERMINATION	33

Section 11.01.	Termination	33

Section 11.02.	Return of Confidential Information	33

Section 11.03.	Effect of Termination	34

ARTICLE XII	MISCELLANEOUS	34

Section 12.01.	Assignment	34

Section 12.02.	Non-Waiver	34

Section 12.03.	No Third-Party Beneficiaries	34

Section 12.04.	Severability	35

Section 12.05.	Entire Agreement; Amendments	35

Section 12.06.	Notices	35

Section 12.07.	Public Announcements	36

Section 12.08.	Governing Law	36

Section 12.09.	Dispute Resolution	36

Section 12.10.	Expenses	37

Section 12.11.	Relationship of the Parties	37

Section 12.12.	Counterparts	37

iii

Exhibits


Exhibit A	-	Transfer Agreement
Exhibit 1.01(ii)	-	Seller’s Knowledge Individuals
Exhibit 2.01(a)(i)(A)	-	Transferred Marks
Exhibit 2.01(a)(i)(B)	-	Transferred Copyrights
Exhibit 2.01(a)(ii)	-	Transferred Contracts
Exhibit 3.01(b)(ii)	-	Form of Bill of Sale
Exhibit 3.01(b)(iii)	-	Form of Assignment and Assumption Agreement
Exhibit 3.01(b)(iv)	-	Form of Trademark Assignment Agreement
Exhibit 3.01(b)(v)	-	Form of License Agreement

Schedules

Schedule 5.02(a)	-	Third Party Consents
Schedule 5.02(b)	-	Governmental or Regulatory Approvals
Schedule 5.03	-	Acquired Assets
Schedule 5.05	-	Intellectual Property
Schedule 5.06	-	Transferred Contracts
Schedule 5.07	-	Litigation

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”), dated as of March 15, 2013, is made by and between Orexo AB , a public limited company organized and existing under the laws of Sweden (“ Seller ”), and Galena Biopharma, Inc. , a Delaware corporation (“ Purchaser ”). Seller and Purchaser are sometimes individually referred to herein as a “ Party ” and are sometimes collectively referred to herein as the “ Parties ”. Capitalized terms not otherwise defined in the text of this Agreement shall have the meanings set forth in ARTICLE I of this Agreement.

W I T N E S S E T H :

WHEREAS, Seller is the owner of certain patents and know-how relating to its proprietary product for pain treatment marketed as Abstral™ in the United States that contains fentanyl as its sole active ingredient and is approved under the Product NDA, including all dosage strengths thereof (the “ Product ”);

WHEREAS, Seller is a party to that certain Termination and Asset Transfer Agreement for Abstral in the United States of America by and between Seller and Strakan International SARL (“ Strakan ”) dated as of June 1, 2012 (the “ Termination Agreement ”), as amended on November 1, 2012, and attached hereto as Exhibit A (the “ First Amendment ,” and together with the Termination Agreement, the “ Transfer Agreement ”);

WHEREAS, pursuant to the terms of the Transfer Agreement Strakan is obligated to transfer and license to Seller certain assets relating to the Product (collectively, the “ Strakan Assets ”);

WHEREAS, Seller desires to sell, and Purchaser desires to purchase from Seller, certain assets of Seller (including the Transfer Agreement) relating exclusively to the Product in the Territory, upon the terms and subject to the conditions set forth in this Agreement; and

WHEREAS, in connection with such sale, the Parties desire to enter into the License Agreement (as defined below) whereby certain intellectual property rights of Seller related to the Product will be licensed to Purchaser.

NOW, THEREFORE, in consideration of the mutual covenants herein set forth, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions .

(a) For purposes of this Agreement, the following terms shall have the corresponding meanings set forth below:

“ Acquisition ” means the consummation of the transactions contemplated by this Agreement and the Ancillary Agreement.

“ Affiliate ” means, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person; and for the purposes of this definition, “ control ” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing. For the avoidance of doubt, Strakan is not, and shall not be considered an “Affiliate” of Seller for any purpose pursuant to this Agreement or any Ancillary Agreement.

“ Ancillary Agreement ” means individually and collectively, each of the Confidentiality Agreement and the Other Acquisition Documents (as and when executed and delivered).

“ Average Field Force ” means, for any month or calendar quarter, the simple average number of Field Personnel in the Field Force each day of such month or calendar quarter, as applicable, which shall be the quotient determined by dividing (i) the sum of the number of Field Personnel in the Field Force on each day of such month or calendar quarter by (ii) the number of days in such month or calendar quarter, as applicable.

“ Business Day ” means a day other than Saturday or Sunday or a day on which banks are required or authorized to close in the State of New York.

“ Closing Consideration ” means ten million dollars ($10,000,000).

“ Code ” means the United States Internal Revenue Code of 1986, as amended.

“ Competing Product ” means any fast-acting formulation of fentanyl with fentanyl as its sole active ingredient.

“ Confidentiality Agreement ” means that certain letter agreement, dated October 25, 2012, between Seller and Purchaser.

“ Confidential Information ” means all information provided by one Party to the other Party in connection with this Agreement, including know-how, scientific information, pre-clinical and clinical data, adverse event information, formulas, methods and processes, pricing information (including discounts, rebates and other price adjustments) and other terms and conditions of sales, customer information, business plans, and all other intellectual property which is not publicly available and is owned or controlled by a Party.

“ Contracts ” means all leases, subleases, indentures, licenses, agreements, contracts, commitments and all other legally binding arrangements, whether written or oral.

“ Deferred Consideration ” means five million dollars ($5,000,000).

“ Detail ” means an interactive face-to-face visit by Field Personnel with a medical professional having prescribing authority or who is able to influence prescribing and purchasing decisions, including pharmacists, pharmacy benefits managers, contracting agents, and payors within the target audience, during which approved uses, safety, effectiveness, contraindications, side effects, warnings and/or other relevant characteristics of a pharmaceutical product are discussed in an effort to increase prescribing preferences and purchases of a pharmaceutical product for its approved uses. “Detailing ” means the act of performing Details.

“ Dollars ” and “ $ ” mean lawful money of the United States of America.

“ FDA ” means the United States Food and Drug Administration.

“ Field Personnel ” means full-time employees of Purchaser and independent contractors engaged by Purchaser on a [***] basis who (x) are [***] ; (y) spend [***] of their time as a [***] ; and (z) [***] .

“ GAAP ” means generally accepted accounting principles in the United States, consistently applied.

“ Governmental or Regulatory Authority ” means any court, tribunal, arbitrator, agency, commission, official or other instrumentality of any country, federal, state, county, city or other political subdivision, foreign or domestic, including without limitation the FDA and any other governmental instrumentality with responsibility for granting any licenses, registrations or regulatory approvals.

“ Law ” means all laws, statutes, rules, regulations, ordinances and other pronouncements or orders having the effect of law of any Governmental or Regulatory Authority.

“ Liabilities ” means any and all assessments, losses, damages (compensatory, punitive or other), liabilities, obligations, commitments, reimbursements, costs and expenses of any kind or nature, actual, contingent, present or future.

“ Licensed Intellectual Property ” has the meaning defined in the License Agreement.

“ Liens ” means liens, claims, encumbrances, security interests, options or charges.

“ Material Adverse Effect ” means any event that has a material, adverse effect on the manufacture, distribution, marketing or sale by or on behalf of the Purchaser of the Product in the Territory as contemplated by this Agreement and the Ancillary Agreements, but excluding the events or effects of: (i) changes to the pharmaceutical industry and markets in which Purchaser or Seller operate, to the extent such changes do not have a disproportionately adverse effect on the Intended Use of the Product in the Territory; (ii) changes in the United States or world financial markets in general; (iii) changes arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing or underway as of the date hereof; (iv) any action taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby or with respect to the Product or the Intended

Use of the Product in the Territory; (v) any matter of which Purchaser is aware on the date hereof; or (vi) any effect resulting from the public announcement of this Agreement, compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement.

“ NDA ” means a New Drug Application or supplemental New Drug Application, as defined in the United States Federal Food, Drug and Cosmetic Act.

“ Net Sales ” means, for any period, the aggregate of the gross amounts invoiced or otherwise billed, charged or received by a Selling Person for the arms’ length sale or other commercial disposition to non-Affiliates of such Selling Person of a Product, less the following deductions to the extent specifically related to the Product and actually allowed, incurred or paid during such period: (i) reasonable cash discounts, returns, allowances, rebates, or chargebacks; (ii) sales, value-added, excise taxes, tariffs and duties, and other taxes directly related to the sale (but excluding income or net profit taxes or franchise taxes of any kind); and (iii) amounts allowed or credited on returns, provided that all of the foregoing deductions are incurred in the ordinary course and calculated in accordance with GAAP during the applicable calculation period throughout the Selling Person’s organization. All such discounts, allowances, credits, rebates and other deductions shall be fairly and equitably allocated to the Product and other products or services of a Selling Person, such that the Product does not bear a disproportionate portion of such deductions. Any disposal of the Product at no charge for, or use without charge in, clinical or preclinical trials (but excluding post-approval clinical trials for which compensation is received by the Selling Person), given as free samples, or distributed at no charge to patients unable to purchase the same shall not be included in Net Sales, in each case, except to the extent that a Selling Person has received any consideration for such Product.

For sake of clarity and avoidance of doubt, the transfer of Product by a Selling Person or one of its Affiliates to another Affiliate of such Selling Person or to a sublicensee of such Selling Person for resale shall not be considered a sale; in such cases, Net Sales shall be determined based on the amount invoiced or otherwise billed by such Affiliate or sublicensee to an independent Third Party, less the Net Sales deductions allowed under this definition.

In the case of any sale of a Product for value other than in an arm’s length transaction exclusively for cash, such as barter or counter-trade, Net Sales shall be calculated based on the fair market value of the non-cash consideration received in connection with such sale and based on the full list price for non-arm’s length transactions. If a Product is sold together with another product and not separately invoiced or billed, the Parties shall agree upon the appropriate allocation of the amount received in consideration for the Product, which allocation shall reflect the fair market value of the Product and the other product.

“ Other Acquisition Documents ” means (i) the Bill of Sale, (ii) the Assignment and Assumption Agreement, (iii) the License Agreement, and (iv) the Trademark Assignment Agreement.

“ Permitted Liens ” means all (i) mechanics’, carriers’, workmen’s, repairmen’s, warehousemen’s or other like Liens arising or incurred in the ordinary course of business and Liens for Taxes and other governmental charges which are not yet due and payable; (ii) Liens in

favor of Purchaser or its Affiliates; and (iii) other imperfections of title or encumbrances, if any, which do not, individually or in the aggregate, materially impair the value or continued use and operation of the assets to which they relate.

“ Person ” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, pool, syndicate, sole proprietorship, unincorporated organization, Governmental or Regulatory Authority, or any other form of legal entity not specifically listed herein.

“ Product NDA ” means NDA No. 22-510 relating to the Product in the Territory.

“ Product Patents ” means each of (i) the United States Patent Number 6,761,910, (ii) United States Patent Number 6,759,059, and (iii) United States Patent Number 7,910,132, including any divisions, continuations, reissues and reexaminations thereof in the Territory.

“ Seller Liability Cap ” means an amount equal to $ [*******] .

“ Seller’s Knowledge ” means the actual knowledge, without investigation, of any of the individuals employed by Seller as of the date hereof with the titles set forth in Exhibit 1.01(ii) .

“ Selling Person ” means the Purchaser, each of its Affiliates and each (A) licensee, sublicensee, assignee or other grantee of rights from Purchaser or any of its Affiliates or another Selling Person to develop, market or sell the Product, (B) buyer, transferee or assignee of any Transferred Intellectual Property or Licensed Intellectual Property from Purchaser or its Affiliates or another Selling Person, or (C) any Affiliate of the foregoing.

“ Subsidiary ” means an entity as to which Seller or Purchaser or any other relevant entity, as the case may be, owns directly or indirectly 50% or more of the voting power or other similar interests. Any Person which comes within this definition as of the date of this Agreement but thereafter fails to meet such definition shall from and after such time not be deemed to be a Subsidiary of Seller or Purchaser or any other relevant entity, as the case may be. Similarly, any Person which does not come within such definition as of the date of this Agreement but which thereafter meets such definition shall from and after such time be deemed to be a Subsidiary of Seller or Purchaser or any other relevant entity, as the case may be.

“ Tax ” or “ Taxes ” means all federal, state, local and foreign income, payroll, withholding, excise, value added, sales, use, personal property, use and occupancy, business and occupation, mercantile, real estate, gross receipts, license, employment, severance, stamp, premium, windfall profits, social security (or unemployment), disability, transfer, registration, alternative or add-on minimum, estimated or capital stock and franchise and other taxes and assessments of any kind whatsoever, including all interest, penalties and additions imposed with respect to such amounts, whether disputed or not.

“ Taxing Authority ” means any Governmental or Regulatory Authority exercising any authority to impose, regulate or administer the imposition of Taxes.

“ Tax Return ” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“ Territory ” means the United States of America including its territories and possessions.

“ Third Party ” means any Person other than: (1) Purchaser or Seller, and (2) any Affiliates of Purchaser or Seller.

“ Trailing Four Quarter Net Sales ” shall mean the Net Sales during any consecutive four calendar quarter period.

“ VAT ” means any value added tax, goods and services tax or any other similar tax, including any sales tax, service tax, or use tax imposed by any Governmental or Regulatory Authority in any country at whatever level.

(b) The following terms have the meanings given to such terms in the Sections set forth below:


Term		Section
Acquired Assets		2.01(a)
Acquisition Proposal		6.07
Additional Assumption Documents		3.01(b)(vi)
Additional Transfer Documents		3.01(c)(v)
Agreement		Preamble
Allocation		9.05(a)
Assignment and Assumption Agreement		3.01(b)(iii)
Assumed Liabilities		2.02(a)
Bill of Sale		3.01(b)(ii)
Call Option		8.04(b)(iv)
Called Assets		8.04(b)(iv)
Claim Dispute Notice		10.04
Closing		3.01(a)
Closing Date		3.01(a)
Compliance Report		8.04(b)(iii)
Direct Claim Notice		10.04
Excluded Assets		2.01(b)
Excluded Liabilities		2.02(b)
Exercise Notice		8.04(b)(iv)
FDA Permits		2.01(a)(ii)
Field Force		8.04(b)(i)
Field Force Floor		8.04(b)(iv)
First Amendment		Recitals
First Position		8.04(b)(i)


Term		Section
Future Fentanyl Product		2.04
Indemnitee		10.03(a)
Indemnitor		10.03(a)(i)
Independent Auditor		8.03
Intended Use		2.01(a)(a)(A)
License Agreement		3.01(b)(v)
Losses		10.01
Marketing Period		8.04(b)(ii)
Negotiation Notice		2.04
Notice Period		2.04
Option Period		8.04(b)(iv)
Party or Parties		Preamble
Payment Period		3.02(b)
Permits		2.01(a)(iii)
Product		Recitals
Product Inventory		2.01(a)(vi)
Product Royalties		3.02(d)
Purchase Price		3.02(a)
Purchaser		Preamble
Purchaser Indemnitees		10.01
Quarterly Report		3.02(e)
Royalty Period		3.02(d)
Sales Milestones		3.02(c)
Seller		Preamble
Seller Indemnitees		10.02
State Permits		2.01(a)(iii)
Strakan		Recitals
Strakan Assets		Recitals
Termination Agreement		Recitals
Third Party Claim		10.03(a)
Trademark Assignment Agreement		3.01(b)(iv)
Transfer Agreement		Recitals
Transfer Taxes		9.04
Transferred Contracts		2.01(a)(ii)
Transferred Copyrights		2.01(a)(i)(B)
Transferred FDA Permits		2.01(a)(ii)
Transferred Intellectual Property		2.01(a)(i)
Transferred Marks		2.01(a)(i)(A)
Transferred State Permits		2.01(a)( )

Section 1.02. Interpretation . The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any

pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth therein); (ii) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (iii) the word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends and such phrase does not mean simply “if”; (iv) all references herein to Articles, Sections, Exhibits or Schedules shall be construed to refer to Articles, Sections, Exhibits and Schedules of this Agreement; and (v) the headings contained in this Agreement or any Exhibit or Schedule and in the table of contents to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any matter set forth in any provision, subprovision, section or subsection of the Schedules to this Agreement shall be deemed set forth for all purposes of the Schedules hereto to the extent reasonably apparent that such matter is relevant to another provision, subprovision, section or subsection of the Schedules hereto. All Schedules attached hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in the Exhibits and Schedules attached hereto but not otherwise defined therein, shall have the meaning as defined in this Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the authorship of any provisions of this Agreement.

ARTICLE II

PURCHASE AND SALE OF ACQUIRED ASSETS

Section 2.01. Purchase and Sale .

(a) Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, Seller shall, or shall cause its Subsidiaries to, sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase from Seller, free and clear of all Liens, all right, title and interest of Seller and its Subsidiaries in, to and under the following assets, properties and rights of Seller and its Subsidiaries (collectively, the “ Acquired Assets ”):

(i) the following (collectively, the “ Transferred Intellectual Property ”):

(A) all marks (whether registered or not), trademark registrations, trademark applications, service mark registrations, service mark applications and domain name registrations of Seller and its Subsidiaries, exclusively used, or held for use, in the distribution, marketing, sale, and manufacture (the “ Intended Use ”) of the Product in the Territory, which are set forth on Exhibit 2.01(a)(i)(A) , together with all extensions and renewals thereof (the “ Transferred Marks ”); and

(B) all copyrights (whether registered or not) and copyright registrations of Seller and its Subsidiaries exclusively related to the Intended Use of the Product in the Territory, which are set forth on Exhibit 2.01(a)(i)(B) , together with all extensions and renewals thereof (the “ Transferred Copyrights ”);

(ii) all governmental, regulatory filings, correspondence, submissions, marketing authorizations, permits, licenses, registrations (including product registration data), regulatory clearances, certificates, approvals, variances, consents and similar items of Seller and its Subsidiaries with the FDA exclusively related to the Intended Use of the Product in the Territory (the “ FDA Permits ”), including those related to marketing, pricing or reimbursement approval, set forth on Exhibit 2.01(a)(ii) (such listed FDA Permits, the “ Transferred FDA Permits ”);

(iii) to the extent transferrable, all state governmental and federal governmental (other than the FDA Permits), regulatory filings, correspondence, submissions, marketing authorizations, permits, licenses, registrations (including product registration data), regulatory clearances, certificates, approvals, variances, consents and similar items of Seller and its Subsidiaries exclusively related to the Intended Use of the Product in the Territory (“ State Permits ”), including those related to marketing, pricing or reimbursement approval, set forth on Exhibit 2.01(a)(iii) (such listed State Permits, the “ Transferred State Permits ” and, together with the Transferred FDA Permits, the “ Permits ”).

(iv) the Contracts set forth on Exhibit 2.01(a)(iv) (the “ Transferred Contracts ”) and all rights and claims of Seller arising under or with respect to the Transferred Contracts;

(v) all books and records prepared and maintained by Seller and its Subsidiaries as of the Closing Date that relate exclusively to Intended Use of the Product in the Territory (excluding any records prepared exclusively in connection with the transactions contemplated by this Agreement, including bids received from Third Parties and related analyses);

(vi) all inventory of the Product owned by the Seller or its Subsidiaries, including but not limited to, the existing finished quantities, work in process, raw materials, constituent substances, materials (including but not limited to, packaging materials and other collateral), stores and supplies, as well as any trade, sample or prototype inventories owned by Seller and its Subsidiaries of the Product in the Territory (the “ Product Inventory ”).

(vii) any “Asset” (as such term is defined in the Transfer Agreement) exclusively relating to the Product in the Territory transferred to Seller or any of its Subsidiaries on or prior to the Closing;

(viii) copies of (A) all current marketing and sales assets that relate solely to the Intended Use of the Product in the Territory and (B) all books, ledgers, files, reports, data, plans and records that relate exclusively to the Intended Use of the Product in the Territory;

(ix) all claims, causes of action or other rights of the Seller, if any, arising out of any of the Acquired Assets arising before, on or after the Closing Date; and

(x) any goodwill associated with the Acquired Assets.

(b) Purchaser is not purchasing or acquiring, and Seller is not selling or assigning, any assets or properties of Seller or any of its Affiliates that are not specifically listed above, and all such other assets and properties shall be excluded from the Acquired Assets (the “ Excluded Assets ”).

Section 2.02. Assumed Liabilities .

(a) Subject to the conditions of this Agreement, Purchaser shall assume, effective as of the Closing, and from and after the Closing, Purchaser shall pay, perform and discharge when due, in accordance with the Assumption Agreement, all Liabilities of Seller arising under or related to the Acquired Assets (whether such Liability arose from any events, circumstances, acts, or omissions existing or occurring prior to or after the Closing) (collectively, and subject to the exclusions in the following subclauses (i) and (ii), the “ Assumed Liabilities ”), excluding (i) any Liabilities of Seller for monies due but not yet payable as of the Closing Date under any Transferred Contract, and (ii) any Liabilities resulting from (1) any breach or violation of any Transferred Contract by Seller occurring prior to the Closing or (2) any act or omission of Seller prior to the Closing that would have constituted a breach or violation upon notice or passage of time under any Transferred Contract.

(b) Purchaser shall not assume and shall not be responsible to pay, perform or discharge any Liabilities described in subclauses 2.02(a)(i) and (ii) or any other Liabilities of Seller or its Affiliates other than the Assumed Liabilities (the “ Excluded Liabilities ”).

(c) Each of Purchaser’s and Seller’s obligations under this Section 2.02 will not be subject to offset or reduction by reason of any actual or alleged breach of any representation, warranty, covenant or agreement contained in this Agreement, any Ancillary Agreement or any right or alleged right to indemnification hereunder.

Section 2.03. Consents of Third Parties .

(a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign any asset (including any Contract) or any claim, right or benefit arising under or resulting from any such asset (including any Contract), if the assignment or transfer thereof, without the consent of a Third Party, would constitute a breach or other contravention of the rights of such Third Party, would be ineffective with respect to any party to an agreement concerning such asset (including any Contract), claim, right or benefit, or, upon assignment or transfer, would in any way adversely affect the rights of Seller or any of its Affiliates or, upon transfer, Purchaser. If any transfer or assignment by Seller to, or

any assumption by Purchaser of, any interest in, or liability, obligation or commitment under, any asset (including any Contract), or any claim, right or benefit requires the consent of a Third Party, then such transfer or assumption shall be made subject to such consent being obtained.

(b) If any such consent is not obtained prior to the Closing, (i) Seller shall use commercially reasonable efforts following the Closing to obtain such consents, and (ii) Seller and Purchaser shall cooperate (each at their own expense) in any lawful and reasonable arrangement reasonably proposed by Purchaser under which Purchaser shall obtain the economic claims, rights and benefits under the asset (including any Contract) or related claim, right or benefit with respect to which the consent has not been obtained in accordance with this Agreement. Such reasonable arrangement may include (i) the subcontracting, sublicensing or subleasing to Purchaser of any and all rights of Seller against the other party to such Contract arising out of a breach or cancellation thereof by the other party, and (ii) the enforcement by Seller of such rights. None of Seller, Purchaser or their respective Affiliates shall be required to commence, defend or participate in any litigation, incur any obligation in favor of, or offer or grant any accommodation (financial or otherwise) to, any Third Party in connection with entering into or implementing such arrangement unless Purchaser agrees to reimburse Seller for any related costs with respect to such litigation or accommodation.

Section 2.04. First Right to Future Fentanyl Product . During the Royalty Period, if Seller seeks to sell, license or sublicense to any Third Party the intellectual property primarily related to the use, distribution, marketing, sale, offer for sale and import in the Territory any new pharmaceutical product containing a rapid-acting formulation of fentanyl as an active ingredient (either as the sole active ingredient or in combination with one or more other active ingredients) having the same clinical utility as the Product owned or licensed by Seller or its Subsidiaries (“ Future Fentanyl Products ”), Seller shall give Purchaser the first right to negotiate an asset purchase or exclusive license or sublicense to such intellectual property solely in the Territory and shall notify Purchaser of the availability of such intellectual property before offering such Future Fentanyl Product to any Third Party for sale, license or sublicense to other companies in the Territory. Purchaser shall notify Seller in writing (the “ Negotiation Notice ”) within thirty (30) days thereafter (the “ Notice Period ”) if Purchaser is interested in acquiring or licensing or sublicensing such intellectual property, and, if so, Purchaser and Seller will enter into good faith negotiation with respect to a mutually acceptable agreement for the sale or license or sublicense of the same to Purchaser. If (i) Purchaser does not deliver to Seller a Negotiation Notice within the Notice Period, or (ii) Seller and Purchaser fail to reach a mutually acceptable agreement within sixty (60) days following receipt by Seller of a Negotiation Notice delivered within such Notice Period, and such forty-five-day period is not extended by mutual agreement, then Seller shall be entitled to offer, sell, license or sublicense such intellectual property without obligation to Purchaser under this Agreement or otherwise.

ARTICLE III

CLOSING

Section 3.01. Closing .

(a) The closing of the Acquisition (the “ Closing ”) shall be held at the offices of Dechert LLP, 1095 Avenue of the Americas, New York, NY 10036, or remotely by exchange of electronic copies of the agreements, documents, certificates and other instruments set forth in Section 3.01(b) and Section 3.01(c) if mutually agreed by the Parties, at 10:00 a.m. on the date which is three (3) Business Days after the conditions to the Closing set forth in Section 4.01 and Section 4.02 shall have been satisfied or waived (other than those conditions which by their nature are to be fulfilled at the Closing, but subject to the fulfillment or waiver of such conditions). The date on which the Closing shall occur is hereinafter referred to as the “ Closing Date ”. The Closing shall be deemed to be effective as of 12:00:01 a.m. eastern standard time on the Closing Date.

(b) At the Closing, Purchaser shall deliver or cause to be delivered to Seller:

(i) an amount equal to the Closing Consideration by wire transfer of immediately available funds denominated in Dollars to a bank account designated in writing by Seller at least two (2) Business Days prior to the Closing Date;

(ii) an executed counterpart of the Bill of Sale, in the form attached hereto as Exhibit 3.01(b)(ii) (the “ Bill of Sale ”);

(iii) an executed counterpart of the Assumption Agreement, in the form attached hereto as Exhibit 3.01(b)(iii) (the “ Assignment and Assumption Agreement ”);

(iv) an executed counterpart of the Trademark Assignment Agreement, in the form attached hereto as Exhibit 3.01(b)(iv) (the “ Trademark Assignment Agreement ”);

(v) an executed counterpart of the License Agreement, in the form attached hereto as Exhibit 3.01(b)(v) (the “ License Agreement ”);

(vi) such other executed instruments of transfer, conveyance, assignment, and assumption as the Seller may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Purchaser of all obligations, liabilities, right, title and interest in and to the Assumed Liabilities (the “ Additional Assumption Documents ”); and

(vii) a certificate, dated as of the Closing Date, executed by an authorized officer of Purchaser, in his or her capacity as such, confirming the satisfaction of the conditions specified in Section 4.01(b) and Section 4.01(c) .

(i) an executed counterpart of the Bill of Sale;

(ii) an executed counterpart of the Assignment and Assumption Agreement;

(iii) an executed counterpart of the Trademark Assignment Agreement;

(iv) an executed counterpart of the License Agreement;

(v) such other executed instruments of transfer, conveyance and assignment as the Purchaser may reasonably request in order to effect the sale, transfer, conveyance and assignment to the Purchaser of all right, title and interest in and to the Acquired Assets (the “ Additional Transfer Documents ”); and

(vi) a certificate, dated as of the Closing Date, executed by an authorized officer of Seller, in his or her capacity as such, confirming the satisfaction of the conditions specified in Section 4.02(b) and Section 4.02(c) .

Section 3.02. Purchase Price .

(a) The aggregate consideration (the “ Purchase Price ”) for the Acquired Assets includes the assumption of the Assumed Liabilities:

(i) the Closing Consideration;

(ii) the Deferred Consideration;

(iii) the Sales Milestones; and

(iv) the Product Royalty.

(b) Purchaser shall pay to Seller the Deferred Consideration within 30 days (the “ Payment Period ”) of the earlier of (i) the approval by the FDA of [***] as a manufacturer with respect to the Product and (ii) the first anniversary of the Closing Date; provided , however , that if a CBE-30 notification with respect to the Product is not filed with the FDA on or before May 1, 2013, then the Payment Period shall be increased by the number of days between May 1, 2013 and the date such CBE-30 notification is filed.

(c) Purchaser shall pay to Seller each of the following one-time only, non-refundable, non-creditable sales milestones (the “ Sales Milestones ”) within thirty (30) days after the end of the first calendar quarter, if any, in which each Trailing Four Quarter Net Sales dollar values set forth below is achieved, in each case, by wire transfer in immediately available funds to an account or accounts designated in writing by Seller at least two (2) Business Days prior to the time for such payment; provided, that, two or more Sales Milestones may become payable in the same calendar quarter.


Trailing Four Quarter Net Sales:			Sales Milestone:
$	[***	]	$	[***	]
$	[***	]	$	[***	]
$	[***	]	$	[***	]

(d) Purchaser shall pay to Seller an amount in dollars equal to [***] % of the Net Sales (the “ Product Royalties ”) each calendar quarter (or portion of such calendar quarter) commencing on the Closing Date and ending on the date on which all claims of the last remaining Product Patents shall have expired or been invalidated by a patent office, court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period), taking into account any extensions granted thereto (such period, the “ Royalty Period ”). Purchaser shall pay the Product Royalties to Seller in arrears not later than thirty (30) days following the end of each calendar quarter during the Royalty Period.

(e) Concurrently with each Product Royalties payment with respect to a calendar quarter, Purchaser shall deliver to Seller a written report with respect to such quarter (the “ Quarterly Report ”) that sets forth each of the following information for each month in such quarter and in the aggregate: (a) the gross sales and number of units sold of the Product in the Territory during such calendar quarter and each month in such calendar quarter, (b) the “gross to net” adjustments with respect to the calculation of Net Sales for such calendar quarter and each month in such calendar quarter, (c) the Net Sales during such calendar quarter and each month in such calendar quarter, (d) a calculation of the Product Royalties due to Seller for such calendar quarter, and (e) the Trailing Four Quarter Net Sales for the consecutive four calendar quarter period ending during such calendar quarter.

Section 3.03. Withholding . Purchaser covenants and agrees that it will not be subjecting any payments due to the Seller under this Agreement or any Ancillary Agreement to US Federal (or other) withholding (or other) Taxes, provided that with respect to the Product Royalties, the Seller shall deliver to Purchaser an executed copy of IRS Form W-8 prior to the payment of such Product Royalty certifying under penalties of perjury that Seller is a resident of Sweden, within the meaning of the US-Sweden Income Tax Treaty, eligible for benefits under such treaty. The parties to this Agreement will take all actions consistent with the foregoing.

ARTICLE IV

CONDITIONS TO CLOSING

Section 4.01. Conditions to Obligations of Purchaser . The obligation of Purchaser to effect the closing of the Acquisition is subject to the satisfaction (or written waiver by Purchaser) as of the Closing of the following conditions:

(a) No Injunctions or Restraints . No Law, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or

issued by any Governmental or Regulatory Authority or other legal restraint or prohibition by a Governmental or Regulatory Authority shall be pending or in effect seeking to prevent or preventing the Acquisition.

(b) Accuracy of Representations and Warranties . All of the representations and warranties made by Seller in ARTICLE V that are qualified by any reference to any materiality qualifications shall each be true and correct as of the Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made only as of a specified date shall be true and correct only as of such date), and all other representations and warranties made by the Seller shall each be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made only as of a specified date shall be true and correct only as of such date).

(c) Performance of Covenants . The covenants and obligations that Seller is required to perform or comply with under this Agreement on or before the Closing Date shall have been duly performed and complied with by Seller in all material respects.

(d) Deliverables . Purchaser shall have received each of the items set forth in Section 3.01(c) .

(e) No Material Adverse Effect . No Material Adverse Effect shall have occurred and be continuing.

(f) No Recalls. No Governmental or Regulatory Authority shall have initiated a generally recall of the Product in the Territory

(g) Required Approvals . All authorizations, consents and approvals of any Governmental or Regulatory Authority set forth on Schedule 4.01(g) shall have been obtained and shall be in full force and effect.

Section 4.02. Conditions to Obligation of Seller . The obligation of Seller to, and to cause its Affiliates to, effect the closing of the Acquisition is subject to the satisfaction (or written waiver by Seller) as of the Closing of the following conditions:

(a) No Injunctions or Restraints . No Law, temporary restraining order, preliminary or permanent injunction or other order enacted, entered, promulgated, enforced or issued by any Governmental or Regulatory Authority or other legal restraint or prohibition by a Governmental or Regulatory Authority shall be pending or in effect seeking to prevent or preventing the Acquisition.

(b) Accuracy of Representations and Warranties . All of the representations and warranties made by Purchaser in ARTICLE VII that are qualified by any materiality qualifications shall each be true and correct as of the Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made only as of a specified date shall be true and correct only as of such date), and all other representations and warranties of the Purchaser shall each be true and correct in all material respects as of the Closing Date as though such representations and warranties were made at such date (except that any representations and warranties that are made only as of a specified date shall be true and correct only as of such date).

(c) Performance of Covenants . The covenants and obligations that Purchaser is required to perform or comply with under this Agreement on or before the Closing Date shall have been duly performed and complied with by Purchaser in all material respects.

(d) Deliverables . Seller shall have received each of the items set forth in Section 3.01(b) .

Section 4.03. Frustration of Closing Conditions . Neither Purchaser nor Seller may rely on the failure of any condition set forth in this ARTICLE IV to be satisfied if such failure was caused by such Party’s failure to act in good faith or to comply with its obligations under Section 9.01 or Section 9.01 (b) to cause the Closing to occur.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

Except as set forth in the Schedules attached hereto, Seller hereby represents and warrants to Purchaser as follows:

Section 5.01. Authority . Seller is a public limited company duly organized, validly existing and in good standing under the laws of Sweden. Seller has the requisite power and authority to enter into this Agreement, and Seller has the requisite power and authority to enter into the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. All acts and other proceedings required to be taken by Seller to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by Seller and, assuming this Agreement has been duly authorized, executed and delivered by Purchaser, constitutes, and the Other Acquisition Documents on the Closing Date will be duly executed and delivered by Seller and upon the due authorization, execution and delivery by each other party to the Other Acquisition Documents will constitute, a legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

Section 5.02. No Conflicts; Consents.

(a) Except as set forth on Schedule 5.02 , the execution and delivery of this Agreement by Seller does not, and the execution and delivery by Seller of each other Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or result in the creation of any Lien upon any of the Acquired Assets under, any

provision of (i) Seller’s certificate of incorporation or by-laws (or the comparable governing instruments), (ii) any Contract to which Seller is a party and by which any of Acquired Assets are bound, or (iii) any judgment, order, or decree, or, subject to the matters referred to in Section 5.02(b) below, any Law applicable to Seller or its properties or assets, other than, in the case of clauses (i) and (ii) above, any such items that would not be reasonably likely, individually or in the aggregate, to have a material adverse effect on the ability of Seller to consummate the Acquisition.

(b) Except as set forth in Schedule 5.02(b) , no consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Governmental or Regulatory Authority is required to be obtained or made by or with respect to Seller in connection with the execution, delivery and performance of this Agreement, the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, other than such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make which, individually or in the aggregate, (i) would not be reasonably likely to have a material adverse effect on the ability of Seller to consummate the Acquisition or perform its obligations under this Agreement or the Ancillary Agreements, and (ii) would not give rise to any liability of Purchaser as a result of the consummation of the Acquisition.

Section 5.03. Acquired Assets . Except as set forth in Schedule 5.03 , the Acquired Assets and the Licensed Intellectual Property constitute all of the material assets, rights or property (other than (x) any intellectual property that are licenses for commercial “off-the-shelf” or “shrink-wrap” software, and (y) administrative, finance and other infrastructure and back office information technology systems, networks and software) owned by Seller or its Affiliates and primarily related to the Intended Use of the Product in the Territory.

Section 5.04. Product Liability . Neither Seller nor any of its Affiliates nor, to the Seller’s Knowledge, the Product has been subject to any recall initiated or requested by any Governmental or Regulatory Authority with respect to the Product in the Territory.

Section 5.05. Intellectual Property .

(a) Except as set forth in Schedule 5.05(a) , Seller or its Affiliate owns, or as of the Closing Date will own, free and clear of all Liens (except (i) to the extent licensed from Third Parties, (ii) for any Liens in favor of Purchaser or its Affiliates, (iii) for any Liens that will be terminated on or prior to the Closing Date, and (iv) to the extent subject to the Transfer Agreement), the Transferred Intellectual Property, and the consummation of the Acquisition will not conflict with, alter or impair any such rights in any material respect.

(b) Except as set forth in Schedule 5.05(b) , as of the date hereof, no claims are pending before any court, arbitrator or other tribunal, or before any administrative law judge, hearing officer or administrative agency or, to Seller’s knowledge, threatened in writing, against Seller or any of its Affiliates by any Third Party with respect to the ownership, validity or enforceability of any Transferred Intellectual Property or Licensed Intellectual Property.

(c) Except as set forth in Schedule 5.05(c) , none of Seller or its Affiliates have granted any options, licenses or agreements relating to the Transferred Intellectual Property or, with respect to the Product in the Territory, relating to the Licensed Intellectual Property, except (i) non-exclusive implied licenses to end-users in the ordinary course of business, (ii) options, licenses or agreements with Purchaser or its Affiliates, (iii) options, licenses or agreements that will be terminated on or prior to the Closing Date, and (iv) Transferred Contracts. Except as set forth in Schedule 5.04(c) , as of the date hereof, none of Seller or its Affiliates is bound by or a party to any material options, licenses or agreements of any kind for intellectual property of any Third Party relating to the Product in the Territory, except (i) options, licenses or agreements with Purchaser or its Affiliates, (ii) options, licenses or agreements that will be terminated on or prior to the Closing Date, and (iii) Transferred Contracts.

(d) To Seller’s Knowledge, no Third Party is infringing or violating or misappropriating any of the Transferred Intellectual Property or has made any claim of ownership or right to any Transferred Intellectual Property. Seller has neither asserted nor threatened in writing any action or claim against any Third Party involving or relating to any Transferred Intellectual Property. Seller has not received any written request from any Third Party that Seller enter into a license with respect to any Third Party Intellectual Property right in relation to the Product, the Acquired Assets or the Intended Use of the Product in the Territory.

(e) To Seller’s Knowledge, the Intended Use of the Product in the Territory does not infringe or violate or constitute a material misappropriation of any intellectual property of any Third Party. Seller has not received any written claim or notice alleging any such infringement, violation or misappropriation.

(f) There is no pending or, to Seller’s Knowledge, threatened claim, interference, opposition or demand of any Third Party challenging the ownership, validity or scope of any Transferred Intellectual Property.

(g) Seller has not sought or procured a “freedom to operate” opinion or analysis from patent counsel with respect to the Intended Use of the Product in the Territory.

Section 5.06. Transferred Contracts . Each Transferred Contract is valid, binding and in full force and effect and, to Seller’s knowledge, is enforceable by Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other laws affecting creditors’ rights generally, general principles of equity and the discretion of courts in granting equitable remedies. As of the date hereof and as of the Closing Date, Seller has performed in all material respects all material obligations required to be performed by it under the Transferred Contracts and is not (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder and, to Seller’s knowledge, as of the date hereof, no other party to any of the Transferred Contracts is (with or without the lapse of time or the giving of notice, or both) in breach or default in any material respect thereunder. Except as set forth in the First Amendment, the Termination Agreement has not been amended in any respect.

Section 5.07. Litigation . Except as set forth in Schedule 5.07 , as of the date hereof, there are no (a) outstanding judgments, orders, injunctions or decrees of any Governmental or

Regulatory Authority or arbitration tribunal against Seller, (b) lawsuits, actions or proceedings pending or, to the knowledge of Seller, threatened against Seller, or (c) investigations by any Governmental or Regulatory Authority which are pending or, to the knowledge of Seller, threatened against Seller, which, in the case of each of clauses (a), (b) and (c), relating to the Intended Use of the Product in the Territory and have had or would be reasonably likely to have a Material Adverse Effect or a material adverse effect on the ability of Seller to consummate the Acquisition and the other transaction contemplated by this Agreement and the Ancillary Agreements.

Section 5.08. Brokers or Finders . No agent, broker, investment banker or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement or the Ancillary Agreements based upon arrangement made by or on behalf of Seller or any of its Affiliates for which Purchaser will have any Liability.

ARTICLE VI

COVENANTS OF SELLER

Seller hereby covenants and agrees as follows:

Section 6.01. Access . From the date hereof until the Closing, Seller shall give Purchaser and its representatives, employees, counsel and accountants reasonable access, during normal business hours and upon reasonable advance notice, to the Acquired Assets for purposes of conducting due diligence or otherwise in connection with the transactions contemplated hereby; provided , however , that such access (i) does not unreasonably disrupt the normal operations of Seller, (ii) would not reasonably be expected to violate any attorney-client privilege of Seller or violate any applicable Law, and (iii) would not reasonably be expected to breach any duty of confidentiality owed to any Person whether the duty arises contractually, statutorily or otherwise.

Section 6.02. Other Covenants . From the date hereof until the Closing, except as otherwise contemplated by the terms of this Agreement or any Ancillary Agreement, Seller will not, and will cause its Affiliates not to, without the prior written consent of Purchaser (such consent not to be unreasonably withheld):

(a) sell, assign, lease, license, transfer, hypothecate or otherwise dispose of any of the Acquired Assets or, with respect to the Product in the Territory, the Licensed Intellectual Property;

(b) amend, terminate, renew, extend or waive in writing any right under any Transferred Contract if such amendment, termination, renewal, extension or waiver would adversely affect the rights to be transferred to Purchaser at the Closing; or

Section 6.03. Exclusive Dealing. Seller shall not (and shall cause its Affiliates not to), directly or indirectly, through any officer, director, partner, employee, investment banker, financial advisor, attorney, accountant or other representative of any of them or otherwise, take

any action to encourage, solicit or initiate or continue any discussions or negotiations with, or provide any information to, any Person (other than Purchaser and its representatives) concerning any purchase (or transfer) of all or any portion of the Acquired Assets, or enter into a confidentiality agreement, letter of intent or purchase agreement, or other similar agreement with respect to any such transaction with any Person, firm or corporation other than Purchaser or its Affiliates, and shall immediately cease and cause to be terminated any activities, discussions or negotiations existing with respect to any of such matters. Seller will promptly notify Purchaser orally and in writing of the existence of any proposals by a Third Party to do any of the foregoing which Seller or any of its officers, directors, employees, investment bankers, financial advisors or other representatives may receive relating to any of such matters.

Section 6.04. Competing Products . Seller agrees that for the period commencing on the Closing Date and ending on the earlier of [***] ( [***] ) anniversary of the Closing Date and the delivery of an Exercise Notice, neither Seller nor its Subsidiaries will directly or indirectly sell, market or otherwise promote, including pursuant to a license, any Competing Product in the Territory. Notwithstanding the foregoing, this Section 6.04 shall not restrict Seller from ownership of less than [***] percent ( [***] %) of the stock of any corporation, limited liability company or other enterprise engaged in the sale, marketing or promotion of any Competing Product (other than the Product as contemplated by this Agreement and the Ancillary Agreements) in the Territory.

Section 6.05. Financial Accounting Information . Following the Closing Date, promptly following Purchaser’s written request at any time and from time to time, Seller and its Subsidiaries will cooperate with Purchaser in connection with Purchaser’s preparation of audited and unaudited financial statements relating to the Product and any “business” (within the meaning of Item 3-05 and related Items of Regulation S-X under promulgated by the U.S. Securities and Exchange Commission (the “ SEC ”)) attributable to the Product as of and for any of the years ended in the three-year period ended December 31, 2012 and any calendar quarter ended prior to the Closing Date as may be necessary to enable Purchaser to comply with applicable financial reporting and other requirements with respect to reports and filings with the SEC. If requested by Purchaser, Seller shall engage Seller’s or its Subsidiaries’ independent auditors, at Purchaser’s sole cost and expense, to audit such financial statements for the periods required by Regulation S-X of the SEC and to render an opinion on such financial statements. Seller will provide, if required by Purchaser’s independent auditors, customary executed representation letters required to enable independent auditors to render an opinion on audited financial statements. Seller shall request, and take reasonable steps to encourage, its and its Subsidiaries’ auditors to cooperate with Purchaser and its auditors. For the avoidance of doubt, (i) all reasonable and documented out-of-pocket costs incurred by Seller and its Subsidiaries in performing its obligations under this Section 6.05 shall be the sole responsibility of Purchaser, and (ii) Seller and its Subsidiaries shall have no obligation to provide, or cause any Third Party to provide, any such information of any Third Party, including Strakan, in performing its obligations under this Section 6.05.

Section 6.06. Payment of Indebtedness . On or prior to the Closing, Seller shall pay or cause to be paid, in full, any Liabilities of Seller for monies due but not yet payable as of the Closing Date under the Transferred Contracts.

Section 6.07 Acquisition Proposals . Prior to the earlier of the Closing and termination of this Agreement, Seller shall not, and shall not permit any officer, director, employee or agent of Seller or any Affiliate thereof to (a) solicit, initiate or encourage submission of proposals or offers, or accept any offers, from any Third Party relating to any acquisition or purchase of all or any material amount of the Acquired Assets and the Licensed Intellectual Property (an “ Acquisition Proposal ”) or (b) participate in any discussions or negotiations regarding, or furnish to any Third Party any information with respect to, or otherwise cooperate in any way with or assist, facilitate or encourage, any Acquisition Proposal by any Third Party.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as follows:

Section 7.01. Authority . Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Purchaser has all requisite corporate power and authority to enter into this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. All corporate acts and other proceedings required to be taken by Purchaser to authorize the execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby have been duly and properly taken. This Agreement has been duly executed and delivered by Purchaser and, assuming this Agreement has been duly authorized, executed and delivered by Seller, constitutes, and the Other Acquisition Documents on the Closing Date will be duly executed by Purchaser, and upon the due authorization, execution and delivery by each other party to the Other Acquisition Documents, will constitute a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject, as to enforcement, to applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and to general equitable principles.

Section 7.02. No Conflicts; Consents .

(a) The execution and delivery of this Agreement by Purchaser does not, and the execution and delivery by Purchaser of each other Ancillary Agreement to which it is, or is specified to be, a party will not, and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, or result in the creation of any Lien upon any of the properties or assets of Purchaser under, any provision of (i) its certificate of incorporation or by-laws (or the comparable governing instruments), (ii) any Contract to which Purchaser is a party or by which any of its properties or assets are bound, or (iii) any judgment, order, or decree, or, subject to the matters referred to in Section 7.02(b) below, any Law applicable to Purchaser or its properties or assets, other than, in the case of clause (i) and (ii) above, any such items that would not be reasonably likely, individually or in the aggregate, to have a material adverse effect on the ability of Purchaser to consummate the Acquisition.

(b) No consent, approval, license, permit, order or authorization of, or registration, declaration or filing with, any Governmental or Regulatory Authority is required to be obtained or made by or with respect to Purchaser in connection with the execution, delivery and performance of this Agreement, the Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby, other than such consents, approvals, licenses, permits, orders, authorizations, registrations, declarations and filings the absence of which, or the failure to make which, individually or in the aggregate, (i) would not be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition or perform its obligations under this Agreement or the Ancillary Agreements, and (ii) would not give rise to any liability of Seller or any of its Affiliates as a result of the consummation of the Acquisition.

Section 7.03. Litigation . As of the date hereof, there are no (a) outstanding judgments, orders, injunctions or decrees of any Governmental or Regulatory Authority or arbitration tribunal against Purchaser, (b) lawsuits, actions or proceedings pending or, to the knowledge of Purchaser, threatened against Purchaser, or (c) investigations by any Governmental or Regulatory Authority which are pending or, to the knowledge of Purchaser, threatened against Purchaser, which, in the case of each of clauses (a), (b) and (c), have had or would be reasonably likely to have a material adverse effect on the ability of Purchaser to consummate the Acquisition and the other transaction contemplated by this Agreement and the Ancillary Agreements.

Section 7.04. Availability of Funds . Purchaser has, and will have at the Closing, cash available or has existing committed borrowing facilities which together are sufficient to enable it to consummate the Acquisition.

Section 7.05. Brokers or Finders . No agent, broker, investment banker or other firm or Person is or will be entitled to any broker’s or finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement or the Ancillary Agreements based upon arrangement made by or on behalf of Purchaser or any of its Affiliates.

ARTICLE VIII

COVENANTS OF PURCHASER

Purchaser hereby covenants and agrees as follows:

Section 8.01. Advise Seller . Purchaser shall promptly advise Seller in writing of any change or event occurring between the date hereof and the Closing Date which Purchaser believes (i) would be reasonably likely to result in the failure of any of the conditions to the Closing set forth in ARTICLE IV to be satisfied as of the Closing Date, or (ii) would be reasonably likely, individually or in the aggregate, to have a material adverse effect on the ability of Purchaser to consummate the Acquisition or the other transactions contemplated by this Agreement and the Ancillary Agreements.

Section 8.02. Access to Information . Purchaser acknowledges that it and its representatives have received or been afforded the opportunity to review prior to the date hereof all written materials which Seller was required to deliver or make available, as the case may be, to Purchaser pursuant to this Agreement on or prior to the date hereof. Purchaser acknowledges that it and its representatives have been permitted full and complete access to the books and records, facilities, equipment, Contracts and other properties and assets of Seller and its Affiliates to the extent relating to the Product, the Acquired Assets or the Assumed Liabilities in the Territory that it and its representatives have desired or requested to see or review, and that it and its representatives have had a full opportunity to meet with the officers and employees of Seller and its Affiliates to discuss the Product, the Acquired Assets and the Assumed Liabilities.

Section 8.03. Records . Purchaser shall, from the date hereof until the date that is two (2) years following the end of the Royalty Period, keep full and accurate books of all accounts and other records in sufficient detail so that the Product Royalties payable hereunder can be properly and fully ascertained. Purchaser shall, at the request of Seller, permit a nationally recognized independent certified public accountant selected by Seller (the “ Independent Auditor ”) to have access during ordinary business hours, to such books and records as may be necessary to determine the accuracy of any Payment Report or payment made under this Agreement or to obtain information as to Product Royalties payable in case of failure to report or pay pursuant to the terms of this Agreement. The Independent Auditor shall be bound by a confidentiality agreement to keep all information acquired from Seller confidential, and shall be permitted to disclose to Seller only the amount and accuracy of the Product Royalties reported and actually paid or otherwise payable under this Agreement. The Independent Auditor will send a copy of its written reports to Purchaser at the same time it is sent to Seller. Seller shall be responsible for the fees and expenses of the Independent Auditor, provided, however, that Purchaser shall reimburse Seller in full for all such documented costs and expenses of the Independent Auditor if the Independent Auditor determines that the Product Royalties paid by Purchaser to Seller are less than ninety-five percent (95%) of the amount actually owed for the relevant period of the audit.

Section 8.04. Efforts .

(a) General Efforts . Purchaser, from the Closing Date until the date that Purchaser pays to Seller the last Sales Milestone payment pursuant to Section 3.02(c) , shall, subject to Section 8.04(b) , take commercially reasonable efforts to cause each of the Trailing Four Quarter Net Sales targets set forth in Section 3.02(c) to occur as soon as reasonably practicable.

(b) Specific Actions . Without limiting the generality of the matters set forth in Section 8.04(a) , unless otherwise agreed by the Parties, Purchaser shall satisfy each of the following requirements:

(i) Establishment of Field Force. Purchaser shall, on or before December 31, 2013, establish a field force to promote the Product to physicians and other customers or potential customers (the “ Field Force ”) in the Territory comprised of at least [***] ( [***] ) Field Personnel dedicated to Detailing the Product in the first position ( i.e. , no other product shall be presented to or discussed with the healthcare professional

before the Product and the predominant portion of time is devoted to the Detailing of such pharmaceutical product, the “ First Position ”)). Notwithstanding the foregoing, in the event the FDA delays unduly the approval of, or refuses to approve, [***] as a manufacturer of the Product as contemplated by Section 3.02(b) , the Parties shall agree in good faith on an adjusted timetable for Purchaser’s establishment and maintenance of the Field Force as provided above and in clause (ii) below.

(ii) Maintenance of Commercialization Efforts . Subject to clause (i), above, Purchaser shall, from January 1, 2014 through December 31, 2015 (the “ Marketing Period ”) use commercially reasonable efforts to maintain the Field Force at or above [***] ( [***] ) Field Personnel. During the Marketing Period, Purchaser shall use commercially reasonable efforts to (a) cause the Field Force to achieve not less than customary productivity standards in the industry and (b) direct at least [***] % of Field Force efforts towards Detailing the Product.

(iii) Reporting Obligations . Within thirty (30) days after the end of each calendar quarter, commencing with the first full calendar quarter ending after the Closing Date and ending at the expiration of the Marketing Period, Purchaser shall deliver to Seller a written report with respect to such preceding calendar quarter (the “ Compliance Report ”) that sets forth each of the following information for each month in such preceding calendar quarter and on an aggregate basis for such calendar quarter: (a) performance versus key performance indicators for areas such as payor contracting, medical affairs and education, clinical development and registries, marketing calendar and promotional materials; (b) the number of Field Personnel comprising the Field Force at the end of each such month and calendar quarter; (c) the Average Field Force; (d) the total number of Details for each such quarter performed by the Field Force; (e) the percentage of Details in such calendar quarter in which the Product was detailed to appropriately targeted primary prescribing physicians; (f) the number of products (including the Product) that were presented to or discussed with the healthcare professional in each Detail in such quarter; (g) the position of the Product in such Detail; (h) the percentage of Details in such calendar quarter in which the Product was detailed in at least the First Position; (i) if, with respect to such calendar quarter either (I) the Average Field Force is less than the Field Force Floor, or (II) the Product is not Detailed in at least the First Position by the Field Force in such calendar quarter, then such Compliance Report shall set forth a reasonably detailed description of the actions Purchaser has taken and intends to take to comply with the requirements of this Section 8.04(b) ; and (j) a description of any other material actions Purchase has taken to comply with its obligations under Section 8.04(a) .

(iv) Breaches . In the event that at any time during the Marketing Period, (a) Purchaser shall fail to deliver a Compliance Report within thirty (30) days following the end of any calendar quarter, or (b) Seller determines in good faith (it being understood that any such determination made solely with reference to the information contained in any one or more Compliance Reports shall be deemed made in good faith) that (I) the Average Field Force during any two consecutive calendar quarters is less than [***] ( [***] ) Field Personnel (the “ Field Force Floor ”), or (II) the Product has not been consistently Detailed in the First Position by the Field Force during any two consecutive

calendar quarters, then Seller shall have an irrevocable right (the “ Call Option ”) to cause Purchaser to transfer to Seller (or a designee of Seller) each of the Acquired Assets, the Strakan Assets, and any assets acquired or developed by Purchaser following the Closing primarily related to the Business (the “ Called Assets ”) for no additional consideration, and Purchaser shall have the obligation to transfer all Called Assets to Seller on terms and conditions (other than with respect to any payments) reasonably consistent with the terms of the Transfer Agreement (without giving effect to any amendments thereto following the Closing). Seller shall have the right to exercise the Call Option within thirty (30) days following the earlier of (x) receipt of a Compliance Report, and (y) the thirtieth calendar day following the end of each calendar quarter (such thirty (30) day period the “ Option Period ”), by giving notice thereof to Purchaser (the “ Exercise Notice ”) pursuant to Section 12.06 before the end of the Option Period. The Exercise Notice shall (i) identify in reasonable detail the basis of the breach giving rise to Seller’s right to exercise the Call Option, and (ii) identify the party (or parties) to which the Called Assets shall be transferred. Upon receipt by Purchaser of the Exercise Notice from Seller, the License Agreement shall terminate automatically and without further action by either Party hereto in accordance with its terms and the parties shall use their best efforts, and shall cooperate with each other, to transfer the Called Assets to Seller or its designees as soon as reasonably practicable. For the avoidance of doubt, if Seller does not deliver an Exercise Notice within the Option Period, Seller shall have no right to exercise the Call Option or deliver an Exercise Notice to Purchaser until the commencement of the next Option Period.

Section 8.05. DISCLAIMER . PURCHASER ACKNOWLEDGES THAT (A) EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE V OR IN ANY ANCILLARY AGREEMENT, NEITHER SELLER NOR ANY OTHER PERSON HAS MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE PRODUCT, THE ACQUIRED ASSETS OR THE ASSUMED LIABILITIES, THE MANUFACTURE, DISTRIBUTION, MARKETING OR SALE OF THE PRODUCT BY SELLER AND ITS AFFILIATES, ANY OTHER ASPECT OF THE RESPECTIVE BUSINESSES OF SELLER OR ITS AFFILIATES OR THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE PRODUCT, THE ACQUIRED ASSETS OR THE ASSUMED LIABILITIES FURNISHED OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES, AND (B) PURCHASER HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY FROM SELLER OR ANY OTHER PERSON WITH RESPECT TO THE PRODUCT, THE ACQUIRED ASSETS OR THE ASSUMED LIABILITIES, ANY OTHER ASPECT OF THE RESPECTIVE BUSINESSES OF SELLER OR ITS AFFILIATES OR THE ACCURACY OR COMPLETENESS OF ANY INFORMATION REGARDING THE PRODUCT, THE ACQUIRED ASSETS OR THE ASSUMED LIABILITIES FURNISHED OR MADE AVAILABLE TO PURCHASER AND ITS REPRESENTATIVES IN DETERMINING TO ENTER INTO THIS AGREEMENT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE V AND IN THE ANCILLARY AGREEMENTS, AND PURCHASER ACKNOWLEDGES THAT NONE OF SELLER OR ANY OTHER PERSON SHALL HAVE OR BE SUBJECT TO ANY LIABILITY TO PURCHASER OR ANY OTHER PERSON RESULTING FROM THE DISTRIBUTION TO PURCHASER, OR PURCHASER’S USE OF, ANY SUCH INFORMATION, OR OF ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO PURCHASER

AND ITS REPRESENTATIVES IN CERTAIN VIRTUAL OR PHYSICAL “DATA ROOMS”, VISITS TO PHYSICAL PREMISES INCLUDING THOSE OF THIRD PARTY MANUFACTURERS, OR IN ANY OTHER FORM IN EXPECTATION OF THE TRANSACTIONS CONTEMPLATED HEREBY. PURCHASER ACKNOWLEDGES THAT, SHOULD THE CLOSING OCCUR, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT OR IN ANY OTHER ANCILLARY AGREEMENT, PURCHASER SHALL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, IN AN “AS IS” CONDITION AND ON A “WHERE IS” BASIS AND PURCHASER SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN PURCHASER GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY LIENS, THAT ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED AND THAT ANY REQUIREMENTS OF APPLICABLE LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

ARTICLE IX

MUTUAL COVENANTS

Section 9.01. Efforts .

(a) Subject to the terms and conditions of this Agreement, following the date hereof, each Party shall use its commercially reasonable efforts to cause the Closing to occur as soon as practicable thereafter. Following the date hereof, each of Seller and Purchaser shall not, and shall not permit any of their respective Affiliates to, take any action that would, or that would reasonably be expected to, result in any of the conditions set forth in ARTICLE IV not being satisfied. This Section 9.01 shall not, and shall not be deemed to, restrict or prohibit Seller or Purchaser in any way whatsoever from exercising any and all rights and remedies available to it under this Agreement or any of the Ancillary Agreements.

(b) Each of Seller and Purchaser shall cooperate with the other Party and its employees, legal counsel, accountants and other representatives and advisers in connection with the steps required to be taken as part of their respective obligations under this Agreement; and each of them shall, at any time and from time to time after the Closing, upon the reasonable request of the other, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, receipts, acknowledgments, acceptances and assurances as may be reasonably required (without incurring unreimbursed expense) to satisfy and perform the obligations of such party hereunder, and to allow Purchaser to accomplish the Intended Use of the Product in the Territory after the Closing. Without limiting the generality of the foregoing, in the event that the FDA does not approve [***] as a manufacturer of the Products as contemplated by Section 3.02(b) or the Parties reasonably determine, in good faith, that any such approval is unlikely to be granted on a timely basis, the Parties shall mutually agree upon a new qualified manufacturer for the Product in the Territory, and Seller shall cooperate with Purchaser to support such manufacturer in obtaining the requisite FDA approval as a manufacturer with respect to the Product.

Section 9.02. Transfer Agreement . Following the date hereof and prior to the Closing, Seller shall use its commercially reasonable efforts to assist Purchaser in coordinating with Strakan regarding the transfer of the Strakan Assets from Strakan to Purchaser and the transition from Strakan to Purchaser following the Closing.

Section 9.03. Bulk Transfer Laws . Purchaser hereby waives compliance by Seller and its Affiliates with the provisions of any so-called “bulk transfer law” of any jurisdiction in connection with the sale of the Acquired Assets to Purchaser.

Section 9.04. Transfer Taxes . All transfer, documentary, sales, use, stamp, VAT, registration and other such Taxes, applicable to the Acquisition (such Taxes, together with any interest, penalties and additions thereto, collectively, “ Transfer Taxes ”), shall be paid by Purchaser. Purchaser shall file all necessary Tax Returns and other documentation required to be filed by it under applicable Law with respect to all Transfer Taxes, and, if required by applicable Law, Seller will, and will cause its Affiliates to, join in the execution of any such Tax Returns and other documentation. Purchaser and Seller shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation required to obtain any exemption from (or reduction in) Transfer Taxes, and shall cooperate in taking any commercially reasonable steps to minimize the Parties’ liability for Transfer Taxes.

Section 9.05. Purchase Price Allocation .

(a) The Parties agree that the Purchase Price and Assumed Liabilities shall be allocated among the Acquired Assets sold by Seller and each Selling Affiliate and purchased by Purchaser in a manner consistent with Section 1060 of the Code and the Treasury Regulations promulgated thereunder (and corresponding provisions of applicable foreign Law) and in accordance with an allocation schedule set forth by Seller and delivered to Purchaser within ninety (90) days after Closing (the “ Allocation ”), which Allocation shall be reasonably acceptable to Purchaser. In the event of a disagreement, a nationally recognized independent accounting firm mutually acceptable to Purchaser and Seller shall settle such dispute with the costs of such firm being borne equally by Seller and Purchaser.

(b) Purchaser and Seller agree to (i) be bound by the Allocation, (ii) act in accordance with the Allocation in the preparation of financial statements and filing of all Tax Returns (including filing Form 8594 with its federal income Tax Return for the taxable year that includes the Closing Date), and (iii) take no position inconsistent with the Allocation for all Tax purposes. In the event that any Taxing Authority disputes the Allocation, Seller or Purchaser, as the case may be, shall promptly notify the other Party of the nature of such dispute.

Section 9.06. Recordation of Transferred Intellectual Property . Purchaser shall be responsible, at its sole cost and expense, for all applicable recordations of the assignment of the Transferred Intellectual Property. Seller agrees to execute and deliver to Purchaser, within a reasonable time after the Closing, such assignments and other documents, certificates and instruments reasonably requested by Purchaser for Purchaser’s filing with the applicable registries and other recording authorities to record the transfer of the Transferred Intellectual Property in accordance with applicable Law.

Section 9.07. Confidentiality and Confidential Information .

(a) Each Party acknowledges that it may receive Confidential Information (as defined below) of the other Party in the performance of or in furtherance of this Agreement. Each Party shall hold confidential and not, directly or indirectly, disclose or publish to any Third Party or use for the benefit of a Third Party or, except in carrying out its duties hereunder, itself or its Affiliates, any Confidential Information of the other Party, without first having obtained the furnishing Party’s written consent to such disclosure or use. Purchaser acknowledges that it continues to remain bound by the terms of the Confidentiality Agreement and that Confidential Information received by it under or in connection with this Agreement and the performance of its obligations hereunder shall be deemed to be, and shall be treated as, Evaluation Materials under the Confidentiality Agreement. These restrictions shall not apply to any Confidential Information which:

(i) is known to the receiving Party or its Affiliates prior to the time of disclosure to it;

(ii) is independently developed by employees, agents, or independent contractors of the receiving Party or its Affiliates without aid or use of the disclosing Party’s Confidential Information (and such independent development can be demonstrated by the receiving Party);

(iii) is disclosed, without restriction as to confidentiality, to the receiving Party or its Affiliates by a Third Party that has a right to make such disclosure; or

(iv) becomes part of the public domain through no breach by the receiving Party of its obligations under this Agreement or any Ancillary Agreement.

Each receiving Party shall disclose Confidential Information of the disclosing Party only to those employees and contractors of such Party and of its Affiliates who have reason to know such information in furtherance of a Party’s duties under this Agreement and who are bound by an obligation of confidentiality to the receiving Party (or its Affiliate) that is no less stringent than the confidentiality obligations set forth in this Section 9.07 .

(b) The receiving Party shall also be entitled to disclose the other Party’s Confidential Information that is required to be disclosed (i) to or by any Governmental or Regulatory Authorities; (ii) to comply with applicable Laws (including, without limitation, to comply with SEC, Swedish Financial Supervisory Authority, or stock exchange disclosure requirements), (iii) to comply with judicial process or an order of any Governmental or Regulatory Authority of competent jurisdiction, or (iv) to defend or prosecute litigation; provided, however, that in each case the Party required to disclose such Confidential Information shall use reasonable efforts to notify the other Party in advance of such disclosure and shall provide the disclosing Party with reasonable assistance to obtain a protective order and/or confidential treatment of such Confidential Information, to the extent available, and thereafter only discloses the minimum Confidential Information required to be disclosed in order to ensure legal compliance.

(c) This obligations set forth in this Section 9.07 shall survive the termination of this Agreement or the Closing for five (5) years. Upon termination of this Agreement, a receiving Party shall return to the disclosing Party or destroy all Confidential Information provided to it by the disclosing Party, including all copies, notes and extracts thereof or other written records containing such Confidential Information, except for (x) one (1) copy that it may keep in counsel’s secure files for the sole purpose of verifying its continuing confidentiality obligations hereunder, and (y) archival copies residing on back-up tapes made by such party in the ordinary course of business; provided , that Purchaser shall not be obligated hereby to return or destroy any Confidential Information that constitutes Acquired Assets actually purchased by it hereunder.

ARTICLE X

INDEMNIFICATION

Section 10.01. Indemnification by Seller . From and after the Closing, Seller shall defend, indemnify and hold harmless Purchaser, its Affiliates and their respective employees, agents, officers and directors (collectively, the “ Purchaser Indemnitees ”), from and against any and all losses, liabilities, obligations, claims, fees (including, without limitation, reasonable documented attorneys’ fees and documented fees of other professionals), expenses and lawsuits (“ Losses ”) suffered or incurred by any Purchaser Indemnitee to the extent arising from or relating to any of the following:

(a) the breach of any representation or warranty of Seller contained in ARTICLE V , any Ancillary Agreement or any certificate delivered hereunder;

(b) the breach of or failure to comply with any covenant or obligation of Seller under this Agreement or any Ancillary Agreement; and

(d) the failure by Purchaser to withhold Taxes with respect to payments due to the Seller as provided in Section 3.04 .

Section 10.02. Indemnification by Purchaser . From and after the Closing, Purchaser shall defend, indemnify and hold harmless Seller, its Affiliates and their respective employees, agents, officers and directors (collectively, the “ Seller Indemnitees ”), from and against any and all Losses suffered or incurred by any Seller Indemnitee to the extent arising from or relating to any of the following:

(a) the breach of any representation or warranty of Purchaser contained in ARTICLE VII , any Ancillary Agreement or any certificate delivered hereunder;

(b) the breach of any covenant of Purchaser contained in this Agreement or any Ancillary Agreement;

(d) any product liability claim in the Territory with respect to Product sold on or after the Closing in the Territory;

(e) any product liability claim in the Territory with respect to Product sold prior to the Closing in the Territory;

(f) the development, testing, manufacture, distribution, marketing, promotion or sale of the Product in the Territory after the Closing;

(g) the development, testing, manufacture, distribution, marketing, promotion or sale of the Product in the Territory prior to the Closing; and

(h) any Transfer Taxes.

Section 10.03. Indemnification Procedure .

(a) Procedures Relating to Indemnification for Third Party Claims . In order to receive the benefits of the indemnity under Section 10.01 or Section 10.02 , as applicable, in respect of, arising out of or involving a claim or demand made by any Third Party (a “ Third Party Claim ”) against a Purchaser Indemnitee or Seller Indemnitee (either, an “ Indemnitee ”), such Indemnitee must:

(i) give the indemnifying Party (the “ Indemnitor ”) written notice of any claim or potential claim promptly after the Indemnitee receives notice thereof; provided , that failure of the Indemnitee to provide such notice shall not constitute a waiver of, or result in the loss of, such Party’s right to indemnification under this Agreement, except in the event that the Indemnitor’s rights, and/or its ability to defend against or settle such claim or potential claim, are materially prejudiced by such failure to notify;

(ii) allow the Indemnitor to assume the control of the defense and settlement (including all decisions relating to litigation, defense and appeal) of any such claim, provided, that: (A) no such settlement may materially adversely affect the rights or obligations of the Indemnitee under this Agreement without the Indemnitee’s prior written consent; and (B) any settlement reached without the prior written consent of the Indemnitee shall be for monetary damages only (which amount shall be fully indemnified hereunder by the Indemnitor) and not for any equitable relief and shall not include any admission or ongoing obligation or restriction on the part of the Indemnitee; and

(iii) reasonably cooperate with the Indemnitor in its defense of the claim (including, without limitation, making documents and records available for review and copying and making persons within the Indemnitee’s control available for pertinent interview and testimony), so long as such cooperation does not vitiate any legal privilege to which such Indemnitee is entitled.

If the Indemnitor defends the claim, the Indemnitee may at its expense and using attorneys of its choice, participate in, but shall not have any control of, the defense of such claim. The Indemnitor shall have no liability under this ARTICLE X as to any claim for which settlement or compromise of such claim, or an offer of settlement or compromise of such claim, is made by an Indemnitee without the prior written consent of the Indemnitor.

Section 10.04. Procedures Related to Indemnification for Other Claims . An Indemnitee seeking indemnification under Section 10.01 or Section 10.02 , as applicable, that does not involve a Third Party Claim shall, within as soon as reasonably practicable deliver to the Indemnitor, written notice (a “ Direct Claim Notice ”) describing in reasonable detail the facts giving rise to the indemnification claim, provided, however, that the failure by any Indemnitee to so notify the Indemnitor shall not relieve the Indemnitor from any liability which it may have to such Indemnitee under Section 10.01 or Section 10.02 , as applicable, except to the extent that the Indemnitor has been materially prejudiced by such failure. The Indemnitor shall have thirty (30) days after its receipt of a Direct Claim Notice to (i) agree to the amount set forth in the Direct Claim Notice and pay such amount to such Indemnified Party in immediately available funds or (ii) provide such Indemnitee with written notice that it disputes its obligation to provide the indemnification sought in the Direct Claim Notice (a “ Claim Dispute Notice ”). If the Indemnitor does not notify the Indemnitee within thirty (30) days following its receipt of such notice that Indemnitor disputes its liability to the Indemnitee with respect to such claim, such claim specified in the Direct Claim Notice shall be conclusively deemed a liability of the Indemnitor. If the Indemnitor delivers a Claim Dispute Notice, the Indemnitee and the Indemnitor shall negotiate in good faith to resolve the matter. In the event that the controversy is not resolved within twenty (20) Business Days after the giving of the Claim Dispute Notice, the parties thereafter may pursue any and all available remedies at law (subject to the limitations and conditions provided in this Agreement).

Section 10.05. Losses Net of Insurance, Tax Benefits . The amount of any Loss for which indemnification is provided under this ARTICLE X shall be net of any amounts recovered or recoverable with commercially reasonable efforts by the Indemnitee under insurance policies or in respect of any indemnity or contribution with respect to such Loss (including under the Transfer Agreement) and shall be reduced to take account of any net Tax benefit (including as a result of any basis adjustment) actually realized by the Indemnitee arising from the incurrence or payment of any such Loss. In computing the amount of any such Tax benefit, the Indemnitee shall be deemed to recognize all other items of income, gain, loss, deduction or credit before recognizing any item arising from the incurrence or payment of any indemnified Loss.

Section 10.06. Limitation on Indemnification .

(a) Notwithstanding anything to the contrary herein, (i) Seller shall not have any liability under Section 10.01(a) unless the aggregate of all Losses for which Seller would be liable under Section 10.01(a) , but for this clause (i), exceeds on a cumulative basis, an amount equal to $50,000, and then only to the extent of any such excess, (ii) Seller’s aggregate liability under Section 10.01(a) shall in no event exceed, on a cumulative basis, the Seller Liability Cap and (iii) Sellers aggregate liability under this ARTICLE X shall in no event exceed, on a cumulative basis, the Closing Consideration.

(b) Notwithstanding anything to the contrary herein, Purchaser shall only have liability under Section 10.02(e) or Section 10.02(g) only to the extent that Purchaser is entitled to seek indemnification for such liability from Strakan (or its successors or assigns) under Section 11.1 of the Strakan Agreement (without giving effect to any amendments thereto following the Closing).

(c) Following the Closing, the Parties’ rights to indemnification pursuant to this ARTICLE X shall, except for equitable relief and specific performance of covenants that survive Closing, be the sole and exclusive remedy available to the parties with respect to any matter arising under or in connection with this Agreement or the transactions contemplated hereby, other than for claims of fraud. Purchaser hereby waives, from and after the Closing Date, to the fullest extent permitted under applicable Law, any and all rights, claims and causes of action it or any of its Affiliates may have against Seller and its Affiliates arising under or based upon this Agreement, the Ancillary Agreements, any document or certificate delivered in connection herewith, the Product, the Acquisition, the Acquired Assets and the Assumed Liabilities, or any federal, state, local or foreign statute, law, ordinance, rule or regulation or otherwise (except pursuant to the indemnification provisions set forth in this ARTICLE X ).

(d) Notwithstanding any provision herein, neither Seller nor Purchaser shall in any event be liable to the other Party or any Indemnitee on account of any indemnity obligation set forth in Section 10.01 or Section 10.02 for any indirect, consequential, special, incidental or punitive damages (except punitive damages payable to a Third Party ), including loss of future revenue or income, loss of business reputation or opportunity relating to the breach or alleged breach of this Agreement, or diminution of value or any damages based on any type of multiple.

Section 10.07. Termination of Indemnification .

(a) The obligations to indemnify and hold harmless an Indemnitee pursuant to (i) Section 10.01(a) and Section 10.02(a) , shall terminate when the applicable representation or warranty terminates pursuant to Section 10.07(b) below, and (ii) the other clauses of Section 10.01 and Section 10.02 , shall not terminate; provided , however , that as to foregoing clause (i) such obligations to indemnify and hold harmless shall not terminate with respect to any item as to which the Indemnitee or the related Party thereto shall have, before the expiration of the applicable period, previously made a claim by delivering a notice of such claim (stating in reasonable detail the basis of such claim) to the indemnifying Party.

(b) The representations and warranties of Seller contained in ARTICLE V shall survive the Closing solely for purposes of Section 10.01(a) and shall terminate at the close of business on the first anniversary of the Closing Date (other than with respect to those representations and warranties of Seller contained in Section 5.01 , Section 5.02 , and Section 5.08 , which shall survive indefinitely), and the representations and warranties of Purchaser contained in ARTICLE VII shall survive the Closing solely for purposes of Section 10.02(a) , and shall terminate at the close of business on the first anniversary of the Closing Date (other than with respect to those representations and warranties of Purchaser contained in Section 7.01 , Section 7.02 and Section 7.05 , which shall survive indefinitely).

Section 10.08. Tax Treatment of Indemnification Payments . For all Tax purposes, each of Purchaser, Seller and their respective Affiliates agrees to treat any indemnity payment under this Agreement as an adjustment to the Purchase Price received by Seller for the transactions contemplated by this Agreement unless a final determination (as defined in Section 1313 of the Code) provides otherwise.

Section 10.09. No Setoff . Purchaser shall not, and shall have no right to, setoff any Losses suffered by Purchaser or any Purchaser Indemnitee against the Deferred Consideration, any Sales Milestone, any Product Royalties, or any payments to be made by Purchaser to Seller under this Agreement or any of the Other Acquisition Documents.

Section 10.10. No Double Recovery . Neither Party shall be entitled to recover the same or duplicative damages with respect to the same breach from the other Party under more than one of this Agreement and the Ancillary Agreements. For the purposes of this Section 10.10 , each Party shall be deemed to have made and received all payments made and received by its Affiliates.

ARTICLE XI

TERMINATION

Section 11.01. Termination . This Agreement may be terminated and the transactions contemplated hereby abandoned by:

(a) mutual written consent of Seller and Purchaser;

(b) Seller if any of the conditions set forth in Section 4.02 shall have become incapable of fulfillment, and shall not have been waived by Seller, in each case, prior to the Closing;

(c) Purchaser if any of the conditions set forth in Section 4.01 shall have become incapable of fulfillment, and shall not have been waived by Purchaser, in each case, prior to the Closing;

(d) either Party, if the Closing does not occur on or prior to June 30, 2013; or

(e) automatically and without further action by either Party, upon the consummation of the transactions contemplated by the Exercise Notice;

provided , however , that the Party seeking termination pursuant to any of the foregoing clauses (b), (c) or (d) is not in breach in any material respect of any of its representations, warranties, covenants or agreements contained in this Agreement.

Section 11.02. Return of Confidential Information . If the transactions contemplated by this Agreement are terminated as provided herein:

(a) Purchaser shall return to Seller all documents and other material received by Purchaser, its Affiliates and their respective representatives from Seller, any of its Affiliates or any of their respective Affiliates or representatives relating to the transactions contemplated hereby and by the Ancillary Agreements, whether so obtained before or after the execution hereof, to Seller; and

(b) all confidential information received by Purchaser, its Affiliates and their respective representatives with respect to Seller, any of its Affiliate or any of their respective Affiliates and the Acquired Assets shall be treated in accordance with the Confidentiality Agreement, which shall remain in full force and effect notwithstanding the termination of this Agreement.

Section 11.03. Effect of Termination . In the event of termination by Seller or Purchaser pursuant to this ARTICLE XI , written notice thereof shall forthwith be given to the other Party and the transactions contemplated by this Agreement shall be terminated, without further action by either Party. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in this ARTICLE XI , this Agreement shall become void and of no further force or effect, except for the provisions of (a) Section 9.07 relating to the confidentiality obligations of the Parties; (b) Section 12.07 relating to public announcements; (c) Section 12.08 relating to governing law; (d) Section 12.09 relating to dispute resolution; (e) Section 12.10 relating to expenses; and (f) this ARTICLE XI . Nothing in this ARTICLE XI shall be deemed to release either Party from any liability for any breach by such Party of the terms and provisions of this Agreement prior to the termination of this Agreement.

ARTICLE XII

MISCELLANEOUS

Section 12.01. Assignment . Except as otherwise expressly permitted by this Agreement, neither Party shall assign or otherwise transfer this Agreement or any interest herein or right hereunder without the prior written consent of the other Party, and any such purported assignment, transfer or attempt to assign or transfer any interest herein or right hereunder shall be void and of no effect; provided , however , that, following the Closing, either Party shall have the right, without such consent, on written notice to the other Party, to assign all of its rights and obligations hereunder to a successor to all or substantially all of such Party’s business or assets, whether by way of merger, sale of stock, sale of assets or other transaction (or series of related transactions), provided , further , that in the case of an assignment by Purchaser, any assignee shall expressly agree to assume Purchaser’s obligations pursuant to this Agreement, including, the payment obligations under Section 3.02 and the covenants in Section 8.04 . Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

Section 12.02. Non-Waiver . Any failure on the part of a Party to enforce at any time or for any period of time any of the provisions of this Agreement shall not be deemed or construed to be a waiver of such provisions or of any right of such Party thereafter to enforce each and every such provision on any succeeding occasion or breach thereof.

Section 12.03. No Third-Party Beneficiaries . This Agreement is for the sole benefit of the Parties and their successors and permitted assigns and the Indemnitees, and nothing herein express or implied shall give or be construed to give to any Person, other than the Parties and such successors and permitted assigns and the Indemnitees, any legal or equitable rights hereunder.

Section 12.04. Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of the Agreement shall remain in full force and effect. Upon such determination, the Parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the Parties to the fullest extent permitted by applicable Law.

Section 12.05. Entire Agreement; Amendments . This Agreement, together with the Ancillary Agreements (in each case, following execution and delivery thereof), contains the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersedes all previous and contemporaneous verbal and written understandings, agreements, representations and warranties with respect to such subject matter or on which the Parties may have relied. This Agreement may not be amended, supplemented or modified except by an instrument in writing signed on behalf of each Party. No waiver of any provision of this Agreement shall be valid unless the waiver is in writing and signed by the waiving Party.

Section 12.06. Notices . Unless otherwise explicitly set forth herein, any notice required or permitted to be given hereunder shall be in writing and shall be delivered personally by hand, or sent by reputable overnight courier, signature required, to the addresses of each Party set forth below or to such other address or addresses as shall be designated in writing in the same matter:

(a) If to Purchaser:

Galena Biopharma, Inc.

310 N. State Street, Suite 208

Lake Oswego, Oregon 97034

Attention: Chief Executive Officer

Facsimile: 855-883-7422

with a copy (which shall not constitute notice) to:

TroyGould PC

1801 Century Park East, 16 ^th Floor

Los Angeles, California 90067

Attention: Dale E. Short

Facsimile: (310) 201-4746

(b) If to Seller:

Orexo AB

P.O. Box 303

SE-751 05 Uppsala

Sweden


Attention:		Chief Executive Officer
Facsimile:		+46 (0)18 780 88 88

with a copy (which shall not constitute notice) to:

Dechert LLP

1095 Avenue of the Americas

New York, New York 10036-6797


Attention:		David S. Rosenthal, Esq.
Facsimile:		(212) 698-3599

All notices shall be deemed given when received by the addressee.

Section 12.07. Public Announcements . Neither Party shall make any public announcement regarding this Agreement, or the subject matter contained herein, without the prior written consent of the other Party (which consent may be withheld in the sole discretion of such other Party), except to the extent required to be disclosed (i) to or by any Governmental or Regulatory Authorities; (ii) to comply with applicable Laws (including, without limitation, to comply with SEC, Swedish Financial Supervisory Authority, or stock exchange disclosure requirements), or (iii) to comply with judicial process or an order of any Governmental or Regulatory Authority of competent jurisdiction; provided, however, that in each case the Party required to disclose such information shall endeavor to give the other Party reasonable advance notice and review of any such disclosure. Notwithstanding the foregoing, the Parties shall coordinate on a mutually acceptable joint press released to be issued by each of the Parties in connection with the execution of this Agreement.

Section 12.08. Governing Law . This Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the U.N. Convention on Contracts for the Sale of Goods or the choice of law provisions thereof.

Section 12.09. Dispute Resolution .

(a) The Parties recognise that a bona fide dispute as to certain matters governed by this Agreement may arise that relate to any Party’s rights or obligations hereunder. In the event of the occurrence of any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, either Party may, by written notice to the other, have such dispute referred to its respective officer designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If either Party desires to pursue arbitration under paragraph (b) below to resolve any such dispute, a referral to such executives under this paragraph (a) shall be a mandatory condition precedent. Said designated officers are as follows.

For Purchaser: Chief Executive Officer

For Seller: Chief Executive Officer

(b) In the event that such officers shall be unable to resolve the dispute by executive mediation within such sixty (60) day period, then the dispute shall be finally settled by binding arbitration as provided below.

(c) Any arbitration proceeding shall be administered by the Arbitration Institute of the Stockholm Chamber of Commerce. The place of arbitration shall be in Stockholm, Sweden. The arbitration shall be conducted in English. The award of arbitration shall be final and binding upon both Parties.

(d) The procedures specified in this Section 12.09 shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement; provided , that a Party, without prejudice to the above procedures, may seek injunctive relief or other provisional judicial relief if in its sole judgment such action is necessary to avoid irreparable damage. Despite such action the Parties will continue to participate in good faith in the procedures specified in this Section 12.09 .

(e) Each party is required to continue to perform its obligations under this Agreement pending final resolution of any such dispute.

Section 12.10. Expenses . Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs or expenses.

Section 12.11. Relationship of the Parties . In making and performing this Agreement, the Parties are acting, and intend to be treated, as independent entities and nothing contained in this Agreement shall be construed or implied to create an agency, partnership, joint venture, or employer and employee relationship between Seller and Purchaser or any of their respective Affiliates. Except as otherwise expressly provided herein, neither Party may act on behalf of the other Party, and neither Party may make (or has any authority to make) any representation, warranty or commitment, whether express or implied, on behalf of the other Party or incur any charges or expenses for or in the name of the other Party. No Party shall be liable for the act of any other Party unless such act is expressly authorized in writing by both Parties. The relationship of the Parties under this Agreement is, and is intended to be, one of independent contractors hereunder.

Section 12.12. Counterparts . This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of each of the Parties. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against the Party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed as of the date first written above.


SELLER:

OREXO AB

/s/ Nicolaj Sorensen
Name:		Nicolaj Sorensen
Title:		CEO and President

PURCHASER:

GALENA BIOPHARMA, INC.

/s/ Mark J. Ahn
Name:		Mark J. Ahn, Ph.D.
Title:		President and Chief Executive Officer

O REXO A SSET P URCHASE A GREEMENT E XHIBITS

E XECUTION V ERSION

Exhibit A

Transfer Agreement

[Attached]


Private & Confidential		Execution Copy


		DATED		2012


		OREXO AB		(1)

		and

		STRAKAN INTERNATIONAL SARL		(2)

		(formerly known as Strakan International Limited)

TERMINATION AND ASSET TRANSFER

AGREEMENT FOR ABSTRAL® IN THE UNITED

STATES OF AMERICA

LOGO

Tel +44 (0)870 903 1000 Fax +44 (0)870 904 1099 mail@wragge.com www.wragge.com

CONTENTS


Clause	Heading	Page
1	DEFINITIONS		3
2	TERMINATION OF RAPINYL NORTH AMERICA LICENCE AGREEMENT AND THE ABSTRAL TRADE MARK AGREEMENT		10
3	TRANSFER OF THE ASSETS		12
4	TRANSFER OF REGULATORY APPROVALS IN THE USA AND PROVISION OF TRANSITION SERVICES TO OREXO		13
5	TRANSFER OF CONTRACTS AND RECORDS		16
6	TRANSFER OF STOCK		17
7	ASSIGNMENT OF THE US ABSTRAL MARK		18
8	DEVELOPMENT, MANUFACTURE AND COMMERCIALISATION		19
9	CONFIDENTIALITY		22
10	REPRESENTATIONS AND WARRANTIES		23
11	INDEMNIFICATION		26
12	MISCELLANEOUS PROVISIONS		27

This Termination and Asset Transfer Agreement is made as of the Signature Date (hereinafter defined) between Orexo AB , a limited liability company organised and existing under the laws of Sweden and having its principal place of business at Virdings allé 32, Uppsala, Sweden (“Orexo”) and Strakan International S.à r.l, a limited liability company organised and existing under the laws of Luxembourg and having its principal place of business at Galabank Business Park, Galashiels TD1 1QH, UK (“Strakan”) (each a “Party” and collectively, the “Parties”) .

WITNESSETH

WHEREAS, Orexo is the owner of all right, title and interest in certain patents and know-how relating to its proprietary Product (as defined below) for pain treatment in the Orexo Territory (as defined below); and

WHEREAS, the Parties have previously entered into the Rapinyl North America Licence Agreement (as defined below) under which certain exclusive rights were granted to Strakan in the United States of America, Canada and Mexico in respect of Orexo’s patents and know-how; and

WHEREAS, the Parties have previously entered into the Rapinyl EU Licence Agreement (as defined below) under which certain exclusive rights were granted to Strakan in the EU and certain other countries in respect of Orexo’s patents and know-how; and

WHEREAS, in 2011 Kyowa Hakko Kirin Co. Ltd (“KHK”) acquired all issued shares of ProStrakan Group Plc thereby making Strakan an Affiliate of KHK; and

WHEREAS, the Parties on even date herewith have entered into a licence and asset transfer agreement in relation to the Product in the RoW Territory (as defined below) (“Abstral RoW Agreement”) ; and

WHEREAS, the Parties have agreed to terminate the Rapinyl North America Licence Agreement and to enter into this termination and asset transfer arrangement in relation to the Product in relation to the United States of America upon the terms and conditions hereinafter set forth and to have Mexico and Canada governed by the Abstral RoW Agreement with effect from the Signature Date; and

WHEREAS, the Parties on even date herewith have entered into an Amended and Restated Licence Agreement for Abstral in the EU and certain other countries whereby the Rapinyl EU Licence Agreement is terminated.

NOW, THEREFORE, in consideration of the covenants and obligations expressed herein, and intending to be legally bound, the Parties agree as follows:

1	DEFINITIONS

1.1	“Abstral Domain Names” means the domain names listed in Exhibit 7.

1.2

“Abstral Trade Mark Agreement” means the letter agreement between the Parties dated 22 September 2011 under which Orexo was granted certain rights in relation to the mark ABSTRAL and Strakan’s trade dress and artwork for the Product as well as Strakan’s training and marketing materials relevant to the Product.

1.3	“Abstral US Mark” means the trade mark ABSTRAL, registered in the United States of America under registration number 3563010 together with all good will associated therewith.

1.4

“Affiliate” means a person or entity that directly or indirectly through one or more intermediates, controls, is controlled by, or is under common control with the person or entity specified. For the purpose of this definition, “control” shall mean with respect to an entity, the direct or indirect ownership of (a) more than fifty percent (50%) of the capital stock or share capital entitled to vote for the election of directors of the entity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) or (b) more than fifty percent (50%) of equity or voting interest of the entity (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction). An entity will be an Affiliate for purposes of this Agreement only so long as it satisfies the definition set forth herein.

1.5	“Assets” means the Abstral US Mark, the Stock, the benefit of the Contracts, the Regulatory Approvals, and the Records.

1.6	“Business Day” means a day other than a Saturday, Sunday or a public holiday in England and Sweden when the banks are open for business in London and Stockholm.

1.7	“cGMP” means the current good manufacturing practices for pharmaceutical products published in Title 21, Parts 210 and 211 of the United States Code of Federal Regulations.

1.8	“Competing Product” means any fast acting formulation of fentanyl.

1.9

“Confidential Information” means all information disclosed, directly or indirectly, by one Party to the other during the term of this Agreement or prior to the Signature Date (including any information disclosed pursuant to the Rapinyl North America Licence Agreement), that is identified as confidential or is customarily regarded as confidential within the pharmaceutical industry, whether disclosed in electronic, tangible, oral or visual form. Confidential Information shall not include such information that: (a) was or becomes generally available to the public other than as a result of an unauthorised disclosure by a Party hereto or any of such Party’s Affiliates, employees, agents or representatives; or (b) was or becomes available to a Party hereto or any of such Party’s Affiliates on a non-confidential basis from a source other than the other Party hereto (or any of such Party’s

Affiliates, employees, agents or representatives); provided that such source was not known by such other Party or its Affiliates to be bound by an agreement to keep such information confidential or otherwise prohibited from transmitting the information by a contractual, legal or fiduciary obligation. Information that is otherwise Confidential Information and consists of a combination of information shall not be deemed to be in the public domain if individual elements of such information are in the public domain, unless the specific combination of those elements is also in the public domain.

1.10	“Contracts” means contracts between Strakan or a Strakan Affiliate and a Third Party exclusively relating to the Product or its Exploitation in the Orexo Territory in force as at the Signature Date, being those contracts brief particulars of which are set out at Exhibit 2.

1.11

“Contract Liabilities” means all losses, costs (including legal costs on an indemnity basis, other professional fees and disbursements and associated VAT), damages, expenses, compensation, interest, charges, actions, proceedings, claims, demands and other liabilities associated with the Contracts.

1.12

“Control” or “Controlled” means possession by a Party of the right to grant to the other Party a licence, sublicense or other right to use, of the scope provided for in this Agreement, to intangible or intellectual property rights (including patent rights, know-how, trade secrets, data and rights to access or cross-reference to a regulatory filing) without violating the terms of any agreement or other arrangement with any Third Party existing at the time such Party would be first required hereunder to grant the other Party such licence, sub-licence or other right.

1.13	“Exploit” means to research, develop, make or have made, use, offer for sale, market and promote.

1.14	“FDA” means the Food and Drug Administration of the United States Department of Health and Human Services or any successor agency thereof performing similar functions

1.15	“Global Safety Agreement” means the Pharmacovigilance Agreement Regarding Abstral between the Parties dated 24 May 2010.

1.16

“Good Marketable Condition” means that the Products supplied to Orexo hereunder (i) have been manufactured, packaged and stored in accordance with all applicable Laws, including without limitation the cGMPs, and the NDA Approval; (ii) will at the time of delivery and during the applicable shelf life conform with the NDA Approval and all other applicable Laws provided that Strakan shall not be liable for any failure to meet Good Marketable Condition resulting from Orexo’s or any entity acting on its behalf failure to comply with the NDA Approval.

1.17	“IND” means Investigational New Drug application number 69,190 in relation to the Product in the Orexo Territory.

1.18

“Know-How” means all proprietary methods, discoveries, inventions, devices, technology, trade secretes, compositions, designs, formulae, know-how, show-how, documentation, data and other information processes and analytical methods used in development, manufacture and medical, pre-clinical, clinical and toxicological testing or formulation, development, registration, manufacture, packaging, labelling, import, export, receipt, shipment, or storage, whether now known or hereafter developed, all relating to the Product or its manufacture or use.

1.19	“Landed Cost” means the Ex-Works price to be paid by Orexo to Strakan for purchased Stock that is in Good Marketable Condition being the price set out in Exhibit 4.

1.20

“Law” means all applicable laws (including the United Stated Federal Food, Drug, and Cosmetic Act, the cGMPs, the Prescription Drug Marketing Act, and the Controlled Substances Act) governing the manufacture, marketing, advertising, distribution and sale of the Product or any other obligations of the Parties, including regulations promulgated thereunder.

1.21	“Licensed Field” means all fields of use in humans in all indications.

1.22	“NDA Approval” means NDA approval number 22-510 in relation to the Product in the Orexo Territory.

1.23

“Orexo Know-How” means Know-How which is (a) Controlled by Orexo, its Affiliates or, to the extent Controlled by Orexo, its licensees during the period in which Strakan is complying with its obligations under Section 4 of this Agreement and (b) is useful for Strakan to Exploit the Product in the Orexo Territory in accordance with Strakan’s obligations under this Agreement.

1.24

“Orexo Patents” means (i) the patents and patent applications identified in Exhibit 1 , all patents issued from any such applications, and any other patents issuing from applications that claim the same priority date as any of the patents and patent applications identified on Exhibit 1 , (ii) all other patent and patent applications that are Controlled by Orexo or any of its Affiliates at any time during the period in which Strakan is complying with its obligations under Section 4 and that claim the composition-of-matter of a Product, or its formulation or its method of manufacture or use, and (iii) any provisionals, continuations, divisionals, continuation-in-part applications, substitutions, reissues, renewals, re-examinations, supplementary protection certificates, extensions, registrations and confirmations of any of (i) and (ii) above, all to the extent Controlled by Orexo or any of its Affiliates at any time during period in which Strakan is complying with its obligations under Section 4 of this Agreement.

1.25	“Orexo Technology” means all Orexo Patents and Orexo Know-How that are Controlled by Orexo or any of its Affiliates during the period in which Strakan is complying with its obligations under Section 4 of this Agreement.

1.26	“Orexo Territory” means the United States of America including its territories and possessions.

1.27	“Product” means fentanyl citrate sublingual tablets, as described in the NDA Approval and including all dosage strengths thereof.

1.28

“Rapinyl EU Licence Agreement” means the licence agreement dated 2 January 2006 between the Parties (as amended) under which certain exclusive rights relating to Orexo’s proprietary product for pain treatment then referred to as Rapinyl™ were granted to Strakan in respect of the territories being member states of the European Union as of 2 January 2006 and also including Iceland, Norway, Switzerland, and Turkey, Bulgaria and Romania and certain other countries.

1.29

“Rapinyl North America Licence Agreement” means the licence agreement dated 31 ^st July 2008 between the Parties (as amended) under which certain exclusive rights relating to Orexo’s proprietary product for pain treatment then referred to as Rapinyl™ were granted to Strakan in respect of the United States of America, Canada and Mexico and their possessions and territories.

1.30	“Records” means (a) a copy of the Contracts; (b) copies of artwork relating to the packaging of the Product in the USA; (c) registration certificates and prosecution history files for the Abstral US Mark; (d) all batch documentation relating solely to

the Stock purchased by Orexo in accordance with Section 6.3; (e) all physician lists, customer lists, marketing materials, market research materials, advertising and promotional materials, other similar information and data, including records of sales and cost data, to the extent pertaining to the marketing or distribution of the Product in the Orexo Territory; (f) copies of all books and records and documents relating to field force activities prior to Signing Date including without limitation customer type and visits, frequency of visiting, Abstral position in visit and notes from the sales reps after visit, (g) copies of all books and records and documents generated in the performance of Transition Services, (h) copies of all books and records and documents exclusively relating to the Product in the Orexo Territory; (i) promotional panels specific to the Product applied to booths and displays, and all equipment and other materials used exclusively in connection with the sale or promotion of the Product whether or not located at Strakan’s address; and (j) the Product NDA and IND, in each case to the extent in the possession or control of Strakan or its Affiliates.

1.31	“Regulatory Approvals” means the NDA Approval and the IND.

1.32	“RoW Territory” means all countries of the world except the United States, the countries of the Rapinyl EU Licence Agreement and Japan.

1.33	“Signature Date” means the date of the signature of the last Party to execute this Agreement.

1.34

“Stock” means the supplies of manufactured Product (including any validation batches) held on behalf of Strakan at the warehouse facilities in Cardinal Health SPS, Nashville and Exel Logistics, Mechanicsburg, PA or at the facilities of Pharmaceuticals International Inc or Sharp Corporation, Allentown, PA as at the Signature Date including any additional quantities of Product finally released by or on behalf of Strakan thereafter during the Transition Period.

1.35

“Strakan Know-How” means Know-How which is (a) Controlled by Strakan, its Affiliates or, to the extent Controlled by Strakan, its licensees during the term of this Agreement and (b) is useful for Orexo to Exploit the Product in the Orexo Territory in accordance with its rights under this Agreement.

1.36	“Strakan Patents” means (i) all patent and patent applications that are Controlled by Strakan or any of its Affiliates in the United States of America that claim the composition-of-matter of the Product, or its formulation or its method of

manufacture or use, and (ii) any provisionals, continuations, divisionals, continuation-in-part applications, substitutions, reissues, renewals, re-examinations, supplementary protection certificates, extensions, registrations and confirmations of any of (i) above, all to the extent Controlled by Strakan or any of its Affiliates.

1.37	“Strakan Technology” means all Strakan Patents and Strakan Know-How.

1.38	“Third Party” means any entity other than Orexo or Strakan or their respective Affiliates.

1.39	“Third Party Costs” means payments made by or on behalf of Strakan or its Affiliates to Third Parties for the provision of Transition Services.

1.40	“Transition Date” means the date when Orexo begins to book sales of Product as provided in Section 4.3 which shall be not later than 31 December 2012.

1.41

“Transition Services” means the regulatory, marketing, promotion, sales, distribution, administrative and other services in respect of the Product that are to be provided by Strakan pursuant to the terms and conditions of this Agreement and the transition plan in Exhibit 5 (the “Transition Plan” ).

1.42	Interpretation

(a)

Whenever any provision of this Agreement uses the term “including” (or “includes”), such term shall be deemed to mean “including without limitation” and “including but not limited to” (or “includes without limitations” and “includes but is not limited to”) regardless of whether the words “without limitation” or “but not limited to” actually follow the term “including” (or “includes”);

(b)

“Herein”, “hereby”, “hereunder”, “hereof”, and other equivalent words shall refer to this Agreement in its entirety and not solely to the particular portion of this Agreement in which any such word is used;

(c)

All definitions set forth herein shall be deemed applicable whether the words defined are used herein in the singular or the plural;

(d)

Wherever used herein, any pronoun or pronouns shall be deemed to include both the singular and plural and to cover all genders;

(e)

The recitals set forth at the start of this Agreement, along with the Exhibits to this Agreement, and the terms and conditions incorporated in such recitals or Exhibits shall be deemed integral parts of this Agreement and all references in this Agreement to this Agreement shall encompass such recitals, Exhibits and the terms and conditions incorporated in such recitals or Exhibits, provided , that in the event of any conflict between the terms and conditions of this Agreement and any terms and conditions set forth in the Exhibits the terms of this Agreement shall control;

(f)

In the event of any conflict between the terms and conditions of this Agreement and any terms and conditions that may be set forth on any order, invoice, verbal agreement or otherwise, the terms and conditions of this Agreement shall govern;

(g)

The Agreement shall be construed as if both Parties drafted it jointly, and shall not be construed against either Party as principal drafter;

(h)

Unless otherwise provided, all references to Sections and Exhibits in this Agreement are to Sections and Exhibits of and to this Agreement;

(i)

All references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters or calendar years;

(j)

Any reference to any federal, national, state, local or foreign statute or law shall be deemed to also refer to all rules and regulations promulgated thereunder, unless to context requires otherwise; and

(k)

Wherever used, the word “shall” and the word “will” are each understood to be imperative or mandatory in nature and are interchangeable with one another; and

(l)

The term “book sales” as applied to a Party shall mean that the applicable Party issues an invoice to a Third Party in respect of the applicable sale of the Product.

2	TERMINATION OF RAPINYL NORTH AMERICA LICENCE AGREEMENT AND THE ABSTRAL TRADE MARK AGREEMENT

2.1	With respect to the Orexo Territory, the Rapinyl North America Licence Agreement and the Abstral Trade Mark Agreement are terminated with effect from the

Transition Date. With respect to Mexico and Canada the Abstral RoW Agreement will govern these countries from the Signature Date. With respect to the Orexo Territory from the Signature Date until the Transition Date, the Rapinyl North America Licence Agreement shall remain in full force and effect with the following amendment:

Articles 2, 3, 4, 5 (subject to Section 2.2 below), 6, 7.1, 7.2, 8, 10 and 11 of the Rapinyl North America Licence Agreement are deleted in their entirety and shall be deemed “Not Used” for the purposes of the Rapinyl North America Licence Agreement. With respect to the Orexo Territory the definition of Net Sales shall from the Signature Date (and with effect on sales made thereafter) be deleted and replaced with the following:

“Net Sales” means the gross amount invoiced by Strakan, its Affiliates or Sub-Licensees for sale of Product, less deductions for: (i) cash discounts actually given; (ii) freight, shipping insurance and other transportation expenses; (iii) sales, value- added, excise taxes, tariffs and duties, and other taxes directly related to the sale; (all to the extent that such items are included in the gross invoice price and specified on the invoice (but not including taxes assessed against the income derived from such sale)); (iv) rebates and returns; (v) bad debts which have been written off by Strakan in accordance with its standard accounting practices provided that bad debts may be deducted only to the extent they do not exceed 2% of the gross amount invoiced.

All such discounts, allowances, credits, rebates and other deductions shall be fairly and equitably allocated to the Products and other products or services of Strakan or its Affiliates, such that the Products do not bear a disproportionate portion of such deductions. In the event that Strakan subsequently receives payment in respect of a bad debt previously deducted under (v) above, Strakan shall pay Orexo any royalty which would have been due on such sum. The transfer of Product by Strakan to an Affiliate will not be deemed a sale.

2.2

Notwithstanding anything to the contrary in this Agreement or the Rapinyl North America Licence Agreement, Strakan shall make payment of all royalties, sales milestones and other sales based payments (if any) set forth in the Rapinyl North America Licence Agreement, that accrue on Net Sales of Product made by Strakan, its Affiliates or Sub-Licensees (i) in the case of the Orexo Territory, prior to the date on which Orexo begins to book the sales of the Product in accordance with the Transition Plan and, (ii) in the case of Mexico and Canada, prior to the Signature

Date. Termination of the Rapinyl North America Licence Agreement shall not affect the following provisions of the Rapinyl North America Licence Agreement, which shall continue in full force and effect: 5.5, 5.6, 5.7 and 12.

2.3

All other provisions of the Rapinyl North America Licence Agreement and all provisions of the Abstral Trade Mark Agreement, including any which are expressly stated in the Rapinyl North America Licence Agreement or the Abstral Trade Mark Agreement (as applicable) as surviving its termination, or which might otherwise have done so by implication, will be terminated (i) from the Transition Date in respect of the Orexo Territory and (ii) from the Signature Date in respect of Mexico and Canada.

2.4

Subject to Section 2.5, each Party hereby releases and discharges the other from all claims or demands under or in connection with the Rapinyl North America Licence Agreement and the Abstral Trade Mark Agreement including without limitation claims for negligence, whether arising before or on the Signature Date, in each case whether known or unknown to the releasing Party.

2.5	The release and waiver at Section 2.4 shall not apply to:

(a)

the Parties’ past and future obligations and liabilities arising under the surviving provisions of the Rapinyl North America Licence Agreement as set out in Sections 2.1 and 2.2;

(b)

the Parties obligations under this Agreement.

3	TRANSFER OF THE ASSETS

3.1	In consideration of the mutual promises and releases set out in this Agreement and the payment of the Landed Cost in accordance with Section 6.3 below, Strakan shall transfer the Assets to Orexo in accordance with the terms of this Agreement.

3.2	Title, right and interest in and to the Assets shall pass as follows:

(a)

title to and beneficial ownership of the Regulatory Approvals shall pass to Orexo as provided in Section 4;

(b)

title to and beneficial ownership of the Contracts shall pass to Orexo as provided in Section 5;

(c)

title to and beneficial ownership of the Abstral US Mark shall pass to Orexo as provided in Section 7;

(d)

title to and beneficial ownership of the Stock shall pass to Orexo as provided in Section 6.2; and

(e)

title to and beneficial ownership of the Records shall pass to Orexo as provided in Section 5.2.

3.3

As from the Signature Date, all the Assets shall, pending any necessary payment, legal assignment, novation or assurance, be held by Strakan on trust for Orexo absolutely meaning that Orexo shall be entitled to all benefit out of such Assets during such period. Any payments emanating from such Assets shall be considered held on Orexo’s account (sw: redovisningsmedel).

4	TRANSFER OF REGULATORY APPROVALS IN THE USA AND PROVISION OF TRANSITION SERVICES TO OREXO

4.1

Following the Signature Date, the Parties shall cooperate to secure the transfer of the Regulatory Approvals from Strakan to Orexo in accordance with the Transition Plan. Strakan and Orexo shall use reasonable endeavours to complete such transfer as soon as possible after the Signature Date and in accordance with the Transition Plan.

4.2

Strakan will sign any notices, applications or other documents presented to it by Orexo that are necessary to transfer the Regulatory Approvals to Orexo unless Strakan reasonably believes that any document presented is misleading. Any communications with the FDA by Strakan in relation to the Product after the Signature Date shall be made in consultation with Orexo.

4.3

Subject to Section 6.2, during the period beginning on the Signature Date and ending on the Transition Date or, if Orexo begins to book sales prior to 31 ^st December 2012, as long as requested by Orexo but not beyond 31 ^st December 2012 (“the Transition Period”) , Strakan shall provide the Transition Services to Orexo in accordance with the Transition Plan. Strakan agrees that if requested in writing by Orexo it will provide transition services (excluding marketing and promotion services) relating to the Product after 31 December 2012 subject to (i) Orexo reimbursing Strakan for any Third Party Costs incurred in connection therewith and (ii) Orexo paying Strakan for its FTE Costs incurred in provided such services at Strakan’s then prevailing FTE rates provided that such services will not be provided

beyond 31 March 2013. Strakan shall be responsible for its costs and all Third Party costs incurred by Strakan in connection with the provision of the Transition Services and as described in the Transition Plan except that Orexo will reimburse Strakan for all Third Party costs incurred by Strakan and relating to the period after 30 September 2012 as set out in the Transition Plan. Strakan will invoice Orexo for any such Third Party costs incurred by Strakan after 30 September 2012 and Orexo shall pay such sums to Strakan with thirty (30) days of the date of the applicable invoice. Orexo shall provide Strakan with any assistance it reasonably requires to comply with its obligations under this Section 4.3. Upon Orexo’s request, Strakan shall provide reasonable supporting documentation of Third Party Costs. Strakan shall not incur Third Party Costs without Orexo prior written approval if exceeding $1,000 per item or $5,000 in the aggregate, unless identified in a budget approved by Orexo in writing in advance. For clarity the budgeted items identified in the Transition Plan shall be deemed approved. Notwithstanding anything to the contrary herein or in the Transition Plan, the annual establishment and product user fees payable in 2012 shall be proportioned between the Parties such that Strakan bears the cost of such fees to the extent such fees relate to the period when Strakan books the sales and Orexo bears the remaining part of said user fees.

4.4	Any assets involved in the provision of services by Strakan under this Section 4 shall remain at all times the property of Strakan or its Affiliates, save as expressly provided in this Agreement.

4.5

Strakan shall perform the Transition Services under the Transition Plan in compliance with all applicable Laws, enactments, orders, regulations and standards and will obtain and maintain in force for the Transition Period all applicable licences, permissions, authorisations, consents and permits reasonably required to perform the Transition Services in accordance with this Section 4 and the terms of this Agreement and the Transition Plan.

4.6

Orexo shall have the option, but not the obligation, to assume full responsibility for all or any part of the Transition Services prior to the end of the Transition Period. Orexo, in its sole discretion, shall have the right to determine the timing of the Transition Date, provided that such date shall not be later than December 31, 2012.

4.7	No staff shall transfer between Strakan and Orexo at the commencement or expiration of the Transition Period.

4.8

Strakan agrees to notify Orexo promptly of any event which could reasonably be expected to have a material adverse effect on the business related to the Product. Strakan shall not offer prices, rebates, discounts and other sales terms which have not previously and customarily been offered by Strakan. During said period Strakan shall also observe customary stock rotation principles.

4.9

During the Transition Period, Strakan shall have a non-exclusive royalty-free licence right under the Orexo Technology and the Abstral US Mark to carry out the activities under this Section 4 in the Orexo Territory. Such licence shall be sublicensable to the extent required by Strakan to comply with its obligations under this Section 4.

4.10

From the Transition Date or, if earlier, the date on which the applicable Regulatory Approval is assigned to Orexo pursuant to the Transition Plan and subject to Strakan’s obligations under this Section 4, Orexo shall be responsible for fulfilling all legal and regulatory obligations under the Regulatory Approvals, including maintaining the Regulatory Approvals.

4.11

Product Returns. Returns shall be the responsibility of the Party who shipped the lot with respect to which a return has occurred. During the Transition Period, Strakan shall be responsible for all Product returns. From and after the Transition Date, Strakan shall be responsible for, and shall reimburse Orexo for, the originally invoiced value of the returns of the Product from batches from which any sale has been made by Strakan prior to the Transition Date.

4.12

Recalls. If the FDA or any other regulatory authority with applicable jurisdiction shall order, or it shall otherwise become necessary to perform, any corrective action or market action with respect to the Product following the date of transfer of the NDA to Orexo (including, without limitation, any recall, field correction, market withdrawal, stock recovery, customer notice or restriction), Orexo shall have the exclusive responsibility to appropriately manage such action. If such corrective action or market action is necessitated by the breach by one of the Parties of any of its warranties, representations, obligations, covenants or agreements contained herein, then such Party shall be liable, and shall reimburse the other Party, for all reasonable costs incurred by the non-breaching Party in connection with such action (including, without limitation, reasonable attorney’s fees and expenses). If each of the Parties is partly responsible for such corrective action or market action, then each Party shall be responsible for its proportionate

share of such costs. If neither Party is responsible for such corrective action or market action, then Orexo shall be responsible for such costs. Strakan shall appropriately cooperate with Orexo, including the completion of an investigation and the preparation and submission of a complaint report to Orexo or its designees. The preceding shall not be in lieu or limitation of any obligation of indemnity of a Party pursuant to Section 11.

5	TRANSFER OF CONTRACTS AND RECORDS

5.1	The Contracts shall be dealt with as follows:

(a)

this Agreement shall constitute an assignment to Orexo of the benefit of all the Contracts which Strakan is entitled to assign without the consent of any Third Party in each case with effect from the Transition Date;

(b)

as from the Transition Date Strakan shall hold the benefit of those of the Contracts which cannot be assigned without the consent of a Third Party for Orexo (and all rights, revenues, obligations, liabilities and losses arising from them after the Transition Date shall belong to and be borne by Orexo) and Strakan shall, at Orexo’s request, give to Orexo all reasonable assistance at no cost to Strakan to enable Orexo to enforce the Contracts;

(c)

Orexo and Strakan shall each use their reasonable endeavours to obtain all necessary consents for and subsequently effect the assignment or novation of each of the Contracts referred to in Section 5.1(b) using the agreed form deed of novation attached at Exhibit 6; and

(d)

with effect from the Transition Date and subject to Strakan performing its obligations under this Section 5 and Section 4 above Orexo shall assume the obligations and carry out, complete and discharge all of the obligations of Strakan under the Contracts and shall indemnify Strakan from all Contract Liabilities to the extent arising from any event, circumstance or condition occurring after the Transition Date.

5.2

During the Transition Period and in accordance with the Transition Plan Strakan will deliver the Records to Orexo. Strakan shall be entitled to retain a copy of the Records to enable Strakan and its Affiliates to comply with all applicable Laws and regulations or to comply with its obligations or enforce its rights under this Agreement or the other agreements referred to in the Background section of this Agreement.

6	TRANSFER OF STOCK

6.1

The Stock shall transfer to Orexo as follows. Orexo shall have the right but not the obligation to purchase at its election all or part of Strakan’s Stock existing on the date on which Orexo starts to book the sales of Product in the Orexo Territory that is in Good Marketable Condition at the Landed Cost. Upon Orexo’s written request to purchase selected part of the Stock (which request shall be made no later than ten (10) days prior to the date on which Orexo begins to book sales of Product in the Orexo Territory) Strakan shall provide in writing within five (5) days after such request information specifying in detail the inventory of Stock and the remaining shelf-life of the Stock to the extent such information has not previously been provided by Strakan to Orexo. Orexo may inspect the inventory of Stock, at its option within five (5) days of receiving such written information from Strakan. Orexo shall inform Strakan in writing within ten (10) days after receiving such written information (or after any inspection by Orexo whichever is later) what Stock it shall purchase. Strakan shall promptly ship the purchased Stock to Orexo or its designated Third Party at Orexo’s cost and risk. Payment for Stock so purchased by Orexo shall be made as provided in Section 6.3. Each delivery of Stock shall be accompanied by a Certificate of Analysis for each Product batch delivered. Any Stock which Orexo does not purchase shall be destroyed by Strakan unless otherwise agreed in writing by the Parties. Any quantities of the Stock purchased by Orexo that is not in Good Marketable Condition may be returned by Orexo for a full refund of the Landed Cost paid for such Stock and reimbursement of direct costs incurred by Orexo in connection with transport of such Stock to Strakan or its destruction. Orexo shall notify Strakan in writing of any such defective Stock within (i) 30 days from delivery in the case of a defect that is apparent on normal visual inspection; or (ii) 30 days from the date on which Orexo became aware of the defect in the case of a defect that is not apparent on normal visual inspection. If Strakan does not acknowledge a defect claimed by Orexo, the parties shall endeavour to settle such disagreement in an amicable and constructive manner. In the event that the Parties fail to agree within four (4) weeks after receipt of the notice of defects, the Parties agree to nominate an independent, reputable laboratory, acceptable to both Parties, which shall examine representative examples taken from such consignment, using the methods of analysis agreed upon by both Parties, and the result shall be binding on both

Parties. The Party whose opinion is not supported by the laboratory, shall pay the fees to the laboratory. It shall be Strakan’s responsibility at its cost to destroy any Stock that is not in Good Marketable Condition and shall provide Orexo with appropriate documentation evidencing that such destruction has taken place.

6.2	From the date on which the Stock is shipped to Orexo pursuant to Section 6.1 above, Orexo shall be responsible for all costs associated with storing, marketing and distributing the Stock including warehousing, insurance and transportation costs.

6.3	Strakan shall invoice Orexo for the Stock upon shipment as provided in Section 6.1. Within 30 days of the date of such invoice, Orexo shall pay to Strakan a sum equivalent to the Landed Cost of the Stock so purchased.

6.4	The payment due under Section 6.3 shall be paid in immediately available funds in USD to the bank account designated in writing by Strakan.

6.5

In the event that the payment due under Section 6.3 is not paid in full within thirty (30) days after the due date as per Section 6.3, the sums owing shall, after prior notice from Strakan and a five (5) Business Day cure period, bear interest at an annual rate of interest equal to the London Interbank Offered Rate (“LIBOR”), plus five (5) percentage points, calculated on the number of days such sums are delinquent.

6.6

Orexo shall have a non-exclusive licence to use any Strakan trade marks which are present on the packaging of the Stock purchased by Orexo and to use such marks to the extent required by applicable law or regulation in the Orexo Territory to promote and sell the Stock so purchased. Such trade marks shall be used in accordance with Strakan’s reasonable instructions and Orexo shall not do or cause to be done anything which might damage, tarnish or jeopardise such trade marks and the goodwill associated with them.

7	ASSIGNMENT OF THE US ABSTRAL MARK

7.1

Strakan agrees to assign all right, title and interest in and to the Abstral US Mark and the Abstral Domain Names to Orexo. On execution of this Agreement, the Parties shall enter into the agreed form assignment document at Exhibit 3 in order to give effect to the assignment of the Abstral US Mark. Strakan hereby grants Orexo a free of charge non-terminable and perpetual sublicensable right and

license to use in the Orexo Territory for the Exploitation of the Product any Strakan’s trade dress and artwork for the Product as well as Strakan’s training and marketing material relevant for the Product under any intellectual property rights Controlled by Strakan provided that such licence shall not include Strakan’s trade marks which are covered in Section 6.6.

7.2	Strakan shall sign any documents and do all such other things as are reasonably necessary to transfer the Abstral Domain Names to Orexo together with the 1-800-ABSTRAL freephone telephone number.

8	DEVELOPMENT, MANUFACTURE AND COMMERCIALISATION

8.1

From the Transition Date, subject to Strakan’s obligations under Section 4, Orexo shall be responsible for the Exploitation of the Product in the Orexo Territory at its sole discretion. Orexo shall provide prior written notice to Strakan of the identity of any Third Party which it or its Affiliates or licensees or distributors are proposing to appoint to manufacture the Product. If such Third Party manufacturer could, in the reasonable opinion of Strakan, be considered to be a potential generic supplier of the Product in any part of the world Strakan shall be entitled to object to such appointment provided such objection is notified to Orexo within fourteen (14) days of the date of Orexo’s notice containing the identity of the proposed Third Party manufacturer. If Strakan provides such a notice of objection Orexo will not and will procure that its Affiliates, licensees and distributors will not appoint the proposed Third Party manufacturer to manufacture the Product.

8.2

Licence Grant: Strakan hereby grants to Orexo, and Orexo hereby accepts, an exclusive (even as to Strakan) perpetual non-terminable paid-up sublicensable licence to develop, make or have made, use, sell, offer for sale, market and promote the Product for all uses in the United States of America under the Strakan Technology. The following provisions in the Rapinyl EU Licence Agreement shall apply mutatis mutandis to Orexo’s license rights to the Strakan Patents in the United States of America: Sections 9.2 through 9.5.

8.3	Competing Products: Strakan agrees that for five years from the Signature Date neither it nor its Affiliates will directly or indirectly sell, market or otherwise promote including by means of a licence any Competing Product in the Orexo Territory.

8.4

Reporting Adverse Events : In accordance with the Global Safety Agreement between the Parties, Strakan shall continue to own the global safety database for the Product. Orexo shall keep Strakan informed of any information of which it becomes aware concerning adverse events (as defined in the applicable FDA regulations, the then current edition of ICH Guidelines and any other relevant regulations or regulatory guidelines or any other safety problem of any significance, hereafter “Adverse Events” ), product quality and product complaints involving Adverse Events relating to the Product. The Parties will negotiate in good faith any necessary amendments to the Global Safety Agreement within sixty (60) days of the Signature Date.

Each of the Parties hereto shall disclose to the other Party all safety reports and other information (collectively “Safety Data” ) which they may from time to time receive or obtain (whether from sources within or without the Orexo Territory) with respect to any adverse drug experiences with respect to the Product, in accordance with a reporting protocol to be mutually agreed by the Parties as promptly as possible following the Signature Date. Orexo shall be responsible for the reporting of Safety Data to FDA as of the Transition Date, Strakan shall be responsible for such reporting before the Transition Date.

8.5	General Reporting: After the Transition Date:

(a)

Strakan shall immediately pass to Orexo all notices and correspondence which Strakan or its Affiliates receive after the Transition Date in relation to the Product in the Orexo Territory (other than relating to the activities of Strakan or its Affiliates before the Transition Date); and

(b)

Orexo shall immediately pass to Strakan all notices and correspondence with Orexo or its Affiliates receive after the Transition Date in relation to the activities of Strakan or its Affiliates with regard to the Product in the Orexo Territory before the Transition Date.

8.6	Regulatory Matters.

(a)

Responsibility for the Product. Subject to compliance by the Parties with the applicable provisions of the Transition Plan, from and after the Transition Date (or such earlier date as the NDA transfers to Orexo in accordance with Section 8.6(b) below), Orexo shall have all regulatory responsibilities under applicable Laws and regulations, reporting and otherwise, in connection with the Product in the Orexo Territory.

(b)

Transfer of NDA. On the Transition Date (or an earlier date agreed upon by the Parties), the Parties shall file with the FDA all of the documents and information required by the FDA to effect the transfer of the NDA from Strakan or any Affiliate to Orexo or an Affiliate of Orexo designated by Orexo. Strakan shall file and shall cause its Affiliates to file all of the documents and the information required of a former owner, including but not limited to a letter acknowledging the transfer of ownership of the NDA, and Orexo shall file the information required of a new owner. Each of Orexo and Strakan shall take any and all other actions required by the FDA or other relevant regulatory authorities, if any, to effect the transfer of the NDA from Strakan or its Affiliate to Orexo or its designated Affiliate as soon as reasonably practicable after the Transition Date (or other agreed upon date). Strakan may retain an archival copy of the NDA, including supplements and records that are required to be kept under applicable Law.

(c)

Communications with Regulatory Agencies. Subject to the respective obligations of the Parties set forth in the Transition Plan, from and after the Transition Date (or, if earlier, the date of transfer of the NDA Approval to Orexo in accordance with Section 8.6(a) above), Orexo shall have responsibility for all communication with the FDA with respect to the matters relating to the Product in or with respect to the Orexo Territory. From and after the Signature Date, Strakan shall make available to Orexo, copies of all correspondence to or from the FDA or other applicable regulatory authority relating to the manufacturing and testing of the Product in the Orexo Territory. From and after the Signature Date, Strakan shall make available to Orexo copies of all regulatory correspondence regarding regulatory warning letters, untitled letters, and correspondence bearing on the safety and efficacy of the Product in the Orexo Territory.

(d)

Additional Information. From and after the Transition Date, Strakan shall provide to Orexo in a timely manner, but in no event less than sixty (60) days prior to the due date of Orexo’s annual report to the FDA with respect to the Product, all information (in written form) which Orexo reasonably requests regarding the manufacture of the Stock which Orexo purchases from Strakan in accordance with Section 6.1 which may be needed for Orexo to comply with applicable annual reporting requirements of the FDA and applicable Laws.

9	CONFIDENTIALITY

9.1

Confidentiality : Except to the extent expressly authorised by this Agreement, the Parties agree that, for a period of ten (10) years after the Signature Date of this Agreement, the Party that has received (“Recipient”) Confidential Information from the other Party (whether under the terms of this Agreement or the Rapinyl North America Licence Agreement) will keep confidential and will not publish or otherwise disclose to any Third Party other than its employees, directors, sublicensees, licensees, advisors or Affiliates or, to the extent reasonably necessary to exercise its rights hereunder, other Third Parties, who, in each case, are under a confidentiality obligation substantially equivalent to that of the Recipient, and will not use for any purpose other than exercising its rights and performing its obligations under this Agreement any Confidential Information furnished to it by the other Party pursuant to this Agreement. Each Party will use at least the same standard of care with any Confidential information it receives as it uses to protect its own Confidential Information, but no less than reasonable care, and each Party will promptly notify the other Party upon discovery of any unauthorised use or disclosure of the other party’s Confidential Information.

9.2

Permitted Disclosures : The confidentiality obligations contained in Section 9.1 will not apply to the extent that the Recipient is required (a) to disclosure information by law, order, or regulation of a governmental agency or a court of competent jurisdiction, (b) to disclose information to any regulatory authority for purposes of obtaining approval to test or market a Product or (c) to satisfy either Party’s duty of disclosure or other requirement in the prosecution of any patent rights, provided, that in each case, that the Recipient will give written notice thereof to the other party and sufficient opportunity to prevent or limit any such disclosure or to request confidential treatment thereof; and provided further, that the Recipient will give reasonable assistance to the disclosing Party to preserve the information as confidential, that the Recipient will only disclose such Confidential Information to the extent required and that such information will remain Confidential Information hereunder despite such disclosure.

9.3

Disclosure of Financial and Other Terms : Except as required by applicable laws, treaties and agreements (including securities laws), the Parties agree that the material terms of this Agreement will be considered Confidential Information of both Parties. Notwithstanding the foregoing, (a) either party may disclose such terms as are required to be disclosed in its publicly-filed financial statements or

other public statements, pursuant to applicable laws, regulations and stock exchange rules (e.g. the London Stock Exchange, the Tokyo Stock Exchange, Nasdaq OMX Nordic (Stockholmsbörsen), or any other stock exchange on which securities issued by Strakan or Orexo or their Affiliates may be issued); provided , such party shall provide the other Party with a copy of the proposed text of such statements or disclosure (including any exhibits containing this Agreement) sufficiently in advance of the scheduled release or publication thereof to afford such other Party a reasonable opportunity to review and comment upon the proposed text (including redacted versions of this Agreement), (b) either Party shall have the further right to disclose the terms of this Agreement under a confidentiality obligation no less protective than those set forth in this Agreement, to any potential acquirer, merger partner or potential providers of financing and their advisors.

10	REPRESENTATIONS AND WARRANTIES

10.1	Mutual Representations and Warranties of Orexo and Strakan hereby represent and warrants to the other Party as of the Signature Date as follows:

(a)

It is duly organised, validly existing and in good standing under the laws of the jurisdiction of incorporation. It has the requisite legal and company power and authority to conduct its business as presently being conducted and as proposed to be conducted by it and is duly qualified to do business in those jurisdictions where its ownership of property or the conduct of its business requires;

(b)

It has all requisite legal and company power and authority (including shareholder authority) to enter into this Agreement and to perform the obligations contemplated hereunder. All company actions on its part, its boards of directors or managers, or similar governing body and its equity holders necessary for (i) the authorisation, execution, delivery and performance by it of this Agreement, and (ii) the consummation of the transactions contemplated hereby, have been duly taken.

(c)

This Agreement is a legally valid and binding obligation of it, enforceable against it in accordance with its terms (except in all cases as such enforceability may be limited by applicable bankruptcy, insolvency, reorganisation, moratorium or similar laws affecting the enforcement of

creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court or other tribunal before which any proceeding may be brought).

(d)

Each Party covenants and agrees as to any Third Party suit, action, arbitration or judicial proceeding or any governmental investigation or inquiry, relating to the Assets or the Product, being prosecuted or defended by the other Party, to cooperate in making records available to such other Party and to provide such access to, and use of, such information and data as reasonably requested by such other Party in connection therewith. Each Party will reimburse the Party providing such cooperation for its reasonable out-of-pocket expenses incurred in connection with its obligations under this Section 10.1(d).

10.2	Additional Representations and Warranties of Strakan

Strakan hereby further represents and warrants to Orexo as of the Signature Date that:

(a)

As far as Strakan and its Affiliates are aware there are no threatened or actual claims, litigation or disputes (including product liability claims and governmental actions or investigations) relating to the Product in the Orexo Territory.

(b)

Strakan, its Affiliates and licensees have complied with, and will comply with in respect of Transition Services, all applicable Laws and regulations in relation to the development, manufacture, marketing, promotion, distribution or sale of the Product in the Orexo Territory.

(c)

Strakan has, prior to the Signature Date, provided Orexo with true, complete and up-to-date copies of all documents comprising each of the Contracts and there has been no amendment or addition to any of them, whether express or implied, which is not contained in those documents.

(d)

Each of the Contracts is in full force and effect, none of Strakan, any of its Affiliates or any Third Party is in breach of any of its obligations under the Contracts and there are no circumstances likely to give rise to any such breach by Strakan, any of its Affiliates or any Third Party.

(e)

No event or omission has occurred which would entitle Strakan, any of its Affiliates or any Third Party to terminate prematurely any of the Contracts.

(f)

No provision of the Contracts is void, voidable or otherwise unenforceable in any respect (including in relation to the payment or receipt of interest).

(g)

Strakan and its Affiliates have complied with all its and their obligations under the Contracts and none of the Contracts is or will become liable to termination because of any breach by or on behalf of Strakan or the transaction contemplated by this Agreement.

(h)

The Stock purchased by Orexo will be in Good Marketable Condition.

(i)

Strakan or its Affiliates are the legal and beneficial owners of the Abstral US Mark, the Regulatory Approvals, the Abstral Domain Names and the Stock.

(j)

Strakan or its Affiliates has the right to provide the Records to Orexo for the intended purpose in accordance with this Agreement.

10.3

Disclaimer of Warranties: Except as otherwise expressly provided in this Agreement or mandated by applicable law (without the right to waive or disclaim), neither party makes any representation or warranty with respect to the licensed compounds, product, any technology, goods, services, rights, or other subject matter of this Agreement and hereby disclaims all warranties, conditions or representations of any kind, express or implied, including implied warranties of performance, merchantability, satisfactory quality, fitness for a particular purpose of non-infringement of third party intellectual property rights.

10.4	Limitation of Liability: Orexo shall not be entitled to make any claim in relation to any representation or warranty of Strakan in Section 10.2 in respect of:

(a)

Anything arising directly or indirectly from any fact, matter or circumstance fairly disclosed in any of the documents provided to Orexo by Strakan prior to the Signature Date;

(b)

Any matter of which Orexo, its agents or advisers or any of them has actual or imputed knowledge as at the Signature Date;

(c)

Any matter or thing done or omitted to be done in accordance with this Agreement or otherwise at the written request or the approval in writing of Orexo.

11	INDEMNIFICATION

11.1

Indemnification by Strakan : Except to the extent required to be indemnified by Orexo under Section 11.2, Strakan shall indemnify, defend and hold harmless Orexo, its Affiliates, and its and their respective, directors, officers, employees and agents (collectively “the Orexo Indemnified Party” ) against any and all claims, liabilities, losses, damages, costs or expenses, including reasonable attorneys’ fees, arising out of any claim or action brought by a Third Party (collectively, “Losses” ) incurred or suffered by the Orexo Indemnified Party to the extent arising out of or caused by:

(i)

The breach by Strakan of one or more of its representations, warranties or other material obligations under this Agreement;

(ii)

The development, testing, manufacture, distribution, marketing, promotion or sale of Products by or on behalf of Strakan, its Affiliates and Sub-Licensees in the Orexo Territory as well as Mexico and Canada, including their possessions and territories (including without limitation any claims based upon product liability) prior to the Transition Date or, in the case of Mexico and Canada, Signature Date.

11.2

Indemnification by Orexo : Except to the extent required to be indemnified by Strakan under Section 11.1, Orexo shall indemnify, defend and hold harmless Strakan, its Affiliates, and its and their respective, directors, officers, employees and agents (collectively “the Strakan Indemnified Party” ) against any and all Losses (as defined above) incurred or suffered by the Strakan Indemnified party to the extent arising out of or caused by:

(i)

The breach of Orexo of one or more of its representations, warranties or other material obligations under this Agreement;

(ii)

The development, manufacture, distribution, marketing, promotion or sale of the Product by or on behalf of Orexo or its Affiliates or licensees in the Orexo Territory (including without limitation any claims based upon product liability) after the Transition Date.

11.3	Notification of Liabilities/Losses: In the event that either party intends to seek indemnification for any claim under any of Sections 11.1 or 11.2, it shall inform the other Party of the claim promptly after receiving notice of the claim.

(i)

In the case of a claim for which Orexo seeks indemnification under Section 11.1, Orexo shall permit Strakan to direct and control the defence of the claim and shall provide such reasonable assistance as is reasonably requested by Strakan (at Strakan’s cost) in the defence of the claim, provided that nothing in this Section 11.3 shall permit Strakan to make any admission on behalf of Orexo, or to settle any claim or litigation which would impose any financial obligations on Orexo without the prior written consent of Orexo, such consent not to be unreasonably withheld or delayed.

(ii)

In the case of a claim for which Strakan seeks indemnification under Section 11.2, Strakan shall permit Orexo to direct and control the defence of the claim and shall provide such reasonable assistance as is reasonably requested by Orexo (at Orexo’s cost) in the defence of the claim, provided always that nothing in this Section 11.3 shall permit Orexo to make any admission on behalf of Strakan, or to settle any claim or litigation which would impose any financial obligations on Strakan without the prior written consent of Strakan, such consent not to be unreasonably withheld or delayed.

11.4	Neither Party limits or excludes its liability for fraudulent misrepresentation nor for death or personal injury arising from its negligence.

11.5	Exclusive Remedy : Each Party agrees that its sole and exclusive remedy with respect to Losses shall be pursuant to the indemnification provisions of this Section 11.

11.6

Insurance : Immediately upon execution of this Agreement, and for a period of five (5) years thereafter, each party shall maintain adequate liability insurance coverage in such amounts and with such coverage as is customary for similar products in the Orexo Territory, including any legally mandatory insurance.

12	MISCELLANEOUS PROVISIONS

12.1	Consequential Damages: In no event shall either Party or their Affiliates be liable for special, punitive, indirect, incidental or consequential damages, whether based on contract, tort or any other legal theory and irrespective of whether such Party

has been advised of the possibility of any such loss or damage, provided, that this limitation shall not limit the indemnification obligation of such Party under the provisions of Section 11 for such damages claimed by a Third Party and nothing in this Section 12.1 is intended to limit Orexo’s payment obligations under Section 6.

12.2	Further Actions : Each Party agrees at its own cost to execute, acknowledge and deliver such further instructions or documents, and to do all such other actions, as may be necessary or appropriate in order to carry out the full purposes and intent of this Agreement.

12.3

Compliance with Laws : Each Party shall review in good faith and cooperate in taking actions to ensure compliance of this Agreement and the parties’ activities hereunder with all applicable Laws, rules, ordinances, regulations and guidelines. Each Party shall provide the other Party such reasonable assistance as may be required for the Party requesting such assistance to comply with all such Laws, rules, ordinances, regulations and guidelines of all governmental entities, bureaus, and agencies having jurisdiction pertaining to this Agreement, including obtaining all import, export and other permits, certificates, licenses or the like required by such Laws, rules, ordinances, regulations and guidelines necessary to permit the Parties to perform hereunder and to exercise their respective rights hereunder.

12.4

Force Majeure : Neither Party shall be responsible or liable in any way for failure or delay in carrying out the terms of this Agreement (other than any payment or confidentiality obligations) resulting from fire, flood, other natural disasters, war, labour difficulties, interruption of transit, accident, explosion, civil commotion, and acts of any governmental authority; provided , that the Party so affected shall give prompt notice thereof to the other. If any such cause prevents either Party from performing any of its material obligations hereunder for more than ninety (90) days, the other Party may then terminate this Agreement upon thirty (30) days prior notice. Except as provided in the preceding sentence, no such failure or delay shall terminate this Agreement, and each party shall complete its obligations hereunder as promptly as reasonably practicable following cessation of the cause or circumstances of such failure or delay.

12.5	Amendment : No amendment, modification or supplement of any provision of this Agreement shall be valid or effective unless made in a writing that explicitly refers to this Agreement and that is signed by a duly authorised officer of each Party.

12.6

Waiver : Except to the extent otherwise expressly set forth in this Agreement, the rights and remedies of the Parties set forth herein or otherwise available at law or equity are cumulative and not alternative. No provision of this Agreement shall be waived by any act, omission or knowledge of any Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorised officer of the waiving Party.

12.7	Counterparts : This Agreement shall be executed in two or more counterparts, each of which shall contain the signature of the Parties and all such counterparts shall constitute one and the same agreement.

12.8	Descriptive Headings : The descriptive headings of this Agreement are for convenience only, and shall be of no force or effect in construing or interpreting any of the provisions of this Agreement.

12.9

Assignment: Neither Party shall have the right to assign this Agreement nor any of its rights hereunder, nor delegate any of its obligations hereunder, without the prior written consent of the other party, which shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, (i) Orexo and Strakan may assign this Agreement to any purchaser of all or substantially all of its assets or all of its assets to which this Agreement relates or to any successor entity resulting from any merger or consolidation of Orexo or Strakan with or into such entity, or (ii) Orexo and Strakan may assign this Agreement to any of its Affiliates but only for as long as such Affiliate remains an Affiliate of the assigning Party provided that the assigning Party remains primarily liable for all of its obligations hereunder and such Affiliate agrees to be bound hereunder. Any attempt to assign this Agreement in breach of the foregoing shall be void. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and each of their successors and permitted assigns.

12.10

Notices: All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or by email or facsimile transmission (receipt verified), five (5) days after mailed by registered or certified air mail (return receipt requested), postage prepaid, or two (2) days after sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided, that notices of a change of address shall be effective only upon receipt thereof): If to OREXO, addressed to:

Orexo AB

Att: CEO

P.O. Box 303

SE-751 05 Uppsala

Sweden

Anders.Lundstrom@orexo.com

If to Strakan, addressed to:

Andrew McLean

Director

Strakan International Sarl

Galabank Business Park

Galashiels TD1 1QH

Andrew.McLean@prostrakan.com

12.11

Severability : Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement and the parties shall in good faith seek to agree on an alternative provision reflecting the intent of the Parties that is enforceable.

12.12

Entire Agreement : This Agreement will constitute and contain the complete, final and exclusive understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties with respect to the subject matter hereof.

12.13

Governing Law : This Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

12.14

Dispute Resolution

(a)

The Parties recognise that a bona fide dispute as to certain matters governed by this Agreement may arise that relate to any Party’s rights or obligations hereunder. In the event of the occurrence of any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, either Party may, by written notice to the other, have such dispute referred to its respective officer designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If either Party desires to pursue arbitration under paragraph (b) below to resolve any such dispute, a referral to such executives under this paragraph (a) shall be a mandatory condition precedent. Said designated offices are as follows.


For Orexo:		Chief Executive Officer

For Strakan:		Chief Executive Officer

(b)	In the event that they shall be unable to resolve the dispute by executive mediation within such sixty (60) day period, then the dispute shall be finally settled by binding arbitration as provided below.

(c)	Any arbitration proceeding shall be administered by the Arbitration Institute of the Stockholm Chamber of Commerce. The place of arbitration shall be in Stockholm, Sweden. The arbitration shall be conducted in English. The award of arbitration shall be final and binding upon both Parties.

(d)

The procedures specified in this Section 12.12 shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement; provided , that a Party, without prejudice to the above procedures, may seek injunctive relief or other provisional judicial relief if in its sole judgment such action is necessary to avoid irreparable damage. Despite such action the Parties will continue to participate in good faith in the procedures specified in this Section 12.12.

(e)	Each party is required to continue to perform its obligations under this Agreement pending final resolution of any such dispute.

12.15

Independent Contracts : Nothing herein shall be construed to create any relationship of employer and employee, agent and principal, partnership or joint venture between the Parties. Each Party is an independent contractor. Neither Party shall have authority to make any statements, representations, or commitments of any kind, or to take any action which shall be binding on the other Party, except as may be explicitly provided for herein or otherwise authorised in writing.

[Remainder of page intentionally left blank - Signature pages to follow]

This Agreement has been executed in two (2) original copies of which the (Parties) have taken one (1) each. The Agreement shall come into force on the date given at the beginning of this Agreement.


For and on behalf of Orexo AB

Date:	June 1 2012

Signed by:	/s/ Anders Lundstrom	[ILLEGIBLE]

Full name	Anders Lundstrom	[ILLEGIBLE]

Position:	CEO	CFO

For and on behalf of Strakan International S.à r.l

Date:	1 ^st June 2012

Signed by:	/s/ Andrew McLean

Full name:	Andrew McLean

Position:	Director & General Counsel

EXHIBIT 1

Orexo Patents

1	Fentanyl Composition for the Treatment of Acute Pain

US Patent No. 6,759,059

2	Pharmaceutical Composition for the Treatment of Acute Disorders

US Patent No. 6,761,910

EXHIBIT 2

Contracts

1	Additional Service Agreement dated 30 June 2010 between Strakan International Limited and Pharmaceuticals International Inc

2	Additional Service Agreement dated 11 October 2010 between Strakan International Limited and Pharmaceuticals International Inc

3	Additional Service Agreement dated 11 March 2011 between Strakan International Limited and Pharmaceuticals International Inc

4	Supply Agreement dated 1 September 2010 between Strakan International Limited and Sharp Corporation.

EXHIBIT 3

Agreed Form Trade Mark Assignment

Private & Confidential

DATED 20


		STRAKAN INTERNATIONAL SARL		(1)

		and

		OREXO AB		(2)

TRADE MARK ASSIGNMENT

THIS AGREEMENT is dated [DATE]

P ARTIES

(1)	Strakan International S.à r.l a limited liability company organised and existing under the laws of Luxembourg and having its principal place of business at Galabank Business Park, Galashiels TD1 1QH, UK (“ Strakan ”).

(2)	Orexo AB a limited liability company organised and exiting under the laws of Sweden and having its principal place of business at Virdings allé 32, Uppsala, Sweden (“ Orexo ”).

Each a “ Party ” and collectively, the “ Parties ”.

B ACKGROUND

(A)	Strakan is the proprietor of the Abstral US Mark (as defined below).

(B)	By the Main Agreement (as defined below) Strakan has agreed to assign the Abstral US Mark to Orexo on the terms set out in this Agreement.

A GREED TERMS

1	Interpretation

1.1	The definitions and rules of interpretation in this clause apply in this Agreement.

Abstral US Mark: the registered trade mark ABSTRAL, registered in the United States of America under registration number 3563010 together with all goodwill associated therewith.

Main Agreement: the Termination and Asset Transfer Agreement for Abstral™ in the United States of America dated [DATE] between Strakan and Orexo.

1.2	Clause and schedule headings shall not affect the interpretation of this Agreement.

1.3	References to clauses are to the clauses of this Agreement.

1.4	Unless the context otherwise requires, words in the singular shall include the plural and in the plural include the singular and a reference to one gender shall include a reference to the other genders.

1.5	A reference to a statute or statutory provision shall include any subordinate legislation made from time to time under that statute or statutory provision.

1.6	Writing or written includes faxes but not e-mail.

1.7	Any words following the terms including , include , in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms.

1.8	A person includes a natural person, corporate or unincorporated body (whether or not having separate legal personality) and that person’s legal and personal representatives, successors and permitted assigns.

2	Assignment

2.1	Pursuant to and in consideration of the mutual obligations and promises set out in the Main Agreement, Strakan hereby assigns to Orexo all right, title and interest in and to the Abstral US Mark, including:

(a)

all statutory and common law rights (including goodwill) attaching to the Abstral US Mark; and

(b)

the right to bring, make, oppose, defend, appeal proceedings, claims or actions and obtain relief (and to retain any damages recovered) in respect of any infringement, or any other cause of action (including passing off) arising from ownership, of the Abstral US Mark whether occurring before, on or after the date of this Agreement.

3	Further assurance

3.1	Strakan shall and shall use all reasonable endeavours to procure that any necessary third party shall, at Strakan’s cost, execute such documents and perform such acts as may reasonably be required for the purpose of giving full effect to this Agreement.

4	Waiver

4.1

Except to the extent otherwise expressly set forth in this Agreement, the rights and remedies of the Parties set forth herein or otherwise available at law or equity are cumulative and not alternative. No provision of this Agreement shall be waived by any act, omission or knowledge of any Party or its agents or employees except by an instrument in writing expressly waiving such provision and signed by a duly authorised officer of the waiving Party.

5	Entire agreement

5.1

This Agreement will constitute and contain the complete, final and exclusive understanding and agreement of the Parties and cancels and supersedes any and all prior negotiations, correspondence, understandings and agreements, whether oral or written, between the Parties with respect to the subject matter hereof.

5.2	Each party acknowledges that, in entering into this Agreement, it has not relied on, and shall have no right or remedy in respect of, any statement, representation, assurance or warranty (whether made negligently or innocently) other than as expressly set out in this Agreement.

5.3	Nothing in this clause shall limit or exclude any liability for fraud.

6	Severance

6.1

Wherever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement and the Parties shall in good faith seek to agree on an alternative provision reflecting the intent of the Parties that is enforceable.

7	Counterparts

7.1	This Agreement may be executed in two or more counterparts, each of which shall contain the signature of the Parties and all such counterparts shall constitute one and the same agreement.

8	Third party rights

8.1	No person other than a party to this Agreement shall have any rights to enforce any term of this agreement.

9	Notices

9.1

All notices and other communications hereunder shall be in writing and shall be deemed given when delivered personally or by email or facsimile transmission (receipt verified), five (5) days after mailed by registered or certified air mail (return receipt requested), postage prepaid, or two (2) days after sent by express courier service, to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice; provided , that notices of a change of address shall be effective only upon receipt thereof):

If to OREXO, addressed to:

Orexo AB

Att: CEO

P.O. Box 303

SE-751 05 Uppsala

Sweden

Anders.Lundstrom@orexo.com

If to Strakan, addressed to:

Andrew McLean

Director

Strakan International Sarl

Galabank Business Park

Galashiels TD1 1QH

Andrew.McLean@prostrakan.com

10	Governing law and jurisdiction

10.1	This Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

10.2

In the event of the occurrence of any dispute arising out of or relating to this Agreement, including any question regarding its existence, validity or termination, either Party may, by written notice to the other, have such dispute referred to its respective officer designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If either Party desires to pursue arbitration under clause 10.3 below to resolve any such dispute, a referral to such executives under this clause 10.2 shall be a mandatory condition precedent. Said designated offices are as follows.


For Orexo:		Chief Executive Officer

For Strakan:		Chief Executive Officer

10.3	In the event that they shall be unable to resolve the dispute by executive mediation within such sixty (60) day period, then the dispute shall be finally settled by binding arbitration as provided below.

10.4	Any arbitration proceeding shall be administered by the Arbitration Institute of the Stockholm Chamber of Commerce. The place of arbitration shall be in Stockholm, Sweden. The arbitration shall be conducted in English. The award of arbitration shall be final and binding upon both Parties.

10.5

The procedures specified in this clause 10 shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement; provided, that a Party, without prejudice to the above procedures, may seek injunctive relief or other provisional judicial relief if in its sole judgment such action is necessary to avoid irreparable damage. Despite such action the Parties will continue to participate in good faith in the procedures specified in this clause 10.

This Agreement has been entered into on the date stated at the beginning of it.

For and on behalf of Strakan International S.à r.l

Date:

Signed by:

Full name:

Position:

For and on behalf of Orexo AB (publ)

Date:

Signed by:

Full name:

Position:

EXHIBIT 4

Landed Cost of Stock

ProStrakan: Abstral US formulation/presentation inventories

Inventories: The following sets out the current on hand Abstral US inventories by location, quantity, value and expiry date. Precise on hand quantities with warehouse location will vary slightly be day due to outbound shipments and reverse logistics flow.

There are two locations for finished goods:

Cardinal Health SPS, Nashville TN (ProStrakan Inc Prewholesaler), this is a live warehouse, supporting sales, reported quantities will reduce with actual sales (on hand quantities reported as at month end February 2012)

Exel Logistics (3 ^rd party warehouse engaged by ProStrakan to store those inventories exceeding CII storage space at Cardinal), this is a static warehouse, will replenish Cardinal at the Cardinal re order point. ProStrakan have an Operational Services Agreement for Vault Services with Exel. This Agreement is effective as of 04/04/11 and remains effective until 03/04/13. The Agreement covers an allocation of 40, CII vault pallets spaces to ProStrakan, together with material receiving and outbound movements. Typical monthly costs are $16,750. This is based on a per pallet rate of $11.33/day.

There are two locations for Work In Progress Inventories (bulk tablets)

Pii, Hunt Valley MD (ProStrakan selected ongoing manufacturer for bulk tablets)

Sharp Corp, Allentown PA (ProStrakan contract packager)

Finished Goods Inventories


	Exel Logistics
Pack ID	Lot	Expiry	Units (packs of 32 tabs)		Unit cost $		Value $
100x32	7305B	April 2014		3509		11.57
100x32	7305C	April 2014		5184		11.57

Total 100X32				8693				100,546

200X32	7306B	April 2014		3500		11.91
200X32	7306C	April 2014		5216		11.91

Total 200X32				8716				103,822

300X32	7386B	April 2014		3500		12.27
300X32	7386C	April 2014		5144		12.27

Total 300X32				8644				106,101

400X32	7307B	April 2014		7560		12.60
400X32	7307C	April 2014		2694		12.60

Total 400X32				10254				129,161

600X32	7308B	April 2014		7452		14.83


600X32	7308C	April 2014	5327	14.83

Total 600X32			12779		189,458

800X32	7309B	April 2014	10126	16.69
800X32	9751A	September 2014	3516	16.69

Total 800X32			13642		227,670

Total Exel			62728		856,758


	Cardinal Health
100X32	7305A	April 2013	2142	11.57
100X32	7305C	April 2014	3360	11.57

Total 100X32			5502		63,638

200X32	7306A	April 2013	2184	11.91
200X32	7306C	April 2014	3360	11.91

Total 200X32			5544		66,038

300X32	7386A	April 2013	2628	12.27
300X32	7386C	April 2014	3360	12.27

Total 300X32			5988		73,500

400X32	7307A	April 2013	2467	12.60
400X32	7307C	April 2014	3360	12.60

Total 400X32			5827		73,398

600X32	7308A	April 2013	2601	14.83
600X32	7308C	April 2014	3360	14.83

Total 600X32			5961		88,376

800X32	7309A	April 2013	2569	16.69

Total 800X32			2569		42,874

Total Cardinal			31391		407,824

Grand Total Abstral US Finished Goods			94,119		1,264,582

Work In Progress Inventories


Sharp Corp
Strength	Expiry			Quantity/tablets		Value $
100		April 2014			449370		57,103
200		April 2014			448916		61,889
300		April 2014			450951		67,284
400		April 2014			405559		64,587
600		April 2014			0		0
800		September 2014			357095		102,541

Total Sharp					2111891		353,404


Pii (based on standard/expected batch yields)
100		March 2016	^See note 1		1000000		123,000


100 ^See ^note 2	March 2016	1000000	^S ^ee note 2	123,000	^S ^ee ^note 2, ^see note 3
200	March 2016	1000000		129,000	^See note 3
300	March 2016	1000000		136,000	^See note 3
400	March 2016	300000		42,600	^See note 3
600	March 2016	200000		37,000	^See note 3
800	March 2016	150000		34,200	^See note 3

Total Pii		3650000		501,800
		4650000		624,800

Grand Total US WIP		5761891		855,204
(bulk tablets)		6761891	^See ^note ²	978,204	^See note 2

Note 1:

Pii batches in validation March 2012, 4 year expiry is in place for US tablets and is expected to remain unchanged

Note 2:

2 batches of 100ug strength were made at Pii. The second batch will be made because the first batch had assay results in specification but towards the bottom end of specification. As all these Pii batches will go on stability, it is considered prudent to have a batch of 100ug that is at least middle of specification at stability set down.

Note 3:

Aliquots of Pii produced batches will be packaged at Sharp. Packaged quantities will be quantity sufficient for stability set down at Pii and not more, the balance of each batch will be maintained as bulk tablets.

EXHIBIT 5

Transition Plan

1	Costs. Chargebacks, credits, cost of returns and rebates that are addressed in Section III, below, shall not be considered Third Party Costs. A summary of costs is provided in Schedule 5-1.

2	Transition Services. The term “Transition Services” shall mean the following services:

2.1	Risk Evaluation and Mitigation Strategy (“REMS”). Strakan shall maintain the Product REMS program to meet all required FDA requirements as NDA holder including:

(a)

Preparation and timely submission of all REMS bridging and assessment reports to FDA

(b)

Preparation and timely submission of the first Transmucosal Immediate Release Fentanyl (“TIRF”) REMS assessment report to FDA

(c)

TIRF REMS Data Management and adverse event reporting system (“AERS”) monitoring

(d)

Protocol approval and pre-testing of the TIRF REMS survey

(e)

Management and operation of the TIRF REMS non-compliance program

(f)

Daily prescription adjudication, monitoring and enrollment issue resolution

(g)

The processing of adverse event (“AE”) reports for the REMS program

(h)

Maintenance of the Abstral call center and handling of all Product-related (e.g. REMS, Abstral) queries

(i)

Closed system project (enrollment of government programs into REMS)

(j)

Non-Compliance Project

(k)

Pay/process invoices from TIRF REMS vendors (I) Processing REMS-related final invoices

(m)

Development of the plan to remove ProStrakan and enable Orexo to be added as a sponsor on the REMS program at point of NDA assignment

(n)

TIRF REMS website management

(o)

Call center medical information including maintaining 1-888-ABSTRAL and education materials

(p)

Closed system materials and program operations materials

(q)

Patient Prescriber Agreement Form

(r)

All REMS business related matters

(s)

In addition, Strakan shall:

(i)

Copy Orexo on all reports, communications and correspondence, written and oral, related to the REMS

(ii)

Include Orexo in the closed system project subject in each case to Orexo being a member of the TRIG,

(iii)

In addition, Strakan shall be responsible for any termination fees or wind down costs associated with Strakans REMS management.

2.2	Commercial Operations. Strakan shall provide the following services:

(a)

Continue to fill customer orders and distribute Product as part of the normal course of business, including Product storage at the current third party logistics (“3PL”) vendors (Cardinal and Exel), order processing, Product distribution, returns processing and any required destruction of material.

(b)

Maintain all required licenses and agreements including:

(i)

All required State licenses (e.g., prescription drug wholesaler licenses and controlled substance registrations, as required in applicable States)

(ii)

All distributor agreements that are in place as of the Signature Date. Strakan will be responsible for any wind down costs associated with termination of the distributor agreements.

(iii)

All necessary federal licenses including the Drug Enforcement Administration (“DEA”) registrations

(iv)

Data processing through ValuCentric and Wolters Kluwer

(c)

In addition, Strakan shall:

(i)

Copy Orexo on all material communications and correspondence related to Abstral

(ii)

Provide Orexo with access to routinely-generated sales and/or other reports relating to Abstral, subject in each case to any applicable Third Party restrictions

2.3	Drug Safety. Strakan shall maintain its Drug Safety Team in the same manner as before the Signature Date, including:

(a)

Continue to maintain the Product call center and process all adverse events, product complaints and product inquiries in accordance with applicable standard operating procedures (“SOPs”) and FDA requirements

(b)

Prepare and submit periodic safety update reports (“PSURs”) to FDA

(c)

Review, evaluate and follow up as required by FDA and any other federal or state agency on AEs

(d)

Prepare any required AE reports for submission to FDA

(e)

In addition, Strakan shall:

(i)

Provide Orexo with monthly reports on AEs, product complaints, or product inquiries

(ii)

Copy Orexo on PSURS

2.4	Sales Force Operations.

(a)

Focus on the most critical customers (prescribers, key opinion leaders (“KOLs”), speakers and active accounts) as set forth below

(i)

Use best efforts to continue marketing to the approximately 153 key prescribers and influential persons listed in Schedule 5-2

(ii)

Perform at least bi-weekly face-to-face sales calls on the 76 prescribers listed in Schedule 5-2 where the Product is the first product discussed in the meeting (“Primary Position”)

(iii)

Perform at least one call per month on the non-prescribing KOLs and speakers listed in Schedule 5-2 with the Product in the Primary Position

(iv)

Use reasonable efforts to identify and call on a further 150 target prescribers who have expressed interest in the Product or have a high potential for prescribing the product in the next 6 months

(v)

Deliver approximately 3150 calls to target prescribers subject to such prescribers being in reasonable geographic locations. The final activities plan will be agreed by Strakan and Orexo.

(b)

Strakan’s obligations hereunder are subject to Strakan’s compliance requirements and the availability of the targeted health care professionals and compliance with applicable Law

(c)

Maintain an incentive compensation (“IC”) plan for the Product sales force as outlined below:

(i)

Sales representatives: $200/Rx over baseline (defined as the greater of (i) last 3 month rolling TRX average, or (ii) YTD TRX average) with a $2k/Qtr cap, plus 5% of all non-retail net sales over baseline (same definition), capped at $5k/Qtr. Contract sales force (15 FTE) is eligible for 50% of the payouts compared to a PSK sales representative

(ii)

District Managers, $75/Rx over entire district’s baseline (defined as the greater of (i) last 3 month rolling TRX average, or (ii) YTD TRX average) with a $3k/Qtr cap, plus 2.5% of all non-retail net sales over baseline (same definition) capped at $5k.

(iii)

Abstral sales continue to count toward President’s Club and Million Dollar Club in Strakans existing IC plan

(iv)

Maintain a compliance system that ensures all sales force operations are conducted in accordance with all applicable laws. -

2.5 Managed Care.

(a)

Maintain and manage performance of the United Healthcare contract

(b)

Maintain and process all rebates due under Medicaid and other federal and state government programs (VA, Tricare, etc)

(c)

Current team will continue its efforts to increase parity access versus competitive products

(d)

Continue “Strike Force” Operations

(e)

Consult with Orexo before introducing any new or committing to any terms, and entering or renewing any managed care agreements

(f)

In addition, Strakan shall

(i)

Allow Orexo to travel to accounts with the NAM team

(ii)

Allow Orexo access to National Accounts Director for discussion on strategies, tactics, customer response and overall disposition of contracts and contract discussions

(iii)

Allow Orexo final right of approval of all contracts, pricing, rebates, discounts, returns, or any other allowance

(iv)

Share pricing committee guidelines and minutes relating to Abstral

(v)

Allow Orexo to take over contracting functions as soon as Orexo deems practicable to take over that discrete function

2.6	Marketing. Strakan shall provide the following services:

(a)

Maintain the following activities:

(i)

Distribution, management and processing of Co Pay Cards and Vouchers

(ii)

Storage of all sales and marketing materials and displays

(iii)

Maintenance and management of website

(iv)

Honor any outstanding advertising commitments (if any) and work with Orexo to determine if any should be canceled

(v)

Lunch & Learn and speaker programs with targeted accounts and allow Orexo to attend as reasonably requested by Orexo

(b)

Work on transferring the following items to Orexo:

(i)

Placebos (if any)

(ii)

All market research materials and information

(iii)

List of KOLs and Speakers

(iv)

Training materials

(c)

Attendance and representation at American Society of Clinical Oncology (“ASCO”) and Multinational Association of Supportive Care in Cancer (“MASCC”)

(d)

Continue targeting ASCO activities and coordinate with Orexo to attend any pre conference meetings

(e)

Until notice is sent to FDA of the NDA transfer to Orexo, new, revised or changes in the use of Product promotional and marketing materials must be reviewed and approved by Strakan and Orexo prior to dissemination or change

2.7	Regulatory.

(a)

Transferring to Orexo the IND, NDA other FDA-related documents and information to label changes to be completed by 31 December 2012

(b)

Compile data and information for, and prepare, a supplement to the NDA (whether a changes-being-effected (“CBE”) or prior approval supplement (“PAS”)) for change in the Product manufacturer, and allow Orexo to review prior to submission where submission is being made prior to 31 December 2012 or supply Orexo with all materials relating to NDA supplement if submission occurs after 31 December 2012

(c)

Submit quarterly PSURs

(d)

Submit REMS assessment reports

(e)

Submit REMS bridging reports

(f)

Submit all required NDA post-approval reports (annual reports, Medwatch, Form FDA-2253s, etc.)

(g)

Submit any required DEA reports or State controlled substance reports

(h)

Send documents to Orexo prior to submission for review and approval

2.8	Finance. Strakan shall provide the following finance related services. The Parties recognize that the scope of the finance services may need to be appropriately adjusted by agreement of Orexo and Strakan when Orexo begins booking the Product sales.

(a)

Process all sales and continue to calculate royalty due under current agreement

(b)

Capture all relevant data for State Aggregate Spend reporting and potential Sunshine Act reporting

(c)

Continue to pay all vendors related to the Product

(d)

Recognize revenue until Orexo begins to book Product sales

(e)

Maintain all Commercial Insurance obligations in relation to sales of Abstral by Strakan.

2.9	Publications. Strakan shall continue to work on the following publications, in cooperation with Orexo:

(a)

International Association for the Study of Pain (“IASP”) abstract presentation

(b)

Abstral Dossier - work with Orexo to complete

(c)

MASCC poster presentation

(d)

Dissolution Manuscript

(e)

Any work in progress as of 31 December 2012 will be transitioned to Orexo to enable timely and orderly completion

2.10	Continuing Medical Education. Tailoring Opioid-Based Therapy for Persistent and Breakthrough Cancer Pain

2.11	Manufacturing.

(a)

Complete validation of Product validation batches 4 through 6, inclusive, (400,600,800) common blend

(b)

Complete Product validation batches 4, 5, 6

(c)

Incremental work (repeat validation batch 1 (100ug))

(d)

Delivery of final validation reports

(e)

Continue to pay for materials and testing (time and materials basis)

(f)

Continue performing all services, including any testing and storage, that are required for all ongoing and proposed Product stability studies

(g)

Initiate any new stability studies that are required by the approved stability protocol, FDA requirements, or planned Product/manufacturing changes

(h)

Contingency - validation batches release testing (repeat if outside 30 day window (packaging lead time))

(i)

Packaging of stability set down quantities

(j)

Maintain Product storage and pay related fees

(k)

Stability study on NCH produced validation batches - 18 month pull

(l)

Packaging of stability set down quantities at Sharps

(m)

Storage of 40 pallet spots of CII at Excel Logistics

(n)

At Orexo’s option (to be exercised in advance of the Transition Date), transfer to Orexo the Prostrakan-owned equipment at Pii and Sharp specific to the manufacture of Abstral at the then present net book value of such equipment

(o)

Orexo will need to work with PII to make DEA fentanyl quotas for 2013 and 2014. Strakan will work with Orexo to facilitate completion of Pii contract and submitting annual fentanyl citrate quota to needed Federal and/or State agencies

(p)

Adhere to all notice provisions to ensure vendor contracts are current through December 31, 2012

(q)

Work with Orexo to facilitate transfer of Sharp agreement (notice must be given by 1 June 2012)

Chargebacks, Credits Rebates, and Returns. It is the Parties’ intent that the Party that ultimately receives the benefit (books the sale) of a Product sale shall be responsible for paying any chargeback, credit, rebate or return (“Credits”) related to that sale and to process all aspects of the Credit (including, with regard to returns, cost of destruction). This Section III shall survive the expiration or termination of the Agreement.

3.1

Allocation of Responsibility by Product Lot. It is the Parties’ intent that only one Party book Product sales from each Product lot. Orexo shall be responsible for Credits resulting from Product units within the Product lots for which Orexo booked the sale, and Strakan shall be responsible for Credits resulting from Product units within the Product lots for which Strakan book the sale. In the event there is a Product lot for which both Parties have booked sales, the Parties shall work together in good faith to equitably allocate responsibility for the Credits for such a Product lot based on the benefit received by the respective Parties from the sale of such lot.

3.2	Prostrakan will be responsible for all other lots in the chain (3PL, Wholesaler, Pharmacy), prior to the Orexo Transition Date.

Additional Services . If during the Transition Period the Parties identify additional services not listed above and which are reasonably required by Orexo in order to transition to Orexo the commercialization of the Product in the Orexo Territory, the Parties will negotiate in good faith an amendment to this Transition Plan to include such services.

Schedule 5-1: Costs to be paid by the Parties.

Schedule 5-2

EXHIBIT 6

Agreed Form Novation Deed

Private & Confidential

DATED 2012


		[CONTINUING PARTY]		(1)

		and

		STRAKAN INTERNATIONAL SARL		(2)

		and

		OREXO AB		(3)

DEED OF NOVATION

THIS DEED is dated [DATE]

P ARTIES

(1)	[FULL COMPANY NAME] incorporated and registered in [TERRITORY] with company number [NUMBER] whose registered office is at [REGISTERED OFFICE ADDRESS] ( “Continuing Party” ).

(2)	Strakan International S.à r.l a limited liability company organised and existing under the laws of Luxembourg and having its principal place of business at Galabank Business Park, Galashiels TD1 1QH, UK ( “Strakan” ).

(3)	Orexo AB a limited liability company organised and exiting under the laws of Sweden and having its principal place of business at Virdins allé 32, Uppsala, Sweden ( “Orexo” ).

Each a “Party” and collectively, the “Parties” .

B ACKGROUND

(A)	The Continuing Party and Strakan are party to a contract relating to Orexo’s proprietary product for pain treatment known as Abstral dated [DATE] (“ Contract” ), a copy of which is annexed to this deed.

(B)	Under a licence agreement dated 31 July 2008, Strakan was granted certain exclusive rights relating to Abstral (known at the date of signing as Rapinyl™) in respect of the United States of America, Canada and Mexico (“Rapinyl North America Licence Agreement”) .

(C)	The Rapinyl North America Licence Agreement has been terminated by a subsequent agreement between Orexo and Strakan dated [DATE]. As a result, Strakan wishes to transfer all its rights, obligations and liabilities under the Contract to Orexo.

(D)	The parties have agreed that Strakan’s rights, obligations and liabilities under the Contract shall be novated to Orexo on the terms of this deed.

A GREED TERMS

1	Novation

1.1	Strakan transfers all its rights and obligations under the Contract to Orexo. Orexo shall enjoy all the rights and benefits of Strakan under the Contract, and all references to Strakan in the Contract shall be read and construed as references to Orexo.

1.2	Orexo agrees to perform the Contract and be bound by its terms in every way as if it were the original party to it in place of Strakan.

1.3	The Continuing Party agrees to perform the Contract and be bound by its terms in every way as if Orexo were the original party to it in place of Strakan.

2	Release of obligations and liabilities

2.1	The Continuing Party and Strakan release each other from all future obligations to the other under the Contract.

2.2	Nothing in this deed shall affect or prejudice any claim or demand that the Continuing Party or Strakan may have against the other under or in connection with the Contract arising before the date of this Deed.

3	Governing law and jurisdiction

3.1

This Deed and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the governing law of the Contract, without regard to the choice of law provisions thereof.

3.2

In the event of the occurrence of any dispute arising out of or relating to this Deed, including any question regarding its existence, validity or termination, any party may, by written notice to the other(s), have such dispute referred to its respective officer designated below or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If any Party desires to pursue resolution of such dispute under clause 3.3 below, a referral to such executives under this clause 3.2 shall be a mandatory condition precedent. Said designated offices are as follows.


For Continuing Party:		[INSERT]

For Orexo:		Chief Executive Officer

For Strakan:		Chief Executive Officer

3.3	In the event that they shall be unable to resolve the dispute by executive mediation within such sixty (60) day period, then the dispute shall be finally settled as provided in the Contract.

This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.


Executed as a deed by [NAME OF
CONTINUING PARTY ] acting by				[SIGNATURE OF DIRECTOR]
[NAME OF DIRECTOR], a director,				Director
in the presence of:


[SIGNATURE OF WITNESS]
[NAME, ADDRESS [AND
OCCUPATION] OF WITNESS]

Executed as a deed by Strakan
International S.à r.l acting by				[SIGNATURE OF DIRECTOR]
[NAME OF DIRECTOR], a director,				Director
in the presence of:


[SIGNATURE OF WITNESS]
[NAME, ADDRESS [AND
OCCUPATION] OF WITNESS]


Executed as a deed by Orexo AB acting by [NAME OF DIRECTOR], a				[SIGNATURE OF DIRECTOR] Director
director, in the presence of:


[SIGNATURE OF WITNESS]
[NAME, ADDRESS [AND
OCCUPATION] OF WITNESS]

ANNEX

The Contract

EXHIBIT 7

Abstral Domain Names

abstral.com

abstralrems.com

remsabstral.com

Amendment

Termination and Asset Transfer

Agreement for Abstral® in the United States of America

between

OREXO AB

and

STRAKAN INTERNATIONAL SARL

(formerly known as Strakan International Limited)

This Amendment is made as of the 1 ^st day of November, 2012 (“Effective Date”) by and between

Orexo AB (publ), a limited liability company duly established and existing under the laws of Sweden and having its principal office at Virdings Allé 32 A, Uppsala, Sweden (“Orexo”), and

Strakan International SARL, a limited liability company organized and existing under the laws of Luxembourg and having its principal place of business at Galabank Business Park, Galashiels TD1 1QH, UK (“Strakan”)

(each a “Party” and collectively, the “Parties”)

WHEREAS, the Parties have entered into a Termination and Asset Transfer Agreement dated 1 ^st June 2012 (the “Termination Agreement”) whereby the Rapinyl North America Licence Agreement was terminated in relation to the Product in the United States of America. Mexico and Canada are governed by the Abstral RoW Agreement;

WHEREAS, the Parties have agreed to amend the scope and extend the term of the Transition Services through 30 ^th June 2013 and to amend certain associated terms and conditions of the Termination Agreement;

NOW, THEREFORE, IT IS HEREBY AGREED as follows:

1	Definitions

1.1 The definitions in the Termination Agreement shall have the same meaning in this Amendment, unless otherwise expressly agreed in this Amendment.

2	Amendments

2.1 The date “31 ^st December 2012” is replaced with “30 ^th June 2013” in the following sections: Sections 1.40, and 4.6, as well as in the following sections in Exhibit 5 (Transition Plan): Section 2.7 (all three places), and 2.11. The date “December 24th 2012” in Schedule 5-1 is replaced with “June 30 ^th 2013”.

2.2 The Transition Plan in Exhibit 5 is amended as follows:

(i)

Section 2.4 (Sales Force Operations) is deleted.

(ii)

Section 2.5 (Managed Care) subparagraph (c) is deleted.

(iii)

Section 2.6 (Marketing) subparagraphs a, i (as it pertains to vouchers), iv, and v as well as subparagraphs c and d are deleted.

(iv)

Section 2.11 (Manufacturing) is deleted except for subparagraphs (j), (m) (until April 3, 2013), (n) and (o). With respect to the storage agreement with Excel Logistics, Inc., Strakan shall have no further obligations under that

agreement after April 3, 2013 and Orexo shall be responsible for any costs, fees, or penalties associated with the storage and transfer of inventory, of the drug product due to the expiration or termination of the storage agreement with Excel Logistics, Inc. consistent with Section 6.1 of the Termination Agreement and subject to Section 3.5 below. Orexo shall be responsible for any such costs arising from Third Party Agreements covering “Essential” costs included in Schedule 5-1.

(v)

Section 2.9 (Publications) is deleted.

(vi)

Section 2.10 (Continuing Medical Education) is deleted.

(vii)

An Updated Schedule -1 (Budget) for the extended Transition Period is attached hereto as Appendix 1 .

2.3 Section 4.3 is deleted and replaced with the following, wording: “Subject to Section 6.2, during the period beginning on the Signature Date and ending on the Transition Date or, if Orexo begins to book sales prior to 30 ^th June 2013, as long as requested by Orexo but not beyond 30 ^th June 2013 (“the Transition Period”) Strakan agrees to provide the Transition Services to Orexo in accordance with the Transition Plan. Notwithstanding the foregoing, in the event that Orexo begins to book sales prior to 30 ^th June 2013, all applicable Third Party Agreements shall be assigned to Orexo or terminated (as the case may be) as determined by Strakan and in consultation with Orexo, and Orexo shall be responsible for any penalties associated with any such assignment or termination of those Third Party Agreements covering “Essential” costs included in schedule 5-1. Strakan will negotiate in good faith with the respective Third Party vendors to eliminate or reduce payment of an such penalties.”

Strakan shall be responsible for its costs and all Third Party costs incurred by Strakan in connection with the provision of the Transition Services and as described in the Transition Plan except that Orexo will reimburse Strakan for:

(i)

the Third Party costs incurred by Strakan identified as “Essential” costs as listed in the attached Updated Schedule 5-1 relating to the period after 30 September 2012;

(ii)

the Third Party costs incurred by Strakan identified as “Non-Essential” costs as listed in the attached Updated Schedule 5-1 relating to the period after 30 September 2012 and through the notice of termination period; and

(iii)

any cancellation fees for early termination of the “Non-Essential” activities. Strakan will negotiate in good faith with the respective Third Party vendors to eliminate or reduce payment of any such fees.

Strakan agrees that Orexo shall have no obligation to reimburse the costs incurred by Strakan identified as “Overhead” costs as listed in the attached Updated Schedule 5-1 relating to the period after 30 September 2012. The parties agree that these “Overhead” costs (ie, 3PL storage, order processing fees, distribution fees, state license fees, government rebate processing fees) as provided in the Updated Schedule 5-1 shall be deducted from Net Sales before calculating the Royalty Payment. Notwithstanding the foregoing, in the event that the “Overhead” costs exceed Net Sales, Strakan shall have no obligation to make Royalty Payment and Orexo agrees to reimburse Strakan for the excess amount.

Notwithstanding anything to the contrary herein or in the Transition Plan, the annual establishment and product user fees payable in 2012 shall be proportioned between the Parties such that Strakan bears the cost of such fees to the extent such fees relate to the period when Strakan books the sales and Orexo bears the remaining part of said user fees. Orexo shall bear the costs of the annual establishment and product user fees payable in 2013 and thereafter.

2.4 A new Section 4.13 is added as follows: “For clarity, nothing herein shall restrict Orexo from activities during, the Transition Period to facilitate agreements between Strakan and Medicare, Medicaid, Group Purchasing Organizations, Managed Care Organizations and similar organizations provided that Orexo shall consult with Strakan in respect of such activities provided that Orexo shall have no right to legally bind Strakan under any such agreements without the prior consent of Strakan which consent shall not be unreasonably withheld. If requested by Orexo, Strakan will respond with comments on the dossiers and publications no later than five (5) business days.”

3	Miscellaneous/Additional Provisions:

3.1 This Amendment shall constitute an integrated part of the Termination Agreement and all the other provisions not amended in this Amendment shall remain effective. In case of any inconsistency between the provisions of the Termination Agreement and this Amendment, the latter shall prevail.

3.2 This Amendment shall become effective upon the date of the last Party’s signature to this Amendment.

3.3 Each Party hereby releases and discharges the other from all claims or demands under or in connection with the Transition Services provided in Exhibit 5 (Transition Plan) of the Termination Agreement including without limitation claims for negligence, whether arising before or on the Effective Date of this Amendment, in each case whether known or unknown to the releasing Party. For avoidance of doubt, the foregoing is not intended to limit or amend, the Parties indemnity obligations under the Termination Agreement.

3.4 The parties agree that Strakan will lead the preparation of and draft the supplement to FDA for approval of PII as manufacturing site and provide the initial draft of the supplement to Orexo for review and approval no later than December 30, 2012 prior to submission to the FDA. In the event that Orexo provides comments to the draft submission, Strakan shall include any such comments into the supplement submission provided any such inclusion is consistent with applicable laws and regulations. The parties agree to use best effort to agree on the overall strategy for FDA submission. Orexo agrees to provide their comments, if any, to the initial supplement draft to Strakan, no later than ten (10) business days after receipt of the initial supplement draft from Strakan. The Parties will discuss such comments in good faith. Strakan shall submit the final supplement to the FDA no later than January 31, 2013. Upon submission to the FDA and until the end of the Transition Period and thereafter, Orexo shall be responsible for obtaining the final approval of the supplement from the FDA including, but not limited to, responding timely to inquiries from the FDA, submission of modifications, supplements, amendments, and attachments. Any communications with FDA shall be submitted by Strakan during the Transition Period, and any such communications will take place directly between Orexo and FDA following transfer of NDA to Orexo on or before June 30, 2013.

Orexo will be responsible for any Third Party costs associated with securing FDA approval of the supplement. Strakan agrees to be collaborative in supporting Orexo obtain FDA approval of the supplement during the Transition Period.

3.5 The parties acknowledge that the storage agreement between ProStrakan and Excel Logistics for the storage of the drug product will expire on April 3, 2013. Orexo shall be responsible for securing the storage of the drug product after expiration of the Excel Logistics agreement including the costs associated with the transfer of the drug product in accordance with Section 6.1 of the Termination Agreement. Section 6.1 of the Termination Agreement shall be modified as follows:

Orexo’s right to purchase Strakan’s Stock shall start upon the expiration date of the Excel Logistics Agreement (April 3, 2013), rather than when Orexo starts to book the sales of Product, as currently provided in Section 6.1. Further, Orexo’s written request to purchase selected part of the Stock shall be made no later than thirty (30) days prior to the expiration of the Excel Logistics Agreement (April 3, 2013), rather than ten (10) days prior to the date on which Orexo begins to book sales of Product.

3.6 Strakan represents and warrants to Orexo to comply with the applicable reporting obligations related to the Sunshine Act for its promotional activities that occurred in 2012. Orexo shall be responsible for complying with the reporting obligations under the Sunshine Act for any applicable activities in 2013.

[SIGNATURE PAGE FOLLOWS ON THE NEXT PAGE]

[SIGNATURE PAGE TO AMENDMENT TO TERMINATION AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date below. This Amendment has been executed in two (2) copies, of which each party has taken one.


OREXO AB (publ)		STRAKAN INTERNATIONAL SARL

By:	/s/ Anders Lundstrom	By:	/s/ Andrew McLean
Name:	Anders Lundstrom	Name:	Andrew McLean
Title:	CEO	Title:	Director
Date:		Date:

APPENDIX 1

Updated Schedule 5-1: Costs to be paid by the Parties. {Updated 10.24.12}


Activity	Updated Cost Projection for Q4	Essential [Orexo will reimburse effective October 1, 2012]	Overhead [PSK will pay]	Non-Essential [PSK will terminate immediately and Orexo to reimburse for any cancellation fees]

TIRF REMS Operations and Prescription Monitoring	$30,000/Q	X

TIRF REMS Survey Launch, Reports, Assessment Reports, Data Management and AERS Monitoring	$12,099.12/Q	X

Closed system project (enrollment of government programs into REMS)	$10,500/Q	X

McKesson Non-Compliance Project Development	Development Cost: $24,712.50/Q

	Non-Compliance Project Report: $4,000 (one-time fee) plus $2,262/Q (recurring charge)	X

REMS Anti-Trust Counsel	$6,749/Q
		X


- This would include product storage at 3PL, order processing, product distribution and returns processing	Approx $30,000/Q
	(Monthly/$10, 000)	X [PSK will pay and the cost will be deducted from Royalty Payment calculation.

- State Licenses (30 pharmaceutical licenses and 7 Controlled substance licenses) (Portion allocated to Abstral)	$18,158/Q [license fee] $2,000/Q [license renewal service]	X [PSK will pay and the cost will be deducted from Royalty Payment calculation.

- All distributor agreements ProStrakan specific, NOT product)(Portion allocated to Abstral)	$20,000/Q	X [PSK will pay and the cost will be deducted from Royalty Payment calculation.

- Data processing through ValuCentric and Wolters Kluwer (portion allocated to Abstral)	-$7,500/Q [ValuCentric Wholesale Data] -$59,375/Q [WK Data] - $24,418/Q [WK AMA Fees for Data]		X [PSK recommends terminating this service - Orexo to pay for any costs associated with early termination, if applicable]


	- $ 24,787/Q [ArchiTech- data warehouse processing] - $ 26,325/Q [Synergistic - Sales CRM] TOTAL: $142,405

Continue to maintain call center for the appropriate handling of all Adverse events	Approx $30,000/Q	X

Incentive Compensation	Approx. $25,000/Q
		X

Maintain and process all rebates due under Medicaid and other core government programs (VA, Tricare, etc)	PharmaMetrics rebate processing fees are $17,310/Q		X [PSK will pay and the cost will be deducted from Royalty Payment calculation.

- Distribution and processing of Co Pay Cards and Vouchers [Vouchers discontinued per Orexo]		X, in part
	$9,000/Q [Transaction and Redemption Fee] $12,600/Q [Admin Fee]	[Voucher program has been terminated per Orexo. Co-Pay cards will continue until expire] Orexo will reimburse for fees until co-pay expire]


- Storage of all materials and displays until transfer	Approx. $4,000/Q	X

- Lunch & Learn and speaker programs with targeted accounts	(4 L&L per month per rep : $96,000) (2 L&L per month per flex rep: $18,000) TOTAL: $114,000		X [L&L and Speaker Programs have terminated per Orexo]

Transfer the following items to Orexo:	Data Room/Knipper	See storage of materials and displays above

- Placebos	Knipper	X

- Market research materials	Data Room/ Knipper	X

- List of KOLs and Speakers	Data Room/ Knipper	Dataroom

- Training materials	Data Room/ Knipper	X

ASCO	PSK paid	Completed

Abstral Dossier	$10,778
	Original Estimate from CHC Feb. 23, 2012: $16,088 PSK paid $13,071 of the Original Estimate.	X [PSK recommends discontinuing Dossier - Orexo will take over per Orexo 10/22/12].


	CHC is charging an additional $7,761 to deliver completed Dossier due to Orexo’s request for further revisions/comments. Final Dossier to be delivered by Nov. 16, 2012. Total Balance Due to CHC: $10,778

MASCC poster presentation - Project completed		Completed

REMS commentary	$5,500 [PSK agreed to pay the additional $5,500]	Completed

Abstral review article	$17,750

	Original Cost estimate for article is $17,750. Anticipate project completion by EOY. Orexo provided comments on manuscript.	X [PSK recommends discontinuing article - Orexo to take over per Orexo 10/22/12]


TIRF review article	$17,750 [Due upon submission, awaiting final author approval to submit manuscript]		X [PSK recommends immediate termination]

Dissolution Manuscript		Completed

IND and NDA transfer - To be completed by December 24th 2012

Prior Approval Supplement for Change in Manufacturer

Submit Quarterly PSUR

Submit REMS Assessment Report

Submit REMS Bridging Report

Submit Quarterly PSUR	Approx. $2,000 [Submission] Approx. $7,000 (onetime preparation fee)	X

Submit REMS Assessment Report	Approx. $3,000	X

Commencement of Abstral validation batches 4-6 inclusive (400,600,800) common blend	Completed


Completion of Abstral validation batches 4, 5, 6	Completed

Incremental work (repeat validation batch 1 (100ug))	Completed

Delivery of validation Report	Completed

Materials and testing (time and materials basis)	Completed

6 month stability study (packaged lots), Engineering batches, 6 month pull	[6 month pull point is completed] Stability Study On-going at Pii for 9, 12, 18, 24, 36 & 48 months pull points.	X [See Contract with Pii regarding on- going stability study costs]

Contingency - Validation batches release testing (repeat if outside 30 day window (packaging lead time)	Completed

Validation batches stability set down	Completed

18 month pull	Completed

Packaging of stability set down quantities	Completed

Storage - 40 pallet spots CII, monthly fee	$16,770/per month Contract with Vendor will expire April, 2013	X


QPharma (Aggregate Spend)	$624/Q	X

Cover My Meds (Online System for Prior Auth)	$750/Q	X

MMR (Medicare/Medicaid Support)	$13,200/Q	X

MMIT (Formulary Compass)	$6,129/Q		X

Zitter (Managed Market Research, Competitive Data)	$4,938/Q		X

Abstral.com	$2,000/Q [includes only minor changes if needed 2-3 hours for design	X

1-888-Abstral	$6,000/Q	X

Exhibit 1.01(ii)

Seller’s Knowledge Individuals

1.	Nikolaj Sorensen

2.	Carl-Johan Blomberg

3.	Thomas Lundqvist

4.	Sofia Mogensen

5.	Åsa Holmgren

6.	Cecilia Coupland

Exhibit 2.01(a)(i)(A)

Transferred Marks

US Trademark Reg No 3,563,010 (“ABSTRAL”)

Exhibit 2.01(a)(i)(B)

Transferred Copyrights

None.

Exhibit 2.01(a)(ii)

Transferred FDA Permits

None.

Exhibit 2.01(a)(iii)

Transferred State Permits

None.

Exhibit 2.01(a)(iv)

Transferred Contracts

1. Transfer Agreement

2. Agreement for the Manufacture Process Validation Batch of Abstral for the 400, 600, and 800mcg Bulk Tablets by and between Pharmaceutics International, Inc. and Seller, dated as of November 13, 2012, and work orders thereunder.

3. Proposal for Revision of the Draft AMCP Format-compliant Dossier for Abstral, by and between Formulary Resources, LLC and Seller, dated as of October 24, 2012.

4. Trade Mark Assignment from Strakan in favor of Seller, dated as of September 17, 2012.

Exhibit 3.01(b)(ii)

Form of Bill of Sale

[See Attached]

E XECUTION V ERSION

BILL OF SALE

This BILL OF SALE (this “ Bill of Sale ”) dated as of March 15, 2013, is made by and between Orexo AB , a public limited company organized and existing under the laws of Sweden (“ Seller ”), and Galena Biopharma, Inc. , a Delaware corporation (“ Purchaser ”). Capitalized terms used but not otherwise defined in this Bill of Sale shall have the meanings set forth in that certain Asset Purchase Agreement, of even date herewith, by and among Seller and Purchaser (as may be amended, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”).

WHEREAS , pursuant to the Purchase Agreement (the terms of which, including all Schedules and Exhibits thereto, being incorporated herein by this reference), Purchaser has agreed to purchase and acquire, from Seller, and Seller has agreed to sell, transfer, assign, convey and deliver to Purchaser, all of Seller’s right, title and interest in, to and under all of the Acquired Assets, free and clear of all Liens, upon the terms and subject to the conditions of the Purchase Agreement.

NOW, THEREFORE , for and in consideration of the Purchase Price and the mutual covenants set forth in the Purchase Agreement and for other good and valuable consideration, the receipt and sufficiency of which Seller and Purchaser hereby acknowledge, and subject to the terms and conditions of the Purchase Agreement:

1) In accordance with and subject to all of the terms and conditions of the Purchase Agreement, Seller by this Bill of Sale hereby grants, sells, assigns, conveys, transfers and delivers to, and vests in Purchaser, to have and to hold forever unto Purchaser, its successors and permitted assigns, forever, effective as of the date hereof, all of Seller’s right, title and interest, legal and equitable, in and to the Acquired Assets (other than the Transferred Contracts) (the assets to be conveyed hereunder the “ Bill of Sale Assets ”) free and clear of all Liens. Notwithstanding anything to the contrary contained herein, Seller shall not be obligated to sell, convey, assign, transfer or deliver, nor does Seller sell, convey, assign, transfer or deliver pursuant hereto, any of the Excluded Assets, and Seller shall retain all right, title and interest in and to the Excluded Assets.

2) This Bill of Sale is an instrument of transfer and conveyance contemplated by, and is executed and delivered under and pursuant to, the Purchase Agreement, and nothing contained in this Bill of Sale shall (i) itself modify, amend, extend or alter (nor shall it be deemed or construed as modifying, amending, extending or altering) any of the provisions of the Purchase Agreement or (ii) itself limit, or be deemed or construed to limit, any of the rights, duties or obligations of Seller or Purchaser under the Purchase Agreement in any manner whatsoever.

3) Each party hereby acknowledges that the other party is making no representation or warranty, express or implied, with respect to the Bill of Sale Assets being conveyed hereby, other than those set forth in the Purchase Agreement.

4) All notices and other communications to be given under the terms of this Bill of Sale or which any of the parties desire to give hereunder shall be in writing and shall be made in accordance with the Purchase Agreement notice provisions.

5) This Bill of Sale shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

6) This Bill of Sale may be executed in any number of counterparts, each of which shall for all purposes be deemed an original, and all such counterparts shall together constitute but one document.

7) This Bill of Sale (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

———— THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK ————

IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Bill of Sale as of the date first above written.

SELLER:

OREXO AB

Name:

Title:

PURCHASER:

GALENA BIOPHARMA, INC.

Name:

Title:

SIGNATURE PAGE TO BILL OF SALE

Exhibit 3.01(b)(iii)

Form of Assignment and Assumption Agreement

[See Attached]

E XECUTION V ERSION

ASSIGNMENT AND ASSUMPTION AGREEMENT

This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “ Assignment and Assumption Agreement ”) dated as of March 15, 2013, is made by and between Orexo AB , a public limited company organized and existing under the laws of Sweden (“ Seller ”), and Galena Biopharma, Inc ., a Delaware corporation (“ Purchaser ”). Capitalized terms used but not otherwise defined in this Assignment and Assumption Agreement shall have the meanings set forth in that certain Asset Purchase Agreement, of even date herewith, by and among Seller and Purchaser (as may be amended, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”).

WITNESSETH :

WHEREAS , pursuant to the Purchase Agreement (the terms of which, including all Schedules and Exhibits thereto, being incorporated herein by this reference), Seller has agreed to assign to Purchaser all of Seller’s right, title and interest in and to the Purchased Assets, and Purchaser has agreed to assume from Seller, the Assumed Liabilities, upon the term and subject to the conditions of the Purchase Agreement;

WHEREAS , Purchaser and Seller now desire to evidence and effectuate the assumption by Purchaser of the Assumed Liabilities and all of Seller’s rights, title and interest to (i) the Transferred Contracts, and (ii) the goodwill set forth in Section 2.01(a)(i) of the Purchase Agreement (together, the “ Assigned Assets ”).

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth in the Purchase Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and subject to the terms and conditions of the Purchase Agreement, Seller and Purchaser hereby agree as follows:

1. Seller hereby assigns, transfers and conveys to Purchaser, and Purchaser hereby takes assignment and transfer of and assumes from Seller, all of Seller’s rights, title and interest (as applicable) in and to the Assigned Assets. Notwithstanding the foregoing, Seller does not assign or transfer any agreement or contract or any claim of right or any benefit or obligation thereunder or resulting therefrom if an assignment or transfer thereof, without the consent of a third party thereto, would constitute a breach or violation thereof.

2. Purchaser hereby assumes and agrees to pay, perform, fulfill and discharge when due, the Assumed Liabilities.

3. Notwithstanding anything to the contrary in this Assignment and Assumption Agreement, the Purchase Agreement or in any other document delivered in connection herewith or therewith, the Assumed Liabilities expressly exclude the Excluded Liabilities (such Excluded Liabilities to remain the sole responsibility of Seller).

4. This Assignment and Assumption Agreement may be executed in counterparts (including by means of telecopied signature pages), each of which shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument.

5. This Assignment and Assumption Agreement is being executed and delivered pursuant and subject to the Purchase Agreement. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms of this Assignment and Assumption Agreement, the terms of the Purchase Agreement shall govern.

6. The Assignment and Assumption Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

7. This Assignment and Assumption Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

8. If any term or other provision of this Assignment and Assumption Agreement shall be held invalid or unenforceable, the remainder of this Assignment and Assumption Agreement shall not be affected.

9. This Assignment and Assumption Agreement may not be amended or altered except by a written instrument executed by Seller and Purchaser.

————THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK————

IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be duly executed as of the day and year first above written.

SELLER:

OREXO AB

Name:

Title:

PURCHASER:

GALENA BIOPHARMA, INC.

Name:

Title:

Exhibit 3.01(b)(iv)

Form of Trademark Assignment Agreement

[See Attached]

E XECUTION V ERSION

TRADEMARK ASSIGNMENT AGREEMENT

This TRADEMARK ASSIGNMENT AGREEMENT (this “ Trademark Assignment Agreement ”) dated as of March 15, 2013, is made by and between Orexo AB , a public limited company organized and existing under the laws of Sweden (“ Assignor ”), and Galena Biopharma, Inc. , a Delaware corporation (“ Assignee ”). Capitalized terms used but not otherwise defined in this Trademark Assignment Agreement shall have the meanings set forth in that certain Asset Purchase Agreement, of even date herewith, by and among Assignor and Assignee (as may be amended, supplemented or otherwise modified from time to time, the “ Purchase Agreement ”).

WITNESSETH:

WHEREAS , Assignor owns the Transferred Trademarks (as defined below);

WHEREAS , pursuant to the Purchase Agreement (the terms of which, including all Schedules and Exhibits thereto, being incorporated herein by this reference), Assignor has agreed to assign to Assignee all of Assignor’s right, title and interest in and to the Transferred Trademarks;

WHEREAS , pursuant to the Purchase Agreement, Assignor wishes to assign to Assignee, and Assignee wishes to acquire from Assignor, the Transferred Trademarks.

Assignor hereby sells, transfers, conveys, assigns and delivers to Assignee any and all rights, title and interests Assignor holds in and to the trademark registrations, trademark applications, service mark registrations, service mark applications and domain name registrations of Assignor set forth on Exhibit A , together with all extensions and renewals thereof (the “ Transferred Trademarks ”), and any and all goodwill connected with and symbolized by, in, to and under the Transferred Trademarks, together with all rights to collect royalties, profits and proceeds in connection with any of the foregoing and all rights to sue for past, present or future infringement, misappropriation or other violation of the foregoing, and all rights to recover damages or lost profits in connection therewith.

Assignor hereby authorizes and requests the Patent and Trademark Office officials in all countries and jurisdictions throughout the world, including the United States of America, to record this Trademark Assignment Agreement and to issue trademarks based upon pending applications included in the Transferred Trademarks to Assignee of Assignor’s entire right, title and interest in and to the same.

3.	This Trademark Assignment Agreement may be executed in counterparts (including by means of telecopied signature pages), each of which shall be deemed an original, but all such counterparts taken together shall constitute one and the same instrument.

This Trademark Assignment Agreement is being executed and delivered pursuant and subject to the Purchase Agreement. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms of this Trademark Assignment Agreement, the terms of the Purchase Agreement shall govern.

5.	This Trademark Assignment Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

6.	This Trademark Assignment Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

7.	If any term or other provision of this Trademark Assignment Agreement shall be held invalid or unenforceable, the remainder of this Trademark Assignment Agreement shall not be affected.

8.	This Trademark Assignment Agreement may not be amended or altered except by a written instrument executed by Assignor and Assignee.

————THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK————

IN WITNESS WHEREOF, the Assignor and Assignee hereto have caused this Trademark Assignment Agreement to be duly executed as of the day and year first above written.

ASSIGNOR:

OREXO AB

Name:

Title:

ASSIGNEE:

GALENA BIOPHARMA, INC.

Name:

Title:

Signature Page to Trademark Assignment Agreement

Exhibit A

Transferred Trademarks

US Trademark Reg No 3,563,010 (“ABSTRAL”)

Exhibit 3.01(b)(v)

Form of License Agreement

[See Attached]

DECHERT DRAFT March 7, 2013

EXHIBIT A

Licensed Patents

United States Patent Number 6,759,059

United States Patent Number 6,761,910

United States Patent Number 7,910,132

E XECUTION V ERSION

Seller Disclosure Schedules

This Seller Disclosure Schedule (this “ Seller Disclosure Schedule ”) is the disclosure schedule referred to in the Asset Purchase Agreement (the “ Agreement ”), dated as of March 15, 2013, by and between Orexo AB, a public limited company organized and existing under the laws of Sweden (“ Seller ”), and Galena Biopharma, Inc., a Delaware corporation (“ Purchaser ”). Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement.

This Seller Disclosure Schedule has been arranged in sections corresponding to each representation and warranty set forth in Article V of the Agreement. Any item listed or referred to in any section or subsection of this Seller Disclosure Schedule will be deemed to be incorporated by reference into each other section or subsection of any representation and warranty in such Article V where it is reasonably apparent that such disclosure would be applicable to such other section or subsection.

This Company Disclosure Letter is qualified in its entirety by reference to the specific provisions of the Agreement and is not intended to constitute and shall not constitute representations, warranties or covenants of the Company.

Schedule 5.02(a)

Third Party Consents

None.

109

Schedule 5.02(b)

Governmental or Regulatory Approvals

None.

110

Schedule 5.03

Acquired Assets

Strakan owns or has rights to the Strakan Assets.

111

Schedule 5.05

Intellectual Property

(a) None.

(b) US Patent Number 6,761,910 (the “910 Patent”) is subject to the following claim and litigation:

Civil Action No. 3:11-cv-03788 (FLW)(LHG) Mylan Pharmaceuticals Inc. and Mylan Inc. (collectively “Mylan”) vs Orexo AB in the United States District Court for the District of New Jersey

In a Paragraph IV Certification (ANDA) case commenced on 30 June 2011 Mylan claims that the 910 Patent is invalid and unenforceable and that Mylan’s generic version of Edluar does not infringe the 910 Patent. Edluar contains zolpidem as the active ingredient and has been licensed to Meda AB for the United States.

(c) US Patent Number 6,761,910 is subject to the following:

1. In a license agreement dated 14 April 2008, Orexo AB has granted Meda AB the exclusive rights to make, have made, use and sell Edluar ( zolpidem including all solvates, prodrugs, salts, isomers, hydrates and esters thereof) under the 910 Patent.

2. In a license (settlement) agreement dated 21 February 2011, Orexo AB and Meda AB have granted Par Formulations, Pvt. Ltd a non-exclusive license under the 910 Patent to make, use, sell offer to sell, import , and distribute its generic Edluar from 1 January 2017 until the expiry of the 910 Patent. Under certain circumstances the Entry Date may be earlier.

3. After the Closing, Orexo AB will retain all rights under the 910 Patent not granted to Purchaser under the License Agreement, including the rights to make, have made, use, and sell products containing active ingredients other than fentanyl, and may exercise such rights at its discretion.

112

Schedule 5.07

Litigation

See Schedule 5.05(b).

113

Exhibit 10.5

E XECUTION V ERSION

LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this “ Agreement ”), dated as of March 15, 2013 (the “ Effective Date ”), is made by and between Orexo AB , a public limited company organized and existing under the laws of Sweden (“ Orexo ”), and Galena Biopharma, Inc. , a Delaware corporation (“ Licensee ”). Orexo and Licensee are sometimes individually referred to herein as a “ Party ” and are sometimes collectively referred to herein as the “ Parties ”. Capitalized terms used but not otherwise defined herein shall have their respective meanings as set forth in the Asset Purchase Agreement (as defined below).

WHEREAS, pursuant to that certain Asset Purchase Agreement, of even date herewith, by and between Orexo and Licensee (the “ Asset Purchase Agreement ”), Licensee has purchased the Acquired Assets from Orexo (the “ Acquisition ”); and

WHEREAS, in connection with the Acquisition, Orexo desires to grant, and Licensee desires to accept, a license to certain intellectual property rights of Orexo related to the Product, all upon the terms and subject to the conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Orexo and Licensee agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions . For purposes of this Agreement, the following terms shall have the corresponding meanings set forth below:

“ Acquisition ” has the meaning set forth in the Recitals.

“ Agreement ” has the meaning set forth in the Preamble.

“ ANDA Action ” has the meaning set forth in Section 2.5(b) .

“ ANDA Certification ” has the meaning set forth in Section 2.5(a) .

“ Asset Purchase Agreement ” has the meaning set forth in the Recitals.

“ Competitive Infringement ” has the meaning set forth in Section 2.5(a) .

“ Competitive Infringement Action ” has the meaning set forth in Section 2.5(c) .

“ Control ” or “ Controlled ” means possession by a Party of the right to grant to the other Party a license or sublicense to, or other right to use, within the scope provided for in this Agreement, intangible or intellectual property rights (including patent rights, know-how, trade secrets and data) without violating the terms of any agreement or other arrangement with any Third Party existing at the time such Party would be first required hereunder to grant the other Party such license, sublicense or other right, and without being obligated to pay any royalties or other consideration therefor.

“ Effective Date ” has the meaning set forth in the Preamble.

“ Know-How ” means all trade styles, copyrights, records (including, but not limited to, operating records), instructions, methods, processes, formulas, formulation information, technical information, validations, package specifications, chemical specifications, chemical and finished goods analytical test methods, data (including, but not limited to, stability data and clinical data), studies, product specifications, drawings and technology, laboratory notebooks, electronic databases and correspondence related to the Product or the distribution, marketing, sale, and manufacture of the Product.

“ Licensed Intellectual Property ” means the Licensed Patents and the Licensed Know-How.

“ Licensed Know-How ” means Know-How Controlled by Orexo or its Subsidiaries as of the Effective Date that is necessary for the manufacture, use, distribution, marketing, sale, offer for sale and importation of Product in the Territory.

“ Licensed Patents ” means the patents and patent applications set forth on Exhibit A , and including any divisions, continuations, reissues and reexaminations thereof in the Territory, in each case to the extent necessary for the manufacture, use, distribution, marketing, sale, offer for sale and importation of Product in the Territory.

“ Licensee ” has the meaning set forth in the Preamble.

“ Orexo ” has the meaning set forth in the Preamble.

“ Party ” or “ Parties ” has the meaning set forth in the Preamble.

“ Pharmacoviglance Agreement ” means the Pharmacoviglance Agreement Regarding Abstral, dated May 24, 2010, between Orexo and Strakan, which has been assigned to Licensee pursuant to the Asset Purchase Agreement.

“ Product ” means the proprietary product for pain treatment referred to as Abstral™ that contains Fentanyl as its sole active ingredient and is approved under the Product NDA, as such Product NDA may be amended and supplemented from time to time.

“ Term ” has the meaning set forth in Section 5.1 .

Section 1.2 Interpretation . The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word

“shall”. Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth therein); (b) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof; (c) the word “extent” in the phrase “to the extent” means the degree to which a subject or other thing extends and such phrase does not mean simply “if”; (d) all references herein to Articles, Sections or Exhibits shall be construed to refer to Articles, Sections or Exhibits of this Agreement; and (e) the headings contained in this Agreement or any Exhibit to this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Any capitalized terms used in the Exhibits attached hereto but not otherwise defined therein, shall have the meaning as defined in this Agreement. In the event of an ambiguity or a question of intent or interpretation, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring either Party by virtue of the authorship of any provisions of this Agreement.

ARTICLE II

LICENSE

Section 2.1 License . Subject to the terms and conditions of this Agreement, Orexo hereby grants to Licensee, and Licensee hereby accepts (a) an exclusive (even as to Orexo), transferable (to the extent permitted by Section 5.1 ), sublicenseable (to the extent permitted by Section 2.2 ) license under the Licensed Intellectual Property solely to use, distribute, market, sell, offer for sale and import the Product solely in the Territory and (b) a non-exclusive, transferable (to the extent permitted by Section 5.1 ), sublicenseable (to the extent permitted by Section 2.2 ) license under the Licensed Intellectual Property to manufacture the Product in the Territory solely to use, distribute, market, sell and offer for sale such Product in the Territory.

Section 2.2 Sublicensing . Licensee may sublicense its rights under Sections 2.1(a) and 2.1(b) to any Affiliate or Third Party only if each such sublicense: (a) is in writing and is subject and subordinate to, and consistent with, the terms and conditions of this Agreement; (b) does not diminish, reduce or eliminate any of Licensee’s obligations under this Agreement; (c) requires the sublicensee to comply with all applicable terms of this Agreement; and (d) prohibits further sublicensing except on terms consistent with this Section 2.2 . Licensee shall provide Orexo with a complete copy of each sublicense within thirty (30) days after execution thereof. Licensee shall be responsible for the performance of each sublicensee and shall ensure that each sublicensee complies with all relevant provisions of this Agreement.

Section 2.3 Licensed Know-How Transfer . In addition to the transfer of any Licensed Know-How as contemplated by the Transfer Agreement, Orexo shall make available, for one hundred eighty (180) days after the Closing (or such longer period as may be mutually agreed by the Parties) and in such form as the Parties shall reasonably agree, all tangible Licensed Know-How in Orexo’s possession or Control (other than any Licensed Know-How subject to the Transfer Agreement) as of the Closing that is requested by Licensee, and during such one

hundred and eighty (180) day period Orexo shall use commercially reasonable efforts to provide Licensee with information or assistance reasonably requested by Licensee with respect to using such Licensed Know-How, provided that the provision of such assistance does not interfere in any material respects with Orexo’s business. Licensee shall reimburse Orexo for its reasonable, out-of-pocket costs and expenses incurred in performing the transfer of, and the provision of information and assistance with respect to, the Licensed Know-How to Licensee under this Section 2.3 .

Section 2.4 Prosecution of Licensed Patents . Orexo shall have the sole right to file, prosecute and maintain the Licensed Patents worldwide, at its cost and at its sole discretion. For each patent application and patent under the Licensed Patents, Orexo shall: (a) prepare, file and prosecute such patent application; (b) maintain such patent; (c) pay all fees and expenses associated with its activities pursuant to clauses (a) and (b) above; (d) keep Licensee currently informed of the filing and progress of all material aspects of the prosecution of any such patent application, and the issuance of patents from any such patent application; (e) consult with Licensee in advance concerning any decisions which could materially and adversely affect the scope or enforcement of any issued claims or the potential abandonment of any such patent application or patent; and (f) notify Licensee promptly of any additions, deletions or changes in the status of any such patent or patent application.

Section 2.5 Enforcement of Licensed Patents .

(a) Each Party shall promptly notify, in writing, the other Party upon learning of any actual or suspected Competitive Infringement, any ANDA Certification, or of any claim of invalidity, unenforceability, or non-infringement of any Licensed Patents, and shall, along with such notice, supply the other Party with any evidence in its possession pertaining thereto. For purposes of this Agreement, (i) “ Competitive Infringement ” means, other than in connection with an ANDA Certification, any allegedly infringing activity by a Third Party with respect to a Licensed Patent in the Territory, which activity falls within the scope then in effect of the licenses granted by Orexo to Licensee as set forth in Section 2.1(a) and is reasonably expected to reduce Net Sales of the Product in the Territory, and (ii) “ ANDA Certification ” means any certification filed by a Third Party pursuant to 21 U.S.C. § 355(j)(2)(A)(vii), or any amendment or successor statute thereto, claiming that the Licensed Patents covering the Product in the Territory are invalid or that infringement of the Licensed Patents in the Territory shall not arise from the manufacture, use or sale of a product by a Third Party, where such certification is made by such Third Party in connection with an abbreviated new drug application filed under 21 U.S.C. § 355(j) for a product where the Product is the reference listed drug.

(b) Unless otherwise mutually agreed by the Parties, Orexo shall have the sole right and the obligation to bring, within the statutory period specified in 21 U.S.C. § 355(j)(5)(B)(iii), and prosecute an infringement suit against a Third Party making an ANDA Certification (each, an “ ANDA Action ”), provided that if Orexo’s legal counsel advises that there does not exist a reasonable basis to bring an ANDA Action, Orexo shall not be obligated to bring such ANDA Action. Orexo shall not compromise or settle an ANDA Action without Licensee’s prior written consent if such compromise or settlement would permit the Third Party to

commercially market the product that is the subject of the ANDA Certification prior to the expiration of the Licensed Patents asserted in such ANDA Action, such consent not to be unreasonably withheld or delayed.

(c) Unless otherwise mutually agreed by the Parties, Orexo shall have the first right, but not the obligation, to attempt to resolve any Competitive Infringement, including by filing an infringement suit, defending against such claim or taking other similar action (each, a “ Competitive Infringement Action ”) and to compromise or settle such infringement or claim. If Orexo determines not to initiate a Competitive Infringement Action, Orexo shall promptly inform Licensee. If Orexo does not initiate a Competitive Infringement Action with respect to such Competitive Infringement within ninety (90) days following notice thereof, Licensee shall have the right to attempt to resolve such Competitive Infringement by providing written notice thereof to Orexo.

(d) The Parties shall allocate costs and expenses associated with an ANDA Action brought under Section 2.5(b) or any other action brought in connection with an ANDA Certification as follows: Orexo shall pay and be responsible for twelve percent (12%) of such costs and expenses, and Licensee shall be responsible for and pay eighty eight percent (88%) of such costs and expenses. The Party bringing a Competitive Infringement Action under Section 2.5(c) shall pay all costs and expenses associated with such Action, other than the costs and expenses of the other Party if the other Party elects to join such Action (except as provided in Section 2.5(g) ).

(e) Any amounts recovered by the Party taking an ANDA Action pursuant to Section 2.5(b) , whether by settlement or judgment, shall be allocated in the following order: (i) to reimburse the Parties for any costs and expenses incurred in proportion to the costs and expenses paid by such Party pursuant to the first sentence of Section 2.5(d) , and (ii) the remaining amount of such recovery shall be allocated eighty eight percent (88%) to Licensee and twelve percent (12%) to Orexo. Any amounts recovered by the Party bringing a Competitive Infringement Action pursuant to Section 2.5(c) , whether by settlement or judgment, shall be allocated in the following order: (i) to reimburse the Party taking such Competitive Infringement Action for any costs incurred, (ii) to reimburse the Party not taking such Competitive Infringement Action for its costs incurred in such Competitive Infringement Action, if it joins such Competitive Infringement Action, and (iii) the remaining amount of such recovery shall be allocated to Licensee to the extent that the amounts recovered pertain to damages awarded or obtained to compensate for the Competitive Infringement, and Orexo shall retain all remaining amounts.

(f) For clarity, in the event of any infringement of any Licensed Patent (i) outside of the Territory, (ii) with respect to any product other than the Product, whether in or outside of the Territory, or (iii) that is not solely a Competitive Infringement, in each case of clauses (i), (ii) and (iii), Orexo shall have the sole right, but not the obligation, to attempt to resolve such infringement or claim and to compromise or settle such infringement or claim.

(g) The Party enforcing the Licensed Patents shall have the sole and exclusive right to select counsel for any suit initiated by it pursuant to this Section 2.5 . The Party not

enforcing the Licensed Patents shall provide reasonable assistance to the other Party, including joining such action as a party plaintiff if required by applicable Law to pursue such action, subject to the other Party’s reimbursement of any reasonable out-of-pocket costs and expenses incurred by the non-enforcing Party in providing such assistance.

Section 2.6 Defense of Licensed Patents . As between the Parties, Orexo shall have the sole right, but not the obligation, to defend, at its cost and at its sole discretion, against a declaratory judgment action or other action challenging any Licensed Patents. If the scope, ownership, validity or enforceability of a Licensed Patent is challenged in any counter-claims in any enforcement action brought by Licensee pursuant to Section 2.5(c) , Orexo shall control the defense of such counterclaims, and Licensee shall take all actions and make such filings as are reasonably directed by Orexo in respect of such defense. Licensee shall provide reasonable assistance to Orexo, including joining such action as a party if required by applicable Law to pursue such action, subject to Orexo’s payment or reimbursement of any reasonable out-of-pocket costs and expenses incurred by Licensee in providing such assistance.

Section 2.7 Third Party Infringement Claims . Other than any obligations arising under Section 10 of the Asset Purchase Agreement, as between the parties, neither Licensor nor Licensee shall have any responsibility for asserted or threatened claims or suits alleging that the development, manufacture, use, distribution, marketing, sale, offer for sale or sale of the Product in the Territory, infringes the patents or other intellectual property rights of a Third Party.

Section 2.8 Listing of Patents; PTE . Licensee shall have the sole right to determine which of the Licensed Patents, if any, shall be listed for inclusion in the Approved Drug Products with Therapeutic Equivalence Evaluations pursuant to 21 U.S.C. Section 355, or any successor Laws, in the Territory. If any election for patent term restoration or extension may be made with respect to any Licensed Patent in the Territory, the Parties shall discuss and seek to reach mutual agreement whether or not to take such action. If the Parties are not able to reach mutual agreement, Orexo shall have the sole right to make the final decision whether or not to seek such patent term restoration or extension with respect to the Licensed Patents.

Section 2.9 Confidentiality . The provisions of Section 9.07 of the Asset Purchase Agreement shall apply with respect to the Licensed Intellectual Property, which shall be deemed the Confidential Information of Orexo.

Section 2.10 Reservation of Rights . Except as provided in Section 2.1 and Section 3.2(c) , Orexo does not grant any license or other rights to Licensee with respect to any intellectual property or other proprietary rights, and no additional rights shall be deemed granted to Licensee by implication, estoppel or otherwise. Further, Orexo does not grant any licenses or rights hereunder with respect to any product other than the Product containing Fentanyl as its sole active ingredient. All rights not expressly granted by Orexo to Licensee hereunder are reserved.

ARTICLE III

REGULATORY AND OTHER OBLIGATIONS

Section 3.1 Development and Commercialization .

(a) Licensee shall be solely responsible for the development, manufacture and commercialization of the Product in the Territory and for compliance with all applicable laws.

(b) Unless otherwise agreed with Strakan, Licensee shall not conduct any clinical trials with the Product outside of the Territory.

(c) If requested by Licensee, and to the extent permitted by Strakan, Orexo shall use commercially reasonable efforts to appoint one or more representatives of Licensee to the Commercialization Committee established between Orexo and Strakan for the Product.

Section 3.2 Regulatory .

(a) Licensee shall have sole responsibility for all regulatory matters under applicable Laws, reporting and otherwise, in connection with the Product in the Territory, including all communication with the U.S. Food and Drug Administration with respect to matters relating to the Product in or with respect to the Territory.

(b) Licensee shall cooperate with Strakan pursuant to the Pharmacoviglance Agreement with respect to coordination of collection, investigation, reporting and exchange of information concerning adverse events, product quality and product complaints, relating to the Product.

(c) To the extent permitted by Law and to the extent necessary for the purpose of promoting and selling the Product in the Territory, Orexo hereby grants to Licensee, Licensee’s Affiliates and Licensee’s sublicensees the non-exclusive right to use and cross-reference any clinical trial information and regulatory filings, Controlled by Orexo or its Affliliates as may be required for Licensee, Licensee’s Affiliates and Licensee’s sublicensees to develop, manufacture and commercialize the Product in the Territory. To the extent permitted by Law and to the extent necessary for the purpose of promoting and selling the Product outside of the Territory, Licensee hereby grants to Orexo, its Affiliates and licensees the non-exclusive right to use and cross-reference any clinical trial information and regulatory filings, Controlled by Licensee or its Affiliates as may be required for Orexo, its Affiliates and licensees to develop, manufacture and commercialize the Product outside of the Territory.

ARTICLE IV

NO IMPLIED WARRANTIES

EXCEPT AS EXPRESSLY SET FORTH IN SECTION 5.04 OF THE ASSET PURCHASE AGREEMENT, OREXO MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY, VALIDITY, ENFORCEABILITY OR NON-INFRINGEMENT REGARDING OR WITH RESPECT TO THE LICENSED INTELLECTUAL PROPERTY.

ARTICLE V

TERM AND TERMINATION

Section 5.1 Term . This Agreement shall commence on the Effective Date and, unless terminated earlier in accordance with Section 5.2 , shall expire upon the expiration of Royalty Period (the “ Term ”). Upon expiration of the Term pursuant to this Section 5.1 , the licenses granted to Licensee under Section 2.1 shall, subject to the terms of this Agreement, become fully paid-up, perpetual and non-exclusive licenses.

Section 5.2 Termination .

(a) Licensee shall have the right to terminate this Agreement at any time upon thirty (30) days prior written notice to Orexo.

(b) This Agreement shall terminate immediately and automatically and without further action of Licensee or Orexo: (i) in the event that Licensee makes any assignment for the benefit of creditors or files a petition in bankruptcy or is adjudged bankrupt or becomes insolvent or is placed in the hands of a receiver or if any of the equivalent of any of the foregoing proceedings or acts referred to in this Section 5.2(b)(i), though known or designated by some other name or term occurs; or (ii) upon receipt by Licensee of an Exercise Notice pursuant to Section 8.04 of the Asset Purchase Agreement.

Section 5.3 Effect of Termination . If this Agreement expires pursuant to Section 5.1 or is terminated pursuant to Section 5.2 , except as provided in Section 5.1 , all licenses and other rights granted under this Agreement to Licensee shall terminate, and any such expiration or termination of this Agreement shall not operate to discharge any liability that had been incurred by either Party prior thereto.

Section 5.4 Survival . Articles IV , V , and VI and Section 2.8 shall survive any expiration or termination of this Agreement.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Assignment . Except as otherwise expressly permitted by this Agreement, neither Party shall assign or otherwise transfer this Agreement or any interest herein or right hereunder without the prior written consent of the other Party, and any such purported assignment, transfer or attempt to assign or transfer any interest herein or right hereunder shall be void and of no effect, except that each Party shall always have the right, without such consent, on written notice to the other Party, assign any or all of its rights and delegate or subcontract any or all of its obligations hereunder to (a) any of its Affiliates, (b) a successor of all or substantially all of the business of such Party, whether by way of merger, sale of stock, sale of assets or other transaction (or series of transactions) or (c) a successor of that portion of such Party’s business to

which this Agreement pertains. Any permitted successor or assignee of rights or obligations hereunder shall, in a writing to the other Party, expressly assume performance of such rights or obligations.

Section 6.2 Non-Waiver . Any failure on the part of a Party to enforce at any time or for any period of time any of the provisions of this Agreement shall not be deemed or construed to be a waiver of such provisions or of any right of such Party thereafter to enforce each and every such provision on any succeeding occasion or breach thereof.

Section 6.3 No Third-Party Beneficiaries . This Agreement is for the sole benefit of the Parties and their successors and permitted assigns, and nothing herein express or implied shall give or be construed to give to any Person, other than the Parties and such successors and permitted assigns, any legal or equitable rights hereunder.

Section 6.4 Severability. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other terms and provisions of the Agreement shall remain in full force and effect. Upon such determination, the Parties shall negotiate in good faith to modify this Agreement so as to give effect to the original intent of the Parties to the fullest extent permitted by applicable Law.

Section 6.5 Entire Agreement; Amendments . This Agreement, together with the Asset Purchase Agreement (following execution and delivery thereof), contains the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersedes all previous and contemporaneous verbal and written understandings, agreements, representations and warranties with respect to such subject matter or on which the Parties may have relied. This Agreement may not be amended, supplemented or modified except by an instrument in writing signed on behalf of each Party. No waiver of any provision of this Agreement shall be valid unless the waiver is in writing and signed by the waiving Party.

Section 6.6 Notices . Unless otherwise explicitly set forth herein, any notice required or permitted to be given hereunder shall be in writing and shall be delivered personally by hand, or sent by reputable overnight courier, signature required, to the addresses of each Party set forth below or to such other address or addresses as shall be designated in writing in the same matter:

(a) If to Licensee:

Galena Biopharma, Inc.

310 N. State Street, Suite 208

Lake Oswego, Oregon 97034

Attention: Chief Executive Officer

Facsimile: 855-883-7422

with a copy (which shall not constitute notice) to:

TroyGould PC

1801 Century Park East, 16 ^th Floor

Los Angeles, California 90067

Attention: Dale E. Short

Facsimile: (310) 201-4746

(b) If to Orexo:

Orexo AB

P.O. Box 303

SE-751 05 Uppsala

Sweden

Attention: Chief Executive Officer

Facsimile: +46 (0)18 780 88 88

with a copy (which shall not constitute notice) to:

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036-6797

Attention: David S. Rosenthal, Esq.

Facsimile: (212) 698-3599

All notices shall be deemed given when received by the addressee.

Section 6.7 Public Announcements . Neither Party shall make any public announcement regarding this Agreement, or the subject matter contained herein, without the prior written consent of the other Party (which consent may be withheld in the sole discretion of such other Party), except to the extent required to be disclosed (i) to or by any Governmental or Regulatory Authorities; (ii) to comply with applicable Laws (including, without limitation, to comply with SEC, Swedish Financial Supervisory Authority, or stock exchange disclosure requirements), or (iii) to comply with judicial process or an order of any Governmental or Regulatory Authority of competent jurisdiction; provided, however, that in each case the Party required to disclose such information shall endeavor to give the other Party reasonable advance notice and review of any such disclosure. Notwithstanding the foregoing, the Parties shall coordinate on a mutually acceptable joint press released to be issued by each of the Parties in connection with the execution of this Agreement.

Section 6.8 Governing Law . This Agreement (and all disputes arising out of it including non-contractual disputes) shall be governed by and interpreted in accordance with the substantive laws of Sweden, without regard to the choice of law provisions thereof.

or their successors, for attempted resolution by good faith negotiations within sixty (60) days after such notice is received. If either Party desires to pursue arbitration under paragraph (b) below to resolve any such dispute, a referral to such executives under this paragraph (a) shall be a mandatory condition precedent. Said designated officers are as follows.

For Purchaser: Chief Executive Officer

For Seller: Chief Executive Officer

(d) The procedures specified in this Section 6.8 shall be the sole and exclusive procedures for the resolution of disputes between the Parties arising out of or relating to this Agreement; provided , that a Party, without prejudice to the above procedures, may seek injunctive relief or other provisional judicial relief if in its sole judgment such action is necessary to avoid irreparable damage. Despite such action the Parties will continue to participate in good faith in the procedures specified in this Section 6.8 .

(e) Each Party is required to continue to perform its obligations under this Agreement pending final resolution of any such dispute.

Section 6.9 Expenses . Whether or not the transactions contemplated hereby are consummated, and except as otherwise specifically provided in this Agreement or in the Asset Purchase Agreement, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs or expenses.

Section 6.10 Relationship of the Parties . In making and performing this Agreement, the Parties are acting, and intend to be treated, as independent entities and nothing contained in this Agreement shall be construed or implied to create an agency, partnership, joint venture, or employer and employee relationship between Orexo and Licensee or any of their respective Affiliates. Except as otherwise expressly provided herein, neither Party may act on behalf of the other Party, and neither Party may make (or has any authority to make) any representation, warranty or commitment, whether express or implied, on behalf of the other Party or incur any charges or expenses for or in the name of the other Party. No Party shall be liable for the act of any other Party unless such act is expressly authorized in writing by both Parties. The relationship of the Parties under this Agreement is, and is intended to be, one of independent contractors hereunder.

Section 6.11 Counterparts . This Agreement shall become binding when any one or more counterparts hereof, individually or taken together, shall bear the signatures of each of the Parties. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original as against the Party whose signature appears thereon, but all of which taken together shall constitute but one and the same instrument. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have caused this License Agreement to be duly executed as of the Effective Date.


Orexo: OREXO AB


/s/ Nicolaj Sorensen
Name:		Nicolaj Sorensen
Title:		Chief Executive Officer and President

Licensee: GALENA BIOPHARMA, INC.


/s/ Mark J. Ahn
Name:		Mark J. Ahn, Ph.D.
Title:		President and Chief Executive Officer

EXHIBIT A

Licensed Patents

United States Patent Number 6,759,059

United States Patent Number 6,761,910

United States Patent Number 7,910,132

Exhibit 10.6

Execution Version

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (as the same may from time to time be amended, modified, supplemented or restated, this “ Agreement ”) dated as of May 8 ^th , 2013 (the “ Effective Date ”) among OXFORD FINANCE LLC, a Delaware limited liability company with an office located at 133 North Fairfax Street, Alexandria, Virginia 22314 (“ Oxford ”), as collateral agent (in such capacity, “ Collateral Agent ”), the Lenders listed on Schedule 1.1 hereof or otherwise a party hereto from time to time including Oxford in its capacity as a Lender (each a “ Lender ” and collectively, the “ Lenders ”), and GALENA BIOPHARMA, INC., a Delaware corporation (“ Parent ”), and APTHERA, INC., a Delaware corporation, each with offices located at 310 N. State Street, Suite 208, Lake Oswego, OR 97070 (individually and collectively, jointly and severally, “ Borrower ”), provides the terms on which the Lenders shall lend to Borrower and Borrower shall repay the Lenders. The parties agree as follows:

1.	ACCOUNTING AND OTHER TERMS

1.1 Accounting terms not defined in this Agreement shall be construed in accordance with GAAP. Calculations and determinations must be made in accordance with GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein. All references to “ Dollars ” or “ $ ” are United States Dollars, unless otherwise noted.

2.	LOANS AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay each Lender, the outstanding principal amount of all Term Loans advanced to Borrower by such Lender and accrued and unpaid interest thereon and any other amounts due hereunder as and when due in accordance with this Agreement.

2.2 Term Loans .

(a) Availability .

(i) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, to make term loans to Borrower on the Effective Date in an aggregate amount of Ten Million Dollars ($10,000,000) according to each Lender’s Term A Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term A Loan ”, and collectively as the “ Term A Loans ”). After repayment, no Term A Loan may be re-borrowed.

(ii) Subject to the terms and conditions of this Agreement, the Lenders agree, severally and not jointly, during the Second Draw Period, to make term loans to Borrower in an aggregate amount up to Five Million Dollars ($5,000,000) according to each Lender’s Term B Loan Commitment as set forth on Schedule 1.1 hereto (such term loans are hereinafter referred to singly as a “ Term B Loan ”, and collectively as the “ Term B Loans ”; each Term A Loan or Term B Loan is hereinafter referred to singly as a “ Term Loan ” and the Term A Loans and the Term B Loans are hereinafter referred to collectively as the “ Term Loans ”). After repayment, no Term B Loan may be re-borrowed.

(b) Repayment . Borrower shall make monthly payments, in arrears, of interest only commencing on the first (1 ^st ) Payment Date following the Funding Date of each Term Loan, and continuing on the Payment Date of each successive month thereafter through and including the Payment Date immediately preceding the Amortization Date. Borrower agrees to pay, on the Funding Date of each Term Loan, any initial partial monthly interest payment otherwise due for the period between the Funding Date of such Term Loan and the first Payment Date thereof. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal and interest, in arrears, to each Lender, as calculated by Collateral Agent (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of such Lender’s Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to thirty (30) months with respect to the Term A Loans and the Term B Loans. All unpaid principal and accrued and unpaid interest with respect to each Term Loan is due and payable in full on the Maturity Date. Each Term Loan may only be prepaid in accordance with Sections 2.2(c) and 2.2(d).

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(c) Mandatory Prepayments . If the Term Loans are accelerated following the occurrence of an Event of Default, Borrower shall immediately pay to Lenders, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of: (i) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (ii) the Final Payment, (iii) the Prepayment Fee, plus (iv) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. Notwithstanding (but without duplication with) the foregoing, on the Maturity Date, if the Final Payment had not previously been paid in full in connection with the prepayment of the Term Loans in full, Borrower shall pay to Collateral Agent, for payment to each Lender in accordance with its respective Pro Rata Share, the Final Payment in respect of the Term Loans.

(d) Permitted Prepayment of Term Loans . Borrower shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under this Agreement, provided Borrower (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least thirty (30) days prior to such prepayment, and (ii) pays to the Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Payment, (C) the Prepayment Fee, plus (D) all other Obligations that are due and payable, including Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts.

2.3 Payment of Interest on the Credit Extensions .

(a) Interest Rate. Subject to Section 2.3(b), the principal amount outstanding under the Term Loans shall accrue interest at a fixed per annum rate (which rate shall be fixed for the duration of the applicable Term Loan) equal to the Basic Rate, determined by Collateral Agent on the Funding Date of the applicable Term Loan, which interest shall be payable monthly in arrears in accordance with Sections 2.2(b) and 2.3(e). Interest shall accrue on each Term Loan commencing on, and including, the Funding Date of such Term Loan, and shall accrue on the principal amount outstanding under such Term Loan through and including the day on which such Term Loan is paid in full.

(b) Default Rate . Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall accrue interest at a fixed per annum rate equal to the rate that is otherwise applicable thereto plus five percentage points (5.00%) (the “ Default Rate ”). Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Collateral Agent.

(c) 360-Day Year . Interest shall be computed on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days.

(d) Debit of Accounts . Collateral Agent and each Lender may debit (or ACH) any deposit accounts, maintained by Borrower or any of its Subsidiaries, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes the Lenders under the Loan Documents when due. Any such debits (or ACH activity) shall not constitute a set-off.

(e) Payments . Except as otherwise expressly provided herein, all payments by Borrower under the Loan Documents shall be made to the respective Lender to which such payments are owed, at such Lender’s office in immediately available funds on the date specified herein. Unless otherwise provided, interest is payable monthly on the Payment Date of each month. Payments of principal and/or interest received after 12:00 noon Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest, as applicable, shall continue to accrue until paid. All payments to be made by Borrower hereunder or under any other Loan Document, including payments of principal and interest, and all fees, expenses, indemnities and reimbursements, shall be made without set-off, recoupment or counterclaim, in lawful money of the United States and in immediately available funds.

Execution Version

2.4 Secured Promissory Notes. The Term Loans shall be evidenced by a Secured Promissory Note or Notes in the form attached as Exhibit D hereto (each a “ Secured Promissory Note ”), and shall be repayable as set forth in this Agreement. Borrower irrevocably authorizes each Lender to make or cause to be made, on or about the Funding Date of any Term Loan or at the time of receipt of any payment of principal on such Lender’s Secured Promissory Note, an appropriate notation on such Lender’s Secured Promissory Note Record reflecting the making of such Term Loan or (as the case may be) the receipt of such payment. The outstanding amount of each Term Loan set forth on such Lender’s Secured Promissory Note Record shall be prima facie evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender’s Secured Promissory Note Record shall not limit or otherwise affect the obligations of Borrower under any Secured Promissory Note or any other Loan Document to make payments of principal of or interest on any Secured Promissory Note when due. Upon receipt of an affidavit of an officer of a Lender as to the loss, theft, destruction, or mutilation of its Secured Promissory Note, Borrower shall issue, in lieu thereof, a replacement Secured Promissory Note in the same principal amount thereof and of like tenor.

2.5 Fees. Borrower shall pay to Collateral Agent:

(a) Facility Fee .

(i) A fully earned, non-refundable facility fee of One Hundred Thousand Dollars ($100,000) to be shared between the Lenders pursuant to their respective Commitment Percentages, Fifty Thousand Dollars ($50,000) of which have already been paid on or about March 19, 2013 and the remaining Fifty Thousand Dollars ($50,000) of which must be paid on or before the funding of the Term A Loans;

(ii) A fully earned, non-refundable facility fee of Fifty Thousand Dollars ($50,000) to be shared between the Lenders pursuant to their respective Commitment Percentages, which shall be payable upon the funding of the Term B Loans;

(b) Final Payment . The Final Payment, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

(c) Prepayment Fee . The Prepayment Fee, when due hereunder, to be shared between the Lenders in accordance with their respective Pro Rata Shares;

(d) Lenders’ Expenses . All Lenders’ Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due; and

(e) Non-Utilization Fee . A non-utilization fee of Fifty Thousand Dollars ($50,000) to be shared between the Lenders pursuant to their respective Commitment Percentages, which shall be payable on May 31, 2014 in the event that (i) the requirements of the commencement of the Second Draw Period have been fulfilled on or before such date and the Borrower has not requested the disbursement of the Term B Loan by such date in accordance with the provisions of this Agreement, (ii) due to the occurrence of an Event of Default, the Second Draw Period has not commenced by such date or (iii) the Term B Loan has not been disbursed by such date (in accordance with the provisions of this Agreement) due to the occurrence of an Event of Default.

2.6 Withholding. Payments received by the Lenders from Borrower hereunder will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any governmental authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to the Lenders, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, each Lender receives a net sum equal to the sum which it would have received had no withholding or deduction been required and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon

Execution Version

request, furnish the Lenders with proof reasonably satisfactory to the Lenders indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.6 shall survive the termination of this Agreement.

3.	CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Each Lender’s obligation to make a Term A Loan is subject to the condition precedent that Collateral Agent and each Lender shall consent to or shall have received, in form and substance satisfactory to Collateral Agent and each Lender, such documents, and completion of such other matters, as Collateral Agent and each Lender may reasonably deem necessary or appropriate, including, without limitation:

(a) original Loan Documents, each duly executed by Borrower and each Subsidiary, as applicable;

(b) duly executed original Control Agreements with respect to any Collateral Accounts maintained by Borrower or any of its Subsidiaries;

(c) duly executed original Secured Promissory Notes in favor of each Lender according to its Term A Loan Commitment Percentage;

(d) the certificate(s) for the Shares, together with Assignment(s) Separate from Certificate, duly executed in blank;

(e) the Operating Documents and good standing certificates of Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of Borrower’s and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

(f) a completed Perfection Certificate for Borrower and each of its Subsidiaries;

(g) the Annual Projections, for the current calendar year;

(h) duly executed original officer’s certificate for Borrower and each Subsidiary that is a party to the Loan Documents, in a form acceptable to Collateral Agent and the Lenders;

(i) certified copies, dated as of date no earlier than thirty (30) days prior to the Effective Date, of financing statement searches, as Collateral Agent shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;

(j) a landlord’s consent executed in favor of Collateral Agent in respect of all of Borrower’s and each Subsidiary’s leased locations;

(k) a bailee waiver executed in favor of Collateral Agent in respect of each third party bailee where Borrower or any Subsidiary maintains Collateral having a book value in excess of One Hundred Thousand Dollars ($100,000.00);

(l) a duly executed legal opinion of counsel to Borrower dated as of the Effective Date;

(m) evidence satisfactory to Collateral Agent and the Lenders that the insurance policies required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing loss payable and/or additional insured clauses or endorsements in favor of Collateral Agent, for the ratable benefit of the Lenders;

Execution Version

(n) Intentionally Left Blank;

(o) evidence satisfactory to Collateral Agent that Borrower has completed its acquisition of exclusive U.S. rights to Abstral tablets and related assets from Orexo AB, a public limited company organized and existing under the laws of Sweden; and

(p) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.2 Conditions Precedent to all Credit Extensions. The obligation of each Lender to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

(a) receipt by Collateral Agent of an executed Disbursement Letter in the form of Exhibit B attached hereto;

(b) the representations and warranties in Section 5 hereof shall be true, accurate and complete in all material respects on the date of the Disbursement Letter and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in Section 5 hereof are true, accurate and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date;

(c) in such Lender’s sole discretion, there has not been any Material Adverse Change or any material adverse deviation by Borrower from the Annual Projections of Borrower presented to and accepted by Collateral Agent and each Lender;

(d) to the extent not delivered at the Effective Date, duly executed original Secured Promissory Notes and Warrants, in number, form and content acceptable to each Lender, and in favor of each Lender according to its Commitment Percentage, with respect to each Credit Extension made by such Lender after the Effective Date; and

(e) payment of the fees and Lenders’ Expenses then due as specified in Section 2.5 hereof.

3.3 Covenant to Deliver. Borrower agrees to deliver to Collateral Agent and the Lenders each item required to be delivered to Collateral Agent under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Collateral Agent or any Lender of any such item shall not constitute a waiver by Collateral Agent or any Lender of Borrower’s obligation to deliver such item, and any such Credit Extension in the absence of a required item shall be made in each Lender’s sole discretion.

3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of a Term Loan set forth in this Agreement, to obtain a Term Loan, Borrower shall notify the Lenders (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon Eastern time three (3) Business Days prior to the date the Term Loan is to be made. Together with any such electronic, facsimile or telephonic notification, Borrower shall deliver to the Lenders by electronic mail or facsimile a completed Disbursement Letter executed by a Responsible Officer or his or her designee. The Lenders may rely on any telephone notice given by a person whom a Lender reasonably believes is a Responsible Officer or designee. On the Funding Date, each Lender shall credit and/or transfer (as applicable) to the Designated Deposit Account, an amount equal to its Term Loan Commitment.

Execution Version

4.	CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Collateral Agent, for the ratable benefit of the Lenders, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Collateral Agent, for the ratable benefit of the Lenders, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral, subject only to Permitted Liens that are permitted by the terms of this Agreement to have priority to Collateral Agent’s Lien. If Borrower shall acquire a commercial tort claim (as defined in the Code), Borrower, shall promptly notify Collateral Agent in a writing signed by Borrower, as the case may be, of the general details thereof (and further details as may be required by Collateral Agent) and grant to Collateral Agent, for the ratable benefit of the Lenders, in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Collateral Agent.

If this Agreement is terminated, Collateral Agent’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as the Lenders’ obligation to make Credit Extensions has terminated, Collateral Agent shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower.

4.2 Authorization to File Financing Statements. Borrower hereby authorizes Collateral Agent to file financing statements or take any other action required to perfect Collateral Agent’s security interests in the Collateral, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Collateral Agent’s interest or rights under the Loan Documents, including a notice that any disposition of the Collateral, except to the extent permitted by the terms of this Agreement, by Borrower, or any other Person, shall be deemed to violate the rights of Collateral Agent under the Code.

4.3 Pledge of Collateral. Borrower hereby pledges, assigns and grants to Collateral Agent, for the ratable benefit of the Lenders, a security interest in all the Shares, together with all proceeds and substitutions thereof, all cash, stock and other moneys and property paid thereon, all rights to subscribe for securities declared or granted in connection therewith, and all other cash and noncash proceeds of the foregoing, as security for the performance of the Obligations. On the Effective Date, or, to the extent not certificated as of the Effective Date, within ten (10) days of the certification of any Shares, the certificate or certificates for the Shares will be delivered to Collateral Agent, accompanied by an instrument of assignment duly executed in blank by Borrower. To the extent required by the terms and conditions governing the Shares, Borrower shall cause the books of each entity whose Shares are part of the Collateral and any transfer agent to reflect the pledge of the Shares. Upon the occurrence and during the continuance of an Event of Default hereunder, Collateral Agent may effect the transfer of any securities included in the Collateral (including but not limited to the Shares) into the name of Collateral Agent and cause new (as applicable) certificates representing such securities to be issued in the name of Collateral Agent or its transferee. Borrower will execute and deliver such documents, and take or cause to be taken such actions, as Collateral Agent may reasonably request to perfect or continue the perfection of Collateral Agent’s security interest in the Shares. Unless an Event of Default shall have occurred and be continuing, Borrower shall be entitled to exercise any voting rights with respect to the Shares and to give consents, waivers and ratifications in respect thereof, provided that no vote shall be cast or consent, waiver or ratification given or action taken which would be inconsistent with any of the terms of this Agreement or which would constitute or create any violation of any of such terms. All such rights to vote and give consents, waivers and ratifications shall terminate upon the occurrence and continuance of an Event of Default.

5.	REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants to Collateral Agent and the Lenders as follows at all times:

5.1 Due Organization, Authorization: Power and Authority. Borrower and each of its Subsidiaries is duly existing and in good standing as a Registered Organization in its jurisdictions of organization or formation and Borrower and each of its Subsidiaries is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its businesses or its ownership of property requires that it be qualified except

Execution Version

where the failure to do so could not reasonably be expected to have a Material Adverse Change. In connection with this Agreement, Borrower and each of its Subsidiaries has delivered to Collateral Agent a completed perfection certificate signed by an officer of Borrower or such Subsidiary (each a “ Perfection Certificate ” and collectively, the “ Perfection Certificates ”). Borrower represents and warrants that (a) Borrower and each of its Subsidiaries’ exact legal name is that which is indicated on its respective Perfection Certificate and on the signature page of each Loan Document to which it is a party; (b) Borrower and each of its Subsidiaries is an organization of the type and is organized in the jurisdiction set forth on its respective Perfection Certificate; (c) each Perfection Certificate accurately sets forth each of Borrower’s and its Subsidiaries’ organizational identification number or accurately states that Borrower or such Subsidiary has none; (d) each Perfection Certificate accurately sets forth Borrower’s and each of its Subsidiaries’ place of business, or, if more than one, its chief executive office as well as Borrower’s and each of its Subsidiaries’ mailing address (if different than its chief executive office); (e) Borrower and each of its Subsidiaries (and each of its respective predecessors) have not, in the past five (5) years, changed its jurisdiction of organization, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificates pertaining to Borrower and each of its Subsidiaries, is accurate and complete (it being understood and agreed that Borrower and each of its Subsidiaries may from time to time update certain information in the Perfection Certificates (including the information set forth in clause (d) above) after the Effective Date to the extent permitted by one or more specific provisions in this Agreement); such updated Perfection Certificates subject to the review and approval of Collateral Agent. If Borrower or any of its Subsidiaries is not now a Registered Organization but later becomes one, Borrower shall notify Collateral Agent of such occurrence and provide Collateral Agent with such Person’s organizational identification number within five (5) Business Days of receiving such organizational identification number.

The execution, delivery and performance by Borrower and each of its Subsidiaries of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s or such Subsidiaries’ organizational documents, including its respective Operating Documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law applicable thereto, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or such Subsidiary, or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or are being obtained pursuant to Section 6.1(b), or (v) constitute an event of default under any material agreement by which Borrower or any of such Subsidiaries, or their respective properties, is bound. Neither Borrower nor any of its Subsidiaries is in default under any agreement to which it is a party or by which it or any of its assets is bound in which such default could reasonably be expected to have a Material Adverse Change.

5.2 Collateral.

(a) Borrower and each its Subsidiaries have good title to, have rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien under the Loan Documents, free and clear of any and all Liens except Permitted Liens, and neither Borrower nor any of its Subsidiaries have any Deposit Accounts, Securities Accounts, Commodity Accounts or other investment accounts other than the Collateral Accounts or the other investment accounts, if any, described in the Perfection Certificates delivered to Collateral Agent in connection herewith with respect of which Borrower or such Subsidiary has given Collateral Agent notice and taken such actions as are necessary to give Collateral Agent a perfected security interest therein. The Accounts are bona fide, existing obligations of the Account Debtors.

(b) On the Effective Date, and except as disclosed on the Perfection Certificate (i) the Collateral is not in the possession of any third party bailee (such as a warehouse), and (ii) no such third party bailee possesses components of the Collateral in excess of One Hundred Thousand Dollars ($100,000.00). None of the components of the Collateral shall be maintained at locations other than as disclosed in the Perfection Certificates on the Effective Date or as permitted pursuant to Section 6.11.

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(d) Borrower and each of its Subsidiaries is the sole owner of the Intellectual Property each respectively purports to own, free and clear of all Liens other than Permitted Liens. Except as noted on the Perfection Certificates, neither Borrower nor any of its Subsidiaries is a party to, nor is bound by, any material license or other material agreement with respect to which Borrower or such Subsidiary is the licensee that (i) prohibits or otherwise restricts Borrower or its Subsidiaries from granting a security interest in Borrower’s or such Subsidiaries’ interest in such material license or material agreement or any other property, or (ii) for which a default under or termination of could interfere with Collateral Agent’s or any Lender’s right to sell any Collateral. Borrower shall provide written notice to Collateral Agent and each Lender within ten (10) days of Borrower or any of its Subsidiaries entering into or becoming bound by any license or agreement with respect to which Borrower or any Subsidiary is the licensee (other than over-the-counter software that is commercially available to the public). Borrower shall, and shall cause its Subsidiaries to, take such commercially reasonable steps as Collateral Agent and any Lender requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for (i) all licenses or agreements with respect to which Borrower or any Subsidiary is the licensee to be deemed Collateral and for Collateral Agent and each Lender to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (ii) Collateral Agent and each Lender shall have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Collateral Agent’s and such Lender’s rights and remedies under this Agreement and the other Loan Documents.

5.3 Litigation. Except as disclosed (i) on the Perfection Certificates, or (ii) in accordance with Section 6.9 hereof, there are no actions, suits, investigations, or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by or against Borrower or any of its Subsidiaries involving more than One Hundred Thousand Dollars ($100,000.00).

5.4 No Material Deterioration in Financial Condition; Financial Statements. All consolidated financial statements for Borrower and its Subsidiaries, delivered to Collateral Agent fairly present, in conformity with GAAP, in all material respects the consolidated financial condition of Borrower and its Subsidiaries, and the consolidated results of operations of Borrower and its Subsidiaries. There has not been any material deterioration in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent financial statements submitted to any Lender.

5.5 Solvency. Borrower and each of its Subsidiaries is Solvent.

5.6 Regulatory Compliance. Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither Borrower nor any of its Subsidiaries has violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a Material Adverse Change. Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

None of Borrower, any of its Subsidiaries, or any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their Affiliates or agents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law.

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5.7 Investments. Neither Borrower nor any of its Subsidiaries owns any stock, shares, partnership interests or other equity securities except for Permitted Investments.

5.8 Tax Returns and Payments; Pension Contributions. Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower and each of its Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower and such Subsidiaries, in all jurisdictions in which Borrower or any such Subsidiary is subject to taxes, including the United States, unless such taxes are being contested in accordance with the following sentence. Borrower and each of its Subsidiaries may defer payment of any contested taxes, provided that Borrower or such Subsidiary, (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies Collateral Agent in writing of the commencement of, and any material development in, the proceedings, and (c) posts bonds or takes any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a Permitted Lien. Neither Borrower nor any of its Subsidiaries is aware of any claims or adjustments proposed for any of Borrower’s or such Subsidiaries’ prior tax years which could result in additional taxes becoming due and payable by Borrower or its Subsidiaries. Borrower and each of its Subsidiaries have paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and neither Borrower nor any of its Subsidiaries have, withdrawn from participation in, and have not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower or its Subsidiaries, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

5.9 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements in accordance with the provisions of this Agreement, and not for personal, family, household or agricultural purposes.

5.10 Shares. Borrower has full power and authority to create a first lien on the Shares and no disability or contractual obligation exists that would prohibit Borrower from pledging the Shares pursuant to this Agreement. To Borrower’s knowledge, there are no subscriptions, warrants, rights of first refusal or other restrictions on transfer relative to, or options exercisable with respect to the Shares. The Shares have been and will be duly authorized and validly issued, and are fully paid and non-assessable. To Borrower’s knowledge, the Shares are not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Borrower knows of no reasonable grounds for the institution of any such proceedings.

5.11 Full Disclosure. No written representation, warranty or other statement of Borrower or any of its Subsidiaries in any certificate or written statement given to Collateral Agent or any Lender, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Collateral Agent or any Lender, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized that the Annual Projections are prepared in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such Annual Projections may differ from the projected results).

5.12 Definition of “ Knowledge. ” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.

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6.	AFFIRMATIVE COVENANTS

Borrower shall, and shall cause each of its Subsidiaries to, do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of organization and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Change. Comply with all laws, ordinances and regulations to which Borrower or any of its Subsidiaries is subject, the noncompliance with which could reasonably be expected to have a Material Adverse Change.

(b) Obtain and keep in full force and effect, all of the Governmental Approvals necessary for the performance by Borrower and its Subsidiaries of their respective businesses and obligations under the Loan Documents and the grant of a security interest to Collateral Agent for the ratable benefit of the Lenders, in all of the Collateral. Borrower shall promptly provide copies to Collateral Agent of any material Governmental Approvals obtained by Borrower or any of its Subsidiaries.

6.2 Financial Statements, Reports, Certificates.

(a) Deliver to each Lender:

(i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet, income statement and cash flow statement covering the consolidated operations of Borrower and its Subsidiaries for such month certified by a Responsible Officer and in a form reasonably acceptable to Collateral Agent;

(ii) as soon as available, but no later than one hundred twenty (120) days after the last day of Borrower’s fiscal year or within five (5) days of filing with the SEC, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm acceptable to Collateral Agent in its reasonable discretion;

(iii) as soon as available after approval thereof by Borrower’s Board of Directors, but no later than thirty (30) days after the last day of each of Borrower’s fiscal years, Borrower’s annual financial projections for the entire current fiscal year as approved by Borrower’s Board of Directors, which such annual financial projections shall be set forth in a month-by-month format (such annual financial projections as originally delivered to Collateral Agent and the Lenders are referred to herein as the “ Annual Projections ”; provided that, any revisions of the Annual Projections approved by Borrower’s Board of Directors shall be delivered to Collateral Agent and the Lenders no later than seven (7) days after such approval and, unless Collateral Agent notifies Borrower to the contrary in writing within thirty (30) days after receipt thereof, the term “Annual Projections” shall include such revisions);

(iv) within five (5) days of delivery, copies of all statements, reports and notices made available to Borrower’s security holders or holders of Subordinated Debt;

(v) within five (5) days of filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission,

(vi) prompt notice of any amendments of or other changes to (A) the capital structure of Borrower (including, without limitation, changes to the classes, par value or number of the authorized or issued shares of capital stock of the Borrower) that would require Borrower to file a report with the Securities and Exchange Commission under the Securities Exchange Act of 1934 if Borrower is subject to the reporting requirements thereof at such time or (B) the Operating Documents of Borrower or any of its Subsidiaries, together with any copies reflecting such amendments or changes with respect thereto;

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(vii) prompt notice of (A) any material change in the composition of the Intellectual Property, (B) the registration of any copyright, including any subsequent ownership right of Borrower or any of its Subsidiaries in or to any copyright, patent or trademark, including a copy of any such registration, and (C) Borrower becoming aware of any event that could reasonably be expected to materially and adversely affect the value of the Intellectual Property;

(viii) as soon as available, but no later than thirty (30) days after the last day of each month, copies of the month-end account statements for each Collateral Account maintained by Borrower or its Subsidiaries, which statements may be provided to Collateral Agent and each Lender by Borrower or directly from the applicable institution(s), and

(ix) other financial information as reasonably requested by Collateral Agent or any Lender.

Notwithstanding the foregoing, documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address.

(b) Concurrently with the delivery of the financial statements specified in Section 6.2(a)(i) above but no later than thirty (30) days after the last day of each month, deliver to each Lender, a duly completed Compliance Certificate signed by a Responsible Officer.

(c) Keep proper books of record and account in accordance with GAAP in all material respects, in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities. Borrower shall, and shall cause each of its Subsidiaries to, allow, at the sole cost of Borrower, Collateral Agent or any Lender, during regular business hours upon reasonable prior notice (provided that no notice shall be required when an Event of Default has occurred and is continuing), to visit and inspect any of its properties, to examine and make abstracts or copies from any of its books and records, and to conduct a collateral audit and analysis of its operations and the Collateral. Such audits shall be conducted no more often than twice every year unless (and more frequently if) an Event of Default has occurred and is continuing.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower, or any of its Subsidiaries, and their respective Account Debtors shall follow Borrower’s, or such Subsidiary’s, customary practices as they exist at the Effective Date. Borrower must promptly notify Collateral Agent and the Lenders of all returns, recoveries, disputes and claims that involve more than One Hundred Thousand Dollars ($100,000.00) individually or in the aggregate in any calendar year.

6.4 Taxes; Pensions. Timely file and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely file, all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower or its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.8 hereof, and shall deliver to Lenders, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with the terms of such plans.

6.5 Insurance. Keep Borrower’s and its Subsidiaries’ business and the Collateral insured for risks and in amounts standard for companies in Borrower’s and its Subsidiaries’ industry and location and as Collateral Agent may reasonably request . Insurance policies shall be in a form, with companies, and in amounts that are reasonably satisfactory to Collateral Agent and Lenders. All property policies shall have a lender’s loss payable endorsement showing Collateral Agent as lender loss payee and waive subrogation against Collateral Agent, and all liability policies shall show, or have endorsements showing, Collateral Agent as additional insured. The Collateral Agent shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral, and each provider of any such insurance shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to the Collateral Agent, that it will give the Collateral Agent thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled. At Collateral Agent’s request, Borrower shall deliver certified copies of policies and evidence of all

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premium payments. Proceeds payable under any policy shall, at Collateral Agent’s option, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy up to One Hundred Thousand Dollars ($100,000.00) with respect to any loss, but not exceeding One Hundred Thousand Dollars ($100,000.00), in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Collateral Agent has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Collateral Agent, be payable to Collateral Agent, for the ratable benefit of the Lenders, on account of the Obligations. If Borrower or any of its Subsidiaries fails to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons, Collateral Agent and/or any Lender may make, at Borrower’s expense, all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Collateral Agent or such Lender deems prudent.

6.6 Operating Accounts.

(a) Subject to the provisions of subsection (d) below, maintain all of Borrower’s and its Subsidiaries’, domestic Collateral Accounts with a banking institution in accounts which are subject to a Control Agreement in favor of Collateral Agent.

(b) Borrower shall provide Collateral Agent five (5) days’ prior written notice before Borrower or any of its Subsidiaries establishes any Collateral Account at or with any Person other than Silicon Valley Bank. In addition, for each Collateral Account that Borrower or any of its Subsidiaries, at any time maintains, Borrower or such Subsidiary shall cause the applicable bank or financial institution at or with which such Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Collateral Agent’s Lien in such Collateral Account in accordance with the terms hereunder prior to the establishment of such Collateral Account, which Control Agreement may not be terminated without prior written consent of Collateral Agent. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit of Borrower’s, or any of its Subsidiaries’, employees and identified to Collateral Agent by Borrower as such in the Perfection Certificates.

(c) Neither Borrower nor any of its Subsidiaries shall maintain any Collateral Accounts except Collateral Accounts maintained in accordance with Sections 6.6(a) and (b).

(d) Notwithstanding the provisions of subsections (a) - (c) above, Borrower may continue to maintain Collateral Accounts with Bank of America, N.A. and Merrill Lynch & Co., Inc. (that are identified in the Perfection Certificate delivered to the Collateral Agent) for a period of up to ninety (90) days from the Effective Date, by the end of which period, Borrower must (i) either deliver evidence of closure of all such Collateral Accounts to the Collateral Agent in form and substance acceptable to the Collateral Agent or (ii) cause each of Bank of America, N.A. and Merrill Lynch & Co., Inc. to execute and deliver one or more Control Agreements or other appropriate instruments with respect to such Collateral Accounts to perfect Collateral Agent’s Lien in such Collateral Accounts in accordance with the terms hereunder, which Control Agreements may not be terminated without prior written consent of Collateral Agent. Prior to the receipt of such evidence by the Collateral Agent or execution and delivery of such Control Agreements, the aggregate cash balance in the Collateral Accounts maintained at Silicon Valley Bank (that are subject to Control Agreement(s) in favor of the Collateral Agent) shall at all times be not less than aggregate amount of the Term Loans made under this Agreement.

6.7 Protection of Intellectual Property Rights. Borrower and each of its Subsidiaries shall: (a) use commercially reasonable efforts to protect, defend and maintain the validity and enforceability of its Intellectual Property that is material to Borrower’s business; (b) promptly advise Collateral Agent in writing upon Borrower becoming aware of material infringement by a third party of its Intellectual Property; and (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Collateral Agent’s prior written consent.

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6.8 Litigation Cooperation. Commencing on the Effective Date and continuing through the termination of this Agreement, make available to Collateral Agent and the Lenders, without expense to Collateral Agent or the Lenders, Borrower and each of Borrower’s officers, employees and agents and Borrower’s Books, to the extent that Collateral Agent or any Lender may reasonably deem them necessary to prosecute or defend any third-party suit or proceeding instituted by or against Collateral Agent or any Lender with respect to any Collateral or relating to Borrower.

6.9 Notices of Litigation and Default. Borrower will give prompt written notice to Collateral Agent and the Lenders of any litigation or governmental proceedings pending or threatened (in writing) against Borrower or any of its Subsidiaries, which could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand Dollars ($100,000.00) or more or which could reasonably be expected to have a Material Adverse Change. Without limiting or contradicting any other more specific provision of this Agreement, promptly (and in any event within three (3) Business Days) upon Borrower becoming aware of the existence of any Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default, Borrower shall give written notice to Collateral Agent and the Lenders of such occurrence, which such notice shall include a reasonably detailed description of such Event of Default or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default.

6.10 Intentionally Omitted.

6.11 Landlord Waivers; Bailee Waivers. In the event that Borrower or any of its Subsidiaries, after the Effective Date, intends to add any new offices or business locations, including warehouses, or otherwise store any portion of the Collateral with, or deliver any portion of the Collateral to, a bailee, in each case pursuant to Section 7.2, then Borrower or such Subsidiary will first receive the written consent of Collateral Agent and, in the event that the Collateral at any new location is valued in excess of One Hundred Thousand ($100,000.00) in the aggregate, such bailee or landlord, as applicable, must execute and deliver a bailee waiver or landlord waiver, as applicable, in form and substance reasonably satisfactory to Collateral Agent prior to the addition of any new offices or business locations, or any such storage with or delivery to any such bailee, as the case may be.

6.12 Creation/Acquisition of Subsidiaries. In the event Borrower, or any of its Subsidiaries creates or acquires any Subsidiary, Borrower shall provide prior written notice to Collateral Agent and each Lender of the creation or acquisition of such new Subsidiary and take all such action as may be reasonably required by Collateral Agent or any Lender to cause each such Subsidiary to become a co-Borrower hereunder or to guarantee the Obligations of Borrower under the Loan Documents and, in each case, grant a continuing pledge and security interest in and to the assets of such Subsidiary (substantially as described on Exhibit A hereto); and Borrower (or its Subsidiary, as applicable) shall grant and pledge to Collateral Agent, for the ratable benefit of the Lenders, a perfected security interest in the Shares of each such newly created Subsidiary.

6.13 Further Assurances .

(a) Execute any further instruments and take further action as Collateral Agent or any Lender reasonably requests to perfect or continue Collateral Agent’s Lien in the Collateral or to effect the purposes of this Agreement.

(b) Deliver to Collateral Agent and Lenders, within five (5) days after the same are sent or received, copies of all material correspondence, reports, documents and other filings with any Governmental Authority that could reasonably be expected to have a material adverse effect on any of the Governmental Approvals material to Borrower’s business or otherwise could reasonably be expected to have a Material Adverse Change.

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7.	NEGATIVE COVENANTS

Borrower shall not, and shall not permit any of its Subsidiaries to, do any of the following without the prior written consent of the Required Lenders:

7.1 Dispositions. Convey, sell, lease, transfer, assign, dispose of or otherwise make cash payments consisting of (collectively, “ Transfer ”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) consisting of cash payments to trade creditors in the ordinary course of business; (b) of Inventory in the ordinary course of business; (c) of worn-out or obsolete Equipment; (d) in connection with Permitted Liens, Permitted Investments and Permitted Licenses; (e) of all or any of the RXi Shares; and (f) Transfers in addition to those specifically enumerated above, to the extent the same are reflected in the Annual Projections.

7.2 Changes in Business, Management, Ownership, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses engaged in by Borrower as of the Effective Date or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) any Key Person shall cease to be actively engaged in the management of Borrower unless a replacement for such Key Person is approved by Borrower’s Board of Directors and engaged by Borrower within ninety (90) days of such change, or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such transaction own more than forty nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a public offering, a private placement of public equity or to other investors so long as Borrower identifies to Collateral Agent the capital investors prior to the closing of the transaction). Borrower shall not, without at least thirty (30) days’ prior written notice to Collateral Agent: (A) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than One Hundred Thousand Dollars ($100,000.00) in assets or property of Borrower or any of its Subsidiaries); (B) change its jurisdiction of organization, (C) change its organizational structure or type, (D) change its legal name, or (E) change any organizational number (if any) assigned by its jurisdiction of organization.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock, shares or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary (provided such surviving Subsidiary is a “co-Borrower” hereunder or has provided a secured Guaranty of Borrower’s Obligations hereunder) or with (or into) Borrower provided Borrower is the surviving legal entity, and as long as no Event of Default is occurring prior thereto or arises as a result therefrom. Without limiting the foregoing, Borrower shall not, without Collateral Agent’s prior written consent, enter into any binding contractual arrangement with any Person to accomplish a merger or acquisition of Borrower, unless (i) no Event of Default exists when such agreement is entered into by Borrower, (ii) such agreement does not give such Person the right to claim any fees, payments or damages from Borrower, and (iii) Borrower notifies Collateral Agent in advance of entering into such an agreement.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted herein (except for Permitted Liens that are permitted by the terms of this Agreement to have priority over Collateral Agent’s Lien), or enter into any agreement, document, instrument or other arrangement (except with or in favor of Collateral Agent, for the ratable benefit of the Lenders) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower, or any of its Subsidiaries, from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or such Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “ Permitted Liens ” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

7.7 Distributions; Investments. (a) Pay any dividends (other than dividends payable solely in capital stock) or make any distribution or payment in respect of or redeem, retire or purchase any capital stock (other than repurchases pursuant to the terms of employee stock purchase plans, employee restricted stock agreements, stockholder rights plans, director or consultant stock option plans, or similar plans, provided such repurchases do not

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exceed One Hundred Thousand Dollars ($100,000.00) in the aggregate per fiscal year) or (b) directly or indirectly make any Investment other than Permitted Investments, or permit any of its Subsidiaries to do so (other than dividends or distributions payable exclusively to Borrower).

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower or any of its Subsidiaries, except for (a) transactions that are in the ordinary course of Borrower’s or such Subsidiary’s business, upon fair and reasonable terms that are no less favorable to Borrower or such Subsidiary than would be obtained in an arm’s length transaction with a non-affiliated Person, and (b) Subordinated Debt or equity investments by Borrower’s investors in Borrower or its Subsidiaries.

7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to the Lenders.

7.10 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a Material Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower or any of its Subsidiaries, including any such liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Authority.

7.11 Compliance with Anti-Terrorism Laws. Collateral Agent hereby notifies Borrower and each of its Subsidiaries that pursuant to the requirements of Anti-Terrorism Laws, and Collateral Agent’s policies and practices, Collateral Agent is required to obtain, verify and record certain information and documentation that identifies Borrower and each of its Subsidiaries and their principals, which information includes the name and address of Borrower and each of its Subsidiaries and their principals and such other information that will allow Collateral Agent to identify such party in accordance with Anti-Terrorism Laws. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Borrower and each of its Subsidiaries shall immediately notify Collateral Agent if Borrower or such Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

8.	EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “ Event of Default ”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension by its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day grace period shall not apply to payments due on the Maturity Date or the date of acceleration pursuant to Section 9.1 (a) hereof). During the cure period, the failure to cure the payment default is not an Event of Default (but no Credit Extension will be made during the cure period);

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8.2 Covenant Default.

(a) Borrower or any of its Subsidiaries fails or neglects to perform any obligation in Sections 6.2 (Financial Statements, Reports, Certificates), 6.4 (Taxes), 6.5 (Insurance), 6.6 (Operating Accounts), 6.7 (Protection of Intellectual Property Rights), 6.9 (Notice of Litigation and Default), 6.11 (Landlord Waivers; Bailee Waivers), 6.12 (Creation/Acquisition of Subsidiaries) or 6.13 (Further Assurances) or Borrower violates any covenant in Section 7; or

(b) Borrower, or any of its Subsidiaries, fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Grace periods provided under this Section shall not apply, among other things, to financial covenants or any other covenants set forth in subsection (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or any of its Subsidiaries or of any entity under control of Borrower or its Subsidiaries on deposit with any Lender or any Lender’s Affiliate or any bank or other institution at which Borrower or any of its Subsidiaries maintains a Collateral Account, or (ii) a notice of lien, levy, or assessment is filed against Borrower or any of its Subsidiaries or their respective assets by any government agency, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; and

(b) (i) any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower or any of its Subsidiaries from conducting any part of its business;

8.5 Insolvency. (a) Borrower or any of its Subsidiaries is or becomes Insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and not dismissed or stayed within forty-five (45) days (but no Credit Extensions shall be made while Borrower or any Subsidiary is Insolvent and/or until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is a default in any agreement to which Borrower or any of its Subsidiaries is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of Two Hundred And Fifty Thousand Dollars ($250,000.00) or that could reasonably be expected to have a Material Adverse Change;

8.7 Judgments. One or more judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least One Hundred Thousand Dollars ($100,000.00) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower or any of its Subsidiaries and shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days after the entry thereof (provided that no Credit Extensions will be made prior to the satisfaction, vacation, or stay of such judgment, order or decree);

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8.8 Misrepresentations. Borrower or any of its Subsidiaries or any Person acting for Borrower or any of its Subsidiaries makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Collateral Agent and/or Lenders or to induce Collateral Agent and/or the Lenders to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

8.9 Subordinated Debt. A default or breach occurs under any agreement between Borrower or any of its Subsidiaries and any creditor of Borrower or any of its Subsidiaries that signed a subordination, intercreditor, or other similar agreement with Collateral Agent or the Lenders, or any creditor that has signed such an agreement with Collateral Agent or the Lenders breaches any terms of such agreement;

8.10 Guaranty . (a) Any Guaranty terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any Guaranty; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor, or (d) the death (of any individual Guarantor) or liquidation, winding up, or termination of existence of any Guarantor that is an entity;

8.11 Governmental Approvals. Any Governmental Approval shall have been revoked, rescinded, suspended, modified in an adverse manner, or not renewed in the ordinary course for a full term and such revocation, rescission, suspension, modification or non-renewal has resulted in or could reasonably be expected to result in a Material Adverse Change; or

8.12 Lien Priority . Any Lien created hereunder or by any other Loan Document shall at any time fail to constitute a valid and perfected Lien on any of the Collateral purported to be secured thereby, subject to no prior or equal Lien, other than Permitted Liens which are permitted to have priority in accordance with the terms of this Agreement.

9.	RIGHTS AND REMEDIES

9.1 Rights and Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default, Collateral Agent may, and at the written direction of Required Lenders shall, without notice or demand, do any or all of the following: (i) deliver notice of the Event of Default to Borrower, (ii) by notice to Borrower declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations shall be immediately due and payable without any action by Collateral Agent or the Lenders) or (iii) by notice to Borrower suspend or terminate the obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders (but if an Event of Default described in Section 8.5 occurs all obligations, if any, of the Lenders to advance money or extend credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Collateral Agent and/or the Lenders shall be immediately terminated without any action by Collateral Agent or the Lenders).

(b) Without limiting the rights of Collateral Agent and the Lenders set forth in Section 9.1(a) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right at the written direction of the Required Lenders , without notice or demand, to do any or all of the following:

(i) foreclose upon and/or sell or otherwise liquidate, the Collateral;

(ii) apply to the Obligations any (a) balances and deposits of Borrower that Collateral Agent or any Lender holds or controls, or (b) any amount held or controlled by Collateral Agent or any Lender owing to or for the credit or the account of Borrower; and/or

(iii) commence and prosecute an Insolvency Proceeding or consent to Borrower commencing any Insolvency Proceeding.

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(c) Without limiting the rights of Collateral Agent and the Lenders set forth in Sections 9.1(a) and (b) above, upon the occurrence and during the continuance of an Event of Default, Collateral Agent shall have the right, without notice or demand, to do any or all of the following:

(i) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Collateral Agent considers advisable, notify any Person owing Borrower money of Collateral Agent’s security interest in such funds, and verify the amount of such account;

(ii) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Collateral Agent requests and make it available in a location as Collateral Agent reasonably designates. Collateral Agent may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Collateral Agent a license to enter and occupy any of its premises, without charge, to exercise any of Collateral Agent’s rights or remedies;

(iii) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, and/or advertise for sale, the Collateral. Collateral Agent is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s and each of its Subsidiaries’ labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Collateral Agent’s exercise of its rights under this Section 9.1, Borrower’s and each of its Subsidiaries’ rights under all licenses and all franchise agreements inure to Collateral Agent, for the benefit of the Lenders;

(iv) place a “hold” on any account maintained with Collateral Agent or the Lenders and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

(v) demand and receive possession of Borrower’s Books;

(vi) appoint a receiver to seize, manage and realize any of the Collateral, and such receiver shall have any right and authority as any competent court will grant or authorize in accordance with any applicable law, including any power or authority to manage the business of Borrower or any of its Subsidiaries; and

(vii) subject to clauses 9.1(a) and (b), exercise all rights and remedies available to Collateral Agent and each Lender under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

Notwithstanding any provision of this Section 9.1 to the contrary, upon the occurrence of any Event of Default, Collateral Agent shall have the right to exercise any and all remedies referenced in this Section 9.1 without the written consent of Required Lenders following the occurrence of an Exigent Circumstance. As used in the immediately preceding sentence, “ Exigent Circumstance ” means any event or circumstance that, in the reasonable judgment of Collateral Agent, imminently threatens the ability of Collateral Agent to realize upon all or any material portion of the Collateral, such as, without limitation, fraudulent removal, concealment, or abscondment thereof, destruction or material waste thereof, or failure of Borrower or any of its Subsidiaries after reasonable demand to maintain or reinstate adequate casualty insurance coverage, or which, in the judgment of Collateral Agent, could reasonably be expected to result in a material diminution in value of the Collateral.

9.2 Power of Attorney. Borrower hereby irrevocably appoints Collateral Agent as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s or any of its Subsidiaries’ name on any checks or other forms of payment or security; (b) sign

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Borrower’s or any of its Subsidiaries’ name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Collateral Agent determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Collateral Agent or a third party as the Code or any applicable law permits. Borrower hereby appoints Collateral Agent as its lawful attorney-in-fact to sign Borrower’s or any of its Subsidiaries’ name on any documents necessary to perfect or continue the perfection of Collateral Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations (other than inchoate indemnity obligations) have been satisfied in full and Collateral Agent and the Lenders are under no further obligation to make Credit Extensions hereunder. Collateral Agent’s foregoing appointment as Borrower’s or any of its Subsidiaries’ attorney in fact, and all of Collateral Agent’s rights and powers, coupled with an interest, are irrevocable until all Obligations (other than inchoate indemnity obligations) have been fully repaid and performed and Collateral Agent’s and the Lenders’ obligation to provide Credit Extensions terminates.

9.3 Protective Payments. If Borrower or any of its Subsidiaries fail to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower or any of its Subsidiaries is obligated to pay under this Agreement or any other Loan Document, Collateral Agent may obtain such insurance or make such payment, and all amounts so paid by Collateral Agent are Lenders’ Expenses and immediately due and payable, bearing interest at the Default Rate, and secured by the Collateral. Collateral Agent will make reasonable efforts to provide Borrower with notice of Collateral Agent obtaining such insurance or making such payment at the time it is obtained or paid or within a reasonable time thereafter. No such payments by Collateral Agent are deemed an agreement to make similar payments in the future or Collateral Agent’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds. Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, (a) Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Collateral Agent from or on behalf of Borrower or any of its Subsidiaries of all or any part of the Obligations, and, as between Borrower on the one hand and Collateral Agent and Lenders on the other, Collateral Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against the Obligations in such manner as Collateral Agent may deem advisable notwithstanding any previous application by Collateral Agent, and (b) the proceeds of any sale of, or other realization upon all or any part of the Collateral shall be applied: first, to the Lenders’ Expenses; second, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the United States Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of the Obligations outstanding; and fourth, to any other indebtedness or obligations of Borrower owing to Collateral Agent or any Lender under the Loan Documents. Any balance remaining shall be delivered to Borrower or to whoever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (x) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (y) each of the Persons entitled to receive a payment in any particular category shall receive an amount equal to its pro rata share of amounts available to be applied pursuant thereto for such category. Any reference in this Agreement to an allocation between or sharing by the Lenders of any right, interest or obligation “ratably,” “proportionally” or in similar terms shall refer to Pro Rata Share unless expressly provided otherwise. Collateral Agent, or if applicable, each Lender, shall promptly remit to the other Lenders such sums as may be necessary to ensure the ratable repayment of each Lender’s portion of any Term Loan and the ratable distribution of interest, fees and reimbursements paid or made by Borrower. Notwithstanding the foregoing, a Lender receiving a scheduled payment shall not be responsible for determining whether the other Lenders also received their scheduled payment on such date; provided, however, if it is later determined that a Lender received more than its ratable share of scheduled payments made on any date or dates, then such Lender shall remit to Collateral Agent or other Lenders such sums as may be necessary to ensure the ratable payment of such scheduled payments, as instructed by Collateral Agent. If any payment or distribution of any kind or character, whether in cash, properties or securities, shall be received by a Lender in excess of its ratable share, then the portion of such payment or distribution in excess of such Lender’s ratable share shall be received by such Lender in trust for and shall be promptly paid over to the other Lender for application to the payments of amounts due on the other Lenders’ claims. To the extent any payment for the account of Borrower is required to be returned

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as a voidable transfer or otherwise, the Lenders shall contribute to one another as is necessary to ensure that such return of payment is on a pro rata basis. If any Lender shall obtain possession of any Collateral, it shall hold such Collateral for itself and as agent and bailee for Collateral Agent and other Lenders for purposes of perfecting Collateral Agent’s security interest therein.

9.5 Liability for Collateral. So long as Collateral Agent and the Lenders comply with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Collateral Agent and the Lenders, Collateral Agent and the Lenders shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Failure by Collateral Agent or any Lender, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Collateral Agent or any Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Collateral Agent and the Required Lenders and then is only effective for the specific instance and purpose for which it is given. The rights and remedies of Collateral Agent and the Lenders under this Agreement and the other Loan Documents are cumulative. Collateral Agent and the Lenders have all rights and remedies provided under the Code, any applicable law, by law, or in equity. The exercise by Collateral Agent or any Lender of one right or remedy is not an election, and Collateral Agent’s or any Lender’s waiver of any Event of Default is not a continuing waiver. Collateral Agent’s or any Lender’s delay in exercising any remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver. Borrower waives, to the fullest extent permitted by law, demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Collateral Agent or any Lender on which Borrower or any Subsidiary is liable.

10.

NOTICES

All notices, consents, requests, approvals, demands, or other communication (collectively, “ Communication ”) by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Any of Collateral Agent, Lender or Borrower may change its mailing address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.


If to Borrower:		GALENA BIOPHARMA, INC. 310 N. State Street, Suite 208 Lake Oswego, OR 97034 Attn: Ryan M. Dunlap Fax: (503) 400-6611 Email: rdunlap@galenabiopharma.com

with a copy (which shall not constitute notice) to:		TROYGOULD PC 1801 Century Park East, Suite 1600 Los Angeles, CA 90067 Attn: Dale E. Short Fax: (310) 789-1459 Email: dshort@troygould.com

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If to Collateral Agent:		OXFORD FINANCE LLC 133 North Fairfax Street Alexandria, Virginia 22314 Attention: Legal Department Fax: (703) 519-5225 Email: LegalDepartment@oxfordfinance.com

with a copy (which shall not constitute notice) to:		Greenberg Traurig, LLP One International Place Boston, MA 021110 Attn: Jonathan Bell Fax: (617) 310-6001 bellj@gtlaw.com

11.

CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

California law governs the Loan Documents without regard to principles of conflicts of law. Borrower, Collateral Agent and each Lender each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Collateral Agent or any Lender from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Collateral Agent or any Lender. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, COLLATERAL AGENT AND EACH LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The

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parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

12.

GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not transfer, pledge or assign this Agreement or any rights or obligations under it without Collateral Agent’s and each Lender’s prior written consent (which may be granted or withheld in Collateral Agent’s and each Lender’s discretion, subject to Section 12.6). The Lenders have the right, without the consent of or notice to Borrower, to sell, transfer, assign, pledge, negotiate, or grant participation in (any such sale, transfer, assignment, negotiation , or grant of a participation, a “Lender Transfer”) all or any part of, or any interest in, the Lenders’ obligations, rights, and benefits under this Agreement and the other Loan Documents; provided , however , that any such Lender Transfer (other than a transfer, pledge, sale or assignment to an Eligible Assignee) of its obligations, rights, and benefits under this Agreement and the other Loan Documents shall require the prior written consent of the Required Lenders (such approved assignee, an “ Approved Lender ”) . Borrower and Collateral Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned until Collateral Agent shall have received and accepted an effective assignment agreement in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee or Approved Lender as Collateral Agent reasonably shall require. Notwithstanding anything to the contrary contained herein, so long as no Event of Default has occurred and is continuing, no Lender Transfer (other than a Lender Transfer (i) in respect of the Warrants or (ii) in connection with (x) assignments by a Lender due to a forced divestiture at the request of any regulatory agency; or (y) upon the occurrence of a default, event of default or similar occurrence with respect to a Lender’s own financing or securitization transactions) shall be permitted, without Borrower’s consent, to any Person which is an Affiliate or Subsidiary of Borrower, a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Collateral Agent and the Lenders and their respective directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Collateral Agent or the Lenders (each, an “ Indemnified Person ”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively, “ Claims ”) asserted by any other party in connection with, related to, following, or arising from, out of or under, the transactions contemplated by the Loan Documents; and (b) all losses or Lenders’ Expenses incurred, or paid by Indemnified Person in connection with, related to, following, or arising from, out of or under, the transactions contemplated by the Loan Documents between Collateral Agent, and/or the Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct. Borrower hereby further indemnifies, defends and holds each Indemnified Person harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including the fees and disbursements of counsel for such Indemnified Person) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or not such Indemnified Person shall be designated a party thereto and including any such proceeding initiated by or on behalf of Borrower, and the reasonable expenses of investigation by engineers, environmental consultants and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Collateral Agent or Lenders) asserting any right to payment for the transactions contemplated hereby which may be imposed on, incurred by or asserted against such Indemnified Person as a result of or in connection with the transactions contemplated hereby and the use or intended use of the proceeds of the loan proceeds except for liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements directly caused by such Indemnified Person’s gross negligence or willful misconduct.

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12.3 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

12.5 Correction of Loan Documents. Collateral Agent and the Lenders may correct patent errors and fill in any blanks in this Agreement and the other Loan Documents consistent with the agreement of the parties.

12.6 Amendments in Writing; Integration. (a) No amendment, modification, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, or any consent to any departure by Borrower or any of its Subsidiaries therefrom, shall in any event be effective unless the same shall be in writing and signed by Borrower, Collateral Agent and the Required Lenders provided that:

(i) no such amendment, waiver or other modification that would have the effect of increasing or reducing a Lender’s Term Loan Commitment or Commitment Percentage shall be effective as to such Lender without such Lender’s written consent;

(ii) no such amendment, waiver or modification that would affect the rights and duties of Collateral Agent shall be effective without Collateral Agent’s written consent or signature;

(iii) no such amendment, waiver or other modification shall, unless signed by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Term Loan or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Term Loan (B) postpone the date fixed for, or waive, any payment of principal of any Term Loan or of interest on any Term Loan (other than default interest) or any fees provided for hereunder (other than late charges or for any termination of any commitment); (C) change the definition of the term “ Required Lenders ” or the percentage of Lenders which shall be required for the Lenders to take any action hereunder; (D) release all or substantially all of any material portion of the Collateral, authorize Borrower to sell or otherwise dispose of all or substantially all or any material portion of the Collateral or release any Guarantor of all or any portion of the Obligations or its guaranty obligations with respect thereto, except, in each case with respect to this clause (D), as otherwise may be expressly permitted under this Agreement or the other Loan Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise modify this Section 12.6 or the definitions of the terms used in this Section 12.6 insofar as the definitions affect the substance of this Section 12.6; (F) consent to the assignment, delegation or other transfer by Borrower of any of its rights and obligations under any Loan Document or release Borrower of its payment obligations under any Loan Document, except, in each case with respect to this clause (F), pursuant to a merger or consolidation permitted pursuant to this Agreement; (G) amend any of the provisions of Section 9.4 or amend any of the definitions of Pro Rata Share, Term Loan Commitment, Commitment Percentage or that provide for the Lenders to receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder; (H) subordinate the Liens granted in favor of Collateral Agent securing the Obligations; or (I) amend any of the provisions of Section 12.10. It is hereby understood and agreed that all Lenders shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F), (G) and (H) of the preceding sentence;

(iv) the provisions of the foregoing clauses (i), (ii) and (iii) are subject to the provisions of any interlender or agency agreement among the Lenders and Collateral Agent pursuant to which any Lender may agree to give its consent in connection with any amendment, waiver or modification of the Loan Documents only in the event of the unanimous agreement of all Lenders.

(b) Other than as expressly provided for in Section 12.6(a)(i)-(iii), Collateral Agent may, if requested by the Required Lenders, from time to time designate covenants in this Agreement less restrictive by notification to a representative of Borrower.

(c) This Agreement and the Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement and the Loan Documents merge into this Agreement and the Loan Documents.

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12.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

12.8 Survival. All covenants, representations and warranties made in this Agreement continue in full force and effect until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been satisfied. The obligation of Borrower in Section 12.2 to indemnify each Lender and Collateral Agent, as well as the confidentiality provisions in Section 12.9 below, shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

12.9 Confidentiality. In handling any confidential information of Borrower, the Lenders and Collateral Agent shall exercise the same degree of care that it exercises for their own proprietary information, but disclosure of information may be made: (a) subject to the terms and conditions of this Agreement, to the Lenders’ and Collateral Agent’s Subsidiaries or Affiliates, or in connection with a Lender’s own financing or securitization transactions and upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; (b) to prospective transferees (other than those identified in (a) above) or purchasers of any interest in the Credit Extensions (provided, however, the Lenders and Collateral Agent shall, except upon the occurrence and during the continuance of an Event of Default, obtain such prospective transferee’s or purchaser’s agreement to the terms of this provision or to similar confidentiality terms); (c) as required by law, regulation, subpoena, or other order; (d) to Lenders’ or Collateral Agent’s regulators or as otherwise required in connection with an examination or audit; (e) as Collateral Agent reasonably considers appropriate in exercising remedies under the Loan Documents; and (f) to third party service providers of the Lenders and/or Collateral Agent so long as such service providers have executed a confidentiality agreement with the Lenders and Collateral Agent with terms no less restrictive than those contained herein. Confidential information does not include information that either: (i) is in the public domain or in the Lenders’ and/or Collateral Agent’s possession when disclosed to the Lenders and/or Collateral Agent, or becomes part of the public domain after disclosure to the Lenders and/or Collateral Agent; or (ii) is disclosed to the Lenders and/or Collateral Agent by a third party, if the Lenders and/or Collateral Agent does not know that the third party is prohibited from disclosing the information. Collateral Agent and the Lenders may use confidential information for any purpose, including, without limitation, for the development of client databases, reporting purposes, and market analysis. The provisions of the immediately preceding sentence shall survive the termination of this Agreement. The agreements provided under this Section 12.9 supersede all prior agreements, understanding, representations, warranties, and negotiations between the parties about the subject matter of this Section 12.9.

12.10 Right of Set Off. Borrower hereby grants to Collateral Agent and to each Lender, a lien, security interest and right of set off as security for all Obligations to Collateral Agent and each Lender hereunder, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Collateral Agent or the Lenders or any entity under the control of Collateral Agent or the Lenders (including a Collateral Agent affiliate) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Collateral Agent or the Lenders may set off the same or any part thereof and apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE COLLATERAL AGENT TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.11 Cooperation of Borrower. If necessary, Borrower agrees to (i) execute any documents (including new Secured Promissory Notes) reasonably required to effectuate and acknowledge each assignment of a Term Loan Commitment or Loan to an assignee in accordance with Section 12.1, (ii) make Borrower’s management available to meet at Borrower’s principal office with Collateral Agent and prospective participants and assignees of Term Loan Commitments or Credit Extensions (which meetings shall be conducted no more often than twice every

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twelve months unless an Event of Default has occurred and is continuing), and (iii) assist Collateral Agent or the Lenders in the preparation of information relating to the financial affairs of Borrower as any prospective participant or assignee of a Term Loan Commitment or Term Loan reasonably may request. Subject to the provisions of Section 12.9, Borrower authorizes each Lender to disclose to any prospective participant or assignee of a Term Loan Commitment, any and all information in such Lender’s possession concerning Borrower and its financial affairs which has been delivered to such Lender by or on behalf of Borrower pursuant to this Agreement, or which has been delivered to such Lender by or on behalf of Borrower in connection with such Lender’s credit evaluation of Borrower prior to entering into this Agreement.

12.12 Borrower Liability . Either Borrower may, acting singly, request Credit Extensions hereunder. Each Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Credit Extensions hereunder. Each Borrower hereunder shall be jointly and severally obligated to repay all Credit Extensions made hereunder, regardless of which Borrower actually receives said Credit Extension, as if each Borrower hereunder directly received all Credit Extensions. Each Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Collateral Agent or any Lender to: (i) proceed against any Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Collateral Agent and or any Lender may exercise or not exercise any right or remedy it has against any Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability. Notwithstanding any other provision of this Agreement or other related document, each Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Collateral Agent and the Lenders under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section shall be null and void. If any payment is made to a Borrower in contravention of this Section, such Borrower shall hold such payment in trust for Collateral Agent and the Lenders and such payment shall be promptly delivered to Collateral Agent for application to the Obligations, whether matured or unmatured.

13.

DEFINITIONS

13.1 Definitions. As used in this Agreement, the following terms have the following meanings:

“ Account ” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.

“ Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

“ Affiliate ” of any Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

“ Agreement ” is defined in the preamble hereof.

“ Amortization Date ” is July 1, 2014.

“ Annual Projections ” is defined in Section 6.2(a).

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“ Anti-Terrorism Laws ” are any laws relating to terrorism or money laundering, including Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

“ Approved Fund ” is any (i) investment company, fund, trust, securitization vehicle or conduit that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business or (ii) any Person (other than a natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (i) and that, with respect to each of the preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) a Person (other than a natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.

“ Approved Lender ” is defined in Section 12.1.

“ Basic Rate ” is, with respect to a Term Loan, the per annum rate of interest (based on a year of three hundred sixty (360) days) equal to the greater of (i) Eight and Forty-Five Hundredth percent (8.45%) and (ii) the sum of (a) the three (3) month U.S. LIBOR rate reported in the Wall Street Journal three (3) Business Days prior to the Funding Date of such Term Loan, plus (b) Eight and Seventeen Hundredth percent (8.17%).

“ Blocked Person ” is any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

“ Borrower ” is defined in the preamble hereof.

“ Borrower’s Books ” are Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, and state tax returns, records regarding Borrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

“ Business Day ” is any day that is not a Saturday, Sunday or a day on which Collateral Agent is closed.

“ Cash Equivalents ” are (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c) certificates of deposit maturing no more than one (1) year after issue provided that the account in which any such certificate of deposit is maintained is subject to a Control Agreement in favor of Collateral Agent. For the avoidance of doubt, the direct purchase by Borrower or any of its Subsidiaries of any Auction Rate Securities, or purchasing participations in, or entering into any type of swap or other derivative transaction, or otherwise holding or engaging in any ownership interest in any type of Auction Rate Security by Borrower or any of its Subsidiaries shall be conclusively determined by the Lenders as an ineligible Cash Equivalent, and any such transaction shall expressly violate each other provision of this Agreement governing Permitted Investments. Notwithstanding the foregoing, Cash Equivalents does not include and Borrower, and each of its Subsidiaries, are prohibited from purchasing, purchasing participations in, entering into any type of swap or other equivalent derivative transaction, or otherwise holding or engaging in any ownership interest in any type of debt instrument, including, without limitation, any corporate or municipal bonds with a long-term nominal maturity for which the interest rate is reset through a dutch auction and more commonly referred to as an auction rate security (each, an “ Auction Rate Security ”).

“ Claims ” are defined in Section 12.2.

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“ Code ” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Collateral Agent’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

“ Collateral ” is any and all properties, rights and assets of Borrower described on Exhibit A .

“ Collateral Account ” is any Deposit Account, Securities Account, or Commodity Account, or any other bank account maintained by Borrower or any Subsidiary at any time.

“ Collateral Agent ” is, Oxford, not in its individual capacity, but solely in its capacity as agent on behalf of and for the benefit of the Lenders.

“ Commitment Percentage ” is set forth in Schedule 1.1 , as amended from time to time.

“ Commodity Account ” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

“ Communication ” is defined in Section 10.

“ Compliance Certificate ” is that certain certificate in the form attached hereto as Exhibit C .

“ Contingent Obligation ” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

“ Control Agreement ” is any control agreement entered into among the depository institution at which Borrower or any of its Subsidiaries maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower or any of its Subsidiaries maintains a Securities Account or a Commodity Account, Borrower and such Subsidiary, and Collateral Agent pursuant to which Collateral Agent obtains control (within the meaning of the Code) for the benefit of the Lenders over such Deposit Account, Securities Account, or Commodity Account.

“ Copyrights ” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

“ Credit Extension ” is any Term Loan or any other extension of credit by Collateral Agent or Lenders for Borrower’s benefit.

“ Default Rate ” is defined in Section 2.3(b).

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“ Deposit Account ” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

“ Designated Deposit Account ” is Borrower’s deposit account, account number 3300975820, maintained with Silicon Valley Bank, at its branch located at 3003 Tasman Drive, Santa Clara, CA 95054.

“ Disbursement Letter ” is that certain form attached hereto as Exhibit B.

“ Dollars , ” “ dollars ” and “$” each mean lawful money of the United States.

“ DSMB ” means Data Safety Monitoring Board.

“ DSMB Report ” means the written report of the DSMB with respect to Borrower’s PRESENT Trial, which report shall be delivered to Borrower in accordance with the PRESENT Trial protocol following the DSMB interim analysis, which is expected to occur after seventy reoccurrences of cancer events.

“ Effective Date ” is defined in the preamble of this Agreement.

“ Eligible Assignee ” is (i) a Lender, (ii) an Affiliate of a Lender, (iii) an Approved Fund and (iv) any commercial bank, savings and loan association or savings bank or any other entity which is an “accredited investor” (as defined in Regulation D under the Securities Act of 1933, as amended) and which extends credit or buys loans as one of its businesses, including insurance companies, mutual funds, lease financing companies and commercial finance companies, in each case, which either (A) has a rating of BBB or higher from Standard & Poor’s Rating Group and a rating of Baa2 or higher from Moody’s Investors Service, Inc. at the date that it becomes a Lender or (B) has total assets in excess of Five Billion Dollars ($5,000,000,000.00), and in each case of clauses (i) through (iv), which, through its applicable lending office, is capable of lending to Borrower without the imposition of any withholding or similar taxes; provided that notwithstanding the foregoing, “Eligible Assignee” shall not include, unless an Event of Default has occurred and is continuing, (i) Borrower or any of Borrower’s Affiliates or Subsidiaries or (ii) a direct competitor of Borrower or a vulture hedge fund, each as determined by Collateral Agent. Notwithstanding the foregoing, (x) in connection with assignments by a Lender due to a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Eligible Assignee shall mean any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Collateral Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Collateral Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such Eligible Assignee as Collateral Agent reasonably shall require.

“ Equipment ” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

“ Equity Event ” is the receipt by Borrower on or after the Effective Date of unrestricted net cash proceeds of not less than Twenty Million Dollars ($20,000,000) from (i) the issuance and sale by Borrower of its unsecured subordinated convertible debt and/or equity securities or (ii) an upfront payment from the consummation of a partnership, joint venture, collaboration or a similar transaction by Borrower.

“ ERISA ” is the Employee Retirement Income Security Act of 1974, as amended, and its regulations.

“ Event of Default ” is defined in Section 8.

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“ Final Payment ” is a payment (in addition to and not a substitution for the regular monthly payments of principal plus accrued interest) due on the earliest to occur of (a) the Maturity Date, or (b) the acceleration of any Term Loan, or (c) the prepayment of a Term Loan pursuant to Section 2.2(c) or (d), equal to the original principal amount of such Term Loan multiplied by the Final Payment Percentage, payable to Lenders in accordance with their respective Pro Rata Shares.

“ Final Payment Percentage ” is Five and One-Half percent (5.50%).

“ Foreign Subsidiary ” is a Subsidiary that is not an entity organized under the laws of the United States or any territory thereof.

“ Funding Date ” is any date on which a Credit Extension is made to or on account of Borrower which shall be a Business Day.

“ GAAP ” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession in the United States, which are applicable to the circumstances as of the date of determination.

“ General Intangibles ” are all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work, whether published or unpublished, any patents, trademarks, service marks and, to the extent permitted under applicable law, any applications therefor, whether registered or not, any trade secret rights, including any rights to unpatented inventions, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income and other tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

“ Governmental Approval ” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

“ Governmental Authority ” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

“ Guarantor ” is any Person providing a Guaranty in favor of Collateral Agent.

“ Guaranty ” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.

“ Indebtedness ” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

“ Indemnified Person ” is defined in Section 12.2.

“ Insolvency Proceeding ” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

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“ Insolvent ” means not Solvent.

“ Intellectual Property ” means all of Borrower’s or any Subsidiary’s right, title and interest in and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

(d) any and all design rights which may be available to Borrower;

(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.

“ Inventory ” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of any Person’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

“ Investment ” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance, payment or capital contribution to any Person.

“ Key Person ” is each of Borrower’s (i) Chief Executive Officer, who is Mark J. Ahn as of the Effective Date, and (ii) Chief Medical Officer, who is Rosemary Mazanet as of the Effective Date.

“ Lender ” is any one of the Lenders.

“ Lenders ” are the Persons identified on Schedule 1.1 hereto and each assignee that becomes a party to this Agreement pursuant to Section 12.1.

“ Lenders’ Expenses ” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses, as well as appraisal fees, fees incurred on account of lien searches, inspection fees, and filing fees) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred by Collateral Agent and/or the Lenders in connection with the Loan Documents.

“ Lien ” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest, or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

“ Loan Documents ” are, collectively, this Agreement, the Warrants, the Perfection Certificates, each Compliance Certificate, each Disbursement Letter, the Post Closing Letter, any subordination agreements, any note, or notes or guaranties executed by Borrower or any other Person, and any other present or future agreement entered into by Borrower, any Guarantor or any other Person for the benefit of the Lenders and Collateral Agent in connection with this Agreement; all as amended, restated, or otherwise modified.

“ Material Adverse Change ” is (a) a material impairment in the perfection or priority of Collateral Agent’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower or any Subsidiary; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

Execution Version

“ Maturity Date ” is, for each Term Loan, the date which is twenty-nine (29) months after the Amortization Date with respect to such Term Loan.

“ Obligations ” are all of Borrower’s obligations to pay when due any debts, principal, interest, Lenders’ Expenses, the Prepayment Fee, the Final Payment, and other amounts Borrower owes the Lenders now or later, in connection with, related to, following, or arising from, out of or under, this Agreement or, the other Loan Documents (other than the Warrants), or otherwise, and including interest accruing after Insolvency Proceedings begin (whether or not allowed) and debts, liabilities, or obligations of Borrower assigned to the Lenders and/or Collateral Agent, and the performance of Borrower’s duties under the Loan Documents (other than the Warrants).

“ OFAC ” is the U.S. Department of Treasury Office of Foreign Assets Control.

“ OFAC Lists ” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

“ Operating Documents ” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

“ Parent ” is defined in the preamble hereof.

“ Patents ” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

“ Payment Date ” is the first (1 ^st ) calendar day of each calendar month, commencing on July 1, 2013.

“ Perfection Certificate ” and “ Perfection Certificates ” is defined in Section 5.1.

“ Permitted Indebtedness ” is:

(a) Borrower’s Indebtedness to the Lenders and Collateral Agent under this Agreement and the other Loan Documents;

(b) Indebtedness existing on the Effective Date and disclosed on the Perfection Certificate(s);

(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

(e) Indebtedness consisting of capitalized lease obligations and purchase money Indebtedness, in each case incurred by Borrower or any of its Subsidiaries to finance the acquisition, repair, improvement or construction of fixed or capital assets of such person, provided that (i) the aggregate outstanding principal amount of all such Indebtedness does not exceed One Hundred Thousand Dollars ($100,000.00) at any time and (ii) the principal amount of such Indebtedness does not exceed the lower of the cost or fair market value of the property so acquired or built or of such repairs or improvements financed with such Indebtedness (each measured at the time of such acquisition, repair, improvement or construction is made);

Execution Version

(f) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of Borrower’s business; and

(g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower, or its Subsidiary, as the case may be.

“ Permitted Investments ” are:

(h) Investments disclosed on the Perfection Certificate(s) and existing on the Effective Date;

(i) (i) Investments consisting of cash and Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, as amended from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Collateral Agent;

(j) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

(k) Investments consisting of Deposit Accounts in which Collateral Agent has a perfected security interest;

(l) Investments in connection with Transfers permitted by Section 7.1;

(m) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate for (i) and (ii) in any fiscal year;

(n) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

(o) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary; and

(p) non-cash Investments in joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support.

“ Permitted Licenses ” are (A) licenses of over-the-counter software that is commercially available to the public, and (B) non-exclusive and exclusive licenses for the use of the Intellectual Property of Borrower or any of its Subsidiaries entered into in the ordinary course of business, provided , that, with respect to each such license described in clause (B), (i) no Event of Default has occurred or is continuing at the time of such license; (ii) the license constitutes an arms-length transaction, the terms of which, on their face, do not provide for a sale or assignment of any Intellectual Property and do not restrict the ability of Borrower or any of its Subsidiaries, as applicable, to pledge, grant a security interest in or lien on, or assign or otherwise Transfer any Intellectual Property; (iii) in the case of any exclusive license, (x) Borrower delivers twenty (20) days’ prior written notice and a brief summary of the terms of the proposed license to Collateral Agent and the Lenders and delivers to Collateral Agent and the Lenders copies of the final executed licensing documents in connection with the exclusive license promptly upon consummation thereof, (y) any such license is made in connection with a bona fide corporate collaboration or partnership, and is approved by Borrower’s (or the applicable Subsidiary’s) board of directors, and (z) any such license could not result in a legal transfer of title of the licensed property but may be exclusive in respects other than

Execution Version

territory and may be exclusive as to territory only as to discrete geographical areas outside of the United States; and (iv) all upfront payments, royalties, milestone payments or other proceeds arising from the licensing agreement that are payable to Borrower or any of its Subsidiaries are paid to a Deposit Account that is governed by a Control Agreement.

“ Permitted Liens ” are:

(q) Liens existing on the Effective Date and disclosed on the Perfection Certificates or arising under this Agreement and the other Loan Documents;

(r) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

(s) liens securing Indebtedness permitted under clause (e) of the definition of “ Permitted Indebtedness ,” provided that (i) such liens exist prior to the acquisition of, or attach substantially simultaneous with, or within twenty (20) days after the, acquisition, lease, repair, improvement or construction of, such property financed or leased by such Indebtedness and (ii) such liens do not extend to any property of Borrower other than the property (and proceeds thereof) acquired, leased or built, or the improvements or repairs, financed by such Indebtedness;

(t) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory or tangible personal property or fixtures, securing liabilities in the aggregate amount not to exceed Twenty Five Thousand Dollars ($25,000.00), and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

(u) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

(v) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

(w) leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Collateral Agent or any Lender a security interest therein;

(x) banker’s liens, rights of setoff and Liens in favor of financial institutions incurred in the ordinary course of business arising in connection with Borrower’s deposit accounts or securities accounts held at such institutions solely to secure payment of fees and similar costs and expenses and provided such accounts are maintained in compliance with Section 6.6(b) hereof;

(y) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.4 or 8.7; and

(z) Liens consisting of Permitted Licenses.

Execution Version

“ Person ” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

“ Post Closing Letter ” is that certain Post Closing Letter dated as of the Effective Date by and among Collateral Agent, the Lenders and Borrower.

“ Prepayment Fee ” is, with respect to any Term Loan subject to prepayment prior to the Maturity Date, whether by mandatory or voluntary prepayment, acceleration or otherwise, an additional fee payable to the Lenders in amount equal to:

(i) for a prepayment made on or after the Funding Date of such Term Loan through and including the first anniversary of the Funding Date of such Term Loan, three percent (3.00%) of the principal amount of such Term Loan prepaid;

(ii) for a prepayment made after the date which is after the first anniversary of the Funding Date of such Term Loan through and including the second anniversary of the Funding Date of such Term Loan, two percent (2.00%) of the principal amount of the Term Loans prepaid; and

(iii) for a prepayment made after the date which is after the second anniversary of the Funding Date of such Term Loan, one percent (1.00%) of the principal amount of the Term Loans prepaid.

“ PRESENT Milestone ” means that on or before May 31, 2014, (i) Borrower has received the DSMB Report and (ii) the DSMB recommends that Borrower either (a) discontinue the PRESENT Trial due to positive efficacy, (b) continue the PRESENT Trial as planned without any increase in sample size (700 evaluable patients), or (c) continue the PRESENT Trial with a sample size adjustment to increase the number of evaluable patients by up to 200 additional evaluable patients (i.e., total of 900 evaluable patients); and, in the cases of (b) or (c), above, the PRESENT Trial is in fact continued as recommended.

“ PRESENT Trial ” means the Borrower’s Phase III randomized, multicenter, multinational clinical trial testing the safety and efficacy of NeuVax vaccine in HER2 negative breast cancer patients.

“ Pro Rata Share ” is, as of any date of determination, with respect to each Lender, a percentage (expressed as a decimal, rounded to the ninth decimal place) determined by dividing the outstanding principal amount of Term Loans held by such Lender by the aggregate outstanding principal amount of all Term Loans.

“ Registered Organization ” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

“ Required Lenders ” means (i) for so long as all of the Persons that are Lenders on the Effective Date (each an “ Original Lender ”) have not assigned or transferred any of their interests in their Term Loan, Lenders holding one hundred percent (100%) of the aggregate outstanding principal balance of the Term Loan, or (ii) at any time from and after any Original Lender has assigned or transferred any interest in its Term Loan, Lenders holding at least sixty six percent (66%) of the aggregate outstanding principal balance of the Term Loan and, in respect of this clause (ii), (A) each Original Lender that has not assigned or transferred any portion of its Term Loan, (B) each assignee or transferee of an Original Lender’s interest in the Term Loan, but only to the extent that such assignee or transferee is an Affiliate or Approved Fund of such Original Lender, and (C) any Person providing financing to any Person described in clauses (A) and (B) above; provided, however, that this clause (C) shall only apply upon the occurrence of a default, event of default or similar occurrence with respect to such financing.

“ Requirement of Law ” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

Execution Version

“ Responsible Officer ” is any of the President, Chief Executive Officer, or Chief Financial Officer of Borrower acting alone.

“RXi” is RXi Pharmaceuticals Corporation, a Delaware corporation.

“RXi Shares” are the approximately 33.4 million shares of common stock of RXi owned by Borrower as of the Effective Date and any other shares of common stock or other securities of RXi issued in exchange for, or as a dividend on, such shares of common stock of RXi.

“ Second Draw Period ” is the period commencing on the later of (a) the occurrence of the Equity Event and (b) the occurrence of the PRESENT Milestone, and ending on the earlier of (y) May 31, 2014 and (z) the occurrence of an Event of Default; provided, however, that the Second Draw Period shall not commence if on the later of the occurrence of the Equity Event and the occurrence of the PRESENT Milestone, an Event of Default has occurred and is continuing.

“ Secured Promissory Note ” is defined in Section 2.4.

“ Secured Promissory Note Record ” is a record maintained by each Lender with respect to the outstanding Obligations owed by Borrower to Lender and credits made thereto.

“ Securities Account ” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

“ Shares ” is one hundred percent (100%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or Borrower’s Subsidiary, in any Subsidiary; provided that, in the event Borrower demonstrates to Collateral Agent’s reasonable satisfaction that a pledge of more than sixty five percent (65%) of the Shares of such Subsidiary which is a Foreign Subsidiary, creates a present and existing adverse tax consequence to Borrower under the U.S. Internal Revenue Code, “Shares” shall mean sixty-five percent (65%) of the issued and outstanding capital stock, membership units or other securities owned or held of record by Borrower or its Subsidiary in such Foreign Subsidiary.

“ Solvent ” is, with respect to any Person: the fair salable value of such Person’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of such Person’s liabilities; such Person is not left with unreasonably small capital after the transactions in this Agreement; and such Person is able to pay its debts (including trade debts) as they mature.

“ Subordinated Debt ” is indebtedness incurred by Borrower or any of its Subsidiaries subordinated to all Indebtedness of Borrower and/or its Subsidiaries to the Lenders (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Collateral Agent and the Lenders entered into between Collateral Agent, Borrower, and/or any of its Subsidiaries, and the other creditor), on terms acceptable to Collateral Agent and the Lenders.

“ Subsidiary ” is, with respect to any Person, any Person of which more than fifty percent (50%) of the voting stock or other equity interests (in the case of Persons other than corporations) is owned or controlled, directly or indirectly, by such Person or through one or more intermediaries.

“ Term Loan ” is defined in Section 2.2(a)(ii) hereof.

“ Term A Loan ” is defined in Section 2.2(a)(i) hereof.

“ Term B Loan ” is defined in Section 2.2(a)(ii) hereof.

Execution Version

“ Term Loan Commitment ” is, for any Lender, the obligation of such Lender to make a Term Loan, up to the principal amount shown on Schedule 1.1 . “ Term Loan Commitments ” means the aggregate amount of such commitments of all Lenders.

“ Trademarks ” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.

“ Transfer ” is defined in Section 7.1.

“ Warrants ” are those certain Warrants to Purchase Stock dated as of the Effective Date, or any date thereafter, issued by Parent in favor of each Lender or such Lender’s Affiliates.

[ Balance of Page Intentionally Left Blank ]

IN WITNESS WHEREOF , the parties hereto have caused this Agreement to be executed as of the Effective Date.


BORROWER:

GALENA BIOPHARMA, INC.

By		/s/ Mark J. Ahn
Name:		Mark J. Ahn, Ph.D.
Title:		President and Chief Executive Officer

BORROWER:

APTHERA, INC.

By		/s/ Mark J. Ahn
Name:		Mark J. Ahn, Ph.D.
Title:		President and Chief Executive Officer

COLLATERAL AGENT AND LENDER:

OXFORD FINANCE LLC

By		/s/ Mark Davis
Name:		Mark Davis
Title:		Vice President — Finance, Secretary &
		Treasurer

[ Signature Page to Loan and Security Agreement ]

SCHEDULE 1.1

Lenders and Commitments


Term A Loans
Lender	Term Loan Commitment		Commitment Percentage
OXFORD FINANCE LLC	$	10,000,000		100.00	%
TOTAL	$	10,000,000		100.00	%


Term B Loans
Lender	Term Loan Commitment		Commitment Percentage
OXFORD FINANCE LLC	$	5,000,000		100.00	%
TOTAL	$	5,000,000		100.00	%


Aggregate (all Term Loans)
Lender	Term Loan Commitment		Commitment Percentage
OXFORD FINANCE LLC	$	15,000,000		100.00	%
TOTAL	$	15,000,000		100.00	%

EXHIBIT A

Description of Collateral

The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

All Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.

Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Borrower has agreed not to encumber any of its Intellectual Property.

EXHIBIT B

Form of Disbursement Letter

[see attached]

DISBURSEMENT LETTER

[DATE]

The undersigned, being the duly elected and acting of GALENA BIOPHARMA, INC., a Delaware corporation, with offices located at 310 N. State Street, Suite 208, Lake Oswego, OR 97070, for and on behalf of each Borrower under the Loan Agreement (as defined below) (collectively, “ Borrower ”), does hereby certify to OXFORD FINANCE LLC (“ Oxford ” and “ Lender ”), as collateral agent (the “ Collateral Agent ”) in connection with that certain Loan and Security Agreement dated as of May [ ], 2013, by and among Borrower, Collateral Agent and the Lenders from time to time party thereto (the “ Loan Agreement ”; with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement) that:

1. The representations and warranties made by Borrower in Section 5 of the Loan Agreement and in the other Loan Documents are true and correct in all material respects as of the date hereof.

2. No event or condition has occurred that would constitute an Event of Default under the Loan Agreement or any other Loan Document.

3. Borrower is in compliance with the covenants and requirements contained in Sections 4, 6 and 7 of the Loan Agreement.

4. All conditions referred to in Section 3 of the Loan Agreement to the making of the Loan to be made on or about the date hereof have been satisfied or waived by Collateral Agent.

5. No Material Adverse Change has occurred.

6. The undersigned is a Responsible Officer.

[Balance of Page Intentionally Left Blank]

7. The proceeds of the Term [A][B] Loan shall be disbursed as follows:


Disbursement from Oxford:
Loan Amount	$
Plus:
—Deposit Received	$

Less:
—Facility Fee	($	)
[—Interim Interest	($	)]
—Lender’s Legal Fees	($	)*

Net Proceeds due from Oxford:	$

TOTAL TERM [A][B] LOAN NET PROCEEDS FROM LENDERS	$

8. The [Term A Loan][Term B Loan] shall amortize in accordance with the Amortization Table attached hereto.

9. The aggregate net proceeds of the Term Loans shall be transferred to the Designated Deposit Account as follows:


Account Name:		GALENA BIOPHARMA, INC.

Bank Name:		Silicon Valley Bank

Bank Address:

Account Number:

ABA Number:

[Balance of Page Intentionally Left Blank]

*	Legal fees and costs are through the Effective Date. Post-closing legal fees and costs, payable after the Effective Date, to be invoiced and paid post-closing.

Dated as of the date first set forth above.


BORROWER:

GALENA BIOPHARMA, INC. for itself and on behalf of all Borrowers

By
Name:
Title:

COLLATERAL AGENT AND LENDER:

OXFORD FINANCE LLC

By:
Name:
Title:

[ Signature Page to Disbursement Letter ]

AMORTIZATION TABLE

(Term [A][B] Loan)

[see attached]

EXHIBIT C

Compliance Certificate


TO:		OXFORD FINANCE LLC, as Collateral Agent and Lender

FROM:		GALENA BIOPHARMA, INC. for itself and on behalf of all Borrowers

The undersigned authorized officer (“ Officer ”) of GALENA BIOPHARMA, INC. for itself and on behalf of all Borrowers under and as defined in the Loan Agreement (as defined below) (collectively, “ Borrower ”), hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement by and among Borrower, Collateral Agent, and the Lenders from time to time party thereto (the “ Loan Agreement ;” capitalized terms used but not otherwise defined herein shall have the meanings given them in the Loan Agreement),

(a) Borrower is in complete compliance for the period ending with all required covenants except as noted below;

(b) There are no Events of Default, except as noted below;

(c) Except as noted below, all representations and warranties of Borrower stated in the Loan Documents are true and correct in all material respects on this date and for the period described in (a), above; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date.

(d) Borrower, and each of Borrower’s Subsidiaries, has timely filed all required tax returns and reports, Borrower, and each of Borrower’s Subsidiaries, has timely paid all foreign, federal, state, and local taxes, assessments, deposits and contributions owed by Borrower, or Subsidiary, except as otherwise permitted pursuant to the terms of Section 5.8 of the Loan Agreement;

(e) No Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Collateral Agent and the Lenders.

Attached are the required documents, if any, supporting our certification(s). The Officer, on behalf of Borrower, further certifies that the attached financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes and except, in the case of unaudited financial statements, for the absence of footnotes and subject to year-end audit adjustments as to the interim financial statements.

Please indicate compliance status since the last Compliance Certificate by circling Yes, No, or N/A under “Complies” column.

Reporting Covenant

Requirement

Actual

Complies

Financial statements

Monthly within 30 days

Yes

N/A

Annual (CPA Audited) statements

Within 120 days after FYE

Yes

N/A

Annual Financial Projections/Budget (prepared on a monthly basis)

Annually (within 10 days of FYE), and when revised

Yes

N/A

A/R & A/P agings

If applicable

Yes

N/A

8-K, 10-K and 10-Q Filings

Within 5 days of filing

Yes

N/A

Compliance Certificate

Monthly within 30 days

Yes

N/A

IP Report

When required

Yes

N/A

Total amount of Borrower’s cash and cash equivalents at the last day of the measurement period

Yes

N/A

Total amount of Borrower’s Subsidiaries’ cash and cash equivalents at the last day of the measurement period

Yes

N/A

Deposit and Securities Accounts

(Please list all accounts; attach separate sheet if additional space needed)

Institution Name

Account Number

New Account?

Account Control Agreement in place?

Yes

Other Matters


1)	Have there been any changes in executive officers since the last Compliance Certificate?	Yes	No

2)	Have there been any transfers/sales/disposals/retirement of Collateral or IP prohibited by the Loan Agreement?	Yes	No

3)	Have there been any new or pending claims or causes of action against Borrower that involve more than [One Hundred Thousand Dollars ($100,000.00)] ?	Yes	No

4)	Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate.	Yes	No

Exceptions

Please explain any exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions.” Attach separate sheet if additional space needed.)


GALENA BIOPHARMA, INC. for itself and on behalf of all Borrowers

By:
Name:
Title:

Date:


		LENDER USE ONLY

		Received by:				Date:

		Verified by:				Date:

		Compliance Status: Yes No

EXHIBIT D

Form of Secured Promissory Note

[see attached]

SECURED PROMISSORY NOTE

(Term [A][B] Loan)


$		Dated: [DATE]

FOR VALUE RECEIVED, the undersigned, GALENA BIOPHARMA, INC., a Delaware corporation and APTHERA, INC., a Delaware corporation, each with offices located at 310 N. State Street, Suite 208, Lake Oswego, OR 97070 (individually and collectively, jointly and severally, “ Borrower ”) HEREBY PROMISES TO PAY to the order of OXFORD FINANCE LLC (“ Lender ”) the principal amount of [ ] MILLION DOLLARS ($ ) or such lesser amount as shall equal the outstanding principal balance of the Term [A][B] Loan made to Borrower by Lender, plus interest on the aggregate unpaid principal amount of such Term [A][B] Loan, at the rates and in accordance with the terms of the Loan and Security Agreement dated May [ ], 2013 by and among Borrower, Lender, Oxford Finance LLC, as Collateral Agent, and the other Lenders from time to time party thereto (as amended, restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”). If not sooner paid, the entire principal amount and all accrued and unpaid interest hereunder shall be due and payable on the Maturity Date as set forth in the Loan Agreement. Any capitalized term not otherwise defined herein shall have the meaning attributed to such term in the Loan Agreement.

Principal, interest and all other amounts due with respect to the Term [A][B] Loan, are payable in lawful money of the United States of America to Lender as set forth in the Loan Agreement and this Secured Promissory Note (this “ Note ”). The principal amount of this Note and the interest rate applicable thereto, and all payments made with respect thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note.

The Loan Agreement, among other things, (a) provides for the making of a secured Term [A][B] Loan by Lender to Borrower, and (b) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events.

This Note may not be prepaid except as set forth in Section 2.2 (c) and Section 2.2(d) of the Loan Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of the Term [A][B] Loan, interest on the Term [A][B] Loan and all other amounts due Lender under the Loan Agreement is secured under the Loan Agreement.

Presentment for payment, demand, notice of protest and all other demands and notices of any kind in connection with the execution, delivery, performance and enforcement of this Note are hereby waived.

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of Borrower’s obligations hereunder not performed when due.

This Note shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of California.

The ownership of an interest in this Note shall be registered on a record of ownership maintained by Lender or its agent. Notwithstanding anything else in this Note to the contrary, the right to the principal of, and stated interest on, this Note may be transferred only if the transfer is registered on such record of ownership and the transferee is identified as the owner of an interest in the obligation. Borrower shall be entitled to treat the registered holder of this Note (as recorded on such record of ownership) as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in this Note on the part of any other person or entity.

[Balance of Page Intentionally Left Blank]

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers thereunto duly authorized on the date hereof.


BORROWER:

GALENA BIOPHARMA, INC.

By
Name:
Title:

BORROWER:

APTHERA, INC.

By
Name:
Title:
Name:
Title:

Term [A][B] Loan Secured Promissory Note

LOAN INTEREST RATE AND PAYMENTS OF PRINCIPAL


Date	Principal Amount	Interest Rate	Scheduled Payment Amount	Notation By

CORPORATE BORROWING CERTIFICATE


B ORROWER :	[GALENA BIOPHARMA, INC.][APTHERA, INC.]	D ATE : [DATE]
L ENDER :	OXFORD FINANCE LLC, as Collateral Agent and Lender

I hereby certify as follows, as of the date set forth above:

1. I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.

2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.

3. Attached hereto as Exhibit A and Exhibit B , respectively, are true, correct and complete copies of (i) Borrower’s Articles/Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth in paragraph 2 above; and (ii) Borrower’s Bylaws. Neither such Articles/Certificate of Incorporation nor such Bylaws have been amended, annulled, rescinded, revoked or supplemented, and such Articles/Certificate of Incorporation and such Bylaws remain in full force and effect as of the date hereof.

4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and the Lenders may rely on them until each Lender receives written notice of revocation from Borrower.

[ Balance of Page Intentionally Left Blank ]

R ESOLVED , that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:


Name	Title	Signature	Authorized to Add or Remove Signatories

			¨

			¨

			¨

			¨

R ESOLVED F URTHER , that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

R ESOLVED F URTHER , that such individuals may, on behalf of Borrower:

Borrow Money . Borrow money from the Lenders.

Execute Loan Documents . Execute any loan documents any Lender requires.

Grant Security . Grant Collateral Agent a security interest in any of Borrower’s assets.

Negotiate Items . Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

Issue Warrants . Issue warrants for Borrower’s capital stock.

Further Acts . Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effectuate such resolutions.

R ESOLVED F URTHER , that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.

[ Balance of Page Intentionally Left Blank ]

5. The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.


By:

Name:

Title:

***	If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

I, the of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

[print title]


By:

Name:

Title:

[ Signature Page to Corporate Borrowing Certificate ]

EXHIBIT A

Articles/Certificate of Incorporation (including amendments)

[see attached]

EXHIBIT B

Bylaws

[see attached]


DEBTOR:		[GALENA BIOPHARMA, INC.][APTHERA, INC.]
SECURED PARTY:		OXFORD FINANCE LLC,
		as Collateral Agent

EXHIBIT A TO UCC FINANCING STATEMENT

Description of Collateral

The Collateral consists of all of Debtor’s right, title and interest in and to the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as noted below)], commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts and other Collateral Accounts, all certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Collateral Agent’s security interest in such Accounts and such other property of Debtor that are proceeds of the Intellectual Property.

Pursuant to the terms of a certain negative pledge arrangement with Collateral Agent and the Lenders, Debtor has agreed not to encumber any of its Intellectual Property.

Capitalized terms used but not defined herein have the meanings ascribed in the Uniform Commercial Code in effect in the State of California as in effect from time to time (the “Code”) or, if not defined in the Code, then in the Loan and Security Agreement by and between Debtor, Secured Party and the other Lenders party thereto (as modified, amended and/or restated from time to time).

Exhibit 10.7

Execution Version

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

WARRANT TO PURCHASE STOCK

Company:

GALENA BIOPHARMA, INC., a Delaware corporation.

Number of Shares:

(this Warrant and any other Warrants issued on the date of issuance of this Warrant pursuant to the Loan Agreement (as defined herein below), together, shall be exercisable for a total number of shares of Common Stock equal to: (i) four and one-half percent (4.50%) of the aggregate principal amount of the term loans funded under the Loan Agreement on the date of issuance of this Warrant divided by (ii) the Warrant Price set forth below).

Type/Series of Stock:

Common Stock.

Warrant Price:

$ per share (which represents the average closing price of the Company’s common stock for the previous twenty days of trading, calculated on the day before the issuance of this Warrant).

Issue Date:

May 8, 2013.

Expiration Date:

May 8, 2020. See also Section 5.1(b).

Credit Facility:

This Warrant to Purchase Stock (“ Warrant ”) is issued in connection with that certain Loan and Security Agreement, dated as of May 8, 2013, among Oxford Finance LLC, as Lender and Collateral Agent, the Lenders from time to time party thereto, and the Company and Apthera, Inc., as Borrower (as modified, amended and/or restated from time to time, the “ Loan Agreement ”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, OXFORD FINANCE LLC (“ Oxford ” and, together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “ Holder ”) is entitled to purchase the number of fully paid and non-assessable shares (the “ Shares ”) of the above-stated Type/Series of Stock (the “ Class ”) of the above-named company (the “ Company ”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.

SECTION 1. EXERCISE .

1.1 Method of Exercise . Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company the original of this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.

1.2 Cashless Exercise . On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive such number of fully paid and non-assessable Shares as are computed using the following formula:


	X = Y(A-B)/A

where:

	X =	the number of Shares to be issued to the Holder;

	Y =	the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);

	A =	the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and

	B =	the Warrant Price.

1.3 Fair Market Value . If the Company’s common stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “ Trading Market ”) and the Class is common stock, the fair market value of a Share shall be the closing price or last sale price of a share of common stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company. If the Company’s common stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.

1.4 Delivery of Certificate and New Warrant . Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.

1.5 Replacement of Warrant . On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.

1.6 Treatment of Warrant Upon Acquisition of Company .

(a) Acquisition . For the purpose of this Warrant, “ Acquisition ” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the Company’s domicile or name), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization (or, if such Company stockholders beneficially own a majority of the outstanding voting power of the surviving or successor entity as of immediately after such merger, consolidation or reorganization, such surviving or successor entity is not the Company); or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

(b) Treatment of Warrant at Acquisition . In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “ Cash/Public Acquisition ”), either (i) Holder shall exercise this Warrant pursuant to Section 1.1 and/or 1.2 and such exercise will be deemed effective immediately prior to and contingent upon the consummation of such Acquisition or (ii) if Holder elects not to exercise the Warrant, this Warrant will expire immediately prior to the consummation of such Acquisition.

(c) The Company shall provide Holder with written notice of any proposed Cash/Public Acquisition (together with such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such contemplated Cash/Public Acquisition giving rise to such notice), which is to be delivered to Holder not less than seven (7) Business Days prior to the closing of the proposed Cash/Public Acquisition. In the event the Company does not provide such notice, then if, immediately prior to the Cash/Public Acquisition, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon such exercise to the Holder and Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as the date thereof.

(d) Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.

(e) As used in this Warrant, “ Marketable Securities ” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in a Trading Market, and (iii) Holder would be able to publicly re-sell, within six (6) months following the closing of such Acquisition, all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise this Warrant in full on or prior to the closing of such Acquisition.

SECTION 2. ADJUSTMENTS TO THE SHARES AND WARRANT PRICE .

2.1 Stock Dividends, Splits, Etc . If the Company declares or pays a dividend or distribution on the outstanding shares of the Class payable in common stock or other securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred. If the Company subdivides the outstanding shares of the Class by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased. If the outstanding shares of the Class are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

2.2 Reclassification, Exchange, Combinations or Substitution . Upon any event whereby all of the outstanding shares of the Class are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant. The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations substitutions, replacements or other similar events.

2.3 No Fractional Share . No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share. If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.

2.4 Notice/Certificate as to Adjustments . Upon each adjustment of the Warrant Price, Class and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, Class and/or number of Shares and facts upon which such adjustment is based. The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, Class and number of Shares in effect upon the date of such adjustment.

SECTION 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY .

3.1 Representations and Warranties . The Company represents and warrants to, and agrees with, the Holder as follows: All Shares which may be issued upon the exercise of this Warrant, and all securities, if any, issuable upon conversion of the Shares, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws. The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of shares of the Class and other securities as will be sufficient to permit the exercise in full of this Warrant and the conversion of the Shares into shares of the Class or such other securities.

3.2 Notice of Certain Events . If the Company proposes at any time to:

(a) declare any dividend or distribution upon the outstanding shares of the Class, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;

(b) offer for subscription or sale pro rata to the holders of the outstanding shares of the Class any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);

(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Class; or

(d) effect an Acquisition or to liquidate, dissolve or wind up;

then, in connection with each such event, the Company shall give Holder:

(1) at least seven (7) Business Days prior written notice of the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Class will be entitled thereto) or for determining rights to vote, if any, in respect of the matters referred to in (a) and (b) above; and

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Class will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event).

Reference is made to Section 1.6(c) whereby this Warrant will be deemed to be exercised pursuant to Section 1.2 hereof if the Company does not give written notice to Holder of a Cash/Public Acquisition as required by the terms hereof. Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements.

SECTION 4. REPRESENTATIONS, WARRANTIES OF THE HOLDER .

The Holder represents and warrants to the Company as follows:

4.1 Purchase for Own Account . This Warrant and the securities to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act. Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

4.2 Disclosure of Information . Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities. Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

4.3 Investment Experience . Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk. Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

4.4 Accredited Investor Status . Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

4.5 The Act . Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein. Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available. Holder is aware of the provisions of Rule 144 promulgated under the Act.

4.6 No Voting Rights . Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.

SECTION 5. MISCELLANEOUS .

5.1 Term; Automatic Cashless Exercise Upon Expiration .

(a) Term . Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Eastern time, on the Expiration Date and shall be void thereafter.

(b) Automatic Cashless Exercise upon Expiration . In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder.

5.2 Legends . Each certificate evidencing Shares (and each certificate evidencing the securities issued upon conversion of any Shares, if any) shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT ”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY THE ISSUER TO OXFORD FINANCE LLC DATED MAY 8, 2013, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR, IN THE OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

5.3 Compliance with Securities Laws on Transfer . This Warrant and the Shares issued upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company). The Company shall not require Holder to provide an opinion of counsel if the transfer is to an affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act. Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.

5.4 Transfer Procedure . After receipt by Oxford of the executed Warrant, Oxford may transfer all or part of this Warrant to one or more of Oxford’s affiliates (each, an “ Oxford Affiliate ”), by execution of an Assignment substantially in the form of Appendix 2. Subject to the provisions of Article 5.3 and upon providing the Company with written notice, Oxford, any such Oxford Affiliate and any subsequent Holder, may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the Shares issuable directly or indirectly, upon conversion of the Shares, if any) to any other transferee, provided, however, in connection with any such transfer, the Oxford Affiliate(s) or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable).

5.5 Notices . All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5. All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

Oxford Finance LLC

133 N. Fairfax Street

Alexandria, VA 22314

Attn: Legal Department

Telephone: (703) 519-4900

Facsimile: (703) 519-5225

Email: LegalDepartment@oxfordfinance.com

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

GALENA BIOPHARMA, INC.

310 N. State Street, Suite 208

Lake Oswego, OR 97034

Attn: Ryan M. Dunlap

Fax: (503) 400-6611

Email: rdunlap@galenabiopharma.com

With a copy (which shall not constitute notice) to:

TROYGOULD PC

1801 Century Park East, Suite 1600

Los Angeles, CA 90067

Attn: Dale E. Short

Fax: (310) 789-1459

Email: dshort@troygould.com

5.6 Waiver . This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

5.7 Attorneys’ Fees . In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

5.8 Counterparts; Facsimile/Electronic Signatures . This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement. Any signature page delivered electronically or by facsimile shall be binding to the same extent as an original signature page with regards to any agreement subject to the terms hereof or any amendment thereto.

5.9 Governing Law . This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

5.10 Headings . The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

5.11 Business Days . “ Business Day ” is any day that is not a Saturday, Sunday or a day on which banks in the State of California or Commonwealth of Virginia are closed.

[Remainder of page left blank intentionally]

[Signature page follows]

IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.


“COMPANY” GALENA BIOPHARMA, INC.

By:

Name:
		(Print)

Title:


“HOLDER” OXFORD FINANCE LLC

By:

Name:
		(Print)

Title:

[ Signature Page to Warrant to Purchase Stock ]

APPENDIX 1

NOTICE OF EXERCISE

1. The undersigned Holder hereby exercises its right purchase shares of the Common Stock of GALENA BIOPHARMA, INC. (the “ Company ”) in accordance with the attached Warrant To Purchase Stock, and tenders payment of the aggregate Warrant Price for such shares as follows:

check in the amount of $ payable to order of the Company enclosed herewith

Wire transfer of immediately available funds to the Company’s account

Cashless Exercise pursuant to Section 1.2 of the Warrant

Other [Describe]

Please issue a certificate or certificates representing the Shares in the name specified below:




Holder’s Name




(Address)

3. By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Stock as of the date hereof.


HOLDER:

By:

Name:

Title:

Date:

Appendix 1

APPENDIX 2

ASSIGNMENT

For value received, Oxford Finance LLC hereby sells, assigns and transfers unto


Name:	[OXFORD TRANSFEREE]

Address:

Tax ID:		]

that certain Warrant to Purchase Stock issued by GALENA BIOPHARMA, INC. (the “ Company ”), on [DATE] (the “ Warrant ”) together with all rights, title and interest therein.


OXFORD FINANCE LLC

By:

Name:

Title:

Date:

By its execution below, and for the benefit of the Company, [OXFORD TRANSFEREE] makes each of the representations and warranties set forth in Article 4 of the Warrant and agrees to all other provisions of the Warrant as of the date hereof.


[OXFORD TRANSFEREE]

By:

Name:

Title:		]

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark J. Ahn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Galena Biopharma, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 9, 2013

/s/ Mark Ahn

Mark J. Ahn

President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Ryan M. Dunlap, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Galena Biopharma, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 9, 2013

/s/ Ryan M. Dunlap

Ryan M. Dunlap

Director, Finance & Controller (Principal Financial and Accounting Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Galena Biopharma, Inc., (the “Company”) on Form 10-Q for the period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers of the Company certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to their knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the Company’s financial condition and result of operations.


/s/ Mark Ahn				/s/ Ryan M. Dunlap
Mark J. Ahn				Ryan M. Dunlap
President and Chief Executive Officer				Director, Finance & Controller (Principal Financial and Accounting Officer

May 9, 2013				May 9, 2013