10-Q

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2010

or

o 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 001-33291

OPTIMER PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization) 33-0830300
(I.R.S. Employer
Identification No.)

10110 Sorrento Valley Road, Suite C
San Diego, CA (Address of principal executive offices) 92121 (zip code)

(858) 909-0736
(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files):  Yes  o    No  o

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:

Large Accelerated Filer o	Accelerated Filer x
Non-accelerated Filer o	Smaller Reporting Company o

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

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of July 30, 2010 was 38,942,753 shares.

OPTIMER PHARMACEUTICALS, INC.
FORM 10-Q
For the Quarterly Period Ended June 30, 2010

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets — June 30, 2010 and December 31, 2009	3
Consolidated Statements of Operations — Three months and six months ended June 30, 2010 and 2009	4
Consolidated Statements of Cash Flows — Six months ended June 30, 2010 and 2009	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures about Market Risk	29
Item 4. Controls and Procedures	31
PART II — OTHER INFORMATION
Item 1A. Risk Factors	31
Item 6. Exhibits	63
SIGNATURE

2

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements

Optimer Pharmaceuticals, Inc.

Consolidated Balance Sheets

	June 30,			December 31,
	2010			2009
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	31,377,616		$	17,054,328
Short-term investments	35,180,463			21,131,145
Research grant and contract receivables	65,482			84,164
Prepaid expenses and other current assets	751,501			332,695
Total current assets	67,375,062			38,602,332
Property and equipment, net	803,989			672,896
Long-term investments	882,000			882,000
Other assets	503,741			498,762
Total assets	$	69,564,792		$	40,655,990
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,447,820		$	2,625,240
Accrued expenses	2,113,604			5,025,669
Total current liabilities	5,561,424			7,650,909
Deferred rent	200,179			253,474
Commitments and contingencies
Stockholders’ equity:
Preferred stock, par value $0.001, 10,000,000 shares authorized, no shares issued andoutstanding at June 30, 2010 and December 31, 2009, respectively	—			—
Common stock, $0.001 par value, 75,000,000 shares authorized, 38,356,991 sharesand 33,139,373 shares issued and outstanding at June 30, 2010 andDecember 31, 2009, respectively	38,357			33,139
Additional paid-in capital	260,035,131			205,114,914
Accumulated other comprehensive income	302,681			38,063
Accumulated deficit	(199,031,315		)	(175,474,665		)
Total Optimer Pharmaceuticals, Inc. stockholders’ equity	61,344,854			29,711,451
Noncontrolling interest	2,458,335			3,040,156
Total stockholders’ equity	63,803,189			32,751,607
Total liabilities and stockholders’ equity	$	69,564,792		$	40,655,990

See accompanying notes.

3

Optimer Pharmaceuticals, Inc.

Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Revenues:
Research grants	$	357,436		$	324,778		$	654,873		$	407,790
Collaborative research agreements	—			100,000			—			100,000
Total revenues	357,436			424,778			654,873			507,790
Operating expenses:
Research and development	6,419,251			10,737,277			17,780,830			19,651,349
Marketing	656,464			266,267			925,058			461,063
General and administrative	3,686,442			1,871,309			6,075,154			3,919,809
Total operating expenses	10,762,157			12,874,853			24,781,042			24,032,221
Loss from operations	(10,404,721		)	(12,450,075		)	(24,126,169		)	(23,524,431		)
Interest income and other, net	53,719			88,070			78,497			275,038
Consolidated net loss	$	(10,351,002	)	$	(12,362,005	)	$	(24,047,672	)	$	(23,249,393	)
Net loss attributable to noncontrolling interest	290,105			—			491,020			—
Net loss attributable to Optimer Pharmaceuticals, Inc.	$	(10,060,897	)	$	(12,362,005	)	$	(23,556,652	)	$	(23,249,393	)
Basic and diluted net loss per share attributable toOptimer Pharmaceuticals, Inc. common stockholders	$	(0.27	)	$	(0.37	)	$	(0.66	)	$	(0.73	)
Shares used to compute basic and diluted netloss per share attributable to common stockholders	38,306,910			33,083,447			36,663,380			31,816,553

See accompanying notes.

4

Optimer Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	Six Months Ended June 30,
	2010			2009
Operating activities
Net loss	$	(24,047,672	)	$	(23,249,393	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	141,869			120,907
Stock based compensation	2,349,167			1,343,348
Stock awards	802,100			—
Deferred rent	(53,295		)	33,324
Changes in operating assets and liabilities:
Prepaids expenses and other current assets	(418,806		)	47,794
Research grant and contract receivables	18,682			(113,680		)
Other assets	(4,979		)	79
Accounts payable and accrued expenses	(2,089,485		)	376,756
Net cash used in operating activities	(23,302,419		)	(21,440,865		)
Investing activities
Purchases of short-term investments	(35,058,358		)	(22,681,668		)
Sales or maturity of short-term investments	21,000,000			20,453,000
Purchases of property and equipment	(272,965		)	(50,615		)
Net cash provided (used) by investing activities	(14,331,323		)	(2,279,283		)
Financing activities
Proceeds from sale of common stock	51,774,170			33,159,511
Net cash provided by financing activities	51,774,170			33,159,511
Effect of exchange rate changes on cash and cash equivalents	182,860			(1,115		)
Net increase in cash and cash equivalents	14,323,288			9,438,248
Cash and cash equivalents at beginning of period	17,054,328			16,778,880
Cash and cash equivalents at end of period	$	31,377,616		$	26,217,128

See accompanying notes.

5

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1.Interim Financial Information

Organization and Business Activities

Optimer Pharmaceuticals, Inc. (“Optimer” or the “Company”) was incorporated in Delaware on November 18, 1998. The Company has one majority-owned subsidiary, Optimer Biotechnology, Inc. (“OBI”), which is incorporated and located in Taiwan. In October 2009, Optimer sold 40% of its equity interest in OBI. Prior to the sale, OBI was a wholly owned subsidiary of Optimer.

Optimer is a biopharmaceutical company focused on discovering, developing and commercializing hospital specialty products.  The Company currently has two anti-infective product candidates, fidaxomicin, for the treatment of Clostridium difficile-infection (“CDI”), and Pruvel™ (prulifloxacin), for the treatment of infectious diarrhea. The Company is developing additional product candidates using its proprietary technology, including its OPopS™ drug discovery platform.

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the results of these interim periods have been included. The results of operations for the three months and six months ended June 30, 2010 are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which was filed with the Securities and Exchange Commission (“SEC”) on March 11, 2010.

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ materially from those estimates.

2.Summary of Significant Accounting Policies

Cash, Cash Equivalents and Investments

Investments with original maturities of less than 90 days at the date of purchase are considered to be cash equivalents.  Except for one auction rate preferred security, all other investments are classified as short-term investments which are deemed by management to be available-for-sale and are reported at fair value with net unrealized gains or losses reported within other comprehensive loss in the consolidated statement of stockholders’ equity.  Realized gains and losses, and declines in value judged to be other than temporary, are included in investment income or interest expense.  The cost of securities sold is computed using the specific identification method.

6

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(Unaudited)

The Company’s auction rate preferred security (“ARPS”) is classified as a noncurrent available-for-sale security in the consolidated balance sheet because of the Company’s intent and ability to hold this security until the market for ARPSs returns or until the issuer refinances the underlying security.

Revenue Recognition

The Company’s license and collaboration agreements contain multiple elements, including non-refundable upfront fees, payments for reimbursement of third-party research costs, payments for research, payments associated with achieving specific development milestones and royalties based on specified percentages of net product sales, if any.  Agreements containing multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator and whether there is objective and reliable evidence of the fair value of the undelivered obligation(s). The consideration received is allocated among the separate units either on the basis of each unit’s fair value or using the residual method, and the applicable revenue recognition criteria are applied to each of the separate units.

When a payment is specifically tied to a separate earnings process, revenues are recognized when the specific performance obligation associated with the payment is completed.  Performance obligations typically consist of significant and substantive milestones pursuant to the related agreement.  Revenues from milestone payments may be considered separable from funding for research services because of the uncertainty surrounding the achievement of milestones for products in early stages of development.  Accordingly, these payments are allowed to be recognized as revenue if and when the performance milestone is achieved if they represent separate earnings.

In connection with certain research collaboration agreements, revenues are recognized from non-refundable upfront fees, which the Company does not believe are specifically tied to a separate earnings process, ratably over the term of the agreement.  Research fees are recognized as revenue as the related research activities are performed.

With respect to revenues derived from reimbursement of direct out-of-pocket expenses for research costs associated with grants, where the Company acts as a principal, with discretion to choose suppliers, bears credit risk and performs part of the services required in the transaction, the Company records revenue for the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in the consolidated statements of operations. None of the payments that the Company has received from collaborators to date, whether recognized as revenue or deferred, are refundable even if the related program is not successful.

7

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

Research and Development Expenses

The Company expenses costs related to research and development until technological feasibility has been established for the product.  Once technological feasibility is established, all product costs are generally capitalized until the product is available for general release to customers.  The Company has determined that technological feasibility for its product candidates will be reached when the requisite regulatory approvals are obtained to make the product available for sale, which, in the United States, generally occurs upon the approval of the new drug application (“NDA”) for such product.  The Company’s research and development expenses consist primarily of license fees, salaries and related employee benefits, costs associated with clinical trials managed by the Company’s contract research organizations and costs associated with non-clinical activities and regulatory approvals.  The Company uses external service providers and vendors to conduct clinical trials, to manufacture supplies of product candidates to be used in clinical trials, to assist and consult on regulatory filings and to provide various other research and development-related products and services.

When nonrefundable payments for goods or services to be received in the future for use in research and development activities are made, the Company defers and capitalizes these types of payments. The capitalized amounts are expensed when the related goods are delivered or the services are performed.

In the statement of operations for the three months and six months ended June 30, 2009 included in this filing, the Company reclassified $209,000 and $324,000, respectively, of medical affairs department expenses from marketing expenses to research and development expenses to be consistent with the classification in the three months and six months ended June 30, 2010.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.  Net income (loss) and other comprehensive income (loss), including foreign currency translation adjustments and unrealized gains and losses on investments, is required to be reported, net of their related tax effect, to arrive at comprehensive income (loss).  Consolidated comprehensive loss was $10.3 million and $12.4 million for the three months ended June 30, 2010 and 2009, respectively.  Consolidated comprehensive loss was $23.9 million and $23.2 million for the six months ended June 30, 2010 and 2009, respectively. As of June 30, 2010, the unrealized gain on investments and the gain on foreign currency translation adjustment was $4,919 and $297,762, respectively. As of December 31, 2009, the unrealized gain on investments and the cumulative loss on foreign currency adjustment was $13,959 and $52,022, respectively.

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of common shares and dilutive common share equivalents outstanding. Common equivalent shares consist of common shares issuable upon the

8

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

exercise of stock options and warrants. Since the Company has a net loss for all periods presented, the effect of all potentially dilutive securities is anti-dilutive. Accordingly, basic and diluted net loss per share is the same for all periods presented. As of June 30, 2010 and 2009, there were 3,898,024 and 2,543,383 shares of common stock, respectively, issuable upon the exercise of stock options and warrants which were excluded from the calculation, as their effect would have been antidilutive.

Income Taxes

Income taxes are accounted for under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date.  The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

Recently Issued Accounting Pronouncements

In April 2010, the Financial Accounting Standards Board (“FASB”) issued amendments related to the revenue recognition method for milestone payments in research and development agreements.  Under these amendments, entities can make an accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved.  The amendments are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this standard is not expected to have a material impact on the Company’s financial position, cash flow or results of operations.

3.   Fair Value of Financial Instruments

The following table summarizes the Company’s financial assets measured at fair value on a recurring basis as of June 30, 2010:

	Quoted Prices in Active Markets(Level 1)		Other Observable Inputs(Level 2)		Unobservable Inputs(Level 3)		Total
Cash equivalents	$	31,377,616	$	—	$	—	$	31,377,616
Marketable securities	$	35,180,463	$	—	$	—	$	35,180,463
Auction rate preferred securities	$	—	$	—	$	882,000	$	882,000

9

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

Level 1:	Quoted prices in active markets for identical assets and liabilities; or
Level 2:	Quoted prices for identical or similar assets and liabilities in markets that are not active, or observable inputs other than quoted prices in active markets for identical assets and liabilities; or
Level 3:	Unobservable inputs.

A reconciliation of the beginning and ending balances of assets measured at fair value on a recurring basis using Level 3 inputs is as follows:

	Auction Rate Preferred Securities as of June 30, 2010
Beginning balance at January 1, 2010	$	882,000
Total gains and losses:
Realized net income	—
Unrealized in accumulated other comprehensive income	—
Purchases, sales, issuances and settlements	—
Transfers in (out) of Level 3	—
Ending balance at June 30, 2010	$	882,000
Change in unrealized gains (losses) included in net income related to assets still held	$	—

All of the Company’s investments in available-for-sale securities are recorded at fair value based on quoted market prices. As of June 30, 2010, the Company held one ARPS valued at $882,000 with a perpetual maturity date that resets every 28 days.  Although as of June 30, 2010, this ARPS continued to pay interest according to its stated terms, the market in these securities continues to be illiquid. Based on a discounted cash flow model used to determine the estimated fair value of its investment in the ARPS, the Company has previously recognized in the consolidated statement of operations an unrealized loss of approximately $118,000 in investment income since the Company had determined that the decline in value was other than temporary. The assumptions used for the discontinued cash flow model include estimates for interest rates, timing and amount of cash flows and expected holding period of the ARPS.  The Company’s ARPS is classified as a long-term investment on the consolidated balance sheets, as the Company does not believe it could liquidate this security in the near term.

4.Short-Term Investments

The following is a summary of the Company’s short-term investment securities, all of which are classified as available-for-sale. The determination of estimated fair value is based upon quoted market prices as of the dates presented.

10

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

	June 30, 2010
	Gross AmortizedCost		Gross UnrealizedGains		Gross UnrealizedLosses			Market Value
Government agencies	$	33,175,548	$	7,774	$	(2,859	)	$	35,180,463

	December 31, 2009
	Gross AmortizedCost		Gross UnrealizedGains		Gross UnrealizedLosses			Market Value
Government agencies	$	21,117,189	$	14,235	$	(279	)	$	21,131,145

Investments in net unrealized loss positions as of June 30, 2010 are as follows:

		Less Than 12 Months of Temporary Impairment					Greater Than 12 Months of Temporary Impairment				Total Temporary Impairment
	Number of Investments	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Government agencies	9	$	10,152,039	$	(2,859	)	$	—	$	—	$	10,152,039	$	(2,859	)

The amortized cost and estimated fair value of securities available-for-sale at June 30, 2010, by contractual maturity, are as follows:

	Amortized Cost		Estimated Fair Value
Due in one year or less	$	35,175,548	$	35,180,463

The weighted-average maturity of our short-term investments as of June 30, 2010 and 2009, was approximately four months and five months, respectively.

Evaluating Investments for Other-than Temporary Impairments

The Company considered a number of factors to determine whether the decline in value in its investments was other than temporary, including the length of time and the extent to which the market value has been less than cost, the financial condition of the issuer and the Company’s intent to hold and ability to retain these short-term investments.  Based on these factors, except for the ARPS which the Company recorded as an other temporary impairment in 2008, the Company believes that the decline in value of its short-term investments is temporary and primarily related to the change in market interest rates since purchase.  The Company determined that it does not intend to sell its short-term investments and it is not more likely than not that the Company will be required to sell its short-term investments before recovery of their amortized cost bases, which may not occur until maturity. The Company anticipates full recovery of amortized cost with respect to these securities at maturity or sooner in the event of a change in the market interest rate environment.

11

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

5.     Stockholders’ Equity

Noncontrolling Interest

In October 2009, the Company sold 40% of its equity interest in OBI.  Pursuant to authoritative guidance, the Company accounts and reports for minority interests, the portion of OBI not owned by the Company, as noncontrolling interests and classifies them as a component of stockholders’ equity on the consolidated balance sheets of the Company.  The Company includes the net loss attributable to noncontrolling interests as part of its consolidated net loss.

The following table reconciles equity attributable to noncontrolling interest:

	For the Six Months Ended June 30, 2010
Noncontrolling interest, January 1, 2010	$	3,040,156
Net loss attributable to noncontrolling interest	(491,021		)
Translation adjustments	(90,800		)
Noncontrolling interest, June 30, 2010	$	2,458,355

Warrants

In connection with a registered direct offering which occurred in March 2009, the Company sold warrants to purchase up to an aggregate of 91,533 shares of its common stock. The warrants are exercisable at an exercise price of $10.93 per share and will expire five years from March 9, 2009.

6.Stock Based Compensation

Optimer Pharmaceuticals, Inc.

Stock Options

Optimer has in effect the 2006 Equity Incentive Plan (“2006 Plan”) which became effective upon the effectiveness of the Optimer’s initial public offering in 2007. Optimer’s 1998 Stock Plan (“1998 Plan”) was terminated upon the effectiveness of Optimer’s initial public offering after which Optimer ceased granting options under the 1998 Plan. Options granted under both the 1998 Plan and the 2006 Plan generally expire no later than ten years from the date of grant (five years for a 10% stockholder) and vest over a period of four years. The exercise price of options granted must at least be equal to the fair market value of Optimer’s common stock on the date of grant.

12

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

Performance-Based Stock Options, Performance-Based Restricted Stock Units, and Stock Awards

On May 5, 2010, the Company’s Board of Directors appointed Pedro Lichtinger as its President and CEO and as a member of its Board of Directors.  Pursuant to Mr. Lichtinger offer letter, he received performance-based stock options to purchase up to an aggregate of 480,000 shares of common stock and performance-based restricted stock units covering up to an aggregate of 120,000 shares of common stock, which vest over time beginning on the dates the Company achieves specified development and commercialization goals.

Simultaneously with Mr. Lichtinger’s appointment, Michael Chang resigned as the Company’s President and CEO.  The Company entered into a consulting agreement with Dr. Chang to provide general consulting services. Pursuant to his consulting agreement and as part of his compensation, Dr. Chang received performance-based stock options to purchase up to an aggregate of 400,000 shares of common stock which vest over time beginning on the dates certain regulatory filings are accepted and approved. Dr. Chang has continued to serve as a member of the Company’s Board of Directors as Chairman and following Dr. Chang’s appointment as Chairman, Dr. Chang received a grant of 65,000 fully-vested shares of common stock.

The performance-based stock options, performance-based restricted stock units and stock grant were made under the 2006 Plan.

Employee Stock Purchase Plan

Optimer also grants stock awards under its employee stock purchase plan (“ESPP”). Under the terms of the ESPP, eligible employees may purchase shares of Optimer’s common stock at the lesser of 85% of the fair market value of Optimer’s common stock on the offering date or the purchase date.

Valuations

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options and stock awards, which have no vesting restrictions and are fully transferable.  In addition, the Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected stock price volatility of the underlying stock.  The following table shows the assumptions used to compute stock-based compensation expense for the stock options, performance based stock options, performance based restricted stock units, and ESPP purchase rights during the three months and six months ended June 30, 2010 and 2009, using the Black-Scholes option pricing model:

	Three months endedJune 30,				Six months endedJune 30,
Stock Options	2010		2009		2010		2009
Risk-free interest rate	2.66-3.53	%	2.00	%	2.66-3.53	%	2.00	%
Dividend yield	0.00	%	0.00	%	0.00	%	0.00	%
Expected life of options (years)	6.05-10.00		6.08		5.02-10.00		5.27-6.08
Volatility	71.24-79.07	%	69.93	%	71.24%-79.07	%	69.93	%

13

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

	Three months endedJune 30,				Six months endedJune 30,
ESPP	2010		2009		2010		2009
Risk-free interest rate	0.19-0.20	%	0.30-0.31	%	0.17-0.20	%	0.30-0.43	%
Dividend yield	0.00	%	0.00	%	0.00	%	0.00	%
Expected life of options (years)	6 months		6 months		6 months		6 months
Volatility	34.23 -39.62	%	62.93 -68.27	%	34.08% - 39.62	%	62.93-74.94	%

The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.  The assumed dividend yield was based on Optimer’s expectation of not paying dividends in the foreseeable future.  The weighted-average expected life of options was calculated using the simplified method.  This decision was based on the lack of relevant historical data due to the Company’s limited history.  In addition, due to the Company’s limited historical data, the Company used the historical volatility of comparable companies whose share prices are publicly available to estimate the Company’s options volatility rate.

During the quarter ended June 30, 2010, Optimer recorded stock-based compensation expense of $190,253 related to both performance based and non-performance based stock options issued to consultants.

Total stock-based compensation expense related to all of Optimer’s stock options, restricted stock units, stock awards issued to employees and employee stock purchases, recognized for the three months and six months ended June 30, 2010 and 2009, was comprised as follows:

	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
Research and development	$	406,145	$	293,570	$	790,142	$	520,417
Marketing	94,997		92,580		188,308		185,755
General and administrative	1,623,761		319,043		2,091,006		637,176
Stock-based compensation expense	$	2,124,903	$	705,173	$	3,069,456	$	1,343,348

As of June 30, 2010, the total unrecognized compensation expense related to unvested stock options and restricted stock units issued to employees was approximately $10.9 million and the related weighted-average period over which it is expected to be recognized is approximately 3.7 years.

Optimer Biotechnology, Inc.

Stock Options

In March 2010, OBI’s board of directors approved a Stock Option Plan and reserved 8.0 million shares of OBI common stock for issuance of equity awards thereunder. The Stock Option Plan provides for the issuance of stock options, restricted stock awards and stock appreciation rights to employees, directors and consultants of OBI. The options generally vest over four years and have a maximum contractual term of ten years.

14

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

Valuations

The following table shows the assumptions used to compute stock-based compensation expense for the stock options granted by OBI during the three and six months ended June 30, 2010 and 2009, using the Black-Scholes option pricing model:

	Three months endedJune 30, 2010		Six months endedJune 30, 2010
Risk-free interest rate	1.375	%	1.25-1.375	%
Dividend yield	0.00	%	0.00	%
Expected life of options (years)	6.08		6.08
Volatility	92.14	%	91.65-92.14	%

The risk-free interest rate assumption was based on the Central Bank of China interest rates.  The assumed dividend yield was based on OBI’s expectation of not paying dividends in the foreseeable future.  The weighted-average expected life of options was calculated using the simplified method.  This decision was based on the lack of relevant historical data due to OBI’s limited history.  Due to OBI’s limited historical data, OBI used the historical volatility of OBI’s peers whose share prices are publicly available to estimate the volatility rate of OBI options.

The following table summarizes the stock-based compensation expense for OBI included in each operating expense line item in Optimer’s consolidated statements of operations:

	Three months endedJune 30, 2010		Six months endedJune 30, 2010
Research and development	$	11,592	$	19,026
General and administrative	30,325		62,785
Stock-based compensation expense	$	41,917	$	81,811

At June 30, 2010, the total unrecognized stock-based compensation expense relating to OBI’s unvested stock-based awards granted to employees, net of forfeitures, was $506,161, which OBI anticipates recognizing as a charge against income over a weighted average period of 3.4 years.

7.     Revenue and Other Collaborative Agreements

Revenues from Research Grants

The Company has one active grant from the National Institute of Allergy and Infectious Diseases (“NIAID”). This grant was awarded in September 2007 and is renewable for $1 million each year until August 2010, up to a maximum of $3 million. The award is being used to conduct supplementary studies to the ongoing fidaxomicin trials to confirm narrow spectrum activity and potency of fidaxomicin against hypervirulent epidemic strains, to support additional toxicology and microbiological studies to demonstrate the safety and efficacy of the fidaxomicin compound

15

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

and its major metabolite in CDI patients and to support a surveillance study of C. difficile isolates across North America to compare activity of fidaxomicin with existing CDI treatments.  For the three months ended June 30, 2010 and 2009, the Company recognized revenues related to research grants of $357,436, and $324,778, respectively. For the six months ended June 30, 2010 and 2009, the Company recognized revenues related to research grants of $654,873, and $407,790, respectively.

Other Collaborative Agreements

Par Pharmaceutical, Inc.

The Company holds worldwide rights to fidaxomicin.  In February 2007, the Company repurchased the rights to develop and commercialize fidaxomicin in North America and Israel from Par Pharmaceutical, Inc. (“Par”) under a prospective buy-back agreement.  The Company paid Par a one-time $5.0 million milestone payment in the quarter ended June 30, 2010 for the successful completion by the Company of its second pivotal Phase 3 trial for fidaxomicin.  The Company may be obligated to pay Par a 5% royalty on net sales by the Company, its affiliates or its licensees of fidaxomicin in North America and Israel, and a 1.5% royalty on net sales by the Company or its affiliates of fidaxomicin in the rest of the world.  In addition, in the event the Company licenses its right to market fidaxomicin in the rest of the world, the Company will be required to pay Par a 6.25% royalty on net revenues received by it related to fidaxomicin.  The Company is obligated to pay each of these royalties, if any, on a country-by-country basis for seven years commencing on the applicable commercial launch in each such country.

Biocon Limited

In May 2010, the Company entered into a long-term supply agreement with Biocon Limited (“Biocon”) for the commercial manufacture of fidaxomicin’s active pharmaceutical ingredient (“API”).   Pursuant to the agreement, Biocon agreed to manufacture and supply the Company up to certain limits, fidaxomicin API and subject to certain conditions, the Company agreed to purchase from Biocon at least a portion of its requirements for fidaxomicin API in the United States and Canada.  The Company previously paid to Biocon $2.5 million for certain equipment purchases and manufacturing scale-up activities, and the Company may be entitled to recover up to $1.5 million of this amount under the supply agreement in the form of discounted prices for fidaxomicin API.  The Company expensed the entire $2.5 million in the second quarter of 2009 because at the time of payment the recovery of up to $1.5 million could not be assured.  The Company may be obligated to make additional payments to Biocon if it fails to meet the minimum purchase requirements after Biocon has dedicated certain manufacturing capacity to the production of fidaxomicin API and if Biocon is unable to manufacture alternative products with the dedicated capacity.  Unless both the Company and Biocon agree to extend the term of the supply agreement, it will terminate seven and a half years from the date the Company obtains marketing authorization for fidaxomicin in the United States or Canada.  The supply agreement will be terminated earlier in the event that the Company does not obtain marketing authorization for fidaxomicin in the United States or Canada prior to December 31, 2013.  In addition, the supply agreement may be earlier terminated (i) by either party by giving two and a half years

16

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

notice after the fifth anniversary of the Effective Date or upon a material breach of the supply agreement by the other party, (ii) by the Company upon the occurrence of certain events, including Biocon’s failure to supply requested amounts of fidaxomicin API, or (iii) by Biocon upon the occurrence of certain events, including the Company’s failure to purchase amounts of fidaxomicin API that it indicates in binding forecasts.  The supply agreement terminated and supersede the prior supply agreement with Biocon, dated August 29, 2005, which was assigned to the Company by Par in February 2007.

Nippon Shinyaku, Co., Ltd.

In June 2004, the Company entered into a license agreement with Nippon Shinyaku, Co., Ltd. (“Nippon Shinyaku”).  Under the terms of the agreement, the Company acquired the non-exclusive right to import and purchase Pruvel, and the exclusive right (with the right to sublicense), within the United States, to develop, make, use, offer to sell, sell and license products suitable for consumption by humans containing Pruvel.  Under this agreement, the Company paid Nippon Shinyaku an up-front fee in the amount of $1.0 million and will be required to make one future milestone payment in the amount of $1.0 million upon submission, if any, of its first NDA for Pruvel in the United States.  Under the agreement, the Company pays Nippon Shinyaku for certain materials.  If Nippon Shinyaku is unable to supply the Company with the contracted amount of Pruvel, then Nippon Shinyaku is obligated to grant the Company a non-exclusive, worldwide license to make or have made Pruvel, in which event the Company will owe Nippon Shinyaku a royalty based on the amount of net sales of Pruvel generated by the Company and the Company’s subsidiary.  Additionally, the Company will owe Nippon Shinyaku certain royalties based on the amount of net sales of Pruvel less the amount of Pruvel the Company buys from Nippon Shinyaku.  Either party may terminate the agreement 60 days after giving notice of a material breach which remains uncured 60 days after written notice.  If not terminated earlier, the agreement will terminate upon the later of ten years from the date of the first commercial sale of Pruvel in the United States or the date on which the last valid patent claim relating to Pruvel expires in the United States.

Cempra Pharmaceuticals, Inc.

In March 2006, the Company entered into a collaborative research and development and license agreement with Cempra Pharmaceuticals, Inc. (“Cempra”).  The Company granted to Cempra an exclusive worldwide license, except in Association of Southeast Asian Nations (“ASEAN”) countries, with the right to sublicense, to the Company’s patent and know-how related to the Company’s macrolide and ketolide antibacterial program.  As partial consideration for granting Cempra the license, the Company obtained equity of Cempra and the Company assigned no value to such equity.   Pursuant to the terms of the agreement, in July 2010, the Company received a $500,000 milestone payment from Cempra for the continuing development of a next generation macrolide, CEM-101, for the treatment of respiratory infections. The Company may receive additional milestone payments as product candidates are developed and/or co-developed by Cempra, in addition to milestone payments based on certain sublicense revenue.  The aggregate potential amount of such milestone payments is not capped and, based in part on the number of products developed under the agreement, may exceed $24.5 million.  The

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Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

Company will also receive royalty payments based on a percentage of net sales of licensed products.  The milestone payments will be triggered upon the completion of certain clinical development milestones and in certain instances, regulatory approval of products.  In consideration of the foregoing, Cempra may receive milestone payments from the Company in the amount of $1.0 million for each of the first two products the Company develops under the agreement which receive regulatory approval in ASEAN countries, as well as royalty payments on the net sales of such products.  The research term of the agreement was completed in March 2008.  Subject to certain exceptions, on a country-by-country basis, the general terms of this agreement continue until the later of: (i) the expiration of the last to expire patent rights of a covered product in the applicable country or (ii) ten years from the first commercial sale of a covered product in the applicable country.  Either party may terminate the agreement in the event of a material breach by the other party, subject to prior notice and the opportunity to cure.  Either party may also terminate the agreement for any reason upon 30 days prior written notice provided that all licenses granted by the terminating party to the non-terminating party will survive upon the express election of the non-terminating party.

Memorial Sloan-Kettering Cancer Center

In July 2002, the Company entered into a license agreement with Memorial Sloan-Kettering Cancer Center (“MSKCC”) to acquire, together with certain nonexclusive licenses, exclusive, worldwide licensing and sublicensing rights to certain patented and patent-pending carbohydrate-based cancer immunotherapies.  As partial consideration for the licensing rights, the Company paid to MSKCC a one-time fee consisting of both cash and 55,383 shares of its common stock.  In anticipation of the various transactions involving OBI which the Company completed in October 2009, the Company assigned its rights and obligations under this agreement to OBI. Under the agreement, which was amended in June 2005, OBI owes MSKCC milestone payments in the following amounts for each licensed product: (i) $500,000 upon the commencement of Phase 3 clinical studies, (ii) $750,000 upon the filing of the first NDA, (iii) $1.5 million upon obtaining marketing approval in the United States and (iv) $1.0 million upon obtaining marketing approval in each and any of Japan and certain European countries, but only to the extent that OBI, and not a sublicensee, achieves such milestones.  OBI may owe MSKCC royalties based on net sales generated from the licensed products and income OBI receives from its sublicensing activities, which royalty payments are credited against a minimum annual royalty payment OBI owes to MSKCC during the term of the agreement.

Scripps Research Institute

In July 1999, the Company acquired exclusive, worldwide rights to its OPopS technology from the Scripps Research Institute (“TSRI”).  This agreement includes the license to the Company of patents, patent applications and copyrights related to OPopS technology.  The Company also acquired, pursuant to three separate license agreements with TSRI, exclusive, worldwide rights to over 20 TSRI patents and patent applications related to other potential drug compounds and technologies, including HIV/FIV protease inhibitors, aminoglycoside antibiotics, polysialytransferase, selectin inhibitors, nucleic acid binders, carbohydrate mimetics and osteoarthritis.  Under the four agreements with TSRI, the Company paid TSRI license fees

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Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

consisting of an aggregate of 239,996 shares of its common stock with a deemed aggregate fair market value of $46,400, as determined on the dates of each such payment.  Additionally, under each agreement, the Company may owe TSRI royalties based on net sales by the Company, its affiliates and sublicensees of the covered products and royalties based on revenue the Company generates from sublicenses granted pursuant to the agreements.  For the first licensed product under each of the four agreements, the Company will also owe TSRI payments upon achievement of certain milestones.  In three of the four TSRI agreements, the milestones are the initiation of a Phase 2 trial or its foreign equivalent, the filing of an NDA or its foreign equivalent and government marketing and distribution approval.  In the remaining TSRI agreement, the milestones are the successful completion of a Phase 3 trial or its foreign equivalent, the filing of an NDA or its foreign equivalent and government marketing and distribution approval.  The aggregate potential amount of milestone payments the Company may be required to pay TSRI under all four TSRI agreements is approximately $14.0 million.  In anticipation of the various transactions involving OBI which the Company completed in October 2009, the Company assigned its rights and obligations under one of these agreements related to osteoarthritis to OBI.

Optimer Biotechnology, Inc.

In October 2009, the Company assigned to OBI certain of its patents and know how related to OPT-88 and OPT-822/821 and also assigned to OBI its rights and obligation under license agreements with MSKCC and TSRI.  Under the agreement with OBI, the Company is eligible to receive up to $10 million in milestone payments for each product developed under the development programs and is also eligible to receive royalties on net sales of any product which is commercialized under the programs.  The term of the Intellectual Property Assignment and License Agreement continues until the last to expire of the patents assigned by the Company to OBI and the patents licensed to OBI under the TSRI and MSKCC agreements.

To provide capital for OBI’s product development efforts, the Company and OBI also entered into a financing agreement with a group of new investors.  Simultaneously, the Company sold 40 percent of its existing OBI shares to the same group of new investors, and the Company and the new investors also purchased new OBI shares.  Also under the financing agreement, if OBI achieves certain development milestones in the future, the Company and the new investors will be obligated to invest approximately an additional $8.6 million and $5.7 million, respectively, in exchange for new OBI shares.  Following the sale of its existing OBI shares and the initial investments in exchange for new OBI shares, the Company currently maintains a 60 percent ownership interest in OBI.

8.     Subsequent Event

In July 2010, the Company received a $500,000 milestone payment from Cempra under the terms of a licensing agreement between the companies.  The milestone payment was made as a result of Cempra’s continuing development of a next-generation macrolide (CEM-101) for the treatment of respiratory infections. Cempra licensed CEM-101 from Optimer and has successfully completed a Phase 1 study.

19

Optimer Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements (continued)

(unaudited)

In July 2010, the Company issued 585,762 shares of common stock to AFOS, LLC as consideration for the engagement of an affiliate of AFOS to provide certain services to the Company and the affiliate’s obligation to provide such services.  The shares are subject to various lock-up periods during which AFOS may not transfer such shares, except under certain exceptions.

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

The following discussion and analysis should be read in conjunction with our consolidated financial statements and accompanying notes appearing elsewhere in this report, as well as the audited financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the Securities and Exchange Commission, or SEC.  This discussion and other parts of this report may contain forward-looking statements based upon current expectations that involve risks and uncertainties.  Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this report.

Overview

We are a biopharmaceutical company focused on discovering, developing and commercializing innovative hospital specialty products. Our current development efforts are focused on products that treat gastrointestinal infections and related diseases where current therapies have limitations, including limited efficacy, serious adverse side effects, drug-to-drug interactions, difficult patient compliance and bacterial resistance. We currently have two late-stage anti-infective product candidates, fidaxomicin and Pruvel™ (prulifloxacin).

Fidaxomicin, our lead product candidate, is a narrow spectrum antibiotic with minimal systemic absorption. We are developing fidaxomicin for the treatment of CDI, the most common nosocomial, or hospital acquired, diarrhea. We have completed two fidaxomicin Phase 3 trials which showed that fidaxomicin achieved the primary endpoint of clinical cure and demonstrated a significantly lower recurrence rate and significantly higher global cure rate (defined as cure with no recurrence within four weeks of completing therapy) compared to Vancocin, the only FDA-approved antibiotic for the treatment of CDI. The data also indicated that treatment with fidaxomicin significantly improved the recurrence rate and global cure rate in CDI patients requiring concomitant antibiotics, compared to vancomycin.  Fidaxomicin was also well-tolerated in the trials. We have also reported additional data from the second Phase 3 trial showing a clinically meaningful reduction in recurrence rates and higher global cure rates compared to Vancocin in both the hyper-virulent BI/NAP1/027 and the non-BI strain type subgroups. Clinical cure rates for fidaxomicin and Vancocin were similar in these two strain type subgroups. We expect to report additional data from our second fidaxomicin Phase 3 trial at scientific and medical conferences throughout the second half of 2010.

We currently hold worldwide rights to fidaxomicin and intend to seek one or more partners for the commercialization of fidaxomicin outside of the United States. We have submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA. We plan to submit a New Drug Application, or NDA, to the FDA in the second half of 2010.

Pruvel is a prodrug in the fluoroquinolone class of antibiotics, a widely-used class of broad-spectrum antibiotics. We are developing Pruvel as a treatment for infectious diarrhea.  In July 2008, we reported positive top-line data from the first Phase 3 trial conducted in Mexico and

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Peru and in February 2009, we reported positive top-line data from the second Phase 3 trial conducted in India, Guatemala and Mexico. The top-line analysis of data from these studies showed that Pruvel met the primary endpoint of time to last unformed stool compared to placebo. Based upon the results of these two Phase 3 trials we intend to submit an NDA for Pruvel in the first quarter of 2011. We plan to initially seek approval for Pruvel for the treatment of infectious diarrhea.

We are developing additional product candidates using our proprietary technology, including our Optimer One-Pot Synthesis, or OPopS™ drug discovery platform. OPopS is a computer-aided technology that allows the development of potential drug candidates through carbohydrate mediated medicinal chemistry and enables the rapid synthesis of a wide variety of proprietary molecules. It includes GlycoOptimization, which enables the modification of a carbohydrate group on an existing drug to improve its properties, and De Novo Glycosylation, which introduces new carbohydrate groups on existing drugs to create new patentable compounds with improvement of pharmacokinetics.

We previously acquired exclusive rights to two other product candidates: OPT-88, a disease-modifying intra-articular therapy for osteoarthritis which we licensed from the Scripps Research Institute, or TSRI, and OPT-822/821, a novel carbohydrate-based cancer immunotherapy which we licensed from Memorial Sloan-Kettering Cancer Center, or MSKCC.  In October 2009, we assigned to OBI certain of our patent rights and know-how related to OPT-88 and OPT-822/821 and also assigned to OBI our rights and obligations under the TSRI and MSKCC agreements. OBI recently filed an IND in Taiwan for OPT-822/821 and plans to initiate a Phase 2/3 clinical trial in Asia in the second half of 2010.  Other potential indications for OPT-822/821 are being evaluated.  After further evaluation, OBI has determined not to pursue additional development of OPT-88.  We maintain a 60% equity interest in OBI and have the right to receive up to $10 million in future milestone payments for OPT-822/821 as well as royalties on net sales of this product.

We were incorporated in November 1998.  Since inception, we have focused on developing our product candidates, including fidaxomicin and Pruvel.  We have never been profitable and have incurred significant net losses since our inception.  As of June 30, 2010, we had an accumulated deficit of $199.0 million.  These losses have resulted principally from costs incurred in connection with research and development activities, including the costs of clinical trial activities associated with our current lead product candidates, license fees and general and administrative expenses.  We expect to continue to incur operating losses for the next several years as we pursue the clinical development, regulatory approval and commercialization of our product candidates, as well as acquire or in-license additional products or product candidates, technologies or businesses that are complementary to our own.

Critical Accounting Policies

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States.  The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosures.  Actual results could

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differ from those estimates. While our significant accounting policies are described in more detail in Note 2 of the Notes to Consolidated Financial Statements appearing elsewhere in this report, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Our license and collaboration agreements contain multiple elements, including non-refundable upfront fees, payments for reimbursement of third-party research costs, payments for ongoing research, payments associated with achieving specific development milestones and royalties based on specified percentages of net product sales, if any. Agreements containing multiple elements are divided into separate units of accounting if certain criteria are met, including whether the delivered element has stand-alone value to the collaborator and whether there is objective and reliable evidence of the fair value of the undelivered obligation(s). The consideration received is allocated among the separate units either on the basis of each unit’s fair value or using the residual method, and the applicable revenue recognition criteria are applied to each of the separate units.

Cash received in advance of services being performed is recorded as deferred revenue and recognized as revenue as services are performed over the applicable term of the agreement.

When a payment is specifically tied to a separate earnings process, revenues are recognized when the specific performance obligation associated with the payment is completed.  Performance obligations typically consist of significant and substantive milestones.  Revenues from milestone payments may be considered separable from funding for research services because of the uncertainty surrounding the achievement of milestones for products in early stages of development.  Accordingly, these milestone payments are allowed to be recognized as revenue if and when the performance milestone is achieved if they represent a substantive earnings process.

In connection with certain research collaboration agreements, revenues are recognized from non-refundable upfront fees, which we do not believe are specifically tied to a separate earnings process, ratably over the term of the agreement or the period over which we have significant involvement or perform services.  Research fees are recognized as revenue as the related research activities are performed.

With respect to revenues derived from reimbursement of direct out-of-pocket expenses for research costs associated with grants, where we act as a principal, with discretion to choose suppliers, bear credit risk and perform part of the services required in the transaction, we record revenue for the gross amount of the reimbursement. The costs associated with these reimbursements are reflected as a component of research and development expense in the consolidated statements of operations.

None of the payments that we have received from collaborators to date, whether recognized as revenue or deferred, are refundable even if the related program is not successful.

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Research and Development

Research and development costs are expensed as incurred and consist primarily of costs associated with clinical trials, compensation, including stock-based compensation, and other expenses related to research and development, including personnel costs, facilities costs and depreciation.

When nonrefundable payments for goods or services to be received in the future for use in research and development activities are made, we defer and capitalize these types of payments. The capitalized amounts are expensed when the related goods are delivered or the services are performed.

Accrued Expenses

A substantial portion of our on-going research and development activities are performed under agreements we enter into with external service providers, including clinical research organizations, or CROs, who conduct many of our research and development activities.  We accrue the costs incurred under these contracts based on factors such as estimates of work performed, milestones achieved, patient enrollment and costs historically incurred for similar contracts.  As actual costs become known, we adjust our accruals.  To date, our accruals have been within management’s estimates, and no material adjustments to research and development expenses have been recognized.  Subsequent changes in estimates may result in a material change in our accruals, which could also materially affect our results of operations.

Stock-Based Compensation

The Financial Accounting Standards Board, or FASB, authoritative guidance requires that share-based payment transactions with employees be recognized in the financial statements based on their fair value and recognized as compensation expense over the vesting period.  We used the modified prospective method and accordingly we did not restate the results of operations for the prior periods.

Total consolidated compensation expense of $2.2 million and $705,000 was recognized in the three months ended June 30, 2010 and 2009, respectively.  Total consolidated compensation expense of $3.2 million and $1.3 million was recognized in the six months ended June 30, 2010 and 2009, respectively. The stock-based compensation expense recognized during the three months and six months ended June 30, 2010 include expense from performance-based stock options and restricted stock units granted to Pedro Lichtinger and Michael Chang in May 2010.

Stock-based compensation expense is estimated as of the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which generally represents the vesting period. We estimate the fair value of our stock options using the Black-Scholes option-pricing model and the fair value of our stock awards and restricted stock units based on the quoted market price of our common stock.

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Estimating the fair value for stock options requires judgment, including estimating stock-price volatility, expected term, expected dividends and risk-free interest rates. Due to Optimer’s and OBI’s limited historical data, the expected volatility incorporates the historical volatility of comparable companies whose share prices are publicly available. The average expected term is calculated using the Simplified Method for Estimating the Expected Term.  Expected dividends are estimated based on Optimer’s and OBI’s dividend history as well as Optimer’s and OBI’s current projections. The risk-free interest rate for Optimer is based on the United States Treasury rate for the U.S. Treasury zero-coupon bonds with maturities similar to the periods approximating the expected terms of the options. The risk-free rate for OBI is based on the Central Bank of China interest rates. These assumptions are updated on an annual basis or sooner if there is a significant change in circumstances that could affect these assumptions.

Equity instruments issued to non-employees are recorded at their fair value and are periodically revalued as the equity instruments vest and are recognized as expense over the related service period.

Results of Operations

Comparison ofThree Months Ended June 30, 2010 and 2009

Collaboration Research and Grant Revenues.  Collaboration research and grant revenues for the three months ended June 30, 2010 and 2009 were $357,000 and $425,000, respectively. The decrease of $68,000, or 16%, was primarily due to a decrease in collaboration research revenue offset by an increase in research funding related to an NIH grant.

Research and Development Expense.  Research and development expense for the three months ended June 30, 2010 and 2009 was $6.4 million and $10.7 million, respectively, a decrease of $4.3 million, or 40%.   The decrease was primarily due to a decrease in fidaxomicin and Pruvel development expenses. Additionally, the prior year’s expenses included certain manufacturing set-up expenses that were reimbursed to Biocon Limited.

Marketing Expense.  Marketing expense for the three months ended June 30, 2010 and 2009 was $656,000 and $266,000, respectively.  The increase of $390,000, or 147%, was primarily due to increased market research efforts on our fidaxomicin program.

General and Administrative Expense.  General and administrative expense for the three months ended June 30, 2010 and 2009 was $3.7 million and $1.9 million, respectively.  The increase of $1.8 million, or 95%, was due to higher compensation expenses, including $1.6 million of stock compensation expense, an increase of $1.3 million over the same period in the prior year.

Interest Income and Other, net.  Net interest income and other for the three months ended June 30, 2010 and 2009 was $54,000 and $88,000, respectively.  The decrease was primarily due to lower interest rates on cash, cash equivalents and investments.

Comparison of Six Months Ended June 30, 2010 and 2009

Collaboration Research and Grant Revenues.  Collaboration research and grant revenues for the six months ended June 30, 2010 and 2009 were $655,000 and $508,000, respectively. The increase of $147,000, or 29%, was primarily due to an increase in research funding related to an NIH grant.

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Research and Development Expense.  Research and development expense for the six months ended June 30, 2010 and 2009 was $17.8 million and $19.7 million, respectively, a decrease of $1.9 million, or 10%.   The decrease was primarily due to a decrease in fidaxomicin and Pruvel development expenses and manufacturing set-up expenses reimbursable to Biocon Inc. incurred in the prior year.  The decrease was offset by a $5.0 million milestone paid to Par for the successful completion of the second fidaxomicin Phase 3 trial.

Marketing Expense.  Marketing expense for the six months ended June 30, 2010 and 2009 was $925,000 and $461,000, respectively.  The increase of $464,000, or 101%, was primarily due to increased market research efforts on our fidaxomicin program.

General and Administrative Expense.  General and administrative expense for the six months ended June 30, 2010 and 2009 was $6.1 million and $3.9 million, respectively.  The increase of $2.2 million, or 56%, was due to higher compensation expenses, including $2.1 million of stock compensation expense, an increase of $1.5 million over the same period in the prior year, as well as higher consulting expenses.

Interest Income and Other, net.  Net interest income and other for the six months ended June 30, 2010 and 2009 was $78,000 and $278,000, respectively.  The decrease was primarily due to lower interest rates on cash, cash equivalents and investments.

Liquidity and Capital Resources

Sources of Liquidity

Since inception, our operations have been financed primarily through the sale of equity securities.  Through June 30, 2010, we received gross proceeds of approximately $256.2 million from the sale of shares of our preferred and common stock as follows:

·in May 2000, we sold a total of 1.6 million shares of Series A preferred stock for proceeds of $3.4 million;

·from March 2001 to December 2001, we sold a total of 4.1 million shares of Series B preferred stock for proceeds of $32.2 million;

·in April 2005, we sold a total of 1.5 million shares of Series C preferred stock for proceeds of $12.0 million;

·from April 2005 to November 2005, we sold a total of 2.9 million shares of Series D preferred stock for proceeds of $22.3 million;

·in February 2007, we sold a total of 7.0 million shares of our common stock in connection with our initial public offering for proceeds of $49.0 million;

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·in October 2007, we sold a total of 4.6 million shares of our common stock in connection with a private placement offering for proceeds of $35.9 million;

·in July 2008, we sold a total of 1.7 million shares of our common stock in a registered direct offering for proceeds of $14.7 million;

·      in March 2009, we sold a total of 3.3 million shares of our common stock and warrants to purchase up to an aggregate of 91,533 shares of our common stock in a registered direct offering for proceeds of $32.9 million; and

·in March 2010, we sold a total of 4.9 million shares of our common stock in a public offering for proceeds of $53.8 million.

Until required for operations, we invest a substantial portion of our available funds in money market funds, corporate debt securities, United States government instruments and other readily marketable debt instruments, all of which are investment-grade quality.  We have established guidelines relating to diversification and maturities of our investments to preserve principal and maintain liquidity.

Cash Flows

As of June 30, 2010, cash, cash equivalents and short-term investments totaled approximately $66.6 million as compared to $38.2 million as of December 31, 2009, an increase of approximately $28.4 million.  The increase in our cash, cash equivalent and short-term investments was primarily due to the $51.2 million raised in a follow-on offering of our common stock in March 2010, offset by the use of cash for our operating expenses.  Of the $66.6 million, $5.0 million was held by OBI as of June 30, 2010.

We cannot be certain if, when or to what extent we will receive cash inflows from the commercialization of our product candidates.  We expect our development expenses to be substantial and to increase over the next few years as we advance the development of our product candidates and prepare for regulatory submissions and commercialization.

In February 2007, we regained worldwide rights to fidaxomicin from Par under a prospective buy-back agreement.  We paid Par a one-time $5.0 million milestone payment in the quarter ended June 30, 2010 for our successful completion of the second pivotal Phase 3 trial for fidaxomicin.  We are also obligated to pay Par a 5% royalty on net sales by us or our affiliates of fidaxomicin in North America and Israel, and a 1.5% royalty on net sales by us or our affiliates of fidaxomicin in the rest of the world.  In addition, in the event we license our right to market fidaxomicin in the rest of the world, we will be required to pay Par a 6.25% royalty on net revenues we receive related to fidaxomicin.  We are obligated to pay each of these royalties, if any, on a country-by-country basis for seven years commencing on the applicable commercial launch in each such country.

In May 2010, we entered into a long-term supply agreement with Biocon for the commercial manufacture of fidaxomicin’s active pharmaceutical ingredient, or API. Pursuant to the agreement, Biocon agreed to manufacture and supply to us, up to certain limits, fidaxomicin API

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and, subject to certain conditions, we agreed to purchase from Biocon at least a portion of our requirements for fidaxomicin API in the United States and Canada.  We previously paid to Biocon $2.5 million for certain equipment purchases and manufacturing scale-up activities, and we may be entitled to recover up to $1.5 million of this amount under the Supply Agreement in the form of discounted prices for fidaxomicin API.  We may be obligated to make additional payments to Biocon if we fail to meet minimum purchase requirements after Biocon has dedicated certain manufacturing capacity to the production of fidaxomicin API and if Biocon is unable to manufacture alternative products with the dedicated capacity.

In June 2004, we entered into a license agreement with Nippon Shinyaku to which we acquired the non-exclusive right to import and purchase Pruvel, and the exclusive right (with the right to sublicense), within the United States, to develop, make, use, offer to sell, sell and license products suitable for consumption by humans containing Pruvel.  Under the terms of the agreement, we will be required to pay Nippon Shinyaku a milestone payment in the amount of $1.0 million upon the submission, if any, of a NDA for Pruvel in the United States.

In October 2008, our Compensation Committee adopted a Severance Benefit Plan covering certain eligible employees of the Company, including executive officers.  In May 2010, the Severance Benefit Plan was amended and restated.  Pursuant to the plan, upon an involuntary termination other than for cause or a constructive termination, an eligible employee may be entitled to receive specified severance benefits. The benefits may include cash severance payments and acceleration of stock award vesting.  The level of benefits provided under the plan depends upon an eligible employee’s position and years of service, and whether the termination is related to a change in control.

In October 2009, we entered into certain transactions with our subsidiary, OBI, pursuant to which we assigned certain intellectual property rights and license agreements to OBI related to our OPT-88 and OPT-822/821 product candidates.  In connection with these transactions, we entered into a financing agreement with OBI and a group of new investors.  Under the terms of the financing agreement, if OBI achieves certain development milestones with respect to OPT-88 and OPT-822/821, we and the group of new investors may be required to purchase approximately an additional $8.6 million and $5.7 million, respectively, of new OBI common shares. In light of OBI’s decision to not pursue further development of OPT-88, we do not expect that we will be required to purchase the additional OBI common shares until such time, if ever, that we and the group of new investors agree to waive the milestone requirements with respect to OPT-88.

Funding Requirements

Our future capital uses and requirements depend on numerous factors including, but not limited to, the following:

·the costs of preparing applications for regulatory approvals and the timing of such approvals;

·the costs of establishing sales or distribution capabilities and the timing of such efforts;

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·our decision to conduct future clinical trials, including the timing and progress of such clinical trials;

·our ability to establish and maintain strategic collaborations, including licensing and other arrangements;

·the costs involved in prosecuting, enforcing or defending patent claims or other intellectual property rights;

·the success of the commercialization of our products; and

·the extent to which we in-license, acquire or invest in other indications, products, technologies and businesses.

We believe that our existing cash and cash equivalents will be sufficient to meet our capital requirements for at least the next 12 months.

Until we can generate significant cash from our operations, we expect to continue to fund our operations with existing cash resources that were primarily generated from the proceeds of offerings of our equity securities and collaborations and government grants.  In addition, we may finance future cash needs through the sale of additional equity securities, strategic collaboration agreements and debt financing.  However, we may not be successful in completing future equity financings, in entering into additional collaboration agreements, in receiving milestone or royalty payments under new or existing collaboration agreements, in obtaining new government grants or in obtaining debt financing.  In addition, we cannot be sure that our existing cash and investment resources will be adequate, that financing will be available when needed or that, if available, financing will be obtained on terms favorable to us or our stockholders.  The credit markets and the financial services industry have been experiencing a period of unprecedented turmoil which has generally made equity and debt financing more difficult to obtain, and may negatively impact our ability to complete financing transactions.  Having insufficient funds may require us to delay, scale-back or eliminate some or all of our development programs, relinquish some or even all of our rights to product candidates at an earlier stage of development or renegotiate less favorable terms than we would otherwise choose.  Failure to obtain adequate financing also may adversely affect our ability to operate as a going concern.  If we raise funds by issuing equity securities, substantial dilution to existing stockholders would likely result.  If we raise funds by incurring additional debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict our ability to operate our business.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Cash Equivalents and Marketable Securities Risk

Our cash and cash equivalents and short-term investments as of June 30, 2010 consisted primarily of money market funds and United States government instruments and other readily marketable debt instruments.  Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates.  The primary objective of

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our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk.  A hypothetical ten percent change in interest rates during the quarter ended June 30, 2010 would have resulted in approximately a $11,000 change in net loss. Accordingly, we would not expect our operating results or cash flows to be affected to any significant degree by a sudden change in market interest rates applicable to our securities portfolio.  In general, money market funds are not subject to market risk because the interest paid on such funds fluctuates with the prevailing interest rate.

Fair Value Measurements

All of our investment securities are available-for-sale securities and are reported on the consolidated balance sheet at market value except for one auction rate preferred security, or ARPS, with a par value of approximately $1.0 million. As a result of the negative conditions in the global credit markets, our ARPS is currently not liquid.  In the event we need to access the funds that are in an illiquid state, we will not be able to do so without a loss of principal, until the security is redeemed by the issuer or it matures.

Foreign Currency Risk

We have operated primarily in the United States of America and most transactions during the three months and six months ended June, 2010 have been made in U.S. dollars. Accordingly, we have not had any material exposure to foreign currency rate fluctuations. We do not have any foreign currency hedging instruments in place.

We have conducted clinical trials in Europe in conjunction with INC Research, our CRO, where we had clinical sites being monitored by clinical research associates. While invoices relating to these clinical trials are generally denominated in U.S. dollars, our financial results could be affected by factors such as inflation in foreign currencies, in relation to the U.S. dollar, in markets where these vendors have assisted us in conducting these clinical trials.

Certain transactions related to us and our subsidiary, OBI, are denominated primarily in Taiwan dollars.  As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets where we conduct business, including the impact of the existing crisis in the global financial markets in such countries and the impact on both the U.S. dollar and the Taiwan dollar.

We do not use derivative financial instruments for speculative purposes. We do not engage in exchange rate hedging or hold or issue foreign exchange contracts for trading purposes. Currently, we do not expect the impact of fluctuations in the relative fair value of other currencies to be material.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of disclosure controls and procedures. As required by Exchange Act Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1a. Risk Factors

The risk factors set forth below with an asterisk (*) next to the title are new risk factors or risk factors containing changes, including any material changes, from the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC.

Risks Related to Our Business

We are a company with limited sources of revenue, and we are largely dependent on the success of our lead product candidate fidaxomicin and, to a lesser degree, our other lead product candidate Pruvel.

We are a biopharmaceutical company with no products approved for commercial sale and, to date, we have not generated any revenues from product sales.  Our ability to generate future revenues depends heavily on our success in:

·      developing and securing U.S. and/or foreign regulatory approvals for fidaxomicin and Pruvel and, to a lesser extent, other product candidates;

·      commercializing, alone or with a partner, any product candidates for which we receive approval from the FDA and/or comparable foreign regulatory authorities; and

·      generating a pipeline of innovative product candidates utilizing our drug discovery platform or through licensing strategies.

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Our product candidates will generally require extensive clinical study and evaluation, regulatory approval in multiple jurisdictions, substantial investment and significant marketing efforts before we generate any revenues from product sales.  We are not permitted to market or promote our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities.  We have not submitted an NDA, or received marketing approval for either fidaxomicin or Pruvel, and we cannot be certain that either of these product candidates will receive regulatory approval or be successful in any future clinical trials.  If we do not receive regulatory approval for and successfully commercialize fidaxomicin and Pruvel, we will not generate any revenues from product sales for several years, if at all, and we may not be able to continue our operations.

We believe our initial success will be more dependent on fidaxomicin than Pruvel, because we believe that the market for the treatment of CDI is larger than the market for the treatment of infectious diarrhea.  Even if we successfully obtain regulatory approval to market fidaxomicin or Pruvel, our revenues for either drug candidate will be dependent upon the size of the markets in the territories for which we have commercial rights and our ability to successfully commercialize our drug candidates in those markets, either alone or with a partner.  If the markets for the treatment of CDI or infectious diarrhea are not as significant as we estimate or we are otherwise unsuccessful in commercializing our drug candidates, our business and prospects will be harmed.

We have incurred significant operating losses since inception and anticipate that we will incur continued losses for the foreseeable future.*

We have experienced significant operating losses since our inception in 1998.  As of June 30, 2010, we had an accumulated deficit of approximately $199.0 million.  We have generated no revenues from product sales to date.  We have funded our operations through June 30, 2010 from the sale of approximately $256.2 million of our securities and through research funding pursuant to collaborations with partners or government grants.  We expect to continue to incur substantial additional operating losses for the next several years as we prepare submissions for regulatory approval of our lead product candidates, build our marketing and sales capabilities and continue our clinical trial and research and development initiatives.  Because of the numerous risks and uncertainties associated with developing, obtaining regulatory approval for and commercializing our product candidates, we are unable to predict the extent of any future losses.  We may never successfully commercialize our product candidates and thus may never have any significant future revenues or achieve and sustain profitability.

If we fail to obtain additional financing, we may be unable to commercialize fidaxomicin and Pruvel or develop and commercialize other product candidates, or continue our other research and development programs.*

We will require additional capital to commercialize our current lead product candidates, fidaxomicin and Pruvel.  We cannot be certain that additional funding will be available on acceptable terms, or at all.  Since 2008, the credit markets and the financial services industry have been experiencing a period of unprecedented turmoil which has generally made equity and debt financing more difficult to obtain, and may negatively impact our ability to complete

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financing transactions.  To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution.  Any debt financing, if available, may require us to pledge our assets as collateral or involve restrictive covenants, such as limitations on our ability to incur additional indebtedness, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could negatively impact our ability to conduct our business.  If we are unable to raise additional capital when required or on acceptable terms, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or one or more of our other research and development initiatives.  We also could be required to:

·      seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available; or

·      relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves.

Any of the above events could significantly harm our business and prospects and could cause our stock price to decline.

We do not currently have sufficient resources to commercialize fidaxomicin and Pruvel on our own. If we are unable to raise additional capital or are unable to effectively collaborate with one or more partners for the commercialization of fidaxomicin or Pruvel, we will not generate significant revenues from sales of these products and our business will be materially harmed.

We are dependent on third party collaborators and we may be unable to enter into future collaboration agreements or we may have disagreements with these collaborators.

We currently plan to build our own marketing and sales force for fidaxomicin in the United States and are evaluating our commercialization options for Pruvel in the United States, and we are seeking one or more partners for the commercialization of fidaxomicin outside of the United States.  We cannot be certain that we will be successful in attracting any such partners.  If we were not able to find appropriate partners for the continued development and commercialization of fidaxomicin, or our other product candidates, we would either have to delay further development and commercialization initiatives,  which would harm our business and prospects, or raise significant additional funds to develop clinical and commercialization capabilities internally.

We are subject to a number of additional risks associated with our dependence on collaborations with third parties.  Conflicts may arise between us and collaborators, such as conflicts concerning the payment or reimbursement of development and commercialization costs, the strategies for developing and commercializing product candidates subject to the collaboration, the achievement of milestones, the interpretation of financial provisions, the ownership of intellectual property developed during the collaboration or the interpretation of clinical data.  If any such conflicts arise, a collaborator could act in its own self-interest, which may be adverse to our best interests.  Any such disagreement between us and a collaborator could result in one or

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more of the following, each of which could delay or prevent the development or commercialization of fidaxomicin, and our other product candidates, and in turn prevent us from generating sufficient revenues to achieve or maintain profitability:

·      reductions in the payment of royalties or other payments we believe are due pursuant to the applicable collaboration arrangement or agreement;

·      uncertainties regarding ownership of intellectual property rights arising from our collaborative activities, which could prevent us from entering into additional collaborations and commercializing such rights;

·      delays in further development or commercialization activities by us or a collaborator if we and a collaborator are unable to agree on development or commercialization activities or the associated costs of these activities;

·      actions taken by a collaborator inside or outside our collaboration which could negatively impact our rights or benefits under our collaboration; or

·      unwillingness on the part of a collaborator to keep us informed regarding the progress of its development and commercialization activities or to permit public disclosure of the results of those activities.

In addition, a collaborator may not have or devote sufficient resources to develop and commercialize our product candidates, may elect to underfund, discontinue or may not properly perform pre-clinical studies or clinical trials, or may divert resources to other programs that are potentially competitive with our product candidates.

If we are unable to obtain FDA approval of our product candidates, we will not be able to commercialize them in the United States.*

We need FDA approval prior to marketing our product candidates in the United States.  If we fail to obtain FDA approval to market our product candidates, we will be unable to sell our product candidates in the United States, which will significantly impair our ability to generate any revenues.

This regulatory review and approval process, which includes evaluation of pre-clinical studies and clinical trials of our product candidates as well as the evaluation of our manufacturing processes and our third-party contract manufacturers’ facilities, is lengthy, expensive and uncertain.  To receive approval for a product candidate, we must, among other things, demonstrate with substantial evidence from well-controlled clinical trials that the product candidate is both safe and effective for each indication for which approval is sought.  Satisfaction of the approval requirements typically takes several years and the time needed to satisfy them may vary substantially, based on the type, complexity and novelty of the pharmaceutical product.  We cannot predict if or when we might receive regulatory approvals for any of our product candidates currently under development.

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We may also experience delays in submitting NDAs to the FDA and/or delays in the FDA review of our NDA submissions.  If we experience difficulty or delays in acquiring and assembling the extensive information needed to support an NDA filing for fidaxomicin or Pruvel, our NDA submissions with respect to these product candidates may be impaired or delayed, which could negatively impact our or a collaborator’s ability to successfully commercialize these product candidates.  After we submit an NDA filing with the FDA, we may also experience delays in the FDA’s review process.  As part of the Prescription Drug User Fee Act, or PDUFA, the FDA has a goal to review and act on a percentage of all submissions in a given time frame. The FDA has missed a portion of their PDUFA goals, and it is unknown whether the review of an NDA filing for fidaxomicin or Pruvel, or for any of our other drug candidates, will be completed within the FDA review goals or will be delayed. Moreover, the duration of the FDA’s review may depend on the number and type of other NDAs that are submitted with the FDA around the same time period.

Even if our product candidates receive regulatory approval, any approvals that we obtain may not cover all of the clinical indications for which we are seeking approval, or could contain significant limitations in the form of narrow indications, warnings, precautions or contra-indications with respect to conditions of use.  In such an event, our ability to generate revenues from such products would be greatly reduced and our business would be harmed.

The FDA has substantial discretion in the approval process and may either refuse to consider our applications for substantive review or may form the opinion after review of our data that our applications are insufficient to allow approval of our product candidates.  If the FDA does not consider or approve an application that we submit, it may require that we conduct additional clinical, pre-clinical or manufacturing validation studies and submit that data before it will reconsider our application.  Depending on the extent of these or any other studies, approval of any applications that we submit may be delayed by several years, or may require us to expend more resources than we have available.  For example, we intend to rely in part on certain legacy data from a third party to support an NDA for Pruvel. If the FDA deems this data to be insufficient, it may delay our submission of a NDA for Pruvel and could require us to complete additional studies.  It is also possible that additional studies, if performed and completed, may not be successful or considered sufficient by the FDA for approval or even to make our applications approvable.  If any of these outcomes occur, we may be forced to abandon one or more of our future applications for approval, which might significantly harm our business and prospects.

Even after completing clinical trials and other studies, our product candidates could fail to receive regulatory approval for many reasons, including the following:

·      the results of our clinical trials and other studies may not demonstrate to the satisfaction of or meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for any indication;

·      the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials or other studies;

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·      the results of our clinical trials or other studies may not demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

·      the results of our clinical trials or other studies may not demonstrate that a product candidate presents an advantage over existing therapies, or over placebo in any indications for which the FDA requires a placebo-controlled trial;

·      the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from clinical trials or other studies;

·      the data collected from clinical trials and other studies of our product candidates may not be sufficient to support the submission of an NDA or other submission or to obtain regulatory approval in the United States or elsewhere; and

·      the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical and other study data insufficient for approval.

Although the FDA has granted Fast Track status to fidaxomicin and selected it for participation in a CMA Pilot 2 Program, we cannot be certain that we will receive any benefits from these designations or that the designations will expedite regulatory review or approval of fidaxomicin.  Participation in these programs has not eliminated any phase of clinical development.  Moreover, our participation in the CMA Pilot 2 Program has involved and will continue to involve frequent discussions and other interactions with the staff of the FDA.  These frequent discussions could subject fidaxomicin to a greater level of scrutiny than it might otherwise have received or require us to make more frequent submissions and endure other burdens that would have been avoided if we had not participated in the program.  Therefore, despite any potential benefits of fidaxomicin’s Fast Track and CMA Pilot 2 Program designations, significant uncertainty remains regarding the clinical development and regulatory approval process for fidaxomicin.

If we fail to gain and/or maintain marketing approvals from regulatory authorities in international markets for fidaxomicin and any future product candidates for which we have rights in international markets, our market opportunities will be limited.

Sales of our product candidates outside of the United States will be subject to foreign regulatory requirements governing clinical trials and marketing approval.  Even if the FDA grants marketing approval for a product candidate, comparable regulatory authorities of foreign countries must also approve the marketing of the product candidate in those countries.  This is important for the commercialization of fidaxomicin for which we currently have exclusive worldwide marketing rights.  Obtaining foreign regulatory approvals could result in significant delays, difficulties and costs for us and require additional pre-clinical studies or clinical trials which would be costly and time consuming.  Regulatory requirements can vary widely from country to country and could delay the introduction of our products in those countries.  Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not guarantee regulatory approval will be obtained in any other country.  In addition, our failure to obtain regulatory approval in any country may

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delay or have negative effects on the process for regulatory approval in others.  For example, if our MAA filing for fidaxomicin is rejected or unanticipated concerns are raised by the EMA during its review, a subsequent NDA submission for fidaxomicin could be negatively impacted. Other than Pruvel, which is sold by other parties in Japan, Italy and certain other European countries, none of our product candidates is approved for sale in any international market for which we have rights. If we fail to comply with regulatory requirements in our international markets or to obtain and maintain required approvals, our target market will be reduced and our ability to generate revenues will be diminished, which would significantly harm our business, results of operations and prospects.

We currently have no sales organization and have no experience as a company in marketing drug products.  If we are unable to expand our marketing capabilities and establish sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenues.

We currently have a limited marketing organization and do not have a sales organization for marketing, sales and distribution of pharmaceutical products. In order to commercialize any products, we must build our marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. We plan to build our own marketing and sales force to commercialize fidaxomicin in the United States and are seeking third-party partners outside of the United States. We own exclusive rights to commercialize Pruvel in the United States, and are evaluating our commercialization options for Pruvel in the United States. The establishment and development of our own sales force to market any products we may develop will be expensive and time consuming and could delay any product launch, and we cannot be certain that we will be able to successfully develop this capability. We do not currently have sufficient funds to develop a sales force and other resources that we believe would be necessary to adequately market fidaxomicin and Pruvel in the United States. We will also have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel. To the extent we rely on third parties to commercialize our products, if any, we may receive less revenues than if we commercialized these products ourselves. In addition, we may have little or no control over the sales efforts of any third parties involved in commercializing our products. In the event we are unable to develop our own marketing and sales force or collaborate with a third-party marketing and sales organization, we would not be able to commercialize our product candidates which would negatively impact our ability to generate product revenues.

We may not be able to enter into acceptable agreements to commercialize fidaxomicin outside of the United States or if, needed, adequately build our own marketing and sales capabilities.

If appropriate regulatory approvals are obtained, we intend to commercialize fidaxomicin outside of the United States through collaboration arrangements with third parties.  We may be unable to enter into collaboration arrangements in international markets.  In addition, there can be no guarantee that if we enter into these collaboration arrangements with other parties that they will be successful or result in more revenues than we could obtain by marketing fidaxomicin on our own. If we are unable to enter into collaboration arrangements for our products or develop an

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effective international sales force, our ability to generate product revenues would be limited, which would adversely affect our business, financial condition, results of operations and prospects. If we are unable to enter into such collaboration arrangements, we may need to develop our own marketing and sales force to market fidaxomicin in a number of countries in Europe and Latin America to hospital-based and long-term care physicians.  These efforts may not be successful as we have no relationships among such hospital-based and long-term care physicians and do not currently have sufficient funds to develop an adequate sales force in these regions.  There is no guarantee that we will be able to develop an effective international sales force to successfully commercialize our products in these international markets.  If we cannot commercialize fidaxomicin, we will have to rely solely on Pruvel and earlier stage product candidates for any future revenues, and our ability to achieve and sustain profitability will be materially harmed.

If our product candidates are unable to compete effectively with branded and generic antibiotics, our commercial opportunity would be reduced or eliminated.

If approved, our lead product candidates will compete against both branded antibiotic therapies, such as Vancocin Pulvules with respect to fidaxomicin and Xifaxan®/rifaxamin with respect to Pruvel, and generic antibiotics such as metronidazole and oral vancomycin with respect to fidaxomicin and ciprofloxacin with respect to Pruvel.  In addition, we anticipate that fidaxomicin will compete with other antibiotic and anti-infective product candidates currently in development for the treatment of CDI. Many of these products have been or will be developed and marketed by major pharmaceutical companies, who have significantly greater financial resources and expertise in research and development, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, manufacturing and marketing approved products than we do.  As a result, these companies may obtain regulatory approval more rapidly than we are able to and may be more effective in selling and marketing their products as well.  Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies.

We anticipate that, if approved, fidaxomicin and Pruvel will face increasing competition in the form of generic versions of branded products of competitors that will lose their patent exclusivity.  For example, fidaxomicin, if approved, will immediately face steep competition from an inexpensive generic form of metronidazole.  Fidaxomicin would currently face generic oral vancomycin competition in Europe and in the future may face competition from generic oral vancomycin in the United States as well.  Generic antibiotic therapies typically are sold at lower prices than branded antibiotics and are generally preferred by managed care providers of health services.  For example, because metronidazole is sold at such a low price, we believe it will be difficult to sell fidaxomicin as a first-line therapy for the treatment of CDI.  If we are unable to demonstrate to physicians and patients that, based on experience, clinical data, side-effect profiles and other factors, our products are preferable to these generic antibiotic therapies, we may never generate meaningful product revenues.  In addition, many antibiotics experience bacterial resistance over time because of their continued use.  There can be no guarantee that bacteria would not develop resistance to fidaxomicin, Pruvel or any of our other product candidates.  Our commercial opportunity would also be reduced or eliminated if our competitors develop and commercialize generic or branded antibiotics that are safer, more effective, have fewer side effects or are less expensive than our product candidates.

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We currently depend, and will in the future continue to depend, on third parties to manufacture our product candidates, including fidaxomicin and Pruvel.  If these manufacturers fail to provide us and our collaborators with adequate supplies of clinical trial materials and commercial product or fail to comply with the requirements of regulatory authorities, we may be unable to develop or commercialize our products. *

We outsource all manufacturing of clinical trial supplies of our product candidates to third parties.  We seek to establish long-term supply arrangements with third-party contract manufacturers. For example, in May 2010, we entered into a long-term supply agreement with Biocon for the commercial manufacturing of the fidaxomicin API.   We intend to continue outsourcing the manufacture of our product candidates to third parties for any future clinical trials and large-scale commercialization of any product candidates that receive regulatory approval and become commercial drugs.

Our ability to develop and commercialize fidaxomicin and Pruvel and any other product candidates depends in part on our ability to arrange for collaborators or other third parties to manufacture our products at a competitive cost, in accordance with strictly enforced regulatory requirements and in sufficient quantities for clinical testing and eventual commercialization.  We have not yet manufactured commercial batches of fidaxomicin, Pruvel or any of our other product candidates.  Collaborators or third-party manufacturers that we select to manufacture our product candidates for clinical testing or on a commercial scale may encounter difficulties with the small- and large-scale formulation and manufacturing processes required for such manufacture.  Such difficulties could result in delays in clinical trials, regulatory submissions and approvals, or commercialization of our product candidates.  The inability of us or our collaborators to enter into and maintain agreements with third-party manufacturers on acceptable terms would cause shortages of clinical trial supplies of our product candidates, thereby delaying or preventing regulatory approval and/or commercialization of the affected product candidate, and adversely affecting our ability to generate revenues.  Specifically, Biocon is currently our sole supplier of fidaxomicin API.  While we work closely with Biocon to try to ensure continuity of supply while maintaining high quality and reliability, we cannot guarantee that these efforts will be successful.  A reduction or interruption in our supply of fidaxomicin API from Biocon, and an inability to develop alternative sources for such supply, could adversely affect our ability to manufacture fidaxomicin in a timely or cost effective manner to make our related product sales. Further, development of large-scale manufacturing processes will require additional validation studies, which the FDA must review and approve, and the time it will take us or a third party manufacturer to develop such large-scale processes and capabilities may delay any product launch following regulatory approval.  Even if we are able to establish additional or replacement manufacturers, identifying these sources and entering into definitive supply agreements and obtaining regulatory approvals may involve a substantial amount of time and cost and such supply arrangements may not be available on acceptable economic terms.

In addition, we, our collaborators and other third-party manufacturers of our products must comply with strictly enforced current good manufacturing practices, or cGMP, requirements enforced by the FDA through its facilities inspection program.  These requirements include

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quality control, quality assurance and the maintenance of records and documentation.  We currently rely on Biocon to manufacture fidaxomicin API and rely on Patheon, Inc. to manufacture the drug product supplies.  As such, Biocon and Patheon will be subject to ongoing periodic unannounced inspections by the FDA and other agencies for compliance with current cGMP, and similar foreign standards. We also rely on Nippon Shinyaku, which contracts with Juzen, as well as Angelini and Patheon, to manufacture Pruvel drug supplies.  The manufacturing facilities of Biocon, Juzen and Patheon have been inspected and approved by the FDA for other companies’ drug products; however, none of Biocon’s, Juzen’s nor Patheon’s facilities have been inspected by the FDA for the manufacture of our drug supplies.  Angelini’s facilities have not been inspected or approved by the FDA.  We or other third-party manufacturers of our products may be unable to comply with cGMP requirements and with other FDA, state, local and foreign regulatory requirements.  We and our collaborators have little control over third-party manufacturers’ compliance with these regulations and standards.  A failure to comply with these requirements by our third-party manufacturers, including Biocon, Juzen, Angelini, and Patheon could result in the issuance of untitled letters and/or warning letters from authorities, as well as sanctions being imposed on us, including fines and civil penalties, suspension of production, suspension or delay in product approval, product seizure or recall or withdrawal of product approval.  In addition, we have no control over these manufacturers’ ability to maintain adequate quality control, quality assurance and qualified personnel.  If the safety of any quantities supplied by third parties is compromised due to their failure to adhere to applicable laws or for other reasons, we may not be able to obtain or maintain regulatory approval for or successfully commercialize one or more of our product candidates, which would significantly harm our business and prospects.

The commercial success of our product candidates will depend upon attaining significant market acceptance of these product candidates among physicians, patients, healthcare payors and the medical community.

Even if our product candidates are approved by the appropriate regulatory authorities for marketing and sale, physicians may not prescribe our product candidates, which would prevent us from generating revenues or becoming profitable.  Market acceptance of fidaxomicin, Pruvel and any of our future product candidates by physicians, patients and healthcare payors will depend on a number of factors, many of which are beyond our control, including:

·      the clinical indications for which the product candidate is approved;

·      acceptance by physicians and patients of each product candidate as a safe and effective treatment;

·      perceived advantages over alternative treatments;

·      the cost of treatment in relation to alternative treatments, including numerous generic antibiotics;

·      the extent to which the product candidate is approved for inclusion on formularies of hospitals and managed care organizations;

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·      the extent to which bacteria develops resistance to the product candidate, thereby limiting its efficacy in treating or managing infections;

·      whether the product candidate is designated under physician treatment guidelines as a first-line therapy or as a second- or third-line therapy for particular infections;

·      the availability of adequate reimbursement by third parties, such as insurance companies and other healthcare payors;

·      limitations or warnings contained in a product’s FDA-approved labeling;

·      relative convenience and ease of administration; and

·      prevalence and severity of adverse side effects.

Because fidaxomicin is a differentiated antibiotic for the treatment of CDI, it may encounter additional hurdles to market acceptance by physicians, who may be skeptical about its clinical benefits, or healthcare payors, who may resist reimbursing a premium-priced therapeutic particularly in light of the availability of generic alternatives.

We plan to target our marketing of Pruvel primarily to high-prescribing physicians of antibiotics for infectious diarrhea, including those at travel clinics.  Because of the number of these physicians in the United States, we will be required to expend significant time and resources to obtain broad market acceptance of Pruvel among these physicians.  We do not have experience in marketing to this population of physicians and do not currently have the resources to be able to conduct such marketing efforts on our own.  As such, we may not be successful in any of these marketing efforts which would limit the commercial success of Pruvel.

In addition, in July 2008 the FDA notified makers of fluoroquinolone antimicrobial drugs for systemic use that a boxed warning is necessary for those products due to the risk of tendonitis and tendon rapture.  As prulifloxacin, the generic name for Pruvel, is a fluoroquinolone antibiotic it may be required to carry a black box warning.  Although these risks have been described for years on the product label of many fluoroquinolones, the increased awareness of this risk may impact the market potential for the fluoroquinolone class of antibiotics, including prulifloxacin.  Furthermore, because prulifloxacin has already been marketed by other companies outside the United States to treat a wide range of bacterial infections, including infectious diarrhea, urinary tract infections and respiratory tract infections, patients may be able to obtain prulifloxacin from these other companies, and not from us, if prulifloxacin is approved in the market where the patient is located.  We have rights to Pruvel only in the United States.  These patients may obtain prulifloxacin in these other markets from other companies even if these patients are from the United States.

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If we fail to develop and commercialize other products or product candidates, we may be unable to grow our business.

A key element of our strategy is to commercialize a portfolio of new anti-infective products in addition to fidaxomicin and Pruvel.  As a significant part of our growth strategy, we intend to develop and commercialize, independently and/or through collaboration partners, additional products and product candidates through our discovery research program using our proprietary technology, including OPopS.  The success of this strategy depends upon our ability to identify, select and acquire pharmaceutical product candidates and products that fit into our development plans on terms that are acceptable to us. To supplement this strategy, we may also obtain rights to additional product candidates from third parties through acquisition or in-licensing transactions.

Any product candidate we identify or to which we acquire rights will likely require additional development efforts prior to commercial sale, including pre-clinical studies, extensive clinical testing and approval by the FDA and applicable foreign regulatory authorities.  All product candidates are prone to the risks of failure that are inherent in pharmaceutical product development, including the possibility that the product candidate will not be shown to be sufficiently safe and/or effective for approval by regulatory authorities.  In addition, we cannot assure you that any such products that are approved will be manufactured or produced economically, successfully commercialized or widely accepted in the marketplace or be more effective than other commercially available alternatives.

A significant portion of the research that we are conducting involves new and unproven technologies.  Research programs to identify new disease targets and product candidates require substantial technical, financial and human resources whether or not we ultimately identify any candidates.  Our research programs may initially show promise in identifying potential product candidates, yet fail to yield product candidates for clinical development.

If we are unable to develop suitable potential product candidates through internal research programs or by obtaining rights to novel therapeutics from third parties, our business and prospects will suffer.

Our focus on drug discovery and development using our technology platform, including our patented proprietary OPopS drug discovery platform, is novel and unique.  As a result, we cannot be certain that our product candidates will produce commercially viable drugs that safely and effectively treat infectious diseases or other diseases.  To date, our technology platform has yielded only a small number of anti-infective product candidates.  In addition, we do not have significant clinical data with respect to any of these potential product candidates.  Even if we or our collaborators are successful in completing clinical development and receiving regulatory approval for one commercially viable drug for the treatment of one disease using our technology platform and carbohydrate chemistry focus, we cannot be certain that we or our collaborators will also be able to develop and receive regulatory approval for other drug candidates for the treatment of other forms of that disease or other diseases.  If we fail to develop and commercialize, independently and/or through collaborators, viable drugs using our platform and specialized focus, we will not be successful in developing a pipeline of potential product candidates to follow fidaxomicin and Pruvel, and our business prospects would be significantly harmed.

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Our future growth depends on our ability to identify and acquire or in-license products.  If we do not successfully identify and acquire or in-license related product candidates or integrate them into our operations, we may have limited growth opportunities.

We in-licensed the U.S. rights to Pruvel from Nippon Shinyaku who, along with Meiji-Seika Kaisha Ltd., conducted the initial development of this product candidate.  An important part of our business strategy is to continue to develop a pipeline of product candidates by acquiring or in-licensing products, businesses or technologies that we believe are a strategic fit for our business.  Future in-licenses or acquisitions, however, may entail numerous operational and financial risks, including:

·      exposure to unknown liabilities;

·      disruption of our business and diversion of our management’s time and attention to develop acquired products or technologies;

·      incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;

·      higher than expected acquisition and integration costs;

·      increased amortization expenses;

·      difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

·      impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

·      inability to retain key employees of any acquired businesses.

We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them into our current infrastructure.  In particular, we may compete with larger pharmaceutical companies and other competitors in our efforts to establish new collaborations and in-licensing opportunities.  These competitors likely will have access to greater financial resources than us and may have greater expertise in identifying and evaluating new opportunities.  Moreover, we may devote resources to potential acquisitions or in-licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts.

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Our ability to pursue the development and commercialization of Pruvel, our other product candidates and our future product candidates depends upon the continuation of our licenses from third parties.

Our license agreement with Nippon Shinyaku provides us with an exclusive license to develop and commercialize Pruvel for any indication in the United States, with a right to sublicense to third parties.  In the event Nippon Shinyaku is not able to supply us with Pruvel, the license agreement provides us with a non-exclusive, worldwide right and license to manufacture or have Pruvel manufactured for us.  Either we or Nippon Shinyaku may terminate the license agreement immediately upon the bankruptcy or dissolution of the other party or upon a breach of any material provision of the agreement if the breach is not cured within 60 days following written notice.  In addition, we are entitled to terminate the agreement in the event that the FDA compels us to cease sales of Pruvel in the United States.  If our license agreement with Nippon Shinyaku terminates, we will lose our rights to develop, manufacture and commercialize Pruvel and our potential revenues would be limited.  Similarly, if our agreement with TSRI, for the license of our OPopS technology is terminated, we will not be able to further develop future product candidates using our OPopS technology, and our third party licensees may be unable to continue development of our existing out-licensed product candidates.

Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is uncertain.  Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical testing.  In addition, sub-analysis of clinical trial data may reveal limitations of our product candidates even though top-line results are positive.  The type and amount of clinical data necessary to gain regulatory approval for our product candidates may also change during or after completion of our clinical trials or we may inaccurately characterize such requirements.

Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize or delay our ability to achieve regulatory approval and commence product sales as currently contemplated.

We have in the past experienced delays in clinical trials of our product candidates and we may experience delays in future clinical trials.  For example, we are planning to conduct a registration study for other formulations and proof-of-concept clinical trials for other indications of fidaxomicin and intend to conduct a study subsequent to NDA submission to compare fidaxomicin to metronidazole for the treatment of CDI.  We do not know whether planned clinical trials will begin on time, will need to be redesigned or will be completed on schedule, if at all.  Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, in reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, and clinical trial sites, in obtaining institutional review board approval at each site, in recruiting suitable patients to participate in a trial, in having patients complete a trial or return for post-treatment follow-up, in adding new sites or in obtaining sufficient supplies of clinical trial materials.  Many factors affect patient enrollment, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, the design of the clinical trial, competing clinical trials, clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating and whether the clinical trial design involves comparison to placebo.

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We could encounter delays if prescribing physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribing existing antibiotics that have established safety and efficacy profiles or with administering placebo to patients in our placebo-controlled trials.  Further, a clinical trial may be suspended or terminated by us, our collaborators, the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.  If we experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates may be harmed, and our ability to generate product revenues from any of these product candidates will be delayed.  In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenues.  Any of these occurrences may significantly harm our business, financial condition and prospects.

We may be required to suspend or discontinue clinical trials due to adverse events, adverse side effects or other safety risks that could preclude approval of our product candidates or negatively affect sales of any marketed product.*

Our clinical trials may be suspended at any time for a number of reasons.  We may voluntarily suspend or terminate our clinical trials if at any time we believe that they present an unacceptable risk to participants.  In addition, regulatory agencies may order the temporary or permanent discontinuation of our clinical trials at any time if they believe that the clinical trials are not being conducted in accordance with applicable regulatory requirements or that they present an unacceptable safety risk to participants.  In our Phase 3 clinical trials of fidaxomicin, the most common drug-related side effects reported were nausea, vomiting, constipation, anorexia, headache and dizziness.  Patients treated with Pruvel have experienced drug-related side effects including abdominal pain, diarrhea, nausea, renal toxicities, cardiac arrhythmias, photosensitivity, rash, excessive flushing of the skin and central nervous system effects, such as seizures.  If adverse, drug-related events are encountered or suspected, our trials would be interrupted, delayed or halted and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications.  Adverse events encountered in any post-approval studies may also harm our collaborators’ efforts to market our product candidates or could result in withdrawal of regulatory approvals.  Even if we believe our product candidates are safe, our data is subject to review by the FDA, which may disagree with our conclusions and delay or deny approval of our product candidates which would significantly harm the commercial prospects of such product candidates.  Moreover, we could be subject to significant liability if any volunteer or patient suffers, or appears to suffer, adverse side effects as a result of participating in our clinical trials.  Any of these occurrences may significantly harm our business and prospects.

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We have relied and in the future may rely on third parties to conduct our clinical trials.  If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we and our collaborators may not be able to obtain regulatory approval for or commercialize our product candidates.*

We have in the past entered into agreements with third-party CROs, such as INC Research, to provide monitors for and to manage data for our clinical programs.

We and any CROs conducting clinical trials for our product candidates are required to comply with current good clinical practices, or GCPs, regulations and guidelines enforced by the FDA for all of our products in clinical development.  The FDA enforces GCPs through periodic inspections of trial sponsors, principal investigators and trial sites.  If we or the CROs that conduct clinical trials of our product candidates fail to comply with applicable GCPs, the clinical data generated in the clinical trials may be deemed unreliable and the FDA may require additional clinical trials before approving any marketing applications.  We cannot assure you that, upon inspection, the FDA will determine that any clinical trials of our product candidates comply with GCPs.  In addition, our clinical trials must be conducted with product produced under cGMP regulations, and require a large number of test subjects.  Our failure to comply with these regulations may require us to repeat clinical trials, which would be costly and delay the regulatory approval process and commercialization of our product candidates.

In addition, these third-party CROs are not our employees, and we cannot control whether or not they devote sufficient time and resources to our clinical programs.  These CROs may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could harm our competitive position.  If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced, or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated or may have to be repeated, and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates.  As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

We rely on our majority-owned subsidiary, OBI, for the development of one of our product candidates.*

In October 2009, we completed a number of transactions involving our subsidiary, OBI, including the sale of 40% of our ownership interest in OBI to various third party investors.  In connection with these transactions, we assigned to OBI, and OBI assumed from us, our rights and obligations under our license agreement with MSKCC related to our OPT-822/821 product candidate and our rights and obligations under one of our license agreements with TSRI related to our OPT-88 product candidate.  We also assigned to OBI certain of our intellectual property and know-how related to these two product candidates. In exchange for these assignments, we have the right to receive certain milestone or royalty payments relating to these product candidates.

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OBI subsequently decided not to pursue further development of OPT-88, and we cannot assure you that OBI will successfully advance the development of OPT-822/821.  In addition, if OBI does not comply with its obligations under the agreement with MSKCC, the agreement may be terminated and we may not be able to re-assume our rights under the agreement.  If the agreement with MSKCC was terminated and we were unable to re-assume our rights, we would not be able to pursue further development of OPT-822/821.  Moreover, the addition of third party investors in OBI has also diminished our ability to control OBI, which is now subject in some respects to the rights of the third party minority stockholders.  In the future, additional equity financings or other issuances of equity securities or securities convertible into equity by OBI may further reduce our ownership position in OBI and we may not maintain a controlling interest in OBI.  To the extent that we do not maintain a controlling equity interest in OBI in the future, we would have to rely on OBI’s contractual obligations, including under our Intellectual Property Assignment and License Agreement, to ensure that OBI continues development of OPT-822/821 and complies with its obligations under the MSKCC agreement.  Finally, OBI will need additional funds to further develop and commercialize OPT-822/821,  and OBI may not be able to secure adequate funding or be able to do so on terms you or we believe are favorable.  If OBI is unable to raise additional funds to continue operations, or otherwise fails to advance the development of OPT-822/821, we will not receive milestone or royalty payments with respect to this product candidate, and the value of our OBI equity position would likely diminish.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We face an inherent risk of product liability lawsuits related to the testing of our product candidates, and will face an even greater risk if product candidates are introduced commercially.  An individual may bring a liability claim against us if one of our product candidates causes, or merely appears to have caused, an injury.  If we cannot successfully defend ourselves against the product liability claim, we may incur substantial liabilities.  Regardless of merit or eventual outcome, liability claims may result in:

·      decreased demand for our product candidates;

·      injury to our reputation;

·      termination of clinical trial sites or entire clinical trial programs;

·      withdrawal of clinical trial participants;

·      significant litigation costs;

·      substantial monetary awards to or costly settlement with patients;

·      product recalls;

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·      loss of revenues; and

·      the inability to commercialize our product candidates.

We may become dependent upon consumer perceptions of us and the safety and quality of our product candidates.  We could be adversely affected if we or our product candidates are subject to negative publicity.  We could also be adversely affected if any of our potential products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to consumers.  Also, because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from consumers’ use or misuse of our potential products or any similar products distributed by other companies could have a material adverse impact on our results of operations.

We have global clinical trial liability insurance that covers our clinical trials up to a $10.0 million annual aggregate limit.  Our current or future insurance coverage may prove insufficient to cover any liability claims brought against us.  We intend to expand our insurance coverage to include the sale of commercial products if marketing approval is obtained for our product candidates, which would increase our insurance premiums.  Because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise.

Even if we receive regulatory approval for our product candidates, we will be subject to ongoing significant regulatory obligations and oversight.

Even if we receive regulatory approval to sell our product candidates, the FDA and foreign regulatory authorities will likely impose significant restrictions on the indicated uses or marketing of such products, or impose ongoing requirements for potentially costly post-approval studies.  In addition, following any regulatory approval of our product candidates, we and our collaborators will be subject to continuing regulatory obligations, such as requirements for storage, recordkeeping and safety reporting, and additional post-marketing obligations, including regulatory oversight of the labeling, packaging, promotion and marketing of our products.  If we or our collaborators become aware of previously unknown problems with any of our product candidates in the United States or overseas or at our third-party manufacturers’ facilities, a regulatory agency may impose restrictions on our products, our third-party manufacturers or on us, including requiring us to reformulate our products, conduct additional clinical trials, make changes in the labeling of our products, implement changes to, or obtain re-approvals of, our third-party manufacturers’ facilities, or withdraw the product from the market.  In addition, we or our collaborators may experience a significant drop in the sales of the affected products and our product revenues will be reduced, our reputation in the marketplace may suffer and we may become the target of lawsuits, including class action suits.  Moreover, if we or our collaborators or third-party manufacturers fail to comply with applicable regulatory requirements, we may be subject to civil or criminal fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, costly new manufacturing requirements and criminal prosecution.  Any of these events could harm or prevent sales of the affected products and reduce our related revenues or could substantially increase the costs and expenses of commercializing and marketing these products, which would significantly harm our business, financial condition and prospects.

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If we fail to attract and retain senior management and key scientific personnel, we may be unable to successfully develop our product candidates, conduct our clinical trials and commercialize our product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with leading academic institutions, clinicians and scientists.  We are highly dependent on our chief executive officer, and the other principal members of our executive and scientific teams. The unexpected loss of the service of any of these persons may significantly delay or prevent the achievement of research, development, commercialization and other business objectives.  Replacing key employees may be difficult and costly and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop and commercialize pharmaceutical products successfully.  We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees.  We employ these individuals on an at-will basis and their employment can be terminated by us or them at any time, for any reason and with or without notice.

We will need to hire additional personnel as we expand our clinical development and commercial activities.  We may not be able to attract or retain qualified management and scientific personnel on acceptable terms in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the San Diego, California area.  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 the achievement of our research and development objectives, our ability to raise additional capital and our ability to implement our business strategy.  In particular, if we lose any members of our senior management team, we may not be able to find suitable replacements, and our business and prospects may be harmed as a result.

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

We are a small company with 81 employees as of July 30, 2010.  To commercialize our product candidates or commence new clinical trials, we will need to expand our employee base for managerial, operational, marketing, sales, financial and other resources.  Future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees and may take time away from running other aspects of our business, including development and commercialization of our product candidates.  Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively.  To that end, we must be able to:

·      manage our development efforts effectively;

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·      manage our current clinical trials effectively;

·      integrate additional management, administrative and manufacturing personnel;

·      build a marketing and sales organization; and

·      maintain sufficient administrative, accounting and management information systems and controls.

We may not be able to accomplish these tasks, and accordingly, may not achieve our research, development and commercialization goals.  Our failure to accomplish any of these goals could harm our financial results and prospects.

Third-party payor coverage and reimbursement may be insufficient or unavailable altogether for our product candidates, which could diminish our sales or affect our ability to sell our products profitably.

Market acceptance and sales of our product candidates will depend on reimbursement policies and may be affected by future healthcare reform measures.  Government third-party payors, such as the Medicare and Medicaid programs, and private payors, including health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels for these drugs. Because third-party payors increasingly are challenging prices charged and the cost-effectiveness of medical products, significant uncertainty exists as to the ability of our product candidates to receive adequate coverage and reimbursement.  We cannot be sure that third-party payors will place our product candidates on approved formularies or that reimbursement will be available in whole or in part for any of our product candidates.  Also, we cannot be sure that insufficient reimbursement amounts will not reduce the demand for, or the price of, our products, if approved.

Many healthcare providers, such as hospitals, receive a fixed reimbursement amount per procedure or other treatment therapy, and these amounts are not necessarily based on the actual costs incurred.  As a result, these healthcare providers may choose only the least expensive therapies regardless of efficacy.  We cannot guarantee that our product candidates will be the least expensive alternative and thus providers may decide not to use them or buy them for treatment.

We have not commenced efforts to have our product candidates reimbursed by government or third-party payors.  If reimbursement is not available or is available only to limited levels, we may not be able to commercialize our products successfully or at all, which would harm our business and prospects.

Current healthcare laws and regulations and future legislative or regulatory reforms to the healthcare system may affect our ability to sell our product candidates profitably.*

The U.S. and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers and payors in the U.S. and elsewhere, there is

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significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the U.S., the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively, PPACA, became law in the U.S. PPACA substantially changes the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry. Among the provisions of PPACA of greatest importance to the pharmaceutical industry are the following:

·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, beginning in 2011;

·an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively;

·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 overage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D, beginning in 2011;

·extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations, effective March 23, 2010;

·expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals beginning in April 2010 and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level beginning in 2014, thereby potentially increasing manufacturers’ Medicaid rebate liability;

·expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program, effective in January 2010;

·new requirements to report certain financial arrangements with physicians, including reporting any “transfer of value” made or distributed to prescribers and other healthcare providers, effective March 30, 2013, and reporting any investment interests held by physicians and their immediate family members during the preceding calendar year;

·a new requirement to annually report drug samples that manufacturers and distributors provide to physicians, effective April 1, 2012;

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·a licensure framework for follow-on biologic products; and

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

We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

We also cannot be certain that fidaxomicin and Pruvel or other current or future drug candidates will successfully be placed on the list of drugs covered by particular health plan formularies, nor can we predict the negotiated price for our drug candidates, which will be determined by market factors. Many states have also created preferred drug lists and include drugs on those lists only when the manufacturers agree to pay a supplemental rebate.  If fidaxomicin and Pruvel or other current or future drug candidates are not included on these preferred drug lists, physicians may not be inclined to prescribe them to their Medicaid patients, thereby diminishing the potential market for our products.

As a result of the PPACA and the trend towards cost-effectiveness criteria and managed healthcare in the United States, third-party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement of new drugs.  They may also refuse to provide any coverage of uses of approved products for medical indications other than those for which the FDA has granted market approvals.  As a result, significant uncertainty exists as to whether and how much third-party payors will reimburse for newly-approved drugs, which in turn will put pressure on the pricing of drugs.  Further, we do not have experience in ensuring approval by applicable third-party payors outside of the United States for reimbursement of our products.  The availability of numerous generic antibiotics at lower prices than branded antibiotics can also be expected to substantially reduce the likelihood of reimbursement for fidaxomicin and Pruvel.  We also anticipate pricing pressures in connection with the sale of our products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations and additional legislative proposals.

We must comply with federal and state “fraud and abuse” laws, and, if we are unable to fully comply with such laws, we could face substantial penalties, which may adversely affect our business, financial condition and results of operations.

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws, the False Claims Act, the Foreign Corrupt Practices Act and state laws requiring reporting and certification under comprehensive compliance programs governing our financial relationships with healthcare providers.  Violations of these laws are punishable by criminal and civil sanctions, including, in some instances, exclusion from participation in federal and state healthcare programs, including Medicare and Medicaid, and the curtailment or restructuring of operations.  We believe that our operations are in material compliance with such laws and we are aware of the need to increase our compliance resources if we begin marketing

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products.  However, because of the far-reaching nature of these laws, there can be no assurance that we would not be required to alter one or more of our practices to be in compliance with these laws.  In addition, there can be no assurance that the occurrence of one or more violations of these laws or regulations would not result in a material adverse effect on our financial condition and results of operations.

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

Our third-party manufacturers’ activities and, to a lesser extent, our own activities involve the controlled storage, use and disposal of hazardous materials, including the components of our product candidates and other hazardous compounds.  We and our manufacturers are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials.  Although we believe that the safety procedures for handling and disposing of these materials comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental contamination or injury from these materials.  We currently have insurance coverage in the amount of approximately $250,000 for damage claims arising from contamination on our property.  These amounts may not be sufficient to adequately protect us from liability for damage claims relating to contamination.  If we are subject to liability exceeding our insurance coverage amounts, our business and prospects would be harmed.  In the event of an accident, state or federal authorities may also curtail our use of these materials and interrupt our business operations.

Our business and operations would suffer in the event of computer, telecommunications or other system failure.

Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.  Any system failure, accident or security breach that causes interruptions in our operations could result in a material disruption of our drug development programs.  For example, the loss of clinical trial information from completed or ongoing clinical trials for fidaxomicin or Pruvel, which is maintained by our third-party CRO, could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data.  To the extent that any disruption or security breach results in a loss or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we may incur liability and the further development of our product candidates may be delayed.

Risks Related to Our Intellectual Property

It is difficult and costly to protect our intellectual property and our proprietary technologies, and we may not be able to ensure their protection.*

Our commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of the use, formulation and structure of our product candidates, and the

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methods used to manufacture them, as well as successfully defending these patents against third-party challenges, including those from generic drug manufacturers.  Our ability to protect our product candidates from unauthorized making, using, selling, offering to sell or importing by third parties is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

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.  No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to date in the United States.  The biotechnology patent environment outside the United States is even more uncertain.  Changes in either the patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property.  Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our licensed patents, our patents or in third-party patents.

The degree of future protection for our proprietary rights is uncertain, because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage.  For example:

·others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of our issued patents and pending patent applications or licensed patents and pending patent applications, or for which we are not licensed under our license agreements;

·others may be able to make competing pharmaceutical formulations containing our product candidates or components of our product formulations that are either not covered by the claims of our issued patents or licensed patents, not licensed to us under our license agreements or are subject to patents that expire;

·we or our licensors might not have been the first to make the inventions covered by our issued patents and pending patent applications or the pending patent applications and issued patents of our licensors;

·we or our licensors might not have been the first to file patent applications for these inventions;

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

·it is possible that our pending patent applications or our licensed patent applications will not result in issued patents;

·our issued patents and pending patent applications or the pending patent applications and issued patents of our licensors may not provide us with any competitive advantages, may be designed around by our competitors, including generic drug companies, or may be held invalid or unenforceable as a result of legal challenges by third parties;

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·we may not develop additional proprietary technologies that are patentable; or

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

In addition, to the extent we are unable to obtain and maintain patent protection for our product candidates or in the event such patent protection expires, it may no longer be cost effective to extend our portfolio by pursuing additional development of a product candidate for follow-on indications.

We have filed 17 patent applications related to fidaxomicin, one of which has resulted in the issuance of a polymorph patent and one of which has resulted in a manufacturing patent, from the United States Patent and Trademark Office, or US PTO, and 15 of which are pending.

The patent and patent applications related to fidaxomicin encompass various topics relating to:

·composition of matter (issued in Taiwan);

·pharmaceutical composition and methods of use;

·polymorphic forms (issued in U.S. with respect to one polymorphic form) and pharmaceutical compositions thereof;

·manufacturing processes (issued in U.S. and Australia);

·treatment of diseases;

·formulation;

·selected CDI patient profiles; and

·primary metabolites.

If we are unable to obtain a composition of matter patent, our competitors, including generic drug companies, may be able to design other similar formulations of the active ingredient of fidaxomicin.  Furthermore, even though the manufacturing process patent has issued, and even if the formulation patent application results in an issued patent, our competitors, including generic drug companies, may be able to design around our manufacturing processes or formulation for fidaxomicin.  As a result, our competitors may be able to develop competing products.

In addition, we currently plan to submit an NDA for Pruvel for the treatment of infectious diarrhea in the first quarter of 2011.  The composition of matter patent covering Pruvel expired in February 2009.  In 2009, our licensor, Nippon Shinyaku received a patent from the US PTO which covers the polymorphic form of a key intermediate in the manufacturing process for Pruvel.  Despite its issuance, this patent may later be challenged by a third party or fail to prevent

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a third party from producing and marketing a generic form of Pruvel in the United States.   If we are unable to rely on the recently-issued polymorph patent, we will likely rely on one or more regulatory marketing exclusivities for Pruvel in the United States.  Specifically, if our NDA for Pruvel is approved, we expect to receive a five-year period of marketing exclusivity under the Hatch-Waxman Act. This exclusivity period is available to the first applicant to gain approval of an NDA for a new chemical entity, or NCE, that has not previously been approved as an active ingredient under Section 505(b) of the Food Drug and Cosmetic Act, or FDCA.  While we expect that the NCE exclusivity period will be available for Pruvel, if the recent polymorph patent is insufficient to maintain exclusivity in the United States with respect to Pruvel, we may face generic competition in the United States five years after our NDA for Pruvel is approved by the FDA. If we are unable to obtain marketing exclusivity beyond five years from the approval of our NDA, our potential revenues from Pruvel sales in the U.S. will be limited.

We depend, in part, on our licensors and collaborators to protect a portion of our proprietary rights.  In such cases, our licensors and collaborators may be primarily or wholly responsible for the maintenance of patents and prosecution of patent applications relating to important areas of our business.  For example, Nippon Shinyaku is responsible for the maintenance of patents and prosecution of patent applications relating to Pruvel.  We may also be dependent on Par to provide technical support for patent applications relating to fidaxomicin.  If any of these parties fail to adequately protect these product candidates with issued patents, our business and prospects would be significantly harmed.

Under our agreement with Nippon Shinyaku, in the event Nippon Shinyaku fails to take all steps necessary to seek extension of the patents licensed to us in the United States 180 days after we request such action be taken, then we have the right to take all necessary actions to extend the licensed patents.  Our agreement with Par does not have explicit provisions regarding our rights to take necessary action with respect to maintenance of patents and prosecution of patent applications nor do such agreements provide us with any legal recourse in the event such parties do not so maintain and/or prosecute.  If any of these parties or others on which we rely for patent maintenance and prosecution fail to adequately maintain patents and prosecute patent applications relating to technology licensed to or from us, we may be required to take further action on our own to protect this technology.  However, we may not be successful in maintaining such patents or prosecuting such patent applications and if so, our business and prospects would be significantly harmed.

We also rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or obtainable.  However, trade secrets are difficult to protect.  Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors.  Enforcing a claim that a third-party entity illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable.  In addition, courts outside the United States are sometimes less willing to protect trade secrets.  Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.

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If we or our licensors fail to obtain or maintain patent protection or trade secret protection for our product candidates or our technologies, third parties could use our proprietary information, which could impair our ability to compete in the market and adversely affect our ability to generate revenues and attain profitability.

We may incur substantial costs as a result of litigation or other proceedings relating to our patent, trademark and other intellectual property rights, and we may be unable to protect our rights to, or use, our technology.

If we choose to go to court to stop someone else from using our inventions, that individual or company has the right to ask the court to rule that the underlying 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 were successful in stopping the infringement of these patents.  There is also the risk that, even if the validity of these patents is upheld, the court will refuse to stop the other party on the ground that such other party’s activities do not infringe our rights to these patents.

Furthermore, a third party may claim that we or our manufacturing or commercialization partners are using inventions covered by the third party’s patent rights and may go to court to stop us from engaging in our normal operations and activities, including making, using or selling our product candidates.  These lawsuits are costly and could 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.  We have indemnified our commercial partners against patent infringement claims and thus would be responsible for any of their costs associated with such claims and actions.  The biotechnology industry has produced a proliferation of patents, and it is not always clear to industry participants, including us, which patents cover various types of products or methods of use.  The coverage of patents is subject to interpretation by the courts and the interpretation is not always uniform.  If we are sued for patent infringement, we would need to demonstrate that our products or methods of use either do not infringe the patent claims of the relevant patent and/or that the patent claims are invalid, and we may not be able to do this.  Proving invalidity, in particular, is difficult since it requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

Although we have conducted searches of third-party patents with respect to fidaxomicin and Pruvel, these searches may not have identified all third-party patents relevant to those products and we have not conducted an extensive search of patents issued to third parties with respect to our other product candidates.  Consequently, no assurance can be given that third-party patents containing claims covering our products, technology or methods do not exist, have not been filed, or could not be filed or issued.  Because of the number of patents issued and patent applications filed in our technical areas or fields, we believe there is a risk that third parties may allege they have patent rights encompassing our products, technology or methods.  In addition, we have not conducted an extensive search of third-party trademarks, so no assurance can be given that such third-party trademarks do not exist, have not been filed, could not be filed or issued, or could not exist under common trademark law.  While we have filed a trademark

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application for the names “Optimer”, “Optimer Pharmaceuticals” and “Pruvel”, we are aware that the name “Optimer” has been registered as a trademark with the U.S. PTO by more than one third party, including one in the biotechnology space.  As such, we believe there is a significant risk that third parties may allege they have trademark rights encompassing the names for which we have applied for protection.

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 and many foreign jurisdictions 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 licensors’ issued patents or our pending applications or our licensors’ pending applications, or that we or our licensors were the first to invent the technology.  Our competitors may have filed, and may in the future file, patent applications covering technology similar to ours.  Any such patent application may have priority over our or our licensors’ patent applications and could further require us to obtain rights to issued patents covering such technologies.  If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the U.S. PTO to determine priority of invention in the United States.  The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful, resulting in a loss of our U.S. patent position with respect to such inventions.

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 the funds necessary to continue our operations.

Risks Related to the Securities Market and Ownership of Our Common Stock

The market price of our common stock may be highly volatile.

Before our initial public offering in February 2007, there was no public market for our common stock.  We cannot assure you that an active trading market will exist for our common stock. You may not be able to sell your shares quickly or at the market price if trading in our common stock is not active.

The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:

·general economic and market conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors;

·announcement of FDA or comparable foreign regulatory agency approval or non-approval of our product candidates, or specific label indications for their use, or delays in the FDA or comparable foreign regulatory agency review process;

·actions taken by the FDA or other regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or marketing and sales activities;

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·changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;

·the success of our development efforts and clinical trials, particularly with respect to fidaxomicin and Pruvel;

·announcements by our collaborators with respect to clinical trial results, regulatory submissions and communications from the FDA or comparable foreign regulatory agencies;

·the success of our efforts to acquire or in-license additional products or product candidates;

·developments concerning our collaborations and partnerships, including but not limited to those with our sources of manufacturing supply and our development and commercialization partners;

·actual or anticipated variations in our quarterly operating results;

·announcements of technological innovations by us, our collaborators or our competitors;

·new products or services introduced or announced by us or our commercialization partners, or our competitors and the timing of these introductions or announcements;

·third-party coverage or reimbursement policies;

·actual or anticipated changes in earnings estimates or recommendations by securities analysts;

·conditions or trends in the biotechnology and biopharmaceutical industries;

·announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

·changes in the market valuations of similar companies;

·sales of common stock or other securities by us or our stockholders in the future;

·additions or departures of key scientific or management personnel;

·disputes or other developments relating to intellectual property, proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies; and

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·trading volume of our common stock.

In addition, the stock market in general and the market for biotechnology and biopharmaceutical companies in particular have experienced extreme price and volume fluctuations that have often been unrelated and/or disproportionate to the operating performance of those companies.  These broad market and industry factors may significantly harm the market price of our common stock, regardless of our operating performance.  In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies.  Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could significantly harm our business, financial condition and prospects.

Future sales of our common stock in the public market could cause our stock price to decline.

Persons who were our stockholders prior to our initial public offering continue to hold a substantial number of shares of our common stock. Many of these stockholders are able to sell their shares in the public market. Significant portions of these shares are held by a small number of stockholders. Sales by such stockholders of a substantial number of shares, or the expectation that such sales may occur, could significantly reduce the market price of our common stock.  Moreover, the holders of a substantial number of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements to permit the resale of their shares in the public market or to include their shares in registration statements that we may file for ourselves or other stockholders.

We have also registered all common stock that we have issued under our employee benefits plans. As a result, these shares can be freely sold in the public market upon issuance, subject to any applicable restrictions under the securities laws. In addition, our directors and executive officers may in the future establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act for the purpose of effecting sales of our common stock. If any of these events cause a large number of our shares to be sold in the public market, the sales could reduce the trading price of our common stock and impede our ability to raise future capital.

We may not be able to liquidate our holding in an auction rate security.*

Our investment securities consist of money market funds, corporate debt securities and government agency securities. As of June 30, 2010, we held one auction rate preferred security valued at $882,000 with perpetual maturity dates that reset every 28 days.  The negative conditions in the global credit markets have prevented some investors from liquidating their holdings, including their holdings of auction rate securities.  There was insufficient demand at auction for our auction rate preferred security.  As a result, such security is currently not liquid, and we could be required to hold it until it is redeemed by the issuer or to maturity.  In the event we need to access the funds that are in an illiquid state, we will not be able to do so without a loss of principal, until a future auction on this investment is successful, the security is redeemed

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by the issuer or it matures. We have reduced the carrying value of our auction rate security by $118,000 to reflect an estimated change in fair market value due primarily to a lack of liquidity. Although the auction rate security continues to pay interest according to its stated terms, based on valuation models, we have recorded an unrealized loss for an other-than-temporary change in valuation of $118,000.  If the credit ratings of the security issuer deteriorates or if uncertainties in these markets continue and any decline in market value is determined to be other-than-temporary, we would be required to adjust the carrying value of the investment through an impairment charge, which could negatively affect our financial condition, cash flow and reported earnings.

We will continue to incur significant costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives.*

As a public company, we will continue to incur significant legal, accounting and other expenses.  In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Stock Market, or Nasdaq, impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices.  Our management and other personnel need to devote a substantial amount of time to these compliance initiatives.  Moreover, these rules and regulations result in increased legal and financial compliance costs and will make some activities more time-consuming and costly.  For example, these rules and regulations make it more difficult and more expensive for us to maintain director and officer liability insurance, and we may be required to incur substantial costs in the future to maintain the same or similar coverage.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. We are required to perform an evaluation of our internal controls over financial reporting to allow management to report on the effectiveness of those controls, as required by Section 404 of the Sarbanes-Oxley Act. Additionally, our independent auditors were required to perform a similar evaluation and report on the effectiveness of our internal controls over financial reporting. At June 30, 2010, management and our independent auditors did not identify any material weaknesses in our internal controls over financial reporting. Our efforts to comply with Section 404 and related regulations has required, and continues to require, the commitment of significant financial and managerial resources. While we anticipate maintaining the integrity of our internal controls over financial reporting and all other aspects of Section 404, we cannot be certain that a material weakness will not be identified when we test the effectiveness of our control systems in the future. If a material weakness is identified, we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources, costly litigation or a loss of public confidence in our internal controls, which could have an adverse effect on the market price of our stock.

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Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders, or remove our current management.  These provisions include:

·a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;

·authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;

·limiting the removal of directors by the stockholders;

·prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

·eliminating the ability of stockholders to call a special meeting of stockholders; and

·establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management.  In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with a stockholder owning 15% or more of our outstanding voting stock for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by our board of directors.  This provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or beneficial to our stockholders.  Such a delay or prevention of a change of control transaction could cause the market price of our stock to decline.

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Item 6.  Exhibits

Exhibit No.		Description of Document
3.1	(2)	Certificate of Incorporation of Optimer Pharmaceuticals, Inc., as amended and restated.
3.2	(4)	Bylaws of Optimer Pharmaceuticals, Inc., as amended.
4.1	(3)	Common Stock Certificate of Optimer Pharmaceuticals, Inc.
4.2	(1)	Investors’ Rights Agreement by and among Optimer Pharmaceuticals, Inc. and certain stockholders of Optimer Pharmaceuticals, Inc. dated November 30, 2005, as amended and restated.
4.3	(5)	Registration Rights Agreement, dated October 23, 2007, by and between Optimer Pharmaceuticals, Inc. and the purchasers listed on the signature pages thereto.
4.4	(6)	Form of Warrant to Purchase Common Stock.
10.1		Amended and Restated Severance Benefit Plan of Optimer Pharmaceuticals, Inc.
10.2	*	API Manufacturing and Supply Agreement between Biocon Limited and Optimer Pharmaceuticals, Inc.
10.3	(7)	Offer Letter, dated May 5, 2010, by and between Mr. Pedro Lichtinger and Optimer Pharmaceuticals, Inc.
10.4	(7)	Separation and Consulting Agreement, dated May 5, 2010, by and between Michael Chang and Optimer Pharmaceuticals, Inc.
10.5	(8)	Compensation Agreement, dated July 22, 2010, by and between Optimer Pharmaceuticals, Inc. and AFOS, LLC.
31.1		Certification of principal executive officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2		Certification of principal financial officer required by Rule 13a-14(a) or Rule 15d-14(a).
32		Certification by the Chief Executive Officer and the Chief Financial Officer of the Registrant, as required by Rule 13a-14(b) or 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

*	Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission.
(1)	Filed with Registrant’s Registration Statement on Form S-1 November 9, 2006.
(2)	Filed with Registrant’s Amendment No. 3 to Registration Statement on Form S-1 January 22, 2007.
(3)	Filed with Registrant’s Amendment No. 4 to Registration Statement on Form S-1 February 5, 2007.
(4)	Filed with Registrant’s Current Report on Form 8-K on September 18, 2007.
(5)	Filed with Registrant’s Current Report on Form 8-K on October 29, 2007.
(6)	Filed with Registrant’s Current Report on Form 8-K on March 5, 2009.
(7)	Filed with Registrant’s Current Report on Form 8-K on May 6, 2010.
(8)	Filed with Registrant’s Current Report on Form 8-K on July 22, 2010.

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SIGNATURE

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.

	OPTIMER PHARMACEUTICALS, INC.
Dated: August 4, 2010	By:	/s/ John D. Prunty
	Name:	John D. Prunty
	Title:	Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

OPTIMER PHARMACEUTICALS, INC.

AMENDED AND RESTATED SEVERANCE BENEFIT PLAN

Section 1.INTRODUCTION.

The Optimer Pharmaceuticals, Inc. Amended and Restated Severance Benefit Plan (the “Plan”) was established effective May 5, 2010 (the “Effective Date”) and amends and restates in its entirety the Optimer Pharmaceuticals, Inc. Severance Benefit Plan established effective October 2, 2008 (the “Prior Plan”).  The purpose of the Plan is to provide for the payment of severance benefits to certain eligible employees of Optimer Pharmaceuticals, Inc. (the “Company”) whose employment with the Company is terminated in a covered termination and who meet the eligibility criteria set forth in Section 2(a) below.  This document constitutes the written instrument under which the Plan is maintained and supersedes any prior plan or practice of the Company or any written agreement between the Company and any employee that provides for payments or benefits in the event of termination of employment or a change in control of the Company, including but not limited to the Prior Plan, except to the extent such written agreement expressly contemplates that such persons are eligible to receive benefits additional to or in lieu of those provided under the Plan.  This Plan document also is the Summary Plan Description for the Plan.

Section 2.ELIGIBILITY FOR BENEFITS.

(a)General Rules.  Subject to the requirements set forth in this Section, the Company will grant severance benefits under the Plan to Eligible Employees.

(1)Definition of “Eligible Employee.”  For purposes of this Plan, an Eligible Employee is a full-time or a part-time regular hire employee of the Company who is notified by the Company in writing that he or she is eligible for participation in the Plan and (i) whose employment is terminated in a Covered Termination (as defined further in Section 2(c) below) provided that the employee has been continuously employed by the Company for at least one hundred eighty (180) days; or (ii) who is selected by the Plan Administrator in its sole discretion to receive the benefits set forth herein.  The determination of whether an employee is an Eligible Employee shall be made by the Company, in its sole discretion, and such determination shall be binding and conclusive on all persons.  For purposes of this Plan, part-time employees are those regular hire employees who are regularly scheduled to work more than twenty (20) hours per week but less than a full-time work schedule.  Regular hire employees working twenty (20) hours per week or less and temporary employees are not eligible for severance benefits under the Plan.

(2)In order to be eligible to receive any benefits under the Plan, an Eligible Employee who is terminated in a Covered Termination must remain on the job until his or her date of termination as scheduled by the Company, which may not exceed thirty (30) days from the date of any notification of termination.

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(3)In order to be eligible to receive any benefits under the Plan, an Eligible Employee also must execute a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate, and such release must become effective in accordance with its terms.  The Company, in its discretion, may modify the form of the required release to comply with applicable law and shall determine the form of the required release, which may be incorporated into a termination agreement or other agreement with the Eligible Employee.

(b)Exceptions to Benefit Entitlement.  An employee, including an employee who otherwise is an Eligible Employee, will not receive benefits under the Plan (or will receive reduced benefits under the Plan) in the following circumstances, as determined by the Company in its sole discretion:

(1)The employee has executed an individually negotiated employment contract or agreement with the Company relating to severance benefits that is in effect on his or her termination date, in which case such employee’s severance benefit, if any, shall be governed by the terms of such individually negotiated employment contract or agreement and shall be governed by this Plan only to the extent that the reduction pursuant to Section 3(c) below does not entirely eliminate benefits under this Plan.

(2)The employee voluntarily terminates employment with the Company for any reason not constituting a Constructive Termination.  Voluntary terminations include, but are not limited to, resignation, retirement or failure to return from a leave of absence on the scheduled date.

(3)The employee is offered an identical or substantially equivalent or comparable position with the Company or an affiliate of the Company.  For purposes of the foregoing, a “substantially equivalent or comparable position” is one that offers the employee substantially the same level of responsibility and compensation and does not require a relocation of the employee’s place of employment by more than thirty (30) miles from its previous location.

(4)The employee is offered immediate reemployment by a successor to the Company or an affiliate of the Company or by a purchaser of its assets, as the case may be, following a change in ownership of the Company or a sale of substantially all of the assets of a division or business unit of the Company.  For purposes of the foregoing, “immediate reemployment” means that the employee’s employment with the successor to the Company or an affiliate of the Company or the purchaser of its assets, as the case may be, results in uninterrupted employment such that the employee does not incur a lapse in pay as a result of the change in ownership of the Company or the sale of its assets.

(5)The employee is rehired by the Company or an affiliate of the Company prior to the date benefits under the Plan are scheduled to commence.

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(6)The employee does not confirm in writing that he or she is and shall remain subject to the Company’s Proprietary Information and Inventions Agreement, including the failure to sign a termination statement under such Agreement.

(7)Following notification of involuntary termination by the Company, the employee does not satisfactorily perform his or her assigned job duties until the date set by the Company for the termination of employment.

(8)The employee terminates employment due to the employee’s death or Disability.

(c)Definitions:  For purposes of this Plan, the following terms shall have the meanings set forth below:

(1)“Base Salary” means the Eligible Employee’s base pay (excluding incentive pay, premium pay, commissions, overtime, bonuses and other forms of variable compensation), at the rate in effect during the last regularly scheduled payroll period immediately preceding the Eligible Employee’s termination date.  For any Eligible Employees that are regular part-time employees, “Base Salary” shall mean the pro-rata equivalent of the Eligible Employee’s base pay which reflects the part-time status of the Eligible Employee.

(2)“Cause” for termination of employment means a termination resulting from the occurrence of any of the following events that has a material negative impact on the business or reputation of the Company:

(i)the employee’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company;

(ii)the employee’s intentional, material violation of any contract or agreement between the employee and the Company or of any statutory duty owed to the Company;

(iii)the employee’s unauthorized use or disclosure of the Company’s confidential information or trade secrets;

(iv)an employee’s intentional refusal or intentional failure to act in accordance with any lawful and proper direction or order of his or her superiors;

(v)an employee’s habitual neglect of the duties of employment;

(vi)an employee’s indictment, charge, or conviction of a felony or any crime involving moral turpitude, or participation in any act of theft or dishonesty; or

(vii)the employee’s gross misconduct.

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(3)“Change of Control” means any of the following events:

(i)a sale, lease or disposition of all or substantially all of the assets of the Company; or;

(ii)a merger or consolidation (in a single transaction or a series of related transactions) of the Company with or into any other corporation or corporations or other entity, or any other corporate reorganization, where the stockholders of the Corporation immediately prior to such event do not retain more than fifty percent (50%) of the voting power of and interest in the successor entity (excluding any transactions if the primary purpose of the transaction is to obtain financing from new or existing investors).

The Board shall have the right to determine whether a Change of Control has occurred in accordance with the foregoing definition, and its determination shall be final, binding and conclusive on all persons.

(4)“Constructive Termination” means the occurrence of one or more of the following events, provided that the Eligible Employee has first provided written notice to the Company within 90 days of the first such occurrence of such condition specifying the event(s) constituting Constructive Termination and specifying that the Eligible Employee intends to terminate employment not earlier than 30 days after providing such notice, and the Company (or surviving corporation) has not cured such event(s) within 30 days (or such longer period as may be specified by the Eligible Employee in such notice) after such written notice is received by the Company (the “Cure Period”), and the Eligible Employee resigns within 30 days following the end of the Cure Period:

(i)a material diminution in the Eligible Employee’s authority, duties or responsibilities; or

(ii)the relocation by the Company of the principle place for the rendering of the Eligible Employee’s services hereunder to a location that requires a one-way increase in the Eligible Employee’s driving distance of more than 45 miles; or

(iii)a material reduction by the Company of annual base compensation, which reduction is not applicable to all of the Company’s senior executive employees.

However, none of the foregoing will constitute a Constructive Termination to the extent mutually agreed upon in advance of the occurrence thereof by the Eligible Employee.

(5)“Covered Termination” means (i) an involuntary termination of an employee’s employment by the Company other than for Cause or (ii) a Constructive Termination by an Eligible Employee who is the CEO or a Company Officer.  A Covered Termination does not include a termination of employment resulting from such Eligible Employee’s resignation for any reason not constituting a Constructive Termination, or due to the Eligible Employee’s death or Disability.

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(6)“Disability” means the employee is prevented from performing his duties hereunder by reason of any physical or mental incapacity that results in the employee’s satisfaction of all requirements necessary to receive benefits under the Company’s long-term disability plan due to a total disability.  If the Company has no long-term disability plan in place, “Disability” shall mean a physical or mental disability or infirmity of the employee, as determined by a physician of recognized standing selected by the Company, that prevents (or, in the opinion of such physician, is reasonably expected to prevent) the normal performance of his duties as an employee of the Company for any continuous period of 180 days, or for 180 days during any one 12-month period.

(7)“Equity Award” means any stock option, restricted stock, restricted stock unit, or other equity award to acquire shares of the Company’s stock.  Notwithstanding the foregoing, for all purposes of the Plan “Equity Award” does not include any equity award issued under or held in any plan that is intended to be qualified under Section 401(a) of the Internal Revenue Code.

(8)“Non-Performance Vesting Equity Award” means at any given time an Equity Award that is not a Performance Vesting Equity Award.

(9)“Performance Vesting Equity Award” means at any given time an Equity Award listed on Appendix C hereto (as may be amended from time to time by the Company) for which the vesting commencement is subject to the attainment of performance goals that have not been attained at such time so that the vesting commencement date for such Equity Award has not yet occurred.

(10)“Year of Service” means each complete year of employment in which an Eligible Employee has been employed by the Company.  For purposes of this definition, a year of employment shall be a 365 day period (or 366 day period in case of a leap year) that, for the first year of employment, commences on the Eligible Employee’s date of hire and that, for any subsequent year, commences on an anniversary of that hire date.  A Year of Service shall include any leave of absence period that was approved by the Company.

Section 3.AMOUNT OF BENEFIT.

(a)Severance Benefits.  Subject to the exceptions set forth in Section 2(b), Severance benefits under the Plan, if any, shall be provided to Eligible Employees described in Section 2(a) as follows:

(i)Eligible Employees that have less than one Year of Service at the time of the Covered Termination shall receive the severance benefits described on Appendix A attached hereto.

(ii)Eligible Employees that have one or more Years of Service at the time of the Covered Termination shall receive the severance benefits described on Appendix B attached hereto.

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(iii)Severance benefits shall be provided to an Eligible Employee either under Appendix A or Appendix B, as applicable, but not both.

(b)Additional Benefits.  Notwithstanding the foregoing, the Company may, in its sole discretion, provide benefits in addition to those benefits set forth in Section 3(a) to Eligible Employees and the provision of any such benefits to an Eligible Employee shall in no way obligate the Company to provide such benefits to any other Eligible Employee or to any other employee, even if similarly situated.

(c)Certain Reductions.  The Company, in its sole discretion, shall have the authority to reduce an Eligible Employee’s severance benefits, in whole or in part, by any other severance benefits, pay in lieu of notice, or other similar benefits payable to the Eligible Employee by the Company or an affiliate of the Company that become payable in connection with the Eligible Employee’s termination of employment pursuant to (i) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act, the California Plant Closing Act, or any other similar state law, (ii) a written employment or severance agreement with the Company, or (iii) any Company policy or practice providing for the Eligible Employee to remain on the payroll for a limited period of time after being given notice of the termination of the Eligible Employee’s employment, and the Plan Administrator shall so construe and implement the terms of the Plan; provided, however, that notwithstanding the foregoing and any other provision in the Plan to the contrary, such reductions shall in no event reduce the cash severance benefits provided under this Plan to less than two (2) weeks of Base Salary.  The Company’s decision to apply such reductions to the severance benefits of one Eligible Employee and the amount of such reductions shall in no way obligate the Company to apply the same reductions in the same amounts to the severance benefits of any other Eligible Employee, even if similarly situated.  In the Company’s sole discretion, such reductions may be applied on a retroactive basis, with severance benefits previously paid being re-characterized as payments pursuant to the Company’s statutory obligation.

(d)Non-Duplication of Benefits.  No Eligible Employee is eligible to receive benefits under this Plan more than one time.

(e)Termination of Benefits.  With respect to each Eligible Employee, benefits under this Plan shall terminate immediately if such Eligible Employee, at any time, violates any material proprietary information, non-disparagement, confidentiality or non-solicitation obligation to the Company.

(f)Vesting Acceleration of Equity Awards. In order to give effect to any acceleration of vesting of Equity Awards to which an Eligible Employee may be entitled under this Plan, notwithstanding anything to the contrary set forth in the Eligible Employee’s Equity Award agreements or the Company’s equity plans regarding immediate forfeiture of unvested shares upon termination or service, following an Eligible Employee’s Covered Termination, the shares subject to any unvested portion of such Eligible Employee’s Equity Awards shall not be forfeited or returned to the applicable

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equity plan before any vesting acceleration of such Equity Awards provided by this Plan is finally determined and given effect, if applicable; provided, however, that nothing in this Section 3(f) prohibits the Company or a successor organization (or its parent) from causing such Equity Awards to earlier terminate pursuant to the terms of the applicable equity plan or award agreements in connection with a Change of Control, merger, acquisition or other similar corporate transaction where such Equity Awards will terminate and not be assumed by the successor or acquiring entity.

Section 4.SECTION 409A COMPLIANCE.

(a)Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under the Plan (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with an Eligible Employee’s termination of employment unless and until the Eligible Employee has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless the Company reasonably determines that such amounts may be provided to the Eligible Employee without causing the Eligible Employee to incur the additional 20% tax under Section 409A.

(b)It is intended that each installment of the Severance Benefits payments provided for in this Plan is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).  For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Plan satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).  However, if the Company (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and the Eligible Employee is, on the termination of service, a “specified employee” of the Company or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after the Eligible Employee’s Separation From Service, or (ii) the date of the Eligible Employee’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Company (or the successor entity thereto, as applicable) shall (A) pay to the Eligible Employee a lump sum amount equal to the sum of the Severance Benefit payments that the Eligible Employee would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Severance Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the Severance Benefits in accordance with the applicable payment schedules set forth in this Plan.

(c)Notwithstanding anything to the contrary set forth herein, the Eligible Employee shall receive the Severance Benefits described above, if and only if the Eligible Employee duly executes and returns to the Company within the applicable time period set forth therein, but in no event more

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than forty-five days following Separation From Service, a separation agreement containing the Company’s standard form of release of claims in favor of the Company (attached to this Agreement as Exhibits A, B and C) and other standard provisions, including without limitation, those relating to non-disparagement and confidentiality (the “Separation Agreement”), and permits the release of claims contained therein to become effective in accordance with its terms.  Notwithstanding any other payment schedule set forth in this Plan, none of the Severance Benefits will be paid or otherwise delivered prior to the effective date of the Separation Agreement.  Except to the extent that payments may be delayed until the Specified Employee Initial Payment Date pursuant to the preceding paragraph, on the first regular payroll pay day following the effective date of the Separation Agreement, the Company will pay the Eligible Employee the Severance Benefits the Eligible Employee would otherwise have received under the Plan on or prior to such date but for the delay in payment related to the effectiveness of the Separation Agreement, with the balance of the Severance Benefits being paid as originally scheduled.

Section 5.PARACHUTE PAYMENTS

(a)In the event that the payments provided herein and benefits otherwise payable to an Eligible Employee (i) constitute “parachute payments” within the meaning of Section 280G of the Code, or any comparable successor provisions, and (ii) but for this Section 5 would be subject to the excise tax imposed by Section 4999 of the Code, or any comparable successor provisions (the “Excise Tax”), then such Eligible Employee’s benefits hereunder shall be either:

(i)provided to such Eligible Employee in full, or

(ii)provided to such Eligible Employee as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax,

whichever of the foregoing amounts, when taking into account applicable federal, state, local and foreign income and employment taxes, the Excise Tax, and any other applicable taxes, results in the receipt by such Eligible Employee, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under the Excise Tax (the “Reduced Amount”).  If a reduction in payments or benefits constituting “parachute payments” is necessary so that the Payment equals the Reduced Amount, reduction shall occur in the following order:  reduction of cash payments; cancellation of accelerated vesting of stock awards; reduction of employee benefits.  If acceleration of vesting of stock award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Eligible Employee’s stock awards.

(b)Unless the Company and such Eligible Employee otherwise agree in writing, any determination required under this Section 5 shall be made in writing in good faith by the Company’s independent certified public accountants (the “Accountants”).  For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code, and other applicable legal authority.  The Company and such Eligible Employee

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shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 5.

(c)If, notwithstanding any reduction described in this Section 5, the IRS determines that such Eligible Employee is liable for the Excise Tax as a result of the receipt of the payment of benefits as described above, then such Eligible Employee shall be obligated to pay back to the Company, within thirty (30) days after a final IRS determination or in the event that such Eligible Employee challenges the final IRS determination, a final judicial determination, a portion of the payment equal to the “Repayment Amount.”  The Repayment Amount with respect to the payment of benefits shall be the smallest such amount, if any, as shall be required to be paid to the Company so that such Eligible Employee’s net after-tax proceeds with respect to any payment of benefits (after taking into account the payment of the Excise Tax and all other applicable taxes imposed on such payment) shall be maximized.  The Repayment Amount with respect to the payment of benefits shall be zero if a Repayment Amount of more than zero would not result in such Eligible Employee’s net after-tax proceeds with respect to the payment of such benefits being maximized.  If the Excise Tax is not eliminated pursuant to this paragraph, such Eligible Employee shall pay the Excise Tax.

(d)Notwithstanding any other provision of this Section 5, if (i) there is a reduction in the payment of benefits as described in this Section 5, (ii) the IRS later determines that such Eligible Employee is liable for the Excise Tax, the payment of which would result in the maximization of such Eligible Employee’s net after-tax proceeds (calculated as if such Eligible Employee’s benefits had not previously been reduced), and (iii) such Eligible Employee pays the Excise Tax, then the Company shall pay to such Eligible Employee those benefits which were reduced pursuant to this Section 5 contemporaneously or as soon as administratively possible after such Eligible Employee pays the Excise Tax so that such Eligible Employee’s net after-tax proceeds with respect to the payment of benefits is maximized.

(e)If an Eligible Employee either (i) brings any action to enforce such Eligible Employee’s rights pursuant to this Section 5, or (ii) defends any legal challenge to such Eligible Employee’s rights hereunder, such Eligible Employee shall be entitled to recover attorneys’ fees and costs incurred in connection with such action, regardless of the outcome of such action; provided, however, that in the event such action is commenced by such Eligible Employee, the court finds the claim was brought in good faith.

Section 6.IMPACT ON OTHER EMPLOYEE BENEFITS

(a)Continued Group Health Plan Benefits.  If the Eligible Employee was enrolled in a group health plan (e.g., medical, dental, or vision plan) sponsored by the Company or an affiliate immediately prior to termination, the Eligible Employee may be eligible to continue coverage under such group health plan (or to convert to an individual policy), at the time of the Eligible Employee’s termination of employment, under the Consolidated Omnibus Budget Reconciliation Act of 1985

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(“COBRA”).  The Company will notify the Eligible Employee of any such right to continue such coverage at the time of termination pursuant to COBRA.  No provision of this Plan will affect the continuation coverage rules under COBRA.

(b)Other Employee Benefits.  All other benefits (such as life insurance, disability coverage, and 401(k) plan coverage) terminate as of the Eligible Employee’s termination date (except to the extent that a conversion privilege may be available thereunder).

Section 7.COMPANY PROPERTY.

(a)Return of Company Property.  Except as provided in Section 7(b) below, an Eligible Employee will not be entitled to any severance benefit under the Plan unless and until the Eligible Employee returns all Company Property.  For this purpose, “Company Property” means all Company documents (and all copies thereof) and other Company property which the Eligible Employee had in his or her possession at any time, including, but not limited to, Company files, notes, drawings records, plans, forecasts, reports, studies, analyses, proposals, agreements, financial information, research and development information, sales and marketing information, operational and personnel information, specifications, code, software, databases, computer-recorded information, tangible property and equipment (including, but not limited to, leased vehicles, computers, facsimile machines, mobile telephones, servers), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof in whole or in part).  As a condition to receiving benefits under the Plan, Eligible Employees must not make or retain copies, reproductions or summaries of any such Company property.

(b)Retention of Certain Company Equipment.  Notwithstanding the provisions of Section 7(a), the Company and an Eligible Employee may agree to allow the Eligible Employee to retain certain Company equipment (e.g., laptops, printers, facsimile machines, copiers, etc.) (“Company Equipment”) for his or her personal use following the Eligible Employee’s termination of employment.  As a condition to retaining any Company Equipment, the Eligible Employee must execute a general waiver and release in substantially the form attached hereto as Exhibit A, Exhibit B or Exhibit C, as appropriate, and such release must become effective in accordance with its terms. The Eligible Employee acknowledges that the Eligible Employee will have imputed income related to the retention of any Company Equipment.  The Eligible Employee will follow all Company instructions as to the return and/or deletion of any Company information contained on the Company Equipment.

Section 8.WITHHOLDING TAXES AND OFFSETS FOR INDEBTEDNESS.

All payments under the Plan will be subject to applicable withholding for federal, state and local taxes.  If an Eligible Employee is indebted to the Company at his or her termination date, the Company reserves the right to offset any severance payments under the Plan by the amount of such indebtedness to the extent permitted by applicable laws.  Additionally, if an Eligible Employee is subject

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to withholding for taxes related to any non-Plan benefits, the Company may offset any severance payments under the Plan by the amount of such withholding taxes.

Section 9.REEMPLOYMENT.

In the event of an Eligible Employee’s reemployment by the Company or an affiliate of the Company during the period of time in respect of which severance benefits pursuant to Sections 3(a) and 3(b) have been paid, the Company, in its sole and absolute discretion, may require such Eligible Employee to repay to the Company all or a portion of such severance benefits as a condition of reemployment.

Section 10.RIGHT TO INTERPRET PLAN; AMENDMENT AND TERMINATION.

(a)Exclusive Discretion.  The Plan Administrator (as defined in Section 13(a) herein) shall have the exclusive discretion and authority to establish rules, forms, and procedures for the administration of the Plan and to construe and interpret the Plan and to decide any and all questions of fact, interpretation, definition, computation or administration arising in connection with the operation of the Plan, including, but not limited to, the eligibility to participate in the Plan and amount of benefits paid under the Plan.  The rules, interpretations, computations and other actions of the Plan Administrator shall be binding and conclusive on all persons.

(b)Amendment or Termination.  The Company reserves the right to amend or terminate this Plan (including Appendix A and Appendix B) or the benefits provided hereunder at any time; provided, however, that no such amendment or termination shall adversely affect the right to any unpaid benefit of any Eligible Employee whose termination date has occurred prior to amendment or termination of the Plan.  In addition, following a Change of Control, no such amendment or termination may adversely affect the benefits to which an employee would become entitled under the Plan as an Eligible Employee upon a Covered Termination if the Plan had not been so amended or terminated, without the consent of the affected employee.  Furthermore, no such amendment or termination may adversely affect the benefits to which a Company officer would become entitled under the Plan as an Eligible Employee upon a Covered Termination if the Plan had not been so amended or terminated, without the consent of such affected officer.  Any action amending or terminating the Plan shall be in writing and executed by the Chief Executive Officer or Chief Financial Officer of the Company.

Section 11.NO IMPLIED EMPLOYMENT CONTRACT.

The Plan shall not be deemed (i) to give any employee or other person any right to be retained in the employ of the Company or (ii) to interfere with the right of the Company to discharge any employee or other person at any time, with or without cause, which right is hereby reserved.

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Section 12.LEGAL CONSTRUCTION.

This Plan is intended to be governed by and shall be construed in accordance with the Employee Retirement Income Security Act of 1974 (“ERISA”) and, to the extent not preempted by ERISA, the laws of the State of California (without regard to principles of conflict of laws).

Section 13.CLAIMS, INQUIRIES AND APPEALS.

(a)Applications for Benefits and Inquiries.  Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing by an applicant (or his or her authorized representative).  The Plan Administrator is:

Optimer Pharmaceuticals, Inc.

Attn:  Director of Human Resources

10110 Sorrento Valley Road, Suite C

San Diego, CA  92121

(b)Denial of Claims.  In the event that any application for benefits is denied in whole or in part, the Plan Administrator must provide the applicant with written or electronic notice of the denial of the application, and of the applicant’s right to review the denial.  Any electronic notice will comply with the regulations of the U.S. Department of Labor.  The notice  of denial will be set forth in a manner designed to be understood by the applicant and will include the following:

(1)the specific reason or reasons for the denial;

(2)references to the specific Plan provisions upon which the denial is based;

(3)a description of any additional information or material that the Plan Administrator needs to complete the review and an explanation of why such information or material is necessary; and

(4)an explanation of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 11(d) below.

This notice of denial will be given to the applicant within ninety (90) days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case, the Plan Administrator has up to an additional ninety (90) days for processing the

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application.  If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial ninety (90) day period.

This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application.

(c)Request for a Review.  Any person (or that person’s authorized representative) for whom an application for benefits is denied, in whole or in part, may appeal the denial by submitting a request for a review to the Plan Administrator within sixty (60) days after the application is denied.  A request for a review shall be in writing and shall be addressed to:

Optimer Pharmaceuticals, Inc.

Attn:  Director of Human Resources

10110 Sorrento Valley Road, Suite C

San Diego, CA  92121

A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant feels are pertinent.  The applicant (or his or her representative) shall have the opportunity to submit (or the Plan Administrator may require the applicant to submit) written comments, documents, records, and other information relating to his or her claim.  The applicant (or his or her representative) shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim.  The review shall take into account all comments, documents, records and other information submitted by the applicant (or his or her representative) relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.

(d)Decision on Review.  The Plan Administrator will act on each request for review within sixty (60) days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional sixty (60) days), for processing the request for a review.  If an extension for review is required, written notice of the extension will be furnished to the applicant within the initial sixty (60) day period.  This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the review.  The Plan Administrator will give prompt, written or electronic notice of its decision to the applicant. Any electronic notice will comply with the regulations of the U.S. Department of Labor.  In the event that the Plan Administrator confirms the denial of the application for benefits in whole or in part, the notice will set forth, in a manner calculated to be understood by the applicant, the following:

(1)the specific reason or reasons for the denial;

(2)references to the specific Plan provisions upon which the denial is based;

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(3)a statement that the applicant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to his or her claim; and

(4)a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA.

(e)Rules and Procedures.  The Plan Administrator will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities in reviewing benefit claims.  The Plan Administrator may require an applicant who wishes to submit additional information in connection with an appeal from the denial of benefits to do so at the applicant’s own expense.

(f)Exhaustion of Remedies.  No legal action for benefits under the Plan may be brought until the applicant (i) has submitted a written application for benefits in accordance with the procedures described by Section 13(a) above, (ii) has been notified by the Plan Administrator that the application is denied, (iii) has filed a written request for a review of the application in accordance with the appeal procedure described in Section 13(c) above, and (iv) has been notified that the Plan Administrator has denied the appeal.  Notwithstanding the foregoing, if the Plan Administrator does not respond to a applicant’s claim or appeal within the relevant time limits specified in this Section 13, the applicant may bring legal action for benefits under the Plan pursuant to Section 502(a) of ERISA.

Section 14.BASIS OF PAYMENTS TO AND FROM PLAN.

The Plan shall be unfunded, and all cash payments under the Plan shall be paid only from the general assets of the Company.  An Eligible Employee’s right to receive payments under the Plan is no greater than that of the Company’s unsecured general creditors.  Therefore, if the Company were to become insolvent, the Eligible Employee might not receive benefits under the Plan.

Section 15.OTHER PLAN INFORMATION.

(a)Employer and Plan Identification Numbers. The Employer Identification Number assigned to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by the Internal Revenue Service is 33-0830300.  The Plan Number assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 511.

(b)Ending Date for Plan’s Fiscal Year and Type of Plan.  The date of the end of the fiscal year for the purpose of maintaining the Plan’s records is December 31.  The Plan is a welfare benefit plan.

(c)Agent for the Service of Legal Process.  The agent for the service of legal process with respect to the Plan is:

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Optimer Pharmaceuticals, Inc.

Attn:  Director of Human Resources

10110 Sorrento Valley Road, Suite C

San Diego, CA  92121

(d)Plan Sponsor and Administrator.  The Plan Sponsor and the “Plan Administrator” of the Plan is:

Optimer Pharmaceuticals, Inc.

Attn:  Director of Human Resources

10110 Sorrento Valley Road, Suite C

San Diego, CA  92121

The Plan Sponsor’s and Plan Administrator’s telephone number is (858) 909-0736.  The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan.

Section 16.STATEMENT OF ERISA RIGHTS.

Participants in this Plan are entitled to certain rights and protections under ERISA.  If you are an Eligible Employee, you are considered a participant in the Plan and, under ERISA, you are entitled to:

(a)Receive Information About Your Plan and Benefits

(1)Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing the Plan and a copy of the latest annual report (Form 5500 Series), if applicable, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration;

(2)Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan and copies of the latest annual report (Form 5500 Series), if applicable, and an updated (as necessary) Summary Plan Description.  The Administrator may make a reasonable charge for the copies; and

(3)Receive a summary of the Plan’s annual financial report, if applicable.  The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.

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(b)Prudent Actions by Plan Fiduciaries.  In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan.  The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries.  No one, including your employer, your union or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA.

(c)Enforce Your Rights.  If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules as set forth in detail in Section 13 herein.

Under ERISA, there are steps you can take to enforce the above rights.  For instance, if you request a copy of Plan documents or the latest annual report from the Plan, if applicable, and do not receive them within 30 days, you may file suit in a Federal court and you are not required to follow the claims procedure set forth in Section 13 herein.  In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.

If you have completed the claims and appeals procedure described in Section 11 and have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court.

If you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court.  The court will decide who should pay court costs and legal fees.  If you are successful, the court may order the person you have sued to pay these costs and fees.  If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

(d)Assistance with Your Questions.  If you have any questions about the Plan, you should contact the Plan Administrator.  If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.  You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration or accessing its website at http://www.dol.gov/ebsa/.

16

Section 17.GENERAL PROVISIONS.

(a)Notices.  Any notice, demand or request required or permitted to be given by either the Company or an Eligible Employee pursuant to the terms of this Plan shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties, in the case of the Company, at the address set forth in Section 15(d) and, in the case of an Eligible Employee, at the address as set forth in the Company’s employment file maintained for the Eligible Employee as previously furnished by the Eligible Employee or such other address as a party may request by notifying the other in writing.

(b)Transfer and Assignment.  The rights and obligations of an Eligible Employee under this Plan may not be transferred, assigned or alienated.  This Plan shall be binding upon any surviving entity resulting from a Change of Control and upon any other person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carried on by the Company without regard to whether or not such person or entity actively assumes the obligations hereunder.

(c)Waiver.  Any party’s failure to enforce any provision or provisions of this Plan shall not in any way be construed as a waiver of any such provision or provisions, nor prevent any party from thereafter enforcing each and every other provision of this Plan.  The rights granted the parties herein are cumulative and shall not constitute a waiver of any party’s right to assert all other legal remedies available to it under the circumstances.

(d)Severability.  Should any provision of this Plan be declared or determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

(e)Section Headings.  Section headings in this Plan are included for convenience of reference only and shall not be considered part of this Plan for any other purpose.

Section 18.EXECUTION.

To record the adoption of the Plan as set forth herein, effective as of May 5, 2010, Optimer Pharmaceuticals, Inc. has caused its duly authorized officer to execute the same this 5th day of May, 2010.

OPTIMER PHARMACEUTICALS, INC.
By:	/s/ John D. Prunty
Title:	Chief Financial Officer and Vice President

17

APPENDIX A

OPTIMER PHARMACEUTICALS, INC. SEVERANCE BENEFIT PLAN

BENEFITS FOR ELIGIBLE EMPLOYEES WITH LESS THAN ONE YEAR OF SERVICE

Certain capitalized terms not specifically defined in this Appendix A are defined in the Plan.

Severance benefits to be provided to Eligible Employees under the Optimer Pharmaceuticals, Inc. Amended and Restated Severance Benefit Plan (the “Plan”) who are terminated pursuant to a Covered Termination and who have less than one Year of Service on the date of such termination are as provided on this Appendix A.

1.Conditions to Receipt of Benefits:  Subject to the exceptions set forth in Section 2(b) of the Plan, the Eligible Employee must meet all the requirements set forth in Sections 2(a) and 7(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate (the “Release”), within the applicable time period set forth therein and permit such release to become effective in accordance with its terms.  The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.

2.Regular Covered Termination Severance Benefits.  Eligible Employees that are terminated in a Covered Termination that occurs either prior to, or more than 12 months following, a Change of Control, and who have less than one Year of Service on the date of such termination, shall receive the benefits set forth in this Section 2.

(a)Base Salary Continuation Benefit.  Eligible Employees shall be entitled to receive continued Base Salary payments for the time period following a Covered Termination as set forth below next to the respective Eligible Employees’ position in effect at the time of the Covered Termination.

Position	Base Salary Continuation Period
Chief Executive Officer	6 months
Company Officers and Vice Presidents	3 months
All Director levels, Managers, and Non-Managerial Staff with annual Base Salary in excess of $100,000	2 weeks, plus 2 weeks for each Year of Service
Non-Managerial Staff with annual Base	2 weeks, plus

1

Salary of $100,000 or less 1 week for each Year of Service

(b)Vesting Acceleration for Non-Performance Vesting Equity Awards.  All Non-Performance Vesting Equity Awards granted by the Company to the Eligible Employee (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting, if any, for the time period or to the extent set forth below next to the Eligible Employee’s respective position.  If such accelerated vesting is with respect to less than 100% of the Non-Performance Vesting Equity Award, if applicable, such acceleration shall be determined in accordance with the vesting schedule applicable to such Equity Award as if the Eligible Employee had been employed for the additional period of time indicated next to the Eligible Employee’s position as of the date of his or her Covered Termination.

Position	Time Period or Extent of Vesting Acceleration for Non-Performance Vesting Equity Awards
Chief Executive Officer	6 months
Company Officers and Vice Presidents	6 months
All Director levels, Managers, , and Non-Managerial Staff with annual Base Salary in excess of $100,000	None
Non-Managerial Staff with annual Base Salary of $100,000 or less	None

3.Change of Control Covered Termination Severance Benefits.  Eligible Employees that are terminated in a Covered Termination that occurs upon or within twelve (12) months following a Change of Control, and who have less than one Year of Service on the date of such termination shall receive the benefits set forth in this Section 3.

(a)Base Salary Continuation Benefit.  Eligible Employees shall be entitled to receive continued Base Salary payments for the time period following a Covered Termination as set forth below next to the respective Eligible Employees’ position in effect at the time of the Covered Termination.

2

Position	Base Salary Continuation Period
Chief Executive Officer	12 months
Company Officers and Vice Presidents	6 months
All Director levels, Managers, and Non-Managerial Staff with annual Base Salary in excess of $100,000	2 weeks, plus 2 weeks for each Year of Service

3

Non-Managerial Staff with annual Base Salary of $100,000 or less 2 weeks, plus
1 week for each Year of Service

(b)Vesting Acceleration of Equity Awards.

(1)All Non-Performance Vesting Equity Awards granted by the Company to the Eligible Employee (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting for the time period or to the extent set forth below next to the Eligible Employee’s respective position.  If such accelerated vesting is with respect to less than 100% of the Equity Award such acceleration shall be determined in accordance with the vesting schedule applicable to such Equity Award as if the Eligible Employee had been employed for the additional period of time indicated next to the Eligible Employee’s position as of the date of his or her Covered Termination.

Position	Time Period or Extent of Vesting Acceleration for Non-Performance Vesting Equity Awards
Chief Executive Officer	All unvested Equity Awards immediately vest 100%
Company Officers and Vice Presidents	All unvested Equity Awards immediately vest 100%
All Director levels, Managers, and Non-Managerial Staff with annual Base Salary in excess of $100,000	12 months
Non-Managerial Staff with annual Base Salary of $100,000 or less	12 months

(2)Any Performance Vesting Equity Awards (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting with respect to 50% of the then unvested shares.

4.Time and Form of Base Salary Continuation Payments.  Subject to the provisions of Section 4 of the Plan, all Base Salary continuation payments shall be paid in accordance with the Company’s standard payroll practices, and shall commence with the first payroll period following the effective date of the Release.  The Company will pay the Eligible Employee the Base Salary continuation severance benefits the Eligible Employee would otherwise have received under the

4

Plan on or prior to such date but for the delay in payment related to the effectiveness of the Release, with the balance of the Base Salary continuation severance benefits being paid as originally scheduled.

5.Reductions Pursuant to Section 3(c) of the Plan.  The severance benefits set forth in this Appendix A are subject to certain reductions under Section 3(c) of the Plan.

6.Amendment of Appendix A.  The foregoing severance benefits are subject to such change as the Company, pursuant to Section 10(b) of the Plan, may determine in its sole and absolute discretion.  Any such change in severance benefits shall be set forth in a revised version of this Appendix A.

5

APPENDIX B

OPTIMER PHARMACEUTICALS, INC. SEVERANCE BENEFIT PLAN

BENEFITS FOR ELIGIBLE EMPLOYEES WITH ONE OR MORE YEARS OF SERVICE

Certain capitalized terms not specifically defined in this Appendix B are defined in the Plan.

Severance benefits to be provided to Eligible Employees under the Optimer Pharmaceuticals, Inc. Amended and Restated Severance Benefit Plan (the “Plan”) who are terminated pursuant to a Covered Termination and who have one or more Years of Service on the date of such termination are as provided on this Appendix B.

1.Conditions to Receipt of Benefits:  Subject to the exceptions set forth in Section 2(b) of the Plan, the Eligible Employee must meet all the requirements set forth in Sections 2(a) and 7(a) of the Plan, including, without limitation, executing a general waiver and release in substantially the form attached to the Plan as Exhibit A, Exhibit B or Exhibit C, as appropriate (the “Release”), within the applicable time period set forth therein and permit such release to become effective in accordance with its terms.  The Company, in its sole discretion, may modify the form of the required general waiver and release to comply with applicable law, and may incorporate such waiver and release into a termination agreement or other agreement with the Eligible Employee.

2.Regular Covered Termination Severance Benefits.  Eligible Employees that are terminated in a Covered Termination that occurs either prior to, or more than 12 months following, a Change of Control, and who have one or more Years of Service on the date of such termination, shall receive the benefits set forth in this Section 2.

(a)Base Salary Continuation Benefit.  Eligible Employees shall be entitled to receive continued Base Salary payments for the time period following a Covered Termination as set forth below next to the respective Eligible Employees’ position in effect at the time of the Covered Termination.

1

Position	Base Salary Continuation Period
Chief Executive Officer	12 months
Company Officers	6 months, plus 1 month for each Year of Service above 1 year, up to a maximum of 12 months
Vice Presidents	3 months, plus 1 month for each Year of Service above 3 years, up to a maximum of 9 months
All Director levels, Managers, and Non-Managerial Staff with annual Base Salary in excess of $100,000	2 weeks, plus 2 weeks for each Year of Service, up to a maximum of 36 weeks
Non-Managerial Staff with annual Base Salary of $100,000 or less	2 weeks, plus 1 week for each Year of Service, up to a maximum of 26 weeks

2

(b)Vesting Acceleration for Non-Performance Vesting Equity Awards.  All Non-Performance Vesting Equity Awards granted by the Company to the Eligible Employee (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting, if any, for the time period or to the extent set forth below next to the Eligible Employee’s respective position.  If such accelerated vesting is with respect to less than 100% of the Equity Award such acceleration shall be determined in accordance with the vesting schedule applicable to such Equity Award as if the Eligible Employee had been employed for the additional period of time indicated next to the Eligible Employee’s position as of the date of his or her Covered Termination.

Position	Time Period or Extent of Vesting Acceleration for Non-Performance Vesting Equity Awards
Chief Executive Officer	24 months
Company Officers and Vice Presidents	12 months
Managers, Executive Directors, and Non-Managerial Staff with annual Base Salary in excess of $100,000	None
Non-Managerial Staff with annual Base Salary of $100,000 or less	None

3.Change of Control Covered Termination Severance Benefits.  Eligible Employees that are terminated in a Covered Termination that occurs upon or within twelve (12) months following a Change of Control, and who have one or more Years of Service on the date of such termination shall receive the benefits set forth in this Section 3.

(a)Base Salary Continuation Benefit.  Eligible Employees shall be entitled to receive continued Base Salary payments for the time period following a Covered Termination as set forth below next to the respective Eligible Employees’ position in effect at the time of the Covered Termination.

3

Position	Base Salary Continuation Period
Chief Executive Officer	12 months
Company Officers	12 months
Vice Presidents	9 months
Managers, Executive Directors, and Non-Managerial Staff with annual Base Salary in excess of $100,000	2 weeks, plus 2 weeks for each Year of Service, up to a maximum of 36 weeks
Non-Managerial Staff with annual Base Salary of $100,000 or less	2 weeks, plus 1 week for each Year of Service, up to a maximum of 26 weeks

(b)Equity Vesting Acceleration.

(1)Vesting Acceleration for Non-Performance Vesting Equity Awards.  All Non-Performance Vesting Equity Awards granted by the Company to the Eligible Employee (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting for the time period or to the extent set forth below next to the Eligible Employee’s respective position.

Position	Time Period or Extent of Vesting Acceleration for Non-Performance Vesting Equity Awards
Chief Executive Officer	immediately vest 100%
Company Officers and Vice Presidents	immediately vest 100%
Managers, Executive Directors, and Non-Managerial Staff with annual Base Salary in excess of $100,000	immediately vest 100%
Non-Managerial Staff with annual Base Salary of $100,000 or less	immediately vest 100%

4

(2)Any Performance Vesting Equity Awards (determined as of the date of the Eligible Employee’s Covered Termination) shall be subject to accelerated vesting, if any, to the extent set forth below.

Years of Service at time of Covered Termination	Extent of Vesting Acceleration for Performance Vesting Equity Award
At least one, but less than 2	60% of unvested shares at time of Covered Termination
At least 2, but less than 3	75% of unvested shares at time of Covered Termination
At least 3, but less than 4	85% of unvested shares at time of Covered Termination
At least 4	100% of unvested shares at time of Covered Termination

4.Time and Form of Base Salary Continuation Payments.  Subject to the provisions of Section 4 of the Plan, all Base Salary continuation payments shall be paid in accordance with the Company’s standard payroll practices, and shall commence with the first payroll period following the effective date of the Release.  The Company will pay the Eligible Employee the Base Salary continuation severance benefits the Eligible Employee would otherwise have received under the Plan on or prior to such date but for the delay in payment related to the effectiveness of the Release, with the balance of the Base Salary continuation severance benefits being paid as originally scheduled.

5.Reductions Pursuant to Section 3(c) of the Plan.  The severance benefits set forth in this Appendix B are subject to certain reductions under Section 3(c) of the Plan.

6.Amendment of Appendix B.  The foregoing severance benefits are subject to such change as the Company, pursuant to Section 10(b) of the Plan, may determine in its sole and absolute discretion.  Any such change in severance benefits shall be set forth in a revised version of this Appendix B.

5

APPENDIX C

CERTAIN EQUITY AWARDS

Award Type	Grantee	Shares Covered by Award	Grant Date
Restricted Stock Unit	Pedro Lichtinger	20,000	May 5, 2010
Restricted Stock Unit	Pedro Lichtinger	20,000	May 5, 2010
Restricted Stock Unit	Pedro Lichtinger	20,000	May 5, 2010
Restricted Stock Unit	Pedro Lichtinger	60,000	May 5, 2010
Stock Option	Pedro Lichtinger	80,000	May 5, 2010
Stock Option	Pedro Lichtinger	80,000	May 5, 2010
Stock Option	Pedro Lichtinger	80,000	May 5, 2010
Stock Option	Pedro Lichtinger	240,000	May 5, 2010

For Employees Age 40 or Older

Individual Termination

EXHIBIT A

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Optimer Pharmaceuticals, Inc. Severance Benefit Plan (the “Plan”).

I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof.  I am not relying on any promise or representation by the Company that is not expressly stated therein.  Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under my proprietary information and inventions agreement with the Company.

Except as otherwise set forth in this Release, I hereby generally and completely release the Company and its parents, subsidiaries, successors, predecessors and affiliates, and their partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release.  This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, or its affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, or its affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended); provided, however, that nothing in this paragraph shall be construed in any way to release the Company or its affiliates from its obligation to indemnify me pursuant to agreement or applicable law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, and that the consideration given under the Plan for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled.  I further acknowledge that I have been advised by this writing, as required by the ADEA, that:  (a) my waiver and

release do not apply to any rights or claims that may arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not do so); (c) I have twenty-one (21) days to consider this Release (although I may choose voluntarily to sign this Release earlier); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an officer of the Company; and (e) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after I sign this Release.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”  I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than twenty-one (21) days following the date it is provided to me.

EMPLOYEE

Name:

Date:

For Employees Age 40 or Older

Group Termination

EXHIBIT B

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Optimer Pharmaceuticals, Inc. Severance Benefit Plan (the “Plan”).

I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof.  I am not relying on any promise or representation by the Company that is not expressly stated therein.  Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under my proprietary information and inventions agreement with the Company.

Except as otherwise set forth in this Release, I hereby generally and completely release the Company and its parents, subsidiaries, successors, predecessors and affiliates, and their partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release.  This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, or its affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, or its affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended); provided, however, that nothing in this paragraph shall be construed in any way to release the Company or its affiliates from its obligation to indemnify me pursuant to agreement or applicable law.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA, and that the consideration given under the Plan for the waiver and release in the preceding paragraph hereof is in addition to anything of value to which I was already entitled.  I further acknowledge that I have been advised by this writing, as required by the ADEA, that:  (a) my waiver and

1

release do not apply to any rights or claims that may arise after the date I sign this Release; (b) I should consult with an attorney prior to signing this Release (although I may choose voluntarily not to do so); (c) I have forty-five (45) days to consider this Release (although I may choose voluntarily to sign this Release earlier); (d) I have seven (7) days following the date I sign this Release to revoke the Release by providing written notice to an office of the Company; (e) this Release shall not be effective until the date upon which the revocation period has expired, which shall be the eighth day after I sign this Release; and (f) I have received with this Release a detailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of all employees of the Company in the same job classification or organizational unit who were not terminated.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”  I hereby expressly waive and relinquish all rights and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than forty-five (45) days following the date it is provided to me.

EMPLOYEE

Name:

Date:

2

For Employees Under Age 40

Individual and Group Termination

EXHIBIT C

RELEASE AGREEMENT

I understand and agree completely to the terms set forth in the Optimer Pharmaceuticals, Inc. Severance Benefit Plan (the “Plan”).

I understand that this Release, together with the Plan, constitutes the complete, final and exclusive embodiment of the entire agreement between the Company, affiliates of the Company and me with regard to the subject matter hereof.  I am not relying on any promise or representation by the Company that is not expressly stated therein.  Certain capitalized terms used in this Release are defined in the Plan.

I hereby confirm my obligations under my proprietary information and inventions agreement with the Company.

Except as otherwise set forth in this Release, I hereby generally and completely release the Company and its parents, subsidiaries, successors, predecessors and affiliates, and their partners, members, directors, officers, employees, stockholders, shareholders, agents, attorneys, predecessors, insurers, affiliates and assigns, from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions occurring at any time prior to and including the date I sign this Release.  This general release includes, but is not limited to: (a) all claims arising out of or in any way related to my employment with the Company, or its affiliates, or the termination of that employment; (b) all claims related to my compensation or benefits, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options, or any other ownership interests in the Company, or its affiliates; (c) all claims for breach of contract, wrongful termination, and breach of the implied covenant of good faith and fair dealing; (d) all tort claims, including claims for fraud, defamation, emotional distress, and discharge in violation of public policy; and (e) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990 (as amended), the federal Age Discrimination in Employment Act (as amended) (“ADEA”), the federal Employee Retirement Income Security Act of 1974 (as amended), and the California Fair Employment and Housing Act (as amended); provided, however, that nothing in this paragraph shall be construed in any way to release the Company or its affiliates from its obligation to indemnify me pursuant to agreement or applicable law.

I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.”  I hereby expressly waive and relinquish all rights

1

and benefits under that section and any law of any jurisdiction of similar effect with respect to my release of any claims hereunder.

I acknowledge that to become effective, I must sign and return this Release to the Company so that it is received not later than fourteen (14) days following the date it is provided to me.

EMPLOYEE

Name:

Date:

2

EX-10.2

Exhibit 10.2

***Text Omitted and Filed Separately

CONFIDENTIAL TREATMENT REQUESTED

Under 17 C.F.R. §§ 200.80(b)(4) and 230.406

API Manufacturing and Supply Agreement

between

Biocon Limited

and

Optimer Pharmaceuticals, Inc.

May 18, 2010

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API Manufacturing and Supply Agreement

This API Manufacturing and Supply Agreement (Agreement) is executed on May 18, 2010

by

Biocon Limited, a company incorporated under the laws of India, having its registered office at 20th K.M., Hosur Road, Electronics City P.O., Bangalore 560 100, India (Biocon);

and

Optimer Pharmaceuticals, Inc., a company duly organized and existing under the laws of Delaware, having its principal offices at 10110 Sorrento Valley Rd., Suite C, San Diego, California 92121, U.S.A (Optimer).

The parties hereby agree as follows.

1.DEFINITIONS

In this Agreement, unless the text expressly or the context necessarily requires otherwise, each of the terms set out in bold below and all grammatical variations thereof shall when capitalized in the manner shown below have the meaning correspondingly assigned to such terms.

1.1          [***].

1.2          Active Pharmaceutical Ingredient (API) means any substance or mixture of substances intended to be used in the manufacture of a drug (medicinal) product and that, when used in the production of a drug, becomes an active ingredient of the drug product.  Such substances are intended to furnish pharmacological activity or other direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease or to affect the structure and function of the body.

1.3          Actual Annual Product Amount has the meaning given in section 6.5

1.4          Affiliate means with respect to a party, any Person, whether directly or indirectly, controlling, controlled by, or under common control with such party or Person, as applicable.  For the purposes of this section 1.4 only, the term “control” means (i) direct or indirect ownership of more than fifty percent (50%) of the equity having the power to vote on or direct the affairs of such party or Person, as applicable, or (ii) the power to direct decisions of such party or Person, as applicable, including the power to direct management and policies of such party or Person, as applicable, whether by reason of ownership, by contract or otherwise.

1.5          Applicable Law means the applicable provisions of any national, state and/or local statute, law, rule, regulation, administrative code, ordinance, notification, decree, order, decision, injunction, award, judgment, permit or license, as the case may be, issued by a governmental, judicial or quasi-judicial authority with jurisdiction over a party, the subject matter of this Agreement or the Compound

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or Product, including the applicable regulations of the FDA and all applicable current good manufacturing practices, including the cGMPs.

1.6          Approval Date means the date on which Optimer receives the first Marketing Authorization.

1.7          Availability Date has the meaning given in section 7.2.

1.8          Batch means the specific quantity of Product produced in a single cycle of a manufacturing process under the same conditions featuring identical properties.

1.9          Batch Record means a record of all materials, quantities, and process steps used to manufacture and test a Batch.

1.10        Binding Forecast has the meaning given in section 6.3.

1.11        Binding Order has the meaning given in section 7.3.

1.12        Biocon Indemnitee has the meaning given in section 12.1.

1.13        Biocon Inventions has the meaning given in section 14.7.

1.14        Biocon Release Documents has the meaning given in section 7.7.

1.15        Campus means Biocon’s manufacturing facility located at 20th KM Hosur Road, Electronics City, Bangalore - 560 100, India for the manufacture of API.

1.16        Capacity Reservation Fee has the meaning given in section 6.5.

1.17        cGMPs mean the current good manufacturing practices and standards for the production of pharmaceutical intermediates and APIs applicable to both commercial and investigational quantities of compounds (as applicable), as set forth in: (a) Parts 210 and 211 of Title 21 of the U.S. Code of Federal Regulations (21 CFR 210 and 21 CFR 211); and (b) European Community Directive 2003/94/EC and the Rules Governing Medicinal Products in the European Union, Volume 4 (Medicinal Products for Human and Veterinary Use: Good Manufacturing Practice); in each case, as may be amended from time to time after the Effective Date, including any successor provisions thereto, and as interpreted by ICH Harmonised Tripartite Guideline, Good Manufacturing Practice Guide for Active Pharmaceutical Ingredients.

1.18        Commercially Reasonable and Diligent Efforts means those prompt efforts and the application or commitment of resources and expertise consistent with the exercise of prudent scientific and business judgment, as applied to other biopharmaceutical products of similar potential and market size by participants in the biopharmaceutical industry having similar resources to the party in question.

1.19        Compound means the molecule Fidaxomicin with the molecular structure set out in Schedule 1.19.

1.20        Confidential Information means any information and data that a party (Discloser) may from time to time disclose, directly or indirectly, via written, graphic, verbal or electronic form or make available to the other party (Recipient)

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pursuant to this Agreement, and that are regarded by the Discloser as confidential or proprietary, including information and materials related to sales and product information, customer information, manufacturing processes and technology, formulations, information regarding applications and submissions made to any Regulatory Authority, product plans, product development efforts, marketing strategies, financial information and projections and other commercial data that is proprietary or of commercial value. Provided that for each Recipient, Confidential Information shall not include information that:

(a)           at the time of disclosure, is known publicly or thereafter becomes known publicly through no fault of such Recipient or its agents;

(b)           becomes available to such Recipient other than on a confidential basis from a third party who is lawfully in possession of such information and not subject to a contractual or fiduciary relationship to the Discloser with respect thereto;

(c)           was developed by such Recipient independently of information obtained from the Discloser and such independent development can be properly demonstrated by the Recipient; or

(d)           was already known to such Recipient before receipt from the Discloser, as shown by its prior written records.

1.21        Control means, with respect to any Intellectual Property Right, possession by a party of the ability (whether by ownership, license or otherwise) to grant access, a license or a sublicense to such Intellectual Property Right without violating the terms of any agreement or other arrangement with any third party as of the time such party would be first required under this Agreement to grant such access, license or sublicense.

1.22        Dedication Fee means a sum of [***] from the amount paid by Optimer to Biocon referenced in section 3.3 (which sum represents the fee paid by Optimer for Biocon to undertake the obligations under section 5 of this Agreement).

1.23        Discloser has the meaning given in section 1.20.

1.24        Drug Product means a dosage form of the Product in the final immediate packaging intended for marketing.

1.25        Effective Date means the date first set forth in this Agreement.

1.26        Elective Termination Notice has the meaning given in section 15.4.

1.27        EMA means the European Medicines Agency and any successor entity.

1.28        FDA means the United States Food and Drug Administration and any successor entity.

1.29        FDCA means the United States Food, Drug and Cosmetic Act and the regulations promulgated thereunder, as each may be amended from time to time.

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1.30        Fee Date means the day in each calendar year which is the last day of the calendar quarter in which the Approval Date falls.

1.31        Force Majeure Event means any act or event that prevents a party (the Nonperforming Party) in whole or in part, from performing its obligations under this Agreement, or satisfying any conditions to the other party’s obligations under this Agreement, is beyond the reasonable control of and not the fault of the Nonperforming Party and that the Nonperforming Party has been unable to avoid or overcome by the exercise of Commercially Reasonable and Diligent Efforts. It is clarified that a Force Majeure Event includes, where all of the preceding conditions are met, each of the following acts or events: shortages in the availability of raw materials required for the manufacture of Product, flood, lightning, earthquake, volcanic eruption, landslide, hurricane, cyclone, typhoon, tornado, drought, famine, plague, or other act of God, fire, explosion, war, riot, civil disturbance, act of public enemy, terrorist act, military action, epidemic, shipwreck, action of a court or public authority, or strike, work-to-rule action, go-slow or similar labor difficulty, each on an industry-wide, region-wide or nationwide basis, but does not include, any event where any of the above conditions are not met or any act or event caused by or attributable to economic hardship, changes in market conditions, insufficiency of funds, or strikes, work-to-rule actions, go-slows or similar labor difficulties that are not industry-wide, region-wide or nationwide.

1.32        High-Potency Product means products such as [***].

1.33        [***] Equipment means the [***] equipment used in the downstream purification of the Product at Park.

1.34        Initial Activities mean all activities to be performed by the parties pursuant to section 3 prior to the manufacture and supply of Product by Biocon to Optimer for the Territory.

1.35        Insolvency Proceeding means, with respect to a party, that such party (a) commences a voluntary case under applicable bankruptcy laws (as now or hereafter in effect), (b) files a petition seeking to take advantage of any other laws relating to bankruptcy, insolvency, or composition for adjustment of distressed or overdue debts, (c) consents to or fails to contest within  120 days using Commercially Reasonable and Diligent Efforts any petition filed against it in an involuntary case under such bankruptcy laws or other laws, (d) applies for or consents to, or fails to contest within  120 days using Commercially Reasonable and Diligent Efforts, the appointment of, or the taking of possession by, a receiver or liquidator of itself or of a substantial part of its property, (e) admits in writing its inability to pay its debts as they become due, (f) makes a general assignment for the benefit of creditors, or (g) takes any corporate action for the purpose of authorizing any of the foregoing.

1.36        Intellectual Property Right means any right, title or interest in or arising from any business secret, compilation, computer program, copyright, design, device, formula, invention, know-how, logo, manufacturing right, method, pattern, process, product, patent right, patent application, program, reverse know-how, technical data, technique, trademark, or trade secret or any part, revalidation or renewal thereof and all other information that derives independent economic value, actual or potential, from not being generally known.

1.37        Latent Defect means a defect that causes a Batch of Product to fail to conform to the Manufacturing Requirements or to the warranties provided by

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Biocon hereunder, which defect is not discoverable upon reasonable physical inspection and testing upon receipt, but is discovered at a later time.

1.38        Litigation Expense means any court filing fee, court cost, arbitration fee or cost, witness fee, and any other reasonable fee or cost of investigating or asserting a claim for indemnification under this Agreement.

1.39        Loss means any liquidated or admitted liability, loss, claim, settlement payment, cost, expense, interest, award, judgment, damages, fine, fee, penalty or other charge, including reasonable attorney fees and disbursements and Litigation Expenses.

1.40        Manufacturing Requirement has the meaning given in section 7.7.

1.41        Marketing Authorization means a Regulatory Approval to market and sell a Drug Product in any country in the Territory.

1.42        Minimum Volume means a volume that is:

(a)           [***] percent of Optimer’s actual quarterly Product requirement for the Territory if the installation, qualification and Validation conditions specified in clause (b) below have not been met due to a reason not attributable to Optimer or its Affiliates or a Force Majeure Event; or

(b)           in the event Biocon achieves the installation and qualification (as required by this Agreement) of the [***] Equipment at Park, and the parties complete the Validation of all Product manufacturing processes at Park by the date specified in section 3.1(c), then solely for the first eight (8) calendar quarters following the Approval Date, [***] percent of Optimer’s actual quarterly Product requirement for the Territory.  For purposes of clarification, if Minimum Volumes are determined by this clause (b) for the first eight (8) calendar quarters following the Approval Date, beginning with the 9th calendar quarter following the Approval Date and through the term of this Agreement, Minimum Volumes shall be determined solely by clause (a) above.

1.43        NDA means one or more New Drug Application(s), or the equivalent thereof, to make and/or sell commercially Drug Products, filed with the FDA or with a Regulatory Authority in any jurisdiction outside of the United States and within the Territory, and all amendments and supplements thereto filed therewith.

1.44        Non-Binding Forecast has the meaning given in section 6.3.

1.45        Optimer Indemnitee has the meaning given in section 12.2.

1.46        Park means Biocon’s manufacturing facility located at Plot No. 2—4, Bommasandra-Jigani Link Road, Bommasandra Post, Bangalore - 560 099, India for the manufacture of API.

1.47        Permitted Products means any non-High-Potency Products such as [***] or like compounds that can be produced using the [***] Equipment without modification from the state used to produce the Product and without affecting any US or European Regulatory Approval for the manufacture of the Product using the [***] Equipment or any other condition specified by the FDA or EMA in connection with the manufacture of the Product using the [***] Equipment.

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1.48        Person means any natural or juristic person, and includes any company or other body corporate, any trust, government agency, or government, as well as any firm or association or partnership of two or more Persons.

1.49        Product means the Compound in the form of finished bulk API.

1.50        Prohibited Products means any High-Potency Products that can be produced using the [***] Equipment and any non-High-Potency Products that are not Permitted Products.

1.51        Purchase Order has the meaning given in section 7.2.

1.52        Quality Agreement means that certain Quality Agreement, dated September 16, 2009, between the parties and related to the manufacture of Product.

1.53        Recall Action has the meaning given in section 8.5.

1.54        Recipient has the meaning given in section 1.20.

1.55        Reduction Notice has the meaning given in section 6.5.

1.56        Regulatory Approval means, in relation to a Drug Product or API for Drug Product, the registrations, authorizations and approvals of any Regulatory Authority that are required to be obtained prior to the marketing or sale of product in a jurisdiction in the Territory. Neither a tentative approval nor an approvable letter shall be considered a Regulatory Approval.

1.57        Regulatory Authority means, with respect to any country or group of countries, the governmental or regulatory agency or entity in such country or group of countries having the responsibility, jurisdiction, and authority to approve the manufacture, packaging, labeling, marketing or sale of a Drug Product within such country or group of countries or any successor body to any of them.

1.58        ROW means any country or market in the world that is not included in the Territory.

1.59        Rules has the meaning given in section 19.2.

1.60        Specifications mean the manufacturing, quality control and quality assurance procedures (including, without limitation, those set forth in the Quality Agreement), processes, instructions and any other attributes that the parties agree upon in connection with the manufacture of Product, as previously agreed to by the parties and set forth in document number [***] and as may be agreed upon by the parties after the Effective Date or as otherwise required by Applicable Law, Regulatory Authorities or Regulatory Approvals.

1.61        Territory means the United States of America and Canada.

1.62        Validated Facility means the Park, the Campus or another Biocon facility approved by Optimer, and all equipment contained at each such facility, in each case in respect of which Validation activities have been successfully completed for all processes connected with the manufacture, storage, handling and shipping of the Product.

1.63        Validation or Validated means establishing, in accordance with

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Applicable Law or guidelines issued by the relevant Regulatory Authority (including in all cases those issued by the FDA and EMA), that the manufacturing and supply activities conducted by Biocon pursuant to this Agreement consistently produce Product in accordance with the Specifications.

1.64        Validation Batches has the meaning given in Section 10.2.

1.65        Work Plan means the work plan previously agreed to by the parties for the conduct of the Initial Activities regarding [***] and [***] set forth in section 3 and the additional work plan to be agreed to by the parties pursuant to section 3.4.

2.INTERPRETATION AND CONSTRUCTION

The following provisions shall apply to the interpretation and construction of this Agreement.

2.1                Captions in this Agreement are for convenience and identification only and shall not affect the interpretation or construction of this Agreement.

2.2                References to sections, clauses or schedules without further specification are references to sections, clauses and schedules of this Agreement.

2.3                Any reference to a statute or any provision of a statute includes a reference to that statute or provision and any rule, regulation, notification, circular, or direction made or issued pursuant to that statute or provision, as may be from time to time modified or re-enacted, whether prior to or after the date of this Agreement.

2.4                References to the singular include references to the plural and vice versa.

2.5                Words denoting one grammatical gender are intended to include references to all grammatical genders.

2.6                References to “include” or “including” shall mean “include without limitation” and “including without limitation” respectively.

3.INITIAL ACTIVITIES

3.1                Biocon shall use Commercially Reasonable and Diligent Efforts to:

(a)           Successfully scale-up the fermentation process at Park to [***] capacity as demonstrated by a successful production of a minimum of [***] of Compound; and

(b)           Procure in its name, install, qualify and validate the [***] Equipment at Park with a [***].  For purposes of clarification, Biocon shall own the [***] Equipment subject to its obligations and the restrictions set forth in this Agreement.

(c)           Cause the [***] Equipment at Park to be commissioned and fully qualified by [***].

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3.2                The parties shall cause the Validation of all Product manufacturing processes, including the [***] at Park and the [***], at Campus and/or the [***] at Park in such manner and sequence as shall be agreed by the parties in the Work Plan.

3.3                As compensation for Biocon’s efforts pursuant to this section 3, Optimer has paid Biocon an upfront sum of $2.5 million which includes the cost of the [***] Equipment at Park ($1.5 million) and a non-refundable Dedication Fee [***]. Biocon acknowledges the receipt of said $2.5 million from Optimer on June 30, 2009 in the amount of [***] and on October 1, 2009 in the amount of [***].

3.4                As promptly as practical after the Effective Date, the parties shall discuss in good faith and agree upon a work plan detailing their respective responsibilities and timing of the Initial Activities described in this section 3, which work plan shall be consistent with completing the Initial Activities as soon as practical and which, together with the work plan previously agreed to with respect to the [***] and [***] referred to in this section 3, shall constitute the Work Plan.

4.MANUFACTURE AND SUPPLY OF PRODUCT

4.1                Biocon shall manufacture the Product in accordance with the Manufacturing Requirements at Validated Facilities and supply such manufactured Product to Optimer or its designee(s) against payment of the price in accordance with section 9 and subject to the other terms of this Agreement.

4.2                Biocon shall obtain Optimer’s prior written approval before Biocon implements any change in the materials, equipment, process or procedures used to manufacture or test Product that would constitute a major change under cGMPs or that would otherwise require a filing with or notification to a Regulatory Authority.

4.3                Biocon shall use Commercially Reasonable and Diligent Efforts to continuously maintain a sufficient stock of raw materials required to manufacture the Product in quantities no less than those set forth in the applicable Non-Binding Forecast at any time; provided that such quantity does not exceed [***] of Product per calendar quarter.  Biocon shall use and rotate all stock of such raw materials on a first-in, first-out basis or as otherwise required by cGMPs and other Applicable Laws.  Biocon will use Commercially Reasonable and Diligent Efforts to obtain the  most competitive price for any raw materials required in the manufacture of Product and shall ensure such materials are released for use, in accordance with Biocon’s quality system and requirements including the Manufacturing Requirements prior to manufacturing any Batch of Product.  Biocon will review its stock levels of raw materials on a regular basis to maintain stock levels in accordance with this section 4.3.  Biocon shall purchase all [***] raw materials and use [***] only in accordance with the [***] specifications most recently agreed to by the parties as set forth in [***], each as applicable to “fresh” or “recycled” [***] used at Park or Campus, or as otherwise required by applicable Regulatory Authorities or by Regulatory Approvals.  Biocon shall keep Optimer reasonably informed with respect to any changes in [***] prices and shall reasonably cooperate with Optimer should Optimer desire to obtain long-term pricing of [***] supplies.

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4.4                Optimer or its designee(s) shall use the Product obtained pursuant to this Agreement solely in the research, development or manufacture of Drug Product in the Territory or in any ROW country or market. For clarification, Optimer shall be permitted to sell or otherwise transfer Product to its commercial partners for such commercial partner’s research, development and commercialization activities related to Compound, Product and Drug Product or any salts, hydrates, solvates, polymorphs, metabolites, prodrugs or analogs thereof, provided that Biocon shall not be obligated to indemnify such commercial partners of Optimer.

5.CAPACITY AND DEDICATED FACILITIES

5.1                Subject to the other provisions of this Agreement, Biocon shall ensure that the annual manufacturing capacities for Product at Park together with the annual manufacturing capacities for Product at Campus are sufficient to manufacture at least [***] of Product annually. The foregoing sentence notwithstanding, Biocon’s obligation to ensure such manufacturing capacities shall not apply (i) until both Park and Campus are Validated Facilities (including Validation of the [***] at Park) or (ii) in the event Optimer has not successfully obtained a Marketing Authorization in the Territory by [***].

5.2                Any capacity enhancement beyond the quantities mentioned in section 5.1 or as adjusted from time to time will require a lead-time and will be negotiated under a separate agreement by the parties.

5.3                Subject to the provisions of section 6, during the term of this Agreement, Biocon shall cause the [***] Equipment to be dedicated solely to the manufacture and supply of Product under this Agreement and shall ensure that the [***] Equipment is not subject to any lien, pledge, security interest or other encumbrances that could reasonably be expected to materially impair Biocon’s ability to perform its obligations under this Agreement, without prior written approval from Optimer. The foregoing sentence notwithstanding, in the event Park is not successfully made a Validated Facility by [***] due to Optimer’s failure to perform its obligations under the Work Plan or in the event Optimer has not successfully obtained a Marketing Authorization in the Territory by the date specified in clause (ii) of section 5.1, Biocon shall be free to make other uses of the [***] Equipment which would not impair Biocon’s ability to later use the [***] Equipment for the manufacture of Product; provided, however, that if and when the Park becomes a Validated Facility, Biocon shall promptly cease such other uses and re-dedicate the [***] Equipment solely to the manufacture of Product, provided Optimer has also obtained a Marketing Authorization in the Territory at that time, and subject to the provisions of section 6.

6.MINIMUM VOLUMES AND FORECASTS

6.1                Subject to the terms and conditions of this Agreement and consistent with Section 7.2, for each calendar quarter following the Approval Date and during the Term, Optimer shall be required to purchase from Biocon the Minimum Volume of Product or the amount of Product set forth in the Binding Forecast for the applicable calendar quarter; provided that:

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(a)           in the event Biocon believes in good faith, due to a Force Majeure Event or otherwise, that it may be unable to supply either (i) the entire amount of Product specified in a Binding Forecast or (ii) [***] of the amount of Product set out in a Non-Binding Forecast for any calendar quarter, Biocon shall immediately notify Optimer of such fact as well as the amount of Product that Biocon, in good faith, can ensure that it will be able to supply in such calendar quarter, and, notwithstanding anything to the contrary in this Agreement, Optimer shall be entitled to obtain such shortfall from a third party(ies) and such amounts shall not count towards Optimer’s total Product requirements in the Territory for purposes of calculating Minimum Volumes during subsequent calendar quarters; and

(b)           if, in two (2) consecutive calendar quarters, Biocon is unable to supply the amount of Product set forth in the applicable Binding Forecast and such quantities of Product requested from Biocon are no more than (i) [***] of Product over the 4 calendar quarters ending with the second consecutive calendar quarter in which such supply failure occurs, and (ii) [***] of Product per calendar quarter in which such supply failure occurs, then, notwithstanding anything to the contrary in this Agreement, (iii) Optimer shall be entitled to procure from a third party(ies) the difference between the amount of Product requested from Biocon during such two consecutive calendar quarters and the amount actually supplied to Optimer by Biocon during such calendar quarters, and such amounts shall not count towards Optimer’s total Product requirements in the Territory for purposes of calculating Minimum Volumes during subsequent calendar quarters, and (iv) beginning with the calendar quarter following the second consecutive calendar quarter in which Biocon’s supply failure occurs and continuing through the calendar quarter following the calendar quarter in which Biocon is able to demonstrate to Optimer’s reasonable satisfaction its ability to supply at least [***] of Product per quarter, Optimer shall only be obligated to purchase from Biocon the lesser of (A) its Minimum Volume or the amount of Product set forth in the relevant Binding Forecast for such quarters and (B) the average quarterly amount of product that Biocon was able to deliver during the two consecutive calendar quarters in which the supply failure occurred.

6.2                The provisions set forth in clauses (a) and (b) of section 6.1 shall be in addition to, and are without prejudice to, any other remedies which may be available to Optimer under this Agreement or otherwise as a result of Biocon’s inability to supply Product under this Agreement, subject to section 18.

6.3                Approximately six (6) months prior to the expected Approval Date, Optimer shall provide Biocon with a rolling forecast of its requirements of Product from Biocon for the calendar quarter immediately following the Approval Date which shall include, without limitation, any Validation Batches as set forth in section 10.2 (the Binding Forecast) as well as a forecast for its estimated requirements of Product from Biocon for the calendar quarter next following (the Non-Binding Forecast). Thereafter, during the term of this Agreement, one (1) calendar quarter prior to the beginning of each applicable calendar quarter, Optimer shall provide Biocon with a Binding Forecast for such quarter together with a Non-Binding Forecast for the subsequent quarter. Without prejudice to the foregoing, Schedule 6.3 contains Optimer’s non-binding, anticipated forecasts of the quantities of Product required pursuant to this Agreement (which forecasts are subject to

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revision in accordance with this Agreement, are based on the assumption that the Approval Date occurs in [***] and shall not be deemed a Non-Binding or Binding Forecast). Optimer shall promptly notify Biocon if Optimer believes in good faith that the amount which will be specified in the next Binding Forecast will be more than [***] or less than [***] of the amount in the current Non-Binding Forecast for the same calendar quarter. If Optimer notifies Biocon that it believes the amount of Product in the next Binding Forecast will be more than [***] of the amount set forth in the current Non-Binding Forecast for the same calendar quarter, Biocon shall thereafter, subject to the capacity limitations in section 5.1, use Commercially Reasonable and Diligent Efforts to enable the supply of such greater amount of Product in such subsequent calendar quarter and shall promptly notify Optimer if it will be unable to supply such amount.  For purposes of clarification, Biocon shall not be deemed to be in breach of this Agreement if it is unable to supply an amount of Product in a Binding Forecast which is greater than [***] of the amount set forth in the previous Non-Binding Forecast for the same calendar quarter.

6.4                Notwithstanding anything contained in section 5.3 or section 6.3, in the event the amount of Product set forth in Optimer’s Binding Forecast for any calendar quarter beginning with the fourth calendar quarter after the Approval Date, when combined with the amount of Product set forth in Binding Forecasts covering the preceeding three calendar quarters (and only if the provisions of section 6.1(b) were not in effect for any of such four calendar quarters), is below [***] of Product (representing [***] of the maximum amount of Product that can be manufactured in a calendar year at Campus and Park), Biocon shall be entitled to utilize the dedicated capacity at Park to produce Permitted Products in such calendar quarter, subject to the remainder of this section 6.4. Such production of Permitted Products shall only be undertaken with Optimer’s prior written approval, which shall not be unreasonably withheld provided Biocon demonstrates and certifies in writing to Optimer, including through relevant cleaning experimental data (via cleaning validation), that (a) cross-contamination with other Permitted Products will not affect the quality of the Product to be produced in accordance with the Specifications pursuant to this Agreement and (b) the use of the dedicated capacity at Park for the production of Permitted Products will not otherwise adversely affect Biocon’s ability to fully perform its future obligations under this Agreement.

In the event that Biocon is entitled to produce Permitted Products pursuant to the preceding paragraph and Biocon has not had an obligation or use to manufacture any Permitted Product which can be manufactured using the [***] Equipment for a period exceeding [***] prior to the beginning of the calendar quarter in which Biocon is so entitled to produce Permitted Products, Biocon shall be allowed to use the [***] Equipment in such calendar quarter for Prohibited Products, subject to all of the requirements set forth in the preceding paragraph with respect to the manufacture of Permitted Products.

6.5                For each Fee Date beginning with the later of (a) the first Fee Date following the third anniversary of the Approval Date and (b) the first Fee Date after Campus and Park are Validated Facilities capable of manufacturing at least [***] of Product per year and Biocon is obligated to reserve such capacity for Product pursuant to section 5.1, if both (c) Optimer has not submitted Purchase Orders providing for an aggregate of at least [***] of Product with Availability Dates within the four calendar quarter period ending on the applicable Fee Date and (d) during

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such four calendar quarters, Biocon did not have an obligation or use to manufacture Permitted Products or Prohibited Products which can be manufactured using the [***] Equipment, then Optimer shall pay Biocon a fee (the Capacity Reservation Fee) [***] Purchaser Orders with Availability Dates within the four calendar quarter period ending on the applicable Fee Date (the Actual Annual Product Amount), [***]; provided, however, that if the Actual Annual Product Amount is less than [***], the Capacity Reservation Fee shall be [***].  If any Capacity Reservation Fee is due with respect to any Fee Date in a calendar year, such fee shall be paid within 30 days of such Fee Date.

At any time, Optimer may inform Biocon in writing that it is reducing the minimum annual Product capacity requirement set forth in the first sentence of Section 5.1 to an amount below [***] (a Reduction Notice).  After delivery of a Reduction Notice, Optimer shall remain liable to pay any Capacity Reservation Fees pursuant to the preceding paragraph that accrue on each of (a) the three Fee Dates after the date of such Reduction Notice, if such date is more than six months prior to the next Fee Date, or (b) the four Fee Dates after the date of such Reduction Notice, if such date is less than six months prior to the next Fee Date.  The foregoing notwithstanding, in lieu of paying any Capacity Reservation Fees required by the preceding sentence after delivering a Reduction Notice, Optimer may pay to Biocon a lump sum payment of [***].  Following delivery of a Reduction Notice and after paying any Capacity Reservation Fees or lump sum payment required pursuant to the preceding two sentences following the deliver of a Reduction Notice, Optimer shall not be required to pay any further Capacity Reservation Fees pursuant to this Section 6.5.  Upon the date that Optimer is released from further obligations to pay Capacity Reservation Fees due to the delivery of a Reduction Notice, Biocon’s obligations to reserve annual Product manufacturing capacity shall be reduced for the remainder of the term of this Agreement to the amount set forth in such Reduction Notice, provided that Biocon’s use of the [***] Equipment other than for the manufacture of Product shall be limited to the manufacture of Permitted Products (or, upon Optimer’s prior approval which shall not to be unreasonably withheld, Prohibited Products) and shall be subject to the demonstration and certification requirements set forth in clauses (a) and (b) of section 6.4.

6.6                If Optimer intends to enter into an agreement with a third party with respect to the commercial supply of [***] of Optimer’s Product requirements in [***], Optimer shall so notify Biocon, including the principal terms of such proposed agreement, and Biocon shall thereafter have a first right of refusal for a period of [***] from the date of such notice by Optimer to agree be the commercial supplier of [***] of Optimer’s [***] Product requirements on substantially the same terms set forth in Optimer’s notice, subject to the following:

(a)           Such right of refusal shall include discussions on the quantities [***] to be supplied by Biocon in [***] and such product volumes shall be provided by Biocon [***];

(b)           Such right of refusal shall not be construed as mandating any minimum volumes, including any [***];

(c)           Nothing in this section 6.6 shall be construed as an obligation

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on Optimer’s part to enter into any [***] agreement with Biocon, and Optimer shall remain free to accept or reject any terms for such an agreement proposed by Biocon, provided Optimer acts in good faith in rejecting such agreement proposed by Biocon; and

(d)           In the event Optimer (or its Affiliate, as the case may be) and Biocon do not reach a definitive agreement [***] within said period of [***], Optimer shall have no further obligation to Biocon with respect to negotiating or entering into any agreement relating to [***] and shall be free to seek competitive bids from third party suppliers and enter into a definitive agreement with any third party for [***].

7.PURCHASE AND DELIVERY PROCEDURE

7.1                During the Term, Optimer agrees to buy from Biocon and Biocon agrees to sell and supply to Optimer, such quantities of the Product as may be set forth on purchase orders placed by Optimer in accordance with the provisions hereof; provided, however, that Biocon shall not be liable for any inability to supply Product or any shortfall in the supply of Product pursuant to this Agreement, if such inability or shortfall is due to Optimer requesting an amount of Product in the Binding Forecast for any calendar quarter which is greater than [***] of the amount previously set forth in the Non-Binding Forecast for the same quarter, subject to the provisions of section 6.3.

7.2                No less than three months prior to the date that a Binding Forecast is due from Optimer for any calendar quarter, Biocon shall provide to Optimer the [***] price per kg applicable to the manufacture of Batches to be supplied during such calendar quarter. Such [***] prices shall be based upon documented price quotations available to Biocon (which shall be provided to Optimer upon request) and shall account for any long-term pricing arrangement in place with respect to [***] supplies and existing supplies of [***] on-hand and available for the manufacture of Batches to be supplied during such calendar quarter.  Subject to the provisions of section 6, Optimer shall submit written orders for the Product in substantially the form of its standard API purchase order (Purchase Orders) setting out the quantity of Product required, value per kg, total value of the Purchase Order, the date the quantity specified in the Purchase Order should be ready for delivery ex works (Availability Date), delivery address and instructions for shipping and packaging. The foregoing sentence notwithstanding, the Availability Date for the first Purchase Order shall not occur prior to six (6) months from the date of such Purchase Order and the Availability Date for any subsequent Purchase Order shall not occur prior to three (3) months from the date of such Purchase Order. In compliance with the first sentence of Section 6.1, during each calendar quarter following the Approval Date, Optimer shall submit Purchaser Orders which (a) collectively cover at least an amount of Product equal to the Minimum Volume for the subsequent calendar quarter or the amount of Product specified in the Binding Forecast relating to the subequent calendar quarter and (b) specify an Availability Date no later than the last day of the subsequent calendar quarter (subject to the limitations in the preceding sentence).

7.3                Biocon shall respond to Optimer within ten (10) working days after receipt of each Purchase Order of Product, either accepting or rejecting the

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order. No order shall be binding upon Biocon unless accepted by Biocon in writing; provided that Biocon shall not reject any Purchase Order that is (a) substantially in the form set forth on Schedule 7.2, (b) does not request an amount of Product that (i) is more than [***] per quarter, (ii) is more than [***] of the amount of Product set forth in the prior Non-Binding Forecast for the same calendar quarter, or (iii) when combined with amounts of Product delivered over the preceding 12 month period, would equal more than [***], and (c) is otherwise consistent with Biocon and Optimer’s obligations under this Agreement.  Purchase Orders accepted in writing by Biocon shall be binding on both the parties (Binding Orders). Binding Orders may only be amended if agreed by both parties. In the event of any ambiguity, contradiction or discrepancy between a Binding Order or other documents of the parties and this Agreement, the provisions of this Agreement shall prevail.

7.4                Biocon shall notify Optimer immediately if Biocon determines that it will not be able to meet any of the terms of a Binding Order, including, but not limited to, quantity and Availability Date.  In any event, Biocon shall provide such notice at least sixty (60) days prior to the Availability Date specified in the applicable Binding Order.  In addition, Biocon will notify Optimer promptly of any supply constraints (e.g. materials, third party contracts, facilities or capacity) of which it becomes aware that may affect Biocon’s ability to supply the Product in accordance with this Agreement or any Binding Order.  For purposes of clarification, Biocon’s compliance with these notice provisions shall in no way limit or prejudice any rights or remedies available to Optimer under this Agreement or otherwise arising out of Biocon’s inability to perform its obligations under a Binding Order or otherwise.

7.5                Biocon shall have the Product in each Binding Order available for shipment ex works, Bangalore (INCOTERMS 2000) on the Availability Date, or such other date as may be agreed by the parties. Biocon shall thereafter promptly prepare Product for shipment and arrange for shipment of Product to a location and by a date designated in writing by Optimer in the applicable Binding Order. Shipment terms are Ex Works, Bangalore (INCOTERMS 2000). All shipments must be accompanied by a packing slip which describes the articles, states the Purchase Order number and shows the shipment’s destination. Biocon agrees to promptly forward the original bill of lading or other shipping receipt for each shipment in accordance with Optimer’s instructions. In accordance with Optimer’s written instructions and at Optimer’s expense, Biocon will arrange for the shipment of Product by the carrier designated by Optimer and for appropriate shipping insurance, and Biocon shall (unless prohibited by Applicable Law) ship Product to the destinations designated by Optimer in containers reasonably sufficient for delivery of Product in accordance with the Specifications. Optimer shall be responsible for carriage, insurance and freight of the Product so delivered at its sole expense, and for compliance with all Applicable Law requirements to import the Product into the Territory. All taxes, duties, charges, imposts, levies and other tariffs payable on the purchase of the Product by and delivery of the Product to Optimer pursuant to this Agreement will be borne by and to the account of Optimer.  Biocon shall provide to Optimer a prior written estimate of the costs for the shipment services and fees described in this section 7.5 and inform Optimer of any material changes to such costs and fees.

7.6                If Optimer or its Affiliate or designee is not ready to accept shipment of Product on the date set forth in the applicable Binding Order, then

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Biocon shall, at cost to Optimer, store such Product in accordance with the Specifications and Quality Agreement, Biocon procedures, and in a manner consistent with customary practices for pharmaceutical products, until Optimer notifies Biocon that it, or its Affiliate or designee is ready to accept delivery. If Optimer requests Biocon to store the Product beyond thirty (30) days from the date set forth in the applicable Binding Order, Optimer shall pay Biocon for the Product as per the applicable payment terms no later than such 30th day and Biocon shall store such product at cost to Optimer. Notwithstanding the foregoing, Biocon shall not be obligated to store such Products beyond sixty (60) days from the date set forth in the applicable Binding Order and Optimer shall be obliged to accept shipment of such Product prior to such 60th day if requested by Biocon.

7.7                Biocon shall manufacture, package, label, store and ship Product in accordance with the Specifications, cGMPs, the Quality Agreement, the NDA and other applicable Regulatory Approvals, and all Applicable Laws.  Biocon will not rework any Batch of the Product without Optimer’s prior written consent.  Biocon’s responsibilities and obligations with respect to the manufacture of Product as set forth in this section 7.7 are hereinafter referred to as the “Manufacturing Requirements.” Biocon shall perform such quality control testing prior to delivery of Product to Optimer as is required to ensure that the Product delivered to Optimer under this Agreement complies with the Manufacturing Requirements and Biocon’s warranties described in section 11, which testing shall include, without limitation, the performance of all required release testing and stability testing described in the Specifications.  Biocon shall perform such tests itself or, with Optimer’s prior written consent, cause to be tested by a third party, each lot of Product before delivery, and shall provide to Optimer (a) a certificate of analysis containing the quality control test results for each such lot, and confirming that each such lot of Product conforms to the Specifications (the Certificate of Analysis), signed by an authorized Biocon official, (b) a Certificate of Conformance confirming that such lot of Product was made in accordance with cGMPs and the process defined in the approved master Batch Record for the Product, signed by an authorized Biocon official, and (c) copies of documents detailing any deviations from any manufacturing processes then in effect (the documents and information described in (a), (b) and (c), the “Biocon Release Documents”). Upon completion of the manufacture and testing of each lot of Product ordered by Optimer under this Agreement, Biocon shall send all the Biocon Release Documents to Optimer as well as any other document required to comply with Applicable Law prior to shipment of the Product.

7.8                The Specifications may be modified from time to time by written agreement of the parties without the necessity of amending this Agreement. If Optimer requests a change in the Specifications that would result in an increase in Biocon’s cost of manufacture, the parties shall discuss what impact, if any, such change should have on the price of Product.  If Optimer agrees in writing to a proposed price increase to implement such change, the price change shall become effective only with respect to those Binding Orders of Product that are manufactured in accordance with the modified Specifications.

7.9                Biocon shall keep complete, accurate, and authentic accounts, notes, data, and records pertaining to its manufacture, processing, testing, packaging, storage and distribution of Product, including, without limitation, master

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production and control records and Product complaint files, in accordance with Applicable Laws.  In addition, Biocon shall retain samples of Products and isolated intermediates of each lot manufactured pursuant to this Agreement for a period of [***] after Optimer’s acceptance of such lot.  The sample size shall be [***] necessary to conduct quality control testing.  Biocon shall retain such records and samples for a period of [***] following the date of manufacture, or longer if required by Applicable Laws, and, upon request, shall make available to Optimer copies of such records and portions of the samples.  After such time period, Biocon shall notify Optimer prior to destroying such records and samples and, at Optimer’s request and expense, shall provide such records and samples to Optimer.

7.10              Biocon shall provide Optimer and its representatives with access during reasonable business hours and after reasonable notice to those areas of Biocon’s manufacturing facilities where Product or raw materials for Product is manufactured, stored or handled and to manufacturing records, and testing and control records (including without limitation release and stability records), of Product manufactured by Biocon, so that Optimer and its representatives may perform a quality assurance audit of such facilities and activities. The duration of such quality assurance audit and inspection shall not exceed 15 man days in a year.  Biocon shall allow employees of Optimer or its designee to be present during all manufacturing of the Product.  Use of all information gained in the course of audits is restricted to the purpose of quality assurance. Likewise, Biocon shall grant similar access to any Regulatory Authority upon reasonable notice so that such Regulatory Authority can perform inspections of its facilities.

8.INSPECTION AND RECALLS

8.1           Optimer may reject delivery of any Batch of Product that does not conform to the Manufacturing Requirements, whether evidenced by the Biocon Release Documents or otherwise. Optimer or its designee will be entitled to test at its own cost to ascertain whether the Product received by it conforms to the Manufacturing Requirements.  Biocon shall also promptly notify Optimer in writing if it becomes aware that any Products manufactured by Biocon are defective or do not conform to the Manufacturing Requirements or other warranties given by Biocon, which notice shall identify in reasonable detail the nature of the non-conformity and the lot or Batch of Products affected.

8.2                In order to reject Product, Optimer must give written notice to Biocon of such rejection within   60 days after receipt  of such Product and specify the reasons for such rejection, and if no such notice of rejection is received, Optimer shall be deemed to have accepted such delivery of Product within such 30 day period from the delivery thereof, except in the case of Latent Defects.  Optimer shall have 10 days after the date of discovery of a Latent Defect in any Product to notify Biocon of rejection of such Product.

8.3          If Optimer provides a rejection notice pursuant to section 8.2, Biocon shall, as promptly as practicable, notify Optimer as to whether it agrees or disagrees with the alleged defect.  In the event Biocon disagrees with the defect identified by Optimer, Product samples from the lots or batches in question will be referred to an independent external laboratory acceptable to both the parties for testing and the finding of such laboratory shall be final and binding on the parties and the cost of

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such laboratory analysis will be to the account of the party in error with regard to the stated defect. To the extent any applicable methods of analysis for the Product are set forth in the Specifications or Quality Agreement, such methods shall be employed by such independent external laboratory in conducting an analysis pursuant to this section 8.3.

8.4          If Biocon agrees with any defect or if an independent external laboratory agrees with Optimer with respect to the existence of a disputed defect, Biocon shall replace the defective Product at no additional cost, and as promptly as practicable, but in no event later than [***] of being advised by Optimer in accordance with section 8.2 (if Biocon agreed with the defect) or later than [***] of an independent external laboratory finding in favor of Optimer (if Biocon disputed the defect).  Biocon will credit Optimer future batches to the extent it is unable to supply replacement Product in accordance with the time periods specified in the previous sentence (due to insufficient safety stock or otherwise). Biocon will also credit Optimer the cost of  testing paid by Optimer to any independent external laboratory that identified defects in the Product Batches that will be replaced including, without limitation, any costs incurred by Optimer in shipping and insuring such Product or replacement Product in connection therewith.

8.5                In the event a recall, withdrawal, or field correction is required or requested by any Regulatory Authority (a Recall Action) or if Optimer acting in good faith, voluntarily decides to recall any Product manufactured by Biocon, Optimer shall coordinate all recall activities.

8.6                Biocon will assist Optimer and its designees in investigating any Recall Action upon request.

8.7                Biocon shall reimburse all of Optimer’s direct, reasonable costs actually incurred in connection with the recall and reimburse Optimer for the purchase price paid for the recalled Product, if a recall arises primarily:

(a)           due to the Product not being manufactured, packaged or delivered by Biocon in accordance with the Manufacturing Requirements and this Agreement, or

(b)           from an act or omission attributable to Biocon’s negligence, willful misconduct or breach of the Agreement, or

(c)           from Biocon’s breach of its warranties stated in section 11.3.

8.8                With respect to recalls arising for any reason not mentioned in section 8.7, Optimer shall bear all the costs of such recall and Biocon shall not be liable to reimburse Optimer for the purchase price paid for the recalled Product and any other related cost or expense.

9.PRICE AND DISCOUNTS

9.1                In consideration for the supply of Product pursuant to this Agreement, Optimer shall pay Biocon the price for Product in United States dollars and at the rates specified in Schedule 9.1. All amounts specified in Schedule 9.1 are stated exclusive of applicable taxes.

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9.2                Optimer shall pay all Biocon invoices together with applicable taxes including in relation to any applicable value added tax, service tax, or sales tax within thirty (30) days of receipt of the relevant invoice, in immediately available funds to the bank accounts designated by Biocon. Optimer shall not withhold any tax in respect of any payments to Biocon.

9.3                Optimer shall further pay and be liable to pay interest at the rate of [***] per month on amounts due and unpaid after 60 days from the date of receipt of the applicable invoice by Optimer. Without prejudice to the foregoing and notwithstanding any other provision of this Agreement, in the event of any delayed payment beyond 90 days, Biocon shall, until the full amount owed including interest is received, be entitled, at its sole discretion, to withhold further delivery of the Product notwithstanding the previous acceptance of any Binding Order for such Product and notwithstanding any other provisions contained in this Agreement.

9.4                The parties hereby agree to negotiate in good faith an adjustment to the price of the Product specified in Schedule 9.1 to compensate for any increase or decrease in the cost of manufacturing the Product caused by a variation in the costs of the primary raw materials in excess of [***] excluding [***] (including due to inflation). The party requesting the price adjustment must be able to demonstrate the requisite increase or decrease in the price of such primary raw materials through supplier invoices and/or other means, including, as applicable, the wholesale price index published by the Department of Economic Affairs, Ministry of Finance, Government of India.  As part of the negotiations regarding any price adjustment pursuant to this section 9.4, the parties shall also agree upon the date on which such price adjustment will take effect, giving consideration to any stock of primary raw materials Biocon may have prior to implementing the price adjustment.

9.5                The parties further agree to adjust the price of the Product if the exchange rate between the United States dollar and Indian rupee calculated using the two week moving average from December 15th through December 31st of any year (the Two Week Average) varies by more than [***] compared to the exchange rate between the United States dollar and Indian rupee as on the Effective Date (the Base Rate).  For purposes of this section 9.5 the prevailing exchange rates on any date shall be based on the United States dollar—Indian rupee exchange rate as confirmed by the Wall Street Journal, Eastern U.S. edition.  Any price adjustment required by this section shall be retroactive to January 1 of the year following the year used to calculate the Two Week Average resulting in the adjustment.

For any adjustment required by this section, the price per kg of Product shall be adjusted by multiplying it by a fraction, the numerator of which is the number of Indian rupees per 1 USD according to the Base Rate and the denominator of which is the number of rupees per 1 USD according to the Two Week Average resulting in such adjustment.  For purposes of clarification, if, after any price adjustment required under this section 9.5, the Two Week Average calculated at the end of any year varies by less than [***] from the Base Rate, the price per kg of Product for the subsequent calendar year shall be re-adjusted to the price per kg of Product that would be in effect had no adjustments been made under this section 9.5.  For clarification purposes only, illustative price adjustments pursuant to this section are set forth in Schedule 9.5.

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9.6                In addition to any other discounts or price reductions provided for under this Agreement, Optimer shall be entitled to a discount on the price of the Product calculated in accordance with the other provisions of this section 9 until such time as the aggregate discount provided to Optimer under this section 9.6 for Product supplied pursuant to this Agreement amounts to USD $1,500,000 (one million, five hundred thousand United States dollars only).  The discount pursuant to this section 9.6 in any given year after the Approval Date shall be determined in accordance with Schedule 9.6; provided that at no time during the term of this Agreement, shall the discount provided to Optimer pursuant to this section 9.6 exceed [***].

9.7                Both parties agree to formally meet at least once a year and review continuous improvement activities, financial responsibilities and other activities resulting from experience in operating the manufacturing process for the Product including potential price adjustments in raw materials. Upon mutual agreement of parties to implement such measures as contemplated under this section:

(a)           [***] of all cost savings, after subtracting captive and implementation costs achieved by the efforts of Optimer or its marketing partners shall be passed on to Optimer through a price reduction on a per Kg basis effective as of the beginning of the second full calendar quarter following the calendar quarter in which the cost savings are achieved.

(b)           Cost savings achieved by the efforts of Biocon shall be shared with Optimer at a ratio of [***] to Optimer and [***] to Biocon, after subtracting captive and implementation costs. These savings shall be passed on to Optimer through a price reduction on a per Kg basis effective as of the beginning of the second full calendar quarter following the calendar quarter in which the cost savings are implemented.

(c)           A batch size in the range of [***] on a  [***] will be the base for determining any process improvements. The batch range on the [***] will be determined after the completion of the validation runs on this column.

10.REGULATORY MATTERS

10.1              Biocon agrees to inform Optimer within 24 hours of notification of any regulatory inquiry, communication or inspection, which directly or indirectly relates to the manufacture of the Product, including any notice of inspection or an inspection visit by any Regulatory Authority which involves the Product or could impact Biocon’s ability to produce the Product.  Optimer, at its option, shall have the right to have its representatives present at any such inspection by a Regulatory Authority.  In the event there are written observations (or any other written communication) by a Regulatory Authority that involve the Product or could impact Biocon’s ability to produce the Product, or any proposed written response by Biocon to any such inspection, Optimer shall be informed within 24 hours and be provided with copies of all documentation within 48 hours, and shall have a reasonable opportunity to review and comment on the proposed response.

10.2              Optimer shall be responsible for all filings necessary for approval

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of the Product.  Biocon further agrees to use Commercially Reasonable and Diligent Efforts to assist Optimer, at Optimer’s expense, in obtaining Regulatory Approvals with respect to  Drug Product in the Territory, including approval of an NDA.  Biocon specifically agrees to cooperate with any inspection by the FDA or other Regulatory Authority, including but not limited to any inspection prior to approval of an NDA.  The conditions under which Product is manufactured shall be provided to Optimer for inclusion in Optimer’s regulatory filings.  Biocon further agrees to provide to Optimer all information regarding any aspect of manufacture of Product that is necessary and related to Optimer’s regulatory filings.  Biocon shall also provide to Optimer or, at Optimer’s direction,  a Regulatory Authority, such amounts of Product as are reasonably necessary for validation testing or otherwise in connection with any Regulatory Approval (Validation Batches).  The parties will agree on the cost of any Validation Batches, such cost not to exceed the cost for an equivalent amount of Product ordered pursuant to section 7 hereof, and any Validation Batches shall be included in determining whether Optimer has met its Minimum Volumes for any applicable quarter.

10.3              Biocon shall, at its own expense, obtain and maintain the necessary permits required for its manufacture and supply of the Product in accordance with this Agreement, including all required facility licenses.

11.REPRESENTATION AND WARRANTIES

11.1              Each party represents and warrants to the others as follows.

(a)           Such party has, and for the term of this Agreement will have, all requisite power and authority to enter into and perform all its obligations under this Agreement and to conduct its business as conducted on the date of this Agreement and as proposed to be conducted by the parties pursuant to this Agreement;

(b)           Such party has taken all actions, obtained all regulatory, corporate and contractual authorizations, and submitted all notices or filings required to be submitted, for such party to validly enter into this Agreement and will use Commercially Reasonable and Diligent Efforts to apply for and obtain all Regulatory Approvals necessary to perform its obligations under this Agreement;

(c)           The execution and delivery of, or the performance of obligations under, this Agreement do not violate or conflict with any statute, rule, regulation, directive or other law, judgment, order, decree or award applicable to such party, or any provision of such party’s constituent documents, or any agreement, contract, promise, covenant, undertaking, representation or warranty, applicable to or made by such party;

(d)           This Agreement constitutes a legal, valid and binding obligation on such party enforceable against such party in accordance with its terms;

(e)           Such party is the lawful owner or licensee of all Confidential Information disclosed or to be disclosed by such party to the other party under this Agreement, and it is has the right to disclose all such Confidential Information to the other party;

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(f)            Such party validly Controls all Intellectual Property Rights licensed by such party to the other party pursuant to this Agreement, and it has the right to license such Intellectual Property Rights; and

(g)           Each of the above representations and warranties are true and correct as of the Effective Date.

11.2              Each of the representations and warranties contained in this Agreement are separate and independent and shall not be qualified or limited by any reference to any other representation or warranty or any other provision of this Agreement or any prior knowledge on the part of or attributable to the other party or its Affiliates. Each party covenants to the other that each of the above representations and warranties shall remain true and correct during the term of this Agreement.

11.3              PRODUCT WARRANTIES. Biocon represents and warrants that Product delivered hereunder will:

(a)           be manufactured, packaged, labeled and delivered by Biocon in accordance with the Manufacturing Requirements, relevant Regulatory Approvals, Applicable Law and this Agreement;

(b)           conform to the Specifications at the time of delivery;

(c)           not contain any contaminant or be adulterated within the meaning of Section 301 of the FDCA, or any other Applicable Law; and

(d)           be free and clear of any lien or encumbrance.

11.4              To the best of Biocon’s knowledge, and subject to Optimer’s warranty contained in section 11.1(f), the manufacture of the Product in accordance with this Agreement will not infringe any Intellectual Property Rights of a third party to which Biocon does not hold a valid license.

11.5              Biocon hereby certifies that it has not been debarred under the provisions of the Generic Drug Enforcement Act of 1992, 21 U.S.C. §§ 306 and 335a.  In the event that Biocon:  (a) becomes debarred; or (b) receives notice of action or threat of action with respect to its debarment, during the Term, Biocon agrees to notify Optimer immediately.  In the event that Biocon becomes debarred as set forth in clause (a) above or Biocon receives notice of action or threat of action as set forth in clause (b) above which Optimer believes in good faith is more likely than not to result in debarment, Optimer will have the right to terminate this Agreement immediately.

11.6              Biocon hereby represents and warrants that it has not knowingly used, and Biocon covenants that it will not knowingly use, in any capacity the services of any individual, corporation, partnership, institution or association which has been debarred under 21 U.S.C. §30.  In the event Biocon becomes aware of the debarment or threatened debarment of any individual, corporation, partnership, institution or association providing services to Biocon which directly or indirectly relate to Biocon’s activities under this Agreement, Biocon will notify Optimer

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immediately.  Optimer will have the right to terminate this Agreement immediately in the event of debarment of such individual, corporation, partnership, institution or association providing services to Biocon in relation to Biocon’s obligations under this Agreement , unless Biocon is able to demonstrate to the reasonable satisfaction of Optimer that such debarment or threatened debarment will have no effect on any Regulatory Approval or Optimer’s ability to market and sell Drug Products incorporating Product manufactured under this Agreement.

11.7              EXCEPT FOR THE WARRANTIES SPECIFICALLY AND EXPRESSLY GIVEN IN THIS AGREEMENT, BIOCON MAKES NO EXPRESS WARRANTIES AND HEREBY EXCLUDES AND DISCLAIMS IN THEIR ENTIRETY ALL IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY PRODUCT PROVIDED BY BIOCON, EVEN IF BIOCON HAS BEEN ADVISED OF ANY PARTICULAR USE OF THE PRODUCT.

12.INDEMNIFICATION AND LIMITATION OF LIABILITY

12.1              Optimer shall defend, indemnify and hold Biocon and its Affiliates and their respective employees, directors, officers, shareholders and agents (each, a Biocon Indemnitee) harmless against any Loss actually incurred by such Biocon Indemnitee to the extent such Loss directly arises from (a) Optimer’s negligence or wilful act or omission in the possession, use, importation, marketing or sale of Product, (b) Optimer’s material breach of this Agreement, or (c) Optimer’s breach of any representation or warranty set forth in section 11, in each case, except to the extent Biocon is obligated to indemnify any Optimer Indemnitee for such claim or proceeding under section 12.2 below.

12.2              Biocon shall defend, indemnify and hold Optimer and its Affiliates and their respective employees, directors, officers, shareholders and agents (each, an Optimer Indemnitee) harmless against any Loss actually incurred by such Optimer Indemnitee to the extent that such Loss directly arises from (a) Biocon’s negligence or wilful act or omission in the manufacture, storage, labeling or delivery of Product; (b) Biocon’s material breach of this Agreement; or (c) Biocon’s breach of any representation or warranty set forth in section 11, in each case, except to the extent Optimer is obligated to indemnify any Biocon Indemnitee for such claim or proceeding under Section 12.1 above.

12.3              Each indemnified party agrees to give the indemnifying party prompt written notice of any matter upon which such indemnified party intends to base a claim for indemnification (an Indemnity Claim) under this section 12. The indemnifying party shall have the right to participate jointly with the indemnified party in the indemnified party’s defense, settlement or other disposition of any Indemnity Claim. With respect to any Indemnity Claim relating solely to the payment of money damages and which could not result in the indemnified party’s becoming subject to injunctive or other equitable relief or otherwise adversely affect the business of the indemnified party in any manner, and as to which the indemnifying party shall have acknowledged in writing the obligation to indemnify the indemnified party hereunder, the indemnifying party shall have the sole right to defend, settle or otherwise dispose of such Indemnity Claim, on such terms as the indemnifying party, in its sole

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discretion, shall deem appropriate, provided that the indemnifying party shall provide reasonable evidence of its ability to pay any damages claimed and with respect to any such settlement shall have obtained the written release of the indemnified party from the Indemnity Claim. The indemnifying party shall obtain the written consent of the indemnified party, which shall not be unreasonably withheld, prior to ceasing to defend, settling or otherwise disposing of any Indemnity Claim if as a result thereof the indemnified party would become subject to injunctive or other equitable relief or the business of the indemnified party would be adversely affected in any manner.

12.4EXCEPT AS PROVIDED IN SECTION 8.7 AND EXCEPT FOR BREACH OF SECTION 13 OR LOSSES ARISING FROM A PARTY’S GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST PROFITS, LOST SAVINGS, OR ANY OTHER INCIDENTAL, SPECIAL, EXEMPLARY, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. THE FOREGOING NOTWITHSTANDING, NOTHING IN THIS SECTION 12.4 SHALL LIMIT EITHER PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS SECTION 12.

12.5Notwithstanding anything contained in any other provision of this Agreement, except as provided in section 8 except for breach of section 13, and except Losses caused by a party’s fraud or fraudulent misrepresentation, each party’s aggregate liability for the entire term of this Agreement to the other party or the other party’s Affiliates and their respective employees, directors, officers, shareholders and agents, for any Loss arising under, in connection with or otherwise in relation to this Agreement shall not exceed [***} prior to the time that Biocon has sold to Optimer at least [***] of Product in any 12 month period and shall not exceed [***] after the time Biocon has sold to Optimer at least [***] of Product in any 12 month period. The foregoing notwithstanding, nothing in this section 12.5 shall limit either party’s indemnification obligations set forth in this section 12 with respect to bodily injury (including death).

13.CONFIDENTIALITY

13.1Each party agrees that where it is a Recipient, unless it has the prior written consent of the Discloser, it shall only use Confidential Information of the Discloser in furtherance of this Agreement. Each party shall treat the terms and conditions of this Agreement as Confidential Information for which it shall be deemed to be a Recipient.

13.2Without prejudice to the generality of the foregoing, each Recipient undertakes that it shall not, whether during the term of this Agreement or for a period of ten (10) years thereafter, itself use such information, except as provided in this Agreement, or disclose, publicize, reveal or make available, directly or indirectly, any Confidential Information to any Person, except for a disclosure required by statute, order of court or otherwise by law (including any disclosure required by the United States Securities and Exchange Commission or by the Securities and Exchange Board of India), or any requirements of any stock exchange on which the securities of the Recipient are listed, and then only after first

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advising the Discloser of such requirement with reasonably sufficient notice to afford the Discloser an opportunity to object or otherwise seek a protective order (except in the case of disclosure required by the United States Securities and Exchange Commission or by the Securities and Exchange Board of India).  Each Recipient may disclose Confidential Information of the Discloser to any of its employees, Affiliates, consultants or agents provided that such Persons need to know such information for purposes of carrying out the Recipient’s activities under this Agreement and such Person is bound by confidentiality obligations regarding such Confidential Information that are at least as strict as those set forth herein.  Each Recipient may also disclose the terms of this Agreement without the prior consent of the Discloser to the extent necessary to permit third parties who are in bona fide discussions with such Recipient to acquire, by way of merger, asset purchase, equity purchase or exclusive license, all or substantially all of such Recipient’s assets or Intellectual Property Rights to which this Agreement relates or to engage in financing transactions with such Recipient, to conduct due diligence, provided that such third parties are bound by confidentiality obligations regarding the terms of this Agreement that are at least as strict as those set forth herein.

13.3Each Recipient agrees to advise its employees, Affiliates, consultants and agents who receive the Confidential Information that such information (a) is confidential to the Discloser and (b) shall not be disclosed to anyone except as necessary to fulfill the purposes of the provision of such Confidential Information pursuant to this Agreement.

13.4The Recipient shall, at the Discloser’s request, return the Discloser’s Confidential Information, in whatever form contained, including all notes or memoranda made by its employees, agents or representatives obtained or derived from any such Confidential Information, together with any listing that identifies the documents provided; provided, however, that the Recipient’s legal counsel may retain one (1) copy of the Confidential Information in a secure location for purpose of identifying such Recipient’s obligations under this Agreement.

13.5The Confidential Information disclosed by the Discloser shall remain the sole and exclusive property and asset of such Discloser and the Recipient shall acquire no ownership, right, title or interest therein by virtue of this Agreement.

13.6Each party further understands and acknowledges that, due to the unique nature of the other party’s Confidential Information, any unauthorized disclosure of any portion of Confidential Information shall cause irreparable injury to the Discloser and that no adequate or complete remedy shall be available to the Discloser to compensate for such injury. Accordingly, each party hereby acknowledges that the Discloser shall be entitle to injunctive relief in the event of such unauthorized disclosure by the Recipient or any of its agents or employees, in addition to whatever other remedies the Discloser might have at law or in equity.

14.INTELLECTUAL PROPERTY RIGHTS

14.1Biocon acknowledges that Optimer Controls Intellectual Property Rights in the Compound and the Drug Product and undertakes not to use such intellectual property for any purpose whatsoever except to the extent necessary to

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supply Product to Optimer or its designee under this Agreement. Optimer hereby licenses to Biocon during the Term on a fully paid-up, non-exclusive, non-sublicensable and royalty free basis, all Intellectual Property Rights in the Compound and the Drug Product Controlled by Optimer to the extent necessary to manufacture and supply Product to Optimer pursuant to this Agreement.

14.2Optimer acknowledges that Biocon Controls certain Intellectual Property Rights or has proprietary know-how in the technology or manufacturing process of API and Optimer undertakes not to use such Intellectual Property Rights or proprietary know-how except as contemplated under this Agreement and/or necessary for obtaining Regulatory Authorizations for the Product or a Drug Product. Biocon herby licenses to Optimer on a fully paid-up and royalty free basis, all Intellectual Property Rights in the technology or manufacturing process of the Product Controlled by Biocon to the extent necessary to obtain Regulatory Authorizations for the Product or a Drug Product and to make full use in accordance with this Agreement of any Product supplied by Biocon under this Agreement.

14.3The parties agree that Optimer shall be the sole and exclusive owner of all right, title and interest in and to any NDA filed with the FDA and the other Regulatory Authorities outside of the United States, and that Optimer shall be the sole and exclusive owner of any Regulatory Approvals related to the Product or a Drug Product.

14.4Each party shall notify the other as soon as practicable after becoming aware of any infringement, suspected infringement or alleged infringement of (a) any Intellectual Property Rights of any third party caused by activities conducted by such party under this Agreement and (b) the other party’s Intellectual Property Rights related to this Agreement or the Product by a third party.

14.5All trademarks, trade names, copyrights, trade secrets, patents or other proprietary rights currently owned by a party, or which such party shall own in the future, in connection with the Compound, Product or Drug Product, shall and shall continue to be owned by such party, and, except as explicitly set forth in this Agreement, the other party shall not acquire or be deemed to acquire any such rights solely by virtue of this Agreement and the parties’ relationship hereunder.

14.6All Intellectual Property Rights (a) generated by Biocon in connection with Biocon’s scale-up, Initial Activities and other activities related to Product, and (b)generated in the performance of work conducted under or contemplated by this Agreement by Biocon or Biocon’s employees, agents, consultants, subcontractors or other representatives, either solely or jointly with employees, agents, consultants or other representatives of Optimer, including all patent and other intellectual property rights therein (collectively, Optimer Intellectual Property), will be owned solely by Optimer; provided, however, that Optimer Intellectual Property shall not include Biocon Inventions (defined below).  At Optimer’s request and expense, Biocon will provide Optimer with reasonable assistance to perfect Optimer’s ownership interest in Optimer Intellectual Property and in obtaining, securing and maintaining patents and other intellectual property rights therein.  Biocon shall and shall cause all its employees, agents, consultants and subcontractors to sign and deliver to Optimer all writings and do all such things

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as may be necessary or appropriate to vest in Optimer all right, title and interest in and to such Optimer Intellectual Property.  Biocon will promptly disclose to Optimer any Intellectual Property Rights arising under this Agreement.  Optimer may, in its sole discretion, file and prosecute in its own name and at its own expense, patent applications on any patentable inventions within the Optimer Intellectual Property.  Upon the request of Optimer, and at the sole expense of Optimer, Biocon will assist Optimer in the preparation, filing and prosecution of such patent applications and will execute and deliver any and all instruments necessary to effectuate the ownership of such patent applications and to enable Optimer to file and prosecute such patent applications in any country.

14.7As used in this Agreement, Biocon Inventions means any and all Intellectual Property Rights conceived or made by, or generated in the performance of work conducted under this Agreement by, Biocon or Biocon’s employees, agents, consultants, subcontractors or other representatives that relate to general processes of manufacturing, packaging or analyzing pharmaceutical products, including any API, and not such processes that relate specifically to the Compound or Product.  Biocon hereby grants to Optimer a fully-paid, sub licensable, non-exclusive license under Biocon Inventions in so far as such inventions are useful for the research, development or commercialization the Compound, Product or Drug Product, and solely for the research, development and commercialization of the Compound, Product or Drug Product within the Territory.

15.TERM AND TERMINATION

15.1The terms and conditions of this Agreement shall supersede any term or condition in any order, confirmation or other document furnished by Optimer or Biocon that is inconsistent with these terms and conditions, unless it is mutually agreed between the parties hereto in writing.

15.2Unless terminated earlier pursuant to the following provisions, the term of this Agreement shall commence on date hereof and shall continue for a period of seven and a half  (7.5) years from the Approval Date. Thereafter, the Agreement may be renewed for such further period upon such terms and conditions as the parties may mutually agree. Both parties shall negotiate any such renewal [***] prior to expiration of this Agreement.

15.3Unless otherwise agreed to by the parties, this Agreement shall automatically terminate in the event Optimer does not obtain a Marketing Authorization for a Drug Product in the Territory on or before December 31, 2013.

15.4Either party may terminate this Agreement without cause by giving at least two (2) years and six (6) months advance notice (Elective Termination Notice) to the other party, which Elective Termination Notice may not be given prior to the fifth (5th) anniversary of the Effective Date but may be given at any time thereafter. Optimer may also terminate this Agreement without cause and without prior notice provided that if it terminates the Agreement without cause and without prior notice, the provision of section 16.3 shall apply.

15.5Optimer may terminate this Agreement for cause and without advance notice to Biocon:

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(a)if, for any two calendar quarters during any continuous four calendar quarter period, Biocon is unable to supply the Binding Forecast volume of Product in accordance with this Agreement, provided that each such Binding Forecast volume of Product was no more than (i) [***] per quarter, and (ii) [***] of the previous Non-Binding Forecast for such quarter, and such Binding Forecast volume of Product does not result in the total supply required exceeding [***] in the relevant four calendar quarter period;

(b)if there is a recall for which Biocon is obligated to reimburse Optimer pursuant to section 8.7 above;

(c)if Optimer has previously notified Biocon in writing of a material breach of Biocon’s obligations under this Agreement and Biocon has not cured such breach within sixty (60) days of such notice;

(d)pursuant to sections 11.5 or 11.6; or

(e)if Biocon is subject to any Insolvency Proceedings.

15.6Biocon may terminate this Agreement for cause and without advance notice to Optimer:

(a)if Biocon has previously notified Optimer in writing of a material breach of Optimer’s obligations under the Agreement and Optimer has not cured such breach within sixty (60) days of such notice;

(b)if Optimer is subject to any Insolvency Proceedings; or

(c)if for any two calendar quarters during any continuous four calendar quarter period, Optimer does not submit Purchase Orders covering at least the amount of Product set forth in its Binding Forecast for each such quarter; provided that Biocon notified Optimer in writing of the failure in the first of two such calendar quarters.

15.7In the event of termination or expiration of this Agreement, Biocon shall provide reasonable assistance to Optimer or its designee (at Optimer’s expense if the termination is by Optimer other than pursuant to section 15.5 or is by Biocon pursuant to section 15.6, or at Biocon’s expense if the termination is by Biocon other than pursuant to section 15.6 or is by Optimer pursuant to section 15.5) to implement the transfer of manufacturing responsibility and process for the Product to another manufacturer, provided that Biocon shall not be required to transfer, license or disclose any of Biocon’s Intellectual Property Rights to a third party.

16.CONSEQUENCES OF TERMINATION

16.1In the event either party notifies the other that it intends to terminate this Agreement (including through an Elective Termination Notice), Biocon shall immediately stop incurring further costs related to any on-going Initial Activities.

16.2In the event of termination of this Agreement pursuant to section 15.3:

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(a)Optimer shall reimburse Biocon for reasonable and documented expenses incurred by Biocon until date of termination for each of the Initial Activities including but not limited to expenses incurred for the installation of [***] Equipment at Park and purchase of raw material for the Validation and/or initial manufacture of Product, provided that such reimbursement shall not exceed  [***] including any sums previously paid to Biocon pursuant to section 3 or prior to the Effective Date for such activities; and

(b)Biocon will pay Optimer the cost price of the [***] Equipment after depreciation using straight line over 10 years through the date of termination and Biocon shall not be obligated to refund the Dedication Fee to Optimer.

16.3If Optimer terminates this Agreement without notice and without cause (except by issuing an Elective Termination Notice) in accordance with section 15.4:

(a)Optimer shall pay and be liable to pay Biocon a fee equal to [***] of the sum of:

(i)the total purchase price of Product that Biocon would have received if Optimer had purchased the amount of Product set forth in the most recent Binding and Non-Binding Forecasts covering the two (2) calendar quarters subsequent to the calendar quarter in which such termination occurred; and

(ii)the total purchase price of Product that Biocon would have received if Optimer had purchased four (4) additional quarters of Product, using an estimated quarterly amount of Product equal to the average amount of Product per quarter actually ordered from Biocon and delivered in all quarters prior to such termination (excluding the lowest and highest quarters during such period);

(b)The foregoing notwithstanding, the amount set forth in this section 16.3(a) shall not exceed [***]; and

(c)The foregoing notwithstanding, Biocon shall be under no obligation to refund the Dedication Fee to Optimer.

16.4If Biocon terminates this Agreement without cause, other than by issuing an Elective Termination Notice in accordance with section 15.4, or if Optimer terminates this Agreement for cause pursuant to section 15.5, Biocon shall compensate Optimer the cost amount necessary to procure the Product from a third party supplier and Biocon shall also compensate Optimer for any cost differences between Biocon and the third party supplier for a period of up to six (6) quarters or the remaining term of the Agreement, whichever is shorter.  Biocon shall also refund a pro rata portion of the Dedication Fee to Optimer for the remaining term of the Agreement had the Agreement not been so terminated, and which pro rata portion shall be calculated on the basis of the Dedication Fee being paid for a period of seven and a half  (7.5 years) years from the Approval Date. However, in any event, the aggregate amount payable by Biocon for early termination under this section will not exceed [***].

16.5No termination shall have any effect on any rights or amounts

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due which accrued prior to the effective date of such termination.

16.6Upon any termination of this Agreement, each party shall immediately discontinue use of any Confidential Information provided by the other and cause all Confidential Information of the other that is in its possession to be returned to the Discloser within thirty (30) calendar days of the date of the notice of termination. The foregoing sentence notwithstanding, each party shall be entitled to retain one copy of the other party’s Confidential Information for purposes of record keeping.

16.7For a period of [***] following any termination of this Agreement, without Optimer’s prior written consent, Biocon shall not, perform manufacturing services for a third party involving the manufacture of any product containing the Compound or salts, hydrates, solvates, polymorphs, metabolites, prodrugs or analogs thereof, or otherwise enable a third party or an Affiliate to manufacture the same. The provisions of section 1 (definitions), section 2 (interpretation and construction), section 8 (inspection and recalls) and sections 12 through 21, together with any schedules referred to in such sections, shall survive any expiry or termination of this Agreement.

17.NON-SOLICITATION

17.1Subject to applicable law relating to the validity of such restrictive covenants, neither party shall knowingly solicit, directly or indirectly (except by way of general solicitation to the public), for employment, or otherwise knowingly employ, engage or contract in a position related to or connected with pharmaceutical products, from the date of this Agreement and until the expiration of six (6) months after the termination or conclusion of this Agreement, any person who is employed or contracted by the other party.

17.2In the event of a breach of the foregoing covenants which results in the hiring of the other party’s employee, the party in default shall be required to pay the non-defaulting party as fair and reasonable liquidated damages, a sum equivalent to the higher of one (1) year’s gross annual salary for the employee in question that is (i) being paid by the non-defaulting party or (ii) agreed to be paid by the defaulting party.

18.FORCE MAJEURE

18.1If a Force Majeure Event occurs, the party whose performance of its obligations under this Agreement is prevented by such Force Majeure Event shall be excused from such performance only to the extent and for the time prevented.

18.2When such party is able to resume performance of its obligations, it shall immediately give the other party written notice to that effect and shall resume performance no later than two (2) business days after the notice is delivered.

18.3The relief offered by this section 18 is the exclusive remedy available to a party with respect to a Force Majeure Event.

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19.GOVERNING LAW AND ARBITRATION

19.1The laws of England and Wales (without giving effect to their conflict of laws principles) govern all matters arising out of or relating to this Agreement (including, without limitation, its interpretation, construction, performance, and enforcement).

19.2The parties shall endeavor to resolve amicably disputes or differences, if any, arising out of or in connection with this Agreement through mutual discussions and negotiations between senior executives of Biocon and Optimer. All disputes arising out of or in connection with this Agreement, that cannot be resolved within thirty (30) days of commencing such negotiations, shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce (Rules) by one arbitrator appointed in accordance with said Rules. The venue for the arbitration shall be London, United Kingdom.  The proceedings shall be conducted in English.

19.3The arbitral award shall be final, conclusive and binding on the parties and may be enforced in any court of competent jurisdiction.

20.NOTICE

20.1Any notice or other communication given or required to be given under or pursuant to this Agreement shall be in writing and shall be sent by recognized electronic mail, recognized courier or facsimile, provided that where such notice is sent by electronic mail or facsimile, a confirmation copy shall be sent by recognized courier within two (2) working days of the transmission by electronic mail or facsimile at the following address of the receiving party, or at such other address as may be notified by the receiving party to the other in writing, provided such change of address has been notified at least ten (10) days prior to the date on which such notice has been given pursuant to this Agreement.

If to Biocon:

Attention:Murali Krishnan

Rakesh Bamzai

Legal Department

Biocon Limited, 20 KM, Hosur Road, Electronics City P.O, Bangalore 560 100, India

Facsimile: 91-80-2852-3423

If to Optimer:

Attention: Chief Executive Officer

Optimer Pharmaceuticals, Inc., 10110 Sorrento Valley Rd., Suite C, San Diego, California 92121, U.S.A

Facsimile: 858-909-0737

21.MISCELLANEOUS

21.1Neither this Agreement nor its performance shall be assigned or delegated by either party to a third party without the prior written consent of the other party, except that such consent shall not be required in connection with any assignment or delegation by either party to any Affiliate or subsidiary of such party, to the acquirer of such party through merger, sale of stock or otherwise, to the acquirer of all or substantially all of such party’s business or assets to which this

31

Agreement relates or to an exclusive or co-exclusive licensee of all or substantially all of such party’s Intellectual Property Rights to which this Agreement relates.  Any purported assignment of rights in violation of or contrary to this section 21.1 is and shall be deemed to be void.

21.2No provision of this Agreement may be waived, except in writing by the party against whom the waiver is sought to be enforced. No failure or delay in exercising any right or remedy or requiring the satisfaction of any condition under this Agreement, and no course of dealing between the parties shall operate as a waiver of any right, remedy or condition. A waiver provided in writing on one occasion is effective only in that instance and only for the purpose for which it is given.

21.3The rights and remedies set forth in this Agreement are the parties’ exclusive rights and remedies, and, except as otherwise expressly provided in this Agreement, neither party has, or will have in the future, any other rights or remedies.

21.4If any provision of this Agreement should be or become entirely or partly invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of any other provision of this Agreement. The invalid or unenforceable provision, as the case may be, shall be regarded as replaced by such valid and enforceable provision that as closely as possible reflects the economic purpose that the parties hereto had pursued with the invalid or unenforceable provision.

21.5Nothing in this Agreement shall, or shall be deemed to constitute a partnership, joint venture or similar arrangement between the parties or to constitute either party as the agent or trustee of the other party for any purpose.

21.6Each party shall bear its own costs and expenses in connection with the preparation, execution and delivery of this Agreement.

21.7No amendment of this Agreement shall be effective unless it is in writing and duly executed by all parties to this Agreement.

21.8This Agreement, including the preamble and schedules and the documents referred to in this Agreement contain all the promises, agreements, conditions and understandings between and among the parties with respect to the subject matter of this Agreement, and supersede all prior or contemporaneous promises, agreements, conditions and understandings, whether oral or written, with respect to such subject matter, including that certain Letter of Intent, dated January 9, 2009, between the parties.  For purposes of clarification, the parties hereby agree that upon the Effective Date, that certain Supply Agreement, dated August 29, 2005, between Biocon and Optimer (as assignee of Par Pharmaceutical, Inc.) shall be deemed mutually terminated by the parties pursuant to section 8.2 thereof.

21.9The remedies expressly provided in this Agreement are exhaustive and shall not be cumulative to any other remedies that may otherwise be available to the parties.

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21.10No provision of this Agreement shall be construed against any party on the ground that it or its counsel drafted that provision.

[Signature Page Follows]

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INTENDING TO BE BOUND, the Parties have caused their authorized representatives to sign and execute this Agreement on their behalf on the day and year first above written.

/S/ ARUN CHANDAVARKAR	/S/ PEDRO LICHTINGER
FOR BIOCON LIMITED	FOR OPTIMER PHARMACEUTICALS, INC.

34

SCHEDULE 1.19

[***]

35

SCHEDULE 6.3

[***]

36

SCHEDULE 9.1

[***]

37

SCHEDULE 9.5

FIRST ADJUSTMENT:

[***]

SECOND ADJUSTMENT:

[***]

38

SCHEDULE 9.6

[***]

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EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Pedro Lichtinger, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Optimer Pharmaceuticals, 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.

Date: August 4, 2010

/s/ Pedro Lichtinger

Pedro Lichtinger

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, John D. Prunty, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Optimer Pharmaceuticals, 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.

Date: August 4, 2010

/s/ John D. Prunty

John D. Prunty

Vice-President and Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), Pedro Lichtinger, the Chief Executive Officer of Optimer Pharmaceuticals, Inc. (the “Company”), and John D. Prunty, the Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1.The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, to which this Certification is attached as Exhibit 32 (the “Quarterly Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Quarterly Report and results of operations of the Company for the period covered by the Quarterly Report.

Dated: August 4, 2010

/s/ Pedro Lichtinger	/s/ John D. Prunty
Pedro Lichtinger Chief Executive Officer (Principal Executive Officer)	John D. Prunty Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.