10-Q

UNITED STATES

SECURITIES 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 September 30, 2010
Or
¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from            to              .

Commission File No. 000-24537

DYAX CORP.

(Exact Name of Registrant as Specified in its Charter)

DELAWARE	04-3053198
(State of Incorporation)	(I.R.S. Employer Identification Number)

300 TECHNOLOGY SQUARE, CAMBRIDGE, MA 02139

(Address of Principal Executive Offices)

(617) 225-2500

(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          ¨

Indicate by check mark whether the registrant has submitted electronically and posted on it corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

YES         ¨                            NO          ¨

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

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES         ¨                            NO          x

Number of shares outstanding of Dyax Corp.’s Common Stock, par value $0.01, as of October 22, 2010:  98,506,451

DYAX CORP.

TABLE OF CONTENTS

			Page
PART I		FINANCIAL INFORMATION	2
Item 1	-	Financial Statements	3
		Consolidated Balance Sheets (Unaudited) as of September 30, 2010 and December 31, 2009	3
		Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, 2010 and 2009	4
		Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2010 and 2009	5
		Notes to Consolidated Financial Statements (Unaudited)	6
Item 2	-	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	-	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	-	Controls and Procedures	32
PART II		OTHER INFORMATION	32
Item 1a	-	Risk Factors	32
Item 6	-	Exhibits	51
Signatures
Exhibit Index

2

PART I – FINANCIAL INFORMATION

Item 1 – FINANCIAL STATEMENTS

Dyax Corp. and Subsidiaries

Consolidated Balance Sheets (Unaudited)

	September 30, 2010			December 31, 2009
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	32,792		$	29,386
Short-term investments		54,718			23,009
Accounts receivable, net		1,771			2,723
Inventory		1,426			578
Other current assets		2,971			2,816
Total current assets		93,678			58,512
Fixed assets, net		2,401			3,508
Restricted cash		2,188			2,177
Other assets		434			604
Total assets	$	98,701		$	64,801
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses	$	9,038		$	11,787
Current portion of deferred revenue		7,556			10,345
Current portion of long-term obligations		699			890
Other current liabilities		961			1,364
Total current liabilities		18,254			24,386
Deferred revenue		13,132			19,785
Note payable		56,345			58,096
Long-term obligations		167			653
Deferred rent and other long-term liabilities		300			483
Total liabilities		88,198			103,403
Commitments and contingencies (Notes 7 and 9)
Stockholders' equity (deficit):
Preferred stock, $0.01 par value; 1,000,000 shares authorized; 0 shares issued and outstanding		—			—
Common stock, $0.01 par value; 125,000,000 shares authorized; 98,500,976 and 78,074,052 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		985			781
Additional paid-in capital		442,815			378,421
Accumulated deficit		(433,380	)		(417,819	)
Accumulated other comprehensive income		83			15
Total stockholders' equity (deficit)		10,503			(38,602	)
Total liabilities and stockholders' equity (deficit)	$	98,701		$	64,801

The accompanying notes are an integral part of the unaudited consolidated financial statements.

3

Dyax Corp. and Subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(In thousands, except share and per share data)
Revenues:
Product sales, net	$	2,622		$	—		$	5,796		$	—
Development and license fee revenues		4,329			4,508			36,345			15,305
Total revenues		6,951			4,508			42,141			15,305
Costs and expenses:
Cost of product sales		119			—			247			—
Research and development expenses		7,940			7,095			23,743			37,787
Selling, general and administrative expenses		7,668			5,923			24,619			18,916
Restructuring costs		—			395			—			2,331
Impairment of fixed assets		—			955			—			955
Total costs and expenses		15,727			14,368			48,609			59,989
Loss from operations		(8,776	)		(9,860	)		(6,468	)		(44,684	)
Other income (expense):
Interest income		62			379			137			558
Interest and other expenses		(2,540	)		(2,712	)		(9,230	)		(7,377	)
Total other expense		(2,478	)		(2,333	)		(9,093	)		(6,819	)
Net loss		(11,254	)		(12,193	)		(15,561	)		(51,503	)
Other comprehensive income (loss):
Foreign currency translation adjustments		—			(311	)		—			(491	)
Unrealized gain (loss) on investments		(1	)		(1	)		33			(134	)
Comprehensive loss	$	(11,255	)	$	(12,505	)	$	(15,528	)	$	(52,128	)
Basic and diluted net loss per share	$	(0.11	)	$	(0.17	)	$	(0.17	)	$	(0.78	)
Shares used in computing basic and diluted net loss per share		98,401,835			72,485,047			91,502,187			66,452,507

The accompanying notes are an integral part of the unaudited consolidated financial statements.

4

Dyax Corp. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)

	Nine Months Ended September 30,
	2010			2009
	(In thousands)
Cash flows from operating activities:
Net loss	$	(15,561	)	$	(51,503	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of purchased premium/discount		26			139
Depreciation and amortization of fixed assets		1,132			1,770
Amortization of intangibles		2			377
Impairment of fixed assets		—			955
Non-cash interest expense		1,145			1,290
Compensation expenses associated with stock-based compensation plans		2,935			4,407
(Gain) loss on disposal of fixed assets		51			(33	)
Provision for doubtful accounts		15			—
Non-cash other income		—			(337	)
Changes in operating assets and liabilities:
Accounts receivable		937			3,617
Prepaid research and development and other current assets		(622	)		106
Inventory		(752	)		—
Accounts payable and accrued expenses		(4,307	)		(4,785	)
Deferred revenue		(9,442	)		(944	)
Other long-term liabilities and assets		179			(257	)
Net cash used in operating activities		(24,262	)		(45,198	)
Cash flows from investing activities:
Purchase of fixed assets		(176	)		(450	)
Purchase of investments		(53,667	)		(26,511	)
Proceeds from maturity of investments		21,999			30,506
Proceeds from sale of fixed assets		29			51
Restricted cash		700			—
Net cash (used in) provided by investing activities		(31,115	)		3,596
Cash flows from financing activities:
Net proceeds from common stock offerings		61,133			17,852
Proceeds from note payable		—			14,820
Repayment of long-term obligations		(2,613	)		(4,588	)
Proceeds from the issuance of common stock under employee stock purchase plan and exercise of stock options		263			407
Net cash provided by financing activities		58,783			28,491
Effect of foreign currency translation on cash balances		—			29
Net increase (decrease) in cash and cash equivalents		3,406			(13,082	)
Cash and cash equivalents at beginning of the period		29,386			27,668
Cash and cash equivalents at end of the period	$	32,792		$	14,586
Supplemental disclosure of non-cash investing and financing activities:
Warrant issued in connection with note payable	$	—		$	477

The accompanying notes are an integral part of the unaudited consolidated financial statements.

5

DYAX CORP.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS OVERVIEW

Dyax Corp. (Dyax or the Company) is a biopharmaceutical company focused on the discovery, development and commercialization of novel biotherapeutics for unmet medical needs. The Company began commercializing KALBITOR® (ecallantide) for treatment of acute attacks of hereditary angioedema (HAE) in patients 16 years of age and older in February 2010.  

KALBITOR was discovered using Dyax’s proprietary drug discovery technology, known as phage display.  This technology is also used to identify other antibody, small protein and peptide compounds with therapeutic potential and has provided the Company an internal pipeline of drug candidates and numerous licenses and collaborations that generate revenues through funded research, license fees, milestone payments and royalties.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with instructions to the Quarterly Report on Form 10-Q.  It is management’s opinion that the accompanying unaudited interim consolidated financial statements reflect all adjustments (which are normal and recurring) necessary for a fair statement of the results for the interim periods.  The financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.  The accompanying December 31, 2009 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by GAAP.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities at the dates of the financial statements and (iii) the reported amounts of revenue and expenses during the reporting periods.  Actual results could differ from those estimates.  The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010.  

 Basis of Consolidation  

The accompanying consolidated financial statements include the accounts of the Company and the Company's European subsidiaries Dyax S.A. and Dyax BV.  All inter-company accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods.  The significant estimates and assumptions in these financial statements include revenue recognition, product sales allowances, useful lives with respect to long lived assets, valuation of stock options, accrued expenses and tax valuation reserves.  Actual results could differ from those estimates.

6

Concentration of Credit Risk 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, short-term investments and trade accounts receivable.  At September 30, 2010 and December 31, 2009, approximately 93% and 81% of the Company's cash, cash equivalents and short-term investments were invested in money market funds backed by U.S. Treasury obligations, U.S. Treasury notes and bills, and obligations of United States government agencies held by one financial institution.  The Company maintains balances in various operating accounts in excess of federally insured limits.

The Company provides most of its services and licenses its technology to pharmaceutical and biomedical companies worldwide, and makes all product sales to its exclusive distributor.  Concentrations of credit risk with respect to trade receivable balances are usually limited on an ongoing basis, due to the diverse number of licensees and collaborators comprising the Company's customer base.  As of September 30, 2010, two customers accounted for 71% and 14% of the accounts receivable balance.  One customer accounted for approximately 64% of the Company's accounts receivable balance as of December 31, 2009, which was collected in the first quarter of 2010.

Cash and Cash Equivalents

All highly liquid investments purchased with an original maturity of ninety days or less are considered to be cash equivalents.  Cash and cash equivalents consist principally of cash and U.S. Treasury funds.

 Investments  

Short-term investments primarily consist of investments with original maturities greater than ninety days and remaining maturities less than one year when purchased.  The Company has also classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations. The Company considers its investment portfolio of investments available-for-sale.  Accordingly, these investments are recorded at fair value, which is based on quoted market prices.  As of September 30, 2010, the Company's investments consisted of U.S. Treasury notes and bills with an amortized cost of $54.6 million, an estimated fair value of $54.7 million and an unrealized gain of $83,000, which is recorded in other comprehensive income on the accompanying consolidated balance sheets.  As of December 31, 2009, the Company's investments consisted of U.S. Treasury notes and bills with an amortized cost and estimated fair value of $23.0 million and had an unrealized gain of $15,000, which is recorded in other comprehensive income on the accompanying consolidated balance sheets.

Inventories 

Inventories are stated at the lower of cost or market with cost determined under the first-in, first-out, or FIFO, basis. The Company evaluates inventory levels and would write-down inventory that is expected to expire prior to being sold, inventory that has a cost basis in excess of its expected net realizable value, inventory in excess of expected sales requirements, or inventory that fails to meet commercial sale specifications, through a charge to cost of product sales. Included in the cost of inventory are employee stock-based compensation costs capitalized under Accounting Standards Codification (ASC) 718.

Fixed Assets

Property and equipment are recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Laboratory and production equipment, furniture and office equipment are depreciated over a three to seven year period. Leasehold improvements are stated at cost and are amortized over the lesser of the non-cancelable term of the related lease or their estimated useful lives. Leased equipment is amortized over the lesser of the life of the lease or their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation and amortization are eliminated from the balance sheet and any resulting gains or losses are included in operations in the period of disposal.

7

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. Each impairment test is based on a comparison of the undiscounted cash flow to the recorded value of the asset. If impairment is indicated, the asset is written down to its estimated fair value on a discounted cash flow basis.

Guarantees

The Company has determined that it is not a party to any agreements that fall within the scope of Guarantees of indebtedness in accordance with ASC 460, Guarantees.  The Company generally does not provide indemnification with respect to the license of its phage display technology. The Company does generally provide indemnifications for claims of third parties that arise out of activities that the Company performs under its collaboration, product development and cross-licensing activities. The maximum potential amount of future payments the Company could be required to make under the indemnification provisions in some instances may be unlimited. The Company has not incurred any costs to defend lawsuits or settle claims related to any indemnification obligations under its license agreements. As a result, the Company believes the estimated fair value of these obligations is minimal. The Company has no liabilities recorded for any of its indemnification obligations recorded as of September 30, 2010 and December 31, 2009.

Revenue Recognition

The Company’s principal sources of revenue are product sales of KALBITOR, license fees, funding for research and development, and milestones and royalties derived from collaboration and license agreements.  In all instances, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, collectibility of the resulting receivable is reasonably assured and the Company has no further performance obligations.

Product Sales and Allowances

Product Sales.  All product sales are generated from the sale of KALBITOR to ASD Specialty Healthcare Inc. (ASD), the Company’s exclusive wholesale distributor, and US Bioservices Corporation (US Bio), its exclusive specialty pharmacy, both of which are wholly-owned subsidiaries of AmerisourceBergen Specialty Group, Inc. (ABSG).  Product sales are recorded upon delivery to ASD and US Bio.  These sales are recorded net of applicable reserves for trade prompt pay discounts, government rebates, a patient assistance program, product returns and other applicable allowances.

Product Sales Allowances.  The Company establishes reserves for trade prompt pay discounts, government rebates, a patient assistance program, product returns and other applicable allowances.  Reserves established for these discounts and allowances are classified as a reduction of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

Allowances against receivable balances primarily relate to prompt payment discounts and are recorded at the time of sale, resulting in a reduction in product sales revenue.  Accruals related to government rebates, the patient financial assistance program, product returns and other applicable allowances are recognized at the time of sale, resulting in a reduction in product sales revenue and the recording of an increase in accrued expenses.

8

The Company maintains a service contract with US Bio for patient service initiatives. Accounting standards related to consideration given by a vendor to a customer, including a reseller of a vendor’s product, specify that each consideration given by a vendor to a customer is presumed to be a reduction of the selling price.  Consideration should be characterized as a cost if the company receives, or will receive, an identifiable benefit in exchange for the consideration, and fair value of the benefit can be reasonably estimated.  The Company has established that the services are at fair value and represent a separate and identifiable benefit related to these services and, accordingly, has classified them as selling, general and administrative expense.

Prompt Payment Discounts.  The Company offers a prompt payment discount to its customers ASD and US Bio.  Since the Company expects their customers will take advantage of this discount, the Company accrues 100% of the prompt payment discount that is based on the gross amount of each invoice, at the time of sale.  The accrual is adjusted quarterly to reflect actual earned discounts.

Government Rebates and Chargebacks.  The Company estimates reductions to product sales for Medicaid and Veterans’ Administration (VA) programs, as well as with respect to certain other qualifying federal and state government programs.  The Company estimates the amount of these reductions based on market research data related to payer mix, actual sales data and historical experience for similar products sold by others.  These allowances are adjusted each period based on actual experience.

Medicaid rebate reserves relate to the Company’s estimated obligations to states under the established reimbursement arrangements of each applicable state.  Rebate accruals are recorded during the same period in which the related product sales are recognized.  Actual rebate amounts are determined at the time of claim by the state, and the Company will generally make cash payments for such amounts after receiving billings from the state.

VA rebates or chargeback reserves represent the Company’s estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at a price lower than the list price charged to the Company’s distributor.  The distributor will charge the Company for the difference between what the distributor pays for the product and the ultimate selling price to the qualified healthcare provider.  Rebate accruals are established during the same period in which the related product sales are recognized. Actual chargeback amounts for Public Health Service are determined at the time of resale to the qualified healthcare provider from the distributor, and the Company will generally issue credits for such amounts after receiving notification from the distributor.

The Company offers a financial assistance program, which involves the use of a patient voucher, for qualified KALBITOR patients in order to aid a patient’s access to KALBITOR.  The Company estimates its liability from this voucher program based on actual redemption rates.

Although allowances and accruals are recorded at the time of product sale, certain rebates are typically paid out, on average, up to six months or longer after the sale.  Reserve estimates are evaluated quarterly and if necessary, adjusted to reflect actual results.  Any such adjustments will be reflected in the Company’s operating results in the period of the adjustment.

Product Returns.  Allowances for product returns are recorded during the period in which the related product sales are recognized, resulting in a reduction to product revenue.  The Company does not provide its customers with a general right of product return. It permits returns if the product is damaged or defective when received by its customers or if the product has expired.  The Company estimates product returns based upon historical trends in the pharmaceutical industry and trends for similar products sold by others.

9

Development and License Fee Revenues

Collaboration Agreements.  The Company enters into collaboration agreements with other companies for the research and development of therapeutic, diagnostic and separations products. The terms of the agreements may include non-refundable signing and licensing fees, funding for research and development, milestone payments and royalties on any product sales derived from collaborations. These multiple element arrangements are analyzed to determine whether the deliverables, which often include a license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting.

The Company recognizes up-front license payments as revenue upon delivery of the license only if the license has stand-alone value and the fair value of the undelivered performance obligations, typically including research and/or steering committee services, can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations are accounted for separately once the obligations are fulfilled. If the license is considered to either not have stand-alone value or have stand-alone value but the fair value of any of the undelivered performance obligations cannot be determined, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed.

Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.

Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance.

If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement would be recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

Many of the Company's collaboration agreements entitle it to additional payments upon the achievement of performance-based milestones. If the achievement of a milestone is considered probable at the inception of the collaboration, the related milestone payment is included with other collaboration consideration, such as up-front fees and research funding, in the Company's revenue model. Milestones that involve substantial effort on the Company's part and the achievement of which are not considered probable at the inception of the collaboration are considered "substantive milestones." Substantive milestones are included in the Company's revenue model when achievement of the milestone is considered probable. As future substantive milestones are achieved, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized as revenue upon achievement of such milestone. The remaining portion of the milestone will be recognized over the remaining performance period using the proportional performance or straight-line method. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval is received. Milestones tied to counter-party performance are not included in the Company's revenue model until the performance conditions are met.

Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Costs of revenues related to product development and license fees are classified as research and development in the consolidated statements of operations and comprehensive loss.

10

Patent Licenses.  The Company generally licenses its patent rights covering phage display on a non-exclusive basis to third parties for use in connection with the research and development of therapeutic, diagnostic, and other products.

Standard terms of the patent rights agreements generally include non-refundable signing fees, non-refundable license maintenance fees, development milestone payments and royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement. Perpetual patent licenses are recognized immediately if the Company has no future obligations and the payments are upfront.

Library Licenses.  Standard terms of the proprietary phage display library agreements generally include non-refundable signing fees, license maintenance fees, development milestone payments, product license payments and royalties on product sales. Signing fees and maintenance fees are generally recognized on a straight line basis over the term of the agreement. As milestones are achieved under a phage display library license, a portion of the milestone payment, equal to the percentage of the performance period completed when the milestone is achieved, multiplied by the amount of the milestone payment, will be recognized. The remaining portion of the milestone will be recognized over the remaining performance period on a straight-line basis. Milestone payments under these license arrangements are recognized when the milestone is achieved if the Company has no future obligations under the license. Product license payments are recognized as revenue when the license is issued if the Company has no future obligations under the agreement. If there are future obligations under the agreement, product license payments are recognized as revenue only to the extent of the fair value of the license. Amounts paid in excess of fair value are recognized in a manner similar to milestone payments. Royalty revenue is recognized upon the sale of the related products provided the Company has no remaining performance obligations under the arrangement.

Payments received that have not met the appropriate criteria for revenue recognition are recorded as deferred revenue.

Cost of Product Sales  

Cost of product sales includes costs to procure, manufacture and distribute KALBITOR and manufacturing royalties. Costs associated with the manufacture of KALBITOR prior to regulatory approval were expensed when incurred as a research and development cost and accordingly, the majority of the costs of KALBITOR sold during the three and nine months ended September 30, 2010 are not included in cost of product sales.

Research and Development  

Research and development costs include all direct costs, including salaries and benefits for research and development personnel, outside consultants, costs of clinical trials, sponsored research, clinical trials insurance, other outside costs, depreciation and facility costs related to the development of drug candidates.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes in accordance with ASC 740.  Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities using the current statutory tax rates. At September 30, 2010 and December 31, 2009, there were no unrecognized tax benefits.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions.

11

Translation of Foreign Currencies

Assets and liabilities of the Company's foreign subsidiaries are translated at period end exchange rates. Amounts included in the statements of operations are translated at the average exchange rate for the period. Beginning July 1, 2009, all currency translation adjustments are recorded to other income (expense) in the consolidated statement of operations. Prior to the closure of the Company’s Liege, Belgium facility, currency translation adjustments were made directly to accumulated other comprehensive income (loss) in the consolidated balance sheets. The change is a result of the closure of that facility. For the three and nine months ending September 30, 2010, the translation of foreign currencies generated a gain of $61,000 and a loss of $33,000, respectively.  For the three and nine months ending September 30, 2009, the translation of foreign currencies generated a gain of $26,000 and a loss of $154,000, respectively.

Share-Based Compensation

The Company’s share-based compensation program consists of share-based awards granted to employees in the form of stock options, as well as its Employee Stock Purchase Plan (the Purchase Plan).  The Company’s share-based compensation expense is recorded in accordance with ASC 718.

Loss Per Share

The Company presents two earnings or loss per share (EPS) amounts, basic and diluted, in accordance with ASC 260.  Basic loss per share is computed using the weighted average number of shares of common stock outstanding. Diluted net loss per share does not differ from basic net loss per share since potential common shares from the exercise of stock options, warrants or rights under the Purchase Plan are anti-dilutive for the periods ended September 30, 2010 and 2009, and therefore, are excluded from the calculation of diluted net loss per share.

Stock options and warrants to purchase a total of 9,932,997 and 9,136,208 shares of common stock were outstanding at September 30, 2010 and 2009, respectively.

Comprehensive Loss

The Company accounts for comprehensive loss under ASC 220, Comprehensive Income, which established standards for reporting and displaying comprehensive loss and its components in a full set of general purpose financial statements. The statement required that all components of comprehensive loss be reported in a financial statement that is displayed with the same prominence as other financial statements.

Business Segments

The Company discloses business segments under ASC 280, Segment Reporting.   The statement established standards for reporting information about operating segments and disclosures about products and services, geographic areas and major customers.  The Company operates as one business segment within one geographic area.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies, which are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

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In October 2009, the FASB issued a new accounting standard which amends existing revenue recognition accounting pronouncements for Multiple-Deliverable Revenue Arrangements.  This new standard provides accounting principles and application guidance on whether multiple deliverables exist, how the arrangement should be separated, and the consideration allocated. This guidance eliminates the requirement to establish the fair value of undelivered products and services and instead provides for separate revenue recognition based upon management’s estimate of the selling price for an undelivered item in circumstances when there is no other means to determine the fair value of that undelivered item. Multiple-deliverable revenue arrangement guidance previously required that the fair value of the undelivered item be the price of the item either sold in a separate transaction between unrelated third parties or the price charged for each item when the item is sold separately by the vendor. This was difficult to determine when the product was not individually sold because of its unique features. Under the previous guidance, if the fair value of all of the elements in the arrangement was not determinable, then revenue was deferred until all of the items were delivered or fair value was determined. This new approach is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which for the Company is no later than January 1, 2011.  While the Company does not expect the adoption of this standard to have a material impact on its financial position or results of operations, this standard may have an impact in the event that future transactions are completed or existing collaborations are materially modified.

In April 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-17, Revenue Recognition — Milestone Method (ASU 2010-017). ASU 2010-017 provides guidance in applying the milestone method of revenue recognition to research or development arrangements. Under this guidance a company may recognize revenue contingent upon the achievement of a milestone in its entirety, in the period in which the milestone is achieved, only if the milestone meets all the criteria within the guidance to be considered substantive. This ASU is effective on a prospective basis for research and development milestones achieved in fiscal years, beginning on or after June 15, 2010, which for the Company is no later than January 1, 2011. Early adoption is permitted; however, adoption of this guidance as of a date other than January 1, 2011 will require the Company to apply this guidance retrospectively effective as of January 1, 2010 and will require disclosure of the effect of this guidance as applied to all previously reported interim periods in the fiscal year of adoption. As the Company plans to implement ASU No. 2010-17 prospectively, the effect of this guidance will be limited to future transactions. The Company does not expect adoption of this standard to have a material impact on its financial position or results of operations as it has no material research and development arrangements which will be accounted for under the milestone method.

3. SIGNIFICANT TRANSACTIONS

CMIC

On September 28, 2010, the Company entered into an agreement with CMIC Co., Ltd, (CMIC) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications in Japan.

Under the terms of the agreement, the Company received a $4.0 million upfront payment.  The Company is also eligible to receive up to $102 million in development and sales milestones for ecallantide in HAE and other angioedema indications and royalties of 20%-24% of net product sales. CMIC is solely responsible for all costs associated with development, regulatory activities, and commercialization of ecallantide for all angioedema indications in Japan. CMIC will purchase drug product from the Company on a cost-plus basis for clinical and commercial supply.

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The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the technology license, development of ecallantide for the treatment of HAE and other angioedema indications in Japan, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  The Company determined that there were two units of accounting.   The first unit of accounting includes the technology license, the committed future development services and the steering committee involvement.  The second unit of accounting relates to the manufacturing services.  The Company has the ability to estimate the scope and timing of their involvement in the future development of this program as the Company’s obligations under the development period are clearly defined and therefore are recognizing revenue related to the first unit of accounting over this period of performance.  For the three and nine months ending September 30, 2010, no revenue was recognized related this agreement.   As of September 30, 2010, the Company has deferred the full amount of the upfront received related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheets.    

Sigma-Tau

In June 2010, the Company entered into a strategic partnership agreement with Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA (Sigma-Tau) to develop and commercialize subcutaneous ecallantide (formerly referred to by Dyax as DX-88) for the treatment of HAE and other therapeutic indications throughout Europe, North Africa, the Middle East and Russia. 

Under the terms of the agreement, Sigma-Tau made a $2.5 million upfront payment, which was received in July 2010.  In addition, Sigma-Tau purchased 636,132 shares of the Company’s common stock at a price of $3.93 per share, which represented a 50% premium over the 20-day average closing price through June 17, 2010, for an aggregate purchase price of $2.5 million.  The Company is also eligible to receive over $100 million in development and sales milestones related to ecallantide and royalties equal to 41% of net sales of product, as adjusted for product costs.  Sigma-Tau will pay costs associated with regulatory approval and commercialization in the licensed territories.  In addition, the Company and Sigma-Tau will share equally the costs for all development activities for optional future indications developed in partnership with Sigma-Tau.

The Company analyzed this multiple element arrangement in accordance with ASC 605 and evaluated whether the performance obligations under this agreement, including the technology license and development, steering committee, and manufacturing services should be accounted for as a single unit or multiple units of accounting.  The Company determined that there were two units of accounting.   The first unit of accounting includes the technology license, the committed future development services and the steering committee involvement.  The second unit of accounting relates to the manufacturing services.  The Company has the ability to estimate the scope and timing of their involvement in the future development of this program as the Company’s obligations under the development period are clearly defined and therefore are recognizing revenue related to the first unit of accounting utilizing a proportional performance model based on the actual effort performed in proportion to the total estimated level of effort.   Under this model, the Company estimates the level of effort to be expended over the term of the agreement and recognizes revenue based on the lesser of the amount calculated based on proportional performance of total expected revenue or the amount of non-refundable payments earned.  The second unit of accounting relates to manufacturing services under which manufacturing revenue will be recognized as manufacturing services are completed during commercialization of ecallantide in the licensed territories.

The $2.5 million upfront payment, $922,000 in equity which represented the difference between the purchase price and the closing price of the common stock on the date of the stock purchase by Sigma-Tau and estimated reimbursements related to the development services, are being recorded as revenue under the proportional performance method.  As future substantive milestones are achieved, and to the extent they are within the period of performance, milestone payments will be recognized as revenue on a proportional performance basis over the contract’s entire performance period, starting with the contract’s commencement. A portion of the milestone payment, equal to the percentage of total performance completed when the milestone is achieved, multiplied by the milestone payment, will be recognized as revenue upon achievement of the milestone. The remaining portion of the milestone will be recognized over the remaining performance period under the proportional performance method.

The Company recognized revenue of approximately $498,000 and $549,000 related to this agreement for the three and nine months ending September 30, 2010, respectively.  As of September 30, 2010, the Company has deferred $2.9 million of revenue related to this arrangement, which is recorded in deferred revenue on the accompanying consolidated balance sheets.    

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Sale of Xyntha Royalty Rights

In April 2010, the Company sold its rights to royalties and other payments related to the commercialization of the product Xyntha®, which was developed by one of the Company’s licensees under the Company’s phage display Licensing and Funded Research Program (LFRP).  Under the terms of this sale, the Company received an upfront cash payment of $9.8 million and is eligible to receive milestone payments of up to $2.0 million based on 2010 and 2011 product sales.  A portion of the upfront cash payment was required to be applied to the Company’s loan with Cowen Healthcare (see Note 7 – Note Payable), including a $1.9 million principal reduction and interest expense of $1.3 million.  The Company evaluated the guidelines of ASC 470-10 “Sale of Future Revenues” and has determined that it has no substantive future obligations under the arrangement.  The full amount of the $9.8 million upfront payment was recognized as revenue during the nine months ended September 30, 2010.

Cubist Pharmaceuticals Inc.

In 2008, the Company entered into an exclusive license and collaboration agreement with Cubist Pharmaceuticals, Inc. (Cubist), for the development and commercialization in North America and Europe of the intravenous formulation of ecallantide for the reduction of blood loss during surgery. Under this agreement, Cubist assumed responsibility for all further development and costs associated with ecallantide in the licensed indications in the Cubist territory. The Company received $17.5 million in license and milestone fees in 2008 as a result of the Cubist agreement. Additionally, the Company received $3.6 million for drug product supply and reimbursement of costs incurred in 2008 related to the conduct of the Phase 2 clinical trial, known as Kalahari 1.  The Company also received $139,000 for drug product supply in 2009.

On March 31, 2010, Cubist announced its plan to stop investing in the clinical development of ecallantide as a therapy to reduce blood loss during surgery and its intention to terminate the 2008 agreement with the Company.  Based upon Cubist’s decision to end clinical development of this program, $13.8 million of deferred revenue was recognized as revenue during the nine months ended September 30, 2010, as the development period had ended.  During the three and nine months ended September 30, 2009, the Company recognized revenue of $1.1 million and $3.2 million, respectively, related to this agreement.

4. FAIR VALUE MEASUREMENTS

The following tables present information about the Company's financial assets that have been measured at fair value as of September 30, 2010 and December 31, 2009 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices, for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and includes situations where there is little, if any, market activity for the asset or liability.

Description (in thousands)	September 30, 2010		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	27,044	$	27,044	$	—	$	—
Marketable debt securities		54,718		54,718		—		—
Total	$	81,762	$	81,762	$	—	$	—

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Description (in thousands)	December 31, 2009		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	19,638	$	19,638	$	—	$	—
Marketable debt securities		23,009		23,009		—		—
Total	$	42,647	$	42,647	$	—	$	—

As of September 30, 2010 and December 31, 2009, the Company's investments consisted of U.S. Treasury notes and bills which are categorized as Level 1. The fair values of cash equivalents and marketable debt securities are determined through market, observable and corroborated sources. The carrying amounts reflected in the consolidated balance sheets for cash, cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses and other current liabilities approximate fair value due to their short-term maturities.

5. INVENTORY

In December 2009, the Company received marketing approval of KALBITOR from the FDA. Costs associated with the manufacture of KALBITOR prior to regulatory approval were expensed when incurred, and therefore were not capitalized as inventory.  Subsequent to FDA approval, all costs associated with the manufacture of KALBITOR have been recorded as inventory, which consists of the following (in thousands):

	September 30, 2010		December 31, 2009
Raw Materials	$	767	$	472
Work in Progress		387		106
Finished Goods		272		—
Total	$	1,426	$	578

6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following (in thousands):

	September 30, 2010		December 31, 2009
Accounts payable	$	1,140	$	686
Accrued employee compensation and related taxes		3,335		4,296
Accrued external research and development and contract manufacturing		2,509		2,431
Accrued license fees		20		2,047
Other accrued liabilities		2,034		2,327
Total	$	9,038	$	11,787

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7. NOTE PAYABLE

In 2008, the Company entered into an agreement with Cowen Healthcare Royalty Partners, LP (Cowen Healthcare) for a $50.0 million loan secured by the Company's phage display Licensing and Funded Research Program (LFRP). This loan is now known as the Tranche A loan.  In March 2009, the Company amended and restated the loan agreement with Cowen Healthcare to include a Tranche B loan of $15.0 million. The Company used $35.1 million from the proceeds of the Tranche A loan to pay off its remaining obligation under a then existing agreement with Paul Royalty Fund Holdings II, LP.

The Tranche A and Tranche B loans (collectively, the Loan) mature in August 2016.  The Tranche A portion bears interest at an annual rate of 16%, payable quarterly, and the Tranche B portion bears interest at an annual rate of 21.5%, payable quarterly. The Loan may be prepaid without penalty, in whole or in part, beginning in August 2012.  In connection with the Loan, the Company has entered into a security agreement granting Cowen Healthcare a security interest in the intellectual property related to the LFRP, and the revenues generated by the Company through the license of the intellectual property related to the LFRP. The security agreement does not apply to the Company's internal drug development or to any of the Company's co-development programs.

Under the terms of the loan agreement, the Company is required to repay the Loan based on the annual net LFRP receipts.  Until June 30, 2013, required payments are tiered as follows: 75% of the first $10.0 million in specified annual LFRP receipts, 50% of the next $5.0 million and 25% of annual included LFRP receipts over $15.0 million.  After June 30, 2013, and until the maturity date or the complete amortization of the Loan, Cowen Healthcare will receive 90% of all included LFRP receipts.  If the Cowen Healthcare portion of LFRP receipts for any quarter exceeds the interest for that quarter, then the principal balance will be reduced.  Any unpaid principal will be due upon the maturity of the Loan.  If the Cowen Healthcare portion of LFRP revenues for any quarterly period is insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding principal or paid in cash by the Company. After five years from the date of funding of each loan the Company must repay to Cowen Healthcare all additional accumulated principal above the original $50.0 million and $15.0 million loan amounts of Tranche A and Tranche B, respectively.

In addition, under the terms of the loan agreement, the Company is permitted to sell or otherwise transfer collateral generating cash proceeds of up to $25.0 million. Twenty percent of these cash proceeds will be applied to principal and accrued interest on the Loan plus any applicable prepayment premium and an additional 5.0% of such proceeds will be paid to Cowen Healthcare as a cash premium.  In April 2010, the Company sold its rights to royalties and other payments related to the commercialization of a product developed by one of the Company’s licensees under the LFRP for $9.8 million (see Note 3, Significant Transactions - Sale of Xyntha Royalty Rights).

In connection with the Tranche A loan, the Company issued to Cowen Healthcare a warrant to purchase 250,000 shares of the Company's common stock at an exercise price of $5.50 per share.  The warrant expires in August 2016 and became exercisable on August 5, 2009.  The Company has estimated the relative fair value of the warrant to be $853,000, using the Black-Scholes valuation model, assuming a volatility factor of 83.64%, risk-free interest rate of 4.07%, an eight-year expected term and an expected dividend yield of zero.  In conjunction with the Tranche B loan, the Company issued to Cowen Healthcare a warrant to purchase 250,000 shares of the Company’s common stock at an exercise price of $2.87 per share.  The warrant expires in August 2016 and became exercisable on March 27, 2010. The Company has estimated the relative fair value of the warrant to be $477,000, using the Black-Scholes valuation model, assuming a volatility factor of 85.98%, risk-free interest rate of 2.77%, a seven-year, four-month expected term and an expected dividend yield of zero.  The relative fair values of the warrants are recorded in additional paid-in capital on the Company's consolidated balance sheets.

The cash proceeds from the Loan were recorded as a note payable on the Company's consolidated balance sheet.  The note payable balance was reduced by $1.3 million for the fair value of the Tranche A and Tranche B warrants, and by $580,000 for payment of Cowen Healthcare’s legal fees in conjunction with the Loan.  Each of these amounts is being accreted over the life of the note.

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The following table reflects the activity on the Loan for financial reporting purposes for the three and nine months ended September 30, 2010 and 2009 (in thousands):

	Three Months Ended  September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Beginning balance	$	56,283		$	57,975		$	58,096		$	46,947
Relative fair value of warrant in connection with Tranche B		—			—			—			(477	)
Accretion on warrants and discount		62			62			184			165
Loan activity:
Tranche B (net proceeds)		—			—			—			14,820
Interest expense		2,511			2,595			7,617			7,022
Payments applied to principal		—			—			(1,935	)		(3,352	)
Payments applied to interest		(1,550	)		(1,763	)		(6,656	)		(6,256	)
Accrued interest payable		(961	)		(834	)		(961	)		(834	)
Ending balance	$	56,345		$	58,035		$	56,345		$	58,035

The Loan principal balance at September 30, 2010, and December 31, 2009 was $57.8 million and $59.7 million, respectively.  The estimated fair value of the note payable was $52.9 million at September 30, 2010.

8. STOCKHOLDER’S EQUITY (DEFICIT) AND STOCK-BASED COMPENSATION

Common Stock

 In June 2010, the Company issued 636,132 shares of its common stock for an aggregate purchase price of $2.5 million in connection with a strategic partnership transaction (see Note 3, Significant Transactions - Sigma Tau).

In March 2010, the Company issued 17,000,000 shares of its common stock in an underwritten public offering.  In connection with this offering, in April 2010, the underwriters exercised in full their over-allotment option to purchase an additional 2,550,000 shares of common stock.  Net proceeds to the Company were approximately $59.6 million, after deducting underwriting fees and offering expenses.

Equity Incentive Plan

The Company's 1995 Equity Incentive Plan (the Equity Plan), as amended, is an equity plan under which equity awards, including awards of restricted stock and incentive and nonqualified stock options to purchase shares of common stock may be granted to employees, consultants and directors of the Company by action of the Compensation Committee of the Board of Directors. Options are generally granted at the current fair market value on the date of grant, generally vest ratably over a 48-month period, and expire within ten years from date of grant. The Equity Plan is intended to attract and retain employees and to provide an incentive for employees, consultants and directors to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company.  At September 30, 2010, a total of 5,147,919 shares were available for future grants under the Plan.

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Employee Stock Purchase Plan

The Company's 1998 Employee Stock Purchase Plan (the Purchase Plan), as amended, allows employees to purchase shares of the Company's common stock at a discount from fair market value. Under this Plan, eligible employees may purchase shares during six-month offering periods commencing on January 1 and July 1 of each year at a price per share of 85% of the lower of the fair market value price per share on the first or last day of each six-month offering period. Participating employees may elect to have up to 10% of their base pay withheld and applied toward the purchase of such shares, subject to the limitation of 875 shares per participant per quarter. The rights of participating employees under the Purchase Plan terminate upon voluntary withdrawal from the Purchase Plan at any time or upon termination of employment. The compensation expense in connection with the Plan was approximately $15,000 and $46,000 for the three and nine months ended September 30, 2010, respectively, and $42,000 and $114,000, for the three and nine months ended September 30, 2009, respectively. There were 49,962 and 49,977 shares purchased under the Plan during the three months ended September 30, 2010 and 2009, respectively and 99,934 and 99,937 shares purchased under the Plan during the nine months ended September 30, 2010 and 2009, respectively. At September 30, 2010, a total of 594,080 shares were reserved and available for issuance under this Plan.

Stock-Based Compensation Expense

The Company measures compensation cost for all stock awards at fair value on date of grant and recognition of compensation over the service period for awards expected to vest.  The fair value of stock options was determined using the Black-Scholes valuation model. Such value is recognized as expense over the service period, net of estimated forfeitures and adjusted for actual forfeitures. The estimation of stock options that will ultimately vest requires significant judgment. The Company considers many factors when estimating expected forfeitures, including historical experience. Actual results and future changes in estimates may differ substantially from the Company's current estimates.

The following table reflects stock compensation expense recorded, net of amounts capitalized into inventory, during the three and nine months ended September 30, 2010 and 2009 (in thousands):

	Three Months Ended September 30,				Nine Months Ended  September 30,
	2010		2009		2010		2009
Compensation expense related to:
Equity incentive plan	$	963	$	816	$	2,896	$	4,294
Employee stock purchase plan		16		41		47		113
	$	979	$	857	$	2,943	$	4,407
Stock-based compensation expense charged to:
Research and development expenses	$	356	$	308	$	1,074	$	1,424
General and administrative expenses	$	623	$	549	$	1,869	$	2,746
Restructuring charges	$	—	$	—	$	—	$	237

Stock-based compensation of $8,000 and $25,000 was capitalized into inventory for the three and nine months ended September 30, 2010, respectively.  Capitalized stock-based compensation is recognized into cost of product sales when the related product is sold.  During the nine months ended September 30, 2009, amendments to the exercise and vesting schedules to certain options resulted in additional stock-based compensation expense of $1.3 million, inclusive of $237,000 of stock-based compensation expense recorded in relation to restructuring activities.

9. INCOME TAXES

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using future expected enacted rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company has recorded a deferred tax asset of approximately $1.8 million at December 31, 2009 reflecting the benefit of deductions from the exercise of stock options which has been fully reserved until it is more likely than not that the benefit will be realized.  The benefit from this deferred tax asset will be recorded as a credit to additional paid-in capital if and when realized through a reduction of cash taxes.

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As required by ASC 740, the Company's management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, and has determined that it is not “more likely than not” that the Company will recognize the benefits of the deferred tax assets.  Accordingly, a valuation allowance of approximately $180.5 million was established at December 31, 2009.

The Company accounts for uncertain tax positions using a "more-likely-than-not" threshold for recognizing and resolving uncertain tax positions. The evaluation of uncertain tax positions is based on factors that include, but are not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position. The Company evaluates uncertain tax positions on a quarterly basis and adjusts the level of the liability to reflect any subsequent changes in the relevant facts surrounding the uncertain positions. As of September 30, 2010, the Company had no unrecognized tax benefits.

The tax years 1995 through 2009 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period.  The Company is currently not under examination in any jurisdictions for any tax years.

Item 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about our industry, management’s beliefs, and certain assumptions made by our management and may include, but are not limited to, statements about:

· the potential benefits and commercial potential of KALBITOR for its approved indication and any additional indications;

· our commercialization of KALBITOR, including revenues and cost of product sales;

· the potential for market approval for KALBITOR in the EU, Japan and other markets outside the United States;

· plans and anticipated timing for pursuing additional indications and uses for ecallantide;

· plans to enter into additional collaborative and licensing arrangements for ecallantide and for other compounds in development;

· estimates of potential markets for our products and product candidates;

· the sufficiency of our cash, cash equivalents and short-term investments; and

· expected future operating results.

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Statements that are not historical facts are based on our current expectations, beliefs, assumptions, estimates, forecasts and projections for our business and the industry and markets in which we compete. We often use the words or phrases of expectation or uncertainty like "believe," "anticipate," "plan," "expect," "intend," "project," "future," "may," "will," "could," "would" and similar words to help identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties, and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, but are not limited to, those discussed later in this report under the section entitled “Risk Factors”. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, whether because of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents we file from time to time with the Securities and Exchange Commission.

BUSINESS OVERVIEW

We are a biopharmaceutical company focused on the discovery, development and commercialization of novel biotherapeutics for unmet medical needs. We began commercializing KALBITOR (ecallantide) for treatment of acute attacks of hereditary angioedema (HAE) in patients 16 years of age and older in February 2010.  We commercialize KALBITOR on our own in the United States and intend to seek approval and commercialize KALBITOR through partners for HAE and other angioedema indications in markets outside of the United States.

During 2010, we entered into three agreements to develop and commercialize subcutaneous ecallantide (formerly referred to by Dyax as DX-88) for the treatment of HAE and other therapeutic indications in territories outside of the United States.  These include:

· A Joint Development and License Agreement with Defiante Farmaceutica S.A., a subsidiary of the pharmaceutical company Sigma-Tau SpA (Sigma-Tau), to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other therapeutic indications throughout for Europe, North Africa, the Middle East and Russia

· A Product Development and License Agreement with CMIC Co., Ltd. to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications in Japan

· A Supply, Distribution and Licensing Agreement with Neopharm Scientific, Ltd. to obtain regulatory approval and commercialize ecallantide for HAE and other angioedema indications in Israel

We have also licensed ecallantide for development through a collaboration with Fovea Pharmaceuticals SA, a subsidiary of sanofi-aventis, for treatment of retinal diseases. We are exploring the use of ecallantide for treatment of drug-induced angioedema, a life threatening inflammatory response brought on by adverse reactions to angiotensin-converting enzyme (ACE) inhibitors.

Beyond ecallantide, we have also developed a pipeline of drug candidates using our proprietary drug discovery technology, known as phage display. We use phage display to identify antibody, small protein and peptide compounds with potential for clinical development.

Although we use our phage display technology primarily to advance our own internal development activities, we also leverage it through licenses and collaborations designed to generate revenues and provide us access to co-develop and/or co-promote drug candidates identified by other biopharmaceutical and pharmaceutical companies. Through our LFRP, we have more than 70 ongoing license agreements. Currently, our licensees have 17 product candidates in clinical trials and our technology has been used in connection with the manufacturing of one approved product.

We have incurred net losses on an annual basis since our inception.  We have generated minimal revenue from product sales to date, and it is possible that we will never have significant product sales revenue. Currently, we generate most of our revenue from collaborators through license and milestone fees, research and development funding, and maintenance fees that we receive in connection with the licensing of our phage display technology. It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates or licensed technology in order to achieve or sustain future profitability.

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KALBITOR AND THE ECALLANTIDE FRANCHISE

Ecallantide is a compound that we developed using our phage display technology, which we have shown in vitro to be a high affinity, high specificity inhibitor of human plasma kallikrein. Plasma kallikrein, an enzyme found in blood, is believed to be a key component responsible for the regulation of the inflammation and coagulation pathways. Excess plasma kallikrein activity is thought to play a role in a number of inflammatory and autoimmune diseases, including HAE.

HAE is a rare, genetic disorder characterized by severe, debilitating and often painful swelling, which can occur in the abdomen, face, hands, feet and airway. HAE is caused by low or dysfunctional levels of C1-INH, a naturally occurring molecule that inhibits plasma kallikrein, a key mediator of inflammation, and other serine proteases in the blood. It is estimated that HAE affects between 1 in 10,000 to 1 in 50,000 people around the world. Despite the fact that 85% of patients experience symptoms before age 20, 68% of patients are not diagnosed until after age 20, which makes it difficult to accurately determine the size of the HAE patient population. HAE patient association registries estimate there is an immediately addressable target population of approximately 6,500 patients in the United States.

KALBITOR

In December 2009, ecallantide was approved by the FDA under the brand name KALBITOR (ecallantide) for treatment of HAE in patients 16 years of age and older regardless of anatomic location. KALBITOR, a potent, selective and reversible plasma kallikrein inhibitor discovered and developed by us, is the first subcutaneous HAE treatment approved in the United States.

As part of product approval, we have established a Risk Evaluation and Mitigation Strategy (REMS) program to communicate the risk of anaphylaxis and the importance of distinguishing between hypersensitivity reaction and HAE attack symptoms. To communicate these risks, the REMS requires a Medication Guide be dispensed with each dose of KALBITOR and a "Dear Healthcare Professional" letter be provided to doctors identified as likely to prescribe KALBITOR and treat HAE patients.

We have also initiated a Phase 4 observational study which will be conducted with 200 HAE patients to evaluate immunogenicity and hypersensitivity with exposure to KALBITOR for treatment of acute attacks of HAE. The study is designed to identify predictive risk factors and develop effective screening tools to mitigate the risk of hypersensitivity and anaphylaxis. This 4-year study was initiated in February 2010.

United States Sales and Marketing

We have established a commercial organization to support sales of KALBITOR in the United States. We believe that a field-based team of approximately 25 professionals, consisting of sales representatives, medical science liaisons and corporate account directors, is appropriate to effectively market KALBITOR in the United States, where patients are treated primarily by a limited number of specialty physicians, consisting mainly of allergists and immunologists.

Distribution

In 2009, we entered into separate agreements with three wholly-owned subsidiaries of AmerisourceBergen Specialty Group, Inc. (ABSG) to establish an exclusive distribution network for KALBITOR and to provide comprehensive call center services to support its commercialization. The ABSG agreements consist of:

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· an agreement with US Bioservices Corporation (US Bio), under which US Bio serves as our exclusive specialty pharmacy for KALBITOR in the United States, and will also manage the KALBITOR Access program for patients and healthcare providers seeking information and access to KALBITOR;

· an agreement with ASD Specialty Healthcare Inc. (ASD), under which ASD serves as our exclusive wholesale distributor for KALBITOR to treating hospitals in the United States; and

· an agreement with Integrated Commercialization Solutions, Inc. (ICS), under which ICS provides warehousing, inventory management and other logistical services in connection with the distribution of KALBITOR throughout the United States.

All three agreements have an initial term of three years, although each contains customary termination provisions and may be terminated by us for any reason upon six months prior written notice.

KALBITOR AccessSM

In furtherance of our efforts to facilitate access to KALBITOR in the United States, we have created the KALBITOR Access program, designed as a one-stop point of contact for information about KALBITOR, that offers treatment support service for patients with HAE and their healthcare providers. KALBITOR case managers provide comprehensive product and disease information, treatment site coordination, financial assistance for qualified patients and reimbursement facilitation services.

Manufacturing

In connection with the commercial launch of KALBITOR in the United States, we have established a commercial supply chain, consisting of single-source third party suppliers to manufacture, test and distribute this product. All third party manufacturers involved in the KALBITOR manufacturing process are required to comply with current good manufacturing practices, or cGMPs.

To date, the ecallantide drug substance used in the production of KALBITOR has been manufactured in the United Kingdom by MSD Biologics (UK) Limited (formerly known as Avecia Biologics Limited), a subsidiary of Merck & Co., Inc. (MSD). As a result of previously completed manufacturing activities conducted at MSD, we have significant inventories of ecallantide drug substance, which we believe are sufficient to supply all ongoing studies relating to ecallantide and KALBITOR, and to meet the anticipated market demand for KALBITOR through 2011. Under existing arrangements with MSD, they have agreed to conduct additional manufacturing campaigns, as necessary to supplement existing inventory. Additionally, we are in the process of evaluating alternative arrangements for long-term commercial supply of ecallantide drug substance.

Ecallantide drug substance is filled, labeled and packaged into the final form of KALBITOR drug product by Hollister-Steir at its facilities in Spokane, Washington under a commercial supply agreement. This process, known in the industry as the "fill and finish" process, is not unique to KALBITOR and alternative manufacturers are readily available in the event that we elect, or are required, to relocate the "fill and finish" process.

Ecallantide Outside of the United States

In markets outside of the United States, we intend to seek approval and commercialize ecallantide for HAE and other angioedema indications in conjunction with multiple partners by entering into license or collaboration agreements with companies that have established distribution systems and direct sales forces in such territories.

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In June 2010, we entered into a strategic partnership agreement with Sigma-Tau to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other therapeutic indications throughout Europe, North Africa, the Middle East and Russia.  We retained our rights to ecallantide in all other territories.  Under the terms of the agreement, Sigma-Tau made a $2.5 million upfront payment to us and also purchased 636,132 shares of our common stock at a price of $3.93 per share, which represented a 50% premium over the 20-day average closing price through June 17, 2010, for an aggregate purchase price of $2.5 million.  We will also be eligible to receive over $100 million in development and sales milestones related to ecallantide and royalties equal to 41% of net sales of product.  Sigma-Tau will pay the costs associated with regulatory approval and commercialization in the licensed territories.  In addition, we and Sigma-Tau will share equally the costs for all development activities for future indications developed in partnership with Sigma-Tau.

The Marketing Authorization Application (MAA) was submitted in May 2010 to the European Medicines Agency (EMA) for ecallantide for the treatment of HAE.   In July 2010, the EMA completed its validation process for the MAA for potential approval to market ecallantide in the European Union (EU).  We recently received the Day 120 consolidated list of questions from the EMA.  These questions are within our expectations.  We are working with our partner, Sigma-Tau on the response to the questions and anticipate an EMA decision by year end 2011.  We also anticipate that the MAA will be transferred from us to Sigma-Tau prior to any approval decision.  If approved, KALBITOR will receive marketing authorization in 27 EU member states.

In September 2010, we entered in an agreement with CMIC Co., Ltd (CMIC) to develop and commercialize subcutaneous ecallantide for the treatment of HAE and other angioedema indications in Japan. Under the terms of the agreement, we received a $4.0 million upfront payment.  We will also be eligible to receive up to $102 million in development and sales milestones for ecallantide in HAE and other angioedema indications and royalties of 20%-24% of net product sales. CMIC is solely responsible for all costs associated with development, regulatory activities, and commercialization of ecallantide for all angioedema indications in Japan. CMIC will purchase drug product from us on a cost-plus basis for clinical and commercial supply.

In March 2010, we entered into an agreement with Neopharm Scientific Ltd., (Neopharm) to obtain regulatory approval and commercialize ecallantide for HAE and other angioedema indications in Israel.  Under the terms of the agreement, we will provide Neopharm drug supply at a price equal to 50% of net sales.  

ECALLANTIDE FRANCHISE

Ecallantide for Treatment of Other Angioedemas

In addition to its approved commercial use, we are also developing ecallantide in other angioedema indications. Another form of angioedema is induced by the use of so-called ACE inhibitors. With an estimated 51 million prescriptions written annually worldwide, ACE inhibitors are widely prescribed to reduce ACE and generally reduce high blood pressure and vascular constriction. It is estimated that up to 2% of patients treated with ACE inhibitors suffer from angioedema attacks, which represents approximately 30% of all angioedemas treated in emergency rooms. Research suggests the use of ACE inhibitors increases the relative activity of bradykinin, a protein that causes blood vessels to enlarge, or dilate, which can also cause the swelling known as angioedema. As a specific inhibitor of plasma kallikrein, an enzyme needed to produce bradykinin, ecallantide has the potential to be effective for treating this condition. We are working with investigators affiliated with the University of Cincinnati on an investigator sponsored study for drug-induced angioedema.  We also plan to initiate a Dyax-sponsored Phase 2 clinical study for this indication by early 2011.

We are also exploring with FDA, the use of ecallantide for acquired angioedema, a condition associated with B-cell lymphoma and autoimmune disorders, as well as for pediatric use in HAE in an “expanded access” setting.

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Ecallantide for On-Pump Cardiac Surgery

On March 31, 2010, Cubist announced its plan to stop investing in the clinical development of ecallantide as a therapy to reduce blood loss during surgery and its intention to terminate our 2008 agreement with them and return all rights to us.  Cubist is expected to complete the data analysis of their clinical trials and provide that information to us.

Ecallantide for Ophthalmic Indications

We entered into a license agreement in 2009 with Fovea Pharmaceuticals SA, a subsidiary of sanofi-aventis, for the development of ecallantide in the EU for treatment of retinal diseases. Under this agreement, Fovea will fully fund development for the first indication, retinal vein occlusion-induced macular edema, for which a Phase 1 trial was initiated in the third quarter of 2009.  We retain all rights to commercialize ecallantide in this indication outside of the EU. Under the license agreement, we do not receive milestone payments, but are entitled to receive tiered royalties, ranging from the high teens to mid twenties, based on sales of ecallantide by Fovea in the EU.  If we elect to commercialize ecallantide in this indication outside of the EU, Fovea will be entitled to receive royalties from us, ranging from the low to mid teens, based on our sales of ecallantide outside the EU. The term of the agreement continues until the expiration of the licensed patents or, if later, the eleventh anniversary of the first commercial sale of ecallantide in an ophthalmic indication. The agreement may be terminated by Fovea on prior notice to us and by either party for cause.

Results of Operations

Three Months Ended September 30, 2010 and 2009

Revenues.   Total revenues for the three months ended September 30, 2010 (the 2010 Quarter) was $7.0 million, compared with $4.5 million for the three months ended September 30, 2009 (the 2009 Quarter).  

Product Sales.  We began commercializing KALBITOR in the United States for treatment of acute attacks of HAE in patients 16 years of age and older in February 2010, at which time product sales commenced.  We sell KALBITOR to ABSG, which functions as our exclusive distributor, and we recognize revenue when title and risk of loss have passed to ABSG, typically upon delivery.  Due to the specialty nature of KALBITOR, the limited number of patients, limited return rights and contractual limits on inventory levels, we anticipate that ABSG will carry limited inventory.

We record product sales allowances and accruals related to trade prompt pay discounts, government rebates, a patient financial assistance program, product returns and other applicable allowances.  For the 2010 Quarter, product sales of KALBITOR were $2.6 million, net of product discounts and allowances of $144,000.

Development and License Fees.  We derive revenues from licensing, funded research and development fees, including milestone payments from our licensees and collaborators. This revenue fluctuates from quarter-to-quarter due to the timing of the clinical activities of our collaborators and licensees.  This revenue was $4.3 million in the 2010 Quarter and $4.5 million in the 2009 Quarter.  The 2010 decrease was due to $1.1 million of revenue recognized in the 2009 Quarter associated with the Cubist license, for which there was no revenue in the 2010 Quarter.  This decrease was partially offset by $498,000 in revenue recognized under our agreement with Sigma-Tau which was executed in June 2010.

Cost of Product Sales.We incurred $119,000 of costs associated with product sales during the 2010 Quarter.  Costs associated with the manufacture of KALBITOR prior to FDA approval were previously expensed when incurred, and therefore are not included in the cost of product sales during this quarter.  The supply of KALBITOR produced prior to FDA approval is expected to meet anticipated commercial needs through 2011.  When this supply has been fully depleted, we expect our costs of product sales will increase, reflecting the full manufacturing cost of KALBITOR.

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Research and Development.Our research and development expenses are summarized as follows:

	Three Months  Ended September 30,
	2010		2009
	(In thousands)
KALBITOR development costs	$	3,948		$	3,804
Other research and development expenses		3,992			3,291
Research and development expenses	$	7,940		$	7,095

Our research and development expenses arise primarily from compensation and other related costs for our personnel dedicated to research, development, medical and pharmacovigilence activities, as well as costs of post-approval studies and commitments and KALBITOR life cycle management, as well as fees paid and costs reimbursed to outside parties to conduct research and clinical trials and the cost of manufacturing drug material prior to FDA approval.  In addition, development expenses include costs associated with obtaining regulatory approval for the treatment of HAE in Europe which are being reimbursed by Sigma-Tau.  The increase in the 2010 Quarter is due to an increase in internal costs, as well as costs related to preclinical activities.  Costs incurred in research and development may increase in future periods as our development programs advance.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the sales and marketing costs of commercializing KALBITOR in 2010 and costs of our management and administrative staff, as well as expenses related to business development, protecting our intellectual property, administrative occupancy, professional fees and the reporting requirements of a public company. Selling, general and administrative expenses for the 2010 and 2009 Quarters were $7.7 million and $5.9 million, respectively.  Costs increased during the 2010 Quarter due to additional infrastructure to support the commercialization of KALBITOR, including the expansion of sales and marketing personnel.  This includes increases of $1.4 million in internal sales and marketing expenses and $749,000 in external sales and marketing expenses.  Selling, general and administrative expenses may increase in future periods as the commercialization of KALBITOR expands.

Restructuring and Impairment.  As a result of the decrease in necessary facility space following a workforce reduction in the first quarter of 2009, we amended our facility lease during the 2009 Quarter to reduce our leased space.  In the 2009 Quarter, a one-time charge of approximately $1.4 million was recorded, of which approximately $955,000 was a result of the write-down of leasehold improvements.

Interest Expense.  Interest expense was $2.6 million in the 2010 Quarter compared to $2.7 million in 2009.  The 2010 decrease is due to slightly lower interest on the Cowen Healthcare loan due to a principal repayment in the second quarter of 2010.

Nine Months Ended September 30, 2010 and 2009

Revenues.   Total revenues for the nine months ended September 30, 2010 (the 2010 Period) was $42.1 million, compared with $15.3 million for the nine months ended September 30, 2009 (the 2009 Period).  

Product Sales.  We began commercializing KALBITOR in the United States for treatment of acute attacks of HAE in patients 16 years of age and older in February 2010, at which time product sales commenced.  We sell KALBITOR to ABSG, which functions as our exclusive distributor, and we recognize revenue when title and risk of loss have passed to ABSG, typically upon delivery.  Due to the specialty nature of KALBITOR, the limited number of patients, limited return rights and contractual limits on inventory levels, we anticipate that ABSG will carry limited inventory.

We record product sales allowances and accruals related to trade prompt pay discounts, government rebates, a patient financial assistance program, product returns and other applicable allowances.  For the 2010 Period, product sales of KALBITOR were $5.8 million, net of product discounts and allowances of $317,000.

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Development and License Fees.  We derive revenues from licensing, funded research and development fees, including milestone payments from our licensees and collaborators. This revenue fluctuates from period-to-period due to the timing of the clinical activities of our collaborators and licensees.  This revenue was $36.3 million in the 2010 Period and $15.3 million in the 2009 Period.  The 2010 increase was due to $9.8 million in revenue recognized under the sale of rights to royalties and other payments related to Xyntha, a product developed by one of our licensees under the LFRP and $13.8 million of previously deferred revenue associated with the Cubist license that was fully recognized during the 2010 Period based upon Cubist’s announcement to end its ecallantide development program.  During the 2009 Period, $3.2 million of revenue was recognized associated with the Cubist license.

Cost of Product Sales.We incurred $247,000 of costs associated with product sales during the 2010 Period.  Costs associated with the manufacture of KALBITOR prior to FDA approval were previously expensed when incurred, and therefore are not included in the cost of product sales during this period.  The supply of KALBITOR produced prior to FDA approval is expected to meet anticipated commercial needs through 2011.  When this supply has been fully depleted, we expect our costs of product sales will increase, reflecting the full manufacturing cost of KALBITOR.

Research and Development.Our research and development expenses are summarized as follows):

	Nine Months Ended September 30,
	2010		2009
	(In thousands)
KALBITOR development costs	$	12,466		$	14,082
Ecallantide drug manufacturing costs		—			8,498
Other research and development expenses		11,277			15,207
Research and development expenses	$	23,743		$	37,787

Our research and development expenses arise primarily from compensation and other related costs for our personnel dedicated to research, development, medical and pharmacovigilence activities, as well as costs of post-approval studies and commitments and KALBITOR life cycle management, as well as fees paid and costs reimbursed to outside parties to conduct research and clinical trials and the cost of manufacturing drug material prior to FDA approval.  In addition, development expenses include costs associated with obtaining regulatory approval for the treatment of HAE in Europe which are being reimbursed by Sigma-Tau.  The decrease in the 2010 Period is primarily due to an $8.5 million decrease in ecallantide drug manufacturing costs and $4.9 million in lower personnel expenses resulting from our workforce reduction in the 2009 Period.

Selling, General and Administrative. Our selling, general and administrative expenses consist primarily of the sales and marketing costs of commercializing KALBITOR in 2010, costs of our management and administrative staff, as well as expenses related to business development, protecting our intellectual property, administrative occupancy, professional fees and the reporting requirements of a public company. Selling, general and administrative expenses for the 2010 and 2009 Periods were $24.6 million and $18.9 million, respectively.  Costs increased $7.7 million during the 2010 Period due to additional infrastructure to support the commercialization of KALBITOR, including the expansion of sales and marketing personnel.  This includes increases of $5.1 million in internal sales and marketing expenses and $2.1 million in external sales and marketing expenses.  These increases are offset by a $1.1 million charge for share-based compensation expense for amendments to the exercise and vesting schedules of certain options in the 2009 Period.

Restructuring and Impairment.  In March 2009, we implemented a workforce reduction to focus our resources on the commercialization of KALBITOR and to support our long-term financial success.  As a result, during the 2009 Period, we recorded restructuring charges related to the workforce reduction of approximately $1.9 million. 

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As a result of the decrease in necessary facility space following a workforce reduction in the first quarter of 2009, we amended our facility lease during the 2009 Quarter to reduce our leased space.  In the 2009 Quarter, a one-time charge of approximately $1.4 million was recorded, of which approximately $955,000 was a result of the write-down of leasehold improvements.

Interest Expense.  Interest expense was $9.2 million in the 2010 Period compared to $7.4 million in 2009.  The 2010 increase is primarily due to additional interest expense of approximately $1.3 million for payments due under the Cowen Healthcare loan in connection with the sale of our rights to royalties and other payments related to the Xyntha product.

Liquidity and Capital Resources

	September 30, 2010		December 31, 2009
	(in thousands)
Cash and cash equivalents	$	32,792	$	29,386
Short-term investments		54,718		23,009
Total cash, cash equivalents and investments	$	87,510	$	52,395

The following table summarizes our cash flow activity for the nine months ended September 30, 2010 and 2009 (in thousands):

	Nine Months Ended September 30,
	2010			2009
Net cash used in operating activities	$	(24,262	)	$	(45,198	)
Net cash (used in) provided by investing activities		(31,115	)		3,596
Net cash provided by financing activities		58,783			28,491
Effect of foreign currency translation on cash balances		—			29
Net increase (decrease) in cash and cash equivalents	$	3,406		$	(13,082	)

We require cash to fund our operating expenses, to make capital expenditures, acquisitions and investments, and to service debt. Through September 30, 2010, we have funded our operations principally through the sale of equity securities, which have provided aggregate net cash proceeds since inception of approximately $398 million.  We have also borrowed funds under our loan agreement with Cowen Healthcare, which are secured by certain assets associated with our LFRP.  In addition, we generate funds from product development and license fees and product sales.  Our excess funds are currently invested in short-term investments primarily consisting of U.S. Treasury notes and bills and money market funds backed by U.S. Treasury obligations.

Operating Activities

The principal use of cash in our operations was to fund our net loss, which was $15.6 million during the nine months ended September 30, 2010.  Of this net loss, certain costs were non-cash charges, such as depreciation and amortization costs of $1.2 million and stock-based compensation expense of $2.9 million.  In addition to non-cash charges, we also had a net change in other operating assets and liabilities of $14.0 million, including a decrease in accounts payable and accrued expenses of $4.3 million, a decrease in accounts receivable of $937,000, and a decrease in deferred revenue of $9.4 million.  The change in deferred revenue is primarily due to the recognition of $13.8 million of revenue associated with Cubist’s announced termination of its ecallantide development program.

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During October 2010, a new drug substance manufacturing campaign was initiated with MSD to meet the demand for KALBITOR and supply clinical programs, as needed.  Costs under this manufacturing campaign are expected to approximate $8 million.

For 2009, our net loss was $51.5 million, of which certain costs were non-cash charges, such as depreciation and amortization costs of $2.3 million, interest expense of $1.3 million, impairment of fixed assets totaling $1.0 million, and stock-based compensation expense of $4.4 million.  In addition to non-cash charges, we also had a net change in other operating assets and liabilities of $2.3 million, including a decrease in accounts payable and accrued expenses of $4.8 million, offset by a decrease in accounts receivable of $3.6 million.

Investing Activities

Our investing activities for the nine months ended September 30, 2010 primarily consisted of the purchase of securities totaling of approximately $53.7 million, offset by investment maturities of $22.0 million, as well as a decrease of $700,000 in restricted cash from the contractual reduction of the letter of credit that serves as our security deposit for the lease of our facility in Cambridge, Massachusetts.

Our investing activities for the nine months ended September 30, 2009, consisted of investment maturities totaling of approximately $30.5 million, offset by purchases of additional securities of $26.5 million and the purchase of approximately $450,000 of fixed assets.

Financing Activities

Our financing activities for the nine months ended September 30, 2010 consisted of net proceeds of $61.1 million from the sale of 20,186,132 shares of our common stock, as well as repayments of long-term debt totaling $2.6 million, including $1.9 million to Cowen Healthcare.

Our financing activities for the nine months ended September 30, 2009, consisted of net proceeds of $14.8 million from the Tranche B loan with Cowen Healthcare, as well as approximately $17.6 million of net proceeds from the sale of 9,280,570 shares of our common stock, and a $4.6 million repayment of long-term obligations, primarily principal payments to Cowen Healthcare.  During the 2009 Period, we amended our existing loan with Cowen Healthcare to receive an additional loan of $15 million.  This Tranche B loan is secured by our LFRP on the same terms as the initial Tranche A loan, which was executed in August 2008.  The Tranche B loan, which matures in August 2016, bears interest at an annual rate of 21.50%, payable quarterly, resulting in a blended interest rate of 17.38% per annum for both the Tranche A and Tranche B loans under the amended loan agreement.

We may seek additional funding through our collaborative arrangements and public or private financings.  We may not be able to obtain financing on acceptable terms or at all, and we may not be able to enter into additional collaborative arrangements. Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies, product candidates or products. The terms of any financing may adversely affect the holdings or the rights of our stockholders. If we need additional funds and are unable to obtain funding on a timely basis, we would curtail significantly our research, development or commercialization programs in an effort to provide sufficient funds to continue our operations, which could adversely affect our business prospects.

OFF BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements with the exception of operating leases.

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COMMITMENTS AND CONTINGENCIES

In our Annual Report on Form 10-K for the year ended December 31, 2009, Part II, Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations, under the heading “Contractual Obligations,” we described our commitments and contingencies. There were no material changes in our commitments and contingencies during the nine months ended September 30, 2010.

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

In our Annual Report on Form 10-K for the year ended December 31, 2009, our critical accounting policies and estimates were identified as those relating to revenue recognition, allowance for doubtful accounts, share-based compensation and valuation of long-lived and intangible assets.  Other than noted below, there have been no material changes to our critical accounting policies from the information provided in our 2009 Annual Report on Form 10-K.

Changes in Critical Accounting Policies

As a result of the February 2010 commercial launch of KALBITOR, we have updated our critical accounting policies to include our product sales recognition and related sales allowances policies.  We believe that our judgment and assumptions with respect to these significant accounting policies are critical to the accounting estimates used in the preparation of our consolidating financial statements.

Product Sales.  Revenue from product sales is recognized when all four of the following criteria are met: (1) we have persuasive evidence an arrangement exists, (2) the price is fixed or determinable, (3) the product has been shipped and title and risk of loss have passed to the customer and (4) collection is reasonably assured.  Our return policy includes provisions for returns of our product when it has expired or was damaged in shipment.  Product sales are recorded net of applicable reserves for trade prompt pay discounts, government rebates, a patient assistance program, product returns and other applicable allowances.

Product Sales Allowances.  We establish reserves for trade prompt pay discounts, government rebates, a patient assistance program, product returns and other applicable allowances.  Reserves established for these discounts and allowances are classified as a reduction of accounts receivable (if the amount is payable to the customer) or a liability (if the amount is payable to a party other than the customer).

Allowances against receivable balances primarily relate to prompt payment discounts and are recorded at the time of sale, resulting in a reduction in product sales revenue.  Accruals related to government rebates, product returns and other applicable allowances are recognized at the time of sale, resulting in a reduction in product sales revenue and an increase in accrued expenses.

We maintain a service contract with our specialty pharmacy for customer service initiatives. We have established the fair value of these services and have classified them as selling, general and administrative expense.

Prompt Payment Discounts.  We offer a prompt payment discount to our customer ABSG.  Since we expect ABSG will take advantage of this discount, we accrue 100% of the prompt payment discount, based on the gross amount of each invoice, at the time of sale.  The accrual is adjusted quarterly to reflect the actual experience.

Government Rebates and Chargebacks.  We estimate reductions to product sales for Medicaid and Veterans’ Administration (VA) programs, as well as with respect to certain other qualifying federal and state government programs.  We estimate the amount of these reductions based on market research data related to payer mix, actual sales data and historical experience for similar products sold by others.

Medicaid rebate reserves relate to our estimated obligations to states under established reimbursement arrangements.  Rebate accruals are recorded during the same period in which the related product sales are recognized.  Actual rebate amounts are determined at the time of claim by the state, and we will generally make cash payments for such amounts after receiving billings from the state.

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VA rebates or chargeback reserves represent estimated obligations resulting from contractual commitments to sell products to qualified healthcare providers at a price lower than the list price charged to our distributor.  The distributor will charge us for the difference between what the distributor pays for the product and the ultimate selling price to the qualified healthcare provider.  Rebate accruals are established during the same period in which the related product sales are recognized. Actual chargeback amounts are determined at the time of resale to the qualified healthcare provider from the distributor, and we will generally issue credits for such amounts after receiving notification from the distributor.

We offer a financial assistance program, which involves the use of a patient voucher, for qualified KALBITOR patients in order to aid a patient’s access to KALBITOR.  We estimate our liability from this voucher program based on actual redemption rates.

Product Returns.  Allowances for product returns are recorded during the period in which the related product sales are recognized, resulting in a reduction to product revenue.  We do not provide customers with a general right of product return. We permit returns if the product is damaged or defective when received by the customer or if the product has expired.  We estimate product returns based upon historical trends in the pharmaceutical industry and trends for similar products sold by others.

During the three and nine months ended September 30, 2010, provisions for product sales allowances reduced gross product sales as follows (in thousands):

	Three months ended September 30, 2010			Nine months ended September 30, 2010
Total gross product sales	$	2,767		$	6,114
Prompt pay and other discounts	$	(56	)	$	(146	)
Government rebates and chargebacks		(87	)		(160	)
Returns		(1	)		(11	)
Product sales allowances	$	(144	)	$	(317	)
Total product sales, net	$	2,623		$	5,797
Total product sales allowances as a percent of gross product sales		5.2	%		5.2	%

If product sales allowances as a percentage of total gross product sales increase up to 10%, this change would not have a material impact on our results of operations or cash flows at this time.

Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk consists primarily of our cash and cash equivalents and short-term investments. We place our investments in high-quality financial instruments, primarily U.S. Treasury notes and bills, which we believe are subject to limited credit risk. We currently do not hedge interest rate exposure. As of September 30, 2010, we had cash, cash equivalents and investments of approximately $87.5 million. Our investments will decline by an immaterial amount if market interest rates increase, and therefore, our exposure to interest rate changes is immaterial. Declines of interest rates over time will, however, reduce our interest income from our investments.

As of September 30, 2010, we had $58.6 million outstanding under short-term and long-term obligations, including our note payable. Interest rates on all of these obligations are fixed and therefore are not subject to interest rate fluctuations.

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Most of our transactions are conducted in U.S. dollars. We have collaboration and technology license agreements with parties located outside of the United States. Transactions under certain of the agreements between us and parties located outside of the United States are conducted in local foreign currencies. If exchange rates undergo a change of up to 10%, we do not believe that it would have a material impact on our results of operations or cash flows.

Item 4 - CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934). Based on this evaluation, our principal executive officer and principal financial officer concluded that these disclosure controls and procedures were effective as of the end of the period covered by this quarterly report.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during our fiscal quarter ended September 30, 2010 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

You should carefully consider the following risk factors before you decide to invest in our Company and our business because these risk factors may have a significant impact on our business, operating results, financial condition, and cash flows. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occurs, our business, financial condition and results of operations could be materially and adversely affected.

Risks Related To Our Business

We have a history of net losses, expect to incur significant additional net losses and may never achieve or sustain profitability.

We have incurred net losses on an annual basis since our inception.  As of September 30, 2010, we had an accumulated deficit of approximately $433.4 million.  We expect to incur substantial additional net losses over the next several years as our research, development, preclinical testing, clinical trial and commercial activities increase.

We have generated minimal revenue from product sales to date, and it is possible that we will never have significant product sales revenue.  Currently, we generate most of our revenue from collaborators through license and milestone fees, research and development funding, and maintenance fees that we receive in connection with the licensing of our phage display technology.  To become profitable, we, alone or with our collaborators, must either successfully commercialize KALBITOR or develop and commercialize our other product candidates or continue to leverage our phage display technology to generate significant research funding and licensing revenue.  It is possible that we will never have significant product sales revenue or receive significant royalties on our licensed product candidates or licensed technology in order to achieve or sustain future profitability.

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We may need substantial additional capital in the future and may be unable to raise the capital that we will need to sustain our operations.

We require significant capital to fund our operations to commercialize KALBITOR and to develop and commercialize other product candidates.  Our future capital requirements will depend on many factors, including:

· future sales levels of KALBITOR and other commercial products and the profitability of such sales, if any;

· the timing and cost to develop, obtain regulatory approvals for and commercialize our pipeline products;

· maintaining or expanding our existing collaborative and license arrangements and entering into additional arrangements on terms that are favorable to us;

· the amount and timing of milestone and royalty payments from our collaborators and licensees related to their progress in developing and commercializing products;

· our decision to manufacture, or have third parties manufacture, the materials used in KALBITOR and other pipeline products;

· competing technological and market developments;

· the progress of our drug discovery and development programs;

· the costs of prosecuting, maintaining, defending and enforcing our patents and other intellectual property rights;

· the amount and timing of additional capital equipment purchases; and

· the overall condition of the financial markets.

We will need additional funds if our cash requirements exceed our current expectations or if we generate less revenue than we expect.  We may seek additional funding through collaborative arrangements, and public or private financings, or other means.  We may not be able to obtain financing on acceptable terms or at all, and we may not be able to enter into additional collaborative arrangements.  Arrangements with collaborators or others may require us to relinquish rights to certain of our technologies, product candidates or products.  The terms of any financing may adversely affect the holdings or the rights of our stockholders and if we are unable to obtain funding on a timely basis, we may be required to curtail significantly our research, development or commercialization programs which could adversely affect our business prospects.

Our revenues and operating results have fluctuated significantly in the past, and we expect this to continue in the future.

Our revenues and operating results have fluctuated significantly on a quarter to quarter basis.  We expect these fluctuations to continue in the future.  Fluctuations in revenues and operating results will depend on:

· the amount of future sales of KALBITOR and related costs to commercialize the product;

· the cost and timing of our increased research and development, manufacturing and commercialization activities;

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· the establishment of new collaboration and licensing arrangements;

· the timing and results of clinical trials, including a failure to receive the required regulatory approvals to commercialize our product candidates;

· the timing, receipt and amount of payments, if any, from current and prospective collaborators, including the completion of certain milestones; and

· revenue recognition and other accepted accounting policies.

Our revenues and costs in any period are not reliable indicators of our future operating results.  If the revenues we receive are less than the revenues we expect for a given fiscal period, then we may be unable to reduce our expenses quickly enough to compensate for the shortfall.  In addition, our fluctuating operating results may fail to meet the expectations of securities analysts or investors which may cause the price of our common stock to decline.

We depend heavily on the success of our lead product, KALBITOR, which is approved in the United States for treatment of acute attacks of HAE in patients 16 years and older.

Our ability to generate product sales will depend on commercial success of KALBITOR in the United States and whether physicians, patients and healthcare payers view KALBITOR as therapeutically effective relative to cost.  We initiated the commercial launch of KALBITOR in the United States in February 2010.

The commercial success of KALBITOR and our ability to generate and increase product sales will depend on several factors, including the following:

· the number of patients with HAE who are diagnosed with the disease and identified to us;

· the number of patients with HAE who may be treated with KALBITOR;

· acceptance of KALBITOR in the medical community;

· HAE patients’ frequency of KALBITOR use to treat their acute attacks of HAE;

· HAE patients’ ability to obtain and maintain sufficient coverage or reimbursement by third-party payers for the use of KALBITOR;

· our ability to effectively market and distribute KALBITOR in the United States;

· the maintenance of marketing approval in the United States and the receipt and maintenance of marketing approval from foreign regulatory authorities; and

· our maintenance of commercial manufacturing capabilities through third-party manufacturers.

If we are unable to develop substantial sales of KALBITOR in the United States and commercialize ecallantide in additional countries or if we are significantly delayed or limited in doing so, our business prospects would be adversely affected.

Because the target patient population of KALBITOR for treatment of HAE is small and has not been definitively determined, we must be able to successfully identify HAE patients and achieve a significant market share in order to achieve or maintain profitability.

The prevalence of HAE patients which has been estimated at approximately 1 in 10,000 to 1 in 50,000 people around the world, has not been definitively determined.  There can be no guarantee that any of our programs will be effective at identifying HAE patients and the number of HAE patients in the United States may turn out to be lower than expected or may not otherwise utilize treatment with KALBITOR for all or any of their acute HAE attacks, all of which would adversely affect our results of operations and business prospects.

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If HAE patients are unable to obtain and maintain reimbursement for KALBITOR from government health administration authorities, private health insurers and other organizations, KALBITOR may be too costly for regular use and our ability to generate product sales would be harmed.

We may not be able to sell KALBITOR on a profitable basis or our profitability may be reduced if we are required to sell our product at lower than anticipated prices or if reimbursement is unavailable or limited in scope or amount.  KALBITOR is significantly more expensive than traditional drug treatments and most patients require some form of third party insurance coverage in order to afford its cost.  Our future revenues and profitability will be adversely affected if HAE patients cannot depend on governmental, private and other third-party payers, such as Medicare and Medicaid in the United States or country specific governmental organizations, to defray the cost of KALBITOR.  If these entities refuse to provide coverage and reimbursement with respect to KALBITOR or determine to provide a lower level of coverage and reimbursement than anticipated, KALBITOR may be too costly for general use, and physicians may not prescribe it.

In addition to potential restrictions on insurance coverage, the amount of reimbursement for KALBITOR may also reduce our ability to profitably commercialize KALBITOR.  In the United States and elsewhere, there have been, and we expect there will continue to be, actions and proposals to control and reduce healthcare costs.  Government and other third-party payers are challenging the prices charged for healthcare products and increasingly limiting and attempting to limit both coverage and level of reimbursement for prescription drugs.

It is possible that we will never have significant KALBITOR sales revenue in order to achieve or sustain future profitability.

We may not be able to gain or maintain market acceptance of KALBITOR among the medical community or patients, which would prevent us from achieving or maintaining profitability in the future.

We cannot be certain that KALBITOR will gain or maintain market acceptance among physicians, patients, healthcare payers, and others.  Although we have received regulatory approval for KALBITOR in the United States, such approval does not guarantee future revenue.  We cannot predict whether physicians, other healthcare providers, government agencies or private insurers will determine that KALBITOR is safe and therapeutically effective relative to cost.  Medical doctors’ willingness to prescribe, and patients’ willingness to accept, KALBITOR depends on many factors, including prevalence and severity of adverse side effects in both clinical trials and commercial use, effectiveness of our marketing strategy and the pricing of KALBITOR, publicity concerning our products or competing products, HAE patient’s ability to obtain and maintain third-party coverage or reimbursement, and availability of alternative treatments.  If KALBITOR fails to achieve market acceptance, we may not be able to market and sell it successfully, which would limit our ability to generate revenue and adversely affect our results of operations and business prospects.

If we fail to comply with continuing regulations, we could lose our approvals to market KALBITOR, and our business would be adversely affected.

We cannot guarantee that we will be able to maintain our regulatory approval for KALBITOR in the United States. We and our future partners, contract manufacturers and suppliers are subject to rigorous and extensive regulation by the FDA, other federal and state agencies, and governmental authorities in other countries.  These regulations continue to apply after product approval, and cover, among other things, testing, manufacturing, quality control, labeling, advertising, promotion, adverse event reporting requirements, and export of biologics.

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As a condition of approval for marketing KALBITOR in the United States and other jurisdictions, the FDA or governmental authorities in those jurisdictions may require us to conduct additional clinical trials.  For example, in connection with the approval of KALBITOR in the United States, we have agreed to conduct a Phase 4 clinical study to evaluate immunogenicity and hypersensitivity with exposure to KALBITOR for treatment of acute attacks of HAE.  The FDA can propose to withdraw approval if new clinical data or information shows that KALBITOR is not safe for use or determines that such study is inadequate.  We are required to report any serious and unexpected adverse experiences and certain quality problems with KALBITOR to the FDA and other health agencies.  We, the FDA or another health agency may have to notify healthcare providers of any such developments.  The discovery of any previously unknown problems with KALBITOR or its manufacturer may result in restrictions on KALBITOR and the manufacturer or manufacturing facility, including withdrawal of KALBITOR from the market.  Certain changes to an approved product, including the way it is manufactured or promoted, often require prior regulatory approval before the product as modified may be marketed.

Our third-party manufacturing facilities were subjected to inspection prior to grant of marketing approval and are subject to continued review and periodic inspections by the regulatory authorities.  Any third party we would use to manufacture KALBITOR for sale must also be licensed by applicable regulatory authorities.  Although we have established a corporate compliance program, we cannot guarantee that we are and will continue to be in compliance with all applicable laws and regulations. Failure to comply with the laws, including statutes and regulations, administered by the FDA or other agencies could result in:

· administrative and judicial sanctions, including warning letters;

· fines and other civil penalties;

· withdrawal of a previously granted approval;

· interruption of production;

· operating restrictions;

· product recall or seizure; injunctions; and

· criminal prosecution.

The discovery of previously unknown problems with a product, including KALBITOR, or the facility used to produce the product could result in a regulatory authority imposing restrictions on us, or could cause us to voluntarily adopt such restrictions, including withdrawal of KALBITOR from the market.

If we do not maintain our regulatory approval for KALBITOR in the United States, our results of operations and business prospects will be materially harmed.

If the use of KALBITOR harms people, or is perceived to harm patients even when such harm is unrelated to KALBITOR, our regulatory approvals could be revoked or otherwise negatively affected and we could be subject to costly and damaging product liability claims.

The testing, manufacturing, marketing and sale of drugs for use in humans exposes us to product liability risks.  Side effects and other problems from using KALBITOR could: 

· lessen the frequency with which physicians decide to prescribe KALBITOR;

· encourage physicians to stop prescribing KALBITOR to their patients who previously had been prescribed KALBITOR;

· cause serious adverse events and give rise to product liability claims against us; and

· result in our need to withdraw or recall KALBITOR from the marketplace.  Some of these risks are unknown at this time.

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We have tested KALBITOR in only a small number of patients.  As more patients begin to use KALBITOR, new risks and side effects may be discovered, and risks previously viewed as inconsequential could be determined to be significant.  Previously unknown risks and adverse effects of KALBITOR may also be discovered in connection with unapproved, or off-label, uses of KALBITOR.  We do not promote, or in any way support or encourage the promotion of KALBITOR for off-label uses in violation of relevant law, but physicians are permitted to use products for off-label uses.  In addition, we expect to study ecallantide in diseases other than HAE in controlled clinical settings, and expect independent investigators to do so as well.  In the event of any new risks or adverse effects discovered as new patients are treated for HAE, regulatory authorities may revoke their approvals and we may be required to conduct additional clinical trials, make changes in labeling of KALBITOR, reformulate KALBITOR or make changes and obtain new approvals for our and our suppliers’ manufacturing facilities.  We may also experience a significant drop in the potential sales of KALBITOR, experience harm to our reputation and the reputation of KALBITOR in the marketplace or become subject to government investigations or lawsuits, including class actions.  Any of these results could decrease or prevent any sales of KALBITOR or substantially increase the costs and expenses of commercializing and marketing KALBITOR.

We may be sued by people who use KALBITOR, whether as a prescribed therapy, during a clinical trial, during an investigator initiated study, or otherwise.  Any informed consents or waivers obtained from people who enroll in our trials or use KALBITOR may not protect us from liability or litigation.  Our product liability insurance may not cover all potential types of liabilities or may not cover certain liabilities completely.  Moreover, we may not be able to maintain our insurance on acceptable terms.  In addition, negative publicity relating to the use of KALBITOR or a product candidate, or to a product liability claim, may make it more difficult, or impossible, for us to market and sell KALBITOR.  As a result of these factors, a product liability claim, even if successfully defended, could have a material adverse effect on our business, financial condition or results of operations.

During the course of treatment, patients may suffer adverse events, including death, for reasons that may or may not be related to KALBITOR.  Such events could subject us to costly litigation, require us to pay substantial amounts of money to injured patients, delay, negatively impact or end our opportunity to receive or maintain regulatory approval to market KALBITOR, or require us to suspend or abandon our commercialization efforts.  Even in a circumstance in which we do not believe that an adverse event is related to KALBITOR, the investigation into the circumstance may be time consuming or may be inconclusive.  These investigations may interrupt our sales efforts, delay our regulatory approval process in other countries, or impact and limit the type of regulatory approvals KALBITOR receives or maintains.

Although we obtained regulatory approval of KALBITOR for treatment of acute attacks of HAE in patients 16 years and older in the United States, we may be unable to obtain regulatory approval for ecallantide in any other territory.

Governments in countries outside the United States also regulate drugs distributed in such countries and facilities in such countries where such drugs are manufactured, and obtaining their approvals can also be lengthy, expensive and highly uncertain.  The approval process varies from country to country and the requirements governing the conduct of clinical trials, product manufacturing, product licensing, pricing and reimbursement vary greatly from country to country.  In certain jurisdictions, we are required to finalize operational, reimbursement, price approval and funding processes prior to marketing our products.  We may not receive regulatory approval for ecallantide in countries other than the United States on a timely basis, if ever.  Even if approval is granted in any such country, the approval may require limitations on the indicated uses for which the drug may be marketed.  Failure to obtain regulatory approval for ecallantide in territories outside the United States could have a material adverse affect on our business prospects.

If we are unable to establish and maintain effective sales, marketing and distribution capabilities, or to enter into agreements with third parties to do so, we will be unable to successfully commercialize KALBITOR.

We are marketing and selling KALBITOR ourselves in the United States, and have only limited experience with marketing, sales or distribution of drug products. If we are unable to adequately establish the capabilities to sell, market and distribute KALBITOR, either ourselves or by entering into agreements with others, or to maintain such capabilities, we will not be able to successfully sell KALBITOR.  In that event, we will not be able to generate significant product sales.  We cannot guarantee that we will be able to establish and maintain our own capabilities or enter into and maintain any marketing or distribution agreements with third-party providers on acceptable terms, if at all.

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In the United States, we sell KALBITOR to ABSG which provides an exclusive distribution network for KALBITOR, including a call center to support its commercialization.  ABSG in turn sells KALBITOR to health-care providers and hospitals.  ABSG does not set or determine demand for KALBITOR.  We expect our exclusive distribution arrangement with ABSG to continue for the foreseeable future.  Our ability to successfully commercialize KALBITOR will depend, in part, on the extent to which we are able to provide adequate distribution of KALBITOR to patients through ABSG.  It is possible that ABSG could change their policies or fees, or both, at some time in the future.  This could result in their refusal to distribute smaller volume products such as KALBITOR, or cause higher product distribution costs, lower margins or the need to find alternative methods of distributing KALBITOR.  Although we have contractual remedies to mitigate these risks for the three-year term of the contract with ABSG and we also believe we can find alternative distributors on relatively short notice, our product sales during that period of time may suffer and we may incur additional costs to replace a distributor.  A significant reduction in product sales to ABSG, any cancellation of orders they have made with us or any failure to pay for the products we have shipped to them could materially and adversely affect our results of operations and financial condition.

We have hired sales and marketing professionals for the commercialization of KALBITOR throughout the United States.  Even with these sales and marketing personnel, we may not have the necessary size and experience of the sales and marketing force and the appropriate distribution capabilities necessary to successfully market and sell KALBITOR.  Establishing and maintaining sales, marketing and distribution capabilities are expensive and time-consuming.  Our expenses associated with building up and maintaining the sales force and distribution capabilities may be disproportional compared to the revenues we may be able to generate on sales of KALBITOR.  We cannot guarantee that we will be successful in commercializing KALBITOR and a failure to do so would adversely affect our business prospects.

If we market KALBITOR in a manner that violates health care fraud and abuse laws, we may be subject to civil or criminal penalties.

In addition to FDA and related regulatory requirements, we are subject to health care “fraud and abuse” laws, such as the federal False Claims Act, the anti-kickback provisions of the federal Social Security Act, and other state and federal laws and regulations.  Federal and state anti-kickback laws prohibit, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid, or other federally or state financed health care programs.  This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, patients, purchasers and formulary managers on the other.  Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing, or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor.

Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid.  Pharmaceutical companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in promotion for uses that the FDA has not approved, or “off-label” uses, that caused claims to be submitted to Medicaid for non-covered off-label uses; and submitting inflated best price information to the Medicaid Rebate Program.

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Although physicians are permitted to, based on their medical judgment, prescribe products for indications other than those cleared or approved by the FDA, manufacturers are prohibited from promoting their products for such off-label uses.  We market KALBITOR for acute attacks of HAE in patients 16 years and older and provide promotional materials and training programs to physicians regarding the use of KALBITOR for this indication.  Although we believe our marketing, promotional materials and training programs for physicians do not constitute off-label promotion of KALBITOR, the FDA may disagree.  If the FDA determines that our promotional materials, training or other activities constitute off-label promotion of KALBITOR, it could request that we modify our training or promotional materials or other activities or subject us to regulatory enforcement actions, including the issuance of a warning letter, injunction, seizure, civil fine and criminal penalties.  It is also possible that other federal, state or foreign enforcement authorities might take action if they believe that the alleged improper promotion led to the submission and payment of claims for an unapproved use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.  Even if it is later determined we are not in violation of these laws, we may be faced with negative publicity, incur significant expenses defending our position and have to divert significant management resources from other matters.

The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payer.  Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines, and imprisonment.  Even if we are not determined to have violated these laws, government investigations into these issues typically require the expenditure of significant resources and generate negative publicity, which would also harm our financial condition.  Because of the breadth of these laws and the narrowness of the safe harbors and because government scrutiny in this area is high, it is possible that some of our business activities could come under that scrutiny.

In recent years, several states and localities, including California, the District of Columbia, Maine, Massachusetts, Minnesota, Nevada, New Mexico, Vermont, and West Virginia, have enacted legislation requiring pharmaceutical companies to establish marketing compliance programs, and file periodic reports with the state or make periodic public disclosures on sales, marketing, pricing, clinical trials, and other activities.  Similar legislation is being considered in other states.  Many of these requirements are new and uncertain, and the penalties for failure to comply with these requirements are unclear.  Nonetheless, although we have established compliance policies that comport with the Code of Interactions with Healthcare Providers adopted by Pharmaceutical Research Manufacturers of America (PhRMA Code) and the Office of Inspector General’s (OIG) Compliance Program Guidance for Pharmaceutical Manufacturers,  if we are found not to be in full compliance with these laws, we could face enforcement action and fines and other penalties, and could receive adverse publicity.

The FDA or similar agencies in other jurisdictions may require us to restrict the distribution or use of KALBITOR or other future products or take other potentially limiting or costly actions if we or others identify side effects after the product is on the market.

The FDA required that we implement a REMS for KALBITOR and conduct post-marketing studies to assess a risk of hypersensitivity reactions, including anaphylaxis.  The REMS consists of a Medication Guide and a communication plan to healthcare providers.  The FDA and other regulatory agencies could impose new requirements or change existing regulations or promulgate new ones at any time that may affect our ability to obtain or maintain approval of KALBITOR or future products or require significant additional costs to obtain or maintain such approvals.  For example, the FDA or similar agencies in other jurisdictions may require us to restrict the distribution or use of KALBITOR.  If we or others identify side effects after KALBITOR is on the market.  Changes in KALBITOR’s approval or restrictions on its use could make it difficult to achieve market acceptance, and we may not be able to market and sell KALBITOR or continue to sell it, successfully, or at all, which would limit our ability to generate product sales and adversely affect our results of operations and business prospects.

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We rely on third-party manufacturers to produce our preclinical and clinical drug supplies and we intend to rely on third parties to produce commercial supplies of KALBITOR and any future approved product candidates.  Any failure by a third-party manufacturer to produce supplies for us may delay or impair our ability to develop, obtain regulatory approval for or commercialize our product candidates.

We have relied upon a small number of third-party manufacturers for the manufacture of our product candidates for preclinical and clinical testing purposes and intend to continue to do so in the future.  As a result, we depend on collaborators, partners, licensees and other third parties to manufacture clinical and commercial scale quantities of our biopharmaceutical candidates in a timely and effective manner and in accordance with government regulations.  If these third party arrangements are not successful, it will adversely affect our ability to develop, obtain regulatory approval for or commercialize our product candidates.

We have identified only a few facilities that are capable of producing material for preclinical and clinical studies and we cannot assure you that they will be able to supply sufficient clinical materials during the clinical development of our biopharmaceutical candidates.  Reliance on third-party manufacturers entails risks to which we would not be subject if we manufactured product candidates ourselves, including reliance on the third party for regulatory compliance and quality assurance, the possibility of breach of the manufacturing agreement by the third party because of factors beyond our control (including a failure to synthesize and manufacture our product candidates in accordance with our product specifications) and the possibility of termination or nonrenewal of the agreement by the third party, based on its own business priorities, at a time that is costly or damaging to us.  In addition, the FDA and other regulatory authorities require that our product candidates be manufactured according to cGMP and similar foreign standards.  Any failure by our third-party manufacturers to comply with cGMP or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates.

In addition, as our drug development pipeline increases and matures, we will have a greater need for clinical trial and commercial manufacturing capacity.  We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates and we currently have no plans to build our own clinical or commercial scale manufacturing capabilities.  To meet our projected needs for commercial manufacturing, third parties with whom we currently work will need to increase their scale of production or we will need to secure alternate suppliers.

We are dependent on a single contract manufacturer to produce drug substance for ecallantide, which may adversely affect our ability to commercialize KALBITOR and other potential ecallantide products.

We currently rely on MSD to produce the bulk drug substance used in the manufacture of KALBITOR and other potential ecallantide products.  Our business, therefore, faces risks of difficulties with, and interruptions in, performance by MSD, the occurrence of which could adversely impact the availability and/or sales of KALBITOR and other potential ecallantide products in the future.  The failure of MSD to supply manufactured product on a timely basis or at all, or to manufacture our drug substance in compliance with our specifications or applicable quality requirements or in volumes sufficient to meet demand could adversely affect our ability to sell KALBITOR and other potential ecallantide products, could harm our relationships with our collaborators or customers and could negatively affect our revenues and operating results.  If the operations of MSD are disrupted, we may be forced to secure alternative sources of supply, which may be unavailable on commercially acceptable terms, cause delays in our ability to deliver products to our customers, increase our costs and negatively affect our operating results.

In addition, failure to comply with applicable good manufacturing practices and other governmental regulations and standards could be the basis for action by the FDA or corresponding foreign agency to withdraw approval for KALBITOR or any other product previously granted to us and for other regulatory action, including recall or seizure, fines, imposition of operating restrictions, total or partial suspension of production or injunctions.

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We do not currently have a long-term commercial supply agreement with MSD for the production of ecallantide drug substance.  We are working to establish a long-term supply contract with MSD or an alternative contract manufacturer.  However, we cannot guarantee that we will be able to enter into long-term supply contracts on commercially reasonable terms, or at all.  We believe that our current supply of the ecallantide drug substance used to manufacture KALBITOR will be sufficient to meet market demand for KALBITOR through 2011, but these estimates are subject to changes in market conditions and other factors beyond our control.  If we are unable to execute a long-term supply agreement or otherwise secure a dependable source for drug substance before our current inventory of ecallantide drug substance is exhausted, it could adversely affect our ability to further develop and commercialize KALBITOR and other potential ecallantide products, generate revenue from product sales, increase our costs and negatively affect our operating results.

Any new biopharmaceutical product candidates we develop must undergo rigorous clinical trials which could substantially delay or prevent its development or marketing.

In addition to KALBITOR, we are developing ecallantide in further indications and other potential biopharmaceutical products.  Before we can commercialize any biopharmaceutical product candidate, we must engage in a rigorous clinical trial and regulatory approval process mandated by the FDA and analogous foreign regulatory agencies.  This process is lengthy and expensive, and approval is never certain.  Positive results from preclinical studies and early clinical trials do not ensure positive results in late stage clinical trials designed to permit application for regulatory approval.  We cannot accurately predict when planned clinical trials will begin or be completed.  Many factors affect patient enrollment, including the size of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the trial, alternative therapies, competing clinical trials and new drugs approved for the conditions that we are investigating.  As a result of all of these factors, our future trials may take longer to enroll patients than we anticipate.  Such delays may increase our costs and slow down our product development and the regulatory approval process.  Our product development costs will also increase if we need to perform more or larger clinical trials than planned.  The occurrence of any of these events will delay our ability to commercialize products, generate revenue from product sales and impair our ability to become profitable, which may cause us to have insufficient capital resources to support our operations.

Products that we or our collaborators develop could take a significantly longer time to gain regulatory approval than we expect or may never gain approval.  If we or our collaborators do not receive these necessary approvals, we will not be able to generate substantial product or royalty revenues and may not become profitable.  We and our collaborators may encounter significant delays or excessive costs in our efforts to secure regulatory approvals.  Factors that raise uncertainty in obtaining these regulatory approvals include the following:

· we must demonstrate through clinical trials that the proposed product is safe and effective for its intended use;

· we have limited experience in conducting the clinical trials necessary to obtain regulatory approval; and

· data obtained from preclinical and clinical activities are subject to varying interpretations, which could delay, limit or prevent regulatory approvals.

Regulatory authorities may delay, suspend or terminate clinical trials at any time if they believe that the patients participating in trials are being exposed to unacceptable health risks or if they find deficiencies in the clinical trial procedures.  There is no guarantee that we will be able to resolve such issues, either quickly, or at all.  In addition, our or our collaborators' failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties and other actions that could impair our ability to conduct our business.

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We lack experience in and/or capacity for conducting clinical trials and handling regulatory processes.  This lack of experience and/or capacity may adversely affect our ability to commercialize any biopharmaceuticals that we may develop.

We have hired experienced clinical development and regulatory staff to develop and supervise our clinical trials and regulatory processes.  However, we will remain dependent upon third party contract research organizations to carry out some of our clinical and preclinical research studies for the foreseeable future.  As a result, we have had and will continue to have less control over the conduct of the clinical trials, the timing and completion of the trials, the required reporting of adverse events and the management of data developed through the trials than would be the case if we were relying entirely upon our own staff.  Communicating with outside parties can also be challenging, potentially leading to mistakes as well as difficulties in coordinating activities.  Outside parties may have staffing difficulties, may undergo changes in priorities or may become financially distressed, adversely affecting their willingness or ability to conduct our trials.  For example, in 2008, the contract research organization collecting and assembling the data from our EDEMA4 trial announced that it was terminating that line of business, which forced us to find a new contractor and delay the filing of our BLA for HAE by almost two months.  We may also experience unexpected cost increases that are beyond our control.

Problems with the timeliness or quality of the work of a contract research organization may lead us to seek to terminate the relationship and use an alternative service provider.  However, changing our service provider may be costly and may delay our trials, and contractual restrictions may make such a change difficult or impossible.  Additionally, it may be impossible to find a replacement organization that can conduct our trials in an acceptable manner and at an acceptable cost.

Government regulation of drug development is costly, time consuming and fraught with uncertainty, and our products in development cannot be sold if we do not gain regulatory approval.

We and our licensees and partners conduct research, preclinical testing and clinical trials for our product candidates.  These activities are subject to extensive regulation by numerous state and federal governmental authorities in the United States, such as the FDA, as well as foreign countries, such as the EMEA in European countries, Canada and Australia.  Currently, we are required in the United States and in foreign countries to obtain approval from those countries' regulatory authorities before we can manufacture (or have our third-party manufacturers produce), market and sell our products in those countries.  The FDA and other United States and foreign regulatory agencies have substantial authority to fail to approve commencement of, suspend or terminate clinical trials, require additional testing and delay or withhold registration and marketing approval of our product candidates.

Obtaining regulatory approval has been and continues to be increasingly difficult and costly and takes many years, and if obtained is costly to maintain.  With the occurrence of a number of high profile safety events with certain pharmaceutical products, regulatory authorities, and in particular the FDA, members of Congress, the United States Government Accountability Office (GAO), Congressional committees, private health/science foundations and organizations, medical professionals, including physicians and investigators, and the general public are increasingly concerned about potential or perceived safety issues associated with pharmaceutical and biological products, whether under study for initial approval or already marketed.

This increasing concern has produced greater scrutiny, which may lead to fewer treatments being approved by the FDA or other regulatory bodies, as well as restrictive labeling of a product or a class of products for safety reasons, potentially including a boxed warning or additional limitations on the use of products, pharmacovigilance programs for approved products or requirement of risk management activities related to the promotion and sale of a product.

If regulatory authorities determine that we or our licensees or partners conducting research and development activities on our behalf have not complied with regulations in the research and development of a product candidate, new indication for an existing product or information to support a current indication, then they may not approve the product candidate or new indication or maintain approval of the current indication in its current form or at all, and we will not be able to market and sell it.  If we were unable to market and sell our product candidates, our business and results of operations would be materially and adversely affected.

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Product liability and other claims arising in connection with the testing our product candidates in human clinical trials may reduce demand for our products or result in substantial damages.

We face an inherent risk of product liability exposure related to KALBITOR and the testing of our product candidates in human clinical trials.

An individual may bring a product liability claim against us if KALBITOR or one of our product candidates causes, or merely appears to have caused, an injury.  Moreover, in some of our clinical trials, we test our product candidates in indications where the onset of certain symptoms or "attacks" could be fatal.  Although the protocols for these trials include emergency treatments in the event a patient appears to be suffering a potentially fatal incident, patient deaths may nonetheless occur.  As a result, we may face additional liability if we are found or alleged to be responsible for any such deaths.

These types of product liability claims may result in:

· decreased demand for KALBITOR and other product candidates;

· injury to our reputation;

· withdrawal of clinical trial volunteers;

· related litigation costs; and

· substantial monetary awards to plaintiffs.

Although we currently maintain product liability insurance, we may not have sufficient insurance coverage, and we may not be able to obtain sufficient coverage at a reasonable cost.  Our inability to obtain product liability insurance at an acceptable cost or to otherwise protect against potential product liability claims could prevent or inhibit the commercialization of any products that we or our collaborators develop, including KALBITOR.  If we are successfully sued for any injury caused by our products or processes, then our liability could exceed our product liability insurance coverage and our total assets.

Competition and technological change may make our potential products and technologies less attractive or obsolete.

We compete in industries characterized by intense competition and rapid technological change.  New developments occur and are expected to continue to occur at a rapid pace.  Discoveries or commercial developments by our competitors may render some or all of our technologies, products or potential products obsolete or non-competitive.

Our principal focus is on the development of human therapeutic products.  We plan to conduct research and development programs to develop and test product candidates and demonstrate to appropriate regulatory agencies that these products are safe and effective for therapeutic use in particular indications.  Therefore our principal competition going forward, as further described below, will be companies who either are already marketing products in those indications or are developing new products for those indications.  Many of our competitors have greater financial resources and experience than we do.

For KALBITOR as a treatment for HAE, our principal competitors include:

· CSL Behring— In October 2009, CSL Behring received FDA approval for its plasma-derived C1-esterase inhibitor, known as Berinert®, which is administered intravenously. Berinert was approved for treatment of acute abdominal or facial attacks of HAE in adult and adolescent patients, and has orphan drug designation from the FDA. CSL Behring also completed a Mutual Recognition Procedure in December 2008, allowing the sale of Berinert® in 23 European countries. Berinert® has been sold in a subset of European countries since 1985. Additionally, CSL Behring is conducting a clinical trial evaluating subcutaneous administration of Berinert.

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· ViroPharma Inc.— In 2008, ViroPharma received FDA approval for its plasma-derived C1-esterase inhibitor, known as Cinryze™, which is administered intravenously. Cinryze was approved for routine prophylaxis against angioedema attacks in adolescent and adult patients with HAE, and has orphan drug designation from the FDA. In June 2009, FDA approved patient labeling for Cinryze to include self-administration for routine prophylaxis, once patients are properly trained by their healthcare provider. A Phase 2 trial initiated by the company in March 2010 is evaluating Cinryze for the treatment of acute HAE attacks in children under the age of 12. An additional Phase 2 trial evaluating subcutaneous administration of Cinryze was completed in October 2010. ViroPharma announced in March 2010 that it had filed an EU Marketing Authorisation Application for the use of its C1 inhibitor for acute treatment and prophylaxis against HAE.

· Jerini AG/Shire plc—Jerini AG received EU market approval in July 2008 for its bradykinin receptor antagonist, known as Firazyr® (icatibant), which is delivered by subcutaneous injection. In April 2008, the FDA issued a Not Approvable letter for icatibant. Icatibant has orphan drug designations from the FDA and in Europe. In June 2009, Jerini/Shire initiated a new Phase 3 United States trial of icatibant for acute HAE attacks. In August 2010, Shire announced the completion of this Phase 3 study.

· Pharming Group NV— In September 2009, Pharming filed for market approval from the EMA for its recombinant C1-esterase inhibitor, known as Ruconest in Europe (previously referred to as Rhucin®) which is delivered intravenously. In June 2010, Pharming announced that it received a positive opinion from the CHMP committee. Pharming has also reported that it will file a Biologic License Application with the FDA no later than January 2011. Pharming’s recombinant C1-esterase inhibitor has Fast Track status from the FDA and orphan drug designations from the FDA and in Europe.

Other competitors include companies that market or are developing corticosteroid drugs or other anti-inflammatory compounds.

In addition, most large pharmaceutical companies seek to develop orally available small molecule compounds against many of the targets for which we and others are seeking to develop antibody, peptide and/or small protein products.

Our phage display technology is one of several technologies available to generate libraries of compounds that can be leveraged to discover new antibody, peptide and/or small protein products. The primary competing technology platforms that pharmaceutical, diagnostics and biotechnology companies use to identify antibodies that bind to a desired target are transgenic mouse technology and the humanization of murine antibodies derived from hybridomas.  Medarex (a wholly-owned subsidiary of Bristol-Myers Squibb), Genmab A/S, and PDL Biopharma are leaders in these technologies. Further, other companies such as BioInvent International AB and XOMA Ltd. have access to phage display technology and compete with us by offering licenses and research services to pharmaceutical and biotechnology companies.

In addition, we may experience competition from companies that have acquired or may acquire technology from universities and other research institutions. As these companies develop their technologies, they may develop proprietary positions that may prevent us from successfully commercializing our products.

If we fail to establish and maintain strategic license, research and collaborative relationships, or if our collaborators are not able to successfully develop and commercialize product candidates, our ability to generate revenues could be adversely affected.

Our business strategy includes leveraging certain product candidates, as well as our proprietary phage display technology, through collaborations and licenses that are structured to generate revenues through license fees, technical and clinical milestone payments, and royalties.  We have entered into, and anticipate continuing to enter into, collaborative and other similar types of arrangements with third parties to develop, manufacture and market drug candidates and drug products.

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In addition, for us to continue to receive any significant payments from our LFRP related licenses and collaborations and generate sufficient revenues to meet the required payments under our agreement with Cowen Healthcare, the relevant product candidates must advance through clinical trials, establish safety and efficacy, and achieve regulatory approvals, obtain market acceptance and generate revenues.

Reliance on license and collaboration agreements involves a number of risks as our licensees and collaborators:

· are not obligated to develop or market product candidates discovered using our phage display technology;

· may not perform their obligations as expected, or may pursue alternative technologies or develop competing products;

· control many of the decisions with respect to research, clinical trials and commercialization of product candidates we discover or develop with them or have licensed to them;

· may terminate their collaborative arrangements with us under specified circumstances, including, for example, a change of control, with short notice; and

· may disagree with us as to whether a milestone or royalty payment is due or as to the amount that is due under the terms of our collaborative arrangements.

We cannot assure you that we will be able to maintain our current licensing and collaborative efforts, nor can we assure the success of any current or future licensing and collaborative relationships.  An inability to establish new relationships on terms favorable to us, work successfully with current licensees and collaborators, or failure of any significant portion of our LFRP related licensing and collaborative efforts would result in a material adverse impact on our business, operating results and financial condition.

Our success depends significantly upon our ability to obtain and maintain intellectual property protection for our products and technologies and upon third parties not having or obtaining patents that would prevent us from commercializing any of our products.

We face risks and uncertainties related to our intellectual property rights.  For example:

· we may be unable to obtain or maintain patent or other intellectual property protection for any products or processes that we may develop or have developed;

· third parties may obtain patents covering the manufacture, use or sale of these products or processes, which may prevent us from commercializing any of our products under development globally or in certain regions; or

· our patents or any future patents that we may obtain may not prevent other companies from competing with us by designing their products or conducting their activities so as to avoid the coverage of our patents.

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Patent rights relating to our phage display technology are central to our LFRP.  As part of our LFRP, we generally seek to negotiate license agreements with parties practicing technology covered by our patents.  In countries where we do not have and/or have not applied for phage display patent rights, we will be unable to prevent others from using phage display or developing or selling products or technologies derived using phage display.  In addition, in jurisdictions where we have phage display patent rights, we may be unable to prevent others from selling or importing products or technologies derived elsewhere using phage display.  Any inability to protect and enforce such phage display patent rights, whether by any inability to license or any invalidity of our patents or otherwise, could negatively affect future licensing opportunities and revenues from existing agreements under the LFRP.

In all of our activities, we also rely substantially upon proprietary materials, information, trade secrets and know-how to conduct our research and development activities and to attract and retain collaborators, licensees and customers.  Although we take steps to protect our proprietary rights and information, including the use of confidentiality and other agreements with our employees and consultants and in our academic and commercial relationships, these steps may be inadequate, these agreements may be violated, or there may be no adequate remedy available for a violation.  Also, our trade secrets or similar technology may otherwise become known to, or be independently developed or duplicated by, our competitors.

Before we and our collaborators can market some of our processes or products, we and our collaborators may need to obtain licenses from other parties who have patent or other intellectual property rights covering those processes or products.  Third parties have patent rights related to phage display, particularly in the area of antibodies.  While we have gained access to key patents in the antibody area through the cross licenses with Affimed Therapeutics AG, Affitech AS, Biosite Incorporated (now owned by Inverness Medical Innovations), CAT, Domantis Limited (a wholly-owned subsidiary of GlaxoSmithKline), Genentech, Inc. and XOMA Ireland Limited, other third party patent owners may contend that we need a license or other rights under their patents in order for us to commercialize a process or product.  In addition, we may choose to license patent rights from other third parties.  In order for us to commercialize a process or product, we may need to license the patent or other rights of other parties.  If a third party does not offer us a needed license or offers us a license only on terms that are unacceptable, we may be unable to commercialize one or more of our products.  If a third party does not offer a needed license to our collaborators and as a result our collaborators stop work under their agreement with us, we might lose future milestone payments and royalties, which would adversely affect us.  If we decide not to seek a license, or if licenses are not available on reasonable terms, we may become subject to infringement claims or other legal proceedings, which could result in substantial legal expenses.  If we are unsuccessful in these actions, adverse decisions may prevent us from commercializing the affected process or products and could require us to pay substantial monetary damages.

We seek affirmative rights of license or ownership under existing patent rights relating to phage display technology of others.  For example, through our patent licensing program, we have secured a limited freedom to practice some of these patent rights pursuant to our standard license agreement, which contains a covenant by the licensee that it will not sue us under certain of the licensee's phage display improvement patents.  We cannot guarantee, however, that we will be successful in enforcing any agreements from our licensees, including agreements not to sue under their phage display improvement patents, or in acquiring similar agreements in the future, or that we will be able to obtain commercially satisfactory licenses to the technology and patents of others.  If we cannot obtain and maintain these licenses and enforce these agreements, this could have a material adverse impact on our business.

Proceedings to obtain, enforce or defend patents and to defend against charges of infringement are time consuming and expensive activities.  Unfavorable outcomes in these proceedings could limit our patent rights and our activities, which could materially affect our business.

Obtaining, protecting and defending against patent and proprietary rights can be expensive.  For example, if a competitor files a patent application claiming technology also invented by us, we may have to participate in an expensive and time-consuming interference proceeding before the United States Patent and Trademark Office to address who was first to invent the subject matter of the claim and whether that subject matter was patentable.  Moreover, an unfavorable outcome in an interference proceeding could require us to cease using the technology or to attempt to license rights to it from the prevailing party.  Our business would be harmed if a prevailing third party does not offer us a license on terms that are acceptable to us.

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In patent offices outside the United States, we may be forced to respond to third party challenges to our patents.  For example, our first phage display patent in Europe, European Patent No. 436,597, known as the 597 Patent, was ultimately revoked in 2002 in proceedings in the European Patent Office.  We are not able to prevent other parties from using certain aspects of our phage display technology in Europe.

The issues relating to the validity, enforceability and possible infringement of our patents present complex factual and legal issues that we periodically reevaluate.  Third parties have patent rights related to phage display, particularly in the area of antibodies.  While we have gained access to key patents in the antibody area through our cross-licensing agreements with Affimed, Affitech, Biosite, Domantis, Genentech, XOMA and CAT, other third party patent owners may contend that we need a license or other rights under their patents in order for us to commercialize a process or product.  In addition, we may choose to license patent rights from third parties.  While we believe that we will be able to obtain any needed licenses, we cannot assure you that these licenses, or licenses to other patent rights that we identify as necessary in the future, will be available on reasonable terms, if at all.  If we decide not to seek a license, or if licenses are not available on reasonable terms, we may become subject to infringement claims or other legal proceedings, which could result in substantial legal expenses.  If we are unsuccessful in these actions, adverse decisions may prevent us from commercializing the affected process or products.  Moreover, if we are unable to maintain the covenants with regard to phage display improvements that we obtain from our licensees through our patent licensing program and the licenses that we have obtained to third party phage display patent rights, it could have a material adverse effect on our business.

We would expect to incur substantial costs in connection with any litigation or patent proceeding.  In addition, our management's efforts would be diverted, regardless of the results of the litigation or proceeding.  An unfavorable result could subject us to significant liabilities to third parties, require us to cease manufacturing or selling the affected products or using the affected processes, require us to license the disputed rights from third parties or result in awards of substantial damages against us.  Our business will be harmed if we cannot obtain a license, can obtain a license only on terms we consider to be unacceptable or if we are unable to redesign our products or processes to avoid infringement.

In all of our activities, we substantially rely on proprietary materials and information, trade secrets and know-how to conduct research and development activities and to attract and retain collaborative partners, licensees and customers.  Although we take steps to protect these materials and information, including the use of confidentiality and other agreements with our employees and consultants in both academic commercial relationships, we cannot assure you that these steps will be adequate, that these agreements will not be violated, or that there will be an available or sufficient remedy for any such violation, or that others will not also develop the same or similar proprietary information.

Failure to meet our Cowen Healthcare debt service obligations could adversely affect our financial condition and our loan agreement obligations could impair our operating flexibility.

We have a loan with Cowen Healthcare which has an aggregate principal balance of $57.8 million at September 30, 2010.  The loan bears interest at a rate of 16% per annum for Tranche A and 21.5% per annum for Tranche B payable quarterly, all of which matures in August 2016.  In connection with the loan, we have entered into a security agreement granting Cowen Healthcare a security interest in substantially all of the assets related to our LFRP.  We are required to repay the loan based on a percentage of LFRP related revenues, including royalties, milestones, and license fees received by us under the LFRP.  If the LFRP revenues for any quarterly period are insufficient to cover the cash interest due for that period, the deficiency may be added to the outstanding loan principal or paid in cash by us.  We may prepay the loan in whole or in part at any time after August 2012.  In the event of certain changes of control or mergers or sales of all or substantially all of our assets, any or all of the loan may become due and payable at Cowen Healthcare's option, including a prepayment premium prior to August 2012.  We must comply with certain loan covenants which if not observed could make all loan principal, interest and all other amounts payable under the loan immediately due and payable.

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Our obligations under the Cowen Healthcare agreement require that we dedicate a substantial portion of cash flow from our LFRP receipts to service the loan, which will reduce the amount of cash flow available for other purposes.  If the LFRP fails to generate sufficient receipts to fund quarterly principal and interest payments to Cowen, we will be required to fund such obligations from cash on hand or from other sources, further decreasing the funds available to operate our business.  In the event that amounts due under the loan are accelerated, payment would significantly reduce our cash, cash equivalents and short-term investments and we may not have sufficient funds to pay the debt if any of it is accelerated.

As a result of the security interest granted to Cowen Healthcare, we are restricted in our ability to sell our rights to part or all of those assets, or take certain other actions, without first obtaining permission from Cowen.  This requirement could delay, hinder or condition our ability to enter into corporate partnerships or strategic alliances with respect to these assets.

The obligations and restrictions under the Cowen Healthcare agreement may limit our operating flexibility, make it difficult to pursue our business strategy and make us more vulnerable to economic downturns and adverse developments in our business.

If we lose or are unable to hire and retain qualified personnel, then we may not be able to develop our products or processes.

We are highly dependent on qualified scientific and management personnel, and we face intense competition from other companies and research and academic institutions for qualified personnel.  If we lose an executive officer, a manager of one of our principal business units or research programs, or a significant number of any of our staff or are unable to hire and retain qualified personnel, then our ability to develop and commercialize our products and processes may be delayed which would have an adverse effect on our business, financial condition, and results of operations.

We use and generate hazardous materials in our business, and any claims relating to the improper handling, storage, release or disposal of these materials could be time-consuming and expensive.

Our phage display research and development involves the controlled storage, use and disposal of chemicals and solvents, as well as biological and radioactive materials.  We are subject to foreign, federal, state and local laws and regulations governing the use, manufacture and storage and the handling and disposal of materials and waste products.  Although we believe that our safety procedures for handling and disposing of these hazardous materials comply with the standards prescribed by laws and regulations, we cannot completely eliminate the risk of contamination or injury from hazardous materials.  If an accident occurs, an injured party could seek to hold us liable for any damages that result and any liability could exceed the limits or fall outside the coverage of our insurance.  We may not be able to maintain insurance on acceptable terms, or at all.  We may incur significant costs to comply with current or future environmental laws and regulations.

Our business is subject to risks associated with international contractors and exchange rate risk.

Since the closing of our European subsidiary operations in 2008, none of our business is conducted in currencies other than our reporting currency, the United States dollar.  We do, however, rely on an international contract manufacturer for the production of our drug substance for ecallantide.  We recognize foreign currency gains or losses arising from our transactions in the period in which we incur those gains or losses.  As a result, currency fluctuations among the United States dollar and the currencies in which we do business have caused foreign currency transaction gains and losses in the past and will likely do so in the future.  Because of the variability of currency exposures and the potential volatility of currency exchange rates, we may suffer significant foreign currency transaction losses in the future due to the effect of exchange rate fluctuations.

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Compliance with changing regulations relating to corporate governance and public disclosure may result in additional expenses.

Keeping abreast of, and in compliance with, changing laws, regulations, and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations, and NASDAQ Global Market rules, have required an increased amount of management attention and external resources.  We intend to invest all reasonably necessary resources to comply with evolving corporate governance and public disclosure standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

We may not succeed in acquiring technology and integrating complementary businesses.

We may acquire additional technology and complementary businesses in the future.  Acquisitions involve many risks, any one of which could materially harm our business, including:

· the diversion of management's attention from core business concerns;

· the failure to exploit acquired technologies effectively or integrate successfully the acquired businesses;

· the loss of key employees from either our current business or any acquired businesses; and

· the assumption of significant liabilities of acquired businesses.

We may be unable to make any future acquisitions in an effective manner.  In addition, the ownership represented by the shares of our common stock held by our existing stockholders will be diluted if we issue equity securities in connection with any acquisition.  If we make any significant acquisitions using cash consideration, we may be required to use a substantial portion of our available cash.  If we issue debt securities to finance acquisitions, then the debt holders would have rights senior to the holders of shares of our common stock to make claims on our assets and the terms of any debt could restrict our operations, including our ability to pay dividends on our shares of common stock.  Acquisition financing may not be available on acceptable terms, or at all.  In addition, we may be required to amortize significant amounts of intangible assets in connection with future acquisitions.  We might also have to recognize significant amounts of goodwill that will have to be tested periodically for impairment.  These amounts could be significant, which could harm our operating results.

Risks Related To Our Common Stock

Our common stock may continue to have a volatile public trading price and low trading volume.

The market price of our common stock has been highly volatile. Since our initial public offering in August 2000 through September 30, 2010, the price of our common stock on the NASDAQ Global Market has ranged between $54.12 and $1.05. The market has experienced significant price and volume fluctuations for many reasons, some of which may be unrelated to our operating performance.

Many factors may have an effect on the market price of our common stock, including:

· public announcements by us, our competitors or others;

· developments concerning proprietary rights, including patents and litigation matters;

· publicity regarding actual or potential clinical results or developments with respect to products or compounds we or our collaborators are developing;

· regulatory decisions in both the United States and abroad;

· public concern about the safety or efficacy of new technologies;

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· issuance of new debt or equity securities;

· general market conditions and comments by securities analysts; and

· quarterly fluctuations in our revenues and financial results.

While we cannot predict the effect that these factors may have on the price of our common stock, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time.

Anti-takeover provisions in our governing documents and under Delaware law and our shareholder rights plan may make an acquisition of us more difficult.

We are incorporated in Delaware. We are subject to various legal and contractual provisions that may make a change in control of us more difficult. Our board of directors has the flexibility to adopt additional anti-takeover measures.

Our charter authorizes our board of directors to issue up to 1,000,000 shares of preferred stock and to determine the terms of those shares of stock without any further action by our stockholders. If the board of directors exercises this power to issue preferred stock, it could be more difficult for a third party to acquire a majority of our outstanding voting stock. Our charter also provides staggered terms for the members of our board of directors. This may prevent stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to acquire control of us without the consent of our board of directors. Our equity incentive plans generally permit our board of directors to provide for acceleration of vesting of options granted under these plans in the event of certain transactions that result in a change of control. If our board of directors used its authority to accelerate vesting of options, then this action could make an acquisition more costly, and it could prevent an acquisition from going forward. Our shareholder rights plan could result in the significant dilution of the proportionate ownership of any person that engages in an unsolicited attempt to take over our company and, accordingly, could discourage potential acquirers.

Section 203 of the Delaware General Corporation Law prohibits a person from engaging in a business combination with any holder of 15% or more of its capital stock until the holder has held the stock for three years unless, among other possibilities, the board of directors approves the transaction. This provision could have the effect of delaying or preventing a change of control of Dyax, whether or not it is desired by or beneficial to our stockholders.

The provisions described above, as well as other provisions in our charter and bylaws and under the Delaware General Corporation Law, may make it more difficult for a third party to acquire our company, even if the acquisition attempt was at a premium over the market value of our common stock at that time.

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Item 6 – EXHIBITS

EXHIBIT NO.	DESCRIPTION
3.1	Amended and Restated Certificate of Incorporation of the Company. Filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
3.2	Amended and Restated By-laws of the Company. Filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
10.1†	Product Development and License Agreement between the Company and CMIC Co. Ltd., dated September 28, 2010.  Filed herewith.
31.1	Certification of Chief Executive Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended. Filed herewith.
31.2	Certification of Chief Financial Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended. Filed herewith.
32	Certification pursuant to 18 U.S.C. Section 1350.  Filed herewith.

† This Exhibit has been filed separately with the Commission pursuant to an application for confidential treatment.  The confidential portions of this Exhibit have been omitted and are marked by an asterisk.

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DYAX CORP.

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.

	DYAX CORP.
Date: November 2, 2010
	/s/ George Migausky
	George Migausky Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

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DYAX CORP.

EXHIBIT INDEX

EXHIBIT NO.	DESCRIPTION
3.1	Amended and Restated Certificate of Incorporation of the Company. Filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
3.2	Amended and Restated By-laws of the Company. Filed as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q (File No. 000-24537) for the quarter ended September 30, 2008 and incorporated herein by reference.
10.1†	Product Development and License Agreement between the Company and CMIC Co. Ltd., dated September 28, 2010.  Filed herewith.
31.1	Certification of Chief Executive Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended. Filed herewith.
31.2	Certification of Chief Financial Officer Pursuant to §240.13a-14 or §240.15d-14 of the Securities Exchange Act of 1934, as amended. Filed herewith.
32	Certification pursuant to 18 U.S.C. Section 1350.  Filed herewith.

† This Exhibit has been filed separately with the Commission pursuant to an application for confidential treatment.  The confidential portions of this Exhibit have been omitted and are marked by an asterisk.

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EX-10.1

Exhibit 10.1

Dyax Corp. has requested that the highlighted portions of this document be accorded confidential treatment pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.

CONFIDENTIAL DOCUMENT

EXECUTION COPY

PRODUCT DEVELOPMENT AND LICENSE AGREEMENT

BY AND BETWEEN

DYAX CORP.

AND

CMIC CO. LTD.

DATED AS OF SEPTEMBER 28, 2010

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

PRODUCT DEVELOPMENT AND LICENSE AGREEMENT

This Product Development and License Agreement (this "Agreement") is made effective as of September 28, 2010 (the "Effective Date") by and between Dyax Corp., with offices at 300 Technology Square, Cambridge, Massachusetts 02139, U.S.A. ("Dyax"), and CMIC Co. Ltd., with offices at Kongo Bldg, 7-10-4 Nishigotanda, Shinagawa-ku, Tokyo 141-0031 ("CMIC").

INTRODUCTION

WHEREAS, Dyax owns or controls certain patents, know-how and other rights related to its proprietary novel plasma kallikrein inhibitor known as DX-88 (ecallantide);

WHEREAS, CMIC is engaged in the development and commercialization of pharmaceutical products in Japan;

WHEREAS, CMIC desires to obtain a license from Dyax to develop products incorporating DX-88 for the treatment of angioedemas in the CMIC Territory (as such term is defined herein); and

WHEREAS, Dyax is willing to grant CMIC such a license on the terms and conditions set forth herein;

NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, Dyax and CMIC hereby agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below:

1.1         "Affiliate".  Affiliate shall mean with respect to any Person, any Person controlling, controlled by or under common control with the former Person.  For the purposes of this Section 1.1, "control" shall mean (a) in the case of a Person that is a corporate entity, the direct or indirect ownership of more than fifty percent (50%) of the stock, shares or ownership interest having the right to vote for the election of directors of such Person and (b) in the case of a Person that is an entity, but is not a corporate entity, the direct or indirect possession of the power to direct, or cause the direction of, the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise.

1.2         "Alliance Manager".  Alliance Manager shall have the meaning given to that term under Section 2.6.

1.3         "Bankruptcy Code".  The Bankruptcy Code shall mean Title 11 of the United States Code.

1.4         "Batch".  Batch shall mean a quantity of Drug Substance manufactured by Dyax (or its CMO) that (a) is expected to have a uniform character and quality within specified limits, and (b) is produced according to a single manufacturing run during the same cycle.

1.5         "Blocking Third Party Patent Rights".  Blocking Third Party Patent Rights shall mean, with respect to any country in the CMIC Territory, on a country-by-country basis, the Patent Rights in such country owned or controlled by a Third Party that would Cover Product or its Manufacture or Commercialization in the Field.  Notwithstanding the foregoing, the [******].

1.6         "Breaching Party".  Breaching Party shall have the meaning given to that term under Section 12.2(b).

1.7         "Business Day".  Business Day shall mean a day that is not a Saturday, Sunday or a day on which banking institutions in Cambridge, Massachusetts, USA or Tokyo, Japan remain closed.

1.8         "Calendar Quarter".  Calendar Quarter shall mean each of the periods ending on March 31, June 30, September 30 and December 31 of any year.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.9         "Challenging Party".  Challenging Party shall have the meaning given to that term under Section 12.2(d).

1.10       "CMIC Development Data". CMIC Development Data shall mean, as it pertains to Product or its use, all pharmacology and toxicology data and information, pre-clinical study data, clinical trial data, protocols, safety data, quality data and other regulatory information and reports, whether in written or electronic form, generated or developed by CMIC or any of its Affiliates in the course of performing the activities under this Agreement during the Term.

1.11       "CMIC Intellectual Property".  CMIC Intellectual Property shall mean CMIC Know-How and CMIC Patent Rights, collectively.

1.12       "CMIC Know-How".  CMIC Know-How shall mean any Know-How that (a) [******], and (b) is useful for the Development, Manufacture and/or Commercialization of Compound or Product as contemplated by this Agreement.

1.13       "CMIC Patent Rights".  CMIC Patent Rights shall mean any Patent Rights that (a) claim CMIC Know-How, and (b) [******].  CMIC Patent Rights shall include CMIC's rights in Joint Patent Rights as well as any Patent Rights covering CMIC Sole Inventions.

1.14       "CMIC Product Trademarks".  CMIC Product Trademarks shall have the meaning given to that term under Section 8.8(d)

1.15       "CMIC Promotional Materials".  CMIC Promotional Materials shall have the meaning given to that term in Section 5.2.

1.16       "CMIC Sole Inventions".  CMIC Sole Inventions shall have the meaning given to that term under Section 8.1(b).

1.17       "CMIC Territory".  CMIC Territory shall mean Japan.  Furthermore, if, pursuant to the Right of Second Offer described in Section 3.6, Dyax and CMIC reach a full agreement on the terms and conditions of a license to develop, manufacture and/or commercialize Product in the People's Republic of China, then, subject to such terms and conditions, CMIC Territory shall thereafter include the People's Republic of China.

1.18       "CMO".  CMO shall mean a contract manufacturing organization contracting with Dyax to supply Dyax or CMIC with Drug Substance or Drug Product pursuant to Article VI.

1.19       "Commercialization" or "Commercialize".  Commercialization or Commercialize shall mean the activities to market, promote, store, import, export, offer to sell and sell Product, including conducting any Post-Approval Studies to support Commercialization.  Commercialization shall not include any activities that are covered by the definitions of "Development", "Manufacturing" or "Post-Filing Activities".

1.20       "Commercially Reasonable Efforts".  Commercially Reasonable Efforts shall mean the conduct and completion of an activity by a Party in a diligent and commercially reasonable manner, using efforts not less than the efforts the Party uses to other similar activities, based on conditions then prevailing and any other technical, legal, scientific, medical or commercial factors that the Party deems in good faith to be relevant.

1.21       "Competitive Infringement".  Competitive Infringement shall have the meaning given to that term under Section 8.3(a).

1.22       "Competitive Product".  Competitive Product shall mean [******].

1.23       "Complaint".  Complaint shall mean any information concerning any side effect, injury, toxicity or sensitivity reaction, or any unexpected incident, adverse drug experience (as that term is defined in Section 505-1 of the FDCA) or adverse event (as that term is defined under the ICH Guidelines) in or involving a subject or, in the case of pre-clinical studies, an animal in a toxicology study, and the seriousness thereof, whether or not determined to be attributable to Compound or Product, including any such information received by either Party from its Related Parties or other Third Parties.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.24       "Compound".  Compound shall mean the compound known as DX-88 (ecallantide) with the amino acid sequence described in Exhibit A.

1.25       "Confidential Information".  Confidential Information shall have the meaning given to that term under Section 9.1.

1.26       "Confidentiality Agreement".  Confidentiality Agreement shall mean the Confidentiality Agreement executed by and between the parties hereto as of June 2, 2009.

1.27       "Control" or "Controlled".  Control or Controlled shall mean, with respect to any intellectual property right or other intangible property, or Know-How, the possession (whether by license granted to or ownership vested in a Party or its Affiliate, other than pursuant to this Agreement) by the Party of the ability to grant to the other Party access, ownership and/or a license or sublicense as provided for herein without violating the terms and conditions of any agreement with any Third Party [******].

For clarity, this proviso shall not apply to any In-License of Blocking Third Party Patent Rights.

1.28       "Cover", "Covering" or "Covered".  Cover, Covering or Covered shall mean, with respect to Compound, Product and/or technology, that (a) in the absence of a license granted under a Valid Claim of an issued patent, the making, use, offering for sale, sale, or importation of Compound or Product, or the practice of such technology would infringe such Valid Claim, and (b) in the absence of a license granted under a Valid Claim of a patent application, the making, use, offering for sale, sale, or importation of Compound or Product, or the practice of such technology would infringe such Valid Claim if it were to issue in a patent.

1.29       "Development" or "Develop".  Development or Develop shall mean, in respect of Compound or Product, pre-clinical and clinical research and drug development activities, including toxicology, test method development and stability testing and studies, process development, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical studies (other than post-approval studies), regulatory affairs, and product approval and regulatory activities (excluding regulatory activities directed to obtaining pricing and reimbursement approvals).

1.30       "Development Costs".  Development Costs shall mean, with respect to Compound or Product, all of the out-of-pocket and internal costs and expenses incurred by or on behalf of the Parties after the Effective Date in connection with the Development of Compound or Product for use in the Field.  Development Costs shall consist of:

(a) Manufacturing Costs for obtaining the Drug Substance and/or Drug Product to be used for the Development of Product;

(b) costs of the studies on the preclinical, toxicological, pharmacokinetic, metabolic, clinical and/or stability aspects of Compound or Product;

(c) costs of conducting the clinical studies for Product (other than Post-Approval Studies), including the costs of clinical supplies, and all of the internal and external costs incurred in purchasing and/or packaging comparator drugs, disposal of clinical samples, related regulatory compliance, quality control, medical affairs, clinical operations, study subject recruitment and the preparation, collation and/or validation of data from such clinical studies;

(d) costs of preparing, submitting, reviewing or developing data or information, and preparing medical writing, for the purpose of submission to a Regulatory Authority to obtain approval to commence clinical studies (other than Post-Approval Studies) or to obtain Regulatory Approval for Product and the costs associated with submitting for, amending or maintaining such approval(s); and

(e) the fully allocated costs of internal clinical, regulatory, scientific, or technical personnel engaged in such Development.

Development Costs shall not include any costs associated with Post-Filing Activities or Post-Approval Studies, which shall be included in Regulatory Activities Costs.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.31       "Development Plan". Development Plan shall mean (i) the HAE Development Plan approved by the JSC under Section 4.1 and (ii) any Other Angioedema Development Plan approved by the JSC under Section 4.2.

1.32       "Drug Product".  Drug Product shall mean the finished Product formulation containing Drug Substance filled into unlabelled vials.

1.33       "Drug Product Order Limit".  Drug Product Order Limit shall mean, with respect to any order for Drug Product placed during a Calendar Quarter, a quantity equal to [******].

1.34       "Drug Substance".  Drug Substance shall mean Compound in bulk form manufactured for use as an active pharmaceutical ingredient in Drug Product.

1.35       "Drug Substance Inventory".  Drug Substance Inventory shall mean Drug Substance that (i) has been Manufactured by Dyax (and for which quality release has been completed) pursuant to an order placed by CMIC in accordance with Section 6.1(c), and (ii) is being held by Dyax (or its contractor) on behalf of CMIC for use in the Manufacture of Drug Product ordered by CMIC in accordance with Section 6.1(d).

1.36       "Drug Substance Order Limit".  Drug Substance Order Limit shall mean, with respect to any order for Drug Substance placed during a Calendar Quarter, a quantity equal to the lower of:

(a) [******]; and

(b) [******].

1.37       "Dyax Development Data".  Dyax Development Data shall mean, as it pertains to Product or its use in Field, all pharmacology and toxicology data and information, pre-clinical study data, clinical trial data, protocols, safety data, quality data and other regulatory information and reports, whether in written or electronic form, generated or developed by Dyax or its Affiliates in the course of developing Product in Field.

1.38       "Dyax Intellectual Property".  Dyax Intellectual Property shall mean Dyax Know-How and Dyax Patent Rights.

1.39       "Dyax Know-How".  Dyax Know-How shall mean any Know-How that (a) either is owned or Controlled by Dyax on the Effective Date [******] and (b) is necessary for the Development, Manufacture and/or Commercialization of Product as contemplated by this Agreement, including all Know-How generated or developed by or for Dyax or its Affiliates in the course of Development of Product.  Notwithstanding the foregoing, Dyax Know-How shall specifically exclude:

(i) [******];

(ii) [******]; and

(iii) [******].

1.40       "Dyax Patent Rights".  Dyax Patent Rights shall mean any Patent Rights that (a) Cover Dyax Know-How and (b) are owned or Controlled by Dyax on the Effective Date or come within Dyax's Control during the Term, including Existing Dyax Patent Rights, Dyax's rights in Joint Patent Rights, and any Patent Rights applicable to Dyax Sole Inventions.  Notwithstanding the foregoing, Dyax Patent Rights shall specifically exclude [******].

1.41       "Dyax Product Trademarks".  Dyax Product Trademarks shall have the meaning given to that term under Section 8.8(b).

1.42       "Dyax Sole Inventions".  Dyax Sole Inventions shall have the meaning given to that term under Section 8.1(b).

1.43       "Dyax Territory".  Dyax Territory shall mean all the countries of the world outside CMIC Territory.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.44       "Executive Officers". Executive Officers shall mean the Chief Executive Officer of Dyax (or a senior executive officer of Dyax designated by Dyax's Chief Executive Officer) and the Chief Executive Officer of CMIC (or a senior executive officer of CMIC designated by CMIC's Chief Executive Officer).

1.45       "Existing Dyax Patent Rights".  Existing Dyax Patent Rights shall mean those Dyax Patent Rights specifically listed on Exhibit B.

1.46       "FDA".  FDA shall mean the United States Food and Drug Administration or any successor agency thereto.

1.47       "FDCA".  FDCA shall mean the United States Federal Food, Drug and Cosmetic Act, as amended.

1.48       "Field".  Field shall mean use in the HAE and Other Angioedema Indications. Notwithstanding anything to the contrary contained herein, in no event shall Field include any use in any other Indications (including any Indications in Opthalmic Field or Surgical Field, which are specifically excluded from the rights granted to CMIC under this Agreement).

1.49       "First Commercial Sale".  First Commercial Sale shall mean, with respect to Product in a country, the first commercial sale of Product in the country.

1.50       "GAAP".  GAAP shall mean (a) with respect to Dyax, generally accepted accounting principles in the United States as consistently applied by Dyax in the preparation of its financial statements and (b) with respect to CMIC, generally accepted accounting principles in Japan as consistently applied by CMIC in the preparation of its financial statements.

1.51       "HAE".  HAE shall mean hereditary angioedema.

1.52       "HAE Development Plan".  HAE Development Plan shall have the meaning given to that term under Section 4.1.

1.53       "ICH Guidelines". ICH Guidelines shall mean the International Conference on Harmonisation guidelines, including E2A, E2B, E2C and E2D thereof as amended and any replacement thereof.

1.54       "IND".  IND shall mean an Investigational New Drug Application filed with FDA or a similar application to conduct clinical studies filed with an applicable Regulatory Authority outside of the United States.

1.55       "Indemnified Parties".  Indemnified Parties shall have the meaning given to that term under Section 11.3.

1.56       "Indemnifying Parties".  Indemnifying Parties shall have the meaning given to that term under Section 11.3.

1.57       "Indication".  Indication shall mean a specified therapeutic use of a Product, which use has been approved by a Regulatory Authority (whether through a label expansion or a separate Regulatory Approval).

1.58       "In-License".  In-License shall mean an agreement between a Party or its Affiliate and a Third Party pursuant to which the Party or its Affiliate has been granted a license to Blocking Third Party Patent Rights for use by either Party or both Parties in accordance with Section 3.4.

1.59       "Invention".  Invention shall mean any Know-How or Patent Right that is generated, conceived, reduced to practice and/or developed during the Term in relation to Compound or Product (or the use thereof).

1.60       "Joint Intellectual Property".  Joint Intellectual Property shall mean Joint Know-How and Joint Patent Rights, collectively.

1.61       "Joint Inventions".  Joint Inventions shall have the meaning given to that term under Section 8.1(c).

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.62       "Joint Know-How".  Joint Know-How shall mean any Know-How that is generated, conceived, reduced to practice, developed or acquired jointly by the Parties in the course of performing the activities under this Agreement, including Joint Inventions.

1.63       "Joint Patent Rights".  Joint Patent Rights shall mean the Patent Rights that Cover Joint Know-How.

1.64       "Joint Steering Committee" or "JSC".  Joint Steering Committee or JSC shall have the meaning given to that term under Section 2.1(a).

1.65       "Know-How".  Know-How shall mean any information, whether proprietary or not and whether patentable or not, including ideas, concepts, inventions, formulas, methods, protocols, procedures, knowledge, know-how, trade secrets, processes, assays, skills, experience, techniques, designs, compositions, plans, documents, results of experimentation and testing, including pharmacological, toxicological, and pre-clinical and clinical test data and analytical and quality control data, improvements, discoveries and works of authorship.

1.66       "Knowledge."  Knowledge shall mean, with respect to a Party or its Affiliates, the actual awareness of a certain fact or information by an officer or senior manager or other employee with a similar responsibility, regardless of title, of the Party or its Affiliate.

1.67       "Manufacturing" or "Manufacture".  Manufacturing or Manufacture shall mean the activities directed to producing, manufacturing, processing, filling and finishing (including packaging and labeling) any Product or component thereof.

1.68       "Manufacturing Costs".  Manufacturing Costs shall mean with respect to Drug Substance or Drug Product, the manufacturing Party's [******] costs, determined in accordance with GAAP by the manufacturing Party in the ordinary course of its business and incurred in the course of Manufacturing the Drug Substance or Drug Product,which costs shall include:

(a) the costs for [******]; and

(b) [******].

1.69       "Marketing Authorization Application". Marketing Authorization Application shall mean the application submitted to the competent government agency to manufacture, market and sell Product in Field in one or more countries within Territory.

1.70       "Net Sales".  Net Sales shall mean, with respect to Product, the gross invoiced sales price of the Product in  CMIC Territory by CMIC and its Related Parties, less the following deductions to the extent included in the gross invoiced sales price for the Product or otherwise directly paid or incurred by CMIC or its Related Parties with respect to the sale of the Product:

[******]

In the case of any sale or other disposal of Product between or among CMIC, it's Affiliates or Sublicensees for resale to Third Party, the Net Sales of the Product shall be calculated as above only on the value charged or invoiced on the first arm's-length sale or other disposition of the Product to Third Party.

Notwithstanding the foregoing, in any case where Product is sold or otherwise disposed of in a transaction that is not the arm's length sale of Product only in cash that is separate from any sale or disposition of other products or of services, the Net Sales of the Product shall mean the greatest of:

[******]

1.71       "Non-Breaching Party".  Non-Breaching Party shall have the meaning given to that term under Section 12.2(b).

1.72       "Ophthalmic Field".  Ophthalmic Field shall mean all uses in the therapeutic treatment or prevention of any ophthalmic disease, infection or other ophthalmic condition.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.73       "Other Angioedema".  Other Angioedema shall mean acquired angioedema, drug-induced angioedema and idiopathic angioedema.

1.74       "Parties".  Parties shall mean Dyax and CMIC.

1.75       "Party".  Party shall mean either Dyax or CMIC.

1.76       "Patent Rights".  Patent Rights shall mean any and all patents and patent applications anywhere in the world, including provisional, utility, substitution, divisional, continuation and continuation-in-part applications, and reissues, reexaminations and extensions thereof, patents of addition and any Supplementary Protection Certificates, restoration of patent term and other similar rights.

1.77       "PMDA".  PMDA shall mean the Pharmaceuticals and Medical Devices Agency or any successor agency thereto responsible for reviewing the application for Regulatory Approval in Japan.

1.78       "Person".  Person shall mean any natural person, corporation, firm, business trust, limited liability company, joint venture, association, organization, company, partnership or other business entity, or any government, or any agency or political subdivisions thereof.

1.79       "Post-Approval Studies".  Post-Approval Studies shall mean those studies and activities subsequent to the granting of Regulatory Approval that are required or necessary for the maintenance of the Regulatory Approval.

1.80       "Post-Filing Activities".  Post-Filing Activities shall mean all the studies and activities subsequent to filing an application for Regulatory Approval in the CMIC Territory but prior to obtaining the Regulatory Approval that are required, or are necessary to comply with the requirements by the Regulatory Authority for obtaining the Regulatory Approval in the CMIC Territory.

1.81       "Product". Product shall mean any pharmaceutical product containing Compound for subcutaneous administration.

1.82       "Product Competitor".  Product Competitor shall mean any [******].  As of the Effective Date, Product Competitors consist of: [******].

1.83       "Product Manufacturing Process".  Product Manufacturing Process shall mean the processes used to complete the Manufacture of unlabeled vials of Product for CMIC under this Agreement, which processes shall include the Manufacture of Drug Substance and Drug Product.

1.84       "Product Trademark(s)".  Product Trademark(s) shall mean the trademark(s) and service mark(s) distinguishing Product, and used in connection with the Commercialization and/or any other distribution, marketing, promotion and sale activities of or for Product according to Section 8.8, and/or accompanying logos, trade dresses and/or indicia of origin.

1.85       "Prosecuting Party".  Prosecuting Party shall have the meaning given to that term under Section 8.2(a).

1.86       "Quality Agreement".  Quality Agreement shall have the meaning given to that term under Section 6.5.

1.87         [******]

1.88       "[******] License Agreement".  [******] License Agreement shall mean the License Agreement effective [******] between [******].

1.89       "[******] Intellectual Property".  [******] Intellectual Property shall mean the "[******] Expression System", the "[******] Expression Technology" and the "[******] Patent Rights" as such terms are defined in Paragraphs 1.3, 1.5 and 1.8 of [******] License Agreement.

1.90       "Regulatory Activities".  Regulatory Activities shall mean all of the activities associated with the submission of Regulatory Filings, including (i) preparing and drafting of the reports for and the correspondence with Regulatory Authorities, (ii), holding meetings and conversations with Regulatory Authorities, (iii) Post-Filing Activities, (iv) the activities relating to the maintenance of Regulatory Approval and (v) the performance of Post-Approval Studies.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.91       "Regulatory Activities Costs".  Regulatory Activities Costs shall mean all the costs and expenses (excluding Development Costs) for Regulatory Activities, including (i) the fully allocated costs of both Parties' internal clinical, regulatory and technical personnel engaged in the Regulatory Activities, (ii) the fees and other amounts to be paid to Regulatory Authority in connection therewith, and (iii) the costs associated with any Post-Filing Activities or Post-Approval Studies.

1.92       "Regulatory Approval".  Regulatory Approval shall mean all the governmental and regulatory approvals required to Commercialize Product for a particular indication in a particular country, including any permit, authorization, license or approval (or waiver) from any Regulatory Authority required for the Commercialization of Product and separate pricing and/or reimbursement approvals from Regulatory Authorities even if not legally required for the Commercialization of Product.

1.93       "Regulatory Authority". Regulatory Authority shall mean any federal, national, multinational, state, provincial or local regulatory agency, department, bureau or other governmental entity with authority over the clinical trial, marketing and/or sale of a pharmaceutical product in a country, including FDA in the United States and PMDA in Japan.

1.94       "Regulatory Exclusivity".  Regulatory Exclusivity shall have the meaning given to that term under Section 8.6.

1.95       "Regulatory Filings". Regulatory Filings shall mean all the applications and registrations, including any INDs, submitted to any Regulatory Authority with respect to Product to obtain the Regulatory Approval of the Product in a country.

1.96       "Related Party". Related Party shall mean any of a Party's Affiliates and Sublicensees.

1.97       "Royalty Term".  Royalty Term shall be the time-period during which CMIC shall pay royalties to Dyax under Section 7.5(b).

1.98       "Safety Data".  Safety Data shall mean adverse event or adverse experience information, as defined under 21 C.F.R. §600.80 or ICH Guidelines, as applicable, or their equivalent under any other applicable law, and other information regarding health risks posed by Product, including Complaints.

1.99       "Sole Inventions".  Sole Inventions shall have the meaning given to that term under Section 8.1(b).

1.100     "Specifications". Specifications shall mean the specifications, including the necessary documentation, certificates of analysis and test results, for Drug Substance and Drug Product, as mutually agreed upon by the Parties.  For the sake of clarity, the Specifications for Drug Substance and Drug Product may vary by country, depending on the countries in which Product is Developed or in which Product is Commercialized.

1.101     "Sublicensee".  Sublicensee shall mean any Third Party to whom a license or sublicense under any Dyax Intellectual Property or CMIC Intellectual Property, as the case may be, has been granted pursuant to this Agreement to Develop, Manufacture or Commercialize products containing Compound.

1.102     "Sublicensee Development Data". Sublicensee Development Data shall, as it pertains to Product or its use, mean all the pharmacology and toxicology data and information, pre-clinical study data, clinical trial data, protocols, safety data, quality data and other regulatory information and reports, whether in written or electronic form, generated or developed by  Sublicensee of either Party, in the course of performing activities under this Agreement during the Term.

1.103     "Subsidiary".  Subsidiary shall mean any Person (a) of which CMIC or Dyax (as applicable) is the direct or indirect owner of over fifty percent (50%) of the voting share capital or ownership interest, and/or (b) of which CMIC or Dyax (as applicable) has the ability to control the policies (or to control the recruitment and dismissal of the management who determine the policies) through a voting agreement or other contract or through the articles of association, bylaws or other internal regulations.

1.104     "Supply Agreement".  Supply Agreement shall have the meaning given to that term under Section 6.5.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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1.105     "Surgical Field".  Surgical Field shall mean use of a product to prevent or treat bleeding during the conduct of any procedure involving the use of instruments (including lasers) to cut, abrade, suture or otherwise physically change body tissues and/or organs.  Notwithstanding anything to the contrary, Surgical Field shall specifically exclude all uses in the treatment of HAE and/or other angioedemas (even during surgery).

1.106     "Term".  Term shall have the meaning given to that term under Section 12.1.

1.107     "Territory".  Territory shall mean CMIC Territory or Dyax Territory, as the context requires.

1.108     "Third Party".  Third Party shall mean any Person other than Party or any of its Affiliates.

1.109     "Transfer Price".  Transfer Price shall mean, with respect to any amount of the Drug Substance or Drug Product delivered to CMIC by Dyax for use in the Development, Manufacture or Commercialization of Product, the [******].

1.110     "United States".  The United States shall mean the United States of America and its territories and possessions.

1.111     "Valid Claim".  Valid Claim shall mean a claim (a) of any issued, unexpired patent that has not been revoked or held unenforceable or invalid by a decision of a court or governmental agency of competent jurisdiction from which no appeal can be taken, or with respect to which an appeal is not taken within the time allowed for the appeal, and that has not been disclaimed or admitted to be invalid or unenforceable through reissue, disclaimer or otherwise or (b) of any patent application that has not been cancelled, withdrawn or abandoned or been pending for [******].

ARTICLE II

MANAGEMENT OF AGREEMENT ACTIVITIES

2.1         Joint Steering Committee.

(a) Formation; Purposes and Principles.  As soon as practicable after the Effective Date, Dyax and CMIC shall establish a joint steering committee (the "JSC"), which shall have the overall responsibility for the oversight of the Parties' activities in Field in accordance with the terms of this Agreement.

(b) Specific Responsibilities.  In addition to its overall responsibility for such oversight, the JSC shall in particular:

(i) review, discuss and agree on the Development activities of CMIC under any Development Plan, including without limitation, the clinical study endpoints, clinical methodology, monitoring and analysis requirements for the clinical studies described in any Development Plan;

(ii) review and approve the updates by CMIC to each Development Plan not less than annually;

(iii) review, discuss and agree on the strategy to seek and obtain Regulatory Approval of Product, as well as the related pricing and reimbursement approvals, in Field in CMIC Territory;

(iv) review and monitor the progress in seeking and obtaining Regulatory Approval of Product, as well as the related pricing and reimbursement approvals, in Field in CMIC Territory;

(v) review, discuss and agree on the Trademarks that shall be used in connection with the Commercialization of Products in Field in CMIC Territory;

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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(vi) review, discuss and comment on the Commercialization plans and strategies for Product in Field in CMIC Territory;

(vii) review, discuss and comment on CMIC's order forecasts and commercial supply requirements for Product;

(viii) facilitate the exchange of data, information, materials and results that may be required for the purposes of obtaining Regulatory Approvals for Product in Field in CMIC Territory; and

(ix) perform such other functions as are expressly provided for elsewhere in this Agreement or as are appropriate to further the purposes of this Agreement as determined by the Parties, including the periodic evaluations of performance against goals under this Agreement.

2.2         Working Groups.  From time to time, the JSC may establish working groups (each, a "Working Group") to oversee the particular projects or activities hereunder, and each Working Group shall be constituted and shall operate as the JSC determines.

2.3         Membership.  Each of the JSC and any Working Group shall be composed of an equal number of representatives appointed by each of Dyax and CMIC.  The JSC shall initially have three (3) representatives of each Party, but the JSC may change its size of the JSC from time to time by the mutual consent of the members of the JSC.  Each Party may replace its JSC and Working Group representatives at any time upon written notice to the other Party. The JSC shall be chaired by a representative of Dyax.  The JSC chairperson shall be responsible for calling its meetings, preparing and circulating an agenda for the JSC meeting in advance of the meeting, and preparing and issuing the minutes of the meeting within [******]thereafter.  The JSC meetings shall be called by its chairperson upon the request of either Party.

2.4         Decision-Making.  The JSC and any Working Group shall [******].  With respect to the decisions of the JSC and any Working Group, the representatives of each Party shall have collectively one vote on behalf of such Party.  Should the members of a Working Group maintain their disagreement on any matter [******].

2.5         Meetings of the JSC and Working Groups.  The JSC and each Working Group shall hold meetings at such times as the JSC and such Working Group may determine, but in no event shall the meetings of the JSC be held less frequently than [******].  The JSC and any Working Groups shall meet alternately at Dyax's facilities in Cambridge, Massachusetts, USA and CMIC's facilities in Tokyo, Japan or at such locations as the Parties may otherwise agree.  Other representatives of each Party or, with approval of the JSC and subject to the confidentiality and limited-usage obligations which are no less stringent than those set forth in Article IX of this Agreement, representatives of Third Parties involved in the Development, Manufacture or Commercialization of Product (or the conduct of Regulatory Activities relating thereto), may attend the meetings of the JSC or such Working Group as nonvoting observers.  Meetings of the JSC and any Working Groups may be held by audio or video teleconference with the consent of each Party.  Each Party shall be responsible for all of its own costs and expenses of participating in the JSC and any Working Groups.  No action taken at a meeting of the JSC or a Working Group shall be effective unless a representative of each Party is present or participating in the meeting.

2.6         Alliance Managers.  Each Party shall designate a single alliance manager, who may be a member of the JSC and/or any Working Group (the "Alliance Manager"), for all of the activities contemplated under this Agreement.  The Alliance Managers shall be responsible for the day-to-day worldwide coordination of the activities contemplated by this Agreement and shall serve to facilitate communication between the Parties.  The Alliance Managers shall have the experience and knowledge appropriate to manage such project management responsibilities.  Each Party may change its designated Alliance Manager from time to time upon written notice to the other Party.

2.7         Third Party Performance of Agreement Activities.CMIC shall be entitled to utilize the services of Third Parties to Develop, Manufacture (to the extent permitted under Article VI) and Commercialize Product (and conduct Regulatory Activities in connection therewith) under the following conditions:

(a) any use of such Third Party that is Product Competitor shall be subject to Dyax's prior written approval;

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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(b) CMIC shall remain at all times fully liable for its responsibilities under this Agreement;

(c) CMIC shall not use any Third Party to conduct part or all of its obligations under this Agreement unless CMIC's rights under its agreement with such Third Party guarantee Dyax the same rights under this Agreement, as guaranteed as if CMIC had conducted such obligations; and

(d) any of CMIC’s agreements with such Third Parties shall provide for confidentiality and limited-usage obligations imposed on such Third Parties, which are no less stringent than those set forth in Article IX of this Agreement.

ARTICLE III

LICENSE GRANTS; TRANSFERS AND ASSIGNMENTS

3.1         Dyax Grants.

(a) Grant of Rights for Development. Subject to the terms and conditions of this Agreement, Dyax hereby grants to CMIC an exclusive license under Dyax Intellectual Property, with the right to grant sublicenses solely as set forth in Section 3.1(d), to Develop, have Developed and conduct Regulatory Activities for Compound and Product for use in Field in CMIC Territory.  Notwithstanding the foregoing, the exclusive license granted by Dyax to CMIC under this Section 3.1(a) does not exclude or limit the right of Dyax to use and exploit itself Dyax Intellectual Property according to this Agreement, or to license Dyax Intellectual Property to Third Parties to Develop Compound or Product for use in Field in CMIC Territory, in either case to the extent necessary for Dyax to perform its obligations under this Agreement.

(b) Grant of Rights for Manufacture.  Subject to the terms and conditions of this Agreement, Dyax hereby grants to CMIC an exclusive license under Dyax Intellectual Property, with the right to grant sublicenses solely as set forth in Section 3.1(d), to Manufacture and have Manufactured Drug Substance and Drug Product for use by or on behalf of CMIC, its Affiliates, Sublicensees and Third Party contractors for the Development and Commercialization of Product in Field in CMIC Territory; provided that, except for Manufacturing activities to package and label Product for use in Field in CMIC Territory (which activities shall be conducted by CMIC at its cost and expense), CMIC shall not exercise any of the rights granted to it under this Section 3.1(b) unless and until CMIC exercises its step-in rights in accordance with Article VI hereof .

(c) Grant of Rights for Commercialization.  Subject to the terms and conditions of this Agreement, Dyax hereby grants to CMIC an exclusive license under Dyax Intellectual Property, with the right to grant sublicenses solely as set forth in Section 3.1(d), to Commercialize Product for use in Field in CMIC Territory.

(d) Sublicense Rights.  CMIC shall be entitled to grant sublicenses under the licenses granted to it under Sections 3.1(a), (b) and (c) to its Affiliates and to Third Parties under the following conditions:

(i) [******];

(ii) CMIC may only grant a sublicense [******]:

(A) [******]; or

(B) [******].

For clarity, any Know-How and Patent Rights so assigned or licensed to CMIC by any such Affiliate or Third Party shall be deemed to be CMIC Intellectual Property hereunder;

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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(iii) Each permitted sublicense under this Section 3.1(d) shall be in writing, shall not contravene or be inconsistent or in conflict with the terms of this Agreement and shall include the provisions requiring the applicable Sublicensee to acknowledge and agree that such sublicense is subject to the applicable license(s) granted hereunder and to the relevant terms of this Agreement;

(iv) CMIC shall at all times remain responsible for the performance of its Sublicensees in relation to the sublicenses granted to the Sublicensees under Section 3.1 (d) and

(v) CMIC shall provide, or cause to be provided, to Dyax a copy of each such sublicense agreement [******]; provided that CMIC shall have the right to redact any terms contained in such sublicense agreement that are not material to Dyax's assessment of whether the sublicense agreement complies with the requirements of this Section 3.1(d).

3.2         Grant Back License.

(a) Subject to the terms and conditions of this Agreement, CMIC hereby grants to Dyax a non-exclusive, fully paid, royalty-free license, with the right to grant sublicenses solely as set forth in Section 3.2(b), under CMIC Intellectual Property, to Develop, conduct Regulatory Activities for, Manufacture and Commercialize Compound or Product (i) in Field in Dyax Territory, and (ii) outside Field in all countries of the world.

(b) Dyax shall be entitled to grant sublicenses under the non-exclusive licenses granted to it under to Section 3.2(a) to its Affiliates and to Third Parties under the following conditions:

(i) Each permitted sublicense under this Section 3.2(b) shall be in writing, shall not contravene or be inconsistent or in conflict with the terms of this Agreement, and shall include the provisions requiring the applicable Sublicensee to acknowledge and agree that such sublicense is subject to the applicable license(s) granted hereunder and to the relevant terms of this Agreement;

(ii) Dyax may only grant a sublicense to [******]:

(A) [******]; or

(B) [******].

For clarity, any Patent Rights or Know-How so licensed or assigned to Dyax by any such Affiliate or Third Party shall be deemed to be Dyax Intellectual Property hereunder;

(iii) Dyax shall at all times remain responsible for the performance of its Sublicensees; in relation to the sublicenses granted to the Sulicensees under Section 3.2 (b) (ii) and

(iv) Dyax shall provide, or cause to be provided, to CMIC a copy of each such sublicense agreement promptly following its execution; provided that Dyax shall have the right to redact any terms contained in such sublicense agreement that are not material to CMIC's assessment of whether the sublicense agreement complies with the requirements of this Section 3.2(b).

3.3         Retained Rights.  Any rights of a Party that are not expressly granted by such Party to the other Party under this Agreement shall be retained by such Party. Furthermore, if any right which is granted by a Party to the other Party is expressly restricted or limited under this Agreement, then any right outside of the scope of such restriction or limitation shall also be retained by such Party.  Without limiting the generality of the immediately preceding sentence, Dyax shall retain the right to (i) exploit and license Dyax Intellectual Property to Develop, Manufacture and Commercialize Compound and Product for use in Field in Dyax Territory, without any duty to account to CMIC or to obtain CMIC's consent for such exploitation or license; (ii) exploit and license Dyax Intellectual Property to Develop, Manufacture and Commercialize Compound and Product outside Field in CMIC Territory, without any duty to account to CMIC or obtain CMIC's consent for such exploitation or license, (iii) exploit Dyax Intellectual Property for the purposes unrelated to Compound or Product without any duty to account to CMIC or obtain CMIC's consent for such exploitation or license, and (iv) otherwise exercise Dyax's rights and perform Dyax's obligations under this Agreement.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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3.4         [******].

3.5         Scope of Agreement; Activities in the Dyax Territory.  The Parties acknowledge and agree that, unless otherwise expressly stated herein:

(a) this Agreement sets forth the terms and conditions pursuant to which (i) CMIC shall Develop and seek Regulatory Approval for Product in Field in CMIC Territory, and (ii) CMIC shall Manufacture and Commercialize Product in Field in CMIC Territory; and

(b) the activities of Dyax to Develop, seek Regulatory Approval for, Manufacture and/or Commercialize Compound and/or Product in Field in Dyax Territory and outside Field in all countries of the world shall be outside the scope of this Agreement and under the sole responsibility of Dyax at its cost and expense.

3.6         Right of Second Offer; China.  In the event that Dyax has first offered to Defiante Farmaceutica S.A. (“Defiante”) certain terms and conditions (the “Original Terms”) of a license to Develop, Manufacture and/or Commercialize Product in the People’s Republic of China, and if the Original Terms have not been accepted by Defiante within [******] of such offer or if the Original Terms have been accepted by Defiante within such [******] period, however, a final and definite agreement on the full terms and conditions of such license have not been executed by Dyax and Defiante within [******] of such offer, Dyax shall secondly offer the Original Terms to CMIC (the “Second Offer”).  The Original Terms shall set forth [******].  Within [******] following its receipt of the Second Offer, CMIC shall notify Dyax in writing of whether it wishes to obtain such license on the Original Terms.  If CMIC does wish to obtain such license on the Original Terms, the Parties shall negotiate in good faith for a period of [******] regarding any additional terms and conditions (other than those set forth herein) applicable to such license.  If CMIC does not wish to obtain such license on the Original Terms or if the Parties fail to execute a final and definite agreement on the full terms and conditions of such license within such [******] period, Dyax shall be free to offer such license to any other Person, provided, however, that the terms and conditions so offered to such other Person should not be more favorable to such other Person than the Original Terms.  If CMIC does wish to obtain such license on the Original Terms and the Parties has executed a final and definite agreement on the full terms and conditions of such license within such [******] period, then all the terms and conditions of such license shall be deemed to be part of this Agreement.  Furthermore, CMIC Territory shall thereafter include the People's Republic of China.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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ARTICLE IV

DEVELOPMENT AND REGULATORY MATTERS

4.1         HAE Development Plan. As soon as practicable after [******], the JSC shall convene to review and discuss the activities that are necessary to obtain Regulatory Approval of Product for the treatment of HAE in CMIC Territory.  Following this process, but in any event no later than [******] after the first day of the first JSC meeting for the HAE Indication, CMIC and Dyax shall jointly complete, and the JSC shall approve, a formal plan to obtain Regulatory Approval for Product in CMIC Territory for the HAE Indication (the "HAE Development Plan").  The HAE Development Plan shall set forth all the activities that are necessary to obtain Regulatory Approval of Product for the treatment of HAE in CMIC Territory as well as the strategies and timelines for completing such activities.

4.2         Development Plan for Other Angioedema Indications. As soon as practicable after [******], the JSC shall convene to review and discuss the activities that are necessary to Develop and obtain Regulatory Approval of Product for the treatment of such Other Angioedema in CMIC Territory.  Following this process, as soon as it is practicable after the first JSC meeting for such Other Angioedema Indication, CMIC and Dyax shall jointly complete, and the JSC shall approve, a formal plan to Develop and obtain Regulatory Approval for Product in CMIC Territory for such Other Angioedema Indication (each, an "Other Angioedema Development Plan").  Each Other Angioedema Development Plan shall set forth all the activities that are necessary to obtain Regulatory Approval of Product for the treatment of such Other Angioedema in CMIC Territory as well as the strategies and timelines for completing such activities.

4.3         Roles and Responsibilities.

(a) Development Activities. CMIC shall assume all the authority and responsibility for all the activities conducted relating to the Development of Product for any Indication in Field in CMIC Territory; provided that the JSC shall review and monitor such activities in accordance with Section 2.1(b) and the following process:

(i) CMIC shall review and update each Development Plan from time to time (but not less frequently than annually) to include therein any additional activities required by any Regulatory Authority in CMIC Territory, up until filing of the application for Regulatory Approval of Product for the applicable Indication in CMIC Territory or the completion of the activities covered thereunder;

(ii) CMIC shall submit all such proposed updates to the JSC for review and approval at the first JSC meeting after such proposal; and

(iii) the JSC shall review such proposed updates and may approve such proposed updates and, upon such approval by the JSC, the HAE Development Plan shall be amended accordingly.

(b) Regulatory Activities. CMIC shall assume all the authority and responsibility for all Regulatory Activities relating to Product for any Indication in Field in CMIC Territory; provided that the JSC shall review and monitor such activities in accordance with Section 2.1(b).   In connection with any such Regulatory Activities, Dyax shall, upon CMIC's request, promptly provide CMIC with any Dyax Development Data that is reasonably deemed to be necessary or useful for Regulatory Approval of Product in Field in CMIC Territory.  For the avoidance of doubt, CMIC shall be the holder of all the Marketing Authorization Applications filed in CMIC Territory. CMIC may have its Affiliate hold the Marketing Authorization Application and Regulatory Approval of Product in Field in CMIC Territory.

(c) Reformulation.  Notwithstanding anything to the contrary contained herein, any Development or other activities relating to the reformulation of Product (including the activities conducted under any Development Plan) shall be conducted by Dyax.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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4.4         Diligent Development Efforts

(a) CMIC shall use [******] to Develop and obtain Regulatory Approval for Product in the HAE Indication according to the HAE Development Plan and in any Other Angioedema Indication according to the Other Angioedema Development Plan approved by the JSC for such Indication in CMIC Territory. For the purpose of this Section 4.4(a), CMIC’s [******] shall be deemed satisfied by the performance of at least one of the following events in each Calendar Year during the Term with respect to each such Indication: [******].

(b) Without limiting the generality of Section 4.4(a), CMIC (directly or through its Related Parties) shall, subject to the provisions of Section 4.4(c) and Section 4.4(d), achieve the following specific development milestones for Product in the HAE Indication in CMIC Territory.

Milestone Event	Deadline
[******]	[******]
[******]	[******]

Each date indicated in this Section 4.4(b) (and any subsequent dates reflecting an extension permitted hereunder) shall be extended automatically to reflect any delay in the achievement of the applicable milestone attributable to External Factors.  For the purposes of this Section 4.4(b), an “External Factor” shall mean that one or more of the following events or circumstances, which has delayed the Development of Product in the HAE Indication in CMIC Territory, has occurred in the Development, Manufacturing or regulatory conditions relating to Product; provided that such events or circumstances were not caused by the negligent act or omission of CMIC or any of its Related Parties:  [******].  The relevant date(s) in this Section 4.4(b) (and any subsequent dates reflecting an extension permitted hereunder) shall be extended by the number of days to be agreed upon by the Parties reasonably based upon the JSC’s reasonable assessment of the period of time required to reach the applicable milestone event in light of the relevant External Factors.

(c) In addition to the foregoing, CMIC may extend the period for completion of any milestone event described in Section 4.4(b) above by up to [******], upon prior written notice to Dyax and the payment to Dyax of a monthly extension fee of [******] for each such [******] extension.

(d) If CMIC fails to meet its obligations under Section 4.4(b) in any material respect, then Dyax shall have, as its sole and exclusive remedy for such failure by CMIC, the right to terminate this Agreement pursuant to Section 12.2(a).

4.5         Manner of Performance; Reports.

(a) CMIC shall perform, or cause to be performed, all of the Development activities for which it is responsible under this Agreement, in good scientific manner and in compliance with all the applicable laws and regulations and good clinical and laboratory practices.

(b) CMIC agrees to keep Dyax fully informed of its progress in, results (including the development of any technology or inventions) of, status on and plans for developing Product in Field in CMIC Territory.

(c) Within [******] after the end of each Calendar Quarter in which the Development activities are performed by CMIC and at least [******] prior to the quarterly meeting of the JSC, CMIC shall provide to the JSC a written progress report, which shall describe the Development activities that CMIC has performed or caused to be performed during such Calendar Quarter, shall evaluate the works performed in relation to the goals and timelines established under the applicable Development Plan, and shall provide such other information as may be reasonably requested by the JSC with respect to such Development activities.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission.

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4.6           Exchange of Development Information.  In accordance with and subject to the terms of Article IX, on an ongoing basis during the Term:

(a) Dyax shall, [******], disclose and transfer to CMIC an electronic copy of the Common Technical Document for Product in the HAE Indication.  Furthermore, within [******], Dyax shall disclose and transfer to CMIC all other Dyax Development Data necessary or useful to the Development of Compound or Product for use in Field in CMIC Territory and shall update such Dyax Development Data and disclose and transfer such updated Dyax Development Data to CMIC at least once semi-annually.  Dyax acknowledges and agrees that all the data generated in connection with the Development activities conducted by Dyax and/or its Related Parties with respect to Compound or Product in Field may be used by CMIC to obtain the Regulatory Approval for Product in Field in CMIC Territory.

(b) CMIC shall [******] disclose and transfer to Dyax all the CMIC Development Data necessary or useful to the Development of Compound or Product for use in Field in  Dyax Territory or outside Field in any country in the world and shall update such CMIC Development Data and disclose and transfer such updated CMIC Development Data to Dyax at least [******].  CMIC acknowledges and agrees that all such data may be used by Dyax to obtain the Regulatory Approval for Product in Field in Dyax Territory or outside Field in any country of the world.

(c) Upon reasonable notice during normal business hours as coordinated through the Alliance Managers and the JSC, each Party shall provide the other Party with such assistance and access to its employees, consultants and subcontractors as may be reasonably necessary for such other Party to exercise its rights and perform its obligations with respect to the Development, Regulatory Activities, Manufacture and/or Commercialization of Product under this Agreement.

4.7           Regulatory Submissions and Regulatory Approvals.

(a) CMIC shall own, and may have its Affiliate own, all the Regulatory Filings and Regulatory Approvals for Product in Field in CMIC Territory, and shall be responsible for the Regulatory Activities for Product in Field in CMIC Territory; provided that, unless Dyax otherwise agrees in good faith, any Regulatory Filings for Product in the HAE Indication in CMIC Territory shall be consistent (to the extent permitted by the applicable law) with the Regulatory Filings for Product in the HAE Indication in the United States. If permitted under the Japanese laws, Dyax and its Related Parties shall have the right to access all the data contained or referenced in such Regulatory Filings, including all reports, correspondence and conversation logs (“Access and Reference Rights”), and CMIC shall provide appropriate notification of Dyax's and its Related Parties' Access and Reference Rights to the related Regulatory Authorities. Again, if permitted under the Japanese laws, CMIC hereby grants, and shall ensure that its Related Parties grant, to Dyax a "Right of Reference or Use," as that term is defined in 21 C.F.R. §314.3(b) as amended from time to time, and any foreign equivalents thereto, to any and all the data contained or referenced in any such Regulatory Filing, including all reports, correspondence and conversation logs, and CMIC shall provide appropriate notification of Dyax's and its Related Parties' Access and Reference Rights to the related Regulatory Authorities.   Notwithstanding the foregoing, CMIC agrees that Dyax shall have the right to access all the data contained or referenced in such Regulatory Filings, through CMIC, to the same extent that CMIC or its Related Parties is granted such access.

(b) Dyax shall own all the Regulatory Filings and Regulatory Approvals for Compound and for Product (i) in Field in Dyax Territory and (ii) outside Field in any country of the world, and shall be responsible for all the Regulatory Activities (i) in Field in Dyax Territory and (ii) outside Field in any country of the world.  CMIC and its Related Parties shall have the right to access all the data contained or referenced in such Regulatory Filings, including all reports, correspondence and conversation logs, to the extent applicable to use of Product in Field in CMIC Territory, and Dyax shall provide appropriate notification of CMIC's and its Related Parties’ Access and Reference Rights to the related Regulatory Authorities.  Dyax hereby grants, and shall ensure that its Related Parties grant, to CMIC a "Right of Reference or Use," as that term is defined in 21 C.F.R. §314.3(b) as amended from time to time, and any foreign equivalents thereto, to any and all data contained or referenced in any such Regulatory Filings, including all reports, correspondence and conversation logs, and Dyax shall provide appropriate notification of CMIC's and its Related Parties' Access and Reference Rights to the related Regulatory Authorities.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

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4.8           Complaints; Adverse Event Reporting Procedures; Notice of Adverse Events Affecting Compound.

(a) Each Party may and shall have access to all the Complaints and Safety Data generated by the other Party and/or its Related Parties and contractors in connection with the Development, Regulatory Activities, Manufacture and Commercialization of Product, subject to and to the extent provided for in this Agreement.

(b) Each Party shall maintain a record of any and all the Complaints and Safety Data it receives with respect to Product.  Each Party shall notify the other Party in reasonable detail of any Complaint or Safety Data received by such Party with respect to Product within sufficient time to allow such other Party and/or its Related Parties to comply with any and all regulatory and other requirements imposed upon them in any jurisdiction in which or for which such Product is being Developed in clinical studies or Commercialized.

(c) Each Party shall require its Related Parties to provide it with all the Complaints and Safety Data relating to Product which they receive. Each Party shall provide the other Party with all the Complaints and Safety Data which it receives relating to Product and which is necessary or desirable for the other Party to comply with all the applicable laws, rules and regulations with respect to Product.  Each Party shall provide such information to the other Party within [******] after its first receipt; provided that any information relating to a serious adverse experience (SAE), as that term is defined at 21 C.F.R. §600.80, in the ICH Guidelines and/or in the Directive 2001/83/EC, shall be provided to the other Party by such party within [******] after such party initially receives it.  The Party providing Complaints or Safety Data shall make all reasonable efforts to assist the receiving Party with any follow-up investigation necessary to comply with applicable laws, rules and regulations with respect to Product.

(d) Dyax shall maintain, or Dyax shall enter into an Agreement with a Third Party to maintain, a global adverse event database for Product (the "AE Database") and shall record any and all Complaints and Safety Data, which Dyax  receives in relation to Product, in the AE Database for CMIC's use in CMIC Territory. CMIC shall have access to all data in the AE Database.

(e) With respect to Product in Field in CMIC Territory, CMIC shall be responsible for submitting adverse event reports to the applicable Regulatory Authorities.  With respect to Product in Field in Dyax Territory and outside Field in all countries of the world, Dyax shall be responsible for submitting adverse event reports to the applicable Regulatory Authorities.

(f) Within [******], the Parties shall develop and agree in writing upon the safety data exchange procedures governing the coordination of collection, investigation, reporting, and exchange of the information concerning any adverse experiences, and any product quality and product complaints involving adverse experiences, and any other Complaints and Safety Data, related to Product, sufficient to enable each Party to comply with its legal and regulatory obligations (the "Pharmacovigilance Agreement"). Dyax shall execute pharmacovigilance agreements with any of CMIC’s future Related Parties involved in the Development, Manufacture or Commercialization of Product.  Such pharmacovigilance agreements shall conform in all material respects with the Pharmacovigilance Agreement to be executed by and between Dyax and CMIC.

(g) The Parties acknowledge and agree that all the safety data maintained in the AE Database for Product may be used by both Parties and their respective Related Parties (i) to obtain all the applicable Regulatory Approvals in accordance with the terms of this Agreement and (ii) in connection with any litigation relating to Product.

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

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4.9           Audits.  CMIC shall, and shall require its Related Parties to, keep the true and accurate records containing all CMIC Development Data.  Such records shall be kept by CMIC and its Related Parties during the periods required by the applicable laws and regulations, provided that such periods should not be shorter than [******] following the end of the calendar year to which they relate.  Upon [******] prior written notice to CMIC, Dyax and its Related Parties (or any Person contracted by Dyax) shall be permitted by CMIC, during normal business hours, to inspect such records and any facilities used by CMIC or its Related Parties in connection with the Development, Manufacture and Commercialization of Product for the purpose of ensuring that such activities are conducted in accordance with the applicable laws and regulations and in conformity with this Agreement.  The notice provided by Dyax to CMIC with respect to any such inspection shall indicate the nature and scope of any such inspection. Dyax shall be responsible for all the external costs associated with any such inspection, including the cost of translating any internal documents of CMIC or its Related Parties (if such translation is deemed to be necessary by Dyax).

ARTICLE V

COMMERCIALIZATION

5.1           Commercialization Efforts; Manner of Performance.

(a) Following the Regulatory Approval of Product in any Indication in Field in CMIC Territory, CMIC shall use Commercially Reasonable Efforts to Commercialize Product in CMIC Territory in such Indication.

(b) In connection with its obligation to use Commercially Reasonable Efforts to Develop, obtain the Regulatory Approval of and Commercialize Product in CMIC Territory in Field, CMIC acknowledges and agrees that it shall not engage in the clinical development, manufacture and/or commercialization of a therapeutic or prophylactic product that would compete, with Product in Field in CMIC Territory.  Notwithstanding the foregoing, the Parties understand that CMIC’s dominant business is a contracting business and that such contracting business could not affect the extent of such Commercially Reasonable Efforts regardless of any products or services which CMIC would provide as contractor on behalf of a third party. With such understanding, the Parties agree that this Agreement should not prevent CMIC from developing or manufacturing any products on behalf of a third party as CRO or CMO; although CMIC agrees that it shall not serve as a CRO with respect to Competitive Products until it completes enrollment of all subjects necessary to complete the clinical development of Product in the HAE Indication.

(c) CMIC shall perform, or cause to be performed, all the Commercialization activities for which it is responsible under this Agreement in compliance with all the applicable laws and regulations.

5.2           Advertising and Promotional Materials.  CMIC shall be responsible, at its own cost and expense, for the creation, preparation, production, reproduction and filing with the applicable Regulatory Authorities, of the relevant written sales, promotion and advertising materials relating to Product ("CMIC Promotional Materials") for Commercialization in Field in CMIC Territory.  All CMIC Promotional Materials shall be compliant in all material respects with all the applicable laws, rules and regulations and any guidelines established by the pharmaceutical industry in the applicable country in CMIC Territory.  When distributing the information related to Product or its use (including the information contained in scientific articles, reference publications and publicly available healthcare economic information), CMIC shall comply in all material respects with all the applicable laws, rules and regulations and any guidelines established by the pharmaceutical industry in the applicable country in CMIC Territory. [******].

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

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5.3           Sales and Distribution. CMIC and its Related Parties shall be responsible for booking sales of Product in Field in CMIC Territory and for all the aspects of the Product order processing, invoicing and collection, distribution, inventory and receivables, and for handling (at its own cost and expense) all returns, recalls, and other withdrawals of the Product sold for use in Field in CMIC Territory.  Dyax and its Related Parties shall be responsible for booking sales of Product in Field in Dyax Territory and outside Field in any country in the world and for all the aspects of the Product order processing, invoicing and collection, distribution, inventory and receivables, and for handling (at its own cost and expense) all returns, recalls, and other withdrawals of the Product sold for use in Field in Dyax Territory and outside Field in any country in the world.

5.4           Cross-Territory and Cross-Field Sales.  CMIC shall not, and shall ensure that its Related Parties agree not to, sell Product in Field in Dyax Territory or outside Field in any country in the world. If CMIC or any of its Related Parties receives any orders relating to use of Product in Field in Dyax Territory or outside Field in any country of the world, it shall refer such orders to Dyax.  Dyax shall be a third party beneficiary of the agreements between or among CMIC, its Affiliates, licensees, distributors and wholesalers with respect to such restriction, with the right to enforce such agreements. Furthermore, CMIC shall make Commercially Reasonable Efforts to restrict the ability of any Third Parties to export Product outside of CMIC Territory for sale and/or use in Field in Dyax Territory or outside Field in any country of the world.

5.5           Recalls and Market Withdrawals.  If any Regulatory Authority in CMIC Territory requests a recall or takes a similar action in connection with the Product being Developed, Manufactured or Commercialized by CMIC under this Agreement, or if either Party determines that an event, incident or circumstance has occurred that may result in the need for a recall or market withdrawal of such Product, the Party notified of such recall or similar action, or the Party that determines the need for such recall or market withdrawal, shall, within [******] of such notification or determination, advise the other Party thereof by e-mail, overnight courier or facsimile.  CMIC shall, in consultation with Dyax, determine whether to conduct a recall of Product in CMIC Territory and the manner in which any such recall shall be conducted (except in the case of a government mandated recall, when CMIC may act for such recall without such advance notice but shall notify Dyax thereof as soon as possible).  In the event that CMIC is responsible for such recall, CMIC shall bear the expense of such recall conducted in CMIC Territory.  In the event that Dyax is responsible for such recall, Dyax shall reimburse CMIC for the expense of such recall conducted by CMIC in CMIC Territory and shall repay CMIC for the amount in which CMIC has paid to Dyax for such recalled Product. Each Party shall make available to the other Party all of its pertinent records that may be reasonably requested in order to effect any such recall.

ARTICLE VI

MANUFACTURE AND SUPPLY OF DRUG PRODUCT

6.1           Manufacture of Drug Substance and Drug Product.  Dyax shall Manufacture Drug Substance and Drug Product for CMIC (or its designee) in sufficient quantities to satisfy the requirements of CMIC and its Related Parties for use in Developing, obtaining Regulatory Approval of, and Commercializing Product in Field in CMIC Territory pursuant to this Agreement; provided that such Manufacture by Dyax shall not include packaging and labeling (which shall be conducted by CMIC at its cost and expense) and that the foregoing obligation of Dyax to Manufacture Drug Substance and Drug Product shall be subject to the following terms and conditions:

(a) Exclusivity.  Dyax shall be CMIC's sole and exclusive manufacturer of all Drug Substance and Drug Product requirements of CMIC and its Related Parties, unless otherwise agreed by Dyax in writing.

(b) Forecasts.  Within [******] following the filing of the Marketing Authorization Application for Product in the HAE Indication in CMIC Territory, and within [******]following the commencement of each Calendar Quarter occurring thereafter, CMIC shall give to Dyax a forecast of Product supply requirements for the [******], determined in good faith and based upon commercially reasonable estimates of Product sales.  Each such forecast shall summarize the projected Product demand, inventory targets, and inventory levels (including the projected Drug Substance Inventory levels) and the estimated quantities of Drug Substance and Drug Product that CMIC expects to order, in accordance with Sections 6.1(c) and (e).

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

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(c) Orders for Drug Substance; Delivery.

(i) For quantities of Drug Substance required by CMIC, CMIC shall provide Dyax with binding purchase orders for Drug Substance.  CMIC may place no more than [******].

(ii) Upon CMIC's issuance of a binding order for Drug Substance:

(A) Each such order shall be considered accepted by and binding upon Dyax, unless such order exceeds the Drug Substance Order Limit for the relevant Calendar Quarter, in which case such order shall be considered accepted by Dyax unless Dyax provides written notice objecting to such order within [******] after Dyax's receipt of such order. In case of  objection, Dyax shall provide the quantity requested up to the Drug Substance Order Limit for the relevant Calendar Quarter and shall use [******]to provide the additional requested quantity.

(B) Dyax shall have [******]after Dyax's receipt of such order to provide CMIC the latest start and completion date for that order. In turn, CMIC will have [******] thereafter to acknowledge and accept this schedule, negotiate a change, or cancel the order. In order to keep cost of goods as low as possible, the preference will be to combine all binding orders for Drug Substance into single campaigns. Any binding order placed per the above conditions will be scheduled to begin production [******].

(iii) All Drug Substance manufactured by Dyax shall, at the option of CMIC, be (A) held as Drug Substance Inventory by Dyax (or its Third Party contractor) on behalf of CMIC pursuant to Section 6.1(d) or (B) delivered [******].  All Drug Substance shall be delivered within [******] following the quality release of such Drug Substance.

(d) Drug Substance Inventory.  If and to the extent that CMIC requests that Drug Substance manufactured by Dyax for CMIC be held as Drug Substance Inventory, then Dyax shall be responsible for the handling and custody of such Drug Substance Inventory (including insurance to cover risk of loss of such Drug Substance Inventory); provided that all costs directly related to the handling, custody and insurance of the Drug Substance Inventory shall be reimbursed by CMIC.

(e) Orders for Drug Product; Delivery.

(i) For the quantities of Drug Product required by CMIC, CMIC shall provide Dyax with the binding purchase orders for Drug Product.  The Parties shall agree on the frequency of such purchase orders and on the maximum and minimum numbers of vials per such a purchase order in the Supply Agreement. Notwithstanding the foregoing, CMIC may at any time provide Dyax with the binding purchase orders for any number of vials of Drug Product to be used as investigational new drug for Development of Product in Field in CMIC Territory.

(ii) Upon CMIC's issuance of a binding order for Drug Product:

(A) Each such order shall be considered accepted by and binding upon Dyax, unless such order exceeds the Drug Product Order Limit for the relevant Calendar Quarter, in which case such order shall be considered accepted by Dyax unless Dyax provides CMIC with written notice objecting to such order within [******] after Dyax's receipt of such order. In case of such objection, Dyax shall provide CMIC with Drug Product in the quantity up to the Drug Product Order Limit for the relevant Calendar Quarter and shall use Commercially Reasonable Efforts to provide CMIC with the additional quantity of Drug Product based upon Dyax's determination of the Drug Product supply requirements for it and its other licensees.

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(B) Dyax shall have [******] after Dyax's receipt of such order to provide CMIC the latest start and completion date for the order. In turn, CMIC shall have [******] thereafter to acknowledge and accept this schedule, negotiate a change thereto, or cancel the order. The Parties agree that the delivery dates of Drug Product from Dyax to CMIC shall be provided for in the Supply Agreement.

(iii) All the Drug Products manufactured by Dyax shall be delivered [******].  Any Drug Product shall be delivered within [******] following the quality release of such Drug Product (but not later than [******] after such Drug Product is filled).  At the time of such delivery, such Drug Product shall have a shelf life equal to [******].

(f) Supply Shortage; Allocation of Drug Substance and Drug Product.  Upon the occurrence of any event that causes the amount of Drug Substance and/or Drug Product Manufactured by Dyax to be insufficient to fully meet the quantities ordered by CMIC under Sections 6.1(c) and (e), then Dyax shall promptly notify CMIC thereof.  Thereafter:

(i) if such a supply shortage in fulfilling the orders properly placed by CMIC on Dyax for Drug Substance or Drug Product is caused by manufacturing failures or delays, the then current Drug Substance or Drug Product available for supply by Dyax shall be allocated between the Parties and Dyax's Sublicensees on a pro-rata basis based on the then current good faith forecasted requirements for Drug Substance or Drug Product by such entities; and

(ii) if such a supply shortage is caused by CMIC’s inaccurate forecasts or otherwise arisen as a result of the orders placed on Dyax by CMIC for Drug Substance in excess of the applicable Drug Substance Order Limit or the orders placed on Dyax by CMIC for Drug Product in excess of the applicable Drug Product Order Limit, then the allocation provided for in Section 6.1(f)(i) above shall not apply.

(g) Pricing. With respect to any amount of Drug Substance or Drug Product Manufactured by Dyax for CMIC for use in the Development or Commercialization of Product, CMIC shall pay to Dyax the applicable Transfer Price for such Drug Substance or Drug Product.  Such Transfer Price shall be paid as follows:

(i) if and to the extent that the external Manufacturing Costs of Drug Substance and/or Drug Product are incurred by Dyax in advance of the actual delivery of Drug Product to CMIC, such Manufacturing Costs shall be invoiced to CMIC and CMIC shall pay such invoice within [******] after receipt thereof; and

(ii) the balance of the Transfer Price and such external Manufacturing Costs of Drug Substance and/or Drug Product paid under item (i) above shall be paid by CMIC within [******] after receipt of the relevant invoice to be issued by Dyax after the quality release (duly documented) of the Drug Product.

6.2           Quality.

(a) Certificates of Analysis.  Dyax shall provide CMIC with the certificates of analysis related to each batch of Drug Substance or Drug Product delivered to CMIC hereunder.  These certificates shall document that each such batch delivered to CMIC conforms to Specifications.  Further, Dyax shall provide CMIC with the batch disposition paperwork documenting the requirements of cGMPsat the time of such delivery. These materials shall include the date of Manufacture and the applicable expiry date of each such batch.

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(b) Quality Control Testing.  Dyax shall perform, or have performed such quality control tests as are indicated in Specifications.  Dyax shall make the results of such quality control tests available to CMIC on or before the date that the related Drug Substance or Drug Product is delivered to CMIC hereunder.  No production batch of the Drug Substance or Drug Product shall be released for such delivery unless such quality control tests show that the Drug Substance or Drug Product meets Specifications.  CMIC shall not perform or re-perform the control quality tests that support any such certificate of analysis. Notwithstanding the foregoing, CMIC may perform such quality tests if required by any Regulatory Authority in CMIC Territory.

6.3           Responsibility for Product Manufacturing Process.  At all times during which Dyax is manufacturing Drug Substance and Drug Product for CMIC (or its designee) under Section 6.1, Dyax shall have the sole authority over Product Manufacturing Process under this Agreement, and shall be fully responsible for all the costs and expenses incurred in connection therewith, except to the extent that Dyax is to be reimbursed by CMIC for such costs and expenses as provided for herein.  Without in any way limiting the foregoing, Dyax shall have the sole authority to (i) select the contract manufacturers involved in Product Manufacturing Process, (ii) terminate any contracts with the contract manufacturers involved in Product Manufacturing Process, and/or (iii) internalize Product Manufacturing Process by Manufacturing Drug Substance and/or Drug Product within the facilities owned or controlled by Dyax.

6.4           Step-in Rights.

(a) For Cause.  Notwithstanding the restrictions set forth in Section 3.1(b) that preclude CMIC from Manufacturing or having Manufactured Drug Substance and Drug Product, CMIC shall have the option, exercisable at any time within [******] after occurrence of any of the following events, to enter into a direct contractual relationship with Dyax's CMO(s) to have them Manufacture Drug Substance and/or Drug Product as necessary to meet the requirements of CMIC and its Related Parties for Development and Commercialization of Product in Field in CMIC Territory:

(i) the quantity of such Drug Substance and/or Drug Product as supplied by Dyax pursuant to the binding orders placed by CMIC under Section 6.1(c) or (e) is less than [******]of the quantity so ordered by CMIC, [******]; provided that, for the purposes of this Section 6.4(a)(i), the amount of any order placed by CMIC under Section 6.1(c) that is in excess of the related Drug Substance Order Limit or the amount of any order placed by CMIC under Section 6.1(e) that is in excess of the related Drug Product Order Limit may not be applied toward the calculation of any supply shortage contemplated under this Section 6.4(a)(i);

(ii) Regulatory Authority notifies Dyax or CMIC in writing that Product Manufacturing Process does not comply with the applicable laws and regulations in CMIC Territory and [******]; or

(iii) Dyax elects to discontinue the Manufacture of Drug Substance and Drug Product to CMIC as provided for in the Supply Agreement.

If CMIC elects to exercise its option under this Section 6.4(a), then all of Dyax's obligations under Section 6.1 shall terminate; provided that:

(iv) Dyax shall provide reasonable assistance to CMIC, at its expense, to enable CMIC to assume the responsibility for Product Manufacturing Process as it applies to Drug Substance and/or Drug Product. The assistance shall include introducing CMIC to Dyax's CMOs and working with CMIC and the CMOs to coordinate technology transfers and any other actions reasonably required in order to enable CMIC to enter into a direct contractual relationship with, and be supplied Drug Substance and Drug Product directly from, any such CMO. Any Drug Substance or Drug Product so Manufactured by CMIC may be used solely for the Development and Commercialization of Product in Field and in CMIC Territory in accordance with the terms of this Agreement.

(v) At CMIC's option and request, Dyax shall continue to Manufacture and supply Drug Product to CMIC [******], or until such time as all of the assistance under Section 6.4(a)(iv) has been completed.

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(vi) Each Party shall appoint at least one manufacturing logistics and quality assurance manager to support the Parties' respective Manufacturing activities, and to function as a liaison with the other Party's manufacturing logistics and quality assurance manager on the matters relating to the Manufacture and supply of Drug Substance and Drug Product under this Agreement.

(b) For Convenience.  Notwithstanding the restrictions set forth in Section 3.1(b) that preclude CMIC from Manufacturing or having Manufactured Drug Product, CMIC shall have the right, exercisable at its convenience, to obtain from Dyax the right to Manufacture and have Manufactured Drug Product (but not Drug Substance) as necessary to meet the requirements of CMIC and its Related Parties for Development and Commercialization of Product in Field in CMIC Territory.  If CMIC has elected to exercise its option under this Section 6.4(b), then all of Dyax's obligations with respect to the Manufacture of Drug Product (but not Drug Substance) under Section 6.1 shall terminate; provided that:

(i) Dyax shall provide reasonable assistance to CMIC at CMIC's expense to enable CMIC to assume the responsibility for the Manufacture of Drug Product. The assistance shall include introducing CMIC to Dyax's CMOs and working with CMIC and the CMOs to coordinate any necessary technology transfers and taking such other actions as may be reasonably required in order to enable CMIC to assume the responsibility for the Manufacture of Drug Product. Any Drug Product so Manufactured by CMIC may be used solely for the Development and Commercialization of Product in Field and in CMIC Territory in accordance with the terms of this Agreement.

(ii) Each Party shall appoint at least one manufacturing logistics and quality assurance manager to support the Parties' respective Manufacturing activities, and to function as a liaison with the other Party's manufacturing logistics and quality assurance manager on the matters relating to the Manufacture of Drug Substance and Drug Product under this Agreement.

Notwithstanding the election by CMIC to assume the Manufacture of Drug Product under this Section 6.4(b), Dyax shall remain responsible for the Manufacture of Drug Substance and, in lieu of holding all the Drug Substance ordered by CMIC under Section 6.1(d) as Drug Substance Inventory, Dyax shall deliver all such Drug Substance directly to CMIC (or its designee).  In consideration for the Drug Substance so delivered by Dyax to CMIC, CMIC shall pay to Dyax the applicable Transfer Price for the Drug Substance.  Such Transfer Price shall be paid as follows:

(iii) if and to the extent that the external Manufacturing Costs of Drug Substance are incurred by Dyax in advance of the actual delivery thereof to CMIC, such Manufacturing Costs shall be invoiced to CMIC and CMIC shall pay such invoice within [******] after receipt thereof; and

(iv) the balance of the Transfer Price and such external Manufacturing Costs of Drug Substance paid under item (iii) above shall be paid by CMIC within [******] after receipt of the relevant invoice to be issued by Dyax after the quality release (duly documented) of the Drug Substance.

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6.5           Supply and Quality Agreements.  After the Effective Date, the Parties shall negotiate in good faith and enter into a comprehensive supply agreement pursuant to which Dyax shall supply Drug Substance and Drug Product to CMIC (the "Supply Agreement") together with a quality agreement. The quality agreement shall conform with the industry standards governing the Drug Substance and Drug Product supplied pursuant to the Supply Agreement (the "Quality Agreement").  The Supply Agreement and the Quality Agreement shall include the terms and conditions similar to those set forth in Sections 6.1 through 6.4 of this Agreement and shall contain such other terms and conditions that the Parties mutually agree that are customary for supply agreements and quality agreements of this type.

6.6           [******].

ARTICLE VII

FINANCIAL PROVISIONS

7.1           License Fee. As soon as possible following the Effective Date (but in no event no later than [******] thereafter), CMIC shall pay to Dyax an upfront license fee in the amount of Four Million Dollars ($4,000,000) as partial consideration for the rights granted by Dyax to CMIC under this Agreement.

7.2           Milestone Payments.

(a) Approval in HAE Indication. Within [******] following the Regulatory Approval of Product for the HAE Indication by the Japanese Government, CMIC shall pay to Dyax a one-time milestone payment in the amount of [******].

(b) Approval in Acquired Angioedema Indication. Within [******] following the Regulatory Approval of Product for the acquired angioedema Indication by the Japanese Government, CMIC shall pay to Dyax a one-time milestone payment in the amount of [******].

(c) Approval in Drug-Induced Angioedema Indication. Within [******]following the Regulatory Approval of Product for the drug-induced angioedema Indication by the Japanese Government, CMIC shall pay to Dyax a one-time milestone payment in the amount of [******].

7.3           Ongoing Costs.  CMIC shall be solely responsible for (i) all the Development Costs incurred in connection with the Development of Product for any Indication in Field in CMIC Territory, (ii) all the Regulatory Activities Costs associated with obtaining the Regulatory Approval for Product for any Indication in Field in CMIC Territory, and (iii) all the costs associated with the Commercialization of Product in Field in CMIC Territory.

7.4           Sales Milestones.  Within [******] of the end of the calendar year in which each of the following events has occurred for the first time with respect to annual Net Sales of Product (cumulative for all Indications) in CMIC Territory, CMIC shall make the following payments to Dyax:

Milestone Event	Payment
First calendar year in which Net Sales of Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]
First calendar year in which Net Sales of all Product in CMIC Territory are greater than [******]	[******]

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For the avoidance of doubt, each of the foregoing milestone payments is a separate payment and shall be paid only once by CMIC.  Consequently, the maximum amount that CMIC is obligated to pay to Dyax under this Section 7.4 is [******].

7.5           Royalties.

(a) Royalty Rates.  For each calendar year during Royalty Term, CMIC shall pay Dyax royalties on the annual Net Sales of Product in CMIC Territory at the following rates:

Net Sales of Product during a Calendar Year	Rate
Portion of Net Sales [******]	[******]
Portion of Net Sales [******]	[******]
Portion of Net Sales [******]	[******]

(b) Royalty Term.  The royalty payment obligations of CMIC for the Net Sales of Product in CMIC Territory at the rates set forth in Section 7.5(a) shall be determined on a country-by-country basis and shall continue until the later of (i) the expiration of the last Valid Claim of the Dyax Patent Rights Covering the composition of matter, use or sale of Product in Field in such country or (ii) the tenth anniversary of the First Commercial Sale of such Product in Field in such country.

(c) Blocking Third Party Patent Rights; In-Licenses.

(i) Dyax shall be responsible for paying any milestones, royalties or other payments due for any In-License of the Blocking Third Party Patent Rights that are allocable to the Development, Manufacture or Commercialization of Product (in its existing form as of the Effective Date) in the HAE Indication in CMIC Territory.

(ii) CMIC shall be responsible for paying any milestones, royalties or other payments due for any In-License of the Blocking Third Party Patent Rights that are allocable to the Development, Manufacture or Commercialization of Product for any Indications other than the HAE Indication in Field in CMIC Territory.

(d) Royalties to [******].  Dyax shall be responsible for all the royalties, milestones or other payments payable to [******] under [******] License Agreement with respect to the Net Sales of Product by CMIC and its Related Parties in Field in CMIC Territory.

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(e)           General.

(i) Royalties shall be calculated (and paid) only once for each Product sold.

(ii) No royalties shall be due upon the sale or other transfer of Product among CMIC or its Related Parties, but in such cases royalties shall be due and calculated upon CMIC's or its Related Party's Net Sales of such Product to the first Third Party.

(iii) No royalties shall accrue on the disposition of Product in reasonable quantities by CMIC or its Related Parties as samples (for promotion or otherwise).

7.6           Net Sales Reports and Royalty Payments.  Within [******] after the end of each Calendar Quarter during which royalties are due from CMIC to Dyax pursuant to Section 7.5, CMIC shall submit to Dyax a report, on a country-by-country basis, providing an accounting of the Net Sales of Product during such Calendar Quarter, and the calculation of the royalties due for such Net Sales under Section 7.5.   Within [******] after the end of such Calendar Quarter, CMIC shall pay to Dyax all such royalties payable by it under Section 7.5, as indicated in the report.

7.7           Audits.  Each Party shall, and shall require its Related Parties to, keep the true and accurate records and books of account containing all the data necessary for the calculation of the amounts payable by it and its Related Parties under this Agreement, including the royalties due under Section 7.5.  Such records and books of account shall be kept by such Party and its Related Parties during the periods required by the applicable laws and regulations, provided that such periods should not be shorter than [******] following the end of the calendar year to which they relate.  Upon one Party's  written request (the "Requesting Party"), the other Party (the "Audited Party") shall permit and have its Related Parties permit an international firm of independent certified public accountants which is appointed by agreement between the Parties or, failing such agreement within [******] after the initiation of discussions between them, appointed by the Requesting Party from such firms that have not performed auditing or other services for either Party or their Related Parties in the previous [******], to  inspect such records and books of account of the Audited Party and its Related Parties and to carry out the following activities:

(a) such accounting firm shall be given access to and shall be permitted to examine and copy such books and records of the Audited Party and its Related Parties and any other documentation that may be relevant for the purposes hereof upon [******] notice having been given to the Audited Party by the Requesting Party and during any reasonable time periods on Business Days for the purpose of certifying  (i) if the Audited Party is CMIC, that the Net Sales or other relevant sums calculated by CMIC and its Related Parties during any calendar year have been reasonably calculated, true and accurate in conformity with this Agreement or, if this is not their opinion, certifying the Net Sales or other relevant sums for such period which in their judgment and evaluation is true and correct; or (ii) if the Audited Party is Dyax, that the Manufacturing Costs charged by Dyax to CMIC during any calendar year have been reasonably calculated, true and accurate in conformity with this Agreement or, if this is not their opinion, certifying the Manufacturing Costs for such period which in their judgment and evaluation is true and correct;

(b) prior to any such examination taking place, such accounting firm shall undertake to the Audited Party in writing that it shall keep all the information and data contained in such books and records strictly confidential and shall not disclose such information and data or copies of such books and records to any Person, including the Requesting Party, but shall only use the same for the purpose of performing the calculations referred to in Section 7.7(a);

(c) any such access, examination and certification shall occur no more than once per calendar year;

(d) the Audited Party shall make and shall have its Related Parties make available to such accounting firm the personnel to answer such accounting firm's reasonable queries on all such books and records which are required for the purpose of calculating the amounts referred to in Section 7.7(a);

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(e) any amount that is found by such accounting firm to be due by one Party to the other Party shall be paid by the owing Party to such other Party within [******] of the final determination of such amount by such accounting firm, provided that, in the event that either Party disagrees on such determination, such Party may refer the matter to the arbitration pursuant to Section 13.3 within [******] of the date of being notified in writing of such determination; and

(f) the reasonable cost of such certification by such accounting firm shall be the responsibility of the Audited Party if the certification shows either (i) that the Audited Party has underpaid monies due to the Requesting Party by more than [******] over a calendar year, or (ii) that the Audited Party has overcharged the Requesting Party for Manufacturing Costs, Development Costs or other relevant sums subject to reimbursement under this Agreement by more than [******] over a calendar year.  In all other instances, the reasonable cost of such certification by such accounting firm shall be the responsibility of the Requesting Party.

7.8           Taxes; Deductions and Set-Offs.  All the payments required under this Agreement shall be made without deduction or withholding of any taxes or similar governmental charges imposed by any governmental agencies in any jurisdictions.  Any withholding taxes imposed on such payments shall be the sole responsibility of the paying Party.  Such payments shall be made without deduction, deferment, set-off, lien or counterclaim of any nature. The Parties recognize that the Parties are required to follow the procedures under the “Convention between the Government of Japan and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income” that may apply to any payments under this Section 7.

7.9           United States Dollars.  All the dollar ($) amounts specified in this Agreement are the United States dollar amounts.

7.10        Currency Exchange.  With respect to the Net Sales invoiced and the expenses incurred in U.S. dollars hereunder, such Net Sales and expenses and the amounts due to the receiving Party hereunder shall be expressed in U.S. dollars.  With respect to the Net Sales invoiced and the expenses incurred in a currency other than U.S. dollars hereunder, such Net Sales and expenses shall be expressed in the currency, in which such Net Sales have been invoiced or such expenses have been incurred, together with their U.S. dollar equivalents, calculated at the average of the spot rate on the first and last Business Days of the Calendar Quarter in which such Net Sales have been invoiced or such expenses have been incurred.  The "closing mid-point rates" found in the "dollar spot forward against the dollar" table published by The Financial Times or any other publication as agreed to by the Parties shall be used as the source of such spot rates.  All the payments hereunder shall be made in U.S. dollars.

7.11        Blocked Payments.  If, by reason of the applicable laws, rules or regulations in any country, it becomes impossible or illegal for CMIC or its Related Parties to transfer, or have transferred on their behalf, the royalties or other payments hereunder to Dyax, CMIC shall promptly notify Dyax of the conditions preventing such transfer and such royalties or other payments shall be deposited by CMIC or its Related Parties in the local currency in the relevant country to the credit of Dyax in a recognized banking institution designated by Dyax or, if none is designated by Dyax within a period of [******] after such notification, in a recognized banking institution selected by CMIC or its Related Party, as the case may be, and identified in a notice given to Dyax.

7.12        Late Payments.  The owing Party shall pay interest to the owed Party on the aggregate amount of any payments that are not paid on or before [******] after the date such payments are due under this Agreement at a rate per annum equal to [******], calculated on the number of days which elapse on and until such payments are paid after the date such payments are due hereunder. The interest shall be compounded monthly.

ARTICLE VIII

INTELLECTUAL PROPERTY OWNERSHIP, PROTECTION AND RELATED MATTERS

8.1           Ownership of Inventions.

(a) Ownership of Product Intellectual Property.   Notwithstanding anything to the contrary contained in this Agreement, the Parties acknowledge and agree that Dyax is, and throughout the Term of this Agreement shall remain, the owner of:

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(i) Existing Dyax Patent Rights; and

(ii) all other Know-How, Patent Rights and other intellectual property that Covers the  Compound or its sale, use or manufacture in Field, including without limitation, any such intellectual property generated, developed, conceived or reduced to practice by or on behalf of CMIC or any of its Related Parties.

(b) Sole Inventions.  Except as set forth in Section 8.1(a), each Party shall exclusively own all the Inventions generated, developed, conceived or reduced to practice in the course of performing the activities under this Agreement solely by such Party, its Related Parties and its and their employees, agents, consultants and contractors ("Sole Inventions").  The Sole Inventions generated, developed, conceived or reduced to practice solely by CMIC, its Related Parties, and its and their employees, agents, consultants and contractors are referred to herein as "CMIC Sole Inventions".  The Sole Inventions generated, developed, conceived or reduced to practice solely by Dyax, its Related Parties, and its and their employees, agents, consultants and contractors, as well as [******], are referred to herein as "Dyax Sole Inventions".

(c) Joint Inventions and Joint Know-How.  Except as set forth in Section 8.1(a), the Parties shall jointly own all the Inventions generated, developed, conceived or reduced to practice in the course of performing the activities under this Agreement jointly by the employees, agents, consultants, and contractors of CMIC and its Related Parties on the one hand, and by the employees, agents, consultants and contractors of Dyax and its Related Parties on the other hand, on the basis of each Party having an undivided interest therein in whole ("Joint Inventions").  The Parties shall jointly own all Joint Know-How and Joint Patent Rights on a worldwide basis deeming such joint ownership to be the same rights as the joint ownership interests of co-inventors named on the United States patents under the United States patent laws, including the right to practice Joint Know-How and Joint Patents and to grant to others a license to the same, without obtaining the consent of or accounting to the other Party.

(d)           Inventorship; Implementation of Joint Ownership.

(i) For the purposes of determining whether a certain Invention is a CMIC Sole Invention, a Dyax Sole Invention or a Joint Invention, the questions of inventorship shall be resolved in accordance with the United States patent laws.  If a dispute arises between the Parties as to such inventorship determination, and such dispute cannot be resolved by the patent counsels to the Parties, the Parties shall refer such determination to a third patent counsel reasonably acceptable to the Parties, who shall make the final determination of such inventorship which shall be binding upon the Parties and their respective inventors.

(ii) In order to implement the rights of joint ownership throughout the world as provided for in Section 8.1(c), each Party hereby assigns to the other Party, and hereby grants to the other Party all the consents, licenses and waivers, in each case that are necessary to achieve such joint ownership and the rights associated with such joint ownership worldwide, and agrees to provide to the other Party the documents that evidence or may be required to record such assignments, consents, licenses and waivers promptly upon the other Party's request.  Promptly after being requested in writing by the other Party, each Party shall provide to the other Party all the documents and instruments required to evidence or record any such assignments, consents, licenses or waivers, or (to the extent consistent with this Agreement) to enforce the rights in Joint Patent Rights.  Each Party hereby appoints the other Party as the appointing Party's attorney-in-fact to execute and deliver each of the foregoing documents and instruments if the other Party is unable to obtain the appointing Party's signature on any such documents and instruments though making reasonable efforts to obtain it.

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8.2           Prosecution and Maintenance of Patent Rights.

(a) As used in this Section 8.2(a), the term "Prosecuting Party" shall mean (i) Dyax with respect to the filing, prosecution and maintenance of Dyax Patent Rights, and any Joint Patent Rights that [******], and (ii) CMIC with respect to the filing, prosecution and maintenance of all other Joint Patent Rights.  The Prosecuting Party shall use Commercially Reasonable Efforts to prepare, file, prosecute and maintain the Patent Rights for which it is responsible under this Section 8.2(a) and shall confer with and keep the other Party reasonably informed regarding the status of such activities. In addition, the Prosecuting Party shall have the following obligations with respect to the filing, prosecution and maintenance of any Patent Rights for which it is responsible under this Section 8.2(a):

(i) the Prosecuting Party shall use Commercially Reasonable Efforts to provide to the other Party for review and comment a substantially completed draft of any patent applications included within the Patent Rights for which it is responsible under this Section 8.2(a) at least [******] prior to the filing of any such patent applications and consider [******] any comments from such other Party if it has received such comments timely;

(ii) the Prosecuting Party shall provide the other Party promptly after any such filing with copies of all the material communications received by it from or filed by it in patent offices with respect to such filing; and

(iii) the Prosecuting Party shall consult with the other Party on any action that would materially affect the scope, validity, enforceability, or maintenance of any Valid Claim included within the Patent Rights for which it is responsible under Section 8.2(a) a reasonable time prior to taking or failing to take such action, including providing access by such other Party to the complete files of any patent nullification, opposition, interference, re-examination, reissue or patent term extension proceedings instituted anywhere in the world without regard to Territory or Field.

Furthermore, if the Prosecuting Party elects not to undertake the preparation, filing, prosecution, defense and/or maintenance of any Patent Rights for which it is made the Prosecuting Party hereunder(or, after commencement of such filing, prosecution, defense and/or maintenance, desires to cease the prosecution, defense or maintenance of any Patent Rights for which it is responsible hereunder), then the Prosecuting Party shall promptly notify the other Party of such election and the other Party shall be entitled (but not obligated), at its expense, to assume the preparation, filing, prosecution, defense and/or maintenance of such Patent Rights.  Notwithstanding the foregoing, CMIC shall not be entitled to assume the preparation, filing, prosecution, defense and/or maintenance of any Dyax Patent Rights that Cover Compound or its use in Field.

(b) Costs and Expenses.  Any costs and expenses incurred by a Party in preparing, filing, prosecuting, maintaining or defending the Joint Patent Rights shall be shared equally by the Parties.  Any costs and expenses incurred by Dyax in preparing, filing, prosecuting, maintaining or defending Dyax Patent Rights in any Territory shall be paid solely by Dyax.

8.3           Third Party Infringement.

(a) Notice.  Each Party shall promptly report in writing to the other Party during the Term any known or suspected (i) infringement of any of Dyax Patent Rights, CMIC Patent Rights or Joint Patent Rights or (ii) unauthorized use of any of Dyax Know-How, CMIC Know-How or Joint Know-How that, in each case, would involve the activities of Third Parties that may adversely affect the Commercialization of Product in Field (a "Competitive Infringement") of which such Party becomes aware and shall provide the other Party with all the available evidence supporting such known or suspected Competitive Infringement. Dyax shall keep CMIC informed of any disputes or proceedings involving any of Dyax Patent Rights anywhere in the world where a Competitive Infringement would involve a product containing Compound.

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(b) Cooperation with Respect to Competitive Infringements.  With respect to any Competitive Infringement described in Section 8.3(a) above, the Parties shall at all times cooperate with, share all material notices and filings in a timely manner with, provide all reasonable assistance to each other and use Commercially Reasonable Efforts to mutually agree upon an appropriate course of action, including, as appropriate, the preparation of material court filings and any discussions concerning prosecution and/or settlement of any claims against any such Competitive Infringements.

(c) Final Authority.  The final decisions on whether to initiate a proceeding, against a Competitive Infringement and the course of action in such proceeding, including settlement negotiations and settlement terms, shall be made (i) with respect to Dyax Patent Rights and any Patent Rights owned solely by Dyax under this Agreement, [******], (ii) with respect to any CMIC Patent Rights, [******], and (iii) with respect to any Joint Patent Rights, [******]. Any disagreement between the Parties concerning the enforcement of Joint Patent Rights shall be referred to Executive Officers for resolution pursuant to Section 13.1 and, if not resolved as provided for in Section 13.1, shall be resolved as provided for in Sections 13.2 and 13.3.

(d) Conduct of Litigation; Costs.  The Party initiating suit with respect to any Competitive Infringement shall have the sole and exclusive right to select counsel for the suit, provided that such selected counsel shall be reasonably acceptable to the other Party and neither previously nor presently adverse to such other Party.  If and to the extent that the initiating Party is unable to initiate or prosecute the suit solely in its own name or it is otherwise advisable in order to obtain an effective remedy through the suit, the other Party shall join the suit at the initiating Party’s cost and shall execute and cause its Related Parties to execute all the documents necessary for the initiating Party to initiate, prosecute and maintain the suit; provided that CMIC shall be required to join any suit initiated by Dyax with respect to a Competitive Infringement only to the extent that such suit relates to the Competitive Infringement in CMIC Territory.  Such other Party shall offer reasonable assistance to the initiating Party in connection with the suit at no charge except for reimbursement of the reasonable out-of-pocket expenses incurred by it in rendering the assistance; provided that CMIC shall be required to offer reasonable assistance to Dyax only to the extent relating to a suit initiated by Dyax in connection with the Competitive Infringement in CMIC Territory  The initiating Party shall assume and pay all of its own out-of-pocket costs incurred by it in connection with any suit, litigation or proceedings initiated by it with respect to a Competitive Infringement, including the fees and expenses of the counsel selected by it.  CMIC shall have the right to participate and be represented in any such suit as is based on a Competitive Infringement in CMIC Territory, by its own counsel at its own expense.

(e) Recoveries. With respect to any suit or action that is based on a Competitive Infringement in CMIC Territory, any recovery obtained as a result of any such proceedings by settlement or otherwise shall be allocated in the following order of priority:

(i) first, the Parties shall be reimbursed for all the costs incurred by them in connection with such proceedings and not otherwise recovered and, if such obtained recovery is less than such costs, the amount of such reimbursement shall be shared pro rata in accordance with the cost incurred by each Party in connection therewith; and

(ii) second [******].

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8.4           Claimed Infringement; Patent Invalidity Claims.  If a Party becomes aware of any claim that the Development, Manufacture or Commercialization of Product would infringe the intellectual property rights of any Third Party, the Party shall promptly notify the other Party of such claim.  For any such case, the Parties shall cooperate and shall mutually agree upon an appropriate course of action.  The costs and expenses of any action instituted for any such case (including the reasonable fees of attorneys and other professionals) shall be borne by the Party defending against the claim.  The other Party may, at its own expense and with its own counsel, participate in such action, defending against the claim. Each Party shall provide to the other Party copies of any notices it receives from Third Parties regarding any patent nullity actions, any declaratory judgment actions and any alleged infringement or misappropriation of Third Party’s intellectual property rights relating to the Development, Manufacture or Commercialization of Product.  Such notices shall be so provided promptly, but in no event after more than [******] following receipt thereof.  Neither Party shall enter into any settlement of such action without the prior written consent of the other Party (which consent shall not unreasonably be withheld, delayed or conditioned) if such settlement includes a finding, stipulation or agreement that any Dyax Intellectual Property or CMIC Intellectual Property is invalid or unenforceable, or results in or requires a reduction in the scope or abandonment of a claim or enforceable right in any Dyax Intellectual Property or CMIC Intellectual Property.  Any disputes between the Parties under this Section 8.4 shall be determined in accordance with the provisions of Section 13.3.

8.5           Patent Term Extensions.  The Parties shall cooperate with each other in gaining patent term extensions and supplemental protection certificates wherever applicable to Patent Rights in CMIC Territory Controlled by either Party that Cover Compound, Product or their method of manufacture or use.  The Parties shall [******].

8.6           Non-Patent Regulatory Exclusivity.  CMIC shall have the exclusive right to apply for Regulatory Exclusivity for Product in Field in CMIC Territory.  As used in this Section 8.6, "Regulatory Exclusivity" shall mean a government-granted right to exclude others from manufacturing, using or selling a pharmaceutical product, other than a right conferred solely by a Patent Right.

8.7           Patent Marking.  To the extent customary in the pharmaceutical industry in each Party's respective Territory and where notice is required to accrue damages or other rights for patent infringement, each Party agrees to comply with the patent marking statutes in each country in its Territory in which Product is sold by such Party and/or its Related Parties.

8.8           Trademarks.

(a) Each Party and its Affiliates shall retain all right, title and interest in and to its and their respective corporate names and logos.

(b) Dyax shall own all Product Trademarks applicable to Product in Field in Dyax Territory or outside of Field in all the countries of the world during the Term ("Dyax Product Trademarks").

(c) Dyax hereby grants CMIC a royalty-free and paid-up license, with the right to grant sublicenses to the Sublicensees under Section 3.1(d), to use Dyax Product Trademarks in connection with the Commercialization of Products in Field in CMIC Territory.  CMIC shall use and shall have such Sublicensees use Dyax Product Trademarks in accordance with the sound trademark and trade name usage principles and any reasonable guidelines provided to CMIC by Dyax in connection therewith.

(d) If and to the extent that Dyax Product Trademarks are not capable of being used in connection with the Commercialization of Product in Field in any country of CMIC Territory, then CMIC and its Sublicensees under Section 3.1(d) shall be free to select and utilize the trademarks of its own ("CMIC Product Trademarks") in connection with the Commercialization of Product in Field in such country of CMIC Territory; provided that any such trademark or its use in the Commercialization of Product shall not adversely affect Dyax's own trademarks or other rights.

(e) If Dyax or CMIC has Knowledge of any suspected infringement of Dyax Product Trademarks or CMIC Product Trademarks by Third Parties, the Party having such Knowledge shall promptly inform the other Party of such suspected infringement.  Dyax and CMIC shall thereafter consult and cooperate with each other to determine the course of action against such suspected infringement.  In any event, Dyax shall have the sole right to take such steps as may be required to enforce Dyax Product Trademarks in any countries of the world, and CMIC shall have the sole right to take such steps as may be required to enforce CMIC Product Trademarks in CMIC Territory.  Each Party shall keep the other Party informed of developments in any court action or proceedings for such suspected infringement, including the status of any settlement negotiations and the terms of any offer related thereto.

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(f) CMIC shall have the sole responsibility and authority for, and control of, all the package labeling and all the package inserts (and any changes or supplements thereto) for Product for Commercialization in CMIC Territory, including determining the packaging and trade dress for Product.

ARTICLE IX

CONFIDENTIALITY AND PUBLICITY

9.1           Confidential Information.  Each Party shall keep in confidence and not disclose to any Third Party, or use for any purpose, except pursuant to, and in order to carry out, the terms and objectives of this Agreement, any Confidential Information of the other Party.  As used herein, "Confidential Information" shall mean all the trade secrets or confidential or proprietary information designated as such in writing by the disclosing Party, including any CMIC Know-How and Dyax Know-How, whether by appropriate letters or by the use of an appropriate stamp or legend, prior to or at the time when any such trade secret or confidential or proprietary information is disclosed by the disclosing Party to the receiving Party.  Notwithstanding the foregoing, the information which is orally or visually disclosed to the receiving Party by the disclosing Party, or is disclosed in writing without appropriate letters, stamps or legends to the receiving Party by the disclosing Party, shall constitute Confidential Information if (x) it would be apparent to a reasonable person, familiar with the disclosing Party's business and the industry in which it operates, that such information is of a confidential or proprietary nature, the maintenance of which is important to the disclosing Party, or (y) the disclosing Party, within [******] after such disclosure, delivers to the receiving Party the written documents describing such information as confidential or proprietary and referencing the place and date of such oral, visual or written disclosure and the names of the employees or officers of the receiving Party to whom such disclosure has been made.  Confidential Information shall further include all the Confidential Information (as such term is defined in the [******] Confidentiality Agreement between the Parties) disclosed to the receiving Party by the disclosing Party pursuant to such Confidentiality Agreement prior to the Effective Date.  The restrictions on the disclosure and use of Confidential Information set forth in this Section 9.1 shall not apply to any Confidential Information that:

(a) is known to the receiving Party or its Affiliates, without any confidentiality and limited-usage obligations for such Confidential Information, prior to disclosure of such Confidential information to them by the disclosing Party or its Affiliates hereunder or under the Confidentiality Agreement (as evidenced by the receiving Party's or its Affiliates' written records);

(b) is part of the public domain or publicly known prior to disclosure of such Confidential Information to the receiving Party or its Affiliates by the disclosing Party or its Affiliates, or becomes part of the public domain or publicly known through no fault of the receiving Party or its Affiliates;

(c) is disclosed to the receiving Party or its Affiliates, without any confidentiality and limited-usage obligations for such Confidential Information, by  Third Party having the legal right to make such disclosure without violating any confidentiality and limited usage obligations  that such Third Party assumes towards the disclosing Party or its Affiliates; or

(d) is independently discovered or developed by the receiving Party or its Affiliates (as evidenced by the receiving Party's or its Affiliates' written records).

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Notwithstanding the obligations of confidentiality and limited-usage set forth above, the receiving Party may provide the Confidential Information disclosed to it to (i) Regulatory Authorities or other governmental authorities in order to seek or seek or obtain patents or to gain or maintain the authorization to Develop, Manufacture or Commercialize Product hereunder; provided that such Confidential Information shall be disclosed only to the extent reasonably necessary to seek or obtain patents or to gain or maintain such authorization, (ii) the extent required by the applicable laws, including the rules or regulations of the United States Securities and Exchange Commission or similar governmental authorities in countries other than the United States. as well as the rules or regulations of any stock exchange or listing entities, (iii) any bona fide actual or prospective underwriters, investors, lenders, other financing sources, collaborators, licensees, sublicensees, strategic partners or acquirors, in each case who are subject to the confidentiality and limited-usage obligations with respect to such Confidential Information no less strict than those set forth in this Section 9.1, to the extent reasonably necessary to enable such actual or prospective underwriters, investors, lenders, other financing sources, collaborators, licensees, sublicensees, strategic partners or acquirors to determine their interest in underwriting an issue of, making an investment in, lending money to, otherwise providing financing to, collaborating with, licensing intellectual properties from, partnering with or acquiring, the receiving Party.  In addition, if either Party is required to disclose the Confidential Information of the other Party by regulations, laws or legal processes, including the rules or regulations of FDA, any similar Regulatory Authorities in countries other than the United States, the United States Securities and Exchange Commission or any stock exchange or listing entities, such Party shall, if practicable under the circumstances, provide to such other Party, prior to such intended disclosure, a copy of the proposed text of any such written disclosure or the proposed content of any such non-written disclosure, and the disclosing Party shall consider in good faith any comments received by it from such other Party with respect to such proposed disclosure and shall disclose only such Confidential Information of such other Party as is so required to be disclosed.  The Parties agree and acknowledge that each Party is subject to the disclosure requirements under the Securities Exchange Act of 1934 and related laws and regulations.  Therefore, in addition to the foregoing obligations, if a Party is required to publicly disclose the other Party's Confidential Information in accordance with such laws or regulations, the Party subject to such disclosure obligations shall, at least [******] prior to such intended disclosure (unless impracticable under the circumstances), provide to such other Party a copy of the proposed text of any such disclosure, so as to permit such other Party to publicly disclose the Confidential Information on or before the date on which the Party originally subject to such disclosure obligations publicly discloses the Confidential Information in accordance with such laws or regulations. The confidentiality and limited-usage obligations set forth in this Section 9.1 and in the Confidentiality Agreement shall survive the expiration or termination of this Agreement and shall continue for [******] after such expiration or termination.

9.2           Related Party, Employee, Consultant and Advisor Obligations.  Except as set forth in Section 9.1, each Party may provide or permit access to the Confidential Information received by such party from such Party only to the receiving Party's Related Parties, and to the employees, consultants, advisors and subcontractors of such Party and its Related Parties, who have a need to know such Confidential Information to assist such Party and its Related Parties with the Development, Manufacture and Commercialization of Product in accordance with this Agreement and who are subject to the obligations of confidentiality and limited-usage with respect to such Confidential Information no less strict than the obligations of confidentiality and limited-usage imposed on such Party as set forth in Section 9.1; provided that Dyax and CMIC should each remain responsible for any failure by its Related Parties, and its and its Related Parties' respective employees, consultants, advisors and subcontractors, to treat such Confidential Information as required under this Section 9.2.

9.3           Publicity; Terms of Agreement.

(a) Following the Effective Date, the Parties shall at a mutually agreeable time issue a mutually agreeable joint press release regarding the subject matter of this Agreement.  After issuance of such initial joint press release, neither Party shall issue any other press release or public announcement regarding the execution or terms of this Agreement without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed, except that a Party may (i) issue such press release or public announcement regarding the execution or terms of this Agreement if the contents of such press release or public announcement have previously been made public other than through a breach of this Agreement by the issuing Party; and (ii) issue such press release or public announcement regarding the execution or terms of this Agreement if required by the applicable regulations or laws, including the rules or regulations of FDA, the United States Securities and Exchange Commission or similar Regulatory Authorities in a countries other than the United States or of any stock exchange or listing entities; provided that, with respect to the press releases and public announcements made pursuant to the foregoing clause (ii), the Party subject to such requirement includes in the press releases or public announcements only such information relating to Compound, Product or this Agreement as is required by such applicable regulations or laws, and shall comply with the last three (3) sentences of Section 9.1.

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(b) In addition, if at any time a Party is legally required to file a copy of this Agreement with the Securities and Exchange Commission (or its counterpart in any country other than the United States), the Party shall attempt to obtain confidential treatment of such economic and trade secret information as included herein for which such treatment is reasonably available in accordance with the applicable laws and regulations and the SEC's (or its counterpart's) practice.  To that end, the Party shall, at least fifteen (15) days in advance of any such filing, provide the other Party with a draft set of redactions to this Agreement for which confidential treatment should be so sought from them, and shall incorporate such other Party's reasonable comments as to the additional information, which it would like to redact, into the above economic and trade secret information, and shall seek from them the confidential treatment for such additional information.

(c) Either Party may further disclose the terms of this Agreement which have been publicly disclosed pursuant to Sections 9.3(a) or (b).  Otherwise, the terms of this Agreement shall be treated as Confidential Information of both Parties.  Such undisclosed terms may be disclosed by a Party to its prospective and actual licensees, Sublicensees, employees, officers, consultants, subcontractors, agents, accountants, lawyers, advisers, bankers, lenders and investors who are bound to the obligations of confidentiality and limited-usage substantially equivalent in scope and extent to or no less strict than those set forth in this Article IX.

9.4           Publications.  During the Term, if a Party desires to publicly disclose any New Information in scientific journals or publications or through scientific presentations, the Party shall provide the other Party with an advance copy of any such proposed abstracts, posters, scientific presentations and scientific journals or publications incorporating such New Information prior to submission for publication.  With regard to such abstracts, posters, and scientific presentations, the advance copy shall be provided by the Party to the other Party at least [******] prior to submission for public disclosure.  With regard to such scientific journals or publications, the advance copy shall be provided by the Party to the other Party at least [******] prior to submission for public disclosure.  The other Party shall have a reasonable opportunity to recommend to the Party any changes to such advance copies it [******].  The disputes concerning the public disclosure shall be referred to Executive Officers for resolution pursuant to Section 13.1 and, if not resolved as provided for in Section 13.1, shall be resolved as provided for in Sections 13.2 and 13.3.  For the purposes of this Section 9.4, "New Information" shall mean any and all ideas, inventions, data, writings, protocols, discoveries, improvements, trade secrets, materials or other proprietary information which has not been previously disclosed to the public, which may arise, be conceived or developed by the Parties or their Related Parties during the Term in the course of performing this Agreement and which is specifically related to the Development, Manufacture or Commercialization of Product.

ARTICLE X

REPRESENTATIONS AND WARRANTIES

10.1           Representations of Authority.  Each Party represents and warrants to the other Party that, as of the Effective Date, it has the full corporate right, power and authority to enter into this Agreement and to perform its obligations under this Agreement; that it has the right to grant to the other Party the licenses and sublicenses granted to the other Party pursuant to this Agreement; and that this Agreement has been duly executed by such Party.

10.2           Consents.  Each Party represents and warrants to the other Party that, except for any Regulatory Approvals, pricing and/or reimbursement approvals, manufacturing approvals and/or similar approvals necessary for the Development, Manufacture or Commercialization of Product, all the necessary consents, approvals and authorizations of all the government authorities and other persons required to be obtained by it as of the Effective Date in connection with the execution, delivery and performance of this Agreement have been obtained by the Effective Date.

10.3           No Conflict.  Each Party represents and warrants to the other Party that, notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement by such Party, the performance of such Party's obligations hereunder and the licenses and sublicenses to be granted by such Party pursuant to this Agreement (a) do not conflict with or violate any requirements of any laws, rules or regulations existing as of the Effective Date and applicable to such Party and (b) do not conflict with, violate, breach or constitute a default under any contractual obligations of such Party or any of its Affiliates existing as of the Effective Date.

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10.4         Enforceability.  Each Party represents and warrants to the other Party that, as of the Effective Date, this Agreement constitutes a legal and valid obligation binding upon such Party and is enforceable against such Party in accordance with the terms and conditions hereof, except as such enforceability may be limited by applicable insolvency and other applicable laws affecting creditors' rights generally or by the availability of equitable remedies.

10.5         No Debarment.  Each Party represents and warrants to the other Party that neither such Party nor any of its Affiliates has been debarred or is subject to debarment under the applicable laws of any country in any Territory. Each Party agrees that neither it nor any of its Affiliates will use in any capacity, in connection with the Development, Manufacture or Commercialization of Product, any person who has been debarred under the applicable laws of any country in any Territory.  Each Party agrees to inform the other Party in writing immediately if such Party or any person used by such Party or any of its Affiliates to perform services hereunder is debarred or is the subject of a conviction, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to the best of such Party's Knowledge, is threatened, relating to the debarment or conviction of such Party or any person used in any capacity by such Party or any of its Affiliates in connection with the Development, Manufacture or Commercialization of Product.

10.6         Additional Representations and Warranties of Dyax.  Dyax represents and warrants to CMIC that, as of the Effective Date:

(a) Dyax has not granted, and will not grant during the Term, any rights, licenses or interests in or to Dyax Intellectual Property or any other intellectual property in the way that would conflict with any of the rights or licenses granted by Dyax to CMIC under this Agreement;

(b) except for [******] License Agreement, there is no agreement between Dyax and any Third Party that imposes an obligation to pay royalties or any other amounts to such Third Party based on the Development, Manufacture or Commercialization of Product in Field in CMIC Territory;

(c) Exhibit B sets forth a complete and correct list of all the Dyax Patent Rights existing as of the Effective Date that claim Compound, Product, its formulation or method of manufacture or use; except for the Dyax Patent Rights licensed under [******] License Agreement, Dyax is the sole and exclusive owner (as listed in the records of the relevant governmental entities) of all the rights, titles and interests in and to Existing Dyax Patent Rights and any other Dyax Intellectual Property;

(d) Dyax has not granted and shall not grant any lien, security interest, mortgage or other encumbrance (excluding any licenses) with respect to any Dyax Intellectual Property, and has not permitted and shall not permit any lien, security interest, mortgage or other encumbrance (excluding any licenses) to attach to any Dyax Intellectual Property;

(e) Dyax has obtained the effective assignment of all the rights, titles and interests of any and all Third Parties (including officers and employees) in and to Existing Dyax Patent Rights (and all the Inventions claimed thereunder); all the inventors of any Dyax Patent Rights have executed or will have executed effective assignments of such inventions to Dyax, and all such assignments are and shall be valid and enforceable;

(f) the issued Existing Dyax Patent Rights are in full force and to the Knowledge of Dyax: (i) all the necessary registration, maintenance and renewal fees and any other payment due and owed with respect to such Patent Rights have been fully paid and all the necessary documents and certificates have been filed with the relevant governmental entities for the purpose of maintaining such Patent Rights; (ii) such Patent Rights disclose the patentable subject matters under 35 U.S.C. Section 101 and their counterparts under the laws of the jurisdictions outside the United States; and (iii) Dyax and each of its Affiliates have complied with the required duty of candor and good faith in dealing with the U.S. Patent and Trademark Offices and similar governmental entities in other countries (collectively, the "Patent Offices"), including the duty to disclose to the Patent Offices all the information required to be disclosed under all the applicable laws and regulations;

(g) there are no claims or demands of any Third Party or any actions, suits or other proceedings (including re-examination, opposition or interference proceedings) pending or threatened against Dyax or any of its Affiliates with respect [******]; and

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(h) to the Knowledge of Dyax, the development, manufacture, commercialization, use or sale of Product (as it exists on the Effective Date) in the HAE Indication as contemplated hereunder [******].

10.7        No Warranties.  EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATION OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, TO THE OTHER PARTY, AND, EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, EACH PARTY HEREBY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT WITH RESPECT TO COMPOUND AND PRODUCT.  EACH PARTY HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE DEVELOPMENT, MANUFACTURE AND COMMERCIALIZATION OF PRODUCT PURSUANT TO THIS AGREEMENT WILL BE SUCCESSFUL.

ARTICLE XI

INDEMNIFICATION, DAMAGES AND INSURANCE

11.1       By CMIC.  CMIC shall defend, indemnify and hold harmless Dyax, its Affiliates and licensees and their respective directors, officers, employees and agents from and against all claims, demands, liabilities, damages, penalties, fines, costs and expenses, including reasonable attorneys' and expert fees and costs, and reasonable costs or amounts paid to settle (collectively, "Losses"), arising from or occurring as a result of a Third Party's claim (including any Third Party product liability or infringement claim), action, suit, judgment for or settlement with such Third Party to the extent that such Losses are due to or based upon:

(a) the negligence, recklessness, bad faith, intentional wrongful acts or omissions or violations of the applicable laws or regulations by or of CMIC, its Related Parties or their respective directors, officers, employees or agents in relation to this Agreement; or

(b) the breach by CMIC of the terms of, or the inaccuracy of any representation or warranty made by it in this Agreement; or

(c) other activities conducted by CMIC or its Related Parties under this Agreement to Develop, Manufacture or Commercialize Product in Field in CMIC Territory;

except to the extent that such Losses arise out of, and are allocable to any cause set forth in Section 11.2(a) or (b) or (c).

11.2       By Dyax.  Dyax shall defend, indemnify and hold harmless CMIC, its Affiliates or Sublicensees and their respective directors, officers, employees and agents from and against all Losses arising from or occurring as a result of a Third Party's claim (including any Third Party product liability or infringement claim), action, suit, judgment for or settlement with such Third Party to the extent that such Losses are due to or based upon:

(a) the negligence, recklessness, bad faith, intentional wrongful acts or omissions or violations of the applicable laws or regulations by or of Dyax, its Related Parties or their respective directors, officers, employees or agents in relation to this Agreement; or

(b) the breach by Dyax of the terms of, or the inaccuracy of any representation or warranty made by it in this Agreement; or

(c) other activities conducted by Dyax or its Related Parties under this Agreement to Develop, Manufacture or Commercialize Product in Field in Dyax Territory or outside Field in all countries of the world;

except to the extent that such Losses arise out of, and are allocable to any cause set forth in Section 11.1(a), (b) or (c).

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11.3       Claims for Indemnification.

(a) A Person entitled to indemnification under Section 11.1 or 11.2 (the "Indemnified Party") shall give prompt written notification to the Party from whom such indemnification is sought (the "Indemnifying Party") of the commencement of any action, suit or proceeding relating to a Third Party claim for which such indemnification may be sought or, if earlier, upon the assertion of any such claim against the Indemnified Party by a Third Party (it being understood and agreed, however, that the failure by the Indemnified Party to give notice of a Third Party’s claim as provided for in this Section 11.3 shall not relieve the Indemnifying Party of its indemnification obligation under this Article XI except and only to the extent that the Indemnifying Party is actually prejudiced as a result of such failure to give notice).

(b) Within [******] after delivery of such notice, the Indemnifying Party may, upon written notice to the Indemnified Party, assume control of the defense of such action, suit, proceeding or claim with counsel reasonably satisfactory to the Indemnified Party.  If the Indemnifying Party does not assume control of such defense, the Indemnified Party shall control such defense.

(c) The Party not controlling such defense may participate therein at its own expense; provided that, if the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably concludes, based on advice from its counsel, that the Indemnifying Party and the Indemnified Party have conflicting interests with respect to such action, suit, proceeding or claim, the Indemnifying Party shall be responsible for the reasonable fees and expenses of counsel to the Indemnified Party solely in connection therewith; provided further that in no event shall the Indemnifying Party be responsible for the fees and expenses of more than one counsel in any one jurisdiction for all the Indemnified Parties.

(d) The Party controlling such defense shall keep the other Party advised of the status and development of such action, suit, proceeding or claim and the defense thereof and shall consider reasonable recommendations made by the other Party with respect thereto.

(e) The Indemnified Party shall not agree to any settlement of such action, suit, proceeding or claim without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, delayed or conditioned.  The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, agree to any settlement of such action, suit, proceeding or claim or consent to any judgment in respect thereof that does not include a complete and unconditional release of the Indemnified Party from any and all liabilities and obligations with respect thereto or that imposes any liabilities or obligations on the Indemnified Party.

11.4        No Consequential or Punitive Damages.  NEITHER PARTY HERETO SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING OUT OF THIS AGREEMENT OR THE EXERCISE OF ITS RIGHTS HEREUNDER, OR FOR LOST PROFITS ARISING FROM OR RELATING TO ANY BREACH OF THIS AGREEMENT, REGARDLESS OF ANY NOTICE OF SUCH DAMAGES; PROVIDED THAT NOTHING IN THIS SECTION 11.4 IS INTENDED TO LIMIT OR RESTRICT (A) THE INDEMNIFICATION RIGHTS OR OBLIGATIONS OF EITHER PARTY WITH RESPECT TO THIRD PARTY CLAIMS,OR (B) ANY CLAIMS WITH RESPECT TO A BREACH OF A PARTY'S OBLIGATIONS OF CONFIDENTIALITY OR LIMITED-USAGE IN ARTICLE IX.

11.5        Product Liability Insurance.  During the Term and for a period of [******] after the expiration of this Agreement or the earlier termination hereof, CMIC shall obtain and/or maintain, at its sole cost and expense, product liability insurance (including any self-insured arrangements); provided that clinical trial insurance policies shall be required from CMIC only while the clinical trials hereunder are ongoing. The product liability insurance or self-insured arrangements shall insure against all reasonably anticipated liability for personal injury, physical injury, property damage or any other injury or damage arising in connection with the manufacture, sale, distribution or marketing of Product in CMIC Territory.  Such insurance shall not be construed to create a limit of CMIC’s liability under the terms of this Agreement.  CMIC shall provide Dyax with a copy of the certificate of such insurance and/or self insurance or other evidence of such insurance and/or self-insurance, upon request.  Furthermore, CMIC shall use Commercially Reasonable Efforts to provide Dyax with written notice at least [******] prior to the cancellation of, non-renewal of or material change to, such insurance and/or self-insurance that materially adversely affects the rights of Dyax hereunder.

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ARTICLE XII

TERM AND TERMINATION

12.1        Term.  Unless terminated earlier in accordance with this Article XII, this Agreement shall remain in force for the period commencing on the Effective Date and ending on the expiration of the last Royalty Term to expire under this Agreement (the "Term").

12.2        Termination Rights.

(a) Termination for Convenience.  CMIC shall have the right to terminate this Agreement at any time after the Effective Date on [******] prior written notice to Dyax.

(b) Termination For Breach.

(i) Upon any material breach of this Agreement by a Party (the "Breaching Party"), the other Party (the "Non-Breaching Party") may terminate this Agreement by providing written notice to the Breaching Party specifying the nature of such material breach (a "Termination Notice").

(ii) The termination hereof as provided for in Section 12.2(b)(i) above shall become effective [******] following receipt of a Termination Notice by the Breaching Party unless the Breaching Party cures such specified material breach during such [******] grace period.  Notwithstanding the foregoing, (i) if such material breach, by its nature, is incurable, the Non-Breaching Party may terminate this Agreement immediately upon receipt of a Termination Notice by the Breaching Party and (ii) if such material breach (other than a payment breach), by its nature, is curable, but not within the foregoing grace period, then the grace period shall be extended if the Breaching Party provides a written plan for curing such material breach to the Non-Breaching Party and uses Commercially Reasonable Efforts to cure such material breach in accordance with such written plan; provided that no such extension shall exceed [******] without the written consent of the Non-Breaching Party.

(iii) Notwithstanding the provisions of Sections 12.2(b)(i) and (ii), if the Non-Breaching Party gives a Termination Notice to the Breaching Party pursuant to Section 12.2(b)(i), and if, as of the end of the grace period set forth in Section 12.2(b)(ii), the Parties are engaged in an arbitration pursuant to Section 13.3 in which the Breaching Party disputes the basis for termination hereof pursuant to Section 12.2(b)(i), then this Agreement shall be terminated [******] after whichever comes earlier, (A) or (B) below;

(A) the arbitrator of such arbitration issues an award upholding the basis for termination hereof, or

(B) the Breaching Party elects to end such dispute, and concedes that its breach hereof as specified in a Termination Notice should be the basis for termination hereof;

unless the Breaching Party cures its breach hereof within [******] of such earlier event.

(c) Termination for Bankruptcy. A Party may terminate this Agreement should the other Party:

(i) commit an act of bankruptcy;

(ii) be declared bankrupt;

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(iii) voluntarily file or have filed against it a petition for bankruptcy or reorganization (unless such petition is dismissed within [******] of such filing or such petition is for a reorganization under Chapter 11 of the Bankruptcy Code or any relevant foreign equivalent thereof and such Party is not in default at the time of the filing of such petition or at any time during such reorganization of any of its obligations under this Agreement); or

(iv) enter into a procedure of winding up to dissolution, or should a trustee or receiver be appointed for its business assets or operations.

All the rights and licenses granted under or pursuant to this Agreement are, and shall otherwise be deemed to be, for the purposes of Section 365(n) of the Bankruptcy Code, license rights to "intellectual property" as defined under Section 101(60) of the Bankruptcy Code. The Parties agree that any Party, as a licensee hereunder, shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code or any relevant foreign equivalent thereof.

(d) Challenges of Patent Rights.  If a Party or any of its Related Parties (the "Challenging Party") should (i) commence or participate in any action or proceeding (including any patent opposition or re-examination proceeding), or otherwise assert in writing any claim, challenging or denying the validity of any of the Patent Rights licensed to the Challenging Party hereunder or any claim thereof or (ii) actively assist any other Person in bringing or prosecuting any action or proceeding (including any patent opposition or re-examination proceeding) challenging or denying the validity of any of such Patent Rights or any claim thereof, the other Party shall have the right to give notice to the Challenging Party (which notice shall be given, if at all, within [******] after the other Party first learns of the foregoing) to the effect that the licenses granted to the Challenging Party to such Patent Rights shall terminate in [******] following such notice and, unless the Challenging Party withdraws or causes to be withdrawn all such challenge(s) within such [******] period, such licenses shall terminate.

12.3        Consequences of Termination.

(a) Termination by Dyax for Cause.

(i) Without limiting any other legal or equitable remedies that Dyax may have, if Dyax terminates this Agreement in accordance with Section 12.2(b), (c) or (d) then:

(A) CMIC's obligations under Section 5.1(b) shall survive for a period of [******] after such termination;

(B) CMIC shall, as promptly as practicable, transfer to Dyax or Dyax's designee all the records and materials in CMIC's possession or control containing the Confidential Information of Dyax;

(C) to the extent necessary and permitted under the applicable laws, CMIC shall appoint Dyax as CMIC's and/or CMIC's Related Parties' agent for all the Product-related matters involving the Regulatory Authorities in CMIC Territory until all the Regulatory Approvals and other regulatory filings for Product have been transferred from CMIC and/or CMIC's Related Parties to Dyax or its designee;

(D) if the effective date of such termination is after First Commercial Sale, to the extent necessary and permitted under the applicable laws, CMIC shall appoint Dyax as its exclusive distributor of Product in CMIC Territory and grant Dyax the right to appoint the sub-distributors of Product, until such time as all the Regulatory Approvals in CMIC Territory have been transferred from CMIC and/or CMIC's Related Parties to Dyax or its designee;

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(E) CMIC shall transfer to Dyax or Dyax's designee the possession and ownership of all the Regulatory Approvals and pricing and reimbursement approvals in CMIC's possession and ownership relating to Product in CMIC Territory subject to reimbursement by Dyax of all the costs and expenses incurred by CMIC or its Related Parties for obtaining such approvals; the amount to be reimbursed by Dyax to CMIC under this Section 12.3(a)(i)(E) shall be first set off any outstanding amounts due from CMIC to Dyax under Article VII;

(F) at Dyax’s request and subject to Dyax acquiring the relevant Regulatory Approvals under Section 12.3(a)(i)(E) above, CMIC shall provide reasonable assistance to allow the transfer to Dyax of any Third Party agreements relating to the Commercialization of Product in CMIC Territory to which CMIC is a party, to the extent that such transfer is not expressly prohibited by the terms of such Third Party agreements;

(G) CMIC shall grant Dyax an exclusive license, with the right to grant sublicenses through multiple tiers, under the CMIC Development Data that relates solely to Product, to Develop, Manufacture and/or Commercialize Product (or conduct the Regulatory Activities related thereto) in Field and throughout the world. The license granted pursuant to this Section 12.3(a)(i)(G) shall be royalty-free, fully-paid and perpetual; provided that, if and to the extent that any such license includes any sublicense of Third Party’s intellectual property, then such sublicense shall be subject to such Third Party’s consent and subject to the terms and conditions of the license between CMIC and such Third Party, and Dyax shall be responsible for the payment to such Third Party of any and all the fees, payments and royalties due under such license between CMIC and such Third Party as a result of the practice by Dyax and its Related Parties of such Third Party’s so sublicensed intellectual property.

(b) Termination by CMIC for Convenience.  If CMIC terminates this Agreement in accordance with Section 12.2(a), then:

(i) the provisions of Section 12.3(a)(i)(A)-(F) shall apply; and

(ii) CMIC shall grant to Dyax (x) an exclusive license, with the right to grant sublicenses, under the CMIC Development Data that relates solely to Product, to develop, manufacture and/or commercialize products containing Compound (or conduct the regulatory activities thereto) in and outside Field and throughout the world and (y) a non-exclusive license, with the right to grant sublicenses, under all the other CMIC Development Data, to develop, manufacture and/or commercialize products containing Compound (or conduct the regulatory activities thereto) in and outside Field and throughout the world.  The licenses granted pursuant to this Section 12.3(b)(ii) shall be royalty-free, fully-paid and perpetual; provided that, if and to the extent that any such license includes any sublicense of Third Party’s intellectual property, then such sublicense shall be subject to such Third Party’s consent and subject to the terms and conditions of the license between CMIC and such Third Party, and Dyax shall be responsible for the payment to such Third Party of any and all the fees, payments and royalties due under such license between CMIC and such Third Party as a result of the practice by Dyax and its Related Parties of such Third Party’s so sublicensed intellectual property.

(c) Termination by CMIC for Cause.  Without limiting any other legal or equitable remedies that CMIC may have, if CMIC has the right to terminate this Agreement in accordance with Section 12.2(b), (c) or (d), then CMIC may, by notice to Dyax, elect to continue this Agreement or to terminate this Agreement, with the consequences set forth in either Section 12.3(c)(i) or Section 12.3(c)(ii), as applicable.

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(i) If CMIC elects to continue this Agreement:  (A) effective as of the date when CMIC has obtained the right to terminate this Agreement, the payments payable by CMIC to Dyax pursuant to Section 7.5 hereof shall be reduced, as liquidated damages to be paid to CMIC by Dyax, and not as a penalty to be paid to CMIC by Dyax, to [******] of the amounts that otherwise would have been payable to Dyax by CMIC; and (B) all the other provisions of this Agreement shall remain in full force and effect without change.

(ii) If CMIC elects to terminate this Agreement, as of the effective date of such termination, all the rights and obligations of the Parties under this Agreement shall terminate except as set forth in Section 12.4.

12.4        Survival.  On the occasion of any expiration or termination of this Agreement, (a) all the financial obligations owed under Article VII as of the effective date of such expiration or termination shall remain in effect, (b) all the obligations to pay damages in connection with any material breach of this Agreement that has not been cured or otherwise resolved or settled as of the effective date of such expiration or termination shall remain in effect, and (c) the provisions set forth in Article XIII and in Sections 4.8(a), 4.8(b), 4.9, 5.5, 7.7, 7.8, 7.9, 7.10, 7.11, 7.12, 8.1, 9.1, 9.2, 9.3, 10.7, 11.1, 11.2, 11.3, 11.4, 12.3, 12.4, 14.1 and 14.13, and all other provisions contained in this Agreement that by their terms survive expiration or termination of this Agreement, shall survive such expiration or termination.  In addition, if this Agreement is not terminated according to Section 12.2 but expires according to Section 12.1, the licenses granted in Sections 3.1, 3.2 and 8.8(c) shall survive as perpetual, fully paid-up, non-royalty-bearing licenses, and any exclusive license in such Sections shall convert to a non-exclusive license. The provisions set forth in Section 4.8 shall remain in effect as long as the Pharmacovigilance Agreement remains in effect or until the date the Pharmacovigilance Agreement otherwise provides for.  The provisions set forth in Section 6.2 shall remain in effect as long as the Quality Agreement remains in effect or until the date the Quality Agreement otherwise provides for. The provisions set forth in Sections 6.1, 6.3, 6.4 and 6.6 shall remain in effect as long as the Supply Agreement remains in effect or until the date the Supply Agreement otherwise provides for.

ARTICLE XIII

DISPUTE RESOLUTION

13.1        Referral to Executive Officers.  If for any reason the JSC cannot resolve any matter referred to it, either Party may refer such matter to Executive Officers for resolution.  If after discussing such matter, or any other matter to be resolved pursuant to this Section 13.1 pursuant to this Agreement, in good faith and attempting to find a mutually satisfactory resolution to it, Executive Officers fail to come to consensus on it within [******] after the date on which it is referred to Executive Officers, the provisions of Section 13.2 shall apply.  The resolutions reached through the provisions of Section 13.1 or 13.2 shall be binding on the Parties.

13.2        Final Decision-Making Authority Allocated to a Single Party.  If Executive Officers fail to come to consensus on any matter referred to them according to Section 13.1 (other than the matters referred to the JSC under Sections 3.4, 4.3 and 4.4) within the period for resolution set forth in Section 13.1, then:

(a) on any matter solely relating to the Development, Regulatory Approval, packaging and labeling and Commercialization of Product in Field in CMIC Territory, CMIC shall have the final decision-making authority; provided that:

(i) with respect to any matter that Dyax reasonably concludes could adversely impact on any Regulatory Approval of Product outside of CMIC Territory (including the timing of such Regulatory Approval), Dyax shall have the final decision-making authority; and

(ii) with respect to any matter relating to any reformulation of Product, Dyax shall have the final decision-making authority;

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(b) on any matter solely relating to the Development, Regulatory Approval, Manufacturing, and Commercialization of Products in Field in Dyax Territory or outside Field in any country of the world, Dyax shall have the final decision-making authority;

(c) on any matter that is reasonably likely to materially and adversely impact on the safety profile of Product in or outside Field (including matters relating to Product formulation and safety), Dyax shall have the final decision-making authority; and

(d) notwithstanding the foregoing provisions of this Section 13.2, neither Party shall have the final decision-making authority pursuant to this Section 13.2 with respect to any matters (i) over which the other Party is expressly allocated the final decision-making authority elsewhere in this Agreement and (ii) for which this Agreement expressly provides that a decision shall not be made without the approval or consent of the other Party.

13.3       Arbitration.  Any dispute arising out of or relating to this Agreement that is not finally resolved through the provisions of Section 13.1 or 13.2, including the interpretation of this Agreement and any breach or alleged breach of this Agreement, shall be resolved through binding arbitration as described below; provided that the specific matters for which this Agreement expressly provides that a decision shall not be made without the approval or consent of one or both of the Parties shall not be subject to resolution under this Section 13.3.  Furthermore, the following procedures shall apply to all the arbitration proceedings pursuant to this Agreement:

(a) A Party may submit such dispute to arbitration by notifying the other Party, in writing, to that effect.  Within [******] after receipt of such notice by the other Party, the Parties shall designate in writing a single arbitrator to resolve the dispute; provided that, if the Parties cannot agree on such arbitrator within such [******] period, the arbitrator shall be selected by the International Court of Arbitration of the International Chamber of Commerce ("ICC").  The arbitrator shall be a lawyer knowledgeable and experienced in the law concerning the subject matter of the dispute and a technical expert in the applicable field if the subject matter of the dispute involves a technical issue, and shall not be an employee, consultant, agent, officer, director or stockholder of either Party or its Related Parties.

(b) Within [******] after the designation of the arbitrator, the arbitrator and the Parties shall meet, at which time the Parties shall be required to set forth in writing all the disputed issues and their proposed ruling on the merits of each such issue.

(c) The arbitrator shall set a date for a hearing, which shall be no later than [******] after the submission of written proposals pursuant to Section 13.3(b), to discuss each of the issues identified in such proposals by the Parties.  The Parties may be accompanied or represented by counsel in the arbitration.  Except as provided for herein, the arbitration shall be governed by the Arbitration Rules of the ICC applicable at the time of the notice of arbitration pursuant to Section 13.3(a); provided that the arbitration shall be conducted by a single arbitrator.

(d) The arbitrator shall use his or her best efforts to rule on each disputed issue within [******] after the completion of the hearings described in Section 13.3(c)  The determination of the arbitrator as to the resolution of any dispute shall be binding and conclusive upon both Parties.  All the rulings of the arbitrator shall be in writing and shall be delivered to the Parties.

(e) The (i) attorneys' fees of the Parties in the arbitration, (ii) fees of the arbitrator and (iii) costs and expenses of the arbitration shall be borne by the Parties as determined by the arbitrator.

(f) Any arbitration pursuant to this Section 13.3 (including the meeting under (b) and the hearing under (c) of this Section 13.3) shall be conducted in English in Paris, France.

(g) Nothing in this Section 13.3 shall be construed as limiting in any way the right of a Party to seek injunctive relief with respect to any actual or threatened breach of this Agreement from, or to bring an action in aid of arbitration in, a court in accordance with Section 14.1.  Should any Party seek such injunctive relief, then for the purposes of determining whether to grant such injunctive relief, the dispute underlying the request for such injunctive relief may be heard by a court in accordance with Section 14.1.

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(h) The arbitrator shall not award the damages excluded pursuant to Section 11.4.

(i) The Parties agree to continue performing under this Agreement in accordance with its provisions pending the final resolution of any dispute through the arbitration as provided for in this Section 13.3, and, without limiting the foregoing, shall continue to cooperate and participate in the committees provided for in this Agreement.

ARTICLE XIV

MISCELLANEOUS

14.1       Choice of Law; Jurisdiction.  This Agreement shall be governed by and interpreted under the laws of the Commonwealth of Massachusetts excluding: (a) its conflicts of laws principles; (b) the United Nations Conventions on Contracts for the International Sale of Goods; (c) the 1974 Convention on the Limitation Period in the International Sale of Goods; and (d) the Protocol amending such 1974 Convention, done at Vienna April 11, 1980.   Subject to Section 13.3, each Party shall submit to the non-exclusive jurisdiction of the state and federal courts sitting in Boston, Massachusetts, United States with respect to any actions or proceedings (other than those described in Section 13.3) arising out of or relating to this Agreement.  Each Party shall waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and shall waive any bond, surety or other security that might be required of the other Party with respect thereto.  Each Party may serve a process on the other Party by sending or delivering a copy of the process to such other Party at the address and in the manner provided for in Section 14.2.  Nothing in this Section 14.1, however, shall affect the right of any Party to serve a legal process in any other manner permitted by law.

14.2       Notices.  Any notice or report required or permitted to be given or made under this Agreement by either Party to the other Party shall be in writing and shall be deemed to have been delivered: (a) upon personal delivery; or (b) ten (10) days after deposit in the mail by air or five (5)  Business Days following deposit with a reputable courier; or (c) in the case of notices provided by facsimile (which notice shall be followed immediately by an additional notice pursuant to clause (a) or (b) above) upon completion of transmission to the addressee's facsimile numbers; such delivery to be made to the following addresses (or such other addresses or facsimile numbers as may be furnished in writing by either Party to the other Party as provided for in this Section 14.2):

If to Dyax:	Dyax Corp. 300 Technology Square Cambridge, Massachusetts 02139 U.S.A. Attention:  [******] Facsimile No.:  [******]
With a copy to:	Dyax Corp. 300 Technology Square Cambridge, Massachusetts 02139 U.S.A. Attention:  [******] Facsimile No.:  [******]
If to CMIC:	CMIC Co., Ltd. Kongo Bldg., 7-10-4 Nishigotanda, Shinagawa-ku Tokyo 141-0031 Japan Attention: [******] Facsimile No.: [******]

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With a copy to: CMIC Co., Ltd. Kongo Bldg., 7-10-4 Nishigotanda, Shinagawa-ku Tokyo 141-0031 Japan Attention: [******] Facsimile No.: [******]

14.3        Construction.  This Agreement has been prepared jointly by both Parties and shall not be strictly construed against either Party.  Any reference in this Agreement to an Article, Section, clause, Exhibit shall be deemed to be a reference to a Article, Section, clause, or Exhibit, of or to, this Agreement.  Except where the context otherwise requires, (a) any definition of or reference to any agreement, instrument or other document refers to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference to any laws refers to such laws as from time to time enacted, repealed or amended, (c) the word “here” in the words "herein," "hereof", "hereunder," and any other word ”here” followed by such suffix refers to this Agreement in its entirety and not to any particular provision of this Agreement, and (d) the words "include," "includes" and "including" shall be deemed to be followed by the phrase "but not limited to," "without limitation" or other phrase of a similar meaning.

14.4        Severability.  If, under the applicable law or regulation, any provision of this Agreement is invalid or unenforceable, or otherwise directly or indirectly affects the validity of any other material provision(s) of this Agreement (such invalid or unenforceable provision, a "Severed Clause"), it is mutually agreed that this Agreement shall endure except for Severed Clauses.  Consulting one another, the Parties shall use their Commercially Reasonable Efforts to agree upon a valid and enforceable provision that is a reasonable substitute for a Severed Clause in view of the intent of this Agreement.

14.5        Captions.  All the captions herein are for convenience only and shall not be interpreted as having any substantive meaning.

14.6        Integration.  This Agreement (together with all Exhibits), constitutes the entire agreement between the Parties hereto with respect to the subject matter hereof and supersedes all previous agreements between the Parties, whether written or oral.  This Agreement may be amended only in writing signed by the properly authorized representatives of each of both Parties.

14.7        Independent Contractors; No Agency.  Neither Party shall have any responsibility for the employment, dismissal or compensation of the other Party's employees, officers and directors or for any employee benefits or other social-welfare systems for the other Party.  No employee, officer, director or representative of a Party shall have any authority to bind or obligate the other Party for any sum or in any manner whatsoever, or to create or impose any contractual or other liability on the other Party without such other Party's written approval.  For all purposes, and notwithstanding any provision of this Agreement to the contrary, either Party’s legal relationship with the other Party under this Agreement shall be that of an independent contractor.

14.8        Assignment; Successors.  Neither Dyax nor CMIC may assign this Agreement in whole or in part, any rights or obligations hereunder, without the prior written consent of the other Party; provided that:

(a) either Party may assign this Agreement to its Affiliate for the period that the Affiliate remains an Affiliate of the assigning Party on the condition that the assigning Party shall remain primarily liable for the prompt and punctual payment and performance of all such assigned obligations of the Affiliate;

(b) this Agreement may be assigned by CMIC in connection with a sale or transfer of all or substantially all of CMIC's business or assets, to which this Agreement relates, to any Third Party who is not a Product Competitor;

(c) this Agreement may be assigned by Dyax to a Third Party in connection with a sale or transfer of all or substantially all of Dyax's business or assets to which this Agreement relates.

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This Agreement shall be binding upon, and shall inure to the benefit of, all the successors and assigns of this Agreement, provided that such succession or assignment is permitted hereunder.

14.9        Execution in Counterparts; Facsimile Signatures.  This Agreement may be executed in counterparts, each of which counterparts, when executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same instrument even if both Parties have not executed the same counterpart.  Even though a copy of this Agreement is signed by a Party and transmitted by facsimile, such transmitted copy shall be deemed to be an original counterpart signed by the Party.

14.10      Waiver.  The waiver by either Party hereto of any right hereunder, or of the failure of the other Party to perform this Agreement, or of a breach hereof by the other Party shall not be deemed a waiver by such Party of any other right hereunder or of any other breach or failure hereof by such other Party whether of a similar nature or otherwise.

14.11      Performance by Affiliates.  To the extent that this Agreement imposes the obligations on Affiliates of a Party, the Party agrees to cause such Affiliates to perform the obligations.  Either Party may use one or more of its Affiliates to perform its obligations and duties hereunder and the Affiliates of a Party are expressly granted certain rights herein; provided that each such Affiliate shall be bound by the corresponding obligations of such Party and the Parties shall remain liable hereunder for the prompt payment and performance of all their respective obligations hereunder.

14.12      Force Majeure.  Neither Party shall be held liable to the other Party nor be deemed to have defaulted under or breached the Agreement for failure or delay in performing any obligation under this Agreement when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, which include embargoes, war, acts of war (whether declared or not), insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or the other Party.  The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all the reasonable efforts necessary to cure such force majeure circumstances.

14.13      Export Control.  This Agreement is made subject to any restrictions on the export of products or technical information from the United States of America or other countries which might be imposed upon or related to Dyax or CMIC from time to time.  Each Party agrees that it shall not export, directly or indirectly, any technical information acquired by it from the other Party under this Agreement or any products using such technical information to a location or in a manner that at the time of such export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental entity.

14.14      Costs.  Each Party shall bear its own legal costs of and incidental to the preparation, negotiation and execution of this Agreement.

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IN WITNESS WHEREOF, Dyax and CMIC have caused this Agreement to be duly executed by their authorized representatives under seal, effective as of the Effective Date.

DYAX CORP.
By:
	Name:   Gustav Christensen
	Title:   President and Chief Executive Officer
CMIC CO. LTD.
By:
	Name:  Kazuo Nakamura, Ph.D.
	Title:   Chairman and CEO

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EXHIBIT A

Amino Acid Sequence of DX-88

[******]

Exhibit A

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

EXHIBIT B

Existing Dyax Patent Rights

DX-88
MATTER		SERIAL	PATENT	PUBL	TITLE	STATUS	ISSUE	EXPIRATION
094003	US	11/323,261	7,276,480	20070249807	PREVENTION AND REDUCTION OF BLOOD LOSS	ISSUED	10/2 /2007	6 /6 /2023
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
094011	US	11/931,373		20080200646	PREVENTION AND REDUCTION OF BLOOD LOSS	PUBLISHED		6 /6 /2023
094AU1	AU	2003243394	2003243394		PREVENTION AND REDUCTION OF BLOOD LOSS	ISSUED	9 /25/2008	6 /6 /2023
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
094EP2	EP	07023364.8		EP1941867	PREVENTION AND REDUCTION OF BLOOD LOSS	PUBLISHED		6 /6 /2023
094HK2	HK	08114131.3		1119955	PREVENTION AND REDUCTION OF BLOOD LOSS	PUBLISHED		6 /6 /2023
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
096001	US	08/208,264	6,057,287		KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	5 /2 /2000	8 /18/2015
096002	US	09/421,097	6,333,402		KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEROF	ISSUED	12/25/2001	1 /11/2014
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
096004	US	09/136,012	5,994,125		KALLIKREIN-INHIBITING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	11/30/1999	1 /11/2014
096005	US	11/365,438	7,628,983	20060264603	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	12/8 /2009	2 /11/2015
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
096AT1	AT	95909223.0	E 275 583	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096BE1	BE	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096CA1	CA	2180950	2180950		KALLIKREIN-INHIBITING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	3 /29/2005	1 /11/2015

Exhibit B

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DX-88
MATTER		SERIAL	PATENT	PUBL	TITLE	STATUS	ISSUE	EXPIRATION
096CH1	CH	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096DE1	DE	95909223.0	EP0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096DK1	DK	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096EP1	EP	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
096ES1	ES	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096FR1	FR	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096GB1	GB	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096GR1	GR	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096HK2	HK	05104679.5		1071899A	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	PUBLISHED		1 /11/2015
096IE1	IE	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096IT1	IT	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015

Exhibit B

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

DX-88
MATTER		SERIAL	PATENT	PUBL	TITLE	STATUS	ISSUE	EXPIRATION
096JP1	JP	7-518726	3805785	9511131	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	5 /19/2006	1 /11/2015
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
096LU1	LU	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096MC1	MC	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096NL1	NL	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096PT1	PT	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096SE1	SE	95909223.0	0739355	EP0739355	KALLIKREIN-BINDING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	9 /8 /2004	1 /11/2015
096US1	US	08/676,125	5,795,865		KALLIKREIN-INHIBITING "KUNITZ DOMAIN" PROTEINS AND ANALOGUES THEREOF	ISSUED	8 /18/1998	8 /18/2015
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
143001	US	11/716,278		20070213275	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /10/2026
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
143CA1	CA	2643693		CA2643693	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /9 /2027
143EP1	EP	07758271.6		EP2001500	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /9 /2027
143HK1	HK	09100264.0		1119964	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /9 /2027
143IN1	IN	PCT/US07/63703		7659/DELNP/2008	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /9 /2027
143JP1	JP	2008-558556		2009529542	FORMULATIONS FOR ECALLANTIDE	PUBLISHED		3 /9 /2027
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]
[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]	[******]

Exhibit B

Confidential materials omitted and filed separately with the Securities and Exchange Commission.  Asterisks denote such omission

EX-31.1

Exhibit 31.1

Certification Pursuant to Section 240.13a-14 or 240.15d-14

of the Securities Exchange Act of 1934, as amended

I, Gustav A. Christensen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dyax Corp.;

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:  November 2, 2010
	/s/Gustav A. Christensen
	Gustav A. Christensen
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification Pursuant to Section 240.13a-14 or 240.15d-14

of the Securities Exchange Act of 1934, as amended

I, George Migausky, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dyax Corp.;

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:  November 2, 2010
	/s/George Migausky
	George Migausky
	Executive Vice President and
	Chief Financial Officer

EX-32

Exhibit 32

Certification of Periodic Financial Report

Pursuant to 18 U.S.C. Section 1350

Each of the undersigned officers of Dyax Corp. (the “Company”) certifies, under the standards set forth in and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2010 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in that Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 2, 2010	/s/ Gustav A. Christensen
	Gustav A. Christensen
	President and Chief Executive Officer
Dated: November 2, 2010	/s/ George Migausky
	George Migausky
	Executive Vice President and
	Chief Financial Officer