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                                                                   Exhibit 10.68



                             COLLABORATION AGREEMENT

                             WARNER-LAMBERT COMPANY

                                       AND

                           SEQUANA THERAPEUTICS, INC.

                                OCTOBER 31, 1997


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                            COLLABORATION AGREEMENT*

     This COLLABORATION AGREEMENT (the "Agreement"), effective as of October 31,
1997, is made by and between WARNER-LAMBERT COMPANY, a Delaware corporation,
with a principal place of business at 201 Tabor Road, Morris Plains, New Jersey
07950 ("Warner"). and SEQUANA THERAPEUTICS, INC. a California corporation. with
a principal place of business at 11099 N. Torrey Pines Road. Suite 160, La
Jolla, California 92037 ("Sequana").

                                   BACKGROUND

     A. Sequana has expertise in the field of gene discovery, gene functional
analysis and high-throughput screening techniques and has proprietary materials
useful for discovery of genes relating to Schizophrenia and Bipolar Disorder.

     B. Warner is in the business of and has expertise in developing,
manufacturing and commercializing pharmaceuticals.

     C. Warner and Sequana wish to enter into a collaborative research program
to share such expertise, to conduct research using a variety. of gene discovery,
gene functional analysis and high-throughput screening techniques, to identify
multiple, novel drug targets and active compounds for development and to
commercialize products and services for the treatment of Schizophrenia or
Bipolar Disorder. If such efforts are successful, Warner shall market certain
Warner Products for use in the Field in the Territory., and the Parties may
co-promote certain Other Products for use in the Field.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises. contained herein, Sequana and Warner agree as follows:

1.   DEFINITIONS

     The following capitalized terms shall have the meanings indicated for
purposes of this Agreement:

     1.1 "AFFILIATE" shall mean any corporation, association or other entity
which directly or indirectly controls. is controlled by or is under common
control with the party. in question. As used in this definition of "Affiliate,"
the term "control" shall mean direct or indirect beneficial ownership of more
than fifty percent (50%) of the voting or income interest in such corporation or
other business entity.

     1.2 "AGENCY" shall mean the U.S. Food and Drug Administration or an
successor entity (the "FDA"), and agencies of other governments of other
countries having similar jurisdiction over the development, manufacturing and
marketing of pharmaceuticals.

-----------------

*    Certain confidential information in the document, marked by brackets, has
     been omitted and filed separately with the Securities and Exchange
     Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1933,
     as amended.


                                       1.

<PAGE>   3

     1.3 "ANTISENSE" shall mean a nucleic acid or a functional analog,
derivative or homologue thereof which is complementary to a segment of DNA of a
target Gene or such target Gene's cognate RNA and which, upon delivery by any
means, alters the transcription, processing, elaboration, RNA expression, or
protein production of or by such target Gene.

     1.4 "AREA" shall mean either of Bipolar Disorder or Schizophrenia.

     1.5 "BACKGROUND TECHNOLOGY" shall mean all proprietary inventions, methods.
ideas. know-how. data. software. protocols. techniques and information (a) that
a Party owns or Controls on the Effective Date or develops during the Term of
the Research Program independently and outside the scope of this Agreement and
has the right to contribute to the Research Program and (b) which is necessary
for the research, design, development, testing, use, manufacture or sale of
Warner Products. Other Products or Diagnostic Products for use in the Field.
including, without limitation, all United States and foreign patents and patent
applications relating thereto (including, without limitation, all reissues,
extensions, substitutions, confirmations, registrations, revalidations,
additions, continuations, continuations-in-part and divisions thereof).

     1.6 "BIOAGENT DB" shall mean the Software known as BioAgentDB, a system for
integrating and displaying genomic and target related information, including a
database server with an interface to the Worldwide Web, as further described in
Exhibit A hereto.

     1.7 "BIPOLAR DISORDER" shall mean bipolar affective disorder, bipolar I
disorder, bipolar II disorder and schizoaffective disorder (bipolar subtype).

     1.8 "COLLABORATION TECHNOLOGY" shall mean all Know-How and Patent Rights
that a Party owns or Controls, which is conceived. reduced to practice or
otherwise developed by Sequana (or its agents) or Warner (or its agents) or
jointly by Sequana and Warner (or their respective agents) during the Term of
the Research Program arising out of the Research Program.

     1.9 "COMPOUND" means any molecule with a molecular weight of [*] which is
identified by Warner or its Affiliates or Sublicensees during the Term of the
Research Program or prior to the fifth anniversary of the termination of the
Term of the Research Program through application of an assay or animal model
developed based on a Gene or Gene product, which Gene or Gene product was
identified during the Term of the Research Program through the use of Sequana
Background Technology (excluding Sequana Technology) or Collaboration Technology
provided, however, that the term "Compound" shall not include any such molecule
identified by Warner or its Affiliates after the Term of the Research Program
through screening against a specific biochemical target which is in the public
domain at the time of such identification and has been proposed as a target for
a disease.

     1.10 "CONFIDENTIAL INFORMATION" means, subject to the limitations set forth
in Article l.1, all Background Technology, all Collaboration Technology and any
Warner data accessible to Sequana through its maintenance of the Sequana
Technology.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                       2.
<PAGE>   4

     1.11 "CONSUMER PRICE INDEX" or "CPI" means the Consumer Price Index, All
Urban Consumers as published by the U.S. Bureau of Labor Statistics.

     1.12 "CONTROL" shall mean possession of the ability to grant the licenses
or sublicenses as provided for herein without violating the terms of any
agreement or other arrangement with any Third Party.

     1.13 "DEVELOPMENT" shall mean the development of any Lead Compound from and
after the filing of an IND, through and including product registration.

     1.14 "DIAGNOSTIC PRODUCT" shall mean a diagnostic, prognostic or
pharmacogenetic product in the form of a device, compound, kit or service
developed based on information identified through the Research Program.

     1.15 "DISEASE GENE" shall mean (a) a Gene identified by a Schizophrenia or
Bipolar Disorder disease associated haplotype that is sufficiently small to
define a single gene product, or (b) a Gene with a mutation which is shown to be
genetically associated with Schizophrenia or Bipolar Disorder and is consistent
with a Schizophrenia or Bipolar Disorder related biological function, in each
case, as determined by the JRPC.

     1.16 "DISEASE GENE MILESTONE" means the identification by or on behalf of
Sequana or Warner of a Disease Gene.

     1.17 "EFFECTIVE DATE" shall mean the date of this Agreement first written
above.

     1.18 "FIELD" shall mean the research and drug discovery, collaboration
aimed at identifying human Genes and Gene sequence information for the purpose
of discovering Compounds, and the development and commercialization of such
Compounds useful for the treatment of Schizophrenia or Bipolar Disease.

     1.19 "FULL TIME EQUIVALENT" or "FTE" shall mean a full time scientist (or
in the case of less than a full-time dedicated scientist, a full-time,
equivalent scientist year) dedicated to research under the Research Program
consisting of no less than [*].

     1.20 "GENE" means a gene including all its regulatory, sequences, and any
and all variants thereof, including, without limitation, "splice variants,"
polymorphisms, alleles and mutations of the gene.

     1.21 "GENE THERAPY" shall mean the introduction of a Gene into a person for
therapeutic purposes by (i) in vivo introduction for incorporation into cells of
such person, or (ii) ex vivo introduction into cells for transfer into a person.

     1.22 "INVENTION" shall have the meaning set forth in Section 2.4.1 below.

     1.23 "IND" shall mean an Investigational New Drug application, as defined
in the U.S. Food. Drug and Cosmetic Act and the regulations promulgated
thereunder, or any corresponding foreign application, registration or
certification.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                       3.
<PAGE>   5

     1.24 "JOINT RESEARCH PROGRAM COMMITTEE" or "JRPC" shall have the meaning
set forth in Article 3.1.

     1.25 "KNOW-HOW" shall mean all ideas, inventions, data, instructions,
processes, formulas, expert opinions and information, including, without
limitation, biological, chemical, pharmacological, toxicological,
pharmaceutical, physical and analytical, clinical, safety, manufacturing and
quality control data and information, in each case, which are necessary, or
useful for and are specific to the research, design, development, testing, use,
manufacture or sale of Warner Products, Other Products or Diagnostic Products.
Know-How does not include any inventions included in the Patent Rights.

     1.26 "LEAD COMPOUND" shall mean a Compound which the lead compound
subcommittee at Warner formally approves for the commencement of activities
designed to assess suitability for clinical development, including preclinical
toxicology studies conducted in accordance with Good Laboratory Practices (GLP),
chemical development and product development studies.

     1.27 "LINKAGE MILESTONE" shall mean the first identification by or on
behalf of Sequana of [*].

     1.28 "MAPPING MILESTONE" shall mean either [*].

     1.29 "NEMASCREEN" shall mean a biological assay developed by or on behalf
of Sequana for high volume chemical screening which utilizes the live nematode C
elegans.

     1.30 "NET SALES" shall mean the gross amount invoiced by Warner or Sequana,
or their Affiliates or Sublicensees, as the case may be for sales to Third
Parties (other than Sublicensees) in arm's length transactions of the applicable
Warner Products or Other Products (excluding any Other Products which the
Parties are co-promoting) and any and all services provided in connection with
sales of such Warner Products or Other Products. [*] A "sale" shall include any
transfer or other disposition for consideration, and Net Sales shall include the
fair market value of all other consideration received by the selling Party or
its Affiliates or permitted Sublicensees in respect of any grant of rights to
make, use, sell or otherwise distribute Warner Products or Other Products,
whether such consideration is in cash, payment in kind. exchange or another
form.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                       4.
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In the case of discounts on "bundles" of products or services which include
Warner Products or Other Products. the selling Party may, [*]

where [*]

     1.31 "NEW DRUG APPLICATION" or "NDA" shall mean a New Drug Application, as
defined in the U.S. Food, Drug and Cosmetic Act and the regulations promulgated
thereunder, and any corresponding foreign application, registration or
certification.

     1.32 "OTHER PRODUCT" means a therapeutic product (other than a Warner
Product) which is (i) a Protein. Gene Therapy, Antisense or Vaccine product and
(ii) developed through the application of Sequana Background Technology
(excluding Sequana Technology) or Collaboration Technology as a result of the
Research Program.

     1.33 "PARTY" shall mean Warner or Sequana, and the "PARTIES" shall mean
Warner and Sequana.

     1.34 "PATENT RIGHTS" shall mean all United States and foreign patents
(including all reissues, extensions, substitutions, confirmations,
re-registrations, re-examinations, revalidations and patents of addition) and
patent applications (including, without limitation, all continuations,
continuations-in-part and divisions thereof) in each case, claiming an invention
which is necessary or useful for the design, development, testing, use,
manufacture or sale of Warner Products, Other Products or Diagnostic Products.

     1.35 "PHASE I", "PHASE II" and "PHASE III" shall mean Phase I (or Phase
I/II). Phase II, and Phase III clinical trials, respectively, in each case as
prescribed by the applicable Agency.

     1.36 "PRODUCT" shall mean a Warner Product, Other Product or Diagnostic
Product, as applicable.

     1.37 "PRODUCT LICENSE AGREEMENT" or "PLA" shall mean Product License
Agreement as defined in the U.S. Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, and any corresponding foreign application, registration
or certification.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                       5.
<PAGE>   7

     1.38 "PROTEIN" shall mean any of a class of compounds, other than a
Compound, composed of a variety of amino acids joined by peptide linkages,
including aggregates, hybrids, fragments and analogs thereof. as well as
naturally post-translationally modified variants thereof (i.e., glycosylated
proteins) and chemically modified versions thereof (e.g., pegylated or
liposomally encapsulated proteins).

     1.39 "RESEARCH PLAN" shall have the meaning set forth in Section 2.1.1.

     1.40 "RESEARCH PROGRAM" shall mean that program of research performed by
the Parties pursuant to Article 2.1.

     1.41 "SCHIZOPHRENIA" shall mean schizophrenia, schizoaffective disorder
(depressive subtype) and schizophrenic spectrum disorders (schizophreniform
disorder, schizotypal disorders and NOS psychotic disorder).

     1.42 "SEQUASEARCH" shall mean the Software known as the SequaSearch Mining
Tools, including Virtual Librarian, ESTagent. Candidate VL, Gene Integrator and
SequaWatcher, improvements to the foregoing. and additional components including
Gene Wizard, Transcript Scanner and SyntenyAgent, as further described in
Exhibit A hereto.

     1.43 "SEQUANA TECHNOLOGY" means the following Background Technology owned
or Controlled by Sequana: (i) BioAgentDB and SequaSearch as described on Exhibit
A; (ii) LIMSLite as described on Exhibit A; (iii) high-throughput DNA sequencing
protocols described on Exhibit A; (iv) high-throughput genotyping protocols
described on Exhibit A; and (v) the micro-array technology protocols described
on Exhibit A.

     1.44 "SOFTWARE" shall mean computer code (in source or object form) owned
or Controlled by Sequana which. when executed by a digital computer, provides
said computer with the capability of manipulating numbers, text and/or graphics
in a manner defined by said computer code.

     1.45 "SUBLICENSEE" shall mean a Third Party to whom Warner has granted a
license or sublicense under the Background Technology or Collaboration
Technology to make, have made, import, use, sell, offer for sale or otherwise
exploit a Warner Product in the Territory. As used in this Agreement.
"Sublicensee" shall also include a Third Party to whom Warner has granted the
right to distribute the Warner Product in the Territory.

     1.46 "TERM OF THE AGREEMENT" shall mean the period from the Effective Date
until with respect to each Product, the expiration of the last royalty,
obligation owed by Warner or Sequana as the case may be, to the other with
respect to such Product, or until this Agreement is otherwise terminated earlier
pursuant to its terms.

     1.47 "TERM OF THE RESEARCH PROGRAM" shall have the meaning set forth in
Section 2.5.1.

     1.48 "TERRITORY" shall mean the entire world.



                                       6.
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     1.49 "THIRD PARTY" shall mean any party other than Warner or Sequana or an
Affiliate of either of them.

     1.50 "VACCINE" shall mean a prophylactic or therapeutic agent that acts by
inducing a humoral and/or cell-mediated immune response directed against an
antigen.

     1.51 "VALID CLAIM" means a claim of a pending patent application within the
Patent Rights (provided such application has not been pending for more than five
(5) years from the date it was first filed with the governmental agency with
jurisdiction over patent applications) or an issued and unexpired patent
included within the Patent Rights which has not been held unenforceable or
invalid by a court or other governmental agency of competent jurisdiction, and
which has not been disclaimed or admitted to be invalid or unenforceable through
reissue or otherwise.

     1.52 "VALIDATED TARGET MILESTONE" shall mean [*]

     1.53 "WARNER PRODUCT" means any therapeutic human product developed by or
under the authority of Warner, an active ingredient of which is a Compound.

2.   RESEARCH PROGRAM

     2.1 COLLABORATIVE RESEARCH PROGRAM. Subject to the terms and conditions set
forth herein. Warner and Sequana will diligently conduct mutually agreed
collaborative research in the Field pursuant to a Research Plan (the "Research
Program"). The activities conducted in connection with the Research Program will
be overseen and administered by the JRPC.

          2.1.1 RESEARCH PLAN. Within 60 days of the Effective Date, the JRPC
will prepare and approve a written plan (the "Research Plan") that will (i)
include a general overview and timetable for each Party's research activities
and appropriate resources and budgets for such research during the next year.
(ii) set specific objectives for such tear, which objectives will be updated or
amended, as appropriate, by the JRPC as research progresses. and (iii) prepare a
preliminary, and non-binding plan for research activities to be conducted by the
Parties in the subsequent year. The JRPC shall review the Research Plan on an
ongoing basis but in no event less than quarterly and may make changes to the
Research Plan then in effect.

          2.1.2 EFFORTS; RESOURCES. Warner and Sequana shall each use reasonable
efforts to conduct the Research Program in a professional and diligent manner in
accordance with the Research Plan within the time schedules contemplated
therein. Subject to the terms of this Agreement, each Party agrees to commit the
personnel, facilities, expertise and other resources necessary to perform its
obligations under the Research Plan; provided, however, that neither

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                       7.
<PAGE>   9

Party warrants that the Research Program shall achieve any of the research
objectives contemplated by them.

          2.1.3 RESEARCH PROGRAM STAFFING. Initially,[*]. The JRPC shall
evaluate the number of Sequana FTEs, and quarterly may adjust such staffing
level upward or downward, [*] Each [*] FTE shall have a primary. assignment to
conduct research in either the Schizophrenia or the Bipolar Disorder Field.

          2.1.4 CLUSTER PLATES LIBRARY. Warner will provide Sequana with its
Cluster Plates Library, a subset of Warner's chemical library to perform
screening activities at Sequana exclusively in connection with the Research
Program when the JRPC agrees that appropriate biological targets or screens have
been developed for testing at Sequana.

          2.1.5 SOFTWARE SUPPORT; UPGRADES. During the Term of the Research
Program. at Warner's request. Sequana shall provide to Warner. without
additional charge, reasonable support. relating to the use of Sequana
Technology, as described on Exhibit A hereto; provided, Sequana shall have no
obligation to provide Warner any support with regard to any modifications to or
derivative works of the Sequana Technology made by Warner or any changes in
function of the Sequana Technology arising from the foregoing. During the Term
of the Research Program, Sequana shall provide to Warner, without additional
charge, such upgrades and fixes to the Software within the Sequana Technology as
Sequana may develop promptly after such upgrades and fixes are developed and
validated, but Sequana shall have no obligation to develop or make any such
upgrades or fixes or any other changes to the Sequana Technology existing as of
the Effective Date. Such Software shall be available to Warner in object or
source code form, as requested by Warner.

     2.2 RESEARCH PROGRAM EXPENSES.

          2.2.1 [*]

          2.2.2 PATIENT SAMPLE COLLECTION AND OTHER THIRD PARTY COSTS. [*] In
the event payments are required under any such contracts without an invoice from
the Third Party, Sequana shall provide Warner with a copy of the relevant
contract and Warner shall pay to Sequana all amounts due to such Third Party at
least fourteen (14) business days prior to the date the relevant payment is due
to the Third Party or. in the case of any payment due within fourteen (14)
business days of the Effective Date, [*] shall make such payment to [*]
within fourteen (14) business days of [*] written notice to [*] that
such payment will become due.

          2.2.3 TECHNOLOGY IMPROVEMENTS: THIRD PARTY INTELLECTUAL PROPERTY. In
the event that the JRPC determines that it is necessary for [*] to acquire
technology or a license from a Third Party with regard to intellectual property,
in each case, which is necessary, or useful for the conduct of the Research
Program. Warner shall be responsible for reimbursing Sequana in accordance with
a schedule and terms and in amounts determined by the JRPC: provided, in the
event that such technology or intellectual property will be used by Sequana
with Third Parties, the amounts payable by Warner shall be reduced pro rata,
based on the total number of such Third Parties which will be using such
technology or intellectual property. It is understood and agreed that Sequana
shall have the principal responsibility for negotiating such agreements. unless
otherwise agreed


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                       8.
<PAGE>   10

by the Parties. The Party with principal responsibility for negotiating such
agreements shall keep the other Party fully informed with respect to such
negotiations, and such other Party shall have the right to review and comment on
such agreements prior to execution, provided such review shall be conducted at
such other Party's expense. It is understood and agreed that nothing in this
Section 2.2.3 shall prohibit either Party from acquiring licenses from Third
Parties with regard to intellectual property or technology for use by such Party
outside the Research Program and that the Party acquiring such rights shall be
responsible for negotiating and preparing such agreements and for paying all
costs associated therewith, and that such Party shall have no obligation to keep
the other Party informed of or provide the other Party an opportunity to review
such agreements.

          2.2.4 SEQUANA TECHNOLOGY. Notwithstanding Section 2.2.3 above, Warner
shall have the responsibility, at its sole expense, for acquiring any licenses
from Third Parties necessary for Warner to utilize the Sequana Technology.

     2.3 THIRD PARTY CONTRACTORS AND COLLABORATORS. During the Term of the
Research Program, Sequana shall be permitted to engage in research
collaborations or scientific contract work to conduct the Research Program with
Third Parties provided that the terms of each such collaboration are approved by
the JRPC and are otherwise consistent with the terms of this Agreement,
including, without limitation, the confidentiality provisions set forth in
Article 11. Any agreement evidencing any such collaboration shall include and
set forth: (i) the financial terms of the Third Party, collaboration, including
the amounts of funding to be provided by each of the Parties to the third party
collaborator; (ii) provisions that rights within the Field developed or received
by either Party in the course of the third party collaboration will be
considered rights of that Party under this Agreement; and (iii) provisions for
any grant of intellectual property rights to the Third Party.

     2.4 RECORDS; REPORTS.

          2.4.1 RECORDS. The Parties shall maintain records that will properly
reflect all work done and results achieved in the performance of the Research
Program (including all data in the form required under any applicable
governmental regulations and as directed by the JRPC), including laboratory
records sufficient to establish the dates of first conception and reduction to
practice of any patentable Collaboration Technology (an "Invention"). Upon
request, the Parties shall provide each other access to such records relating to
the Research Program during ordinary business hours during the Term of the
Research Program.

          2.4.2 REPORTS. The JRPC shall periodically and not less often than
semi-annually during the Term of the Research Program, request and the Parties
shall have the obligation to prepare and provide to the JRPC, written reports
summarizing the progress of the research performed by or sponsored by the
Parties pursuant to the Research Plan during the preceding six months. In
addition, the Parties will exchange at least quarterly verbal or written reports
presenting a meaningful summary of their activities performed in connection with
the Research Program. All Collaboration Technology made by either Party be
promptly disclosed to the other, with significant discoveries or advances being
communicated as soon as practical after such information is obtained or its
significance is appreciated.



                                       9.
<PAGE>   11

          2.4.3 RESEARCH PROGRAM EXPENDITURES. During the Term of the Research
Program, Sequana shall provide Warner with a quarterly report regarding Research
Program expenditures by Sequana in the preceding quarter which shall include the
names of the individuals constituting the FTE's, and the number of hours each
individual spent on the Research Program in the aggregate and by Area of the
Field, Sequana shall keep records of all expenses incurred in connection with
the Research Program. During the Term of the Research Program and for one year
thereafter. Warner shall have the right to audit such records no more than once
per year during ordinary business hours, at mutually agreed times, to verify
Sequana's expenditures in connection with the Research Program.

     2.5 TERM AND TERMINATION OF RESEARCH PROGRAM.

          2.5.1 Term of the Research Program. The term of the Research Program
shall commence on the Effective Date and, unless terminated earlier pursuant to
Section 2.5.2 or Article 13 or extended by mutual agreement of the Parties,
shall terminate on the fifth anniversary of the Effective Date (the "Term of the
Research Program". With notice to Sequana at least one hundred (100) days prior
to the end of the then-current Term of the Research Program. the Term of the
Research Program may, at Warner's option, be extended for up to three additional
one (1) year periods.

          2.5.2 FIELD TERMINATION.

               (a) With written notice to Sequana during the 45 days after the
end of the thirty-sixth (36th) month of the Term of the Research Program, Warner
may terminate the Research Program with respect to Schizophrenia and/or Bipolar
Disorder ninety (90) days following such notice unless Sequana has achieved any
one of the following on or before the third anniversary, of the Effective Date:
[*].

               (b) Upon termination of the Research Program for either the
Schizophrenia or Bipolar Disorder Area pursuant to Section 2.5.2(a): (i) Warner
shall be obligated to fund the Research Program with respect to research in the
terminated Area for ninety (90) day's following notice of such termination:
thereafter. Warner may cease funding of the average number of FTEs actually
working on the Research Program with respect to research in the terminated Area
for the prior six months up to a maximum of [*], of the aggregate number of FTEs
involved in the Research Program during such six (6) month period, [*] (ii) all
rights and licenses granted to Warner by Sequana with respect to research in the
terminated Area shall terminate, and such rights shall revert to Sequana; and
(iii) [*].

               (c) In the event of any termination by Warner pursuant to Section
2.5.2(a)(i) each Party shall retain such ownership interest in the Collaboration
Technology as it shall hold on the effective date of such termination: and (ii)
Warner will grant Sequana an exclusive (even as to Warner), worldwide,
fully-paid, perpetual license (with the right to

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                      10.
<PAGE>   12

sublicense) under Warner's interest in any Collaboration Technology owned by
Warner necessary or useful to make, have made, import, use, offer for sale and
sell Warner Products, Other Products and Diagnostic Products for use in the
terminated Area (Schizophrenia or Bipolar Disorder, as the case may be), but not
Warner Products or Other Products also being sold by Warner for the other Area,
in the event an Area remains unterminated.

     2.6 RESEARCH PROGRAM EXCLUSIVITY. During the Term of the Research Program,
Sequana will not conduct, alone or with any Third Party any research activities
in which genetics and genomics technologies are used specifically to discover
Genes responsible for Schizophrenia or Bipolar Disorder, except as permitted
pursuant to Section 2.3. It is understood and agreed that, subject to Section
4.9, either Party may conduct research and commercialization activities with
respect to (i) pharmacogenetics whether or not related to Schizophrenia or
Bipolar Disorder, (ii) determining the function of Genes identified by Third
Parties whether or not related to Schizophrenia or Bipolar Disorder and in no
event will Sequana utilize Collaboration Technology in such research effort and
further that Sequana shall cease such research with such Third Party in the
event that the function of such Gene(s) is determined to be related to
Schizophrenia or Bipolar Disorder. or (iii) diseases other than Schizophrenia or
Bipolar Disorder, alone or with third parties.

     2.7 FURTHER AGREEMENT REGARDING WARNER COMPOUND LIBRARY. [*]

3.      JOINT RESEARCH PROJECT COMMITTEE

     3.1 MEMBERSHIP. Promptly after the Effective Date, Warner and Sequana will
each appoint three (3) representatives to a committee to oversee the Research
Program (the "JRPC"). A Party may change any of its appointments to the JRPC at
any time with written notice to the other Party. The JRPC shall remain available
after the termination of the Term of the Research Program in order to determine
the completion of the last two milestones listed in Section 5.4.2.

     3.2 RESPONSIBILITIES. The JRPC will review, direct and supervise all
operational and scientific aspects of the Research Program. The JRPC shall be
responsible for (i) preparing and approving the Research Plan; (ii)
coordinating. monitoring and reporting research progress and ensuring open and
frequent exchange between the Parties with respect to Research Program
activities; (iii) determining whether to acquire licenses from Third Parties
with respect to intellectual property necessary or useful for the conduct of the
Research Program; (iv) discussing patent matters relating to the Research
Program Activities; (v) approving allocations of tasks and resources required to
carry, out the goals of the Research Program; (vi) approving all plans and
annual budgets for the various projects and programs within the Research
Program; (vii) determining criteria, as appropriate, for the accomplishment of
gene discovery, and functional genomics milestones and determining when such
milestones have been accomplished; (viii) encouraging and facilitating ongoing
cooperation between the Parties; (ix) coordinating and monitoring the payments
and reimbursements to be made by and between the Parties; (x)


*   Certain confidential information contained in this document, marked by
    brackets, has been ommitted and filed separately with the Securities and
    Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
    1934, as amended.

                                      11.


<PAGE>   13

determining and designating Genes to be Disease Genes or Non-Disease Genes; (xi)
determining the necessity for acquisition or license of third party technology
and/or other intellectual property and the schedule and terms for reimbursement
of the costs thereof; and (xii) performing such other functions as appropriate
to further the purposes of this Agreement. as determined by the Parties.

     3.3 MEETINGS. The JRPC will meet at least quarterly, alternating between
the corporate offices of Sequana and Warner (in Ann Arbor, Michigan) and will
otherwise communicate regularly by telephone, electronic mail, facsimile and/or
video conference. The JRPC may meet by telephone or video conference or in
person at such times as are agreeable to the members of the JRPC, but no less
frequently than as specified above. Attendance at meetings shall be at the
respective expense of the participating Parties. The Party hosting the meeting
shall assure that agendas and minutes are prepared for each of its meetings and
distributed to the Parties. Each Party recognizes the importance of the JRPC in
the success of the Research Program and will use diligent efforts to cause all
of its representatives of such committee to attend all meetings of such
committee. If personal attendance is not possible for valid reasons, voting by
proxy is permissible.

     3.4 DECISION MAKING; DISPUTES. All actions taken and decisions made by the
JRPC created hereunder shall be by unanimous agreement and recorded in writing.
If the JRPC is unable to resolve after thirty (30) days, a dispute regarding any
issue presented to it or arising in it, such dispute will be referred to the
Chief Executive Officer of Sequana and Warner's Chairman of its Parke-Davis
Pharmaceutical Research Division for good faith resolution, for a period of
ninety (90) days. In the event such individuals are unable to resolve such
dispute, subject to Section 14.1, either Party may pursue any remedies it may
have at law or in equity.

4.   LICENSE GRANTS

     4.1 GRANT BY SEQUANA. Subject to the terms and conditions of this
Agreement, Sequana hereby grants and agrees to grant to Warner the following
licenses:

          4.1.1 an exclusive (even as to Sequana) worldwide license under
Sequana's interest in Sequana's Background Technology (other than the Sequana
Technology) and Collaboration Technology, with the right to sublicense pursuant
to Section 4.4, to the extent necessary for Warner to make, have made, use and
import Compounds and Lead Compounds, and to make, have made use, import, offer
for sale and sell Warner Products in the Territory, and to use, offer for sale,
sell and promote any Other Product in the co-promotion countries, if the Parties
enter into a Co-Promotion Agreement pursuant to Section 8.2;

          4.1.2 a non-exclusive, nontransferable, worldwide, royalty-free
license, without the right to sublicense, under the Sequana Technology, to use
and duplicate the Sequana Technology, and to make derivative works of the
Software within the Sequana Technology, in each case solely to conduct internal
research during the Term of the Research Program in any field except research
relating to non-insulin-dependent diabetes mellitus, insulin resistance syndrome
and the complications of the foregoing; and



                                      12.
<PAGE>   14

          4.1.3 a non-exclusive, royalty-free license to use data developed by
Sequana in connection with the Research Program solely for Warner's clinical
studies of Warner Products.

It is understood and agreed that, subject to Section 4.9, the licenses granted
above provide no right for Warner to use the Collaboration Technology' or
Background Technology (other than Sequana Technology) for any use outside the
Field. It is further understood and agreed that in the event that Sequana
acquires the right to grant to Warner a license with respect to the use of the
Sequana Technology for research relating to non-insulin-dependent diabetes
mellitus, insulin resistance syndrome and the complications of the foregoing,
Sequana shall promptly provide notice to Warner and thereafter the license
granted to Warner in Sections 4.1.2 and 4.1.3 above shall automatically include
the right to use the Sequana Technology for such internal research.

     4.2 GRANT BY WARNER. Subject to the terms and conditions of this Agreement,
Warner hereby grants and agrees to grant to Sequana the following licenses:

          4.2.1 an exclusive (except as to Warner) license, with the right to
sublicense under Warner's interest in the Background Technology, Collaboration
Technology, Patent Rights and Know-How to the extent necessary, for Sequana to
use, offer for sale, sell and promote any Other Product in the co-promotion
countries, if the Parties enter into a Co-Promotion Agreement pursuant to
Section 8.2;

          4.2.2 an exclusive (even as to Warner) worldwide license, with the
right to sublicense, under Warner's interest in Background Technology.
Collaboration Technology Patent Rights and Know-How to make, have made, use,
import, offer for sale and sell Diagnostic Products.

          4.2.3 a non-exclusive, royalty-free, worldwide license, with the right
to sublicense, under Warner's interest in any improvements or enhancements made
by Warner to the Sequana Technology for all purposes.

     4.3 CROSS-LICENSES. Each Party hereby grants and agrees to grant to the
other a non-exclusive, non-transferable, royalty-free license to use and
practice such Party's interest in the Background Technology and Collaboration
Technology solely for research purposes in the Field in connection with the
Research Program during the Term of the Research Agreement.

     4.4 SUBLICENSES. Warner may sublicense the rights granted in Section 4.1.1
to Third Parties with the prior written consent of Sequana, which consent shall
not be unreasonably withheld or to any of its Affiliates without such consent.
Each sublicense granted by Warner shall be consistent with all the terms and
conditions of this Agreement. Warner shall remain responsible to Sequana for all
of each such Sublicensee's applicable financial and other obligations under this
Agreement.

     4.5 RETAINED RIGHTS. It is understood and agreed that. Sequana shall retain
the exclusive right to develop (including pre-clinical and clinical
development), make, have made, use, sell and otherwise commercialize products
other than Warner Products subject to Warners right of first negotiation
regarding Other Products. It is understood and agreed that Sequana may practice
and use its Background Technology and Collaboration Technology to facilitate the
exercise of its rights hereunder. It is further understood and agreed that,
subject to Section 4.9,



                                      13.
<PAGE>   15

Sequana has the right to enter into agreements with Third Parties with respect
to research, development and/or the commercialization of products for areas
outside the Field and may grant such Third Party rights with regard to Sequana's
interest in the Collaboration Technology for use outside the Field.

     4.6 NO UNAUTHORIZED USE. Each Party hereby covenants to the other that it
will not practice the Background Technology or Collaboration Technology of the
other Party, and Warner will not use the Sequana Technology for any purpose
other than as expressly permitted in this Agreement.

     4.7 NO IMPLIED LICENSES. No rights or licenses with respect to any
intellectual property owned by Sequana or Warner are granted or shall be deemed
granted hereunder or in connection herewith, other than those rights expressly'
granted in this Agreement.

     4.8 WARNER PRODUCTS. It is understood and agreed that Warner's obligations
under this Agreement apply to all Warner Products, including, without
limitation, Warner Products sold for use outside the Field.

     4.9 RIGHTS OUTSIDE THE FIELD. Warner may develop and commercialize
Compounds for indications outside the Field, and conduct research and
development of Compounds for indications outside the Field using Disease Genes
and Non-Disease Genes, as follows:

          4.9.1 COMPOUNDS. Warner shall have the exclusive right to develop any
Compound for indications outside the Field, Warner shall notify Sequana in
writing of each such Compound promptly following identification, and each
indication outside the Field for which Warner intends to develop and/or
commercialize such Compound.

          4.9.2 DISEASE GENES. Warner shall have the exclusive right under the
Collaboration Technology to use any Disease Gene identified during the Research
Program to develop Compounds or other molecules with a [*] excluding any [*],
for indications outside the Field. Warner shall notify Sequana in writing of
each Compound and each indication outside the Field for which Warner intends to
develop such Compound. Notwithstanding the foregoing, Sequana shall retain the
right to use any Disease Gene for research purposes and to develop and
commercialize products other than Warner Products.

          4.9.3 NON-DISEASE GENES.

               (a) DEFINITION. For purposes hereof, "Non-Disease Gene" shall
mean any full length, novel Gene identified in the Research Program which the
JRPC during the Term of the Research Program either (i) determines is not a
Disease Gene, or (ii) fails to determine is a Disease Gene; provided, if a
Non-Disease Gene is subsequently determined to be a Disease Gene during the Term
of the Research Program, or subsequently by agreement of the parties, then such
Non-Disease Gene shall thereafter be treated as a Disease Gene and subject to
Section 4.9.2 hereof.

               (b) WARNER OPTION.



*   Certain confidential information contained in this document, marked by
    brackets, has been ommitted and filed separately with the Securities and
    Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
    1934, as amended.


                                      14.
<PAGE>   16
                    (i) During the Term of the Research Program, Warner shall
have an exclusive option to obtain the exclusive right to use any Non-Disease
Gene to develop Compounds or other molecules with a [*], excluding any [*],
provided that Warner provides Sequana with written notice of its intention to
pursue development with respect such Non-Disease Gene and a preliminary,
research plan for such development.

                    (ii) Warner may exercise the foregoing option on a
Non-Disease Gene-by-Non-Disease Gene basis by developing a [*], and paying to
Sequana the [*]. In the event that Warner has not developed a [*], within such
[*], Warner may extend its option for [*] period by pre-paying the [*], payment
which payment shall be credited against [*]. Warner may thereafter exercise its
option by developing a [*], within such additional [*].

                    (iii) Upon development of a [*], and payment of the [*],
Warner shall have an exclusive license to use the applicable Non-Disease Gene to
develop Compounds or other molecules with [*], excluding any [*].

                    (iv) If Warner fails to develop such [*], within the initial
[*], period or the [*], option extension period, its option shall expire, and
notwithstanding Section 4.1, each of Sequana and Warner shall thereafter have a
nonexclusive license under the other party's rights in the Collaboration
Technology to use the applicable Non-Disease Gene to develop compounds for
indications outside the Field.

                    (v) Notwithstanding the foregoing, if at any time during any
option period or extended option period provided above, Warner determines that
it will not pursue development with respect to the applicable Non-Disease Gene,
Warner shall promptly notify, Sequana in writing of such determination, upon
which notice Warner's option shall terminate immediately and each of Sequana and
Warner shall thereafter have a nonexclusive license under the other party's
rights in the Collaboration Technology to use the applicable Non-Disease Gene to
develop compounds for indications outside the Field.

                    (vi) Subject to Section 4.9.3(c), during the option period,
Warner shall have the exclusive right to use any particular Non-Disease Gene for
research purposes to evaluate whether it wishes to exercise its option for such
Non-Disease Gene.

               (c) SEQUANA RIGHTS. Unless and until Warner exercises its option
and acquires an exclusive license to use a particular Non-Disease Gene pursuant
to Section 4.9.3(b) above, Sequana shall have the right to use such Non-Disease
Gene to conduct its own internal research and develop products for any use for
indications outside the Field. If Warner fails or declines to acquire an
exclusive license from Sequana with respect to a particular Non-Disease Gene,
Warner shall grant to Sequana a non-exclusive, royalty-free license, with the
right to sublicense, to use any data developed by or on behalf of Warner
relating to such Non-Disease




*   Certain confidential information contained in this document, marked by
    brackets, has been ommitted and filed separately with the Securities and
    Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
    1934, as amended.

                                      15.
<PAGE>   17

Gene and its expression, for indications outside the Field. If Warner fails or
declines to acquire an exclusive license and does not intend to proceed with
further research with regard to a particular Non-Disease Gene, then in addition
to the rights subject to the preceding sentence, Sequana shall have an exclusive
option to acquire an exclusive license under Warner's interest in the
Collaboration Technology to use such Non-Disease Gene for any use with regard to
compounds for indications outside the Field, on terms to be negotiated in good
faith by the parties.

     4.10 PAYMENT OBLIGATIONS. In addition to the payment of [*] Milestones as
set forth in Section 4.9.3 (b) above, with respect to each indication outside
the Field for which Warner Develops a Lead Compound or Warner Product using a
Disease Gene or Non-Disease Gene for which it has exclusive rights under
Sections 4.9.2 or 4.9.3(b)(iii), Warner shall make [*] payments to Sequana
equivalent to the [*] set forth in Section 5.4, and the [*] set forth in Section
5.5 (subject to Section 5.6), provided however, that Warner will not be
obligated to make any [*] payment more than one time for the same Compound.
Warner shall make royalty payments to Sequana in accordance with Section 5.7 for
each Warner Product, whether for indications within or outside the Field.

5.   CONSIDERATION

     5.1 TECHNOLOGY ACCESS FEE. In partial consideration for the rights granted
Warner herein, [*] shall be creditable against the reimbursements for patient
sample collection costs due Sequana under Section 2.2.2.

     5.2 LICENSE FEE. In partial consideration for the license and rights
granted Warner herein in Section 4.1,2 above. upon the establishment of the
Sequana Technology, excluding the micro-array protocols, and the completion of
training with respect thereto as described in Exhibit A, Warner shall [*]. Such
amount shall not be refundable nor creditable against other amounts due Sequana
under this Agreement.

     5.3 RESEARCH PROGRAM PAYMENTS.

          5.3.1 FTE-BASED PAYMENTS. Warner agrees to pay to Sequana research
funding during the Term of the Research Program based on the number of Sequana
FTEs involved in the Research Program as established pursuant to Section 2.1.3.
For each such FTE, Warner will [*] at which rate shall [*].

          5.3.2 PAYMENT SCHEDULE. The amounts to be paid to Sequana in
connection with the Research Program shall be [paid quarterly, in advance. The
initial payment for the first quarter of Year 1 of the Research Program shall be
made on the Effective Date and subsequent payments shall be made on or before
the first day of January, April, July and October] during the Term of the
Research Program. Such payments shall be made without withholding for taxes or
any other charge and, shall be non-refundable and non-creditable against other
payments due Sequana under this Agreement.

     5.4 [*]. The JRPC shall be responsible for determining when each of the
following milestone(s) have been achieved, and shall promptly make such
determination in writing. In the event the JRPC cannot agree whether a milestone
has been achieved, the decision will be subject to the dispute resolution
procedure of Section 3.4.


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      16.
<PAGE>   18
          5.4.1 [*]. Within thirty (30) days of the date of determination by the
JRPC of the achievement of the applicable milestone during the Term of the
Research Program: Warner will pay to Sequana the following non-refundable
milestone payments:

<TABLE>
<CAPTION>
                        MILESTONES                Amount
<S>                                            <C>
     [*]                                           [*]
     [*]                                           [*]
     [*]                                           [*]
     [*]                                           [*]
     [*]                                           [*]
</TABLE>



          5.4.2 [*]. Within thirty (30) days of the date of determination by the
JRPC of the achievement of such milestone during the Term of the Research
Program. Warner will pay to Sequana the following non-refundable milestone
payments:

<TABLE>
<CAPTION>
                        MILESTONES             Amount
<S>                                           <C>
     [*]                                        [*]
     [*]                                        [*]
     [*]
     [*]                                        [*]
     [*]                                        [*]

</TABLE>


          5.5 [*]. Within thirty (30) days following the occurrence of the
relevant events specified below, Warner shall pay to Sequana the following
non-refundable amounts:

<TABLE>
<CAPTION>
                        MILESTONES                    Amount
<S>                                                 <C>
     [*]                                               [*]
     [*]                                               [*]
</TABLE>


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      17.
<PAGE>   19

<TABLE>
<CAPTION>
                        MILESTONES                    Amount
<S>                                                  <C>
     [*]                                               [*]
     [*]                                               [*]
     [*]                                               [*]
</TABLE>



     5.6 BACKUP WARNER PRODUCTS. The payments due under Section 5.5 above shall
be made with respect to each Warner Product; provided, however, [*].

     5.7 ROYALTIES.

          5.7.1 WARNER PRODUCT ROYALTIES. In consideration of the rights granted
hereunder, Warner shall pay the following royalties to Sequana with respect to
aggregate Net Sales of Warner Products in the Territory, on a Warner
Product-by-Warner Product basis:

               [*]

          5.7.2 COMPUTATION OF ROYALTIES. All sales of Warner Products between
Warner and any of its Affiliates and sublicensees shall be disregarded for
purposes of computing Net Sales and royalties under this Section 5.7, and in
such instances royalties shall be payable only upon sales to unlicensed Third
Parties. Nothing herein contained shall obligate either Party to pay the other
Party more than one royalty on any unit of a Warner Product.

          5.7.3 ROYALTY TERM. The obligation of Warner to pay royalties under
this Article 5 shall continue for each Warner Product on a Warner
Product-by-Warner Product and country-by-country basis, until such time as there
are no Valid Claims in such country covering a Compound contained in such Warner
Product.

     5.8 THIRD PARTY ROYALTIES. [*] shall be responsible for the payment of any
royalties, license fees and milestone and other payments due from [*] to any
other Third Party(ies) under licenses or similar agreements entered into upon
the approval of the JRPC, or entered into by [*], necessary for the manufacture,
use, import, or sale of Warner Products in the Territory (other than the
agreements referred to in Section 2.2.2).

     5.9 WITHHOLDING TAXES. Any income or other tax that a Party hereunder, its
Affiliates or sublicensees is required to withhold (the "Withholding Party,")
and pay on behalf of the other Party, hereunder (the "Withheld Party") with
respect to the royalties payable under this


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      18.
<PAGE>   20

Agreement shall be deducted from and offset against said royalties prior to
remittance to the Withheld Party: provided, however. that in regard to any tax
so deducted, the Withholding Party shall give or cause to be given to the
Withheld Party such assistance as may reasonably be necessary, to enable the
Withheld Party to claim exemption therefrom or credit therefor, and in each case
shall furnish the Withheld Party proper evidence of the taxes paid on its
behalf.

     5.10 PURCHASE OF SEQUANA STOCK. Pursuant to the terms of the Stock Purchase
Agreement on the Effective Date, Warner shall purchase from Sequana [*].

     5.11 POST RESEARCH PROGRAM DEVELOPMENT; MILESTONES AND ROYALTIES. With
respect to the identification by Warner of Compounds, Lead Compounds and Warner
Products after the termination of the Term of the Research Program and on or
prior to the fifth (5th) anniversary of such termination, Warner shall make
milestone and royalty payments to Sequana as follows:

          5.11.1 [*]. Within thirty (30) days of the date of determination by
the JRPC of the achievement of events constituting the [*] described in Section
5.4.2, or upon the occurrence of any of the milestones described in Section 5.5,
Warner will pay to Sequana milestone payments equivalent to the corresponding
milestone payments set forth in Sections 5.4.2 and 5.5 (subject to the
application of Section 5.6). The foregoing milestone payments shall be reduced
by [*] for Compounds identified during the period commencing on the [*] and
ending on the [*].

          5.11.2 ROYALTIES. With respect to Warner Products developed from
Compounds identified by Warner after the termination of the Term of the Research
Program, Warner shall pay royalties to Sequana based on the aggregate Net Sales
of Warner Products in the Territory, on a Warner Product-by-Warner Product
basis, in accordance with the royalty rates set forth in Section 5.7.1 above.
The foregoing royalty payments shall be reduced by [*] for Compounds identified
during the period commencing on the [*] and ending on the [*].

6.      BOOKS AND RECORDS

     6.1 ROYALTY REPORTS AND PAYMENTS. The royalties due under Section 5.7 or
Section 5.11 shall be paid quarterly, within sixty (60) days after the close of
each calendar quarter, or earlier, if practical, immediately following each
quarterly period in which such royalties are earned. With each such quarterly
payment, Warner shall furnish Sequana a royalty statement setting forth, on a
country by-country and Warner Product-by-Warner Product basis, the total number
of units of each royalty-bearing Warner Product sold hereunder for the quarterly
period for which the royalties are due. Simultaneously with the delivery of each
such report, Warner shall pay to Sequana the total royalties, if any, due to
Sequana for the period of such report. If no


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      19.
<PAGE>   21

royalties are due, Warner shall so report. In addition, at Sequana's request.
but no more often than once in any twelve (12) month period, Warner shall report
to Sequana on a country-by-country and Warner Product-by-Warner Product basis
the amounts of any deductions and/or adjustments to Net Sales taken by Warner
pursuant to Section 1.22 with respect to Net Sales in the preceding four (4)
calendar quarters.

     6.2 PAYMENT METHOD; LATE PAYMENTS. All amounts due Sequana hereunder shall
be paid in U.S. dollars by wire transfer in immediately available funds to a
bank account designated by Sequana. Any payments or portions thereof due
hereunder which are not paid on the date such payments are due under this
Agreement shall bear interest at a rate equal to the lesser of prime rate as
reported by the Citibank (or its successor in interest), New York, New York,
plus two percent (2%), or the maximum rate permitted by law. calculated on the
number of days such payment is delinquent, compounded monthly. This Section 6.2
shall in no way limit any other remedies available to Sequana.

     6.3 CURRENCY CONVERSION. Royalties earned shall first be determined in the
currency of the country in which they are earned and then converted to its
equivalent in United States currency. The buying rates of exchange for
converting the currencies involved into the currency of the United States quoted
by Citibank (or its successor in interest) New York, New York at the close of
business on the last business day of the quarterly period in which the royalties
were earned shall be used to determine any such conversion.

     6.4 RESTRICTIONS ON PAYMENTS. The obligation to pay royalties under this
Agreement shall be waived and excused to the extent that statutes, laws, codes
or government regulations in a particular country, prevent such royalty,
payments; provided, however, in such event, if legally permissible, Warner shall
pay the royalties owed to Sequana by depositing such amounts in a bank account
in such country that has been designated by Sequana and promptly report such
payment to Sequana.

     6.5 RECORDS; INSPECTION. Warner and its Affiliates shall keep (and cause
its Sublicensees to keep) complete, true and accurate books of account and
records for the purpose of determining the royalty amounts payable under Article
5. Such books and records shall be kept reasonably accessible for at least three
(3) years following the end of the calendar quarter to which they pertain. Such
records will be open for inspection during such three (3) year period by a
representative or agent of Sequana reasonably acceptable to Warner, which
approval shall not be unreasonably withheld for the purpose of verifying the
royalty. statements. Such inspections may be made no more than once each
calendar year, at reasonable times mutually agreed by Warner and Sequana.
Sequana's representative or agent will be obliged to execute a reasonable
confidentiality agreement prior to commencing any such inspection and may only
disclose to Sequana the amount of any variance or error. Sequana shall bear the
costs and expenses of inspections conducted under this Section 6.5, unless a
variation or error producing an underpayment in royalties payable exceeding
[*] of the amount payable for any inspection period is
established in the course of any such inspection, whereupon all costs relating
to the inspection and any unpaid amounts that are discovered will be paid by
Warner, together with interest on such unpaid amounts at the rate specified in
Section 6.2 above.



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      20.
<PAGE>   22

7.      COMMERCIALIZATION

     7.1       PRODUCT DEVELOPMENT.

          7.1.1 WARNER. Warner shall be responsible for all costs of conducting
Development of Product(s) in the Territory, to which it holds an exclusive
license under this Agreement, including, without limitation, expenses incurred
in conducting clinical trials for such Products. In addition, Warner shall be
responsible, at its sole expense, for all commercialization of such Product(s)
in the Territory so long as Warner retains exclusive rights thereto under this
Agreement. During the term of this Agreement, Warner shall keep Sequana fully
informed of its activities subject to this Agreement, including without
limitation, the achievement of the milestones set forth in Sections 5.4 and 5.5
and the commercialization of the applicable Product(s). On or before January 31
of each year, during the term of this Agreement, Warner shall provide Sequana
with a written report summarizing such events and activities and detailing those
which have not been previously reported. When a registration package requesting
approval for commercial sale of any Product to which Warner holds an exclusive
license under this Agreement is first filed in any country, within the
Territory, and when approval is received therefor, Warner will immediately
notify Sequana in writing.

          7.1.2 SEQUANA. Sequana shall be responsible for all costs of
conducting Development of Product(s) in the Territory to which it retains
commercialization rights under this Agreement, including, without limitation,
expenses incurred in conducting clinical trials for such Products. In addition,
Sequana shall be responsible, at its sole expense, for all commercialization of
such Product(s) in the Territory so long as Sequana retains exclusive rights
thereto under this Agreement. During the term of this Agreement. Sequana shall
keep Warner fully informed of its activities subject to this Agreement, and the
commercialization of the applicable Product(s). On or before January, 31 of each
year, during the term of this Agreement, Sequana shall provide Warner with a
written report summarizing such events and activities and detailing those which
have not been previously reported. When a registration package requesting
approval for commercial sale of any Product to which Sequana holds
commercialization rights under this Agreement is first filed in any country,
within the Territory, and when approval is received therefor, Sequana will
immediately notify Warner in writing.

     7.2       DUE DILIGENCE.

          7.2.1 REASONABLE EFFORTS. Each Party shall, with respect to those
Products which it has the right to develop and commercialize under this
Agreement, use all reasonable efforts to: (i) develop and bring such Products to
the market as soon as reasonably practicable, (ii) obtain regulatory approvals
to market such Products, and (iii) after obtaining regulatory approvals for any
such Product, launch such Product and promote and meet the market demand
therefor. In connection therewith, the applicable Party shall use efforts not
less than those efforts such Party makes with respect to its own comparable
products of comparable commercial potential, stage of development and patent
protection.



                                      21.
<PAGE>   23

          7.2.2 LACK OF DILIGENCE.

               (a) In the event that Warner (i) fails to use or continue to use
diligent efforts to actively develop and commercialize a particular Lead
Compound (or corresponding Warner Product) as set forth in Section 7.2.1 above,
or (ii) notifies Sequana that it will not conduct further commercialization with
respect to a particular Lead Compound, then Sequana may terminate Warner's
rights under this Agreement with respect to such Lead Compound (and
corresponding Warner Product, Other Product or Diagnostic Product, as the case
may be) in the Territory. In such event, Sequana shall thereafter have the
exclusive rights to commercialize such Lead Compound (or corresponding Warner
Product, Other Product or Diagnostic Product, as the case may be) in the
Territory, alone or with Third Parties, subject to a royalty obligation to
Warner to be negotiated in good faith, which [*]

               (b) In the event that Warner (i) fails to use or continue to use
diligent efforts to actively develop and commercialize at least one Lead
Compound (or corresponding Warner Product) for a particular Validated Target, or
(ii) after the term of the Research Program notifies Sequana that it will not
conduct further commercialization with respect to at least one Lead Compound (or
corresponding Warner Product) for a particular Validated Target, then Sequana
may terminate Warner's rights under this Agreement with respect to any and all
Lead Compounds (and corresponding Warner Product, Other Product or Diagnostic
Product, as the case may be) with activity for or against such Validated Target.
In such event, Sequana shall thereafter have the exclusive rights to
commercialize any such Lead Compound (and any corresponding Warner Product,
Other Product or Diagnostic Product. as the case may be) for such Validated
Target in the Territory, alone or with Third Parties, without obligation to
Warner. provided that Sequana will not commercialize a Lead Compound or Warner
Product to which it acquires rights pursuant to this Section 7.2.2(b), intended
for the same indication as another royalty-bearing Warner Product being
commercialized by Warner pursuant to this Agreement at the time Sequana acquires
such rights.

               (c) In the event that Sequana, itself or through a Third Party,
(i) fails to use or continue to use diligent efforts to actively develop and
commercialize a particular Other Product as set forth in Section 7.2.1 above
with regard to which it has commenced Phase II clinical trials, or (ii) notifies
Warner that it will not conduct further commercialization with respect to a
particular Other Product, then Warner may acquire a license with respect to such
Other Product as provided in Section 7.2.3(c). If Warner acquires rights to
develop a particular Other Product pursuant to this Section 7.2.2(c) for use in
the Field, Sequana agrees not to commercialize an Other Product of the same
product type (i.e., Antisense, Protein, Gene Therapy or Vaccine) for the same
indication as such Other Product being commercialized by Warner pursuant to this
Agreement at the time Sequana acquires such rights.

          7.2.3 LICENSES.

               (a) In the event that any of Warner's rights terminate pursuant
to Section 7.2.2(a) above, at Sequana's request, Warner shall grant to Sequana
an exclusive (even as to Warner), worldwide, fully-paid, perpetual license (with
the right to sublicense) under Warner's interest in any Collaboration
Technology, Patent Rights and Know-How owned by Warner to the



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.




                                      22.
<PAGE>   24

extent necessary to make, have made, import, use, offer for sale and sell such
Lead Compounds (and corresponding Warner Products, Other Products and Diagnostic
Products).

               (b) In the event that any of Warner's rights terminate pursuant
to Section 7.2.2(b) above, at Sequana's request, Warner shall grant to Sequana
an exclusive (even as to Warner), worldwide, fully-paid, perpetual license (with
the right to sublicense) under Warner's interest in any Collaboration
Technology, Patent Rights and Know-How owned by Warner to the extent necessary,
to make, have made, import, use, offer for sale and sell any Lead Compounds (and
corresponding Warner Products, Other Products and Diagnostic Products) with
activity for or against such Validated Target.

               (c) In the event that Sequana fails to exercise diligence with
respect to a particular Other Product pursuant to Section 7.2.2(c) above, at
Warner's request, Sequana shall grant to Warner an exclusive (even as to
Sequana), worldwide, royalty bearing license (with the right to sublicense)
under Sequana's interest in any Background Technology, Collaboration Technology,
Patent Rights and Know-How owned by Sequana to the extent necessary, to make,
have made, import, use, offer for sale and sell such Other Product.

     7.3 WARNER TRADEMARKS. Warner may select and own one or more trademarks for
marketing a Warner Product in countries in the Territory (the "Warner
Trademarks"), taking into consideration the Trademark(s) selected by the Parties
for any countries in which the Parties are conducting co-promotion, if any. All
expenses for (i) registration of such Warner Trademark and (ii) bringing,
maintaining and prosecuting any action to protect or defend such Warner
Trademark in such countries shall be borne by Warner. If Warner and its
Affiliates and Sublicensees terminate the sale of any Warner Product during the
term of this Agreement, at Sequana's request, Warner shall assign during the
term of this Agreement to Sequana any Warner Trademark which specifically
identifies such Warner Product and no other Warner Products, and Sequana shall
be responsible for any enforcement and/or maintenance thereof thereafter.

     7.4 USE OF TRADEMARKS. Except as set forth in this Article 7, nothing
contained in this Agreement shall grant to either Party any right, title, or
interest in or to any trademarks of the other Party, whether or not specifically
recognized or perfected under applicable laws. At no time during or after the
term of this Agreement shall either Party challenge or assist others to
challenge trademarks used in connection with the Warner Products or the
registration thereof or attempt to register any trademarks, marks, or trade
names confusingly similar to such trademarks.

8.   OTHER PRODUCTS

     8.1 RIGHT OF FIRST NEGOTIATION.

          8.1.1 NOTICE; NEGOTIATION PERIOD. Sequana hereby grants to Warner a
right of first negotiation to acquire an exclusive, worldwide license under (i)
the Sequana Technology, and (ii) Sequana's interest in the Collaboration
Technology and Background Technology (other than Sequana Technology) to make,
have made, use, offer for sale, import and sell Other Products. The right of
first negotiation shall apply on an Other Product-by-Other Product basis and
shall commence upon the written notification (which shall specifically refer to
this Section



                                      23.
<PAGE>   25

8.1) by Sequana to Warner of its decision to develop or sublicense a particular
Other Product, and shall terminate within six (6) months thereafter or at such
other time as the Parties may mutually agree in writing. The right of first
negotiation may be exercised by Warner by providing written notice to Sequana of
its interest in entering into a license agreement and the Parties shall
negotiate such an agreement in good faith for a period of six (6) months from
the date of Sequana's initial notice to Warner.

          8.1.2 SEQUANA DEVELOPMENT.

               (a) If the Parties are unable to negotiate an agreement with
respect to any such Other Product within the period described in Section 8.1.1
above: (i) Warner shall grant to Sequana an exclusive (even as to Warner),
worldwide, license, with right to grant sublicenses, under Warner's interest in
any Collaboration Technology, Patent Rights and Know-How to make, have, made,
use, offer for sale, import and sell such Other Product, and (ii) Sequana shall
be free to develop and/or commercialize such Other Product independently or to
grant rights to develop and/or commercialize such products to any Third Party on
any terms; provided that for the [*] period following the expiration of the
negotiation period provided in Section 8.1.1 above. Sequana shall not enter into
such an agreement with a Third Party on terms which, when considered as a whole,
are more favorable to the Third Party than the last terms offered to Sequana by
Warner during the negotiation period described in Section 8.1.1.

               (b) If Sequana develops and/or commercializes any such Other
Products independently, [*]

               (c) If Sequana, grants rights to a Third Party, to develop and/or
 commercialize any such Other Products.[*]

          8.1.3 WARNER DEVELOPMENT. If Warner acquires a license from Sequana
with respect to a particular Other Product pursuant to Section 7.2.3(c) above
[*]

     8.2 CO-PROMOTION OPTION. With respect to each Other Product that Warner and
Sequana enter into a further agreement pursuant to Section 8.1.1. Sequana shall
have the option, exercisable on or before [*] prior to the projected filing of a
PLA or NDA, as the case may be, in the United States (as established by the
JRPC) with respect to each Other Product, with written notice to Warner, to
co-develop and co-promote such Other Product for any such indication in any one
or more of the co-promotion countries (the "Co-Promotion Option").

          8.2.1 EXERCISE OF OPTION. If Sequana exercises the Co-Promotion Option
with respect to a particular Other Product, Sequana shall have the right to
co-promote such Other Product in the co-promotion country(ies), and the Parties
shall promptly negotiate and enter into a further Co-Promotion Agreement
consistent with this Agreement and which shall include the provisions set forth
on Exhibit A hereto, unless otherwise agreed by the Parties.

          8.2.2 ELECTION NOT TO EXERCISE OPTION. If Sequana does not exercise
its option to co-develop and co-promote any such Other Product, [*]

     8.3 DIAGNOSTIC PRODUCTS.



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      24.
<PAGE>   26


          8.3.1 DIAGNOSTIC SERVICES. In the event that Warner notifies Sequana
(i) that Warner believes that the sales of a particular Warner Product could be
significantly increased if there was a service not requiring Agency approval for
(x) the diagnosis of the indication which such Warner Product is intended to
treat, or (y) the selection of a treatment regimen, and Warner provides Sequana
data evidencing such position, and (ii) that Warner has commenced, or intends to
commence within twelve (12) months, Phase I clinical trials with respect to such
Warner Product. Then, if Sequana has not notified Warner within [*] of its
receipt of Warner's notice that it intends, itself or with a third party, to
provide such a diagnostic service, at Warner's request, Sequana will grant to
Warner a non-exclusive worldwide license under Sequana's interest in the
Background Technology (other than the Sequana Technology) and Collaboration
Technology, Patent Rights and Know-How with the right to sublicense, to the
extent necessary, for Warner to make, have made, use, import, offer for sale and
sell such a diagnostic service for such purpose in the Territory. If Sequana
provides Warner notice that it wishes to provide such service the parties shall
negotiate in good faith the terms of an agreement therefore.

          8.3.2 REGULATORY APPROVALS. If Warner has commenced Phase III clinical
trials with respect to a particular Warner Product, and notifies Sequana that
Warner believes that the sales of such Warner Product could be significantly
increased if there was an Agency-approved Diagnostic Product for the diagnosis
of the indication which such Warner Product is intended to treat and if Sequana
has not notified Warner within [*] of its receipt of Warner's notice that it
intends, itself or with a third party, to develop such a Diagnostic Product for
such purpose, then at Warner's request, Sequana will grant to Warner a
non-exclusive worldwide license under Sequana's interest in the Background
Technology (other than the Sequana Technology), Collaboration Technology, Patent
Rights and Know-How, with the fight to sublicense, to the extent necessary for
Warner to make, have made, use, import, offer for sale and sell such Diagnostic
Product in the Territory. In such event, such Diagnostic Product shall be
treated as a Warner Product for all purposes of this Agreement. It is understood
and agreed that nothing in this Section 8.3 shall obligate Sequana to develop or
commercialize any Diagnostic Product or service.

          8.3.3 ASSAY FORMATS. In the event that Warner acquires a license
pursuant to Section 8.3.1 above with regard to a particular Diagnostic Product.
Sequana agrees that it shall not, directly or indirectly, commercialize in a
single assay format any Diagnostic Product intended to compete with a Diagnostic
Product licensed to Warner: provided, Sequana shall retain the right to
commercialize, directly or indirectly, any such Diagnostic Product in a format
bearing two (2) or more assays (e.g., a panel format).

     8.4 SALE OF DIAGNOSTIC PRODUCTS. Sequana agrees to sell to Warner any
Diagnostic Products being sold by Sequana for use in connection with Warner
Products or Other Products which Warner or its Affiliates or Sublicensees is
commercializing hereunder, subject to Sequana's standard terms and conditions of
sale.

9.   INTELLECTUAL PROPERTY

     9.1       OWNERSHIP OF TECHNOLOGY.



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.



                                      25.
<PAGE>   27

          9.1.1 BACKGROUND TECHNOLOGY. Except as otherwise set forth herein,
each Party shall retain ownership or Control, as the case may be, over its
Background Technology. The owner of any patentable Background Technology shall
have the fight, at its option and expense, to prepare, file and prosecute in its
own name any patent applications with respect to such Background Technology and
to maintain any patents issued thereon.

          9.1.2 COLLABORATION TECHNOLOGY. Title to all inventions and other
intellectual property solely made by employees of Warner or its Affiliates, in
connection with and arising out of the Research Program ("Warner Inventions")
shall be deemed owned by Warner. Title to all inventions and other intellectual
property made solely by employees of Sequana, in connection with and arising out
of with the Research Program ("Sequana Inventions") shall be deemed owned by
Sequana. Title to all inventions and other intellectual property made jointly by
employees of Warner or its Affiliates and Sequana in connection with and arising
out of the Research Program ("Joint Inventions") shall be deemed jointly owned
by Sequana and Warner. Inventorship of inventions and other intellectual
property, rights conceived and/or reduced to practice pursuant to this
Agreement. and rights of ownership with respect thereto. shall be discussed by
patent counsel of Warner and Sequana prior to the filing of each patent
application subject to this Agreement. Inventorship shall be determined in
accordance with the patent laws of the country or countries in which such
inventions or other intellectual property were made. In the event that the
Parties disagree as to inventorship and/or the applicable law with respect to
any invention or patent application, such matter shall be subject to resolution
pursuant to Article 14. Inventorship and rights of ownership of Collaboration
Technology (whether or not patentable) shall be determined in accordance with
United States laws of inventorship or the law of California, as applicable.

     9.2 SOLELY-OWNED PATENT RIGHTS.

          9.2.1 The sole owner (the "Owner") of any Invention shall have the
right, at its option to prepare, file and prosecute patent applications in its
own name, in such countries as it deems appropriate, and conduct any
interferences, re-examinations, reissues, oppositions or requests for patent
term extensions relating thereto, using counsel of its choice. and to maintain
any patents issued. In connection therewith, the non-Owner Party agrees to
cooperate with the Owner, at the Owner's expense, in the preparation and
prosecution of all such patent applications and in the maintenance of any
patents issued. The Owner shall keep the other Party currently informed of all
steps to be taken in such preparation, prosecution and maintenance of all of its
patent rights which claim an Invention and shall upon request furnish the other
Party with copies of such patent rights and other related correspondence
relating to such Invention to and from patent offices and where feasible, permit
the other Party a period of at least fourteen (14) days to offer its comments
thereon before the Owner makes a submission to a patent office which could
materially affect the scope or validity of the patent coverage that may result,
and promptly provide the other Party copies of any documents relating to
Inventions which the Party conducting such activities receives from such patent
offices, including notice of all interferences, reissues, reexaminations.
oppositions or requests for patent term extensions.

          9.2.2 If the Owner fails to (i) fulfill its obligations under this
Section 9.2, or (ii) protect against abandonment of a Patent Right which claims
an Invention, to the extent that the Owner has the right to do so, the Owner
may, at its discretion, permit the non-Owner Party, at its



                                      26.
<PAGE>   28

option and expense, to undertake such obligations. The Party, not undertaking
such actions shall fully cooperate with the other Party, and shall provide to
the other Party whatever documents that may be needed in connection therewith.
The Party not undertaking such actions may require a suitable indemnity against
all damages, costs and expenses and impose such other reasonable conditions as
such Party's advisors may request. If a non-Owner undertakes the obligations of
"Owner" under this Article 9 with respect to any Patent Rights of the other
Party under this Section 9.2.2, it shall prosecute and maintain the same at its
own expense, and shall not abandon or compromise them or fail to exercise any
rights of appeal without giving the other Party, the right to take over the
prosecuting Party's conduct, at such other Party's own expense.

     9.3 JOINTLY OWNED INVENTIONS.

          9.3.1 RESPONSIBILITIES. In the case of each Joint Invention the
Parties shall agree which Party will have the rights and responsibilities of the
"Inventor" as described in this Article 9) in respect of any such patentable,
jointly owned Collaboration Technology, and which Party shall have the rights
and responsibilities of a non-Inventor therefor. The Inventor shall use patent
counsel reasonably acceptable to the non-Inventor, and shall keep the
non-Inventor fully informed as to the status of such patent matters, including,
without limitation, by providing the non-Inventor and its patent counsel the
opportunity, at the non-Inventor's expense, to review and comment on any
documents relating to the Joint Invention which will be filed in any patent
office at least thirty (30) days before such filing, and promptly providing the
non-Inventor copies of any documents relating to Joint Invention which the
Inventor receives from such patent offices, including notice of all
interferences, reissues, reexaminations, oppositions or requests for patent term
extensions.

          9.3.2 COOPERATION.

               (a) The Parties will cooperate to file, prosecute and maintain
patent applications covering the Joint Invention(s) within the Collaboration
Technology in the United States and the European Union (in Europe through a
European Patent Convention application) (collectively, the "Core Countries") and
other countries agreed by the Parties, Warner will pay all expenses and fees
associated with the filing, prosecution, issuance and maintenance of any patent
application and resulting patent for a Joint Invention in the Core Countries and
other agreed countries.

               (b) In the event that either Party wishes to seek patent
protection with respect to any Joint Invention outside the Core Countries, it
shall notify the other Party hereto. If both Parties wish to seek patent
protection with respect to such Joint Invention in such country or countries,
the activities to seek such protection shall be subject to Section 9.3.2(a)
above. If only one Party wishes to seek patent protection with respect to such
Joint Invention in such country or countries (including, without limitation.
Japan), it may file, prosecute and maintain patent applications and patents with
respect thereto, at its own expense. Whenever possible, the Parties shall
cooperate to obtain the benefit of international treaties, conventions and/or
agreements (e.g., the Patent Cooperation Treaty) in order to obtain the benefits
afforded thereby. In any such case, the Party declining to participate in such
activities (the "Nonparticipating Party") shall grant to the other party, in the
applicable country or countries, an exclusive (even as to the



                                      27.
<PAGE>   29

Nonparticipating Party) license, with right to sublicense, the Nonparticipating
Party's interest in the applicable Joint Invention.

     9.4 EXPENSES. Warner will reimburse Sequana for all reasonable expenses
incurred after the Effective Date in connection with filing, prosecuting,
maintaining, extending, defending and enforcing the Collaboration Technology
directly arising out of and exclusively related to the Research Program.

     9.5 ENFORCEMENT.

          9.5.1 NOTICE. Sequana and Warner shall each promptly notify the other
of any infringement or unauthorized use of an Invention which comes to its
attention, describing the facts relating thereto in reasonable detail.

          9.5.2 SOLELY OWNED INVENTIONS. Subject to 9.5.3 below, in the event
that any Background Technology or Collaboration Technology solely owned by a
Party (collectively "Technology") necessary, for manufacture, use and sale of a
Warner Product or an Other Product is infringed or misappropriated by a Third
Party in any country, in the Territory, or is subject to a declaratory judgment
action arising from such infringement in such country, Warner or Sequana, as the
case may be, shall promptly notify the other Party hereto. The Party which owns
or Controls such Technology (the "Technology Owner") shall have the initial
right (but not the obligation) to enforce such Technology, or defend any
declaratory, judgment action with respect thereto, at its expense. In the event
that the Technology Owner fails to initiate a suit to enforce such Technology
against a commercially significant infringement in the Field by a Third Party in
any jurisdiction in the Territory within one hundred eighty (180) days of a
request by the other Party (the "Licensee") to do so, if the Licensee has the
right to commercialize such Warner Product or Other Product, the Licensee may,
subject to the Technology Owner's agreements with Third Parties, initiate such
suit in the name of the Technology Owner of such Technology against such
infringement, at the expense of such Licensee. In the event that the Technology
Owner's agreements with a Third Party do not allow the other Party hereto to
initiate a suit as described above to enforce the Technology against a Third
Party, infringer, then the Technology Owner shall be obligated to commence such
a suit and use diligent efforts in connection therewith or obtain for the
Licensee the right to commence suit against the infringer. The Party involved in
any such claim, suit or proceeding, shall keep the other Party' hereto
reasonably informed of the progress of any such claim, suit or proceeding. [*]

          9.5.3 JOINT INVENTIONS. In the event Sequana or Warner becomes aware
of any actual or threatened infringement in the Territory of any Patent Right
which claims a Joint Invention, that Party shall promptly notify, the other and
the JRPC shall promptly discuss how to proceed in connection with such actual or
threatened infringement. In the event such infringement relates to a jointly
owned Other Product or Warner Product and only one Party, wishes to participate
in such proceeding, it shall have the right to proceed alone, at its expense,
and may retain any recovered; provided, at the request and expense of the
participating Party, the other Party, agrees to cooperate and join in any
proceedings in the event that a Third Party asserts that the co-owner of such
Joint Invention is necessary or indispensable to such proceedings.



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.




                                      28.
<PAGE>   30

     9.6 ALLEGATIONS OF INFRINGEMENT BY THIRD PARTIES.

          9.6.1 RESPONSIBILITIES.

               (a) Warner shall be solely responsible for any threatened or
actual claims for Third Party patent infringement or other Third Party
intellectual property rights arising out of the manufacture, use, sale or
importation of a Warner Product to which Warner retains a license pursuant to
Article 8, or a Diagnostic Product to which Warner has acquired and retains a
license pursuant to Sections 8.3.1 or 8.3.2, or an Other Product which Warner is
not co-promoting with Sequana, but has acquired and retains a license from
Sequana pursuant to Section 7.2.3(c).

               (b) Sequana shall be solely responsible for any threatened or
actual claims for Third Party patent infringement or other Third Party
intellectual property rights arising out of the manufacture, use, sale or
importation of Diagnostic Products or Warner Products which it is
commercializing and Other Products to which Sequana has exclusive rights.

          9.6.2 PROCEDURES.

               (a) Upon receiving notice of such actual or threatened claims.
Warner or Sequana, as the case may be, shall promptly meet with the Other Party
to discuss the course of action to be taken to resolve or defend any such
infringement litigation.

               (b) With respect to claims subject to Section 9.6.1(a), Warner is
not named as a Party in such a claim, suit or proceeding, Warner may, at its own
expense and through counsel of its own choice, seek leave to intervene in such
claim, suit or proceeding Sequana agrees not to oppose such intervention. If
Warner and not Sequana, is named as a Party to such claim, suit or proceeding,
Warner shall have the right to control the defense and settlement of such claim,
suit or proceeding, at its own expense, using counsel of its own choice, however
Sequana, at its own expense and through counsel of its own choice, may seek to
intervene if the claim, suit or proceeding relates to the commercialization of
the Warner Product in the Field, and in such event, Warner agrees not to oppose
such intervention. If Sequana shall. at any time, tender its defense to Warner,
then Warner shall defend Sequana in such claim, suit or proceeding, at Warner's
own expense and through counsel of its own choice, and Warner shall control the
defense and settlement of any such claim, suit or proceeding; provided, Warner
shall not enter into any agreement which makes any admission regarding (i)
wrongdoing on the part of Sequana, or (ii) the invalidity, unenforceability, or
absence of infringement of any Patent Rights owned solely by Sequana or patent
claiming a Joint Invention, without the prior written consent of Sequana, which
consent shall not be unreasonably withheld.

               (c) With respect to claims subject to Section 9.6. l(b), if
Sequana is not named as a Party in such a claim, suit or proceeding, Sequana
may, at its own expense and through counsel of its own choice, seek leave to
intervene in such claim, suit or proceeding. Warner agrees not to oppose such
intervention. If Sequana, and not Warner, is named as a Party to such claim,
suit or proceeding, Sequana shall have the right to control the defense and
settlement of such claim, suit or proceeding, at its own expense, using counsel
of its own choice. however Warner, at its own expense and through counsel of its
own choice, may seek to




                                      29.
<PAGE>   31

intervene if the claim, suit or proceeding relates to the commercialization of
the Product, and in such event, Sequana agrees not to oppose such intervention.
If Warner shall, at any time, tender its defense to Sequana, then Sequana shall
defend Warner in such claim, suit or proceeding, at Sequana's own expense and
through counsel of its own choice, and Sequana shall control the defense and
settlement of any such claim, suit or proceeding; provided, Sequana shall not
enter into any agreement which makes any admission regarding (i) wrongdoing on
the part of Warner, or (ii) the invalidity, unenforceability or absence of
infringement of any Patent Rights owned solely by Warner or patent claiming a
Joint Invention, without the prior written consent of Warner. which consent
shall not be unreasonably withheld.

          9.6.3 COOPERATION. The Parties shall cooperate with each other in
connection with any such claim, suit or proceeding and shall keep each other
reasonably informed of all material developments in connection with any such
claim, suit or proceeding.

     9.7 INDEPENDENT INVENTIONS. Ownership rights to inventions that do not rely
in material part on technology, data or knowledge contributed by the other Party
and which are not derived under the Research Program and that are made by the
employees of Sequana (but not of Warner) or by the employees of Warner (but not
of Sequana), as the case may be, whether or not made during the Term of this
Agreement, shall reside solely in Sequana or Warner, respectively, as the case
may be. Neither Party will claim or seek ownership rights, licenses or royalties
or other compensation with respect to such inventions of the other Party. The
applicable Party shall have the right, at its option and expense, to prepare in
its own name, file and prosecute any patent applications and to maintain any
patents issued with respect to such inventions. In connection therewith, the
other Party agrees to cooperate with the filing Party at the filing Party's
expense in the preparation and prosecution of all such patent applications
covering such independent inventions to the extent that such Party's cooperation
is reasonably necessary therefor. This obligation shall survive the expiration
or termination of this Agreement.

10.  REPRESENTATIONS AND WARRANTIES

     10.1 LEGAL AUTHORITY. Each Party represents and warrants to the other that
it has the legal power. authority and right to enter into this Agreement and to
perform its respective obligations set forth herein.

     10.2 NO CONFLICTS. Each Party represents and warrants that as of the date
of this Agreement it is not a party to any agreement or arrangement with any
Third Party or under any obligation or restriction, including pursuant to its
Certificate of Incorporation or Bylaws, which in any way limits or conflicts
with its ability to fulfill any of its obligations under this Agreement, and
shall not enter into any such agreement during the term of this Agreement.

     10.3 OTHERS BOUND. Each Party covenants that any contract it enters into
with a Third Party, performing services under this Agreement on behalf of such
Party will bind such Third Party to all of the relevant terms and conditions of
this Agreement, unless otherwise agreed by the Parties.

     10.4 DISCLAIMER OF WARRANTIES. Sequana and Warner each specifically
disclaim that the Research Program will be successful, in whole or part, SEQUANA
AND WARNER



                                      30.
<PAGE>   32

EXPRESSLY DISCLAIM ANY WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE. WITH RESPECT TO THE CONFIDENTIAL INFORMATION, BACKGROUND TECHNOLOGY,
WARNER PATENTS OR KNOW-HOW, OR SEQUANA TECHNOLOGY, PATENTS OR KNOW-HOW,
COLLABORATION TECHNOLOGY OR LEAD COMPOUNDS, OR WARNER PRODUCTS, INCLUDING.
WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE, VALIDITY OF ANY BACKGROUND TECHNOLOGY OR COLLABORATION TECHNOLOGY,
PATENTED OR UNPATENTED, OR NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS
OF THIRD PARTIES.

     10.5 THIRD PARTY CONTRACTS. As of the Effective Date, the Third Party
Contracts listed on Exhibit C are in full force and effect and no default has
occurred or is ongoing with respect to such contracts.

11.  CONFIDENTIALITY

     11.1 CONFIDENTIAL INFORMATION. Except as expressly provided herein, the
Parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving Party shall keep completely confidential and shall not
publish or otherwise disclose and shall not use for any purpose except for the
purposes contemplated by this Agreement any Confidential Information of the
other Party, or any other data, samples, technical and economic information
(including the economic terms hereof), commercialization, clinical and research
strategies and know-how and other information provided by the other Party (the
"Disclosing Party") during the Term of this Agreement or during the negotiation
of this Agreement, or in connection with the transactions contemplated thereby,
or any Collaboration Technology and all other data, results and information
developed pursuant to the Research Program and solely owned by the Disclosing
Party (collectively the "Confidential Information") furnished to it by the
Disclosing Party hereto pursuant to this Agreement or the transactions
contemplated thereby, except that "Confidential Information" shall not include:

               (a) information that is or becomes part of the public domain
through no fault of the non-Disclosing Party or its Affiliates; and

               (b) information that is obtained after the date hereof by the
non-Disclosing Party or one of its Affiliates from any Third Party which is
lawfully in possession of such Confidential Information and not in violation of
any contractual or legal obligation to the Disclosing Party, with respect to
such Confidential Information;

               (c) information that is known to the non-Disclosing Party or one
or more of its Affiliates prior to disclosure by the Disclosing Party, as
evidenced by the non-Disclosing Party's written records; and

               (d) information that is necessary to be disclosed to any
governmental authorities or pursuant to any regulatory filings, but only to the
limited extent of such legally required disclosure; or

               (e) information which has been independently developed by the
non-Disclosing Party without the aid or use of any Confidential Information.



                                      31.
<PAGE>   33

     11.2 PERMITTED DISCLOSURES. Confidential Information may be disclosed to
employees, agents, consultants, sublicensees or suppliers of the non-Disclosing
Party or its Affiliates, but only to the extent reasonably required to
accomplish the purposes of this Agreement and only if the non-Disclosing Party
obtains prior agreement from its employees, agents, consultants, sublicensees,
or suppliers to whom disclosure is to be made to hold in confidence and not make
use of such information for any purpose other than those permitted by this
Agreement. Each Party will use at least the same standard of care as it uses to
protect proprietary or confidential information of its own to ensure that such
employees, agents, consultants, sublicensees or suppliers do not disclose or
make any unauthorized use of the Confidential Information. Notwithstanding any
other provision of this Agreement, each Party may disclose the terms of this
Agreement to prospective lenders, investment bankers and other financial
institutions of its choice solely for purposes of financing the business
operations of such Party either (i) upon the written consent of the other Party
or (ii) if the disclosing Party obtains a signed confidentiality, agreement with
such entity or financial institution with respect to such information, upon
terms substantially similar to those contained in this Article I 1.

     11.3 PUBLICITY. All publicity, press releases and other announcements
relating to this Agreement or the transaction contemplated hereby shall be
reviewed in advance by, and shall be subject to the approval of, both Parties;
provided, however, that either Party may (i) publicize the existence and general
subject matter of this Agreement without the other Party's approval, and (ii)
disclose the terms of this Agreement only to the extent required to comply with
applicable securities laws and in the case of (ii), the non-disclosing Party
shall have the right to review and comment on such disclosure prior to its
submission, where practicable. Once a particular disclosure described in (i) has
been approved for disclosure, either Party may make disclosures which do not
differ materially therefrom without any need for further consents.

     11.4 PUBLICATION. Until the fifth anniversary of the termination of the
Term of the Research Program, the Parties shall cooperate in appropriate
publication of the results of research and development work performed pursuant
to this Agreement, but subject to the predominating interest to obtain patent
protection for any patentable subject matter. To this end, it is agreed that
prior to any public disclosure of such results, the Party proposing disclosure
shall send the other Party a copy of the information to be disclosed and shall
allow the other Party twenty-one (21) days from the date of receipt in which to
determine whether the information to be disclosed contains subject matter for
which patent protection should be sought prior to disclosure, or otherwise
contains Confidential Information of the reviewing Party which such Party,
desires to maintain as a trade secret. If notification is not received during
the twenty-one (21) day period, the Party proposing disclosure shall be free to
proceed with the disclosure. If due to a valid business reason or a reasonable
belief by the non-disclosing Party that the disclosure contains subject matter
for which a patentable invention should be sought, then prior to the expiration
of the twenty-one (21 ) day period, the non-disclosing Party shall so notify the
disclosing Party, who shall then delay public disclosure of the information for
an additional period of up to sixty (60) days to permit the preparation and
filing of a patent application on the subject matter to be disclosed or other
action to be taken. The Party proposing disclosure shall thereafter be free to
publish or disclose the information. The determination of authorship for any
abstract or publication shall be in accordance with accepted scientific
practices.

12.  INDEMNIFICATION



                                      32.
<PAGE>   34

     12.1 WARNER. Warner agrees to indemnify and hold harmless Sequana and its
Affiliates and Sublicensees and their respective employees, agents, officers,
directors and permitted assigns (each a "Sequana Indemnity") from and against
any claims by a Third Party resulting in any liabilities, damages, settlements,
claims, actions, suits, penalties, fines, costs or expenses incurred (including,
without limitation, reasonable attorneys' fees and other expenses of litigation)
(any of the foregoing, a " Claim") arising out of or resulting from (i)
negligence or willful misconduct by Warner in the conduct of the Research
Program, (ii) a breach of any of the representations or warranties of Warner
hereunder, or (iii) the research and development. Manufacture, use, promotion,
marketing, sale or other distribution of any Lead Compound and/or Warner Product
or Other Product or Diagnostic Product that Warner obtains a license from
Sequana pursuant to Sections 7.2.3(c), 8.1.1, 8.3.1 or 8.3.2 by Warner or its
Affiliates or Sublicensees, except, in each case, to the extent that such Claim
arises out of or results from the negligence or willful misconduct of a Sequana
Indemnity.

     12.2 SEQUANA. Sequana agrees to indemnify and hold harmless Warner and its
Affiliates and Sublicensees and their respective employees, agents, officers,
directors and permitted assigns (each a "Warner Indemnity") from and against any
claims by a Third Party resulting in any liabilities, damages, settlements,
claims, actions, suits, penalties, fines, costs or expenses incurred (including,
without limitation, reasonable attorneys' fees and other expenses of litigation)
(any of the foregoing, a " Claim") arising out of or resulting from (i) the
negligence or willful misconduct of Sequana in the conduct of the Research
Program, or (ii) a breach of any of the representations or warranties by Sequana
hereunder, (iii) the research, development, manufacturing, use, promotion,
marketing, sale or other distribution of any Diagnostic or Other Product or any
Warner Product which is licensed to Sequana pursuant to Section 7.2 except, in
each case, to the extent that such Claim arises out of or results from the
negligence or willful misconduct of a Warner Indemnity.

     12.3 PROCEDURE. A Party or person (the "Indemnity") that intends to claim
indemnification under this Article 12 shall promptly notify, the other Party
(the "lndemnitor") in writing of any loss, claim, damage, liability or action in
respect of which the Indemnitee or any of its Affiliates. Sublicensees or their
directors, officers, employees, agents or counsel intend to claim such
indemnification, and the Indemnitor shall have the right to participate in, and
to the extent the Indemnitor so desires, to assume the defense thereof with
counsel chosen by Indemnitor, with consent of Indemnitee, which consent shall
not be unreasonably withheld. The failure to deliver written notice to the
Indemnitor within a reasonable time after the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
Indemnitor of any liability to the Indemnitee under this Article 12. At the
Indemnitor's request, the Indemnitee under this Article 12, and its employees
and agents, shall cooperate fully with the Indemnitor and its legal
representatives in the investigation and defense of any action, claim or
liability, covered by this indemnification and provide full information with
respect thereto.

     12.4 INSURANCE. During the term of this Agreement [*]

13.  TERM AND TERMINATION



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.




                                      33.
<PAGE>   35

     13.1 TERM. This Agreement shall be effective as of the Effective Date and.
Unless otherwise terminated earlier pursuant to the other provisions of this
Article 13, shall continue in full force and effect on a Product-by-Product and
country-by-country basis until the date that neither Party nor its Affiliates
and Sublicensees has any remaining royalty obligations to the other Party, in
such country. Following the expiration of royalty obligations in any country
within the Territory with respect to a particular Product subject to a license
granted herein, each Party shall have a non-exclusive, non-transferable, fully
paid license under the other Party's interest (i) in the non-patented Background
Technology, and (ii) the Know-How within the Collaboration Technology, in each
case, solely to commercialize such Product.

     13.2 TERMINATION FOR CAUSE. Either Party may terminate this Agreement in
the event the other Party has materially breached or defaulted in the
performance of any of its obligations hereunder, and such default has continued
for sixty (60) days after written notice thereof was provided to the breaching
Party by the nonbreaching Party, or if a cure of such default cannot reasonably
be effected within such sixty (60) day period, the defaulting Party has failed
to deliver within such period a plan for curing such breach or default which is
reasonably sufficient to effect a cure. Any termination shall become effective
at the end of such sixty (60) day period unless the breaching Party has cured
any such breach or default prior to the expiration of the sixty (60) day period,
or has delivered to the other Party a plan for curing such breach which is
reasonably acceptable to the other Party. Notwithstanding the above, in the case
of a failure to pay any amount due hereunder, the period for cure of any such
default following notice thereof shall be ten (10) days and, unless payment is
made within such ten day period, the termination shall become effective at the
end of such period.

     13.3 KEY PERSON PROVISIONS. Warner shall have the right to terminate the
Term of the Research Program in the event that (a) either [*] are no longer
employed by Sequana, for any reason and (b) a suitable, appropriately qualified
individual, reasonably acceptable to Warner, is not identified within 180 days
of the effective date of the termination of such employment. Neither Warner nor
its Affiliates shall employ or seek to employ either [*] during the Term of the
Research Program without the prior written consent of Sequana, which shall not
be unreasonably withheld.

     13.4 CHANGE IN CONTROL.

          13.4.1 DEFINED. For purposes of this Section 13.4, the term "Change in
Control" shall mean the direct or indirect acquisition or accumulation during
the Term of the Research Program of such number of shares of the stock of or
such income interest in Sequana as to give the acquiring or accumulating party
50% or more of the outstanding voting shares of stock or income interest of
Sequana (such acquiring or accumulating party is hereinafter referred to as the
"Acquiring Party").

          13.4.2 BY A MAJOR PHARMACEUTICAL COMPANY. Warner shall have the right
to terminate the Term of the Research Program within 60 days of the date of a
Change in Control upon 30 clays prior written notice, in the event that the
Acquiring Party is one of the top 35 pharmaceutical companies ranked in order of
worldwide pharmaceutical sales, as published by



* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.




                                      34.
<PAGE>   36

Scrip in its then most recent ranking prior to the date of the Change in Control
(a "Major Pharmaceutical Company").

          13.4.3 BY ANY OTHER ENTITY. In the event that the Acquiring Party is
other than a Major Pharmaceutical Company, Warner shall have the right to
terminate the Term of the Research Program upon 90 days prior written notice at
any time prior to the first anniversary of a Change in Control in the event that
it reasonably determines that the qualitative or quantitative commitment or
performance of Sequana is materially adversely affected by such Change in
Control, provided that if the Acquiring Party is Arris Pharmaceutical
Corporation Warner may terminate the Term of the Research Program by 90 days
prior written notice which notice may only be given during the 30 day period
commencing on the first anniversary of such Change in Control. A material
adverse effect on the qualitative or quantitative commitment or performance of
Sequana shall include, without limitation: (a) a material reduction in the
quality of the FTEs provided by Sequana, (b) Sequana's material failure to
maintain appropriate technology in accordance with the standards of the genomics
industry, (c) a material reduction in the time spent by either [*] on the
Research Program or their successors as approved under Section 13.3 or (d) any
other reduction in the diligent pursuit and performance of the Research Program
by Sequana.

     13.5 EFFECT OF TERMINATION UNDER SECTION 13.3 OR 13.4. In the event of a
termination of the Term of the Research Program by Warner under Sections 13.3 or
13.4, (a) Warner shall retain the license rights granted to it under Section 4
to Sequana Background Technology and Collaboration Technology and Sequana's
license rights under Section 4 shall terminate except for those rights granted
to it under Sections 4.2, 4.5 and 4.9 and (b) for terminations made pursuant to
Section 13.4.3, Warner shall continue to fulfill its responsibilities under this
Agreement until the effective date of termination. All other terms and
conditions of this Agreement shall remain in full force and effect.

     13.6 EFFECT OF BANKRUPTCY. If, during the Term of the Research Program,
either Party, files a voluntary petition in bankruptcy, is adjudicated a
bankrupt, makes a general assignment for the benefit of creditors, admits in
writing that it is insolvent or fails to discharge within sixty (60) days after
an involuntary petition in bankruptcy filed against it, then the Term of the
Research Program and this Agreement may be immediately terminated by the other
Party, with notice.

     13.7 EFFECT OF TERMINATION.

          13.7.1 ACCRUED RIGHTS AND OBLIGATIONS. Termination of this Agreement
for any reason shall not release any Party hereto from any liability which, at
the time of such termination, has already accrued to the other Party or which is
attributable to a period prior to such termination, nor preclude either Party
from pursuing any rights and remedies it may have hereunder or at law or in
equity which accrued or are based upon any event occurring prior to such
termination.

          13.7.2 RERUN OF CONFIDENTIAL INFORMATION. Upon any termination of this
Agreement, Warner and Sequana shall promptly return to the other Party all
Confidential Information received from the other Party (in the case of Software
including all Sequana source


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                      35.
<PAGE>   37

and object code) (except one copy of which may be retained by legal counsel
solely for purposes of monitoring compliance with the provisions of Article 11
and archival purposes).

          13.7.3 STOCK ON HAND. In the event this Agreement is terminated for
any reason, Warner and its Affiliates and Sublicensees shall have the right in
the Territory to sell the stock of any Warner Products then on hand. subject to
Articles 5 and 6 and the other applicable terms of this Agreement.

          13.7.4 LICENSES.

               (a) Subject to Sections 13.7.4(e) and 13.8 below, in the event of
any termination of this Agreement by Sequana pursuant to Section 13.2, the
licenses granted Warner in Article 4 shall terminate concurrently.

               (b) Subject to Sections 13.7.4(f) and 13.8 below, in the event of
any termination of this Agreement by Warner pursuant to Section 13.2, the
licenses granted Sequana in ,Article 4 shall terminate concurrently.

               (c) In the event of any termination of this Agreement by Warner
pursuant to Section 13.6. the licenses granted to Sequana, shall terminate
concurrently.

               (d) In the event of any termination of this Agreement by Sequana
pursuant to Section 13.6. the licenses granted to Warner shall terminate
concurrently.

               (e) If more than one Warner Product, Other Product or Diagnostic
Product is being commercially developed or exploited by Warner or its Affiliates
and Sublicensees hereunder, and Sequana terminates this Agreement pursuant to
Section l3.2 due to a breach relating only to a single Warner Product, Other
Product or Diagnostic Product, then Sequana shall be entitled to terminate this
Agreement only with respect to the applicable Warner Product, Other Product or
Diagnostic Product.

               (f) If more than one Other Product, Warner Product or Diagnostic
Product is being commercially developed or exploited by Sequana or its
Affiliates and Sublicensees hereunder, and Warner terminates this Agreement
pursuant to Section 13.2 due to a breach relating only to a single Other
Product, Warner Product or Diagnostic Product, then Warner shall be entitled to
terminate this Agreement only with respect to the applicable Other Product,
Warner Product or Diagnostic Product.

               (g) Except as expressly provided in this Section 13.7.4, in the
event of any termination of this Agreement the licenses granted pursuant to
Sections 2.5.2, 4.2 and 7.2.3 shall remain in effect.

     13.8 SURVIVAL. Sections 2.4.1, 2.5.2, 4.5, 4.9, 5.9, 7.4, 8.2, 9.l, 9.3,
9.5.1, 9.5.3, 9.7, 13.l, 13.7 and 13.8, and Article 6 (until all royalty and
reporting obligations relating to the period prior to the date of expiration or
termination have been satisfied) and Articles 10, 11, 12, 14 and 15 shall
survive the expiration or termination of this Agreement for any reason.

14.  DISPUTE RESOLUTION



                                      36.
<PAGE>   38

     14.1 MEDIATION. If a dispute arises out of or relates to this Agreement, or
the breach thereof, and if said dispute cannot be settled through negotiation,
the Parties agree first to try in good faith to settle the dispute by mediation
under the Commercial Mediation Rules of the American Arbitration Association,
before resorting to arbitration, litigation, or some other dispute resolution
procedure.

     14.2 VENUE. The exclusive venue of any dispute arising out of or in
connection with the performance of or any breach of this Agreement, shall be the
state courts or U.S. District Court located in or for Sequana's principal place
of business, and the Parties hereby irrevocably consent to the personal
jurisdiction of such courts.

15.  MISCELLANEOUS

     15.1 GOVERNING LAW. This Agreement and any dispute arising from the
performance or any breach hereof shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
conflicts of laws principles.

     15.2 WAIVER. No failure on the part of Sequana or Warner to exercise and no
delay in exercising any right under this Agreement, or provided by statute or at
law or in equity or otherwise, shall impair, prejudice or constitute a waiver of
any such right, nor shall any partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right.

     15.3 ASSIGNMENT. This Agreement shall not be assignable by either Party, to
any third Party hereto without the written consent of the other Party, hereto:
except either Party may assign this Agreement, without such consent, to (i) an
Affiliate of such Party; or (ii) an entity that acquires all or substantially
all of the business or assets of such Party (or with respect to Warner, all of
Warner's pharmaceutical research and development business or assets) to which
this Agreement pertains, whether by merger, reorganization, acquisition, sale,
or otherwise. The terms and conditions of this Agreement shall be binding on and
inure to the benefit of the permitted successors and assigns of the Parties.

     15.4 NOTICES. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or sent by nationally
recognized overnight express delivery, service, registered or certified mail,
return receipt requested, postage prepaid, in each case to the respective
address specified below, or such other address as may be specified in writing to
the other Parties hereto:

     Warner:          Warner-Lambert Company
                      2800 Plymouth Road
                      Ann Arbor, Michigan 48105
                      Attn: Vice President & Chairman
                          Parke-Davis Pharmaceutical Research

                      with a copy to:

                      Warner-Lambert Company
                      201 Tabor Road



                                      37.
<PAGE>   39

                      Morris Plains, New Jersey 07950
                      Attn: Vice President, General Counsel


     Sequana:         Sequana Therapeutics, Inc.
                      11099 N. Torrey Pines Road
                      Suite 160
                      La Jolla, California 92037
                      Attn: President

                      with a copy to: Legal Department

     15.5 PERFORMANCE WARRANTY. Each Party hereby warrants and guarantees the
performance of any and all rights and obligations of this Agreement by its
Affiliate(s) and Sublicensees.

     15.6 FORCE MAJEURE. Neither Party shall be liable to the other for failure
or delay in the performance of any of its obligations under this Agreement for
the time and to the extent such failure or delay is caused by earthquake, riot,
civil commotion, war, hostilities between nations, governmental law, order or
regulation, embargo, action by the government or any agency thereof, act of God,
storm, fire, accident, labor dispute or strike, sabotage, explosion or other
similar or different contingencies. in each case. beyond the reasonable control
of the respective Party. The Party affected by force majeure shall provide the
other Party, with full particulars thereof as soon as it becomes aware of the
same (including its best estimate of the likely extent and duration of the
interference with its activities), and will use its best endeavors to overcome
the difficulties created thereby and to resume performance of its obligations as
soon as practicable. If the performance of any obligation under this Agreement
is delayed owing to a force majeure for any continuous period of more than six
(6) months. the Parties hereto shall consult with respect to an equitable
solution, including the possible termination of this Agreement.

     15.7 INDEPENDENT CONTRACTORS. It is understood that both Parties hereto are
independent contractors and are engaged in the operation of their own respective
businesses, and neither Party hereto is to be considered the agent or partner of
the other Party for any purpose whatsoever. Neither Party has any authority to
enter into any contracts or assume any obligations for the other Party, or make
any warranties or representations on behalf of the other Party, Sequana
acknowledges that neither it nor any of its employees are employees of Warner or
members of any of its benefit plans and that neither it nor any of its employees
are eligible to participate in any such benefit plans even if it is later
determined that its or any of its employees' status during the period of this
Agreement was that of an employee of Warner. In addition. Sequana waives any
claim that it may have under the terms of any such benefit plans or under any
law for participation in or benefits under any of Warner's benefit plans.

     15.8 ADVICE OF COUNSEL. Sequana and Warner have each consulted counsel of
their choice regarding this Agreement. and each acknowledges and agrees that
this Agreement shall not be deemed to have been drafted by one Party or another
and will be construed accordingly.



                                      38.
<PAGE>   40

     15.9 SEVERABILITY. In the event that any provisions of this Agreement are
determined to be invalid or unenforceable by a court of competent jurisdiction.
the remainder of the Agreement shall remain in full force and effect without
said provision. The Parties shall in good faith negotiate a substitute clause
for any provision declared invalid or unenforceable, which shall most nearly
approximate the intent of the Parties in entering this Agreement; provided, if
the Parties are unable to agree on such a substitute clause and the deletion of
the provision held invalid or unenforceable would produce material adverse
financial consequences for one Party, such Party shall have the right to
terminate the Agreement upon one hundred eighty (180) days notice.

     15.10 PATENT MARKING. Each Party agrees to mark and have its Affiliates and
Sublicensees mark all Products they sell or distribute pursuant to this
Agreement in accordance with the applicable statute or regulations in the
country, or countries of manufacture and sale thereof.

     15.11 FURTHER ASSURANCES. At any time or from time to time on and after the
date of this Agreement, either Party shall at the request of the other Party (i)
deliver to the requesting Party, such records, data or other documents
consistent with the provisions of this Agreement, (ii) execute, and deliver or
cause to be delivered, all such consents, documents or further instruments of
assignment, transfer or license, and (iii) take or cause to be taken all such
actions, as the requesting Party may reasonably deem necessary or desirable in
order for the requesting Party to obtain the full benefits of this Agreement and
the transactions contemplated hereby.

     15.12 COMPLIANCE WITH LAWS. Each party shall furnish to the other Party any
information requested or required by that Party during the term of this
Agreement or any extensions hereof to enable that Party to comply with the
requirements of any U.S. or foreign federal, state and/or government agency.
Each Party shall comply with all applicable U.S., foreign, state, regional and
local laws, rules and regulations relating to its activities to be performed
pursuant to this Agreement, including without limitation, the United States
Foreign Corrupt Practices Act, United States export regulations and such other
United States and foreign laws and regulations as may be applicable, and shall
obtain all necessary approvals, consents and permits required by the applicable
agencies of the government of the United States and foreign jurisdictions.

     15.13 NO IMPLIED LICENSES OR WARRANTIES. No right or license under any
patent application, issued patent, know-how or other proprietary, information is
granted or shall be granted by implication. All such rights or licenses are or
shall be granted only as expressly provided in the terms of this Agreement.

     15.14 ENTIRE AGREEMENT. This Agreement together with the attached Exhibits
entered by the Parties of even date herewith, constitute the entire agreement,
both written or oral, with respect to the subject matter hereof, and supersede
all prior or contemporaneous understandings or agreements, whether written or
oral, between Warner and Sequana with respect to such subject matter.



                                      39.
<PAGE>   41

     15.15 HEADINGS. The captions to the several Sections and Articles hereof
are not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.

     15.16 COUNTERPARTS. This Agreement may be executed in two counterparts.
each of which shall be deemed an original and which together shall constitute
one instrument.



                                      40.
<PAGE>   42


     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their authorized representatives as of the Effective Date.

<TABLE>
<CAPTION>
WARNER-LAMBERT COMPANY                      Sequana Therapeutics, Inc.
<S>                                         <C>

By:/s/   R.M. Cresswell                     By: /s/  Kevin J. Kinsella
   -----------------------------------         ---------------------------------
Name:  R.M. Cresswell                       Name:  Kevin J. Kinsella
     ---------------------------------           -------------------------------
Title:  V.P. & Chairman Pharmaceutical      Title:  President & CEO
        Research
      --------------------------------            ------------------------------
</TABLE>

<TABLE>
<CAPTION>
Exhibits

<S>   <C>
A:    Sequana Technology (1.31 )
B:    Co-Promotion Guidelines (8.2)
C:    Third Party Contracts
</TABLE>


                                      41.
<PAGE>   43

                                    EXHIBIT A

                               SEQUANA TECHNOLOGY


This exhibit provides details regarding the Sequana Technology that is defined
in Section 1.37 of the Agreement. Elements of Sequana Technology are:

               BioAgentDBTM and SequaSearchTM
               LIMSLite
               High-throughput DNA sequencing protocols
               High-throughput genotyping protocols
               Micro-Array technology protocols

Each of these elements is described in more detail below. In addition, for each
element, the following information is provided as appropriate:

               A description of "establishment" of the technology at Warner
               under Section 5.2 of the Agreement that is required to be
               complete before payment of the Technology Access Fee.

               Additional technology that will be established at Warner under
               this Agreement but which is not required to be complete as a
               condition for payment of the Technology Access Fee.

               A discussion of the level of support that will be provided to
               Warner as a part of this Agreement.

BIOAGENTDB(TM)

Sequana will deliver a database system (BioAgentDBTM), and a package of software
agents (SequaSearchTM) useful for automatically mining public scientific
databases. The immediately available SequaSearch modules will include
Virtual-Librarian, CandidateVL, and SequaWatcher. Additional SequaSearch
modules scheduled for general availability by Q1 1998 include GeneIntegrater and
EST agent. These modules will be made available to Warner promptly after they
are developed and validated.

The BioAgentDB for the Field will be housed at Sequana and a port will be made
available for secure access by Warner from the internet. After approximately one
calendar quarter utilizing the BioAgentDB for the Field at Sequana and
associated familiarization with the product by appropriate Warner staff. Sequana
will transfer one existing BioAgentDB system to the Warner Ann Arbor. MI
research facility for utilization within Warner in other disease areas.

BioAgentDB consists of three parts. [*]

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                      A-1.
<PAGE>   44

DESCRIPTION OF SEQUASEARCH MODULES

VIRTUAL-LIBRARIAN

Monitors the PubMed literature which pertains to a disorder of interest. The
information is then retrieved, reformatted, parsed and deposited into the
BioAgentDB. The agent distinguishes new literature from previously reported
literature. E-mail alerts (with URLs) are sent to the scientists informing them
when new information becomes available. PubMed is a National Library of Medicine
("NLM") web-based product which provides free access to MEDLINE which is the
NLM's database of bibliographic citations (e.g., authors, title, and journal
reference) and author abstracts from about 3,800 biomedical journals.

CANDIDATEVL

Monitors the literature (PubMed) pertaining to candidate genes which axe in
common with the disorder. The information is then retrieved, reformatted. parsed
and deposited into the BioAgentDB with hyperlinks to the information on a
candidate gene. The agent distinguishes new literature from previously reported
literature. E-mail alerts (with URLs) are sent to the scientists informing them
when new- information becomes available.

SEQUAWATCHER

Monitors new information on Websites relevant to the user(s). SequaWatcher can
be configured to monitor any number of web pages, and to provide a daily report
on web pages when the content has changed.

ESTAGENT

Monitors the National Center for Biotechnology Information ("NCBI") Integrated
Gene Map for sequences which are newly mapped to genomic regions of interest
(such as a linkage region). It retrieves the mapped sequences together with
higher resolution mapping information, flanking markers, and possible
identification of the mapped sequences. This information is automatically
retrieved, reformatted, and deposited in the BioAgentDB such that genomic maps
are automatically generated. The NCBI's Integrated Gene Map is a map of more
than 16,000 human genes which have been mapped relative to a framework map that
contains about 1000 polymorphic genetic markers. This gene map unifies the
existing genetic and physical maps with the nucleotide and protein sequence
database.

GENEINTEGRATOR

Monitors Swiss-Prot and GenPept for new biological attributes (site of
expression, map location. function, developmental stage, polymorphisms) of
candidate genes. It automatically retrieves, reformats, parses, and deposits the
information into the candidate gene record in BioAgentDB.

GENEWIZARD

[*]

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                      A-2.
<PAGE>   45

TRANSCRIPTSCANNER

Monitors the UniGene database at the National Center for Biotechnology
Information for clones and mapped EST contigs for those connected with a
disorder of interest. TranscriptScanner is currently under development.

SYNTENYAGENT

Monitors the mouse genome databases for genes that are syntenic with regions of
interest in the human genome. SyntenyAgent is currently under discussion.

[*]

Sequana will transfer to Warner other agents including but not limited to
GeneWizard, TranscriptScanner, and SyntenyAgent if and when they become
commercially available and other general BioAgentDB system upgrades. These items
are not tied to the License

ACCESS FEE

BioAgentDB will be supported in the following manner at Warner:

     (a)  At least one Warner employee will be designated the "Super User" and
          will be trained at Sequana on the full functionality of BioAgentDB.

     (b)  At least one Warner employee will be designated "Systems Support" and
          will be trained at Sequana on the systems support issues related to
          BioAgentDB (i.e. UNIX, Sybase, Mac, web server system administration).

     (c)  The Super User will handle all user and data support issues and
          questions that arise at Warner.

     (d)  The System Support personnel will handle all system support issues and
          questions that arise at Warner.

     (e)  Any questions or problems that the Super User or System Support cannot
          resolve will be forwarded to the Sequana Help Desk which will be open
          Monday - Friday, 7 AM to 5 PM PST and staffed by qualified personnel.

     (f)  Sequana guarantees a response to (but not necessarily complete
          resolution of any Warner inquiry within 24 hours, and Sequana and
          Warner will cooperate to promptly resolve any such question or
          problem.

     (g)  Customization of BioAgentDB will be done by Warner, or by Sequana
          under a separate contract arrangement. However. any changes to the
          source code that are made by Warner that result in incompatibilities
          with future upgrades provided by Sequana will be the responsibility of
          Warner to resolve.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                      A-3.
<PAGE>   46


LIMSLITE

The LIMSLite system is the non-microsatellite genotyping components of the
Sequana LIMS system that are necessary to perform basic phenotype/genotype
correlations. [*]

LIMSLite will be "established" at Warner for the purposes of Section 5.2 of the
Agreement upon achievement of the following:

        Installation of the database schema and lookup tables on the Warner
        Sybase server at Warner facility.
        Installation of the 4D server at Warner facility.
        Installation of the Web Server at Warner facility.
        Installation of 4D client software on DNA intake clients and up to four
        (4) additional clients at Warner facility.

Additional installation efforts at Warner related to LIMSLite that are required
under this agreement but which will not be necessary before the payment of the
License Access Fee described in Section 5.2 include:

Super User and System Support on-site training and support during initial
installation.

LIMSLite will be supported in the following manner at Warner:

          At least one Warner employee will be designated the "Super User" and
          will be trained at Sequana on the full functionality of LIMSLite.

          At least one Warner employee will be designated "Systems Support" and
          will be trained at Sequana on the systems support issues related to
          LIMSLite (i.e. UNIX, Sybase, Mac. web server system administration).

          The Super User will handle all user and data support issues and
          questions that arise at Warner.

          The System Support personnel will handle all system support issues and
          questions that arise at Warner.

          Any questions or problems that the Super User or System Support cannot
          resolve will be forwarded to the Sequana Help Desk which will be open
          Monday -Friday, 7 AM to 5 PM PST and staffed by qualified personnel.

          Sequana guarantees a response to (but not necessarily complete
          resolution of) any Warner inquiry, within 24 hours and Sequana and
          Warner will cooperate to promptly resolve any such question or
          problem.

          Customization of LIMSLite will be done by Warner, or by Sequana under
          a separate contract arrangement.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                      A-4.
<PAGE>   47

          Any changes to the source code that are made by Warner that result in
          incompatibilities with future upgrades provided by Sequana will be the
          responsibility of Warner to resolve.

HIGH-THROUGHPUT DNA SEQUENCING

Sequana has established a high-throughput, high accuracy DNA sequencing
laboratory through the development and utilization of several novel sequencing
strategies and systems. Strict quality control procedures are developed and
built in each and every important step of high throughput sequence production to
ensure maximum efficiency and accuracy.

Sequana will transfer to Warner Sequana's DNA sequencing Standard Operating
Procedures (SOPs) and provide on-site training of up to three person-weeks
total. The SOPs to be transferred to Warner include:

[*]

Installation of high-throughput sequencing at Warner under Section 5.2 of the
agreement will be considered to be achieved upon transfer of the SOPs and
completion of the training at Sequana.

Sequana is not obligated to provide Warner with additional consulting services
or support with respect to DNA sequencing.

HIGH THROUGHPUT GENOTYPING

Sequana has established a high-throughput, high accuracy polymorphism detection
and non-microsatellite genotyping laboratory through the development and
utilization of several molecular systems. Sequana will transfer to Warner
Sequana's non-microsatellite polymorphism detection and genotype determination
Standard Operating Procedures (SOPs) outlined below and provide on-site training
of Warner scientists for up to three person weeks total. The SOPs to be
transferred to Warner include:

[*]

Installation of high throughput genotyping at Warner under Section 5.2 of the
agreement will be considered to be achieved upon transfer of the SOPs and
completion of the training at Sequana.

Sequana is not obligated to provide Warner with additional consulting services
or support with respect to high-throughput genotyping.

MICRO-ARRAY PROTOCOLS

Sequana is a participant in the Molecular Dynamics/Amersham Microarray
Technology Access Program. As a member of the Early Access Program, Sequana is
gaining considerable lead time in the utilization and development of the
MD/Amersham Microarray System ("System"). [*] During this period, the Microarray
Group within Sequana will be focusing on extending the capabilities of the
System in collaboration with MD/Amersham as follows:

[*]

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.

                                      A-5.

<PAGE>   48

          Optimizing the immobilization chemistry and labeling protocols to
          detect rare mRNAs from small quantities of tissue;

          Adapting the Microarray System to work in the "Northern" mode (useful
          in monitoring the expression of a set of genes in a large number of
          tissue samples) in as well as the more common "reverse Northern" mode;

          Developing proprietary bioinformatics tools to analyze the data
          generated by the System and present results in a queriable,
          user-friendly front-end.

As part of the technology transfer to Warner, Sequana will transfer operating
know-how related to the System to the extent that it is permitted under the
agreement with Molecular Dynamics/Amersham. The objective of this sharing of
proprietary, know-how is to allow Warner to better evaluate the unique features
of this System with respect to the other commercially available chip-based
technologies for gene expression studies. Based on the terms of its agreement
with Molecular Dynamics/Amersham. Sequana will be able to share data generated
by the System with Warner anytime after January 1, 1998.

It will not be necessary, to transfer the micro-array protocols to Warner as a
condition for payment of the License Access Fee described in Section 5.2 of the
Agreement.


                                      A-6.
<PAGE>   49

                                    EXHIBIT B

                             CO-PROMOTION PRINCIPLES

     1. REQUIRED SALES EFFORT. Each Party shall supply the total promotional and
marketing effort (including details, if determined to be an appropriate sales
activity,) for each Other Product being co-promoted by the Parties in each
co-promotion country, as determined by a marketing committee to be established
by the Parties (the "Marketing Committee"). The Parties shall be equally
represented on the Marketing Committee. It is understood and agreed that the
sales effort required from the Parties may differ with respect to the size of
the sales force, number of details and other factors, based on the target market
for which such Party has marketing responsibilities as determined by the
Marketing Committee. The Marketing Committee will determine appropriate written
standards for measuring and accounting procedures to confirm and document each
Party's performance of its required sales effort, prior to the commencement of
the term of co-promotion for any Other Product, and may modify the required
sales effort required by each Party as it deems appropriate: provided that
Sequana's percentage of the total required sales effort established by the
Marketing Committee shall not exceed [*] or be [*]. If Sequana has failed or is
unable to supply [*] of the required sales effort established by the Marketing
Committee then Sequana's right to co-promote the applicable Other Product
hereunder shall terminate in the applicable country and Warner shall thereafter
have the exclusive right to promote such Other Product in such country. If in
any year a Party's actual sales effort falls below its assigned percentage of
the total required sales effort, unless otherwise agreed, such Party's share of
profit shall be reduced for that and all future years, to the percentage of
required sales effort actually provided by such Party in such year, subject to
application of this provision in future years if a Party fails to meet its
required sales effort.

     2. MARKETING PLAN AND BUDGET. The co-promotion of each Other Product will
be governed by a marketing plan and budget (the "Marketing Plan and Budget").
The Marketing Committee will be responsible for approving the Marketing Plan and
Budget developed by the Marketing Committee. The Marketing Plan and Budget will
describe fully, to the extent practicable, the proposed plan for
commercialization of the Other Product in each co-promotion country, including
overall marketing strategy, anticipated marketing, sales and promotion efforts
by each Party,, market and sales forecasts, pricing analysis and estimated
launch date, as well as advertising and other promotional materials to be used
in the co-promotion. The Marketing Plan and Budget will be prepared taking into
consideration factors such as market conditions, regulatory factors and
competition, and the budget will include all projected co-promotion expenses for
the Other Product.

     3. PROMOTIONAL AND ADVERTISING MATERIALS. The Parties shall disseminate in
the co-promotion countries only those promotional and advertising materials
which have been provided or approved for use by the Marketing Committee. All
such materials shall be consistent with the relevant Marketing Plan and Budget
approved by the Marketing Committee and neither Party shall make any claims or
representations in respect of the Other Products that have not been approved by
the Marketing Committee.

* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                      B-1.

<PAGE>   50

     4. PRICING. The Marketing Plan will include the general operating
guidelines and strategies for the pricing and discounting of Other Products
co-promoted in the co-promotion countries.

     5. ORDERS; SALES. All customer orders for Other Products shall be received
and executed by Warner. All sales of Other Products will be billed and booked by
Warner.

     6. REIMBURSEMENT OF DEVELOPMENT COSTS. In the event that Sequana exercises
the Co-Promotion Option for a particular Other Product, then at the time of
execution by the Parties of a co-promotion agreement for such Other Product,
Sequana will [*] of the applicable obligation, and its share of profit shall be
reduced correspondingly. In any such event, Sequana shall be entitled to a
credit with respect to any amounts paid by it prior to such date for Development
costs against its share of Development costs incurred after such date to the
extent its prior payments are in excess of the obligations due for its reduced
percentage share of such Development costs. until such time as such credit is
exhausted. In the event that Sequana is unable to pay any of its obligations
with respect to the Development costs in cash and continue to reasonably operate
its business in a prudent manner, Warner agrees to consider alternative forms of
payment (e.g., Sequana capital stock, loans or cash advances). In no event will
Warner be required to accept any alternative form of payment and in no event
will Warner agree to accept Sequana capital stock if, in its sole judgment, the
value of such stock is likely to decrease over time.

     7. DETERMINATION OF CO-PROMOTION PAYMENTS. In those countries in which the
Parties are co-promoting an Other Product, Net Sales of the Other Products in
such co-promotion countries shall be allocated first to reimburse each Party for
its co-promotion expenses relating to such Other Product and then to pay each
Party its share of profit. A Party's percentage share of profit in any year
shall equal the percentage of total required sales effort it is obligated to
provide under paragraph 1. In the event of a negative total profit in any year
for a particular Other Product in a particular co-promotion country. Net Sales
shall be distributed to the Parties to reimburse their co-promotion expenses
such that the proportion of such Party's unreimbursed co-promotion expenses to
the total of all unreimbursed co-promotion expenses is equal to such Party's
percentage of total required sales effort for a particular Other Product in a
particular co-promotion country. For purposes of this Agreement, the term
"co-promotion expenses" shall mean the following expenses incurred by a Party or
for its account, to the extent allocable to the preparation for the commercial
launch of an Other Product in a co-promotion country, or the marketing,
promotion and sales of an Other Product in such co-promotion country:

               (i) the cost of goods as determined by applying Generally
Accepted Accounting Principles as consistently applied by Warner with respect to
all of its pharmaceutical products; and

               (ii) post-Regulatory Approval medical and clinical trial costs.
costs of monitoring adverse drug reactions. costs of quality control complaints
and costs associated with maintenance of the Regulatory Approvals; and

               (iii) costs of distribution and shipping of the Other Product to
distributors and customers for the Other Product; and


* Certain confidential information contained in this document, marked by
  brackets, has been omitted and filed separately with the Securities and
  Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of
  1934, as amended.


                                      B-2.
<PAGE>   51

               (iv) direct costs, specifically allocable to the Other Product,
incurred for the sales (including cost of sales forces, speciality sales force,
call reporting and other monitoring/tracking costs, and regional sales
management and marketing management), advertising, promotion and marketing of
the Other Product through any means (including advertisements, promotional
literature, market research, symposia. exhibits and direct mail); and

               (v) costs of product liability insurance required to be purchased
by the Marketing Committee and costs associated with the defense and settlement
of product liability claims; and

               (vi) costs associated with the registration of the trademark used
in connection with such Other Product or any trademark infringement litigation;
and

               (vii) any consideration payable to Third Parties for licenses
required for the manufacture, importing. sale. marketing or use of the Other
Product in the applicable co-promotion country; and

               (viii) expenses associated with recalls; and

               (ix) any other expenses on which the Parties may mutually agree.
Co-Promotion expenses shall not include general corporate overhead.

     8. TERMINATION OF CO-PROMOTION. Either Party shall have the right upon 90
days prior written notice to terminate its participation in the co-promotion of
an Other Product in any co-promotion country. Once a Party terminates its
participation in the co-promotion of an Other Product, it shall grant to the
non-terminating Party such licenses under Collaboration Technology and
Background Technology as shall be necessary for the non-terminating Party to
commercialize such Other Product in such country. Any licenses granted to Warner
shall be on the terms and conditions set forth in the Agreement, and any
licenses granted to Sequana shall be exclusive (even as to Warner), royalty-free
and fully paid, and shall include the right to grant sublicenses.

     9. TERMINATION UPON CHANGE OF CONTROL. In the event the Parties enter a
Co-Promotion Agreement, and subsequently (i) fifty (50%) or more of Sequana's
outstanding shares of stock entitled to vote for the election of directors are
acquired by a Major Pharmaceutical Company (by purchase or merger or if control
of Sequana is otherwise acquired by a Major Pharmaceutical Company); or (ii)
this Agreement is assigned to a Major Pharmaceutical Company upon a sale of
substantially all of the assets of Sequana; then in any such case Warner may
terminate Sequana's right to co-promote Other Products in the co-promotion
countries pursuant to this Agreement upon written notice to Sequana provided
that such notice is given within thirty (30) days after the earlier of (x) the
date Sequana gives Warner written notice of an event described in (i)or (ii)or
(y) the date Sequana enters into an agreement obligating Sequana to complete a
transaction described in (i) or (ii). "Major Pharmaceutical Company" shall be
any of the top thirty-five (35) pharmaceutical companies, ranked in order of
worldwide pharmaceutical sales, as published by Scrip in its most recent ranking
prior to the date of the notice of termination.



                                      B-3.
<PAGE>   52

     10. TRADEMARKS. The Marketing Committee shall approve all trade dress,
logos, slogans, designs and copyrights used on and in connection with any Other
Product in the co-promotion countries. Warner and Sequana shall be joint owners
of the trade dress, logos, slogans, designs and copyrights specifically
developed for and used on and in connection with any Other Product in the
co-promotion countries (the "Other Product Logos and Copy"). Warner and Sequana
shall each retain sole and exclusive ownership of their own respective and
independently developed and pre-existing trademarks, names, trade dress, logos,
slogans, designs and copyrights regardless of whether such trademarks, names,
trade dress, logos, slogans, designs or copyrights are used on or in connection
with any Other Product.


                                      B-4.
<PAGE>   53

                                    EXHIBIT C

                              THIRD PARTY CONTRACTS


1.   The University of Pittsburgh Research Agreement Regarding the Genetics of
     Bipolar Disorder effective as of September 1, 1995.

2.   Le Centre Hopitalier Universitaire de Quebec Research Agreement Regarding
     the Genetics of Bipolar Disorder effective of as May 1, 1996.

3.   The Research Foundation of State University of New York Research Agreement
     Regarding the Genetics of Schizophrenia effective September 15, 1995, as
     amended by letter dated February 19, 1997 and by letter dated September 13,
     1996.

4.   The Clark Institute of Psychiatry Collections Agreement Regarding Bipolar
     Affective Disorder effective September 15, 1997.




                                      C-1.