<PAGE>


_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________
                                                                   Exhibit 10.43





                  RESEARCH COLLABORATION AND LICENSE AGREEMENT

                                     between

                               MERCK & CO., INC.

                                       and

                         ARRIS PHARMACEUTICAL CORPORATION






<PAGE>
                               TABLE OF CONTENTS

Article I--Definitions..............................................   1

Article II--Research Program........................................   8

     Section 2.1--General...........................................   8

     Section 2.2--Conduct of Research...............................   8

     Section 2.3--Use of Research Funding...........................   8

     Section 2.4--Exchange of Information...........................   8

     Section 2.5--Joint Research Committee..........................   8

     Section 2.6--Records and Reports...............................   8

          Subsection 2.6.1--Records.................................   8

          Subsection 2.6.2--Copies and Inspection of Records........   9

          Subsection 2.6.3--Quarterly Reports.......................   9

     Section 2.7--Research Program Information and Inventions.......   9

     Section 2.8--Research Program Term.............................   9

     Section 2.9--ARRIS Delta Technology............................  10

     Section 2.10--Rights to Compounds..............................  10

Article III--License; Development and Commercialization.............  11

     Section 3.1--Research License Grants...........................  11

     Section 3.2--Commercialization License.........................  12

     Section 3.3--Development and Commercialization.................  12

     Section 3.4--Exclusivity in the Field..........................  12

Article IV--Confidentiality and Publication.........................  12

     Section 4.1--Nondisclosure Obligations.........................  12

     Section 4.2--Restriction on ARRIS Delta Technology.............  12

     Section 4.3--Exceptions........................................  12

     Section 4.4--Permitted Disclosure of Proprietary Information...  13

     Section 4.5--Publication.......................................  13

     Section 4.6--Press Releases....................................  14

Article V--Payments; Royalties and Reports..........................  14

     Section 5.1--Commitment Fee....................................  14

                                      i
_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________



<PAGE>

     Section 5.2--Research Program Funding..........................  14

     Section 5.3--Milestone Payments................................  15

     Section 5.4--Royalties.........................................  16

          Subsection 5.4.1--Royalties Payable By MERCK..............  16

          Subsection 5.4.2--Managed Pharmaceutical Contracts........  18

          Subsection 5.4.3--Change in Sales Practices...............  18

          Subsection 5.4.4--Bulk Compound ..........................  18

          Subsection 5.4.5--Compulsory Licenses.....................  18

          Subsection 5.4.6--Third Party Licenses....................  18

     Section 5.5--Reports; Payment of Royalties.....................  18

     Section 5.6--Audits............................................  19

     Section 5.7--Payment Exchange Rate.............................  20

     Section 5.8--Income Tax Withholding............................  20

Article VI--Representations and Warranties..........................  20

     Section 6.1--ARRIS Representations and Warranties..............  20

     Section 6.2--MERCK Representations and Warranties..............  21

Article VII--Patent Matters.........................................  21

     Section 7.1--Filing, Prosecution and Maintenance of Patents....  21

     Section 7.2--Right to Prosecute and Maintain Patents...........  22

     Section 7.3--Interference, Opposition, Reexamination and
                  Reissue...........................................  23

     Section 7.4--Enforcement and Defense...........................  23

     Section 7.5--Patent Term Restoration...........................  25

Article VIII--Term and Termination..................................  25

     Section 8.1--Term and Expiration...............................  25

     Section 8.2--Termination by MERCK..............................  25

     Section 8.3--Termination.......................................  27

          Subsection 8.3.1--Termination for Cause...................  27

          Subsection 8.3.2--Effect of Termination for Bankruptcy....  28

     Section 8.4--Effect of Expiration or Termination...............  28

Article IX--Miscellaneous...........................................  29


                                     ii

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________



<PAGE>

                  RESEARCH COLLABORATION AND LICENSE AGREEMENT

    THIS AGREEMENT is effective as of November       , 1996 (the "Effective
Date"), between MERCK & CO., INC., a corporation organized and existing under
the laws of New Jersey ("MERCK") and ARRIS PHARMACEUTICAL CORPORATION, a
corporation organized and existing under the laws of Delaware ("ARRIS").

                                  WITNESSETH:

    WHEREAS, ARRIS has developed ARRIS Know-How (as defined below) and has
rights to ARRIS Patents (as defined below);

    WHEREAS, MERCK and ARRIS desire to enter into a research collaboration upon
the terms and conditions set forth herein;

    WHEREAS, MERCK desires to obtain a license under the ARRIS Patents and ARRIS
Know-How, upon the terms and conditions set forth herein;

    NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties hereby agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

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

1.1  "Active Compound" shall mean any compound in purified form that

     (A)

        (1) is a [ * ] compound characterized by having the ability to inhibit
            (or, in the case of a prodrug, an active species of which inhibits)
            human cathepsin K or human cathepsin L [ * ] and having greater than
            [ * ] and having greater than [ * ] in an [ * ] wherein the
            concentration of the compound is not greater than [ * ], and

        (2) satisfies one or more of the following:

        (a) is discovered, identified or synthesized by or on behalf of ARRIS
            and/or MERCK, or an Affiliate of either of them, pursuant to work
            conducted under this Agreement, and is determined by the JRC to


                                      1

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________



<PAGE>

            meet the criteria of Subsection 1.1(A)(1) above either [* ] pursuant
            to work conducted under [ * ] or (ii) [ * ] pursuant to work
            deriving directly from or based directly upon the results of the
            work conducted under the Agreement; or

        (b) is acquired prior to the end of the Research Program Term (including
            without limitation acquisition of rights thereto) by ARRIS or MERCK,
            or an Affiliate of either of them, from a third party, on an
            absolute or contingent basis (such as rights under an option), and
            is determined by the JRC to meet the criteria of Subsection
            1.1(A)(1) above pursuant to work conducted under this Agreement
            during the Research Program Term; or

        (c) is generically described within a claim describing a genus of
            compounds the utility of which is given as human cathepsin K or
            human cathepsin L inhibition, as defined in any pending or issued
            claim of any unexpired ARRIS Patent, MERCK Patent or Collaboration
            Patent filed in the United States or Japan or as a European Patent
            Application, or as a Patent Cooperation Treaty ("PCT") application
            designating the United States and the contracting states of the
            European Patent Convention, and as to which the JRC determines that
            at least one member of such genus meets the requirements of either
            Subsection 1.1(A)(1)(a) or 1.1(A)(1)(b) above, PROVIDED THAT such
            compound is synthesized and assayed [ * ];

  or

  (B)   (1) is (a) identified to the JRC from the ARRIS library by ARRIS or from
            the MERCK library by MERCK, or (b) discovered or synthesized by or
            on behalf of ARRIS and/or MERCK, or an Affiliate of either of them
            pursuant to work conducted under this Agreement [ * ], or (c)
            acquired by ARRIS or MERCK, or an Affiliate of either of them,
            pursuant to work conducted under this Agreement prior to [ * ],
            and (2) is designated an Active Compound by the JRC by [ * ].

   Notwithstanding the provisions of Subsections 1.1(A) and (B) above, Active
   Compounds shall not include:

  (x) Any compound that meets the requirements for being an Active Compound as
      set forth above but that has not been determined to be or selected as a
      Program Compound by the later of: (i) [

                                      2

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________


<PAGE>

      * ], or (ii) [ * ] by a party hereunder; or

       (y) Any compound marketed by MERCK or its Affiliates as of the Effective
           Date; or

       (z) Any compound for which MERCK as of the Effective Date is conducting
           human clinical trials or has filed an IND (which has not been
           abandoned or withdrawn), provided that such compound is not known as
           of the Effective Date to have human cathepsin K and/or L inhibitory
           activity.

1.2  "ARRIS Delta Technology" shall mean that specific technology, methods,
     techniques, materials, know-how, inventions, information and data
     described generally in a letter from ARRIS to MERCK of even date with
     this Agreement, all improvements to and inventions incorporating the
     ARRIS Delta Technology (but excluding (i) Active Compounds, (ii) any
     improved or modified Active Compounds which are themselves Active Compounds
     and (iii) those inventions which arise from the use by MERCK or its
     Affiliates or sublicensees of ARRIS Delta Technology to the extent
     permitted under Section 4.3 of this Agreement) made prior to [ * ], and
     the Patents owned or Controlled by ARRIS at any time covering the
     foregoing.

1.3  "Affiliate" shall mean (i) any corporation or business entity of which more
     than 50% of the securities or other ownership interests representing the
     equity, the voting stock or general partnership interest are owned,
     controlled or held, directly or indirectly, by MERCK or ARRIS; or (ii) any
     corporation or business entity which, directly or indirectly, owns,
     controls or holds 50% (or the maximum ownership interest permitted by law)
     or more of the securities or other ownership interests representing the
     equity, the voting stock or, if applicable, the general partnership
     interest, of MERCK or ARRIS.

1.4  "ARRIS Know-How" shall mean all information, materials and technology,
     including without limitation methods, techniques, know-how, inventions,
     data, ARRIS Research Information, Technology and Improvements, to the
     extent (a) owned or Controlled by ARRIS or an ARRIS Affiliate at any time
     prior to [ * ], and (b) necessary or useful to the work MERCK shall perform
     in the Field pursuant to the Agreement, but excluding ARRIS Patents,
     Collaboration Patents, and ARRIS Delta Technology.

1.5  "ARRIS Patents" shall mean all Patents owned or Controlled by ARRIS that
     claim (a) Active Compounds, the manufacture or use of Active Compounds,
     or methods or materials used for discovering, identifying, or assaying for
     Active Compounds, or (b) to the extent not covered in subsection (a), any
     ARRIS Know-How or ARRIS Research Information, where such Patents cover
     inventions made prior to [ * ], but excluding the ARRIS Delta Technology.

                                     3


_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________


<PAGE>

1.6  "ARRIS Research Information" shall mean all Research Program
     Information and Inventions developed or invented solely by
     ARRIS (including by its employees, agents or consultants).

1.7  "Calendar Quarter" shall mean the respective periods of
     three consecutive calendar months ending on March 31, June
     30, September 30 and December 31.

1.8  "Calendar Year" shall mean each successive period of 12
     months commencing on January 1 and ending on December 31.

1.9  "Combination Product" shall mean a Licensed Product which
     includes one or more active ingredients other than a Program
     Compound in combination with one or more Program Compounds.

1.10 "Collaboration Patents" shall mean all Patents that claim
     inventions in Research Program Information and Inventions
     that are invented jointly by ARRIS and MERCK (including by
     their respective employees, agents or consultants).

1.11 "Collaboration Research Information" shall mean all Research
     Program Information and Inventions developed or invented
     jointly by ARRIS and MERCK (including by their respective
     employees, agents or consultants).

1.12 "Control" shall mean, with respect to a compound, material,
     information or intellectual property right, possession by a
     party of a license with the right to sublicense existing as
     of the Effective Date or that is acquired during the term of
     this Agreement.

1.13 "Field" shall mean the discovery, identification, synthesis,
     assaying, manufacture, and research use of Active Compounds
     and the clinical development of Program Compounds and the
     manufacture, use, sale or importation of Licensed Products.

1.14 "First Commercial Sale" shall mean, with respect to any
     Licensed Product, the first sale by MERCK or its Affiliates
     or sublicensees to a third party intended for end use or
     consumption of such Licensed Product in a country after all
     required approvals, including marketing and pricing
     approvals, have been granted by the governing health
     authority of such country.

1.15 "Improvement" shall mean any enhancement in the manufacture,
     formulation, ingredients, preparation, presentation, means
     of delivery, dosage or packaging of Program Compound or
     Licensed Product.

1.16 "JRC" shall mean the Joint Research Committee described in
     Section 2.5 of this Agreement.

                                       4

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

1.17 "Licensed Product" shall mean a preparation in final form
     for sale by prescription, over-the-counter or any other
     method for any and all uses, including, without limitation,
     in humans and/or animals and/or agriculture, and all other
     uses, which contains a Program Compound, including, without
     limitation, any Combination Product.

1.18 "MERCK Know-How" shall mean all information, materials, and
     technology, including without limitation methods,
     techniques, know-how, inventions, data, MERCK Research
     Information, Technology or Improvements, to the extent (a)
     owned or Controlled by MERCK or a MERCK Affiliate at any
     time prior to [  *  ], and (b) in the reasonable opinion of
     MERCK necessary or useful to the work ARRIS shall perform in
     the Field pursuant to the Agreement, but excluding MERCK
     Patents, and Collaboration Patents.

1.19 "MERCK Research Information" shall mean all Research Program
     Information and Inventions developed or invented solely by
     MERCK (including by its employees, agents or consultants).

1.20 "MERCK Patents" shall mean all Patents owned or Controlled
     by MERCK that claim (a) Active Compounds, the manufacture or
     use of Active Compounds, or methods or materials used for
     discovering, identifying, or assaying for Active Compounds,
     or (b) to the extent not covered in subsection (a), any
     MERCK Know-How or MERCK Research Information, where such
     Patents cover inventions made prior to [  *  ].

1.21 "Net Sales" shall mean [  *  ] Licensed Product sold by
     MERCK, its Affiliates or sublicensees (which term does not
     include distributors) to the first independent third party
     after deducting, if not previously deducted, from the amount
     invoiced:

     (a)  trade and quantity discounts;

     (b)  credits  and allowances on account of returned or
          rejected products;

     (c)  rebates, chargebacks and other amounts paid on sale or
          dispensing of Licensed Product;

     (d)  [  *  ];

     (e)  [  *  ]; and

                                       5

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.

<PAGE>

     (f)  [  *  ] used for [  *  ] Licensed Product as it is
          sold, to the extent included within the gross invoice
          price of Licensed Product.

     With respect to sales of Combination Products, Net Sales
     shall be calculated on the basis of the invoice price of
     Licensed Product(s) containing the same weight of Program
     Compound sold without other active ingredients.  If such
     Licensed Product is not sold without other active
     ingredients, Net Sales shall be calculated on the basis of
     [  *  ] which shall be the [  *  ] which shall be the
     [  *  ], but in no event shall such [  *  ] shall be
     determined [  *  ] in accordance with [  *  ].

1.22 "Patents" shall mean any and all issued patents and patent
     applications (which shall be deemed to include certificates
     of invention and applications for certificates of invention)
     and including all divisions, continuations,
     continuations-in-part, reissues, renewals, extensions,
     supplementary protection certificates or the like of any of
     the foregoing patents and patent applications and foreign
     equivalents thereof.

1.23 "Program Compound" shall mean

     (a)  an Active Compound that:

          (i)  has [  *  ] against human cathepsin K or L;

          (ii)      [  *  ];

          (iii)     if a human cathepsin K inhibitor, has greater
               than [  *  ]; or, if a human cathepsin L
               inhibitor, has  greater than [  *  ]; and

          (iv)      [  *  ];
     or


                                      6

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>


     (b)  any other Active Compound designated as a Program
          Compound by the JRC by the [  *  ]; or

     (c)  any compound deemed to be a Program Compound as
          provided in Section 2.10(d) of this Agreement.

1.24 "Proprietary Information" shall mean all scientific,
     clinical, regulatory, marketing, financial and commercial
     information or data, whether communicated in writing, orally
     or by any other means, that is provided by one party to the
     other party in connection with this Agreement.  Proprietary
     Information shall include, without limitation, MERCK
     Know-How, ARRIS Know-How and ARRIS Delta Technology.

1.25 "Research Program Information and Inventions" shall mean all
     discoveries, Improvements, processes, formulas, data,
     inventions, know-how and trade secrets, patentable or
     otherwise, developed or discovered under or arising from the
     parties' work, alone or jointly, under the Research Program.

1.26 "Research Program" shall mean the collaborative research
     effort between the parties as set forth in Article II of
     this Agreement and Attachment 2.1 hereto.

1.27 "Technology" shall mean all polynucleotides encoding human
     cathepsins, the expression vectors and systems containing
     the coding regions of the polynucleotides encoding the human
     cathepsins, various organisms (including, but not limited
     to, [  *  ]) transformed with the polynucleotides encoding
     the human cathepsins and required for the production of
     recombinant human cathepsin polypeptides, protocols and
     biochemical expertise involved in the activation and
     purification of human cathepsins, [  *  ], substrates,
     assays, non-reversible and reversible inhibitors of human
     cathepsins, and all additional know-how involved in the
     design of cathepsin inhibitors.

1.28 "Territory" shall mean all of the countries in the world.

1.29 "Valid Patent Claim" shall mean a claim of an issued and
     unexpired patent included within the ARRIS Patents, MERCK
     Patents or Collaboration Patents, which has not been revoked
     or held unenforceable or invalid by a decision of a court or
     other governmental agency of competent jurisdiction,
     unappealable or unappealed within the time allowed for
     appeal, and which has not been disclaimed, denied or
     admitted to be invalid or unenforceable through reissue or
     disclaimer or otherwise.

                                      7


_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

                            ARTICLE II
                         RESEARCH PROGRAM

2.1  General.  ARRIS and MERCK shall engage in the Research
     Program upon the terms and conditions set forth in this
     Agreement.  The activities to be undertaken during the
     Research Program are set forth in Attachment 2.1 which may
     be amended from time to time upon the mutual written
     agreement of the authorized representatives of the parties.

2.2  Conduct of Research.  ARRIS and MERCK each shall conduct the
     Research Program in good scientific manner, and in
     compliance in all material respects with all requirements of
     applicable laws, rules and regulations and all applicable
     good laboratory practices to attempt to achieve their
     objectives efficiently and expeditiously.

2.3  Use of Research Funding.  ARRIS shall apply the research
     funding it receives from MERCK under this Agreement in
     accordance with the Research Program attached hereto as
     Attachment 2.1, as such may be amended from time to time
     upon the mutual written agreement of authorized
     representatives of the parties.

2.4  Exchange of Information.  Upon execution of this Agreement,
     ARRIS shall disclose to MERCK in English and in writing all
     ARRIS Know-How not previously disclosed.  During the term of
     this Agreement, ARRIS shall also promptly disclose to MERCK
     in English and in writing on an ongoing basis all ARRIS
     Know-How.  MERCK shall promptly disclose to ARRIS during the
     term of this Agreement MERCK Know-How which MERCK
     determines, in its discretion, may be necessary or useful to
     ARRIS in the performance of the Research Program.

2.5  Joint Research Committee.  The parties shall form a Joint
     Research Committee ("JRC") which shall be composed of three
     scientists from each party and chaired by MERCK.  The JRC
     shall meet at least monthly during the Research Program Term
     to monitor and evaluate the progress of and direct the
     Research Program.  The JRC may designate compounds as Active
     Compounds in accordance with Subsection 1.1(B) or Program
     Compounds in accordance with Subsection 1.23(b) during the
     period ending on [  *  ].  Such meetings may be face-to-face
     or by teleconference or videoconference, except that there
     must be one face-to-face meeting approximately every three
     months at alternating sites.  In the event of any unresolved
     differences between the parties with respect to issues that
     come before the JRC, [  *  ].

2.6  Records and Reports.

     2.6.1     Records.  ARRIS and MERCK each shall maintain
     records which shall be complete and accurate and shall

                                      8

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

     fully and properly reflect all work done and
     results achieved in the performance of the Research Program in
     sufficient detail and in good scientific manner appropriate for
     patent and regulatory purposes.

2.6.2 Copies and Inspection of Records.  MERCK shall have the
      right, during normal business hours and upon reasonable
      notice no more than [  *  ], to inspect and copy all of the
      records of ARRIS referenced in Section 2.6.1, except that
      ARRIS need not disclose any data or information relating to
      compounds in ARRIS's library as of the Effective Date that
      do not meet the criteria in Subsection 1.1(A)(1).  MERCK
      shall maintain such records and the information disclosed
      therein in confidence in accordance with Section 4.1.  MERCK
      shall have the right to arrange for a reasonable number of
      its employees, agents and outside consultants to visit ARRIS
      at its offices and laboratories during normal business hours
      and upon reasonable notice, and to discuss the Research
      Program and its results in detail with the technical
      personnel and consultants of ARRIS.  All inspections,
      copying and visits hereunder shall be conducted in a manner
      so as not to disrupt ARRIS's business or cause any
      disclosure of any other ARRIS confidential information.

2.6.3 Quarterly Reports.  Within 30 days following the end of each
      Calendar Quarter during the term of this Agreement, ARRIS
      shall provide to MERCK a written progress report which shall
      describe the work performed to date on the Research Program,
      evaluate the work performed in relation to the goals of the
      Research Program and provide such other information required
      by the Research Program or reasonably requested by MERCK
      relating to the progress of the goals or performance of the
      Research Program.  Upon request, ARRIS shall provide copies
      of the records described in Section 2.6.1. above (excluding
      the data and information excluded as set forth in Section
      2.6.2).

2.7   Research Program Information and Inventions.  The Research
      Program Information and Inventions developed or invented
      under this Agreement shall be owned as follows:

      (a)  ARRIS Research Information shall be owned [  *  ];

      (b)  MERCK Research Information shall be owned [  *  ]; and

      (c)  Collaboration Research Information shall be owned
          [  *  ].

      Each party  shall promptly disclose to the other the
      development, making, conception and reduction to practice of
      all Research Program Information and Inventions.  ARRIS
      shall not be required to disclose to MERCK the invention or
      development of ARRIS Delta Technology except to the extent
      such inventions or developments relate directly to the
      Field.

2.8   Research Program Term.  Except as otherwise provided herein,
      the term of the Research Program shall commence on the
      Effective Date and continue for a

                                      9

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

      period of two years (or three years if extended as provided below
      in this Section 2.8) (the "Research Program Term"), except that
      MERCK may terminate the Research Program and this Agreement in
      accordance with Section 8.2.  The parties by mutual written
      agreement executed by authorized representatives may extend the
      Research Program Term for one additional year.  Upon extension of
      the Research Program Term, if applicable, Attachment 2.1 setting
      forth the Research Program shall be amended in writing by mutual
      agreement.

2.9   ARRIS Delta Technology.  As part of its efforts under the
      Research Program, ARRIS shall use all reasonable efforts to
      apply the ARRIS Delta Technology to the identification,
      discovery and synthesis of Active Compounds.  The ARRIS
      Delta Technology shall remain proprietary to ARRIS.  MERCK
      agrees not to make any use of the Delta Technology, except
      as may be permitted under Section 4.3 of this Agreement.
      The parties understand and agree, however, that incident to
      MERCK's research and development activities in collaboration
      with ARRIS under the Research Program, MERCK and/or its
      Affiliates (including their respective employees or agents)
      may make inventions or developments relating to or based
      upon the ARRIS Delta Technology.  MERCK hereby assigns to
      ARRIS all improvements to and inventions incorporating the
      ARRIS Delta Technology (excluding (i) Active Compounds, (ii)
      any improved or modified Active Compounds which are
      themselves Active Compounds and (iii) those inventions which
      arise from the use of ARRIS Delta Technology by MERCK or its
      Affiliates or sublicensees as may be permitted under Section
      4.3 of this Agreement) made during the Agreement.

2.10  Rights to Compounds.  The parties contemplate that each of
      them will make compounds from its library available for
      testing for purposes of this Agreement and that additional
      compounds may be invented and/or synthesized in the course
      of the Research Program.  In respect of such compounds, the
      parties agree as follows:

      (a) Pre-existing compounds which are tested in the
          Research Program and are determined, under the
          provisions of Section 1.1, not to be Active Compounds
          shall revert to the party which made such compound
          available, without any restriction under this
          Agreement.

      (b) Compounds which are invented in the course of the
          Research Program shall be owned [  *  ] each such
          compound, with compounds which are invented jointly by
          the parties [  *  ], and all such compounds that are
          determined under the provisions of Section 1.1 not to
          be Active Compounds shall [  *  ] such compounds,
          [  *  ] under this Agreement.

     (c)  Active Compounds shall not be subject to clinical
          development (but shall be available for pre-clinical
          investigation) by either party except pursuant to the
          terms of this Agreement unless and until such Active

                                     10

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* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

          Compound is released from this Agreement.  Active Compounds shall
          be released from this Agreement if such Active Compound is not
          determined to be or designated as a Program Compound under the
          provisions of Section 1.23 by the later of:  (i) [  *  ], or (ii)
          [  *  ] such Active Compound was first synthesized by a party
          hereunder.  Rights in Active Compounds which are released from
          this Agreement shall be determined in accordance with subsections
          (a) and (b) above.

     (d)  Neither party shall develop or market any compound that
          at any time during the periods specified in Section 1.1
          met the definition of Active Compound under Section
          1.1, even if such compound later was released from the
          terms of this Agreement as provided in subsection (c)
          above and subsection (x) of Section 1.1, except
          pursuant to the terms of this Agreement if such
          compound is developed for its inhibition of cathepsin K
          or L.  Any such compound developed shall be deemed a
          Program Compound for all purposes hereunder.

     (e)  Program Compounds shall be developed and marketed only
          in accordance with the terms of this Agreement.

     (f)  No implied license under patent rights is granted under
          this Section 2.10.

                           ARTICLE III
            LICENSE; DEVELOPMENT AND COMMERCIALIZATION

3.1  Research License Grants.

     (a)  Upon the terms and conditions set forth herein, ARRIS
          hereby grants MERCK the sole license under the ARRIS
          Know-How and the ARRIS Patents solely as necessary to
          conduct the discovery, research and development of
          Active Compounds under this Agreement.  The foregoing
          license may be sublicensed to MERCK Affiliates and,
          with the consent of the parties, to third party
          sublicensees.

     (b)  Upon the terms and conditions set forth herein, MERCK
          hereby grants ARRIS the sole license under the MERCK
          Know-How and the MERCK Patents solely as necessary to
          conduct the discovery, research and development of
          Active Compounds under this Agreement.

     (c)  As used in Subsections 3.1(a) and (b) above, the phrase
          "sole license" shall mean that the licensor has not
          granted and shall not grant to any third party during
          the term of this Agreement the license rights granted
          to the licensee in the applicable Subsection.

                                     11

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* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

3.2  Commercialization License.  Upon the terms and conditions
     set forth herein, ARRIS hereby grants MERCK the exclusive
     license under the ARRIS Know-How and the ARRIS Patents and
     ARRIS' interest in the Collaboration Research Information
     and the Collaboration Patents solely to develop, make, have
     made, use, import and sell Program Compounds and Licensed
     Products in the Territory.  The foregoing license may be
     sublicensed to MERCK Affiliates and third party
     sublicensees.

3.3  Development and Commercialization.  MERCK shall use [  *  ]
     in developing and commercializing [  *  ] pharmaceutical
     products, at its own expense, to develop and commercialize a
     Licensed Product in such countries in the Territory [  *  ].

3.4  Exclusivity in Field.  ARRIS and MERCK each covenant to the
     other that during the period commencing on the Effective
     Date and continuing until [  *  ], it will conduct no
     activity concerning discovering, identifying, researching or
     developing compounds which meet the criteria of Subsection
     1.1(A)(1) except pursuant to this Agreement (provided that
     the foregoing shall not prevent a party or its Affiliates
     from conducting pre-clinical investigations on such
     compounds for uses outside of their inhibition of cathepsin
     K or cathepsin L).  The foregoing shall not be interpreted
     to limit the other obligations under this Agreement,
     including without limitation those under Sections 2.9 and
     2.10 and Article IV.

                            ARTICLE IV
                 CONFIDENTIALITY AND PUBLICATION

4.1  Nondisclosure Obligations.  All Proprietary Information
     disclosed by one party to the other hereunder shall be
     maintained in confidence by the receiving party and shall
     not be disclosed to any non-party or used for any purpose
     except as expressly permitted herein without the prior
     written consent of the other party to this Agreement, except
     that the foregoing shall not apply to the extent provided in
     Section 4.3 below.

4.2  Restriction on ARRIS Delta Technology.  MERCK agrees
     [  *  ] not to disclose ARRIS Delta Technology to any of its
     employees except to those MERCK employees who reasonably
     require same for the purposes of this Agreement and who have
     been apprised of the confidential nature of such disclosure.

4.3  Exceptions.  The non-use and non-disclosure obligations of
     Sections 4.1 and 4.2 shall not apply to the extent that the
     Proprietary Information:

     (a)  is known by the receiving party at the time of its
          receipt, and not through a prior disclosure by the
          disclosing party, as documented by business records;

                                     12

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* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

     (b)  is properly in the public domain;

     (c)  is subsequently disclosed to the receiving party by a
          third party who may lawfully do so and is not under an
          obligation of confidentiality to the disclosing party;
          or

     (d)  is developed by the receiving party independently of
          Proprietary Information received from the disclosing
          party.

4.4  Permitted Disclosure of Proprietary Information.
     Notwithstanding Section 4.1, a party receiving Proprietary
     Information of the other party may disclose such Proprietary
     Information:

     (a)  to governmental or other regulatory agencies in order
          to gain approval to conduct clinical trials or to
          market Licensed Product, but such disclosure may be
          only to the extent reasonably necessary to obtain such
          authorizations;

     (b)  by MERCK to its permitted sublicensees, agents,
          consultants, Affiliates and/or other third parties to
          the extent necessary for the research and development,
          manufacturing and/or marketing of the Licensed Product
          (or for such parties to determine their interest in
          performing such activities) in accordance with this
          Agreement on the condition that such third parties
          agree to be bound by the confidentiality obligations
          contained within this Agreement, PROVIDED the term of
          confidentiality for such third parties shall be no less
          than[  *  ], or

     (c)  if required to be disclosed by law or court order,
          provided that notice is promptly delivered to the other
          party in order to provide an opportunity to challenge
          or limit the disclosure obligations.

     (d)  Notwithstanding the foregoing, [  *  ].

4.5  Publication.  MERCK and ARRIS each acknowledge the other's
     interest in publishing its results to obtain recognition
     within the scientific community and to advance the state of
     scientific knowledge.  Each party also recognizes the mutual
     interest in obtaining valid patent protection and in
     protecting business interests and trade secret information.
     Consequently, either party, its employees, agents or
     consultants wishing to make such a publication shall deliver
     to the other party a copy of the proposed written
     publication or an outline of an oral disclosure at least
     [  *  ] prior to submission for publication or presentation.
     The reviewing party shall have the right (a) to propose
     modifications to the publication for patent reasons, trade
     secret reasons or business reasons or (b) to request a
     reasonable delay in publication or presentation in order to
     protect know-how and patentable information.

                                      13

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* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>


     If the reviewing party requests a delay, the publishing party shall
     delay submission or presentation for [  *  ] after the filing of
     the initial patent application to enable patent applications
     protecting each party's rights in such information to be filed in
     accordance with Article VII below.  Upon expiration of such
     [  *  ], the publishing party shall be free to proceed with the
     publication or presentation.  If the reviewing party requests
     modifications to the publication, the publishing party shall edit
     such publication to prevent disclosure of trade secret or
     proprietary business information prior to submission of the
     publication or presentation.

4.6  Press Releases.  Each party shall have the right to make
     public announcements concerning this Agreement or the
     subject matter hereof, provided that the other party shall
     have reasonable opportunity and the right to approve the
     content of such announcement prior to its being made, which
     approval shall not be delayed or unreasonably withheld.
     MERCK shall have reasonable opportunity and the right to
     review all filings describing the terms of this Agreement,
     prior to their submittal by ARRIS to the SEC, including all
     proposed redacted copies of this Agreement.  ARRIS shall
     give due respect to any reasonable and timely request by
     MERCK with respect thereto, including confidential treatment
     of selected portions of this Agreement.

                            ARTICLE V
                 PAYMENTS; ROYALTIES AND REPORTS

5.1  Commitment Fee.  In consideration of ARRIS's commitment to
     perform its obligations under the Research Program and for
     access to the ARRIS Know-How granted hereunder, MERCK shall
     pay ARRIS a non-refundable commitment fee of [  *  ] upon
     execution of this Agreement by both parties.

5.2  Research Program Funding.  In consideration for ARRIS's
     performance of its obligations under the Research Program,
     and subject to the terms and conditions contained herein,
     MERCK shall pay ARRIS:

     (a)  For the First Year of the Research Program Term:  an
          amount equal to [  *  ] (representing [  *  ] per Full
          Time Equivalent ("FTE") for [  *  ]), payable in four
          equal quarterly installments of [  *  ] each.  The
          first such quarterly installment of [  *  ] shall be
          due upon execution of this Agreement by both parties.
          The remaining three such quarterly installments of
          [  *  ] each shall be due on the first day of the
          respective three month period, i.e., on February 1,
          1997, May 1, 1997 and August 1, 1997.   Should the
          parties agree to amend the Research Program to require
          [  *  ] additional FTEs during the First Year, the
          additional payment for such FTE(s) shall equal  [  *  ]
          per FTE.

                                       14

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* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

     (b)  For the Second Year of the Research Program Term:  an
          amount equal to [  *  ] (representing [  *  ] per FTE
          for [  *  ]), payable in four quarterly installments of
          [  *  ] each.  Such quarterly installments shall be due
          on the first day of the respective three month period,
          i.e., on November 1, 1997, February 1, 1998, May 1,
          1998 and August 1, 1998.   If the JRC determines to
          accelerate the Research Program during the Second Year
          by requiring up to as many as [  *  ] during the Second
          Year, the parties shall amend the Research Program
          accordingly and the additional payment for such FTE(s)
          shall equal [  *  ] per FTE.

     (c)  For any Third Year of the Research Program Term:  If
          the Research Program Term is extended for a Third Year
          as set forth in Section 2.8 above, payments for such
          Third Year shall equal [  *  ] per required FTE.

5.3  Milestone Payments.   Subject to the terms and conditions of
     this Agreement, MERCK shall pay to ARRIS the following
     milestone payments:

     (a)  [  *  ] upon [  *  ] set forth in Section [  *  ] of
          this Agreement;

     (b)  [  *  ] upon [  *  ]of a [  *  ];

     (c)  [  *  ] upon [  *  ] of a Program Compound for [  *  ]
          as defined by MERCK;

     (d)  [  *  ] upon [  *  ] of [  *  ] using a Program
          Compound;

     (e)  [  *  ] upon [  *  ] of [  *  ] using a Program
     Compound;

     (f)  [  *  ] upon [  *  ] a Licensed Product for [  *  ];

     (g)  [  *  ] upon [  *  ] a Licensed Product in the [  *  ].

     ARRIS shall notify MERCK in writing within [  *  ] upon the
     achievement of the milestone described in (b) above, and
     MERCK shall pay ARRIS the appropriate milestone payment
     within [  *  ] of its receipt of such notice.  MERCK shall
     notify ARRIS in writing within [  *  ] upon the achievement of

                                     15

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

      each milestone described in (a) and (c) through (g) above, and
      upon such notice shall pay ARRIS the appropriate milestone
      payment.

      The milestone payments described in (a) through (c) above
      shall be payable only upon the initial achievement of such
      milestone and no amounts shall be due hereunder for
      subsequent or repeated achievement of such milestone.

      The milestone payments described in (d) through (g) above
      shall be payable only upon the achievement of each such
      milestone for the [  *  ] a particular milestone event.
      Notwithstanding the foregoing, if a Program Compound is
      approved and marketed as a Licensed Product, and MERCK
      elects to develop or to continue developing, e.g., as a
      second generation product, another Program Compound (which
      does not contain the same Program Compound or any salt form,
      different formulation, or stereo-isomer thereof as such
      Licensed Product) as a Licensed Product, MERCK shall make
      the required payment for [  *  ] described in [  *  ] any
      such [  *  ], which shall include payment of all milestone
      payments described in [  *  ] that were [  *  ] of such
      Licensed Product.

      [  *  ] of each milestone payment made for the achievement
      of a milestone described in (f) and (g) as set forth above
      [  *  ] for the Program Compound for which such milestone
      was paid; PROVIDED, HOWEVER, that the [  *  ] for such
      Program Compound [  *  ] in such year.

5.4   Royalties.

5.4.1 Royalties Payable By MERCK.  Subject to the terms and
      conditions of this Agreement, MERCK shall pay to ARRIS
      royalties during each Calendar Year on a country-by-country
      basis:

      (a)  if the Licensed Product is covered by a Valid Patent
           Claim in the country of sale, then:

          (i)  an amount equal to [  *  ] of the Net Sales of
               such Licensed Products in such countries, until
               the total  annual Net Sales of Licensed Products
               by MERCK, its Affiliates or sublicensees equals
               [  *  ];

          (ii) for that amount of annual Net Sales of Licensed
               Products by MERCK, its Affiliates or sublicensees
               greater than [  *  ] and less than or equal to
               [  *  ], an amount equal to [  *  ]

                                   16

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

                    of such Net Sales in such countries; and

          (iii)     for that amount of annual Net Sales of
               Licensed Products by MERCK, its Affiliates or
               sublicensees greater than [  *  ], an amount equal
               to [  *  ] of such Net Sales in such countries; or

     (b)  for sales in countries other than those covered in
          Subsection 5.4.1(a) above:

          (i)  an amount equal to [  *  ] of the Net Sales of
               such Licensed Products in such countries, until
               the total annual Net Sales of Licensed Products by
               MERCK, its Affiliates or sublicensees equals
               [  *  ];

          (ii) for that amount of annual Net Sales of Licensed
               Products by MERCK, its Affiliates or sublicensees
               greater than [  *  ] and less than or equal to
               [  *  ], an amount equal to [  *  ] of such Net
               Sales in such countries; and

         (iii) for that amount of annual Net Sales of
               Licensed Products by MERCK, its Affiliates or
               sublicensees greater than [  * ], an amount equal
               to [  *  ] of such Net Sales in such countries.

     Royalties on each Licensed Product at the rates set forth
     above shall be effective as of the date of First Commercial
     Sale of Licensed Product in a country and shall continue
     until either (i) the expiration of the last applicable
     patent on such Licensed Product in such country in the case
     of sales under Subsection 5.4.1(a) above or (ii) until the
     [  *  ] in such country in the case of sales of Licensed
     Product under Subsection 5.4.1(b) above, in each case
     subject to the following conditions:

     (x)  that only one royalty shall be due with respect to the
          same unit of Licensed Product;

     (y)  that no royalties shall be due upon the sale or other
          transfer among MERCK, its Affiliates or sublicensees,
          but in such cases the royalty shall be due and
          calculated upon MERCK's or its Affiliate's or its
          sublicensee's Net Sales to the first independent third
          party; and

     (z)  no royalties shall accrue on the disposition without
          charge of Licensed Product in reasonable quantities by
          MERCK, its Affiliates or its sublicensees as samples
                    (promotion or otherwise) or as donations (for


                                     17

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

          example, to non-profit institutions or government agencies for a
          non-commercial purpose).

5.4.2 Managed Pharmaceutical Contracts.  MERCK may sell Licensed
      Products to an independent third party (such as a retailer
      or wholesaler) and may subsequently perform services
      relating to Licensed Products and other products under a
      managed pharmaceutical benefits contract or other similar
      contract.  In such cases, Net Sales shall be based [  *  ]
      in Section 1.21, [  *  ] receive compensation arising from
      the performance of such services.

5.4.3 Change in Sales Practices.  The parties acknowledge that
      during the term of this Agreement, MERCK's sales practices
      for the marketing and distribution of Licensed Product may
      change to the extent to which the calculation of the payment
      for royalties on Net Sales may become impractical or even
      impossible.  In such event the parties agree to meet and
      discuss in good faith new ways of compensating ARRIS to the
      extent currently contemplated under Section 5.4.1.

5.4.4 Bulk Compound.  In a country other than a Major Market
      Country (which shall be for purposes of this Section the
      United States, the United Kingdom, France, Canada, Germany,
      Japan, Italy and Spain) in those cases where MERCK sells
      bulk Program Compound to a third party other than a
      sublicensee rather than Licensed Product in packaged form,
      and is unable to determine Net Sales, the royalty
      obligations of this Article V shall be [  *  ].

5.4.5 Compulsory Licenses.  If a compulsory license is granted
      with respect to Licensed Product in any country in the
      Territory with a royalty rate lower than the royalty rate
      provided by Section 5.4.1., then the royalty rate to be paid
      by MERCK on Net Sales in that country under Section 5.4.1
      shall be [  *  ].

5.4.6 Third Party Licenses.  If one or more patent licenses from a
      third party or parties are required by MERCK, its Affiliates
      and/or sublicensees to develop, make, have made, use, sell
      or import Compound or Licensed Product in a particular
      country ("Third Party Patent License(s)"), any royalties
      actually paid by MERCK under such Third Party Patent
      License(s) with respect to sale of such Licensed Product in
      such country based on rates [  *  ] the rates to be paid
      ARRIS under Section 5.4.1(a) with respect to such sales,
      shall be credited against the royalty payments to be paid
      ARRIS by MERCK with respect to the sale of such Licensed
      Products in such country; PROVIDED, HOWEVER, that the
      royalties payable to ARRIS in any given year shall not be
      reduced by more than [  *  ] in such year.

5.5   Reports; Payment of Royalty.  Following the First Commercial
      Sale of a Licensed Product and during the term of the
      Agreement, MERCK shall furnish

                                     18

_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________

<PAGE>

     to ARRIS a quarterly written report for the Calendar Quarter
     showing the sales of all Licensed Products subject to
     royalty payments sold by MERCK, its Affiliates and its
     sublicensees in the Territory during the reporting period
     and the royalties payable under this Agreement.  Reports
     shall be due on the [  *  ] following the close of each
     Calendar Quarter.  Royalties that have accrued in a
     particular Calendar Quarter shall be due and payable on the
     date such royalty report is due. MERCK shall keep complete
     and accurate records in sufficient detail to enable the
     royalties payable hereunder to be determined.

5.6  Audits.

     (a)  Upon the written request of ARRIS and not more than
          once in each Calendar Year, MERCK shall permit an
          independent certified public accounting firm of
          nationally recognized standing selected by ARRIS and
          reasonably acceptable to MERCK, at ARRIS's expense, to
          have access during normal business hours to such of the
          records of MERCK as may be reasonably necessary to
          verify the accuracy of the royalty reports hereunder
          for any Calendar Year ending not more than [  *  ]
          prior to the date of such request.  The accounting firm
          shall disclose to ARRIS only whether the royalty
          reports are correct or incorrect and the specific
          details concerning any discrepancies.  No other
          information shall be provided to ARRIS.

     (b)  If such accounting firm correctly concludes that
          additional royalties were owed during such period,
          MERCK shall pay [  *  ] of the date ARRIS delivers
          to MERCK such accounting firm's written report so
          correctly concluding.

     (c)  MERCK shall include in each sublicense granted by it
          pursuant to this Agreement a provision requiring the
          sublicensee to make reports to MERCK, to keep and
          maintain records of sales made pursuant to such
          sublicense and to grant access to such records by
          ARRIS's independent accountant to the same extent
          required of MERCK under this Agreement.  Upon the
          expiration of [  *  ] following the end of any Calendar
          Year, the calculation of royalties payable with respect
          to such Calendar Year shall be binding and conclusive
          upon ARRIS, and MERCK and its sublicensees shall be
          released from any liability or accountability with
          respect to royalties for such Calendar Year.

     (d)  ARRIS shall treat all information subject to review
          under this Section 5.6 or under any sublicense
          agreement in accordance with the confidentiality
          provisions of Article IV of this Agreement, and shall
          cause its accounting firm to enter into an acceptable
          confidentiality agreement with MERCK obligating such
          firm to retain all such financial information in
          confidence pursuant to such confidentiality agreement.


                                     19
_______________________________________________________________________________
* 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 Exhange Act of
  1934, as amended.
_______________________________________________________________________________
<PAGE>

5.7  Payment Exchange Rate.  All payments to be made by MERCK to
     ARRIS under this Agreement shall be made in United States
     dollars and may be paid by check made to the order of ARRIS
     or bank wire transfer in immediately available funds to such
     bank account in the United States designated in writing by
     ARRIS from time to time.  In the case of sales outside the
     United States, the rate of exchange to be used in computing
     the amount of currency equivalent in United States dollars
     due ARRIS shall be the rate of exchange used by MERCK in its
     worldwide accounting system, prevailing on the fourth to the
     last MERCK business day of the Calendar Quarter during which
     such sales were made, which shall be generally reflective of
     then prevailing actual currency exchange rates.

5.8  Income Tax Withholding.  If laws, rules or regulations
     require withholding of income taxes or other taxes imposed
     upon payments set forth in this Article V, MERCK shall make
     such withholding payments as required and subtract such
     withholding payments from the payments set forth in this
     Article V.  MERCK shall submit appropriate proof of payment
     of the withholding taxes to ARRIS within a reasonable period
     of time.

                            ARTICLE VI
                  REPRESENTATIONS AND WARRANTIES

6.1  Arris Representations and Warranties.  ARRIS represents and
     warrants to MERCK that as of the date of this Agreement:

     (a)  to the best of ARRIS's knowledge, the ARRIS Patents and
          ARRIS Know-How existing as of the Effective Date are
          subsisting and are not invalid or unenforceable, in
          whole or in part;

     (b)  it has the full right, power and authority to enter
          into this Agreement, to perform the Research Program
          and to grant the licenses granted under Article III
          hereof;

     (c)  to the best of ARRIS's knowledge, the ARRIS Patents,
          ARRIS Know-How and ARRIS Delta Technology practiced as
          permitted herein do not infringe on any intellectual
          property rights owned by any third party, and do not
          result from a misappropriation by ARRIS of any property
          owned by any third party;

     (d)  there are no claims, judgments or settlements against
          or owed by ARRIS or pending or threatened claims or
          litigation relating to the ARRIS Patents, ARRIS
          Know-How and ARRIS Delta Technology;

     (e)  it has disclosed to MERCK all relevant information
          regarding the ARRIS Patents and ARRIS Know-How
          reasonably relating to activities under this Agreement;

                                       20
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.

<PAGE>


     (f)  that during the course of the Research Program, ARRIS
          will not knowingly infringe any valid patents; and

     (g)  [  *  ] of the Effective Date of this Agreement and
          [  *  ] hereunder was [  *  ].

6.2  Merck Representations and Warranties.  MERCK represents and
     warrants to ARRIS that as of the date of this Agreement it
     has the full right, power and authority to enter into this
     Agreement, to perform the Research Program and to grant the
     licenses granted under Section 3.1(b) hereof.

                           ARTICLE VII
                          PATENT MATTERS


7.1  Filing, Prosecution and Maintenance of Patents.

     (a)  Each party agrees at its expense to file, prosecute and
          maintain in the Territory, upon appropriate
          consultation with the other party, United States patent
          applications relating to the Research Program
          Information and Inventions owned in whole or in part by
          such party, and, with respect to ARRIS, the inventions
          in the ARRIS Patents licensed to MERCK under this
          Agreement; PROVIDED, HOWEVER, with respect to
          Collaboration Research Information, [  *  ] obligation
          to file, prosecute, and maintain at its expense the
          United States patent applications for such inventions
          and [  *  ] fully and shall cause its employees to
          cooperate fully on the filing and prosecution of such
          patents. In each case, the filing party shall give the
          non-filing party an opportunity to review the text of
          the application before filing, shall consult with the
          non-filing party with respect thereto, and shall supply
          the non-filing party with a copy of the application as
          filed, together with notice of its filing date and
          serial number.  Each party shall keep the other advised
          of the status of the actual and prospective patent
          filings and upon the request of the other party,
          provide advance copies of any papers related to the
          filing, prosecution and maintenance of such patent
          filings.  Each party promptly shall give notice to the
          other of the grant, lapse, revocation, surrender,
          invalidation or abandonment of any Patents for which
          the party is responsible hereunder for the filing,
          prosecution and maintenance.

     (b)  Each party agrees to file, within one year of the
          filing date of any patent application it files pursuant
          to Subsection 7.1(a), a counterpart International
          Application under the PCT designating all member
          countries and any additional counterpart national
          patent applications in non-PCT member states so
          requested by the other party and to maintain and/or
          prosecute such applications.  [  *  ] for the [  *  ]
          pursuant to this Subsection 7.1(b).  The costs and
          expenses relating to filing, prosecuting and/or
          maintaining all national patent applications in non-PCT
          member countries and all national patent applications
          arising from the National


                                       21

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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.

<PAGE>

          Stage of any PCT patent applications filed pursuant to this Subsection
          7.1(b) [  *  ].  For Collaboration Patents, MERCK shall file any
          United States non-provisional and PCT patent applications and bear
          all costs and expenses related to such filings.

     (c)  Each party agrees to be responsible for maintaining
          through the end of its term each patent issuing from
          any patent application it files pursuant to Subsections
          7.1(a) and (b). [  *  ] for the [  *  ] of each United
          States patent issuing from any patent application it
          files pursuant to Subsection 7.1(a).  The costs and
          expenses relating to the maintenance of each patent
          issuing from any patent application filed pursuant to
          Subsection 7.1(b) shall be [  *  ].

     (d)  Notwithstanding the foregoing, ARRIS shall have the
          first right to file and prosecute all patent
          applications claiming Active Compounds identified,
          designed or developed using or based upon the ARRIS
          Delta Technology. Such applications shall be reviewed
          by MERCK prior to filing.  All such patent prosecution
          efforts shall be paid for as provided in Subsections
          7.1(a) through (c) above.

7.2  Right to Prosecute and Maintain Patents.

     (a)  Each party shall give timely notice to the other of its
          decision to forego filing of any patent application
          required under Section 7.1 or to cease prosecution
          and/or maintenance of such applications or patents and,
          in such case, shall permit the other party, [  *  ], to
          continue prosecution or maintenance [  *  ].  If the
          other party elects to continue prosecution or
          maintenance, or to file based on such party's election
          not to file pursuant to Section 7.1 above, such
          notifying party shall execute such documents and
          perform such acts [  *  ] as may be reasonably
          necessary to permit the other party to continue such
          prosecution or maintenance.  Any patents or patent
          applications so prosecuted or maintained shall be
          assigned to such other party.

     (b)  Notwithstanding any provisions of this Agreement,
          either party, upon appropriate consultation with and
          assent by the other party, may forego or postpone the
          filing of any patent applications required under
          Section 7.1 of this Agreement or may terminate the
          prosecution and/or maintenance or have the other party
          take responsibility for filing, prosecuting and/or
          maintaining any patent applications or other Patents


                                       22

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.

<PAGE>

          required, filed or perfected under or pursuant to Section 7.1
          without any loss of rights granted or provided for under this
          Agreement.

7.3  Interference, Opposition, Reexamination and Reissue.

     (a)  Each party, within ten days of learning of such event,
          shall inform the other party of any request for, or
          filing or declaration of, any interference, opposition,
          or reexamination relating to the ARRIS Patents or
          Collaboration Patents.  MERCK and ARRIS thereafter
          shall consult and cooperate fully to determine a course
          of action with respect to any such proceeding.  MERCK
          shall have the right to review and approve any
          submission to be made in connection with such
          proceeding.

     (b)  ARRIS shall not institute any opposition,
          reexamination, or reissue proceeding relating to the
          ARRIS Patents or Collaboration Patents without the
          prior written consent of MERCK, which consent shall not
          unreasonably be withheld.

     (c)  In connection with any interference, opposition,
          reissue, or reexamination proceeding relating to the
          ARRIS Patents or Collaboration Patents, MERCK and ARRIS
          will cooperate fully and will provide each other with
          any information or assistance that either reasonably
          may request.  ARRIS shall keep MERCK informed of
          developments in any such action or proceeding,
          including, to the extent permissible, the status of any
          settlement negotiations and the terms of any offer
          related thereto.

     (d)  Each party [  *  ] proceeding relating to any patent
          application it files pursuant to Subsection 7.1(a) or
          patent issuing therefrom.  The parties shall [  *  ]
          any interference, opposition, reexamination or reissue
          proceeding relating to any patent application filed
          under Subsection 7.1(b) or patent issuing therefrom.

7.4  Enforcement and Defense.

     (a)  Each party shall give the other notice of either (x)
          any infringement of ARRIS Patents or Collaboration
          Patents in the Field, or (y) any misappropriation or
          misuse of ARRIS Know-How, that may come to ARRIS's
          attention.  MERCK and ARRIS thereafter shall consult
          and cooperate fully to determine a course of action
          including, without limitation, the commencement of
          legal action by either or both of MERCK and ARRIS, to
          terminate any infringement of such patent rights in the
          Field or any misappropriation or misuse of ARRIS
          Know-How in the Field.  However, ARRIS, upon notice to
          MERCK, shall have the first right to initiate and
          prosecute such legal action [  *  ] in the name of
          ARRIS (and, if appropriate, MERCK), or to control the
          defense of


                                       23

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.

<PAGE>

          any declaratory judgment action relating to ARRIS
          Patents, Collaboration Patents or ARRIS Know-How.
          ARRIS promptly shall inform MERCK if it elects not to
          exercise such first right, and if such infringement or
          misuse materially adversely affects MERCK's efforts
          under this Agreement, MERCK thereafter shall have the
          right either to initiate and prosecute such action or
          to control the defense of such declaratory judgment
          action in the name of MERCK and, if necessary, ARRIS.

     (b)  If ARRIS elects not to initiate and prosecute an action
          as provided in Subsection 7.4(a), and, due to material
          adverse effect on MERCK, MERCK has the right and chose
          to prosecute an action, the cost of any agreed-upon
          course of action to terminate infringement of ARRIS
          Patents or Collaboration Patents, misappropriation or
          misuse of ARRIS Know-How, including the costs of any
          legal action commenced or the defense of any
          declaratory judgment, [  *  ].  Any proceeds from such
          action [  *  ] will be [  *  ].

     (c)  For any action to terminate any infringement of ARRIS
          Patents or Collaboration Patents or any
          misappropriation or misuse of ARRIS Know-How, in the
          event that either MERCK or ARRIS is unable to initiate
          or prosecute such action solely in its own name as
          provided herein, the other party will join such action
          voluntarily and will execute and cause its Affiliates
          under its control to execute all documents necessary
          for the party seeking to initiate litigation to
          prosecute and maintain such action.  In  connection
          with any such action, MERCK and ARRIS will cooperate
          fully and will provide each other with any information
          or assistance that either reasonably may request.  Each
          party shall keep the other informed of developments in
          any such action or proceeding, including, to the extent
          permissible by law, the status of any settlement
          negotiations and the terms of any offer related
          thereto.

     (d)  Any recovery obtained by either or both MERCK and
          ARRIS,  in connection with or as a result of any action
          contemplated by this Section 7.4 to terminate an
          infringement or misuse where such  infringement or
          misuse materially adversely affects MERCK's efforts
          under the Agreement, whether by settlement or
          otherwise, shall be shared in order as follows:

          (i)  [  *  ] for such action, then [  *  ];

          (ii) if [  *  ], then any proceeds shall be [  *  ].


                                       24

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.

<PAGE>

     (e)  ARRIS shall inform MERCK of any certification regarding
          any ARRIS Patents it has received pursuant to either 21
          U.S.C. Sections 355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV)
          or under [  *  ] and shall provide MERCK with a copy of
          such certification within five days of receipt.
          ARRIS's and MERCK's rights with respect to the
          initiation and prosecution of any legal action as a
          result of such certification or any recovery obtained
          as a result of such legal action shall be as defined in
          Subsections 7.4(a) through (d) hereof; PROVIDED,
          HOWEVER, that ARRIS shall exercise its first right to
          initiate and prosecute any action and shall inform
          MERCK of such decision within ten days of receipt of
          the certification, after which time MERCK shall have
          the right to initiate and prosecute such action.

     (f)  For any action for which the parties are [  *  ] which
          is [  *  ] shall control the action.  If the parties
          are [  *  ] shall control the action.

7.5  Patent Term Restoration.  The parties shall cooperate in
     obtaining patent term restoration or supplemental protection
     certificates or their equivalents in any country in the
     Territory where applicable to ARRIS Patents.  If elections
     with respect to obtaining such patent term restoration are
     to be made, [  *  ] shall have the right to make the
     election and [  *  ] shall abide by such election.

                           ARTICLE VIII
                       TERM AND TERMINATION

8.1  Term and Expiration.  This Agreement shall be effective as
     of the Effective Date and, unless terminated earlier under
     Sections 8.2 or 8.3 below, shall continue in effect until
     expiration of all royalty obligations hereunder.  Upon
     expiration of this Agreement due to expiration of all
     royalty obligations hereunder, MERCK's licenses pursuant to
     Section 3.1 shall become fully paid-up, perpetual licenses.

8.2  Termination by MERCK.  Notwithstanding anything to the
     --------------------
     contrary herein, MERCK shall have the right to terminate
     this Agreement

     (a)  at any time after the end of the Research Program Term
          for any reason by giving [  *  ] advance written notice
          to ARRIS; or

     (b)  during the Research Program Term, upon [  *  ] written
          notice, solely in the event that MERCK in its
          reasonable judgment exercised in good faith determines
          that

          (i)  the parties have demonstrated, [  *  ]

                                       25


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1934, AS AMENDED.

<PAGE>

          , or

          (ii)      [  *  ].

          [  *  ] under Subsection 8.2 (b)(i) above is one that
          would demonstrate that [  *  ].

     In the event of termination under this Section 8.2,

           (i) the rights and obligations hereunder, including
               any payment obligations not due or accrued as of
               the termination date, shall terminate, and

          (ii) MERCK shall have [  *  ] for all internal
               research purposes excluding inhibition of
               cathepsin K or L, and

         (iii) To the extent not previously disclosed under
               Section 2.7, upon termination of this Agreement
               pursuant to this Section 8.2, MERCK shall disclose
               to ARRIS the development, making, conception and
               reduction to practice of all Research Program
               Information and Inventions as of the effective
               date of such termination.  ARRIS shall have the
               option to obtain an exclusive license under
               MERCK's interest in the Research Program
               Information and Inventions and the Collaboration
               Patents solely for use in discovering, developing,
               making, using, importing and selling inhibitors of
               cathepsin K and L, and an exclusive license under
               the MERCK Patents solely for use in discovering,
               developing, making, using, importing and selling
               inhibitors of cathepsin K and L pursuant to a
               license agreement to be negotiated in good faith
               by the parties promptly after the exercise of such
               option.  ARRIS shall have the right to exercise
               such option within a [  *  ] of the effective date
               of termination of this Agreement under this
               Section 8.2, after which period such option shall
               expire if unexercised.  Such license agreement
               shall contain at least the following terms:  (a)
               that ARRIS [  *  ] to be [  *  ] (b) that ARRIS
               shall not [  *  ]; (c) that ARRIS shall not [  *  ]


                                       26


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.

<PAGE>

               [  *  ]; (d) that ARRIS shall not [  *  ]; (e) that ARRIS shall
               [  *  ] with respect to [  *  ] having [  *  ]; (f) that ARRIS
               shall [  *  ] of the license agreement; (g) that ARRIS shall
               [  *  ] of the [  *  ] with respect to [  *  ] under the license;
               (h) that ARRIS shall [  *  ] as follows: (i) with respect to
               [  *  ] and are [  *  ] of this Agreement on the terms set forth
               in [  *  ], and (ii) [  *  ] with respect to [  *  ] which are
               commercialized by ARRIS under the license; and (i) [  *  ] to any
               [  *  ] as of the Effective Date.  Such license agreement also
               shall contain such other commercially reasonable terms as
               typically are in license agreements.  Upon exercise by ARRIS of
               such option, MERCK and ARRIS promptly thereafter shall negotiate
               in good faith and enter into such license agreement.

8.3  Termination.

8.3.1 Termination for Cause.  This Agreement may be terminated by
     notice by either party at any time during the term of this
     Agreement:

     (a)  if the other party is in breach of its material
          obligations hereunder by causes and reasons within its
          control and has not cured such breach within [  *  ]
          after receipt of a letter requesting such cure; or

     (b)  in the event ARRIS materially breaches its obligations
          during the Research Program Term, and fails to cure
          such breach within [  *  ] after notice of such breach,
          then MERCK may, in lieu of termination under Subsection
          8.3.1(a) above, terminate the Research Program, the
          research license granted to ARRIS under Subsection
          3.1(b) and all of MERCK's obligations to fund any
          further research hereunder, PROVIDED, HOWEVER that all
          other rights and obligations of MERCK and ARRIS
          hereunder shall be preserved, including without limitation,
          the licenses




                                       27


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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.

<PAGE>

          retained by MERCK under Subsection 3.1(a) and Section 3.2 of this
          Agreement.

     (c)  In the event ARRIS materially breaches its obligations
          at any time during the term of this Agreement and MERCK
          either notifies ARRIS of the termination of this
          Agreement under Section 8.3.1(a) or initiates
          arbitration against ARRIS for breach of this Agreement,
          or both, any [  *  ] may be [  *  ] of this Agreement
          [  *  ].

8.3.2 Effect of Termination for Bankruptcy.

     If this Agreement is terminated by ARRIS or its appointed
     trustee based on bankruptcy, all rights and licenses granted
     under or pursuant to this Agreement by ARRIS to MERCK are,
     and shall otherwise be deemed to be, for purposes of Section
     365(n) of the Bankruptcy Code, licenses of rights to
     "intellectual property" as defined under Section 101(52) of
     the Bankruptcy Code.  The parties agree that MERCK, as a
     licensee of such rights under this Agreement, shall retain
     and may fully exercise all of its rights and elections under
     the Bankruptcy Code.  The parties further agree that, in the
     event of the commencement of a bankruptcy proceeding by or
     against ARRIS under the Bankruptcy Code, MERCK shall be
     entitled to a complete duplicate of (or complete access to,
     as appropriate) any such intellectual property and all
     embodiments of such intellectual property upon written
     request therefore by MERCK.  Such intellectual property and
     all embodiments thereof promptly shall be delivered to MERCK
     (i) upon any such commencement of a bankruptcy proceeding
     upon written request therefore by MERCK, unless ARRIS elects
     to continue to perform all of its obligations under this
     Agreement or (ii) if not delivered under (i) above, upon the
     rejection of this Agreement by or on behalf of ARRIS upon
     written request therefore by MERCK.

8.4  Effect of Expiration or Termination.  Expiration or
     termination of this Agreement shall not relieve the parties
     of any obligation accruing prior to such expiration or
     termination, and the provisions of Sections 2.6, 2.7, 2.9,
     2.10, Sections 3.1 and 3.2 to the extent provided in Article
     VIII, 5.6, and Articles I, IV, VII, VIII and IX shall
     survive the termination or expiration of the Agreement, with
     Article IV continuing in effect for [  *  ] thereafter.  Any
     expiration or early termination of this Agreement shall be
     without prejudice to the rights of either party against the
     other accrued or accruing under this Agreement prior to
     termination, including, without limitation, the obligation
     to pay royalties for Licensed Products or Program Compound
     sold prior to such termination.



                                       28

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.


<PAGE>

                           ARTICLE IX
                          MISCELLANEOUS

9.1  Force Majeure.  Neither party shall be held liable or
     responsible to the other party nor be deemed to have
     defaulted under or breached this Agreement for failure or
     delay in fulfilling or performing any term of this Agreement
     when such failure or delay is caused by or results from
     causes beyond the reasonable control of the affected party
     including, but not limited to, fire, floods, mudslides,
     earthquakes, embargoes, war, acts of war (whether war be
     declared or not), insurrections, riots, civil commotions,
     strikes, lockouts or other labor disturbances, acts of God
     or acts, omissions or delays in acting by any governmental
     authority or the other party.  The affected party shall
     notify the other party of such force majeure circumstances
     as soon as reasonably practical.

9.2  Excused Performance.  The obligation of MERCK with respect
     to any Licensed Product under Section 3.3 is expressly
     conditioned upon [  *  ] relating to the [  *  ].  The
     obligation of MERCK to develop or market any such Licensed
     Product shall be delayed or suspended so long as [  *  ].
     All judgments as to [  *  ] shall be made by [  *  ].

9.3  Binding Effect; Assignment.  This Agreement shall inure to
     the benefit of and be binding upon each party and its
     successors and permitted assigns.  Except as otherwise
     provided in Subsections 9.3(a) and (b), neither party shall,
     directly or indirectly, assign this Agreement or any of its
     rights or obligations hereunder without the prior written
     consent of the other party.  Without limiting the generality
     of the foregoing, a merger, acquisition or change of control
     of a party hereto shall be deemed to be an assignment.  As
     used in this Section 9.3, change of control shall mean a
     transaction pursuant to which a person or group acting in
     concert, other than the currently controlling person or
     group, immediately after such transaction shall effectively
     control election of directors, but shall not include changes
     in the identity of owners of a party's publicly held stock
     not involving any stock owner achieving ownership of more
     than [  *  ] of a party's publicly held stock entitled to
     vote for the election of directors.

     (a)  Notwithstanding the foregoing, MERCK may, without
          consent, assign this Agreement and its rights and
          obligations hereunder to an Affiliate or in connection
          with the transfer or sale of all or substantially all
          of its assets related to the Licensed Product or the
          business, or in the event of its merger or
          consolidation or change of control or similar
          transaction. Any such assignee shall assume all
          obligations of its assignor under the Agreement.

     (b)  Notwithstanding the foregoing, ARRIS may assign this
          Agreement without consent in connection with a merger
          of, acquisition of, or sale of



                                       29

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1934, AS AMENDED.


<PAGE>
          all or substantially all of the assets of ARRIS, PROVIDED,
          HOWEVER, that such assignment shall be [  *  ] of the obligations
          of ARRIS hereunder, and further that if such merger, acquisition
          or sale of assets [  *  ], where ARRIS is not the surviving
          entity, then such assignment shall be subject to Section 9.4
          below.  In the event of any such assignment by ARRIS hereunder,
          the licenses granted MERCK hereunder shall not cover any
          intellectual property of such assignee not previously Controlled
          by ARRIS existing prior to the date of such assignment.

9.4  Consequences of Certain Assignments by ARRIS.  In the event
     that ARRIS, during the Research Program Term, assigns this
     Agreement as permitted in Section 9.3(b) [  *  ], ARRIS,
     immediately upon its ability [  *  ] such merger,
     acquisition or sale, shall [  *  ] merger, acquisition or
     sale and MERCK may, at its choice, on written notice to such
     assignee given at any time within 30 days of such
     assignment, [  *  ] shall be [  *  ] the assignment of this
     Agreement:

     (a)  [  *  ] and any further obligation [  *  ] research
          efforts under the Research Program.  After such
          [  *  ], PROVIDED HOWEVER, that the [  *  ] as
          specified under Section [  *  ] shall be [  *  ] shall
          be equal to the number of days in the Research Program
          Term from the Effective Date to the [  *  ];

     (b)  [  *  ], and immediately thereafter such assignee shall
          [  *  ] hereunder;

     (c)  possession, during the Research Program Term, of the
          [  *  ] and under [  *  ] and the [  *  ] under this
          Agreement.  The [  *  ] during the Research Program
          Term to MERCK Affiliates and to third party
          sublicensees; and



                                       30


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1934, AS AMENDED.


<PAGE>


     (d)  possession of a [  *  ] at the end of the Research
          Program Term.

     (e)  For purposes of Subsections 9.4 (a), (c) and (d) above
          and Article I, the "Research Program Term" shall have
          the period of time such term had under the provisions
          of Section 2.8 just prior to the assignment of the
          Agreement by ARRIS.

     Upon any such assignment, and whether or not [  *  ] in
     Subsections 9.4(a) through (d) above, MERCK shall retain all
     of its rights under this Agreement, including without
     limitation the licenses granted to MERCK in Sections 3.1(a)
     and 3.2 of this Agreement.

9.5  Severability.  If one or more of the provisions contained in
     this Agreement are held invalid, illegal or unenforceable in
     any respect, the validity, legality and enforceability of
     the remaining provisions shall not be affected or impaired
     thereby, unless the absence of the invalidated provision(s)
     adversely affects the substantive rights of the parties.
     The parties shall in such case use their best efforts to
     replace the invalid, illegal or unenforceable provision(s)
     with valid, legal and enforceable provision(s) which,
     insofar as practical, implement the purposes of this
     Agreement.

9.6  Use of Names.  Neither party may use the names of the other
     party or those of its Affiliates, sublicensees, employees,
     agents or consultants or any of their trademarks, names,
     logotypes or symbols without the prior written consent of
     the other party.

9.7  Notices.  All notices or other communications which are
     required or permitted hereunder shall be in writing and
     sufficient if delivered personally, sent by telecopier (and
     promptly confirmed by personal delivery, registered or
     certified mail or overnight courier), sent by
     nationally-recognized overnight courier or sent by
     registered or certified mail, postage prepaid, return
     receipt requested, addressed as follows:

          if to ARRIS, to:
                         Arris Pharmaceutical Corporation
                         385 Oyster Point Boulevard, Suite 3
                         South San Francisco, California 94080
                         Attention:  President, Chief Executive Officer
                         Telecopier No.:  415/829-1067


                                       31


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1934, AS AMENDED.


<PAGE>

          with a copy to:   Cooley Godward LLP
                            3000 El Camino Real
                            Palo Alto, California 94306
                            Attention: Robert L. Jones, Esq.
                            Telecopier No.:  415/857-0603

          if to MERCK, to:  Merck & Co., Inc.
                            One Merck Drive
                            P.O. Box 100
                            Whitehouse Station, NJ 08889-0100
                            Attention: Office of Secretary
                            Telecopier No.: 908/735-1246

          with a copy to:   Attention: Office of Assistant General Counsel
                            Telecopier No.: 908/735-1226

     or to such other address as the party to whom notice is to
     be given may have furnished to the other party in writing in
     accordance herewith.  Any such communication shall be deemed
     to have been given when delivered if personally delivered or
     sent by telecopier on a business day, on the business day
     after dispatch if sent by nationally-recognized overnight
     courier and on the third business day following the date of
     mailing if sent by mail.

9.8  Applicable Law.  This Agreement shall be governed by and
     construed in accordance with the laws of the State of New
     Jersey and the United States without reference to any rules
     of conflict of laws or renvoi.

9.9  Arbitration.  Any disputes arising between the parties
     relating to, arising out of or in any way connected with
     this Agreement or any term or condition hereof, or the
     performance by either party of its obligations hereunder,
     whether before or after termination of the Agreement, shall
     be finally resolved by binding arbitration.  Whenever a
     party shall decide to institute arbitration proceedings, it
     shall give written notice to that effect to the other party.
     The party giving such notice shall refrain from instituting
     the arbitration proceedings for a period of [  *  ]
     following such notice.  During such period, the parties
     shall make good faith efforts to amicably resolve the
     dispute without arbitration.  Any arbitration hereunder
     shall be conducted under the rules of the American
     Arbitration Association.  Each such arbitration shall be
     conducted by a panel of three arbitrators:  one arbitrator
     shall be appointed by each of MERCK and the ARRIS and the
     third shall be appointed by the American Arbitration
     Association.  Any such arbitration shall be held in New
     York, New York.  The arbitrators shall have the authority to
     grant specific performance.  Judgment upon the award so
     rendered may be entered in any court having jurisdiction or
     application may be made to such court for judicial
     acceptance of any award and an order of enforcement, as the
     case may be.  In no event shall a demand for arbitration be
     made after the date when institution



                                       32

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.


<PAGE>

     of a legal or equitable proceeding based on such claim, dispute or other
     matter in question would be barred by the applicable statute
     of limitations.

9.10 Entire Agreement.  This Agreement contains the entire
     understanding of the parties with respect to the subject
     matter hereof.  All express or implied agreements and
     understandings, either oral or written, heretofore made are
     expressly merged in and made a part of this Agreement.  This
     Agreement may be amended, or any term hereof modified, only
     by a written instrument duly executed by both parties
     hereto.

9.11 Headings.  The captions to the Articles, Sections and
     Subsections of this Agreement are not a part of the
     Agreement, but are merely guides or labels to assist in
     locating and reading the Articles, Sections and Subsections.

9.12 Independent Contractors.  ARRIS and MERCK shall be
     independent contractors and the relationship between them
     shall not constitute a partnership, joint venture or agency.
     Neither party shall have the authority to make any
     statements, representations or commitments of any kind, or
     to take any action, which shall be binding on the other,
     without the prior written consent of the other party.

9.13 Waiver.  The waiver by a party of any right under this
     Agreement or of the other party's failure to perform or
     breach shall not be a waiver of any other right, failure or
     breach whether of a similar nature or otherwise.

9.14 Counterparts.  This Agreement may be executed in two or more
     counterparts, each of which shall be deemed an original, but
     all of which together shall constitute one and the same
     instrument.

     IN WITNESS WHEREOF, the parties have executed this Agreement
as of its Effective Date.


MERCK & CO., INC.                  ARRIS PHARMACEUTICAL CORPORATION

BY:  ________/s/______________     BY: ____/s/_____________________
     Raymond V. Gilmartin              John P. Walker

TITLE:  Chairman, President        TITLE:  President &
          and Chief Executive                Chief Executive Officer
          Officer

DATE:  November 6, 1996            DATE:  November 6, 1996

                                       33

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.


<PAGE>

                          ATTACHMENT 2.1

                         RESEARCH PROGRAM


1.   [  *  ]

     [  *  ]

2.   [  *  ]

     [  *  ]

                                       34


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.

<PAGE>


3.   [  *  ]

4.   [  *  ]

5.   [  *  ]


                                  35



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.


<PAGE>


6.   [  *  ]

7.   [  *  ]

a.   [  *  ]

b.   [  *  ]

c.   [  *  ]




                                   36



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.


<PAGE>



                           APPENDIX A-1


[  *  ]



                                       37


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.


<PAGE>


                           APPENDIX A-2


[  *  ]




                                       38


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.

<PAGE>


                            APPENDIX B

                             [  *  ]


[  *  ]



                                       39




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.

<PAGE>
                            APPENDIX C


[  *  ]












                                       40



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.