<PAGE>   1
                                                                    EXHIBIT 10.7



                                               TEXT OMITTED AND FILED SEPARATELY
                                               "CONFIDENTIAL TREATMENT REQUESTED
                                          UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
                                                          200.83 AND 240.24b-2."



                                LICENSE AGREEMENT


                                     BETWEEN

                              ELAN CORPORATION, PLC
         (ACTING THROUGH ITS DIVISION ELAN PHARMACEUTICAL TECHNOLOGIES)


                                       AND

                        ELAN PHARMA INTERNATIONAL LIMITED



                                       AND


                                 HEPASENSE LTD.



                                JANUARY 14, 2000

<PAGE>   2

                                TABLE OF CONTENTS


1       DEFINITIONS

2       ELAN LICENSE TO HEPASENSE

3       INTELLECTUAL PROPERTY

4       NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY

5       FINANCIAL PROVISIONS

6       RIGHT OF INSPECTION AND AUDIT

7       REPRESENTATIONS AND WARRANTIES

8       TERM AND TERMINATION

9       CONFIDENTIAL INFORMATION

10      GOVERNING LAW AND DISPUTE RESOLUTION

11      IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE

12      ASSIGNMENT

13      NOTICES

14      MISCELLANEOUS



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<PAGE>   3

THIS AGREEMENT made this 14th January 2000

BETWEEN:

(1)     ELAN CORPORATION, PLC, a public limited company incorporated under the
        laws of Ireland, acting through its division ELAN PHARMACEUTICAL
        TECHNOLOGIES and having its registered office at Lincoln House, Lincoln
        Place, Dublin 2, Ireland and ELAN PHARMA INTERNATIONAL LIMITED, a
        private limited company and having its registered office at WIL House,
        Shannon Business Park, Shannon, County Clare, Ireland;

(2)     HEPASENSE LTD., a private limited company incorporated under the laws of
        Bermuda and having its registered office at 102 St. James Court,
        Clarendon House, Church St., Hamilton, Bermuda; and

(3)     ISIS PHARMACEUTICALS, INC., a corporation duly incorporated and validly
        existing under the laws of the state of Delaware and having its
        principal place of business at 2292 Faraday Avenue, Carlsbad, California
        92008, United States of America.


RECITALS:

A.      Simultaneously herewith, Isis, Elan, EIS, and HepaSense (capitalized
        terms used herein are defined below) are entering into the JDOA for the
        purpose of recording the terms and conditions of the joint venture and
        of regulating their relationship with each other and certain aspects of
        the affairs of, and their dealings with HepaSense.

B.      HepaSense desires to enter into this Agreement with Elan so as to permit
        HepaSense to utilize the Elan Intellectual Property in making, having
        made, importing, using, offering for sale and selling the Products in
        the Field in the Territory.

C.      Simultaneously herewith HepaSense and Isis are entering into the Isis
        License Agreement relating to HepaSense's use of the Isis Intellectual
        Property.


1       DEFINITIONS

1.1     In this Agreement unless the context otherwise requires:

        "ADDITIONAL OLIGONUCLEOTIDES" shall mean another Oligonucleotide from
        the Isis portfolio of Oligonucleotides nominated by Isis and accepted by
        Elan to be incorporated within or packaged with the System for
        commercialization. For the avoidance of doubt, the Parties acknowledge
        that any Additional Oligonucleotide shall be at least at the same stage
        of development as the Designated Oligonucleotide, i.e., shall be ready
        for clinical testing;

        "ADDITIONAL PRODUCTS" shall mean the pharmaceutical formulation
        incorporating an



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<PAGE>   4

        Additional Oligonucleotide and incorporated within or packaged with the
        System.

        "AFFILIATE" shall mean any corporation or entity controlling, controlled
        or under the common control of Elan or Isis, as the case may be. For the
        purpose of this definition, "control" shall mean direct or indirect
        ownership of fifty percent (50%) or more of the stock or shares entitled
        to vote for the election of directors. HepaSense is not an Affiliate of
        Elan or EIS.

        "AGREEMENT" shall mean this license agreement (which expression shall be
        deemed to include the Recitals and Schedules hereto).

        "BUSINESS PLAN" shall have the meaning, as such term is defined in the
        JDOA.

        "COMPETITIVE CHANGE OF CONTROL EVENT" shall mean that a Primary
        Technological Competitor of Elan acquires directly or indirectly voting
        stock or equivalent securities in Isis or HepaSense representing [ * ]
        percent or more of the stock which carries entitlement to vote, or a
        Primary Technological Competitor of Elan acquires by all or
        substantially all of the business of Isis or HepaSense to which the
        Definitive Documents relate, whether by merger, sale of stock, sale of
        assets or otherwise;

        "CONFIDENTIAL INFORMATION" shall have the meaning, as such term is
        defined in Clause 9.

        "DEFINITIVE DOCUMENTS" shall mean the definitive agreements relating to
        the transaction including finance, stock purchase, research and license
        agreements.

        "DESIGNATED OLIGONUCLEOTIDE" shall mean Isis 14803.

        "EFFECTIVE DATE" shall mean the date of this Agreement.

        "ELAN" shall mean Elan, plc and EPIL, and their respective successors
        and permitted assigns.

        "ELAN, PLC" shall mean Elan Corporation, plc, a public limited company
        incorporated under the laws of Ireland acting through its division Elan
        Pharmaceutical Technologies.

        "EIS" shall mean Elan International Services, Ltd., a private limited
        company incorporated under the laws of Bermuda and having its registered
        office at St James Court, Flatts, Smiths, FL04 Bermuda.

        "ELAN IMPROVEMENTS" shall mean any enhancement or improvement relating
        to the System, developed (i) by Elan whether or not pursuant to the
        Project, (ii) by HepaSense or Isis or by a third party (under contract
        with HepaSense) pursuant to the Project, and/or (iii) jointly by any
        combination of Elan, Isis or HepaSense pursuant to the Project, except
        as limited by agreements with third parties.

        Subject to third party agreements, Elan Improvements shall constitute
        part of Elan



                                       4

                                               *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>   5

        Intellectual Property and be included in the license of the Elan
        Intellectual Property pursuant to Clause 2.1 solely for the purposes set
        forth therein; provided, however, that an enhancement or improvement
        relating to the System which modifies the System in a manner for
        delivery of a drug other than delivery of factory pre-programmed
        continuous amounts of the drug shall remain the property of Elan but
        shall not be included in the license of the Elan Intellectual Property
        pursuant to Clause 2.1. If the inclusion of a Elan Improvement in the
        license of Elan Intellectual Property is restricted or limited by a
        third party agreement, Elan shall use reasonable commercial efforts to
        minimize any such restriction or limitation.

        For the avoidance of doubt, any enhancement or improvement relating to
        both the System and the Isis Know-How or Isis Patents developed by any
        of the parties individually or jointly pursuant to the Project or by a
        third party (under contract with HepaSense) pursuant to the Project
        shall, except as limited by agreements with third parties, be deemed to
        be HepaSense Intellectual Property.

        "ELAN INTELLECTUAL PROPERTY" shall mean the Elan Know-How, the Elan
        Patents and the Elan Improvements. For the avoidance of doubt, Elan
        Intellectual Property shall exclude inventions, patents and know-how
        owned, licensed or controlled by Targon Corporation, Axogen Limited and
        Neuralab Limited and by all Affiliates or subsidiaries (present or
        future) of Elan, plc. within the division of Elan, plc carrying on
        business as Elan Pharmaceuticals which incorporates, inter alia, EPIL
        (to the extent that EPIL is the owner of patents, know-how or other
        intellectual property or technology invented and/or developed within the
        division of Elan, plc carrying on business as Elan Pharmaceuticals),
        Athena Neurosciences, Inc., Elan Pharmaceuticals, Inc., Elan
        Diagnostics, Carnrick Laboratories, and Elan Europe Limited.

        "ELAN KNOW-HOW" shall mean any and all rights owned, licensed or
        controlled by Elan to any scientific, pharmaceutical or technical
        information, data, discovery, invention (whether patentable or not),
        technique, process, procedure, system, formulation or design relating to
        the System that is not generally known to the public.

        "ELAN LICENSE" shall have the meaning set forth in Clause 2.1 hereof.

        "ELAN PATENTS" shall mean any and all patents and patent applications as
        set forth in Schedule 1, and all rights therein, and including all
        extensions, continuations, continuations-in-part, divisionals,
        patents-of-additions, re-examinations, re-issues, supplementary
        protection certificates and foreign counterparts thereto owned by or
        licensed to Elan containing claims relating to the System.



                                       5
<PAGE>   6

        "EPIL" shall mean Elan Pharma International Limited, a private limited
        company incorporated under the laws of Ireland, that is wholly owned by
        Elan, plc.

        "FIELD" shall mean the administration of the Designated Oligonucleotide
        by all routes of administration. Upon nomination by Isis and acceptance
        by Elan of an Additional Oligonucleotide, the parties shall amend the
        definition of the Field to include the administration of the Additional
        Oligonucleotide by such means of administration as agreed to by the
        parties.

        Notwithstanding the foregoing, the Parties acknowledge and agree that,
        pursuant to existing agreement among Elan, Isis and Orasense Ltd, both
        Isis and Elan and their Affiliates may be subject to certain
        restrictions concerning the development and commercialization of
        products comprised upon the oral administration of any Oligonucleotide.

        "FINANCIAL YEAR" shall mean each year commencing on 1 January (or in the
        case of the first Financial Year, the Effective Date) and expiring on 31
        December of each year.

        "HCV" shall mean the hepatitis C virus.

        "HEPASENSE INTELLECTUAL PROPERTY" shall mean HepaSense Patents and
        HepaSense Know How. In addition to the foregoing, any enhancement or
        improvement relating to both the System and the Isis Know-How or Isis
        Patents developed by any of the Parties individually or jointly pursuant
        to the Project or by a third party (under contract with HepaSense)
        pursuant to the Project shall, except as limited by agreements with
        third parties, be deemed to be HepaSense Intellectual Property.

        "HEPASENSE KNOW-HOW" shall mean any and all rights owned, licensed or
        controlled by HepaSense to any scientific, pharmaceutical or technical
        information, data, discovery, invention (whether patentable or not),
        technique, process, procedure, system, formulation or design that is not
        generally known to the public arising out of the conduct of the Project
        by any person that does not constitute Elan Improvements or Isis
        Improvements.

        "HEPASENSE PATENTS" shall mean any and all patents and patent
        applications arising out of the conduct of the Project by any person
        that does not constitute Elan Improvements or Isis Improvements and all
        rights therein, and including all extensions, continuations,
        continuations-in-part, divisionals, patents-of-additions,
        re-examinations, re-issues, supplementary protection certificates and
        foreign counterparts thereto owned or licensed to HepaSense.

        "IN MARKET" shall mean the sale of the Product and Additional Products
        in the Territory by HepaSense or its Affiliates, or where applicable by
        a permitted sub-licensee, to an unaffiliated third party, such as (i)
        the end-user consumer of the Product (ii) a wholesaler, managed care
        organization, hospital or pharmacy or other third party who effects the
        final commercial sale to the end-user consumer of the Product, and shall
        exclude the transfer pricing of the Product(s) by Elan to an Affiliate



                                       6
<PAGE>   7

        or a sub-licensee.

        "ISIS" shall mean Isis Pharmaceuticals, Inc. and its Affiliates,
        excluding HepaSense.

        "ISIS INTELLECTUAL PROPERTY" shall mean the Isis Know-How, the Isis
        Patents and the Isis Improvements, as such terms are defined in the Isis
        License Agreement.

        "ISIS LICENSE" shall mean have the meaning set forth in Clause 2.1 of
        the Isis License Agreement.

        "ISIS LICENSE AGREEMENT" shall mean that certain license agreement, of
        even date herewith, entered into between Isis and HepaSense.

        "ISIS PATENTS" shall have the meaning as such term is defined in the
        Isis License Agreement.

        "ISIS IMPROVEMENTS" shall have the meaning as such term is defined in
        the Isis License Agreement.

        "ISIS 14803" shall mean the Oligonucleotide described in Exhibit A to
        the Isis License Agreement.

        "JDOA" shall mean that certain joint development and operating
        agreement, of even date herewith, by and between Elan, Isis, EIS and
        HepaSense.

        "LICENSED TECHNOLOGIES" shall mean the Elan Intellectual Property and
        the Isis Intellectual Property.

        "LICENSES" shall mean the Elan License and the Isis License.

        "NET SALES" shall mean that sum determined by deducting the following
        deductions from the aggregate gross In Market sales proceeds billed for
        the Products by HepaSense or, its Affiliate or a permitted sub-licensee,
        as the case may be:

        (i)   transportation charges or allowances, if any, included in such
              price;

        (ii)  trade, quantity or cash discounts, broker's or agent's
              commissions, if any, allowed or paid;

        (iii) credits or allowances, if any, given or made on account of price
              adjustments, returns, promotional discounts, rebates and any and
              all federal, state or local government rebates whether in
              existence now or enacted at any time during the term of the
              Licenses;

        (iv)  any tax, excise or governmental charge upon or measured by the
              sale, transportation, delivery or use of the Products; and

        (v)   reasonable samples, materials for clinical studies and reasonable



                                       7
<PAGE>   8

              compassionate programs.

        Net Sales shall also include the amount or fair market value of all
        other consideration received by HepaSense or its Affiliates or
        sublicensees in respect of Products and Additional Products, whether
        such consideration is payment in kind, exchange or another form. If a
        Product or Additional Product is provided to an third party by HepaSense
        or its Affiliates or sublicensees without charge or provision of invoice
        and used by such third party, then HepaSense or its Affiliates or
        sublicensees shall be treated as having sold such Product or Additional
        Product to such third party for an amount equal to the fair market value
        of such Product. Sales between or among HepaSense and its respective
        Affiliates or authorized licensees shall be excluded from the
        computation of Net Sales. A "sale" of a Product or Additional Product is
        deemed to occur upon the earlier of invoicing, shipment or transfer of
        title in the Product or the Additional Product to an third party. For
        avoidance of doubt, Net Sales shall include royalties received by
        HepaSense or its Affiliates from any third party in respect of Products
        and Additional Products.

        "OLIGONUCLEOTIDE" shall mean any single stranded, [ * ] oligonucleotide
        including those [ * ] used as a human therapeutic and/or prophylactic
        compound containing between [ * ] nucleotides and/or nucleosides
        including oligonucleotide analogs which may include [ * ]. For purposes
        of this agreement, Oligonucleotide shall specifically exclude
        oligonucleotides used in gene therapy except [ * ] an oligonucleotide,
        oligonucleotides used as [ * ] or oligonucleotides used as adjuvants.
        Oligonucleotide shall also specifically exclude polymers in which the
        linkages are amide based, such as peptides and proteins and shall also
        exclude [ * ].

        "ORAL" shall mean administration by way of the mouth for the purpose of
        topical or systemic delivery by way of the alimentary canal.

        "PARTY" shall mean Elan or HepaSense, as the case may be, and "PARTIES"
        shall mean Elan and HepaSense.

        "PRIMARY TECHNOLOGICAL COMPETITOR OF ELAN" shall mean those entities
        listed on Schedule 2A hereto.

        "PRODUCT" shall mean the pharmaceutical formulation incorporating the
        Designated Oligonucleotide for [ * ] within the Field, including,
        without limitation, the incorporation of the Designated Oligonucleotide
        within or packaged with the System.

        "PROJECT" shall mean all activities as undertaken by Elan, Isis and
        HepaSense in order to develop the Products



                                       8

                                               *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>   9

        "SUBSTITUTE OLIGONUCLEOTIDE" shall have the meaning set forth in Clause
        2.2 hereof;

        "SYSTEM" shall mean an ambulatory drug delivery system for direct
        attachment to the body of a patient having a flexible diaphragm drug
        reservoir, which is capable of delivering factory pre-programmed
        continuous amounts of drug upon activation as disclosed and described in
        the Elan Patents set forth in Schedule 1 attached hereto.

        "TECHNOLOGICAL COMPETITOR OF ELAN" shall mean a company, corporation or
        person listed in Schedule 2B and successors thereof or any additional
        broad-based technological competitor of Elan added to such Schedule from
        time to time upon mutual agreement of the Parties.

        "TERM" shall have the meaning set forth in Clause 8.

        "TERRITORY" shall mean all the countries of the world.

        "UNITED STATES DOLLAR" and "US$" shall mean the lawful currency for the
        time being of the United States of America.

1.2     In this Agreement:

        1.2.1  The singular includes the plural and vice versa, and the
               masculine includes the feminine and vice versa and the neuter
               includes the masculine and the feminine.

        1.2.2  Any reference to a Clause or Schedule shall, unless otherwise
               specifically provided, be to a Clause or Schedule of this
               Agreement.

        1.2.3  The headings of this Agreement are for ease of reference only and
               shall not affect its construction or interpretation.


2       ELAN LICENSE TO HEPASENSE

2.1     Elan hereby grants to HepaSense for the Term an exclusive license
        (including the limited right to grant sublicenses under Clause 10 of the
        JDOA) (the "Elan License") to the Elan Intellectual Property to make,
        have made, import, use, offer for sale and sell the Product in the Field
        in the Territory, subject to any contractual obligations that Elan has
        as of the Effective Date, including but not limited to the Development
        License and Supply Agreement dated 26 July 1999 between EPIL and Merck
        Corporation and the License Agreement dated as of April 20, 1999 between
        Orasense Ltd, and Elan Pharmaceutical Technologies, and the
        Manufacturing Agreement dated June 11, 1999 among Elan Corporation plc,
        EPIL and MiniMed. Upon nomination by Isis and acceptance by Elan of an
        Additional Oligonucleotide, the Parties shall negotiate in good faith
        how the Additional Product based upon such Additional Oligonucleotide
        should be developed and commercialized, whether a license should be
        granted to Isis or HepaSense or otherwise, (i) the terms of a grant of a
        new license of Elan Intellectual Property for use with the Additional
        Oligonucleotide or (ii) the



                                       9
<PAGE>   10

        terms for amendment of the Elan License to include the license of the
        Elan Intellectual Property to make, have made, import, use, offer for
        sale and sell Additional Products based upon the Additional
        Oligonucleotide in the Field in the Territory, subject to any
        contractual obligations that Elan has as of the date of such agreement.

2.2     Elan hereby confirms that no financial or compensation obligations are
        in effect on the date hereof between Elan and an unaffiliated third
        party relating to the System for use in the Field.

        To the extent royalty or other compensation obligations payable to third
        parties with respect to the Elan Intellectual Property would be
        triggered by use of such Elan Intellectual Property in connection with
        the Project, Elan shall inform HepaSense and Isis of such royalty or
        compensation obligations. If HepaSense and Isis agree to utilize such
        Elan Intellectual Property in connection with the Project, HepaSense
        will be responsible for the payment of such royalty or other
        compensation obligations relating thereto.

2.3     Isis shall be a third party beneficiary under this Agreement and shall
        have the right to cause HepaSense to enforce HepaSense's rights under
        this Agreement against Elan.

2.4     Notwithstanding anything contained in this Agreement to the contrary,
        Elan shall have the right outside the Field and subject to the
        non-competition provisions of Clause 4 to exploit and grant licenses and
        sublicenses of the Elan Intellectual Property.

        For the avoidance of doubt, HepaSense shall have no right to use the
        Elan Intellectual Property outside the Field.

2.5     Except as provided in Clause 10 in the JDOA, HepaSense shall not be
        permitted to assign, license or sublicense any of its rights under the
        Elan Intellectual Property and/or the HepaSense Intellectual Property
        without the prior written consent of Elan.

2.6     Any agreement between HepaSense and any permitted third party for the
        development or exploitation of the Elan Intellectual Property shall
        require such third party to maintain the confidentiality of all
        information concerning the Elan Intellectual Property and shall provide
        that any Elan Improvements shall belong to Elan and shall permit an
        assignment of rights by HepaSense to Elan in accordance with the terms
        of this Agreement.

        Insofar as the obligations owed by HepaSense to Elan are concerned,
        HepaSense shall remain responsible for all acts and omissions of any
        permitted sub-licensee, including Isis, as if they were acts and
        omissions by HepaSense.


3       INTELLECTUAL PROPERTY



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3.1     OWNERSHIP OF INTELLECTUAL PROPERTY:

        3.1.1  HepaSense shall own the HepaSense Intellectual Property.

        3.1.2  Elan shall own the Elan Intellectual Property.


4       NON-COMPETITION/AFTER ACQUIRED TECHNOLOGY

4.1     Subject to Clause 4.2 hereof and Clause 14 of the JDOA, Elan, alone or
        in conjunction with a third party, shall not, for a period of [ * ]
        years from the Effective Date, develop or commercialize the Designated
        Oligonucleotide or any other Oligonucleotide designated towards the
        treatment of HCV, subject to (a) the Development, License and Supply
        Agreement dated 26 July 1999 between EPIL and Merck Corporation, (b) the
        Subscription, Joint Development and Operating Agreement, dated July 21,
        1999, between Elan, plc, EIS, Targeted Genetics Corporation and Targeted
        Genetics HepaSense, Ltd. and (c) the License Agreement, dated as of July
        20, 1999, between Targeted Genetics HepaSense, Ltd. and Elan, plc.

        Notwithstanding anything to the contrary contained herein, the
        provisions of Clause 4.1 shall only act as a restriction upon Affiliates
        and subsidiaries of Elan, plc. carrying on business as Elan
        Pharmaceutical Technologies and, except for the development and
        commercialization of any Oligonucleotide designated towards the
        treatment of HCV administered by the System during such [* ] year
        period, shall not act as a restriction upon, nor in any way affect,
        Targon Corporation, Axogen Limited, Neuralab Limited, Affiliates and
        subsidiaries (present or future) within the division of Elan, plc
        carrying on business as Elan Pharmaceuticals which incorporates, inter
        alia, EPIL (to the extent that EPIL is the owner of patents, know-how or
        other intellectual property or technology invented and/or developed
        within the division of Elan, plc carrying on business as Elan
        Pharmaceuticals), Athena Neurosciences, Inc., Elan Pharmaceuticals,
        Inc., Elan Diagnostics, Carnrick Laboratories, and Elan Europe Limited.

4.2     If, after the Effective Date, Elan obtains or licenses from a third
        party know-how or patent rights relating to the System in the Field, or
        acquires or merges with a third party entity that has know-how or patent
        rights relating to the System in the Field, Elan shall offer to license
        such know-how and patent rights to HepaSense (subject to existing
        contractual obligations), on commercially reasonable terms on an arm's
        length basis for a reasonable period under the prevailing circumstances.

        If HepaSense determines that HepaSense should not acquire such license,
        Elan shall be free to fully exploit such know-how and patent rights with
        the Elan Intellectual Property then licensed to HepaSense, whether
        inside or outside the Field, and to grant to third parties licenses and
        sublicenses with respect thereto.


5       FINANCIAL PROVISIONS



                                       11

                                               *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>   12

5.1     LICENSE FEE:

        In consideration of the license by Elan to HepaSense of the Elan Patents
        under Clause 2, HepaSense shall pay to Elan a non-refundable license fee
        of US [ * ] (the "LICENSE FEE"), the receipt of which is hereby
        acknowledged by Elan.

        The License Fee shall not be subject to future performance obligations
        of Elan to HepaSense or Isis and shall not be applicable against future
        services provided by Elan to HepaSense or Isis. The license fee terms as
        set out in Clause 5.1 of this Agreement are independent and distinct
        from the other terms of this Agreement.


5.2     MILESTONE AND ROYALTY PAYMENTS RELATING TO PRODUCTS: All net proceeds
        derived by HepaSense from the Product shall be allocated as additional
        royalties in proportion to [ * ], as more particularly set forth below.

                      (a) Milestone Payments - If any third party shall make
           milestone payments (e.g., for NDA filing, approvals, etc.) to
           HepaSense, HepaSense shall pay to Elan and Isis an additional royalty
           in the amount of such milestone payments [ * ].

                      (b) Royalties payable to Elan and Isis Upon sales of the
           Product - Elan and Isis shall receive royalties based on In-market
           Net Sales of the Product aggregating [ * ] for sales directly by
           HepaSense or its sublicensees or such other royalty as the Parties
           may negotiate.


5.3     MILESTONE AND ROYALTY PAYMENTS RELATING TO ADDITIONAL PRODUCTS: All net
        proceeds derived by HepaSense from Additional Products shall be
        allocated as additional royalties [ * ], as more particularly set forth
        below. Elan, Isis and HepaSense shall negotiate separate royalty
        payments for Elan (including, without limitation, participation by
        HepaSense and Elan in milestone payments made by independent third
        parties to Isis) for any Additional Products at commercially reasonable
        rates on arms length terms between unrelated parties; provided, however,
        that HepaSense or Isis, as the case may be, shall not be obligated for
        the payment of an additional one-time access license fee.

5.4     Payment of royalties pursuant to Clause 5.3 shall be made quarterly in
        arrears during each Financial Year within 50 days after the expiry of
        the calendar quarter. The method of payment shall be by wire transfer to
        an account specified by Elan. Each payment made to Elan shall be
        accompanied by a true accounting of all Products sold by HepaSense's
        permitted sublicensees, if any, during such quarter.

        Such accounting shall show, on a country-by-country and
        Product-by-Product basis, Net Sales (and the calculation thereof) and
        each calculation of royalties with respect



                                       12

                                               *CONFIDENTIAL TREATMENT REQUESTED

<PAGE>   13

        thereto, including the calculation of all adjustments and currency
        conversions.

        Any royalties, license fees or other payments due under this Agreement
        to Elan shall be apportioned in accordance with a formula agreed between
        Elan, plc and EPIL.

5.5     HepaSense shall maintain and keep clear, detailed, complete, accurate
        and separate records for a period of 3 years:

        5.5.1  to enable any royalties on Net Sales that shall have accrued
               hereunder to be determined; and

        5.5.2  to enable any deductions made in the Net Sales calculation to be
               determined.

5.6     All payments due hereunder shall be made in United States Dollars.
        Payments due on Net Sales of any Product for each calendar quarter made
        in a currency other than United States Dollars shall first be calculated
        in the foreign currency and then converted to United States Dollars on
        the basis of the exchange rate in effect on the last working day for
        such quarter for the purchase of United States Dollars with such foreign
        currency quoted in the Wall Street Journal (or comparable publication if
        not quoted in the Wall Street Journal) with respect to the currency of
        the country of origin of such payment, determined by averaging the rates
        so quoted on each business day of such quarter.

5.7     If, at any time, legal restrictions in the Territory prevent the prompt
        payment when due of royalties or any portion thereof, the Parties shall
        meet to discuss suitable and reasonable alternative methods of paying
        Elan the amount of such royalties. In the event that HepaSense is
        prevented from making any payment under this Agreement by virtue of the
        statutes, laws, codes or government regulations of the country from
        which the payment is to be made, then such payments may be paid by
        depositing them in the currency in which they accrue to Elan's account
        in a bank acceptable to Elan in the country the currency of which is
        involved or as otherwise agreed by the Parties.

5.8     Elan and HepaSense agree to co-operate in all respects necessary to take
        advantage of any double taxation agreements or similar agreements as
        may, from time to time, be available.

5.9     Any taxes payable by Elan on any payment made to Elan pursuant to this
        Agreement shall be for the account of Elan. If so required by applicable
        law, any payment made pursuant to this Agreement shall be made by
        HepaSense after deduction of the appropriate withholding tax, in which
        event the Parties shall co-operate to obtain the appropriate tax
        clearance as soon as is practicable. On receipt of such clearance,
        HepaSense shall forthwith arrange payment to Elan of the amount so
        withheld.


6       RIGHT OF INSPECTION AND AUDIT

6.1     Once during each Financial Year, or more often not to exceed quarterly
        as reasonably requested by Elan, HepaSense shall permit Elan or its duly
        authorised representatives,



                                       13
<PAGE>   14

        upon reasonable notice and at any reasonable time during normal business
        hours, to have access to inspect and audit the accounts and records of
        HepaSense and any other book, record, voucher, receipt or invoice
        relating to the calculation of the royalty payments on Net Sales
        submitted to Elan.

        Any such inspection of HepaSense's records shall be at the expense of
        Elan, except that if any such inspection reveals a deficiency in the
        amount of the royalty actually paid to Elan hereunder in any Financial
        Year quarter of 5% or more of the amount of any royalty actually due to
        Elan hereunder, then the expense of such inspection shall be borne
        solely by HepaSense. Any amount of deficiency shall be paid promptly to
        Elan by HepaSense.

        If such inspection reveals a surplus in the amount of royalties actually
        paid to Elan by HepaSense, Elan shall reimburse HepaSense the surplus
        within 15 days after determination.

6.2     In the event of any unresolved dispute regarding any alleged deficiency
        or overpayment of royalty payments hereunder, the matter will be
        referred to an independent firm of chartered accountants chosen by
        agreement of Isis and Elan for a resolution of such dispute. Any
        decision by the said firm of chartered accountants shall be binding on
        the Parties.


 7      REPRESENTATIONS AND WARRANTIES


7.1     Elan represents and warrants to HepaSense and Isis as of the Effective
        Date that, except as set forth on Schedule 3 hereto:

        7.1.1   Elan has the right to grant the Elan License;

        7.1.2   there are no agreements between Elan and any third party that
                conflict with the Elan License;

        7.1.3   the patents and patent applications included in the Elan Patents
                are free and clear of encumbrances and liens;

        7.1.4   to the best of Elan's knowledge, there are no proceedings
                pending or threatened against Elan in connection with the Elan
                Intellectual Property in relation to the Field; and

        7.1.5  the Elan Intellectual Property constitutes all intellectual
               property owned or licensed by Elan that is reasonably applicable
               to the Project as it relates to the System.

7.2     In addition to any other indemnities provided for herein, Elan shall
        indemnify and hold harmless HepaSense and its Affiliates and their
        respective employees, agents, officers and directors from and against
        any claims, losses, liabilities or damages



                                       14
<PAGE>   15

        (including reasonable attorney's fees and expenses) incurred or
        sustained by HepaSense arising out of or in connection with any:

        7.2.1   breach of any representation, covenant, warranty or obligation
                by Elan hereunder; or

        7.2.2   act or omission on the part of Elan or any of its respective
                employees, agents, officers and directors in the performance of
                this Agreement.

7.3     In addition to any other indemnities provided for herein, HepaSense
        shall indemnify and hold harmless Elan and its Affiliates and their
        respective employees, agents, officers and directors from and against
        any claims, losses, liabilities or damages (including reasonable
        attorney's fees and expenses) incurred or sustained by Elan arising out
        of or in connection with any:

        7.3.1   breach of any representation, covenant, warranty or obligation
                by HepaSense hereunder; or

        7.3.2   act or omission on the part of HepaSense or any of its agents or
                employees in the performance of this Agreement.

7.4     The Party seeking an indemnity shall:

        7.4.1   fully and promptly notify the other Party of any claim or
                proceeding, or threatened claim or proceeding;

        7.4.2   permit the indemnifying Party to take full care and control of
                such claim or proceeding;

        7.4.3   co-operate in the investigation and defence of such claim or
                proceeding;

        7.4.4   not compromise or otherwise settle any such claim or proceeding
                without the prior written consent of the other Party, which
                consent shall not be unreasonably withheld conditioned or
                delayed; and

        7.4.5   take all reasonable steps to mitigate any loss or liability in
                respect of any such claim or proceeding.

7.5     EXCEPT AS SET FORTH IN THIS CLAUSE 7, ELAN IS GRANTING THE LICENSES
        HEREUNDER ON AN "AS IS" BASIS WITHOUT REPRESENTATION OR WARRANTY WHETHER
        EXPRESS OR IMPLIED INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS
        FOR A PARTICULAR PURPOSE, OR INFRINGEMENT OF THIRD PARTY RIGHTS, AND ALL
        SUCH WARRANTIES ARE EXPRESSLY DISCLAIMED.

7.6     NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, ELAN AND
        HEPASENSE SHALL NOT BE LIABLE TO THE



                                       15
<PAGE>   16

        OTHER BY REASON OF ANY REPRESENTATION OR WARRANTY, CONDITION OR OTHER
        TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE EXPRESS TERMS OF THIS
        AGREEMENT, FOR ANY CONSEQUENTIAL, SPECIAL OR INCIDENTAL OR PUNITIVE LOSS
        OR DAMAGE (WHETHER FOR LOSS OF PROFITS OR OTHERWISE) AND WHETHER
        OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR EMPLOYEES
        OR AGENTS OR OTHERWISE.


8.      TERM AND TERMINATION

8.1     On a product by product basis, subject to the provisions of Clause 10
        and 11, the term of the Licenses granted hereunder with respect to a
        Product and/or Additional Product in each country in the Territory (the
        "TERM") shall be the greater of:

        8.1.1   [ * ] years from the date of the first commercial sale of the
                Product or Additional Products; or

        8.1.2   the life of the patent rights utilized in the Product or
                Additional Products or upon which the Product or Additional
                Product is based.

8.2     If either Party commits a Relevant Event, the other Party shall have, in
        addition to all other legal and equitable rights and remedies hereunder,
        the right to terminate this Agreement upon 30 days' prior written notice
        to the defaulting Party.

8.3     For the purpose of this Clause 8, a "RELEVANT EVENT" is committed or
        suffered by a Party if:

        8.3.1   it commits a material breach of its obligations under this
                Agreement or the JDOA and such breach (i) is not capable of
                being cured or (ii) is capable of being cured the breaching
                Party fails to remedy it within 60 days of being specifically
                required in writing to do so by the other Party; provided, that
                if the breaching Party has proposed a course of action to
                rectify the breach and is acting in good faith to rectify same
                but has not cured the breach by the 60th day, such period shall
                be extended by such period as is reasonably necessary to permit
                the breach to be rectified;

        8.3.2   a distress, execution, sequestration or other process is levied
                or enforced upon or sued out against a material part of its
                property which is not discharged or challenged within 30 days;

        8.3.3   it is unable to pay its debts in the normal course of business;

        8.3.4   it ceases wholly or substantially to carry on its business,
                otherwise than for the purpose of a reconstruction or
                amalgamation, without the prior written consent of the other
                Party (such consent not to be unreasonably withheld);



                                       16

                                               *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>   17

        8.3.5   the appointment of a liquidator, receiver, administrator,
                examiner, trustee or similar officer of such Party or over all
                or substantially all of its assets under the law of any
                applicable jurisdiction, including without limitation, the
                United States of America, Bermuda or Ireland;

        8.3.6   an application or petition for bankruptcy, corporate
                re-organisation, composition, administration, examination,
                arrangement or any other procedure similar to any of the
                foregoing under the law of any applicable jurisdiction,
                including without limitation, the United States of America,
                Bermuda or Ireland, is filed, and is not discharged within 60
                days, or a Party applies for or consents to the appointment of a
                receiver, administrator, examiner or similar officer of it or of
                all or a material part of its assets, rights or revenues or the
                assets and/or the business of a Party are for any reason seized,
                confiscated or condemned.

8.4     In the event that a Competitive Change of Control Event shall occur, at
        the sole option of Elan and upon written notice to Isis and HepaSense,
        the Elan License shall be immediately terminated. Upon written notice
        from Isis to Elan of a proposed Competitive Change of Control Event or
        the occurrence of a Competitive Change of Control Event, Elan shall have
        thirty (30) days from such notice to Isis to provide written notice to
        Isis as to whether it intends to terminate the Elan License. In the
        event Elan does not provide written notice to Isis during such thirty
        (30) day period of its intention to terminate the Elan License, such
        termination right shall be deemed waived with respect to such
        occurrence.

8.5     Upon expiration or termination of the Agreement:

        8.5.1.  any sums that were due from HepaSense to Elan on Net Sales in
                the Territory or in such particular country or countries in the
                Territory (as the case may be) prior to the expiration or
                termination of this Agreement as set forth herein shall be paid
                in full within 60 days after the expiration or termination of
                this Agreement for the Territory or for such particular country
                or countries in the Territory (as the case may be);

        8.5.2   any provisions that expressly survive termination or expiration
                of this Agreement, including without limitation this Clause 8,
                shall remain in full force and effect;

        8.5.3   all representations, warranties and indemnities shall insofar as
                are appropriate remain in full force and effect;

        8.5.4   the rights of inspection and audit set out in Clause 6 shall
                continue in force for a period of one year; and

        8.5.5   all rights and licenses granted pursuant to this Agreement and
                to the Elan Intellectual Property pursuant to the JDOA
                (including the rights of HepaSense pursuant to Clause 11 of the
                JDOA) shall cease for the Territory or for such particular
                country or countries in the Territory (as the case may be) and
                shall



                                       17
<PAGE>   18

                revert to or be transferred to Elan, and HepaSense shall not
                thereafter use in the Territory or in such particular country or
                countries in the Territory (as the case may be) any rights
                covered by this Agreement;

        8.5.6   subject to Clause 8.5.7 and to such license, if any, granted by
                HepaSense to Elan pursuant to the provisions of Clause 10 of the
                JDOA, all rights to HepaSense Intellectual Property shall be
                transferred to and jointly owned by Isis and Elan but may not be
                exploited by both Elan and Isis, unless otherwise agreed by the
                unanimous vote of the Management Committee, and may only be
                exploited by either Elan and Isis pursuant to written consent
                from the other Party.

                In the event of a dispute arising pursuant to this Clause 8.5.6,
                Elan and Isis agree to negotiate in good faith on the course of
                action to be taken with respect to determining their respective
                entitlements pursuant to this Clause 8.5.6; and

        8.5.7   the rights of permitted third party sub-licensees in and to the
                Elan Intellectual Property shall survive the termination of the
                license and sublicense agreements granting said intellectual
                property rights to HepaSense; and HepaSense, Elan and Isis shall
                in good faith agree upon the form most advantageous to Elan and
                Isis in which the rights of HepaSense under any such licenses
                and sublicenses are to be held (which form may include
                continuation of HepaSense solely as the holder of such licenses
                or assignment of such rights to a third party or parties,
                including an assignment to both Elan and Isis).

                Any sublicense agreement between HepaSense and such permitted
                sublicensee shall permit an assignment of rights by HepaSense
                and shall contain appropriate confidentiality provisions.

9       CONFIDENTIAL INFORMATION

9.1     The Parties agree that it will be necessary, from time to time, to
        disclose to each other confidential and proprietary information,
        including without limitation, inventions, works of authorship, trade
        secrets, specifications, designs, data, know-how and other proprietary
        information relating to the Field, the Products, processes, services and
        business of the disclosing Party.

        The foregoing shall be referred to collectively as "CONFIDENTIAL
        INFORMATION".

9.2     Any Confidential Information disclosed by one Party to another Party
        shall be used by the receiving Party exclusively for the purposes of
        fulfilling the receiving Party's obligations under this Agreement and
        the JDOA and for no other purpose.

9.3     Each Party shall disclose Confidential Information of the other Party
        only to those employees, representatives and agents requiring knowledge
        thereof in connection with fulfilling the Party's obligations under this
        Agreement. Each Party further agrees to inform all such employees,
        representatives and agents of the terms and provisions of



                                       18
<PAGE>   19

        this Agreement and their duties hereunder and to obtain their agreement
        hereto as a condition of receiving Confidential Information. Each Party
        shall exercise the same standard of care as it would itself exercise in
        relation to its own confidential information (but in no event less than
        a reasonable standard of care) to protect and preserve the proprietary
        and confidential nature of the Confidential Information disclosed to it
        by the other Party. Each Party shall, upon request of the other Party,
        return all documents and any copies thereof containing Confidential
        Information belonging to, or disclosed by, such other Party.

9.4     Any breach of this Clause 9 by any person informed by one of the Parties
        is considered a breach by the Party itself.

9.5     Confidential Information shall not be deemed to include:

        9.5.1   information that is in the public domain;

        9.5.2   information which is made public through no breach of this
                Agreement;

        9.5.3   information which is independently developed by a Party as
                evidenced by such Party's records;

        9.5.4   information that becomes available to a Party on a
                non-confidential basis, whether directly or indirectly, from a
                source other than a Party, which source did not acquire this
                information on a confidential basis; or

        9.5.5   information which the receiving Party is required to disclose
                pursuant to:

                (i)     a valid order of a court or other governmental body; or

                (ii)    any other requirement of law;

                provided that if the receiving Party becomes legally required to
                disclose any Confidential Information, the receiving Party shall
                give the disclosing Party prompt notice of such fact so that the
                disclosing Party may obtain a protective order or other
                appropriate remedy concerning any such disclosure. The receiving
                Party shall fully co-operate with the disclosing Party in
                connection with the disclosing Party's efforts to obtain any
                such order or other remedy. If any such order or other remedy
                does not fully preclude disclosure, the receiving Party shall
                make such disclosure only to the extent that such disclosure is
                legally required.

9.6     The provisions relating to confidentiality in this Clause 9 shall remain
        in effect during the term of this Agreement, and for a period of 7 years
        following the expiration or earlier termination of this Agreement.

9.7     The Parties agree that the obligations of this Clause 9 are necessary
        and reasonable in order to protect the Parties' respective businesses,
        and each Party agrees that monetary damages would be inadequate to
        compensate a Party for any breach by the



                                       19
<PAGE>   20

        other Party of its covenants and agreements set forth herein.

        Accordingly, the Parties agree that any such violation or threatened
        violation shall cause irreparable injury to a Party and that, in
        addition to any other remedies that may be available, in law and equity
        or otherwise, each Party shall be entitled to obtain injunctive relief
        against the threatened breach of the provisions of this Clause 9, or a
        continuation of any such breach by the other Party, specific performance
        and other equitable relief to redress such breach together with its
        damages and reasonable counsel fees and expenses to enforce its rights
        hereunder, without the necessity of proving actual or express damages.

9.8     For the avoidance of doubt, all Confidential Information of HepaSense
        received by Elan hereunder shall not be disclosed by Elan to its
        Affiliates and/or subsidiaries (present or future) within the division
        of Elan Pharmaceuticals Corporation, plc. carrying on business as Elan
        Pharmaceuticals (which incorporates, inter alia, Athena Neurosciences,
        Inc., Elan Pharmaceuticals, Inc., Elan Diagnostics, Carnrick
        Laboratories, and Elan Europe Limited) and Targon Corporation.

10      GOVERNING LAW AND DISPUTE RESOLUTION

10.1    This Agreement shall be governed by and construed in accordance with the
        laws of the State of New York without regard to principles relating to
        conflicts of laws.

10.2    The Parties will attempt in good faith to resolve any dispute arising
        out of or relating to this Agreement promptly by negotiation between
        executives of the Parties. In the event that such negotiations do not
        result in a mutually acceptable resolution, the Parties agree to
        consider other dispute resolution mechanisms including mediation.

10.3    Any dispute under this Agreement which is not settled by mutual consent
        under Clause 10.2 will be subject to resolution in accordance with
        Clauses 19 and 24.8 of the JDOA, which is incorporated by reference and
        shall for such purposes survive termination of the JDOA.

11      IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE

        Neither Elan nor HepaSense shall be liable for delay in the performance
        of any of its obligations hereunder if such delay results from causes
        beyond its reasonable control, including, without limitation, acts of
        God, fires, strikes, acts of war, intervention of a government
        authority, but any such delay or failure shall be remedied by such Party
        as soon as practicable.

12      ASSIGNMENT

        This Agreement may not be assigned by either Party without the prior
        written consent of the other, save that either Party may assign this
        Agreement to its Affiliates or subsidiaries without such prior written
        consent [and that Elan may assign this Agreement to any off-balance
        sheet special purpose entity established by Elan or EIS without such
        prior written consent;] provided that such assignment does not have any



                                       20
<PAGE>   21

        adverse tax consequences on the other Party.

13      NOTICES

13.1    Any notice to be given under this Agreement shall be sent in writing in
        English by registered airmail or telefaxed to the following addresses:

        If to HepaSense at:

        102 St. James Court
        Clarendon House
        Church St.
        Hamilton, Bermuda
        Attention: Secretary
        Telephone: 441-295-1422
        Fax:       441-292-4720

        with a copy to Elan, plc and EPIL at:

        Elan Corporation, plc
        Elan Pharma International Limited
        c/o Elan International Services, Ltd.
        102 St. James Court
        Flatts,
        Smiths FL04
        Bermuda
        Attention: Secretary
        Telephone: 441 292 9169
        Fax:       441 292 2224

        with a copy to:

        Isis Pharmaceuticals, Inc.
        2292 Faraday Avenue
        Carlsbad, California 92008
        Attention: B. Lynne Parshall, Esq.
        Telephone: (760) 603-2460
        Telefax:   (760) 931-9639

        If to Isis at:

        Isis Pharmaceuticals, Inc.
        2292 Faraday Avenue
        Carlsbad, California 92008
        Attention: B. Lynne Parshall, Esq.
        Telephone: (760) 603-2460
        Telefax:   (760) 931-9639



                                       21
<PAGE>   22

        If to Elan, plc and/or EPIL at:

        Elan Corporation, plc
        Elan Pharma International Limited
        C/o Elan International Services, Ltd.
        102 St. James Court
        Flatts,
        Smiths FL04
        Bermuda
        Attention: Secretary
        Telephone: 441 292 9169
        Fax:       441 292 2224

        or to such other address(es) and telefax numbers as may from time to
        time be notified by either Party to the other hereunder.

13.2    Any notice sent by mail shall be deemed to have been delivered within
        seven 7 working days after dispatch and any notice sent by telex or
        telefax shall be deemed to have been delivered within twenty 24 hours of
        the time of the dispatch. Notice of change of address shall be effective
        upon receipt.


14      MISCELLANEOUS

14.1    WAIVER:

        No waiver of any right under this Agreement shall be deemed effective
        unless contained in a written document signed by the Party charged with
        such waiver, and no waiver of any breach or failure to perform shall be
        deemed to be a waiver of any other breach or failure to perform or of
        any other right arising under this Agreement.

14.2    SEVERABILITY:

        If any provision in this Agreement is agreed by the Parties to be, or is
        deemed to be, or becomes invalid, illegal, void or unenforceable under
        any law that is applicable hereto:

        14.2.1  such provision will be deemed amended to conform to applicable
                laws so as to be valid and enforceable; or

        14.2.2  if it cannot be so amended without materially altering the
                intention of the Parties, it will be deleted, with effect from
                the date of such agreement or such earlier date as the Parties
                may agree, and the validity, legality and enforceability of the
                remaining provisions of this Agreement shall not be impaired or
                affected in any way.

14.3    FURTHER ASSURANCES:



                                       22
<PAGE>   23

        At the request of any of the Parties, the other Party or Parties shall
        (and shall use reasonable efforts to procure that any other necessary
        parties shall) execute and perform all such documents, acts and things
        as may reasonably be required subsequent to the signing of this
        Agreement for assuring to or vesting in the requesting Party the full
        benefit of the terms hereof.

14.4    SUCCESSORS:

        This Agreement shall be binding upon and enure to the benefit of the
        Parties hereto, their successors and permitted assigns.

14.5    NO EFFECT ON OTHER AGREEMENTS/CONFLICT:

        No provision of this Agreement shall be construed so as to negate,
        modify or affect in any way the provisions of any other agreement
        between the Parties unless specifically referred to, and solely to the
        extent provided herein.

        In the event of a conflict between the provisions of this Agreement and
        the provisions of the JDOA, the terms of the JDOA shall prevail unless
        this Agreement specifically provides otherwise.

14.6    AMENDMENTS:

        No amendment, modification or addition hereto shall be effective or
        binding on any Party unless set forth in writing and executed by a duly
        authorised representative of each Party.

14.7    COUNTERPARTS:

        This Agreement may be executed in any number of counterparts, each of
        which when so executed shall be deemed to be an original and all of
        which when taken together shall constitute this Agreement.

14.8    GOOD FAITH:

        Each Party undertakes to do all things reasonably within its power which
        are necessary or desirable to give effect to the spirit and intent of
        this Agreement.

14.9    NO RELIANCE:

        Each Party hereby acknowledges that in entering into this Agreement it
        has not relied on any representation or warranty save as expressly set
        out herein or in any document referred to herein.

14.10   RELATIONSHIP OF THE PARTIES:

        Nothing contained in this Agreement is intended or is to be construed to
        constitute



                                       23
<PAGE>   24

        Elan and HepaSense as partners, or Elan as an employee of HepaSense, or
        HepaSense as an employee of Elan.

        Neither Party hereto shall have any express or implied right or
        authority to assume or create any obligations on behalf of or in the
        name of the other Party or to bind the other Party to any contract,
        agreement or undertaking with any third party.



                                       24
<PAGE>   25

IN WITNESS WHEREOF the Parties hereto have executed this Agreement.



SIGNED BY:
          -------------------------
for and on behalf of
ELAN CORPORATION, PLC ACTING
THROUGH ITS DIVISION ELAN
PHARMACEUTICAL TECHNOLOGIES


SIGNED BY:
          -------------------------
for and on behalf of
ELAN PHARMA INTERNATIONAL LIMITED



SIGNED BY:
          -------------------------
For and on behalf of
HEPASENSE LTD.



AGREED TO AND ACCEPTED BY

SIGNED BY:
          -------------------------
For and on behalf of ISIS PHARMACEUTICAL, INC.



                                       25
<PAGE>   26

                                   SCHEDULE 1

                                  ELAN PATENTS


                                CONTINUOUS SYSTEM

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
FILE NUMBER        BRIEF DESCRIPTION                             COUNTRY         STATUS
----------------------------------------------------------------------------------------------------------
<S>                <C>                                           <C>             <C>
EMT 13             Original System                               Australia       Granted (693136)
                                                                 Canada          Pending
                                                                 EP              Pending
                                                                 Israel          Granted (111685)
                                                                 Japan           Pending
                                                                 New Zealand     Granted (276485)
                                                                 Taiwan          Granted (079227)
                                                                 United States   2 Granted (5,527,288;
                                                                                 5,848,991); 1 Pending
                                                                 South Africa    Granted (94/9185)
----------------------------------------------------------------------------------------------------------
EMT 19             Medipad-Vial on board, needle on the          Australia       Pending
                   periphery                                     Canada          Pending
                                                                 EP              Pending
                                                                 Ireland         Granted (77523)
                                                                 Japan           Pending
                                                                 Mexico          Pending
                                                                 New Zealand     Pending
                                                                 Norway          Pending
                                                                 Taiwan          Pending
                                                                 United States   Granted (5,814,020)
                                                                 South Korea     Pending
                                                                 South Africa    Granted (96/7502)
----------------------------------------------------------------------------------------------------------
EMT 24             Delivery Needle                               Australia       Pending
                                                                 Canada          Canada
                                                                 EP              Pending
                                                                 Ireland         Granted (80772)
                                                                 Israel          Pending
                                                                 Japan           Pending
                                                                 New Zealand     Pending
                                                                 South Africa    Granted (97/5065)
                                                                 South Korea     Pending
                                                                 Taiwan          Issued (096579)
                                                                 United States   Pending
----------------------------------------------------------------------------------------------------------
EMT 29             Improved Medipad & Filling System             PCT             Pending
                   (pressure adjustmt. valve, 3-position         Argentina       Pending
                   needle)                                       Ireland         Pending
                                                                 Taiwan          Pending
                                                                 United States   Pending
----------------------------------------------------------------------------------------------------------
EMT 33             Improved Method of Packaging a Drug           PCT             Pending
----------------------------------------------------------------------------------------------------------
</TABLE>



                                       26
<PAGE>   27

<TABLE>
<S>                <C>                                           <C>             <C>
----------------------------------------------------------------------------------------------------------
                   Delivery Kit                                  Ireland         Pending
                                                                 South Africa    Issued (98/5188)
                                                                 Taiwan          Pending
                                                                 United States   Pending
----------------------------------------------------------------------------------------------------------
EMT 36             Improved Adhesive System for a Medical        PCT             Pending
                   Device                                        Taiwan          Pending
                                                                 United States   Pending
----------------------------------------------------------------------------------------------------------
EMT41DES           Design of Medipad Housing (3ml)               United States   Granted (D404482)
----------------------------------------------------------------------------------------------------------
EMT 45             Liquid Drug Container                         United States   Pending
----------------------------------------------------------------------------------------------------------
</TABLE>

All countries are initially designated when filing in the European Patent Office
or the Patent Cooperation Treaty, and are then selected during the regional or
national phase.




                                       27
<PAGE>   28

                                   SCHEDULE 2A
                  PRIMARY TECHNOLOGICAL COMPETITORS OF ELAN(1)

                                      [ * ]


                                   SCHEDULE 2B
                      TECHNOLOGICAL COMPETITORS OF ELAN(1)

                                      [ * ]


----------

1.  Including any and all divisions or subsidiaries of the above.



                                       28

                                               *CONFIDENTIAL TREATMENT REQUESTED
<PAGE>   29

                                   SCHEDULE 3

                         ELAN EXCEPTIONS AND DISCLOSURES



                                     [ * .]



                                       29

                                               *CONFIDENTIAL TREATMENT REQUESTED