**EXHIBIT 10.32**

***= Certain confidential information contained in this document, marked byasterisks, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of1934, as amended.

**RELEASE AGREEMENT**

This Release Agreement (“Agreement”),dated and effective as of July 27, 2001 (the “Effective Date”), is by andbetween IntraBiotics Pharmaceuticals, Inc., a Delaware corporation,(“IntraBiotics”), and Diversa Corporation, a Delaware corporation (“Diversa,”and, together with IntraBiotics, the “Parties”).  Defined terms used but not otherwise defined hereunder shall havethe meanings given them in that certain Drug Discovery, Development, and LicenseAgreement, dated as of January 6, 2001, between Diversa and IntraBiotics(“License Agreement”).

**RECITALS**

**             WHEREAS**,Diversa and IntraBiotics entered into the License Agreement as of January 6,2001; and

**             WHEREAS**,Diversa and IntraBiotics entered into that certain binding term sheet (the“Term Sheet”) dated as of June 27, 2001 relating to the termination of theLicense Agreement and the mutual release of the obligations of bothIntraBiotics and Diversa under such License Agreement; and

**             WHEREAS**,the Term Sheet contemplated that the Parties would subsequently execute anddeliver a definitive termination agreement, containing the terms and conditionsset forth in the Term Sheet and other terms and conditions consistent the TermSheet, that would supersede the Term Sheet; and

**             WHEREAS**,the Parties desire to set forth herein the terms governing such definitivetermination agreement.

**             NOW,THEREFORE**, in consideration ofthe mutual covenants set forth in this Agreement, the receipt and sufficiencyof which the Parties hereby acknowledge, the Parties hereby agree as follows:

             1.          **Payments by IntraBiotics to Diversa.**  On     ***    , IntraBiotics paidDiversa the non-refundable, non-creditable sum of                            ***                 ***      .  On                  ***          , IntraBiotics shallpay Diversa the non-refundable, non-creditable sum of                            ***                    viawire transfer in immediately available funds in accordance with the followinginformation:

| Bank  of America     |
|----------------------|
| ***                  |
| ***                  |
| 450  B Street        |
| San  Diego, CA 92101 |

             2.          **Issuance of Warrants to Diversa.**  On the date hereof, IntraBiotics shall issueto Diversa warrants to purchase 700,000 shares of common stock of IntraBioticsof (collectively, the “Warrants”) pursuant to the form of Warrant attached asExhibit A hereto.  The shares ofIntraBiotics’s common stock into which the Warrants are exercisable are subjectto a Registration Rights Agreement between IntraBiotics and Diversa in the formattached as Exhibit B hereto.

             3.          **Ownership of R&D Program Data & Materials.**  Diversa shall solely own all of the data andmaterials generated by the research activities performed by employees andconsultants of Diversa pursuant to the R&D Program.

             4.          **Assignment of IntraBiotics’s Assays to Diversa.**  Diversa shall solely own each and everyprimary, secondary, and tertiary assay used or discussed in the Work Plan,which assays are described in Exhibit C hereto (the “Assays”).  To that end, IntraBiotics hereby assigns toDiversa such right, title in interest in and to the Assays as IntraBiotics mayhave.

             5.          **Mutual Releases.**

                           a.          Diversa Release.  In consideration of the obligations,warranties and representations of Diversa contained hereunder and contingentupon the timely performance by IntraBiotics of its obligations hereunder,Diversa hereby releases, acquits, and forever discharges IntraBiotics, itsparents and subsidiaries, and their officers, directors, agents, servants,employees, attorneys, shareholders, partners, successors, assigns, affiliates,customers, and clients of and from any and all claims liabilities, demands,causes of action, costs, expenses, attorneys’ fees, damages, indemnities andobligations of every kind and nature, in law, equity, or otherwise, known andunknown, suspected and unsuspected, disclosed and undisclosed, arising out ofor in any way related to agreements, acts or conduct at any time prior to thedate of this Term Sheet, including, but not limited to: all such claims anddemands directly or indirectly arising out of or in any way connected with theLicense Agreement; and claims pursuant to any federal, state or local law orcause of action including, but not limited to, tort law; contract law; fraud;defamation; and breach of the implied covenant of good faith and fairdealing.  In giving this release, whichincludes claims which may be unknown to Diversa at present, Diversa herebyacknowledges that it has read and understands Section 1542 of the Civil Code ofthe State of California which reads as follows:

                           “Ageneral release does not extend to claims which the creditor does not know orsuspect to exist in his favor at the time of executing the release, which ifknown by him must have materially affected his settlement with the debtor.”

**                           Diversahereby expressly waives and relinquishes all rights and benefits under Section1542 of the Civil Code of the State of California and any law or legal principleof similar effect in any jurisdiction with respect to claims released hereby.**

                           b.          IntraBiotics Release.  In consideration of the obligations,warranties and representations of IntraBiotics contained hereunder,IntraBiotics hereby releases, acquits, and forever discharges Diversa, itsparents and subsidiaries, and their officers, directors, agents, servants,employees, attorneys, shareholders, partners, successors, assigns, affiliates,customers, and clients of and from any and all claims liabilities, demands,causes of action, costs, expenses, attorneys’ fees, damages, indemnities andobligations of every kind and nature, in law, equity, or otherwise, known andunknown, suspected and unsuspected, disclosed and undisclosed, arising out ofor in any way related to agreements, acts or conduct at any time prior to thedate of this Term Sheet, including, but not limited to: all such claims anddemands directly or indirectly arising out of or in any way connected with theLicense Agreement; and claims pursuant to any federal, state or local law orcause of action including, but not limited to, tort law; contract law; fraud;defamation; and breach of the implied covenant of good faith and fairdealing.  In giving this release, whichincludes claims which may be unknown to IntraBiotics at present, IntraBioticshereby acknowledges that it has read and understands Section 1542 of the CivilCode of the State of California which reads as follows:

                           “Ageneral release does not extend to claims which the creditor does not know orsuspect to exist in his favor at the time of executing the release, which ifknown by him must have materially affected his settlement with the debtor.”

**                           IntraBiotics  hereby expressly waives and relinquishes allrights and benefits under Section 1542 of the Civil Code of the State ofCalifornia and any law or legal principle of similar effect in any jurisdictionwith respect to claims released hereby.**

             6.          **Termination;Survival of Obligations.** Except as set forth herein, the License Agreement is terminated.  Only the confidentiality provisions ofSections 7.1, 7.2, and 7.3 of the License Agreement (and any applicableprovisions of the Confidential Disclosure Agreement between Diversa andIntraBiotics executed on July 17, 2000 that do not contradict the terms ofSections 7.1, 7.2 or 7.3 of the License Agreement) shall survive for a periodof ten (10) years.

             7.          **NoAdmission of Liability.** Diversa and IntraBiotics hereby acknowledge that this is a compromisesettlement of various matters, and that the payments in consideration of thisAgreement shall not be construed to be an admission of any liability orobligation by either party to the other party or to any other personwhomsoever.

             8.          **Publicity;Regulatory Filings.** Diversa and IntraBiotics each acknowledge and agree that neither theTerm Sheet or this Agreement nor the terms contained therein or herein shall beconsidered ether confidential or “Confidential Information” as such term isdefined in the License Agreement; provided, however, that informationregarding the Assays shall be considered Confidential Information under theterms of the License Agreement and, notwithstanding the exception in Section7.3.3 of the License Agreement, IntraBiotics shall have the obligations of aReceiving Party with respect to information regarding the Assays and Diversashall be considered a Disclosing Party with respect to information regardingthe Assays as such terms are defined in the License Agreement.  Accordingly, each of Diversa andIntraBiotics shall be permitted to disclose the existence of the Term Sheet orthis Agreement and the terms thereof or hereof, except disclosures byIntraBiotics with respect to the Assays, in such communications as such partyshall determine in its sole discretion, including, without limitation (i) inone or more press releases and (ii) in one or more filings with the Securitiesand Exchange Commission (or any other governmental agency, such as the FederalTrade Commission, with which the License Agreement, Term Sheet, and/orAgreement is required to be provided or filed by Diversa and/or IntraBiotics);provided, however, that IntraBiotics shall not issue any press releaseregarding the Term Sheet, this Agreement, or the termination of the LicenseAgreement without the express written consent of Diversa to the content of suchpress release.

             9.          **GeneralTerms.**  This Agreementshall be governed by and construed in accordance with the laws of the State ofCalifornia without regard to provisions governing conflicts of law.  This Agreement is not assignable in part orin whole by any party without the prior written consent of the other party;provided, however, that either party may assign this Agreement to itsaffiliates or to a successor by merger or sale of all or substantially all ofits business to which this Agreement relates. The terms of this Agreement shall inure to the benefit of and be bindingupon the parties and their respective successors and assigns.  The terms and conditions of this Agreementconstitute the entire agreement between Diversa and IntraBiotics and supersedeall previous negotiations or agreements, either oral or written, between theparties with respect to the subject matter of this Agreement, including,without limitation, the Term Sheet and the License Agreement.  This Agreement shall not be amended,supplemented or abrogated other than by a written instrument signed by theauthorized representative of each Party. The failure of either Party to enforce at any time any of the provisionsof this Agreement, or any rights in respect of it, or to exercise any electionprovided in it, shall in no way be considered to be a waiver of suchprovisions, rights or elections, and shall in no way affect the validity ofthis Agreement.  If any action at law orin equity is necessary to enforce or interpret the terms of this Agreement, theprevailing party shall be entitled to reasonable attorneys’ fees, costs andnecessary disbursements in addition to any other relief to which such party maybe entitled.  In the event that anyprovision of this Agreement is, for any reason, held to be invalid orunenforceable in any respect, such invalidity or unenforceability shall notaffect any other provision hereof, and the parties shall negotiate in goodfaith to modify this Agreement to preserve (to the extent possible) theiroriginal intent.  Each party warrantsthat it has the authority to enter into this Agreement on the basis of theterms and conditions herein and that it has not made any other agreementinconsistent with its obligations under this Agreement.  This Agreement may be executed in one ormore counterparts, each of which shall be deemed to be an original and all ofwhich taken together shall constitute one and the same agreement.

*(signaturepage follows)*

 

**IN WITNESSWHEREOF****,**the undersigned have duly executed and delivered this Agreement effectiveas of the date first above written.

|   | DIVERSA  CORPORATION                |
|--------|-------------------------------------|
|   |                                |
|   | By:                                 | /s/  KARIN EASTHAM |
|   |                                |  |
|   |                                |
|   | Name:                               | Karin  Eastham |
|   |                                |  |
|   |                                |
|   | Title:                              | Senior Vice President, Finance and  Chief Financial Officer |
|   |                                |  |
|   |                                |
|   | INTRABIOTICS  PHARMACEUTICALS, INC. |
|   |                                |
|   | By:                                 | /s/  KENNETH J. KELLEY |
|   |                                |  |
|   |                                |
|   | Name:                               | Kenneth J. Kelley |
|   |                                |  |
|   |                                |
|   | Title:                              | President and Chief Executive Officer |
|   |                                |  |

**Exhibit A**

**Warrant**

**ExhibitB**

**RegistrationRights Agreement**

**Exhibit C**

**AssaysAssigned to Diversa**

 

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***= Certain confidential information contained in this document, marked byasterisks, has been omitted and filed separately with the Securities andExchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of1934, as amended.

DocumentNumber:  386048