<PAGE>

                                                                   EXHIBIT 10.7

                         PRODUCT ACQUISITION AGREEMENT

          PRODUCT ACQUISITION AGREEMENT, dated as of April 14, 2000, by and
between DURECT Corporation, a Delaware corporation, and ALZA Corporation, a
Delaware corporation.

                                   RECITALS

          WHEREAS, Seller manufactures and sells osmotic, miniature, implantable
pumps for research use in laboratory animals (the "Business"); and

          WHEREAS, Seller desires to sell and cause to be transferred to Buyer
(including either existing Affiliates of Buyer or those organized for that
purpose), and Buyer (including such Affiliates) desires to purchase and accept
the transfer from Seller certain assets and properties of Seller used primarily
in the Business, including the Product as defined below, all as hereinafter
specifically provided;

          NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties and agreements herein contained, the parties hereto
hereby agree as follows:

                                   ARTICLE I
                                  DEFINITIONS

 1.1  Certain Defined Terms.  As used in this Agreement, the following terms
shall have the following meanings (such definitions to be equally applicable to
both the singular and plural forms of the terms defined):

          "Accessory Products" means any products or devices including without
limitation those products set forth on Schedule 1 and other products or devices,
e.g., catheters and cannulas, to the extent such products and devices are sold
specifically for use with the Product or an Improvement.

          "Action" means any notice of material noncompliance or violation, or
any claim, demand, action, suit, audit, assessment or arbitration, or any other
request (including any request for information), proceeding or investigation, by
or before any Governmental Authority or any nongovernmental arbitration,
mediation or other nonjudicial dispute resolution body.

          "Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
under the Securities Exchange Act of 1934, as amended.

          "Agreement" means this Product Acquisition Agreement, including all
schedules and exhibits hereto, as it may be further amended from time to time as
herein provided.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -1-



<PAGE>

          "Ancillary Agreements" means the General Support Services Agreement,
Coating Services Agreement and New Models Development Agreement attached hereto
as Exhibit A, Exhibit B and Exhibit C respectively, each of which is required by
this Agreement to be executed and delivered by the parties hereto at or before
the Closing.

          "Assets" has the meaning specified in Section 2.1.

          "Assumed Liabilities" has the meaning specified in Section 3.1.

          "Books and Records" means all of the following which are maintained at
Seller's facilities in Mountain View, California and the Vacaville Facility
which relate solely to the making, using and sale of the Product and Accessory
Products: books, records, manuals and other materials, accounting books and
records, property records for property, plant and equipment, files, computer
tapes, disks and other storage media and records, advertising matter, market
research, catalogues, price lists, correspondence, mailing lists, lists of
customers and suppliers, distribution lists, photographs, production data (for
two years), sales and promotional materials and records, purchasing materials
and records, personnel records, credit records, manufacturing and quality
control records and procedures, lot records, blueprints, copies of research and
development files, data and laboratory books, trademark files and disclosures,
media materials and plates, sales order files, and artwork.

          "Business" has the meaning specified in the Recitals to this
Agreement.

          "Buyer" means DURECT Corporation, a Delaware corporation, and, as
applicable, Affiliates of Buyer used or formed for the purpose of consummating
the transactions contemplated by this Agreement.

          "Buyer Indemnified Parties" has the meaning specified in Section 8.2.

          "Buyer Loss" has the meaning specified in Section 8.2.

          "Closing" means the closing of the transactions contemplated by this
Agreement as specified in Section 4.1.

          "Contracts" has the meaning specified in subsection 2.1(c).

          "Employee" has the meaning specified in Section 5.9.

          "Encumbrance" means any interest (including any security interest),
pledge, mortgage, lien (including environmental liens), charge, claim (including
any adverse claim) or other right of third Persons, whether created by law or in
equity, including any such restriction on the use, voting, transfer, receipt of
income or other exercise of any attributes of ownership.

          "Environmental Laws" means all laws, regulations, ordinances, codes,
policies, Governmental Orders and consent decrees, and any judicial or
administrative interpretations thereof, of Governmental Authorities, or any
common law doctrines, in effect from time to time relating to pollution or
protection of the environment, natural resources or protection of health

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -2-
<PAGE>

from Hazardous Material exposure, including those relating to emissions,
discharges, releases or threatened releases of Hazardous Material into the
environment (including ambient air, surface water, groundwater or land), or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Material.

          "Governmental Authority" means any international, national, federal,
state, territorial or provincial, municipal or local government, governmental
authority, regulatory or administrative agency, governmental commission,
department, board, bureau, agency or instrumentality, political subdivision,
court, tribunal, official, arbitrator or arbitral body.

          "Governmental Order" means any order, writ, rule, judgment,
injunction, decree, stipulation, determination, award, citation or notice of
violation entered by or with any Governmental Authority

          "Hazardous Material" means all substances, materials, chemicals,
compounds, pollutants or wastes regulated by, under or pursuant to any
Environmental Laws.

          "Improvements" means an improved version of the Product which meets
all of the following criteria: [ *  *  *  ]

          "Inventories" has the meaning specified in subsection 2.1(a).

          "Lease" has the meaning specified in subsection 2.1(d).

          "Liabilities" means any and all debts, liabilities and obligations of
any nature whatsoever, whether accrued or fixed, absolute or contingent, mature
or unmatured or determined or determinable, including those arising under any
law, rule, regulation, Action, Governmental Order, and those arising under any
contract, agreement, commitment or undertaking.

          "Material Adverse Effect" means any event(s) with respect to,
change(s) in, or effect(s) on, the Product or the Assets or the Business which,
individually or in the aggregate, may be adverse to the Business or the results
of operations, the condition (financial or otherwise), assets, properties,
Liabilities of the Business in a manner that is material to the Business taken
as a whole, excluding any effects of a general nature which do not affect the
Business uniquely.

          "Person" shall include any individual, trustee, firm, corporation,
partnership, limited liability company, Governmental Authority or other entity,
whether acting in an individual, fiduciary or any other capacity.

          "Product" means the ALZET(R) osmotic, implantable pumps for research
use in laboratory animals as existing on the Closing Date, as described on
Schedule 1.

          "Product Trademark" means the ALZET(R) trademark, including all common
law rights and applications and registrations therefor, throughout the world.

          "Purchase Price" has the meaning specified in Section 2.4.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -3-
<PAGE>

          "Retained Liabilities" has the meaning specified in Section 3.2.

          "Seller" means ALZA Corporation, a Delaware corporation.

          "Seller Indemnified Parties" has the meaning specified in Section 8.3.

          "Seller Loss" has the meaning specified in Section 8.3.

          "Vacaville Facility" means Seller's facility used for the manufacture
of Product prior to the Closing located in Vacaville, California.

 1.2  Other Defined Terms.  In addition to the terms defined in Section 1.1,
certain other terms are defined elsewhere in this Agreement and, whenever such
terms are used in this Agreement, they shall have their respective defined
meanings.

                                  ARTICLE II
                          PURCHASE AND SALE OF ASSETS

 2.1  Purchase of Assets. Upon the terms and subject to the conditions herein
set forth, in consideration of the payment of the Purchase Price, Seller hereby
sells, conveys, assigns, transfers and delivers to Buyer, and Buyer hereby
purchases and acquires from Seller, subject only to the express representations
set forth in Article V, all of Seller's rights, title and interests in and to
the following (collectively, the "Assets"):

          (a)  the Product and all raw materials and inventories, including
inventories of work in process, stores, supplies and finished goods, which are
used solely in the manufacture, use or sale of the Product and Accessory
Products as listed on Schedule 2.1(a) (collectively, the "Inventories");

          (b)  that machinery, manufacturing equipment, laboratory and testing
equipment, computers, tools and other tangible personal property, whether owned,
leased or subleased, set forth on Schedule 2.1(b) (collectively, the "Fixed
Assets");

          (c)  the contracts listed on Schedule 2.1(c) (collectively, the
"Contracts");

          (d)  subject to the consent by the landlord to the assignment, the
lease to the Vacaville Facility described on Schedule 2.1(d) (the "Lease"),
together with all of Seller's rights to improvements thereon and fixtures
thereto;

          (e)  (1) the Product Trademark and other trademarks listed on Schedule
2.1(e), including all applications and registrations therefor, and any and all
common law trademarks pertaining to the Product or as used with Accessory
Products throughout the world and the goodwill associated with the foregoing
trademarks; (2) all copyrights, including any common law copyrights and
applications therefor throughout the world for Product and Accessory Products
related advertising material, and (3) the good will associated with the Product
(collectively, the "Intangible Personal Property"); and

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -4-
<PAGE>

          (f)  all Books and Records and the marketing assets as listed in
Schedule 2.1(f).

     In the event that assets which are used primarily in the manufacture, use
or sale of the Product and Accessory Products are inadvertently omitted from the
above schedules, then Buyer and Seller shall in good faith, upon mutual
agreement, revise the schedules to include such assets.

     2.2  License.  Seller hereby grants to Buyer a nonexclusive license to
Seller's know-how, trade secrets, confidential information, software, technical
information, process technology, plans, drawings, analytical and process methods
related to the manufacture, testing and packaging of the Product, designs,
inventions, research records, procedures, manuals and blue prints in order for
Buyer to make, use and sell the Product.

     2.3  Product Trademark.

          (a)  Buyer acknowledges that the Product Trademark is similar to
Seller's name and that Seller has a continuing interest in the manner that the
Product Trademark is used.  Buyer agrees to use the Product Trademark only in
connection with the Product, Improvements and Accessory Products and will not
without Seller's prior written consent: (a) modify or alter in any way the
Product Trademark; (b) transfer the Product Trademark, other than to an
Affiliate of Buyer; or (c) authorize any use of the Product Trademark other than
in connection with the Product, Improvements or Accessory Products.  Buyer
further agrees not to use the DUROS(R) trademark, Seller's name or any other
trademark of Seller in any manner in association with the Product, Improvements
or Accessory Products except as provided in Section 7.8.

          (b)  Buyer shall notify ALZA in writing of any conflicting uses of, or
of any acts of infringement, unfair competition or imitation by others involving
the Product Trademark promptly after such matters are brought to Buyer's
attention or Buyer obtains knowledge thereof.

     2.4  Purchase Price and Payment.  Upon the terms and subject to the
conditions herein set forth, and in consideration of the sale, assignment,
transfer and delivery to Buyer and its Affiliates of the Assets, at the Closing,
Buyer or its Affiliates shall pay to Seller an aggregate of [*  *  *] the
                                                            -
"Purchase Price"); and Buyer shall, or shall cause its Affiliates to, assume, as
of the Closing, the Assumed Liabilities as and to the extent provided in Article
III.

     2.5  Full Possession.  Subject to the terms and conditions of this
Agreement, and subject to the Ancillary Agreements, at the Closing, Seller shall
put Buyer and its Affiliates into full and actual possession and enjoyment of
the Product and the Assets.  The sale of the Product and the Assets contemplated
hereby shall be effected by instruments of conveyance, transfer and assignment
as Buyer may request that are necessary to vest in Buyer all of the rights,
title and interests of Seller in the Product and the Assets as provided herein
and to put Buyer in full and actual possession, enjoyment and operating control
of the Product and the Assets.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -5-
<PAGE>

                                   ARTICLE I
                           ASSUMPTION OF LIABILITIES

 3.1  Assumption of Liabilities.  Effective as of the Closing, without any
further responsibility or Liability of or recourse to Seller or any of Seller's
Affiliates, subsidiaries, stockholders, officers, directors, employees, agents,
successors or assigns, Buyer hereby absolutely and irrevocably assumes, and
shall pay, perform and be liable and responsible for, only the following
Liabilities of Seller (collectively, the "Assumed Liabilities"):

          (a) all obligations of Seller arising after the Closing Date under the
Contracts; and

          (b) subject to the assignment of the Lease to Buyer, all obligations
of Seller arising after the Closing Date under the Lease.

     3.2  Retained Liabilities. Except as provided in Section 3.1, Buyer and its
Affiliates shall not assume and shall not be responsible for, and there shall
not be transferred to or assumed by Buyer or any of its Affiliates, any
Liabilities of Seller or its Affiliates (or any predecessors thereof).

                                   ARTICLE I
                                    CLOSING

 4.1  Closing. The consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements (the "Closing") shall take place at
Seller's principal executive offices located at 1900 Charleston Road, Mountain
View, CA, at 2 p.m., local time, on April 14, 2000 or at such other place, time
and date as the parties hereby may agree in writing. The consummation of such
transactions is herein collectively referred to as the "Closing." The date and
time of the Closing are sometimes referred to herein as the "Closing Date."

 4.2  Seller's Obligations at Closing. At the Closing, Seller shall deliver or
cause to be delivered to Buyer:

          (a)  All bills of sale and other instruments of conveyance, transfer
and assignment, including a trademark assignment in connection with the
trademarks assigned in Section 2.1(e) in the form attached as Exhibit D, that
are necessary to vest in Buyer all of the rights, title and interests of Seller
in the Assets, free and clear of all Encumbrances;

          (b)  This Agreement and the Ancillary Agreements, duly executed by
     Seller.

 4.3  Buyer's Obligations at Closing. At the Closing, Buyer shall deliver or
cause to be delivered to Seller:

          (a)  The Purchase Price, which shall be delivered to Seller by wire
transfer of immediately available funds to an account or accounts designated in
writing by Seller;

          (b)  A California resale certificate pursuant to Sections 6091 et seq
of the California Revenue and Taxation Code; and

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -6-
<PAGE>

          (c)  This Agreement and the Ancillary Agreements, duly executed by
Buyer or its Affiliates, as the case may be.

                                   ARTICLE I
                   REPRESENTATIONS AND WARRANTIES OF SELLER

          Seller represents and warrants to Buyer as follows:

 5.1  Organization, Standing and Power. Seller is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power and authority to own its assets and
properties and to conduct its business as and where it is being conducted,
including to own the Assets owned by it and conduct its business as and where it
is being conducted by it. Seller is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed would not result in a Material Adverse
Effect.

 5.2  Authorization.

          (a) Seller has full corporate power and authority to enter into this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby.  The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Seller.  This Agreement has been duly executed
and delivered by Seller.  This Agreement constitutes, and upon the execution and
delivery thereof by Seller each Ancillary Agreement will constitute, a legal,
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).

          (b) Except for transfer of Seller's interest in the Lease, no consent,
waiver, approval, order or authorization of, notice to, or registration,
declaration, designation, qualification or filing with, any Governmental
Authority or third Person, domestic or foreign, is or has been or will be
required on the part of Seller in connection with the execution and delivery of
this Agreement or any Ancillary Agreement or the consummation of the
transactions contemplated hereby or thereby, except where the failure to obtain
such consent would not result in a Material Adverse Effect.

 5.3  Non-Contravention. Neither the execution and delivery of this Agreement or
any Ancillary Agreement, nor the consummation of the transactions contemplated
hereby or thereby, will violate or conflict with or provide a right of
termination to any Person under (a) any provision of the Charter or Bylaws of
Seller, (b) any law, rule, regulation or Governmental Order to which Seller or
the Product and the Assets are bound or subject or (c) any agreement, indenture,
undertaking, permit, license or other instrument to which Seller is a party or
by which it or any of


*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -7-
<PAGE>

its properties may be bound or affected, other than (x) the requirements of any
applicable bulk sales or bulk transfer laws or (y) where such violation,
conflict or right of termination would not result in a Material Adverse Effect.

 5.4  Disclosure. There is no fact (other than matters of a general societal,
economic or political nature which do not affect the business of Seller or Buyer
uniquely) known to Seller, and there have been no events or transactions or
information which have come to the attention of Seller, which might reasonably
be expected to have a Material Adverse Effect on the Product or the Assets.

 5.5  Real Property.

          (a)  The Lease is a legal, valid and binding agreement enforceable in
accordance with its terms and is in full force and effect. There are no existing
material defaults under the Lease by Seller and no event of default on the part
of Seller or, to the knowledge of Seller, on the part of any other party thereto
has occurred which (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default
thereunder permitting landlord to terminate. Subject to consent by the landlord
to assignment of the Lease to Buyer, upon consummation of the transactions
contemplated by this Agreement, the Lease will continue in full force and effect
without penalty or other adverse consequence and shall be unaffected by such
transactions. The Lease has not been amended or otherwise affected by any side
letter, interpretation or correspondence relating thereto except for amendments
provided to Buyer. Seller has made available to Buyer true and correct copies of
the Lease.

 5.6  Title to Assets. Seller has good and marketable title to the Product and
all of the Assets, free and clear of any Encumbrances.

 5.7  Intangible Personal Property.

          (a)  The execution, delivery and performance of this Agreement, the
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby will not breach, violate or conflict with any instrument or
agreement governing any intellectual property necessary or required for, or used
in, the conduct of the Business as presently conducted; and

          (b)  Seller has not been notified of any claim by a third party that
Seller's manufacture or sales of the Product violate any proprietary right of
any other party. The Product Trademark is subsisting and Seller has no notice of
any claims that a third party has any rights thereto. There are no existing or
pending patents held by Seller that would prevent Buyer from manufacturing,
using or selling the Product. Seller has not received any notice asserting that
the manufacture, use or sale of the Product conflicts with the rights of any
other party. Seller is not aware of any material unauthorized use, infringement
or misappropriation on the part of any third party of the Assets or the
Intangible Personal Property.

    5.8  Litigation; Legal Matters. There is no Action pending or, to the
knowledge of Seller, threatened against or involving Seller or any of the
officers, directors, stockholders, properties, assets or businesses of Seller,
whether at law or in equity, or before or by any

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -8-
<PAGE>

Governmental Authority, nor any Governmental Order against, or the subject of
which is, the Product or the Assets.

    5.9  Employees; Employee Benefit Plans; Labor.

          (a)  Schedule 5.9 contains a complete and correct list of all
employees of Seller whose employment is primarily devoted to the manufacture or
sale of the Product (collectively, the "Employees").

          (b)  There are no employment agreements or other similar arrangements
that pertain to any Employee, except standard secrecy agreements for all
employees.

          (c)  Except to the extent provided in Article X, Buyer will incur no
Liability with respect to, or on account of, and Seller will retain any
Liability for, and on account of, any employee benefit plan of Seller including,
but not limited to, Liabilities Seller may have to such employees under all
employee benefit schemes, incentive compensation plans, bonus plans, pension and
retirement plans, vacation, profit-sharing plans (including any profit-sharing
plan with a cash-or-deferred arrangement) share purchase and option plans,
savings and similar plans, medical, dental, travel, accident, life, disability
and other insurance and other plans or arrangements, whether written or oral and
whether "qualified" or "non-qualified," or to any employee as a result of
termination of employment by Seller as contemplated by this Agreement.

          (d)  No Employee is covered under any collective bargaining agreement.
With respect to the use of the Assets: (a) there is no unfair labor practice
complaint against Seller pending or, to the knowledge of Seller, threatened
before the National Labor Relations Board or any comparable state or local
Governmental Authority; (b) there is no labor strike, dispute, slowdown or
stoppage actually pending or, to the knowledge of Seller, threatened against or
directly affecting Seller; (c) no union representation question exists or
negotiations regarding union representation have taken place or are ongoing
respecting the employees of any of the Business and no notice or demand for
union recognition has been received by Seller; (d) no grievance or any Action
arising out of or under collective bargaining agreements is pending and no
claims therefor exist; (e) no collective bargaining agreement which is binding
on Seller prevents it from relocating or closing any of its operations; (f)
Seller has not experienced any work stoppage or other labor difficulty; and (g)
there are no pending or, to the knowledge of Seller, threatened unfair
employment practice charges or administrative proceedings relating to any past
or present employees of the Business.

    5.10 Environmental Matters. Except as set forth in Schedule 5.10:

          (a)  to Seller's knowledge, prior to the Closing, Seller has operated
and maintained the Business and the Assets, in compliance with all applicable
Environmental Laws and Governmental Orders and the requirements of all
Environmental Permits held or required to be held by Seller and Seller has not
received a notice of violation or other demand from a third Person alleging that
the Business is in violation of any Environmental Law;

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -9-
<PAGE>

          (b)  to Seller's knowledge, no Environmental Permits are necessary or
required for any activities currently conducted by or on behalf of the Business
except for the permit required for the coating process currently conducted in
Seller's Mountain View facility;

          (c)  to Seller's knowledge, there are no underground storage tanks at
the Vacaville Facility containing Hazardous Materials or which formerly
contained Hazardous Materials; nor is there, to Seller's knowledge, Hazardous
Material in any of the fixtures, structures, soils, groundwater, surface water
or air on, under or about or emanating from the Assets or the Vacaville
Facility,

          (d)  to Seller's knowledge, the Vacaville Facility is not listed nor
proposed for listing on the U.S. National Priorities List under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. (S)(S) 9601 et seq. or on the Comprehensive Environmental Response
Compensation Liability Information System or any foreign or state list of sites
requiring investigation, remediation or cleanup;

          (e)  Seller has provided Buyer with true, accurate and complete copies
of any Governmental Orders applicable to the Product, the Vacaville Facility and
the Assets, and written reports, if any, of material releases of Hazardous
Materials on, under, or emanating from the Vacaville Facility in Seller's
possession or reasonable control.

    5.11 Contracts and Commitments.

          (a)  True and complete copies of all Contracts (together with all
ancillary documents thereto, including any amendments, consents for alterations
and documents regarding variations) set forth in Schedule 2.1(c) have been
delivered to Buyer.

          (b)  With respect to the Contracts, (i) each is a legal, valid and
binding obligation of Seller and, to the knowledge of Seller, each other party
thereto, and is in full force and effect, and (ii) Seller has not been notified
that it is in breach of any such Contract, nor has Seller notified the other
party that it is in breach of any such Contract.

    5.12 Compliance With Laws.  Seller has not been notified of any violation
of laws or regulations in connection with its manufacture and sale of Product.

    5.13 Inventory.  All of the Inventories consist of a quality and quantity
usable and salable in the ordinary course of business.

    5.14 Brokers and Finders.  Neither Seller nor any of its officers, directors
or employees has employed any broker or finder or incurred any liability for any
brokerage fee, commission or finder's fee in connection with the transactions
contemplated by this Agreement.

    5.15 Permits. Except as disclosed in Section 5.10(b), to Seller's knowledge,
there are no governmental licenses, permits, approvals, license applications and
product registrations required for the making, using and selling of the Product.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -10-
<PAGE>

     5.16 Patents.  As of the Closing Date, there are no unexpired patents (or
equivalent rights) nor applications pending anywhere in the world which are
owned or controlled by Seller which would be infringed by the manufacture, use
and sale of the Product.

                                   ARTICLE I
                    REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer represents and warrants to Seller as follows:

    6.1  Organization.  Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.

    6.2  Authorization.

          (a)  Buyer has full corporate power and authority to enter into this
Agreement and the Ancillary Agreements and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer. This Agreement constitutes, and upon the execution and
delivery thereof by Buyer, each Ancillary Agreement will constitute, a legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).

          (b)  No consent, waiver, approval, order or authorization of, notice
to, or registration, declaration, designation, qualification or filing with, any
Governmental Authority or third Person, domestic or foreign, is or has been or
will be required on the part of Buyer or any of its Affiliates in connection
with the execution and delivery of this Agreement or any Ancillary Agreement or
the consummation of the transactions contemplated hereby or thereby.

    6.3  Non-Contravention.  Neither the execution and delivery of this
Agreement or any Ancillary Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with (a) any provision
of the charter or bylaws of Buyer or any of its Affiliates, (b) any law, rule,
regulation or Governmental Order to which Buyer or any such Affiliate or any of
their business or assets are bound or subject or (c) any agreement, indenture,
undertaking, permit, license or other instrument to which Buyer or any such
Affiliate is a party or by which any of them or any of their properties may be
bound or affected.

                                  ARTICLE II
                               CERTAIN COVENANTS

    7.1  Access to Information. To the extent reasonably requested by Buyer,
Seller shall provide Buyer with information about the Product and the Business
following the Closing.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -11-
<PAGE>

    7.2  Transition.  For the [*  *  *], Seller will conduct the Business on
behalf of Buyer under the General Support Services Agreement.

    7.3  Confidentiality. After the Closing Date, each party shall, and shall
cause its representatives, Affiliates and employees:  (a) to treat and hold as
confidential (and not to disclose or provide access to any Person to) any
confidential information of the other party disclosed in connection with this
transaction or in performance of this Agreement or the Ancillary Agreements; and
(b) in the event that any of them becomes legally compelled to disclose any such
information: (i) to provide the other party with prompt written notice of such
requirement so that such other party or an Affiliate thereof may seek a
protective order or other remedy or waive compliance with this Section 7.3; (ii
in the event that such protective order or other remedy is not obtained, or such
other party waives compliance with this Section 7.3, to furnish only that
portion of such information which is legally required to be provided and to
exercise its best efforts to obtain assurances that confidential treatment will
be accorded such information; and (iii) to the extent permitted by law, to
promptly furnish (prior to, at, or as soon as practicable following such
required disclosure) to the other party any and all copies (in whatever form or
medium) of all such disclosed information; provided, however, that this sentence
shall not apply to any information which, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement, or is
subsequently disclosed to the public, or to Seller or Buyer by a third party.
Each party agrees and acknowledges that remedies at law for any breach of its
obligations under this Section 7.3 may be inadequate and that in addition
thereto the other party (or its Affiliate) shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any such
breach.

    7.4  Bulk Sales Compliance.  Buyer will not seek to enforce compliance by
Seller with the provisions of any bulk sales or transfers law or similar law of
any jurisdiction in respect of the transactions contemplated by this Agreement
and the Ancillary Agreements.

    7.5  Restrictive Covenants.

          (a)  Except to perform its obligations under this Agreement or the
Ancillary Agreements, for a period of [* * *], Seller will not sell for research
use in laboratory animals any products that compete directly with the Product
and that work in substantially the same way as the Product, or manufacture any
such products for such purpose, nor will Seller grant rights to any third party
to do so, or own, directly or indirectly, more than [* * *] in any other entity
that engages in such activity. Nothing herein shall be deemed to limit the
activities of any entity that is the successor or assignee of all or
substantially all of Seller's business.

          (b)  For a period of [* * *], Seller shall not, without Buyer's
written consent, solicit for employment at Seller nor hire any Employee, unless
such Employee has ceased to be employed by Buyer or any of its Affiliates for at
least [* * *]; provided, however, the restriction in this Section 7.5(b) shall
not apply to any Employee who Buyer has terminated at its own initiative.

          (c)  Seller agrees and acknowledges that remedies at law for any
breach of Seller's obligations under this Section 7.5 may be inadequate and that
in addition thereto Buyer (or its

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -12-
<PAGE>

Affiliate) shall be entitled to seek equitable relief, including injunction and
specific performance, in the event of any such breach.

    7.6  Purchase of Inventory.  On the Closing Date, Buyer shall purchase the
Inventories from Seller at the per unit standard cost set forth on Schedule 7.6.
Buyer shall pay Seller the purchase price for the Inventories in accordance with
the following schedule: [*  *  *]; provided, however, that the purchase price
shall be paid in full within [*  *  *], if such purchase price has not been paid
in full by that time.

    7.7  Product Discussions. At the request of Seller, Buyer shall participate
in periodic discussions with Seller summarizing the type and quantity of
products sold in connection with the Business, the identity of all customers of
the Business and, to the extent known by Buyer, the purpose for which each such
product was ordered.

    7.8  Promotional and Marketing Material.The parties acknowledge that Buyer
intends to continue to utilize the Product Trademark in the marketing and sale
of the Product after the Closing. As soon as practicable after the Closing Date,
Buyer shall make such changes to the packaging, product labeling, and
promotional and marketing materials in connection with the Business as necessary
to reflect (i) Buyer as the manufacturer and seller of the Product and (ii) to
include Seller's logo and identify Seller as the developer of the Product;
provided, however, that finished Product in the Inventories as of the Closing
Date may be sold as currently packaged in the ordinary course of business so
long as such packaging is modified to indicate Buyer as the seller of such
products.

    7.9  Vendors. Upon written request by Buyer, after the Closing Date Seller
will provide all reasonable assistance to Buyer in contacting and establishing
an ongoing business relationship with vendors of supplies, raw materials and
services used by Seller in connection with the manufacture and sale of the
Product prior to the Closing Date.

    7.10 Exploitation of the Business; Discontinuation of the Business.  After
the Closing, Buyer will use its [*  *  *].  If at any time after the Closing
Date, Buyer discontinues the Business (other than as a result of transferring
the Business to a third party), Seller may, at its sole discretion, obtain from
Buyer (i) all rights, title and interest in the Product and the Assets (to the
extent then existing) at a purchase price to be negotiated by the parties and
(ii) the Product inventory then in Buyer's possession at the standard cost
incurred by Buyer therefor.

    7.11 No Action. Seller, on behalf of itself, its assigns, successors and
Affiliates, hereby covenants that neither it nor its Affiliates, assigns or
successors will institute or bring any Action against Buyer, its assigns,
successors or Affiliates alleging that the making, using, selling, offering for
sale or importation of the Product and Improvements will infringe any patent or
equivalent intellectual property rights anywhere in the world owned or
controlled by Seller or any of its Affiliates, provided that such Products and
Improvements are sold solely for research use in laboratory animals.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -13-
<PAGE>

                                  ARTICLE III
                   INDEMNIFICATION, LIMITATION OF LIABILITY
                          AND DISCLAIMER OF WARRANTY

    8.1 Survival. All representations and warranties of Seller and Buyer and
their Affiliates contained in this Agreement and the Ancillary Agreements
(including all schedules and exhibits hereto and thereto and all certificates,
documents, instruments and undertakings furnished pursuant to this Agreement and
the Ancillary Agreements) shall survive the consummation of the transactions
contemplated hereby and thereby. All indemnification obligations of Seller and
Buyer in this Agreement or the Ancillary Agreements (including all schedules and
exhibits thereto and all certificates, documents, instruments and undertakings
furnished pursuant to this Agreement and the Ancillary Agreements) shall survive
indefinitely. All covenants, obligations and agreements of Buyer and Seller and
their Affiliates contained in this Agreement and the Ancillary Agreements
(including all schedules and exhibits hereto and thereto and all certificates,
documents, instruments and undertakings furnished pursuant to this Agreement and
the Ancillary Agreements) shall survive the consummation of the transactions
contemplated hereby and thereby.

    8.2 Indemnification by Seller. Seller shall indemnify and hold harmless
Buyer, its subsidiaries and Affiliates, any assignee or successor thereof, and
each officer, director, employee, agent and representative of each of the
foregoing (collectively, the "Buyer Indemnified Parties") from and against, and
pay or reimburse the Buyer Indemnified Parties for, any and all losses, Actions,
Liabilities, damages, claims, costs and expenses (including reasonable expenses
of investigation and legal fees and costs in connection therewith), interest,
awards, judgments, penalties and Encumbrances suffered or incurred by any of the
Buyer Indemnified Parties (hereinafter a "Buyer Loss") to the extent arising
from any Action instituted by a third party against any of the Buyer Indemnified
Parties relating to the manufacture, use, sale, distribution, import, export or
testing of Products, the operation of the Business or the use, operation,
ownership, lease, possession, control, occupancy, maintenance or condition of
the Assets, in each case, prior to the Closing.

    8.3 Indemnification by Buyer. Buyer shall indemnify and hold harmless
Seller, any assignee or successor of Seller, and each officer, director,
employee, agent and representative of each of the foregoing (collectively, the
"Seller Indemnified Parties") from and against, and pay or reimburse the Seller
Indemnified Parties for, any and all losses, Actions, Liabilities, damages,
claims, costs and expenses (including reasonable expenses of investigation and
legal fees and costs in connection therewith), interest, awards, judgments,
penalties and Encumbrances suffered or incurred by any of the Seller Indemnified
Parties (hereinafter a "Seller Loss") to the extent arising from any Action
instituted by a third party against any of the Seller Indemnified Parties
relating to any Assumed Liability or the manufacture, use, sale, distribution,
import, export or testing of Products, the operation of the Business or the use,
operation, ownership, lease, possession, control, occupancy, maintenance or
condition of the Assets, in each case, after the Closing.

    8.4 General Indemnification Provisions.

          (a)  For the purposes of this Section 8.4, the term "Indemnitee" shall
refer to the Person or Persons indemnified, or entitled, or claiming to be
entitled, to be indemnified, pursuant

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -14-
<PAGE>

to the provisions of Section 8.2 or 8.3, as the case may be; the term
"Indemnitor" shall refer to the Person having the obligation to indemnify
pursuant to such provisions; and "Losses" shall refer to Seller Losses or Buyer
Losses, as the case may be.

          (b)  Within a reasonable time following the determination thereof, an
Indemnitee shall give the Indemnitor written notice of any matter which such
Indemnitee has determined has given rise to a right of indemnification under
this Agreement stating the amount of the Loss, if known, and method of
computation thereof, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises (subject to the last sentence of this
subsection). The obligations and Liabilities of any party under this Article
VIII with respect to Losses arising from claims, assertions, events or
proceedings of any third party (including claims by any assignee or successor of
the Indemnitee or any Governmental Authority), which are subject to the
indemnification provided for in this Article VIII ("Third Party Claims") shall
be governed by and be subject to the following additional terms and conditions:
If any Indemnitee shall receive written notice of any Third Party Claim, the
Indemnitee shall promptly give the Indemnitor written notice of such Third Party
Claim (subject to the last sentence of this subsection) and shall permit the
Indemnitor, at its option, to participate in the defense of such Third Party
Claim by counsel of its own choice and at its expense. If the Indemnitor
acknowledges in writing its obligation to indemnify the Indemnitee hereunder
against any Loss (without limitation) that may result from such Third Party
Claim, then the Indemnitor shall be entitled, at its option, to assume and
control the defense against such Third Party Claim at its expense and through
counsel of its choice if it gives written notice of its intention to do so to
the Indemnitee within 15 calendar days of the receipt of notice of such Third
Party Claim from Indemnitee, unless, in the reasonable opinion of counsel for
the Indemnitee, there is a conflict or a potential conflict of interest between
the Indemnitee and the Indemnitor in such Action, in which event the Indemnitee
shall be entitled to direct the defense with respect to those issues as to which
such conflict exists with separate counsel of its choice reasonably acceptable
to the Indemnitor. The fees and expenses of any such separate counsel shall be
borne by the Indemnitor. In the event that the Indemnitor exercises its right to
undertake the defense against any such Third Party Claim as provided above, the
Indemnitee shall cooperate with the Indemnitor in such defense and make
available to the Indemnitor, at Indemnitor's expense, all witnesses, pertinent
records, materials and information in its possession or under its control
reasonably relating thereto as is required by the Indemnitor. Similarly, in the
event the Indemnitee is, directly or indirectly, conducting the defense against
any Third Party Claim, the Indemnitor shall cooperate with the Indemnitee in
such defense and make available to it all witnesses, pertinent records,
materials and information in its possession or under its control reasonably
relating thereto as is reasonably required by the Indemnitee. No such Third
Party Claim, except the settlement thereof which involves the payment of money
only either by a party other than the Indemnitee or for which the Indemnitee is
totally indemnified (without limitation) by the Indemnitor and the unconditional
release from all related liability of the Indemnitee, may be settled by the
Indemnitor without the written consent of the Indemnitee. In the event that an
Indemnitee reasonably determines, and gives notification to the Indemnitor, that
the failure to resolve a Third Party Claim is having a material adverse effect
on the Indemnitee's ongoing business, and as a result the Indemnitee wishes to
propose a settlement of the Third Party Claim and the third party will
unconditionally release the Indemnitor from any and all Liabilities relating

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -15-
<PAGE>

to or arising from such Third Party Claim, then the Indemnitor shall not
unreasonably withhold its consent to such settlement. If the Indemnitor does not
consent to such settlement, the Indemnitee may settle the Third Party Claim on
the terms proposed without discharging the Indemnitor from its liability
hereunder with respect to such Third Party Claim. The foregoing notwithstanding,
the failure of any Indemnitee to give any notice required to be given hereunder
shall not affect such Indemnitee's right to indemnification hereunder except to
the extent the Indemnitor from whom such indemnity is sought shall have been
actually and materially prejudiced in its ability to defend the claim or action
for which such indemnification is sought by reason of such failure.

          (c)  Payment by an Indemnitee to a third party with respect to a Loss
shall not affect such Indemnitee's rights to indemnification pursuant to this
Article VIII.

    8.5 Limitation on Liability.

          (a)  EXCEPT FOR THE INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTIONS
8.2 AND 8.3 OR AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT, PUNITIVE OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE TRANSACTION CONTEMPLATED
BY THIS AGREEMENT, REGARDLESS OF THE FORM OF THE CLAIM, INCLUDING WITHOUT
LIMITATION CLAIMS FOR INDEMNIFICATION, TORT, BREACH OF CONTRACT, WARRANTY,
REPRESENTATION OR COVENANT OR ANY LOSS OF PROFITS, EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES AND WHETHER OR NOT SUCH DAMAGES ARE REASONABLY
FORESEEABLE.

          (b) Except for the indemnification obligations set forth in Sections
8.2 and 8.3,  Buyer's obligation to pay for the inventory set forth in section
7.6 or as otherwise expressly provided in this Agreement, (i) Seller or Buyer's
aggregate liability arising out of or related to the transaction contemplated by
this Agreement, regardless of the form of the claim or action, is limited to the
amount [*  *  *], and (ii) neither party shall have any claim against the other
for any inaccuracy in any representation or breach of warranty set forth in
Articles V and VI unless such party shall have given the other party notice of
such claim not later than [* * *] after the Closing Date.

    8.6 Disclaimer of Warranty.  EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, SELLER MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTIES OF
QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND OTHER THAN
EXPRESSLY SET FORTH IN THIS AGREEMENT, SPECIFICALLY DISCLAIMS ALL SUCH
WARRANTIES.

                                  ARTICLE II
                                  TAX MATTERS

     9.1  Taxes Relating to Transactions Contemplated by This Agreement.  All
sales and use taxes imposed in connection with the transfer of the Assets,
whether such taxes are

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -16-
<PAGE>

assessed initially against Seller or Buyer or any Affiliate of Buyer, shall be
borne and paid by Buyer.

                                   ARTICLE I
                     EMPLOYEES AND EMPLOYEE BENEFIT PLANS

   10.1 Business Employees.

          (a)  Within seven (7) days after the Closing, Buyer shall offer to
employ, for at least a [* * *] period following the Closing, the Employees;
provided that Buyer shall not be obligated to hire any Employee (i) [* * *]. For
                                                                         ---
any Employee, such employment shall be offered on terms which include no less
than (i) [* * *]

          (b)  Seller will coordinate with Buyer in communicating with the
Employees so offered employment by Buyer.

          (c)  If the employment of any Employee is terminated by Buyer, other
than for cause, at any time within [*  *  *], Buyer agrees to provide [*  *  *].

          (d) Buyer and Seller acknowledge and agree that the Employees are
deemed to be third party beneficiaries of this Article X.

   10.2 Modification of Confidentiality and Related Agreements. Seller agrees
that disclosure of information relating specifically to manufacture, use or sale
of the Product or provision of any services by any Person who becomes an
employee of Buyer or its Affiliates in connection with the transactions
contemplated hereby (a "New Employee") to Buyer or its Affiliates shall not be a
violation of any provision of any trade secret, confidentiality, non-compete or
comparable agreements entered into prior to the Closing between Seller, on the
one hand, and any New Employee, on the other hand.

                                  ARTICLE II
                              GENERAL PROVISIONS

   11.1 Fees and Expenses. Except as otherwise provided in this Agreement, each
party will pay all fees and expenses incurred by it in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby and
thereby.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -17-
<PAGE>

   11.2 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission, (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:

          (a)  If to Seller


               ALZA Corporation
               1900 Charleston Road
               Mountain View, California  94043
               Attention:  General Counsel
               Telecopy No.:  650-564-7848
               Telephone No.:  650-564-5260

          (b)  if to Buyer:

               DURECT Corporation
               10240 Bubb Road
               Cupertino, California  95014-4166
               Attention:  General Counsel
               Telecopy No.:  (408) 777-3577
               Telephone No.:  (408) 777-1827

               with a copy to:

               Orrick, Herrington & Sutcliffe LLP
               Old Federal Reserve Bank Building
               400 Sansome Street
               San Francisco, California 94111
               Attention:  Richard V. Smith, Esq.
               Telecopy No.:  (415) 773-5759
               Telephone No.:  (415) 392-1122

   11.3 Interpretation; Conflict Between Agreements.

          (a)  When a reference is made in this Agreement to Sections,
subsections, Schedules or Exhibits, such reference shall be to a Section,
subsection, Schedule or Exhibit to this Agreement unless otherwise indicated.
The words "include," "includes" and "including" when used herein shall be deemed
in each case to be followed by the words "without limitation." The word "herein"
and similar references mean, except where a specific Section or Article
reference is

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -18-
<PAGE>

expressly indicated, the entire Agreement rather than any specific Section or
Article. The table of contents and the headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Except as otherwise expressly provided herein,
all monetary amounts referenced in this Agreement shall mean U.S. dollars.

          (b)  In the event of any inconsistency, conflict or ambiguity as to
the rights and obligations of the parties under this Agreement and any Ancillary
Agreement, the terms of this Agreement shall control and supersede any such
inconsistency, conflict or ambiguity.

   11.4 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of statute, law,
regulation, Governmental Order or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. In such event, any
such term or provision shall be modified, amended and limited to the extent
necessary to render the same and the remainder of this Agreement valid,
enforceable and lawful.

   11.5 Assignment. This Agreement may not be assigned by operation of law or
otherwise, except that either party (including its Affiliates) may assign its
rights and benefits hereunder and under the Ancillary Agreements (provided that
the assigning party or its Affiliates, as applicable, shall remain responsible
for its obligations hereunder) (a) to any Affiliate of the assigning party, (b)
to any Person acquiring all or substantially all of the assets and properties of
the assigning party or, (c) in the case of Buyer, to any person acquiring all or
substantially all of the assets and properties of the Business, as such Business
is then conducted by Buyer and its Affiliates. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon and
inure to the benefit of the successors and permitted assigns of Buyer and
Seller.

   11.6  No Third-Party Beneficiaries. Other than as set forth in Section
10.1(d), this Agreement is for the sole benefit of the parties hereto and their
permitted assigns and nothing herein expressed or implied shall give or be
construed to give to any Person, other than the parties hereto and such assigns,
any legal or equitable rights hereunder.

   11.7  Amendment, Other Remedies and Waiver.

          (a)  This Agreement may not be amended or modified except by an
instrument in writing signed by Seller and Buyer.

          (b)  The rights and remedies of the parties to this Agreement are
cumulative and not alternative of any other remedy conferred hereby or by law or
equity, and the exercise of any remedy will not preclude the exercise of any
other.

          (c)  Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement or any Ancillary Agreement will
operate as a waiver of such right, power or privilege, and single or partial
exercise of any such right, power or privilege will preclude any other or
further exercise of such right, power or privilege or the exercise of any

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -19-
<PAGE>

other right, power or privilege. To the maximum extent permitted by law, (i) no
Action or right arising out of this Agreement or the Ancillary Agreements can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
Action or right unless in a writing signed by the other party; (ii) no waiver
that may be given by a party will be applicable except in the specific instance
for which it is given; and (iii) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement.

   11.8 Further Assurances. Each of Buyer and Seller agrees to (a) cooperate
fully with the other party, and to cause its Affiliates to cooperate fully, (b)
execute and cause such Affiliates to execute such further instruments, documents
and agreements, and (c) give such further written assurances as may be
reasonably requested by Buyer or Seller, as the case may be, to evidence and
reflect the transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement. If at any time and from
time to time after the Closing Date (without limitation as to time or otherwise)
Buyer reasonably determines that all of Seller's rights, title and interests in
and to an Asset has failed to be fully transferred and conveyed in accordance
with this Agreement to Buyer or an Affiliate thereof, as the case may be, then
Seller shall cause such Asset to be transferred and conveyed to Buyer or an
Affiliate thereof in accordance with this Agreement as soon as reasonably
practicable after notice from Buyer to Seller. If requested by Buyer, Seller
shall prosecute or otherwise enforce in its own name for the benefit of Buyer
any claims, rights or benefits that are transferred to Buyer and its Affiliates
by this Agreement and that require prosecution or enforcement in the name of
Seller. Any prosecution or enforcement of claims, rights or benefits under this
Section 11.8 shall be solely at Buyer's expense, unless the prosecution or
enforcement is made necessary by a breach of this Agreement by Seller. Following
the Closing Date, Seller shall refer to Buyer and its Affiliates, as
appropriate, as promptly as practicable, any telephone calls, letters, orders,
notices, requests, inquiries and other communications relating to the Assets and
the Business.

   11.9 Mutual Drafting. This Agreement is the joint product of Buyer and Seller
and each provision hereof has been subject to the mutual consultation,
negotiation and agreement of Buyer and Seller and shall not be construed for or
against any party hereto.

  11.10 Governing Law; Consent to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of California
(without giving effect to its choice of law principles). Subject to Section
11.11, each of the parties hereto irrevocably submits to the exclusive
jurisdiction of (a) the Superior Court of the State of California, San Francisco
County, and (b) the United States District Court for the Northern District of
California, for the purposes of any Action arising out of this Agreement, any
Ancillary Agreement or any transaction contemplated hereby or thereby. Each of
the parties hereto agrees to commence any Action relating hereto either in the
United States District Court for the Northern District of California, or if such
Action may not be brought in such court for jurisdictional reasons, in the
Superior Court of the State of California, San Francisco County. Each of the
parties hereto further agrees that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth in
Section 11.2 shall be effective service of process for any Action in

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -20-
<PAGE>

California with respect to any matters to which it has submitted to jurisdiction
in this Section 11.10. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any Action
arising out of this Agreement, any Ancillary Agreement or any transaction
contemplated hereby or thereby in (i) the Superior Court of the State of
California, San Francisco County, or (ii) the United States District Court for
the Northern District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Action brought in any such court has been brought in an inconvenient
forum.

  11.11 Dispute Resolution. Any dispute, controversy or claim between the
parties relating to, arising out of or in connection with this Agreement or the
Ancillary Agreements (or any subsequent agreements or amendments thereto),
including as to their existence, enforceability, validity, interpretation,
performance, indemnification, breach or damages, including claims in tort,
whether arising before or after the termination of this Agreement, shall be
settled only by binding arbitration pursuant to the Commercial Arbitration
Rules, as then amended and in effect, of the American Arbitration Association
(the "Rules"), subject to the following:

          (a)  The arbitration shall take place in San Francisco County,
California, and in no other place.

          (b)  There shall be one arbitrator, who shall be selected under the
normal procedures prescribed in the Rules.

          (c)  Subject to legal privileges, each party shall be entitled to
discovery in accordance with the Federal Rules of Civil Procedure.

          (d)  The arbitrators shall comply with Section 11.10, provided that
the procedural law shall be the U.S. Arbitration Act, as amended, to the extent
not inconsistent with the Rules and this Section 11.11.

          (e)  At the arbitration hearing, each party may make written and oral
presentations to the arbitrator, present testimony and written evidence and
examine witnesses.

          (f)  The arbitrators' decision shall be in writing, shall be binding
and final and may be entered and enforced in any court of competent
jurisdiction.

          (g)  The arbitrators shall have the authority to grant injunctive
relief and order specific performance.

          (h)  No party shall be eligible to receive, and the arbitrators shall
not have the authority to award, exemplary or punitive damages.

          (i)  Each party to the arbitration shall bear their own attorney's
fees and costs, but shall pay one-half of the fees and expenses of the
arbitrators and the American Arbitration Association.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -21-
<PAGE>

  11.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

   11.13 Public Announcements. Neither Buyer, Seller nor the representatives of
either of them shall issue to the media any news release or other public
announcement with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of the other party hereto. The
foregoing notwithstanding, any such news release or other public announcement
may be made if required by applicable law or a securities exchange rule,
provided that the party required to make such news release or other public
announcement shall confer with the other party concerning the timing and content
of such news release or other public announcement before the same is made. Buyer
and Seller will consult with each other concerning the means by which employees,
customers and suppliers and others having dealings with Seller with respect to
the Business will be informed of the transactions contemplated hereby, and Buyer
shall be allowed to have present for any such communication a representative of
Buyer.

   11.14 Entire Agreement. This Agreement, together with all Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties delivered pursuant hereto, constitute the entire agreement and
supersede all prior agreements and undertakings, both written and oral, among
Buyer and Seller with respect to the subject matter hereof and are not intended
to confer upon any other Person any rights or remedies hereunder, except as
otherwise expressly provided herein.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -22-
<PAGE>

          IN WITNESS WHEREOF, Buyer and Seller have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.

                              DURECT CORPORATION, INC.,
                               a Delaware corporation

                              By:  /s/ James E. Brown
                                   ________________________________
                                   Name:  James E. Brown
                                   Title: Chief Executive Officer


                              ALZA CORPORATION,
                               a Delaware corporation

                              By:  /s/ Peter Staple
                                   ________________________________
                                   Name:  Peter Staple
                                   Title: Executive Vice President

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -23-
<PAGE>

                                  ATTACHMENTS


EXHIBITS

Exhibit A           General Support Services Agreement

Exhibit B           Coating Services Agreement

Exhibit C           New Models Development Agreement

Exhibit D           Form of Trademark Assignment

Schedule 1          Product and Accessory Products

Schedule 2.1 (a)    Inventories

Schedule 2.1 (b)    Fixed Assets

Schedule 2.1 (c)    Contracts

Schedule 2.1 (d)    Lease

Schedule 2.1 (e)    Trademarks

Schedule 2.1 (f)    Marketing Materials

Schedule 5.9        Employees

Schedule 5.10       Environmental Matters

Schedule 7.6        Inventory Price List

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -24-
<PAGE>

                      GENERAL SUPPORT SERVICES AGREEMENT


          This GENERAL SUPPORT SERVICES AGREEMENT (this "Agreement"), dated as
of April 14, 2000 (the "Effective Date" ), is made by and between ALZA
CORPORATION, a Delaware corporation ("Seller"), and DURECT CORPORATION, a
Delaware corporation ("Buyer").

                                R E C I T A L S

          A.  Seller and Buyer have entered into a Product Acquisition Agreement
of even date herewith (the "Acquisition Agreement"), providing for the sale by
Seller to Buyer of certain Assets (as defined in the Acquisition Agreement).

          B.  Buyer desires that Seller render certain services to Buyer on an
interim basis to assist in the operation of the Business (as defined in the
Acquisition Agreement) of the manufacture and sale of the Product (as defined in
the Acquisition Agreement).  Seller is willing to perform such services on the
terms and subject to the conditions set forth herein.


                               A G R E E M E N T

          In consideration of the premises and the respective covenants and
obligations set forth herein the parties agree as follows:

          1.   Services.  (a)  For the [ *  *  * ], or a shorter period as Buyer
               --------
may designate, commencing on the Effective Date, Seller shall conduct all
aspects of the ALZET osmotic pump business ("Business") on behalf of Buyer in
its usual, regular and ordinary manner, substantially in the same manner as
conducted prior to the Effective Date (the "Transition Period").

               (b)  For the period commencing on the cessation of the Transition
Period through the term hereof, Seller shall provide to Buyer for use in
connection with the manufacture and sale of the Product the services described
in the Schedule of Services attached hereto as Exhibit A and incorporated herein
                                               ---------
by this reference.  Except as otherwise noted on Exhibit A, the Services shall
                                                 ---------
be of the type and at the level of use provided by Seller to the Business
immediately prior to the Effective Date.  Such services will be provided at
reasonable times and upon reasonable notice, as mutually agreed.

               (c)  The services provided by Seller to Buyer under subsection
1(a) and 1(b) are individually and collectively referred to hereafter as the
"Services".

          2.   Term.  The term of this Agreement shall commence on the Effective
               ----
Date.  The parties acknowledge that the purpose of this Agreement is to provide
Services on an interim basis to permit Buyer to develop its ability to provide
the Services or to obtain alternate sources of supply of Services within a
reasonable period of time after the date hereof.  Buyer shall use its best
efforts to

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.
<PAGE>

develop its ability to provide to itself the Services and/or obtain alternate
sources of supply for the Services as soon as practicable after the Effective
Date. Buyer may terminate this Agreement with respect to any item of Service
upon [* * *] prior written notice to Seller. Unless this Agreement is renewed by
mutual agreement of the parties, this Agreement shall terminate not later than
December 31, 2000; provided that, no such termination shall affect the
obligations of Buyer to make payments due hereunder.

          3.   Compensation.  On the Effective Date, Buyer shall pay [*  *  *].
               ------------
With respect to Services during the Transition Period, it is intended that [*  *
*].  Buyer and Seller shall coordinate with each other to account for and
 --
implement the foregoing provision in a mutually acceptable manner.  After the
Transition Period [*  *  *].  Seller's [*  *  *].
                                               --

          4.   Invoicing.  Seller shall invoice Buyer for the Services on one or
               ---------
more invoices at such intervals as Seller shall determine, provided that Seller
will not invoice Buyer more than once  per month.  All payments shall be due and
payable 30 days after the date of the invoice.

          5.   Disputes.  If Buyer disputes any charge set forth in an invoice,
               --------
Buyer shall notify Seller in writing within 30 days after receipt of such
invoice.  The parties shall promptly attempt to resolve any such dispute.  If
either party determines that the dispute cannot be resolved in a mutually
agreeable manner, the dispute shall be resolved exclusively as set forth in
Section 11.11 of the Acquisition Agreement.

          6.   Force Majeure.  Neither Seller nor Buyer shall have any liability
               -------------
to the other for any failure to fulfill any obligations hereunder during a
period in which they are prevented from doing so by act of God, fire, riot,
labor disturbance, accident, war, act of any government, partial or total
interruption or loss, or shortage of transportation facilities or supplies or by
other causes beyond the reasonable control of the parties, whether similar to
the causes specified or not.  The party claiming benefit of this provision shall
notify the other promptly of the cause and attempt in good faith to resume
performance as soon as reasonably possible, and there shall be no charge for
supplies not in fact delivered or services not performed.  Neither party shall
be obligated to settle a dispute or otherwise take any action which is not
commercially reasonable to terminate an event of force majeure.

          7.   Notice of Scheduled Shutdowns.  Seller will provide to Buyer
               -----------------------------
reasonable notice, consistent with Seller's past practices, of any scheduled
shutdowns which are reasonably likely to interrupt the Services.

          8.   Indemnities.  Subject to the terms of the Acquisition Agreement,
               -----------
(a) Seller shall indemnify, defend and hold harmless Buyer and its affiliates,
officers, directors, stockholders, employees, agents, representatives,
successors and assigns, from and against any and all claims, liabilities,
obligations, losses, deficiencies and damages (except for criminal penalties) or
judgments of any kind or nature whatsoever caused by the willful misconduct or
gross negligence of Seller or its affiliates, officers, directors, stockholders,
employees, agents, representatives, successors and assigns arising from or
associated with provision of the Services set forth on Exhibit A, including
reasonable fees and expenses of counsel and (b) except as provided in clause
(a), Buyer shall indemnify, defend and hold harmless Seller and its affiliates,
officers, directors, stockholders, employees, agents,

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               2
<PAGE>

representatives, successors and assigns, from and against any and all claims,
liabilities, obligations, losses, deficiencies and damages (except for criminal
penalties) or judgments of any kind or nature whatsoever arising from or
associated with provision of the Services set forth on Exhibit A, including
reasonable fees and expenses of counsel.

          9.   Relationship of the Parties.  For purposes of this Agreement,
               ---------------------------
Buyer and Seller shall be deemed to be independent contractors, and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute Buyer and Seller as partners, joint venturers, co-owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever.  Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party.  Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.

          10.  Confidentiality.  The parties agree to keep confidential any and
               ---------------
all information and data received or generated pursuant to this Agreement except
for such disclosures which are required by law or other governmental authority
or which are reasonably necessary to be disclosed by Seller in order to provide
any Services.

          11.  Expenses, Taxes, Etc.  Except as otherwise provided in this
               --------------------
Agreement, each party will pay all fees and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby and
thereby.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               3
<PAGE>

          12.  Notices.  All notices and other communications given or made
               -------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission, (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:

          (a)   If to Seller

                ALZA Corporation
                1900 Charleston Road
                Mountain View, California 94043Attention:  General
                CounselTelecopy No.:  (650) 564-7848
                Telephone No.:  (650) 564-5260

          (b)   if to Buyer:

                DURECT Corporation10240 Bubb RoadCupertino,
                California 95014-4166Attention: Jean Liu,
                Esq.Telecopy No.:  (408)777-3577Telephone No.:
                (408) 777-1417

          13.  Interpretation.  Capitalized terms used in this Agreement and not
               --------------
defined herein shall have the meanings assigned to them in the Acquisition
Agreement.  When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section or Exhibit to this Agreement unless
otherwise indicated.  The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."  The word "herein" and similar references mean, except where a
specific Section reference is expressly indicated, the entire Agreement rather
than any specific Section.  The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  Except as otherwise expressly provided
herein, all monetary amounts referenced in this Agreement shall mean U.S.
dollars.

          14.  Severability.  If any term or other provision of this Agreement
               ------------
is invalid, illegal or incapable of being enforced by any rule of statute, law,
regulation, judgment, injunction, decree or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party.  In such
event, any such term or provision shall be deemed, without further action on the
part of the parties hereto, modified, amended and limited to the extent
necessary to render the same and the remainder of this Agreement valid,
enforceable and lawful.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               4
<PAGE>

          15.  Assignment.  This Agreement may not be assigned by operation of
               ----------
law or otherwise, except that either party (including its Affiliates) may assign
its rights and benefits hereunder (provided that the assigning party or its
Affiliates, as applicable, shall remain responsible for its obligations
hereunder) (a) to any Affiliate of the assigning party, (b) to any Person
acquiring all or substantially all of the assets and properties of the assigning
party, or in the case of Buyer, the Business, as such Business is then conducted
by Buyer and its Affiliates or (c) to any Person acquiring a distinct line or
division of such Business, with respect to the rights and benefits of Buyer
hereunder that pertain thereto.  Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of Buyer and Seller.

          16.  No Third-Party Beneficiaries.  This Agreement is for the sole
               ----------------------------
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.

          17.  Amendment, Other Remedies and Waiver.
               ------------------------------------

          (a)  This Agreement may not be amended or modified except by an
instrument in writing signed by Seller and Buyer.

          (b)  The rights and remedies of the parties to this Agreement are
cumulative and not alternative of any other remedy conferred hereby or by law or
equity, and the exercise of any remedy will not preclude the exercise of any
other.

          (c)  Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement will operate as a waiver of such
right, power or privilege, and single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege.  To
the maximum extent permitted by law, (i) no Action or right arising out of this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the Action or right unless in a writing signed by the other
party; (ii) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (iii) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.

          18.  Mutual Drafting.  This Agreement is the joint product of Buyer
               ---------------
and Seller and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Buyer and Seller and shall not be
construed for or against any party hereto.

          19.  Governing Law; Consent to Jurisdiction.  This Agreement shall be
               --------------------------------------
governed by, and construed in accordance with, the laws of the State of
California (without giving effect to its choice of law principles).  Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of (a) the
Superior Court of the State of California, San Francisco County,

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               5
<PAGE>

and (b) the United States District Court for the Northern District of
California, for the purposes of any Action arising out of this Agreement or any
transaction contemplated hereby or thereby. Each of the parties hereto agrees to
commence any Action relating hereto either in the United States District Court
for the Northern District of California, or if such Action may not be brought in
such court for jurisdictional reasons, in the Superior Court of the State of
California, San Francisco County. Each of the parties hereto further agrees that
service of any process, summons, notice or document by U.S. registered mail to
such party's respective address set forth in Section 12 shall be effective
                                                     --
service of process for any Action in California with respect to any matters to
which it has submitted to jurisdiction in this Section 19.  Each of the parties
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any Action arising out of this Agreement or any transaction
contemplated hereby or thereby in (i) the Superior Court of the State of
California, San Francisco County, or (ii) the United States District Court for
the Northern District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Action brought in any such court has been brought in an inconvenient
forum.

          20.  Counterparts.  This Agreement may be executed in one or more
               ------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

          21.  Public Announcements.  Neither Buyer, Seller nor the
               --------------------
representatives of either of them shall issue to the media any news release or
other public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other party hereto.
The foregoing notwithstanding, any such news release or other public
announcement may be made if required by applicable law or a securities exchange
rule, provided that the party required to make such news release or other public
announcement shall confer with the other party concerning the timing and content
of such news release or other public announcement before the same is made.
Buyer and Seller will consult with each other concerning the means by which
employees, customers and suppliers and others having dealings with Seller with
respect to the Business will be informed of the transactions contemplated
hereby, and Buyer shall be allowed to have present for any such communication a
representative of Buyer.

          22.  Entire Agreement.  This Agreement, together with all Exhibits
               ----------------
hereto, and the documents and instruments and other agreements among the parties
delivered pursuant hereto constitute the entire agreement and supersede all
prior agreements and undertakings, both written and oral, among Buyer and Seller
with respect to the subject matter hereof and are not intended to confer upon
any other Person any rights or remedies hereunder, except as otherwise expressly
provided herein.

          23.  Survival.  The provisions of Sections 5, 8, 9, 10, 11, 12, 14,
               --------
19, 21 and this Section 23 shall survive the termination for any reason of this
Agreement.  Any payments due under this Agreement with respect to any period
prior to its termination shall be made notwithstanding the termination of this
Agreement.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               6
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

DURECT CORPORATION,                  ALZA CORPORATION
a Delaware corporation               a Delaware corporation



By: /s/ James E. Brown               By: /s/ Peter Staple
   _________________________            _________________________
   Name:  James E. Brown                Name:  Peter Staple
   Title: Chief Executive Officer       Title: Executive Vice President


*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                                                               7
<PAGE>

                                   EXHIBIT A

                             Schedule of Services

Services to be Provided:

[* * *]
     -

Payment for Services:

DIRECT EXPENSES
---------------

      [* * *]

INDIRECT EXPENSES**
-----------------

[* * *]
     -

*Materials has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                      -1-
<PAGE>

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -2-
<PAGE>

                          COATING SERVICES AGREEMENT

          This COATING SERVICES AGREEMENT (this "Agreement"), dated as of April
14, 2000 (the "Effective Date"), is made by and between ALZA CORPORATION, a
Delaware corporation ("Seller"), and DURECT CORPORATION, a Delaware corporation
("Buyer").

                                R E C I T A L S

          A.   Seller and Buyer have entered into a Product Acquisition
Agreement of even date herewith (the "Acquisition Agreement"), providing for the
sale by Seller to Buyer of certain Assets (as defined in the Acquisition
Agreement).

          B.   Buyer desires that Seller render certain services to Buyer on an
interim basis to assist in the operation of the Business (as defined in the
Acquisition Agreement) of the manufacture and sale of the Product (as defined in
the Acquisition Agreement).  Seller is willing to perform such services on the
terms and subject to the conditions set forth herein.

                               A G R E E M E N T

          In consideration of the premises and the respective covenants and
obligations set forth herein the parties agree as follows:

          1.   Services.  Seller shall provide to Buyer for use in connection
               --------
with the manufacture and sale of the Product the services described in the
Schedule of Services attached hereto as Exhibit A and incorporated herein by
                                        ---------
this reference (individually and collectively, the "Services").  Except as
otherwise noted on Exhibit A, the Services shall be of the type and at the level
                   ---------
of use provided by Seller to the Business immediately prior to the Effective
Date.  Such services will provided at reasonable times and upon reasonable
notice, as mutually agreed.

          2.   Term.  The term of this Agreement shall commence on the Effective
               ----
Date. The parties acknowledge that the purpose of this Agreement is to provide
Services on an interim basis to permit Buyer to develop its ability to provide
the Services or to obtain alternate sources of supply of Services within a
reasonable period of time after the date hereof. Buyer shall use its best
efforts to develop its ability to provide to itself the Services and/or obtain
alternate sources of supply for the Services as soon as practicable after the
Effective Date. Buyer may terminate this Agreement with respect to any item of
Service upon [* * *] prior written notice to Seller. Unless this Agreement is
renewed by mutual agreement of the parties, this Agreement shall terminate not
later than the date which is three (3) years following the Closing Date (as
defined in the Acquisition Agreement); provided that, no such termination shall
affect the obligations of Buyer to make payments due hereunder.

          3.   Compensation.  On the Effective Date, Buyer shall pay Seller
               ------------
[* * *]. In addition, [* * *]. Seller's [* * *.]
                                             -

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -3-
<PAGE>

          4.   Invoicing.  Seller shall invoice Buyer for the Services on one or
               ---------
more invoices at such intervals as Seller shall determine, provided that Seller
will not invoice Buyer more than once  per month.  All payments shall be due and
payable 30 days after the date of the invoice.

          5.   Disputes.  If Buyer disputes any charge set forth in an invoice,
               --------
Buyer shall notify Seller in writing within 30 days after receipt of such
invoice.  The parties shall promptly attempt to resolve any such dispute.  If
either party determines that the dispute cannot be resolved in a mutually
agreeable manner, the dispute shall be resolved exclusively as set forth in
Section 11.11 of the Acquisition Agreement.

          6.   Specific Performance.  Each of the parties hereto acknowledges
               --------------------
and agrees that the extent of damages to Buyer in the event of a breach by
Seller of this Agreement would be impossible to ascertain and there is and will
be available to Buyer no adequate remedy at law to compensate it in the event of
such a breach.  Consequently, the Seller agrees that, in the event that it fails
to perform any Services hereunder, Buyer shall be entitled, in addition to any
other relief to which it may be entitled including without limitation money
damages, to enforce any or all of such covenants to perform any Services by
injunctive or other equitable relief ordered by any court of competent
jurisdiction.

          7.   Indemnities.  Subject to the terms of the Acquisition Agreement,
               -----------
(a) Seller shall indemnify, defend and hold harmless Buyer and its affiliates,
officers, directors, stockholders, employees, agents, representatives,
successors and assigns, from and against any and all claims, liabilities,
obligations, losses, deficiencies and damages (except for criminal penalties) or
judgments of any kind or nature whatsoever caused by the willful misconduct or
gross negligence of Seller or its affiliates, officers, directors, stockholders,
employees, agents, representatives, successors and assigns arising from or
associated with provision of the Services set forth on Exhibit A, including
                                                       ---------
reasonable fees and expenses of counsel and (b) except as provided in clause
(a), Buyer shall indemnify, defend and hold harmless Seller and its affiliates,
officers, directors, stockholders, employees, agents, representatives,
successors and assigns, from and against any and all claims, liabilities,
obligations, losses, deficiencies and damages (except for criminal penalties) or
judgments of any kind or nature whatsoever arising from or associated with
provision of the Services set forth on Exhibit A, including reasonable fees and
                                       ---------
expenses of counsel.

          8.   Force Majeure.  Neither Seller nor Buyer shall have any liability
               -------------
to the other for any failure to fulfill any obligations hereunder during a
period in which they are prevented from doing so by act of God, fire, riot,
labor disturbance, accident, war, act of any government, partial or total
interruption or loss, or shortage of transportation facilities or supplies or by
other causes beyond the reasonable control of the parties, whether similar to
the causes specified or not.  The party claiming benefit of this provision shall
notify the other promptly of the cause and attempt in good faith to resume
performance as soon as reasonably possible, and there shall be no charge for
supplies not in fact delivered or services not performed.  Neither party shall
be obligated to settle a dispute or otherwise take any action which is not
commercially reasonable to terminate an event of force majeure.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -4-
<PAGE>

          9.   Notice of Scheduled Shutdowns.  Seller will provide to Buyer
               -----------------------------
reasonable notice, consistent with Seller's past practices, of any scheduled
shutdowns which are reasonably likely to interrupt the Services.

          10.  Relationship of the Parties.  For purposes of this Agreement,
               ---------------------------
Buyer and Seller shall be deemed to be independent contractors, and anything in
this Agreement to the contrary notwithstanding, nothing herein shall be deemed
to constitute Buyer and Seller as partners, joint venturers, co-owners, an
association or any entity separate and apart from each party itself, nor shall
this Agreement constitute any party hereto an employee or agent, legal or
otherwise, of the other party for any purposes whatsoever.  Neither party hereto
is authorized to make any statements or representations on behalf of the other
party or in any way obligate the other party, except as expressly authorized in
writing by the other party.  Anything in this Agreement to the contrary
notwithstanding, no party hereto shall assume nor shall be liable for any
liabilities or obligations of the other party, whether past, present or future.

          11.  Confidentiality.  The parties agree to keep confidential any and
               ---------------
all information and data received or generated pursuant to this Agreement except
for such disclosures which are required by law or other governmental authority
or which are reasonably necessary to be disclosed by Seller in order to provide
any Services.

          12.  Expenses, Taxes, Etc.  Except as otherwise provided in this
               --------------------
Agreement, each party will pay all fees and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby and
thereby.

          13.  Notices.  All notices and other communications given or made
               -------
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), or
sent by facsimile transmission, (confirmation received) to the parties at the
following addresses and facsimile transmission numbers (or at such other address
or number for a party as shall be specified by like notice), except that notices
after the giving of which there is a designated period within which to perform
an act and notices of changes of address or number shall be effective only upon
receipt:

           (a)  If to Seller

                ALZA Corporation
                1900 Charleston Road
                Mountain View, California 94043
                Attention: General Counsel
                Telecopy No.: (650) 564-7848
                Telephone No.: (650) 564-5260

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -5-
<PAGE>

           (b)  if to Buyer:

                DURECT Corporation
                10240 Bubb Road
                Cupertino, California  95014-4166
                Attention: Jean Liu, Esq.
                Telecopy No.: (408) 777-3577
                Telephone No.: (408) 777-1417

          14.  Interpretation.  Capitalized terms used in this Agreement and not
               --------------
defined herein shall have the meanings assigned to them in the Acquisition
Agreement.  When a reference is made in this Agreement to Sections or Exhibits,
such reference shall be to a Section or Exhibit to this Agreement unless
otherwise indicated.  The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation."  The word "herein" and similar references mean, except where a
specific Section reference is expressly indicated, the entire Agreement rather
than any specific Section.  The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.  Except as otherwise expressly provided
herein, all monetary amounts referenced in this Agreement shall mean U.S.
dollars.

          15.  Severability.  If any term or other provision of this Agreement
               ------------
is invalid, illegal or incapable of being enforced by any rule of statute, law,
regulation, judgment, injunction, decree or public policy, all other conditions
and provisions of this Agreement shall nevertheless remain in full force and
effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party.  In such
event, any such term or provision shall be deemed, without further action on the
part of the parties hereto, modified, amended and limited to the extent
necessary to render the same and the remainder of this Agreement valid,
enforceable and lawful.

          16.  Assignment.  This Agreement may not be assigned by operation of
               ----------
law or otherwise, except that Buyer (including its Affiliates) may assign its
rights and benefits hereunder (provided that Buyer or its Affiliates, as
applicable, shall remain responsible for its obligations hereunder) (a) to any
Affiliate of Buyer, (b) to any Person acquiring all or substantially all of the
assets and properties of the Business, as such Business is then conducted by
Buyer and its Affiliates or (c) to any Person acquiring a distinct line or
division of such Business, with respect to the rights and benefits of Buyer
hereunder that pertain thereto.  Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon and inure to the
benefit of the successors and permitted assigns of Buyer and Seller.

          17.  No Third-Party Beneficiaries.  This Agreement is for the sole
               ----------------------------
benefit of the parties hereto and their permitted assigns and nothing herein
expressed or implied shall give or be construed to give to any Person, other
than the parties hereto and such assigns, any legal or equitable rights
hereunder.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -6-
<PAGE>

          18.  Amendment, Other Remedies and Waiver.
               ------------------------------------

          (a) This Agreement may not be amended or modified except by an
instrument in writing signed by Seller and Buyer.

          (b) The rights and remedies of the parties to this Agreement are
cumulative and not alternative of any other remedy conferred hereby or by law or
equity, and the exercise of any remedy will not preclude the exercise of any
other.

          (c) Neither the failure nor any delay by any party in exercising any
right, power or privilege under this Agreement will operate as a waiver of such
right, power or privilege, and single or partial exercise of any such right,
power or privilege will preclude any other or further exercise of such right,
power or privilege or the exercise of any other right, power or privilege.  To
the maximum extent permitted by law, (i) no Action or right arising out of this
Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the Action or right unless in a writing signed by the other
party; (ii) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (iii) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.

          19.  Mutual Drafting.  This Agreement is the joint product of Buyer
               ---------------
and Seller and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Buyer and Seller and shall not be
construed for or against any party hereto.

          20.  Governing Law; Consent to Jurisdiction.  This Agreement shall be
               --------------------------------------
governed by, and construed in accordance with, the laws of the State of
California (without giving effect to its choice of law principles).  Each of the
parties hereto irrevocably submits to the exclusive jurisdiction of (a) the
Superior Court of the State of California, San Francisco County, and (b) the
United States District Court for the Northern District of California, for the
purposes of any Action arising out of this Agreement or any transaction
contemplated hereby or thereby.  Each of the parties hereto agrees to commence
any Action relating hereto either in the United States District Court for the
Northern District of California, or if such Action may not be brought in such
court for jurisdictional reasons, in the Superior Court of the State of
California, San Francisco County.  Each of the parties hereto further agrees
that service of any process, summons, notice or document by U.S. registered mail
to such party's respective address set forth in Section 12 shall be effective
service of process for any Action in California with respect to any matters to
which it has submitted to jurisdiction in this Section 19.  Each of the parties
hereto irrevocably and unconditionally waives any objection to the laying of
venue of any Action arising out of this Agreement or any transaction
contemplated hereby or thereby in (i) the Superior Court of the State of
California, San Francisco County, or (ii) the United States District Court for
the Northern District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Action brought in any such court has been brought in an inconvenient
forum.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -7-

<PAGE>

          21.  Counterparts.  This Agreement may be executed in one or more
               ------------
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.

          22.  Public Announcements.  Neither Buyer, Seller nor the
               --------------------
representatives of either of them shall issue to the media any news release or
other public announcement with respect to this Agreement or the transactions
contemplated hereby without the prior written consent of the other party hereto.
The foregoing notwithstanding, any such news release or other public
announcement may be made if required by applicable law or a securities exchange
rule, provided that the party required to make such news release or other public
announcement shall confer with the other party concerning the timing and content
of such news release or other public announcement before the same is made.
Buyer and Seller will consult with each other concerning the means by which
employees, customers and suppliers and others having dealings with Seller with
respect to the Business will be informed of the transactions contemplated
hereby, and Buyer shall be allowed to have present for any such communication a
representative of Buyer.

          23.  Entire Agreement.  This Agreement, together with all Exhibits
               ----------------
hereto, and the documents and instruments and other agreements among the parties
delivered pursuant hereto constitute the entire agreement and supersede all
prior agreements and undertakings, both written and oral, among Buyer and Seller
with respect to the subject matter hereof and are not intended to confer upon
any other Person any rights or remedies hereunder, except as otherwise expressly
provided herein.

          24.  Survival.  The provisions of Sections 5, 6, 7, 10, 11, 12, 13,
               --------
15, 20, 22 and this Section 24 shall survive the termination for any reason of
this Agreement.  Any payments due under this Agreement with respect to any
period prior to its termination shall be made notwithstanding the termination of
this Agreement.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -8-
<PAGE>

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.

DURECT CORPORATION,                  ALZA CORPORATION
a Delaware corporation               a Delaware corporation

By: /s/ James E. Brown                By: /s/ Peter Staple
   -------------------------------       ---------------------------------
   Name: James E. Brown                  Name: Peter Staple
   Title: Chief Executive Officer        Title: Executive Vice President

                                   EXHIBIT A

                             Schedule of Services

Services to be Provided:

[* * *]
     -

Responsibilities of ALZA in Provision of Services:

[* * *]
     -


Responsibilities of DURECT in Provision of Services:

[* * *]
     -

Payment for Services: [* * *]
                           -

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC.

                                      -9-
<PAGE>

                       NEW MODELS DEVELOPMENT AGREEMENT

   THIS NEW MODELS DEVELOPMENT AGREEMENT ("AGREEMENT") IS ENTERED INTO AS OF
    APRIL 14, 2000 BETWEEN ALZA CORPORATION ("ALZA") AND DURECT CORPORATION
                                  ("DURECT").

                                R E C I T A L S
                                ---------------

     A.   ALZA and DURECT are parties to a Product Acquisition Agreement
("Acquisition Agreement") dated the date hereof, whereby DURECT acquired ALZA's
right, title and interest in and to the osmotic, miniature, implantable pumps
for research use in laboratory animals, sold under the trademark ALZET(R) (the
"Product").

     B.   The parties desire that ALZA continue certain in-process development
of two New Models of the Product.

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

     1.   Definitions.  For the purposes of this Agreement, the following terms
          -----------
will have the respective meanings set forth below:

          1.1  "Development Costs" means the costs of the Program incurred by
ALZA pursuant to this Agreement and determined in accordance with Exhibit A
hereto.
          1.2  "New Models" means either of and each of (1) [* * *] and (2)
[* * *].
     -
          1.3  "Program" means all activities undertaken by either or both
parties in accordance with the terms hereof for the development of the New
Models.

     2.   Product Development Program.
          ---------------------------

          2.1  Promptly after execution of this Agreement and approval of a work
plan as described in Section 2.2, ALZA will commence the Program activities
necessary to continue development of the New Models.  In connection with the
Program, both parties will make available appropriate scientific, engineering
and other

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC. 10
<PAGE>

personnel to perform tasks under the Program. The parties will use reasonable
commercial efforts to carry out the Program, will participate in periodic
conferences to review its status and will cooperate in the prompt preparation
and review of, and discussion concerning, work plans and cost estimates and
revisions thereto described in Section 2.2.

          2.2  ALZA and DURECT agree to cooperate to devise mutually acceptable
work plans and cost estimates for the development of the New Models.  The
parties understand and agree that it is difficult to accurately predict the
activities that will be necessary to develop the New Models, or the cost
thereof, and significant uncertainties exist in any product development effort.
As a result, any such work plan and cost estimate will be diligently reviewed
and revised from time to time in order that it remain a faithful best-estimate
of work to be done by the parties under the Program and, with regard to ALZA's
activities, the Development Costs thereof.

          2.3  DURECT will pay to ALZA, on a monthly basis, [* * *]. ALZA will
invoice DURECT on or before the fifteenth day of each month for the preceding
month's Development Costs. All payments will be made within 30 days after the
date of the invoice. Notwithstanding the foregoing, [* * *]
                                                         -

     3.   Ownership.
          ---------

          Any inventions and information solely relating to the New Models
("Inventions") and any intellectual property rights therein and thereto will be
the property of DURECT, without regard to whether the Inventions are made by
employees of DURECT, ALZA or both parties.  ALZA shall promptly disclose any
such Inventions to DURECT, execute all required instruments to assign ownership
of such Inventions to DURECT and cooperate with DURECT to obtain and enforce any
patents or other registrations covering such Inventions.  This provision will
survive the termination of this Agreement for any reason.

     4.   Term and Termination.
          --------------------

          4.1  Unless earlier terminated under Section 4.2, this Agreement will
remain in effect until completion of the development of the New Models.

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC. 11
<PAGE>

          4.2  DURECT may terminate this Agreement at any time upon not less
than 30 days' written notice to ALZA.  ALZA may terminate this Agreement upon
not less than 30 days' written notice to DURECT, if DURECT fails to pay any
amounts due to ALZA under this Agreement within 30 days after the date of
invoice, unless DURECT shall have paid such outstanding amounts within 30 days
of DURECT's receipt of ALZA's written notice thereof.

          4.3  Termination of this Agreement will be without prejudice to ALZA's
right to receive payment of all Development Costs incurred prior to the
effective date of the termination.  After termination of this Agreement by
DURECT or termination by ALZA due to a breach of this Agreement by DURECT,
DURECT will reimburse ALZA, within 30 days after invoice, for any uncancellable
obligations and expenses incurred by ALZA prior to such termination in
connection with the Program and all costs incurred by ALZA in terminating the
Program.

     5.   Miscellaneous.
          -------------

          5.1  This Agreement will be governed by and construed in accordance
with the laws of the State of California, excluding any choice of law rules
which may direct the application of the laws of another jurisdiction.

          5.2  This Agreement will not be amended or modified except in a
writing signed by each of the parties hereto.

          5.3  All notices, requests and other communications required or
permitted to be given hereunder or with respect hereto will be in writing, and
may be given by (i) personal delivery, (ii) registered first-class United States
mail, postage prepaid by the sender, return receipt requested, (iii) overnight
delivery service, charges prepaid by the sender, or (iv) via facsimile and, in
each case, addressed to the other party at the address for such party as set
forth below, and will be effective upon receipt in the case of (i) (iii) or (iv)
above, and five days after mailing in the case of (ii) above.

     If to ALZA:    ALZA Corporation
                    1900 Charleston Road
                    Mountain View, CA 94043
                    Fax #: 650-564-7848
                    Attention: Senior Vice President and General Counsel

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC. 12
<PAGE>

     If to DURECT:  DURECT CORPORATION
                    10240 Bubb Road
                    Cupertino, CA 95014
                    Fax #: (408) 777-3577
                    Attention: General Counsel

Any party may change its address at which notice is to be received by written
notice provided pursuant to this Section 5.3.

          5.4  Each party will be responsible for assuring that all applicable
rules, laws and regulations are met in the performance of its duties hereunder.

          5.5  This Agreement, together with the exhibits hereto, sets forth the
entire agreement and understanding between the parties with respect to the
subject matter hereof, and supersedes all prior agreements and understandings
between the parties with respect to the subject matter hereof, whether oral or
in writing.

          5.6  Neither party will be liable to the other due to the termination
of this Agreement as provided herein, whether in loss of good will, anticipated
profits or otherwise.

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.

ALZA CORPORATION                             DURECT CORPORATION

By:    /s/ Peter Staple                      By:    /s/ James E. Brown
       __________________________                   _________________________

Title: Executive Vice President              Title: Chief Executive Officer
       __________________________                   _________________________

*Material has been omitted pursuant to a request for confidential treatment, and
such material has been filed separately with the SEC. 13
<PAGE>

                                   EXHIBIT A

                               DEVELOPMENT COSTS


Development Costs are equal to the sum of (i) research expenses, (ii) general
and administrative expenses and (iii) capital asset expenditures.

     (i)   Research expenses include both direct expenses and indirect expenses.

           (a)   Direct expenses include direct research salaries (including
                 project management and temporary labor), clinical expenses,
                 supplies and other expenses incurred specifically in connection
                 with the Program.

           (b)   Indirect expenses include general research management and
                 support costs of the research and product development
                 organization. Indirect expenses are allocated to all projects
                 and billed to clients at a fixed rate* of 160% of direct
                 research salaries.

           Examples of items included in direct and indirect expenses are listed
           on Exhibit A-1

           (ii)  General and administrative expenses are allocated among the
           research and product development, manufacturing and marketing
           organizations. The portion allocated to the research and product
           development organization is then allocated to all research and
           development projects and billed to clients at a fixed rate* of 80% of
           direct research salaries.

                 Examples of items included in general and administrative
           expenses are listed on Exhibit A-1.

           (iii) Capital asset expenditures are the actual costs of new capital
           assets acquired specifically for the project.


--------------
* This fixed billing rate will not be changed prior to January 1, 2001 and, if
changed on or after January 1, 2001, such changes will be limited to not more
than one change per calendar year and shall be a maximum of 10% of the rate in
effect at the time of the increase.



* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC. 1



<PAGE>

                                  EXHIBIT A-1

                                  Examples of
                               Research Expenses
                               -----------------


Direct Expenses
---------------

Direct research salaries*
Project clinical expenses and outside services
Project specific supplies
Project travel and related expenses
Miscellaneous project expenses
Regulatory and filing fees and maintenance payments

Indirect Expenses
-----------------

Research management and indirect salaries*
General research supplies and materials
General research consulting and outside services
Facilities expenses
Telephone and communications
Equipment depreciation, rent, maintenance and services
Research travel and related expenses
Patent and trademark expenses
Miscellaneous indirect research expenses


                                  Examples of
                      General and Administrative Expense
                      ----------------------------------

Corporate management, administrative, and indirect salaries*
Telephone and communications
Equipment depreciation, rent, maintenance and services
Board of directors and corporate consulting
Annual audit, accounting and legal expenses
Facilities expenses
Information services (data processing) expenses
Interest expense
Miscellaneous general and administrative expenses

*Salaries include fringe benefits at a fixed rate of 52% of salaries. This fixed
rate will not be changed prior to January 1, 2001 and, if changed on or after
January 1, 2001, such changes will be limited to not more than one change per
calendar year and shall be a maximum of 10% of the rate in effect at the time
of the increase.

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.
<PAGE>

                                  SCHEDULE 1
                                  ----------

                                  THE PRODUCT
                                  -----------

A General Description

[*  *  *.]
        --


           ------------------------------------------------------------------
                        Item                              Part #
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]
           ------------------------------------------------------------------

             [ * * * ]                                 [ * * * ]



Ancillary products:
------------------

 .  [ * * * ]

 .  [ * * * ]


Non-Profiled Document

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                      -7-
<PAGE>

                                SCHEDULE 2.1(a)
                                ---------------

                                   INVENTORY
                                   ---------



The attached inventory list is subject to confirmation by Seller and Buyer.

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                      -8-
<PAGE>

                                SCHEDULE 2.1(b)
                                ---------------
                                 FIXED ASSETS
                                 ------------

                      Asset No.            Description
                      --------             -----------
                 [[ * * * ]                                    [ * * * ]
                 -
* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                      -9-
<PAGE>

                                SCHEDULE 2.1(c)
                                ---------------

                                   CONTRACTS
                                   ---------

1.  Distributorship Agreement between ALZA and [[ * * * ].]
                                               -         --

2.  Distributorship Agreement between ALZA and [[ * * * ].]
                                                         --

3.  Distributorship Agreement between ALZA and[[ * * * ].]
                                                        --

4.  Distributorship Agreement between ALZA and[[ * * * ].]
                                                        --

5.  Distributorship Agreement between ALZA and [[ * * * ]

6.  Distributorship Agreement between ALZA and [[ * * * ]

7.  Distributorship Agreement between ALZA and [ * * * ]

8.  Distributorship Agreement between ALZA and [[ * * * ]

9.  Distributorship Agreement between ALZA and [[ * * * ]

10. Distributorship Agreement between ALZA and [ * * * ]

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -10-
<PAGE>

                                SCHEDULE 2.1(d)
                                ---------------

                                     LEASE
                                     -----

Lease between ALZA and Chevron Land and Development Company dated February 1,
1986, as amended October 15, 1990, January 25, 1995, March 27, 1997 and December
1, 1999.

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -11-
<PAGE>

                                SCHEDULE 2.1(e)
                                ---------------

                                  TRADEMARKS

1.   ALZET


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Trademark Name:                   Country Name      Registration No:     Reg. Date:           Classes:
------------------------------------------------------------------------------------------------------------
<S>                          <C>                    <C>                  <C>                  <C>
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
ALZET                                [***]              [***]              [***]               [***]
------------------------------------------------------------------------------------------------------------
</TABLE>

2.   SPECIAL DELIVERY


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
 Country    Trademark Name:                  Owner Name       Registration No:      Reg. Date:         Classes:
-------------------------------------------------------------------------------------------------------------------
<S>         <C>                           <C>                 <C>                  <C>                 <C>
  [***]        SPECIAL DELIVERY                 [***]              [***]              [***]              [***]
-------------------------------------------------------------------------------------------------------------------
</TABLE>

3.   ALZAID

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
 Country    Trademark Name:                    Owner        Registration No:     Reg. Date:            Classes:
-------------------------------------------------------------------------------------------------------------------
<S>         <C>                                <C>          <C>                  <C>                   <C>
  [***]         ALZAID                          [***]              [***]              [***]              [***]
--------------------------------------------------------------------------------------------------------------------
</TABLE>

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -12-
<PAGE>

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -13-
<PAGE>

                                SCHEDULE 2.1(f)
                                ---------------

                               MARKETING ASSETS
                               ----------------


[[ * * * ]



* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -14-
<PAGE>

                                 SCHEDULE 5.9
                                 ------------

                                   EMPLOYEES
                                   ---------


Name                                  Title
----                                  -----

[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]
[ * * * ]                             [ * * * ]


* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -15-
<PAGE>

                                 SCHEDULE 5.10
                                 -------------

                             ENVIRONMENTAL MATTERS
                             ---------------------


The following are exceptions to the representations and warranties of Seller in
Section 5.10:


[ *  *   * ]


* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -16-
<PAGE>

                                 SCHEDULE 7.6
                                 ------------

                   PER UNIT PRICE OF PRODUCTS IN INVENTORIES
                   -----------------------------------------



                        Part #                  Price (per Unit)
                        -----                   ----------------

[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]
[ *  *  *  ]          [  *  *  *  ]               [ *  *  *  ]


* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -17-
<PAGE>

* Material has been omitted pursuant to a request for confidential treatment,
and such material has been filed separately with the SEC.

                                     -18-