<PAGE>
                                                                  Exhibit 10.3
                                OPTION AGREEMENT


     AGREEMENT made this 30th day of December, 1982 by and between ALZA
CORPORATION, a California corporation ("ALZA") and ALZA TTS RESEARCH PARTNERS,
LTD., a California limited partnership (the "Partnership").

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

     A.   On the date hereof, ALZA and the Partnership have entered into a
Technology License Agreement and a Development Contract.

     B.   Pursuant to the Development Contract, the Partnership will employ
ALZA to perform the research and development work described therein, which is
anticipated to result in Products.

     C.   In order to induce ALZA to enter into the Technology License
Agreement and in order to carry out the commercial exploitation of Products,
the Partnership desires to grant to ALZA certain options as set forth herein.

     NOW, THEREFORE, the parties agree as follows:

     1.   DEFINITIONS

          1.1  "ALZA Proprietary Rights" shall have the meaning set forth in
the Development Contract.


<PAGE>

          1.2  "Confidential Information" shall mean all Partnership
Technology disclosed to ALZA hereunder except information that:

               (a)  is known to or used by ALZA prior to the time of disclosure
     hereunder;

               (b)  lawfully is disclosed to ALZA by a third party having the
     right to disclose it; or

               (c)  either before or after the time of disclosure to ALZA
     becomes known to the public other than by an unauthorized act or omission
     of ALZA or its employees or agents.

          1.3  "Completion" of a Product shall mean the actual reduction to
practice of such Product within the meaning of Section 102(g) of Title 35 of
the United States Code.

          1.4  "Continuation Option" shall mean the option granted to ALZA
pursuant to Section 3 of this Agreement.

          1.5  "Development Contract" shall mean the Research and Development
Agreement of even date herewith between the Partnership and ALZA.

          1.6  "Discontinued Product" shall mean any Product or Product
Candidate for which the Partnership (i) has commenced a Product Development
Program but has determined for any reason to discontinue permanently the
activities thereunder prior to obtaining regulatory approval in the United
States or in two other Major Market Countries and (ii) has given ALZA the
notice described in Section 3.1 hereof.


                                       -2-
<PAGE>

          1.7  "FDA" shall mean the United States Food and Drug
Administration.

          1.8  "License Option" shall mean the option granted to ALZA
pursuant to Section 2 of this Agreement.

          1.9  "Licensed Technology" shall have the meaning set forth in the
Development Contract.

          1.10 "Major Market Country" shall mean any one of the United
States, Japan, West Germany, Italy, France or the United Kingdom.

          1.11 "NDA" shall mean a new drug application as that term is
defined in the United States Food, Drug and Cosmetics Act.

          1.12 "Partnership License Agreement" shall mean an exclusive
license agreement between ALZA and the Partnership substantially in the form
of Exhibit A to this Agreement.

          1.13 "Partnership Technology" shall have the meaning set forth in
the Development Contract.

          1.14 "Product" shall have the meaning set forth in the Development
Contract.

          1.15. "Product Candidate" shall have the meaning set forth in the
Development Contract.

          1.16 "Product Development Program" shall have the meaning set forth
in the Development Contract.

          1.17 "Proprietary Rights" shall have the meaning set forth in the
Development Contract.

                                       -3-
<PAGE>

          1.18 "Prospectus" shall have the meaning set forth in the Development
Contract.

          1.19 "Technology License Agreement" shall mean the Technology License
Agreement of even date herewith between ALZA and the Partnership.

     2.   LICENSE OPTION

          2.1  GRANT OF LICENSE OPTION.  On the terms and subject to the
conditions of this Agreement, the Partnership hereby grants to ALZA a License
Option for each Product.

          2.2  TIME FOR EXERCISE.  Subject to Section 3.7, ALZA may exercise
the License Option with respect to each Product at any time beginning one
year and one day after the Completion of the Product and ending on the later
of (i) 90 days after such date and (ii) 90 days after the Partnership
notifies ALZA of receipt of the first to be received of either (a) approval
by the FDA of the NDA relating to the Product or (b) comparable regulatory
approval of the Product in any two other Major Market Countries.  The License
Option for any Product automatically will expire if not exercised within the
foregoing time period.  The Partnership promptly will notify ALZA upon the
Completion of each Product.

          2.3  MANNER OF EXERCISE.  ALZA shall exercise any License Option by
delivering to the Partnership, within the time period described in Section
2.2 above, a notice of exercise specifying the Product as to which the
License Option is exercised.  A Partnership License Agreement for such Product


                                       -4-
<PAGE>

shall be deemed to be effective as of the date of such notice of exercise
without the necessity of any additional action by the parties.  For the
convenience of the parties, however, the Partnership shall, upon receipt of
ALZA's notice, forward to ALZA two executed copies of a Partnership License
Agreement dated the effective date; ALZA shall execute both copies and return
one to the Partnership as soon as possible.  Failure of either or both of the
parties to execute such Partnership License Agreement shall not, however,
affect the effectiveness of the license granted thereby.  The parties shall
enter into a separate Partnership License Agreement for each Product as to
which ALZA elects to exercise a License Option.

     3.   CONTINUATION OPTION

          3.1  GRANT OF CONTINUATION OPTION.  In the event that the
Partnership determines to discontinue permanently the Product Development
Program for any Product or Product Candidate prior to obtaining regulatory
approval either (i) by the FDA or (ii) by comparable regulatory authorities
in two other Major Market Countries, the Partnership immediately shall notify
ALZA to such effect.  On the date of such notice, such Product or Product
Candidate automatically shall become a Discontinued Product.  On the terms
and subject to the conditions of this Agreement, the Partnership hereby
grants to ALZA a Continuation Option with respect to each Discontinued
Product. Under each Continuation Option, ALZA shall have the right to
continue the


                                       -5-
<PAGE>

development of a Discontinued Product until the earlier of receipt of (i)
approval by the FDA of the NDA relating to the Product or (ii) comparable
regulatory approval in two other Major Market Countries.  If ALZA exercises the
Continuation Option, ALZA will proceed with a view to Completion of the
Discontinued Product and obtaining regulatory approvals thereof.  From time to
time as reasonably requested by the Partnership, ALZA will provide the
Partnership with reports on the progress of the development of a Discontinued
Product and any regulatory approvals thereof.

          3.2  TIME FOR EXERCISE.  ALZA may exercise its Continuation Option
with respect to any Discontinued Product at any time beginning on the date on
which it receives the notice described in Section 3.l and ending 90 days
after the termination for any reason of the Development Contract; provided,
however, that if at any time beginning 90 days after such notice for any
Product or Product Candidate, ALZA has not exercised its Continuation Option
for such Product or Product Candidate and the Partnership obtains an offer
from a third party to Complete the Product or Product Candidate, the
Partnership shall so notify ALZA and, for a period of 30 days thereafter,
ALZA may exercise its Continuation Option for such Product.  If ALZA does not
exercise its Continuation Option within such 30-day period, but the
Partnership for any reason does not consummate an agreement with the third
party to Complete the


                                       -6-
<PAGE>

Product or Product Candidate, the Continuation Option for the Product or
Product Candidate will remain in effect.  If the Partnership enters into a
written agreement with such third party to Complete the Product or Product
Candidate, on the date of such agreement, ALZA's License Option and
Continuation Option for such Product or Product Candidate automatically shall
terminate.

          3.3  MANNER OF EXERCISE.  ALZA shall exercise its Continuation
Option by delivering to the Partnership, within the applicable time periods
described in Section 3.2 above, a notice of exercise specifying the
Discontinued Product as to which the Continuation Option is being exercised.

          3.4  SIMULTANEOUS OPTIONS.  Subject to the other provisions of this
Agreement, if the Partnership already has notified ALZA of the Completion of
a Product in accordance with Section 2.2 prior to determining to discontinue
the Product Development Program for that Product, then ALZA will have a
simultaneous License Option and Continuation Option for such Discontinued
Product, and ALZA may exercise either or both such options in accordance with
the applicable provisions of this Agreement.

          3.5  ALZA RIGHTS UPON COMPLETION OF A DISCONTINUED PRODUCT.  If
ALZA exercises a Continuation Option prior to the Completion of a
Discontinued Product, ALZA immediately shall notify the Partnership upon the
Completion of the Discontinued Product, and thereafter ALZA shall have the
right to


                                       -7-
<PAGE>

exercise its License Option for such Discontinued Product during the same
periods and in the same manner as described in Sections 2.2 and 2.3. After
such notice, ALZA may nonetheless, without exercising the License Option for
such Discontinued Product, continue the development of such Product until the
earlier of (i) FDA approval of the NDA for the Discontinued Product or (ii)
comparable regulatory approval in two other Major Market Countries.

          3.6  PARTNERSHIP LICENSE AGREEMENTS FOR DISCONTINUED PRODUCTS.  If
ALZA exercises the License Option for any Discontinued Product in accordance
with Section 2, the parties shall enter into a Partnership License Agreement
on the same terms as set forth in Exhibit A hereof, except that the royalties
to be paid to the Partnership by ALZA in respect of any Discontinued Product
shall be the royalties payable under subsections 3.1(a) and 3.1(b) of Exhibit
A reduced by the number obtained by multiplying the royalties otherwise so
payable by a fraction, the numerator of which shall be all Development Costs
(as defined and described in the Development Contract) paid by ALZA with
respect to the Discontinued Product through the date of the earlier of (i)
approval of the Product by the FDA or (ii) approval of the Product by
comparable regulatory authorities in two other Major Market Countries, and
the denominator of which shall be all of the Development Costs paid with
respect to such Discontinued Product by both ALZA and


                                       -8-
<PAGE>

the Partnership through such date.  Within 60 days after ALZA's exercise of
any License Option for a Discontinued Product, each party shall provide the
other party with a written accounting of all Development Costs of the
Discontinued Product paid or expended by such party through the date of such
exercise.  As soon as practicable thereafter, the Partnership shall forward
to ALZA two copies of an executed Partnership License Agreement modified in
accordance with this Section 3.6; ALZA shall execute both copies and return
one to the Partnership as soon as possible.  The Partnership License
Agreement shall be deemed to be effective as of the date of ALZA's notice of
exercise of the License Option for the Discontinued Product, and failure of
either or both of the parties to execute the Partnership License Agreement
shall not affect the effectiveness of the license granted thereby.  If, on
the effective date of the Partnership License Agreement, the Product has not
been approved by either (i) the FDA or (ii) comparable regulatory authorities
in two other Major Market Countries, the Partnership License Agreement for
that Product automatically shall be amended, on and effective as of the date
that the earlier of such approvals is obtained, to fix a new royalty rate
calculated as set forth above, but reflecting the total Development Costs
paid by ALZA through the date of the FDA approval or the regulatory approvals
in two other Major Market Countries, whichever is earlier. Within 60 days
after receipt of the relevant approval or


                                       -9-
<PAGE>

approvals, ALZA will provide the Partnership with a complete accounting of
all such Development Costs and the parties shall execute an amendment to the
Partnership License Agreement setting forth the new royalty rate, which shall
be payable with respect to all royalties due beginning on the date of such
approval or approvals.

          3.7  RIGHTS UPON TERMINATION OF OR FAILURE TO CONTINUE DEVELOPMENT.
If ALZA exercises its Continuation Option with respect to any Discontinued
Product and continues the development thereof, but either does not later
exercise its License Option or determines, prior to receipt of either (i) FDA
approval or (ii) comparable regulatory approval in two other Major Market
Countries not to further continue such development for any reason, ALZA shall
so notify the Partnership and the License Option for such Product
automatically shall terminate on the date of such notice.  Beginning on the
date of such notice, the Partnership shall have the right to license,
manufacture, use, commercialize, sell or otherwise dispose of the
Discontinued Product in the same manner and to the same extent as though ALZA
had not exercised the Continuation Option; provided, however, that 50% of the
proceeds of any such license, manufacture, use, commercialization, sale or
other disposition of the Discontinued Product received by the Partnership
shall be paid by the Partnership to ALZA until ALZA has been reimbursed for
all Development Costs of the Discontinued Product paid by


                                      -10-
<PAGE>

ALZA through the date of ALZA's notice hereunder.  Within 60 days after such
notice, ALZA shall deliver to the Partnership a written accounting of the
Development Costs of such Discontinued Product paid or expended by it through
the date of ALZA's notice.

          3.8  REVIEW OF BOOKS AND RECORDS.  In the event of the exercise of
any Continuation Option hereunder, each party shall have the right, at all
reasonable times and at its own expense, to examine or have examined by a
certified public accountant or similar person reasonably acceptable to the
other party, pertinent books and records of the other party, for the sole
purpose of determining the Development Costs paid or expended by the other
party.  This right may be exercised only once with respect to each Product or
Product Candidate and must be exercised within two years after the license or
other disposition of the Product.

     4.   NO CONFLICT

     The Partnership agrees that no license, sale or other commercial
exploitation of any Product or Product Candidate has been or shall be made or
offered to any person or entity on any basis that is or will be in conflict
with this Agreement or any Product License Agreement unless or until, with
respect to any Product or Product Candidate, the periods of time set forth in
Section 2.2 and Section 3.2, as applicable, have elapsed.


                                      -11-
<PAGE>

     5.   ACCESS TO INFORMATION

          5.1  INFORMATION AVAILABLE.  Subject to the restrictions on
disclosure of Confidential Information set forth in Section 6 below, the
Partnership shall make available to ALZA at all reasonable times all
Partnership Technology.

          5.2  CONSULTATION.  The Partnership shall consult with ALZA and
inform it on a continuing basis of developments and the current state of the
Partnership Technology and will review from time to time with ALZA the
progress towards Completion of the Products.

     6.   CONFIDENTIALITY

          6.1  USE OF CONFIDENTIAL INFORMATION.  During the term of this
Agreement, and for a period of five years following its termination, ALZA
shall maintain in confidence all Confidential Information; provided, however,
that nothing contained herein shall prevent ALZA from disclosing any
Confidential Information to the extent that such Confidential Information (i)
is required to be disclosed in connection with the securing of necessary
governmental authorization for the marketing of Products or (ii) is required
to be disclosed by law for the purpose of complying with governmental
regulations.

          6.2  SURVIVAL OF TERMS.  The obligations of ALZA pursuant to
Section 6.1 shall survive the termination of this Agreement for any reason.


                                      -12-
<PAGE>

     7.   DISCLAIMERS

          THE PARTNERSHIP DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY (i) THAT
PARTNERSHIP TECHNOLOGY OR LICENSED TECHNOLOGY OR THE USE THEREOF, OR ANY PRODUCT
CANDIDATES OR PRODUCTS INCORPORATING OR MANUFACTURED BY THE USE THEREOF, WILL BE
FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF
PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (ii) OF THE ACCURACY,
RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS OR
MERCHANTABILITY OF THE PARTNERSHIP TECHNOLOGY OR LICENSED TECHNOLOGY OR THEIR
SUITABILITY OR THE FITNESS THEREOF FOR ANY PURPOSE WHATSOEVER INCLUDING, WITHOUT
LIMITATION, THE DESIGN, DEVELOPMENT, MANUFACTURE, USE OR SALE OF PRODUCT
CANDIDATES OR PRODUCTS.  THE PARTNERSHIP DISCLAIMS ALL OTHER WARRANTIES OF
WHATEVER NATURE, EXPRESS OR IMPLIED.

     8.   EFFECTIVE DATE; TERMINATION

          8.1  EFFECTIVE DATE.  This Agreement automatically shall become
effective on the date of the closing of the sale of the Class A Limited
Partnership interests described in the Prospectus.

          8.2  TERMINATION.  This Agreement shall terminate when all of the
License Options and Continuation Options either shall have been exercised or
shall have terminated in accordance with Sections 2 and 3 of this Agreement
as to each Product or Product Candidate.


                                      -13-
<PAGE>

     9.   MISCELLANEOUS

          9.1  WAIVER.  No waiver of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged
with such waiver, and no waiver of any right arising from any breach or
failure to perform shall be deemed to be a waiver of any future breach or
failure to perform or of any other right arising under this Agreement.

          9.2  NOTICES.  Any notice or other communication required or
permitted to be given to either party under this Agreement shall be given in
writing and shall be delivered by hand or by registered or certified mail,
postage prepaid and return receipt requested, addressed to each party at the
following addresses or such other address as may be designated by a notice
pursuant to this Section 9.2:

     If to Partnership:       ALZA TTS Research Partners, Ltd.
                              c/o ALZA Development Corporation
                              950 Page Mill Road
                              Palo Alto, California  94304
                              Attention:  President

     If to ALZA:              ALZA Corporation
                              950 Page Mill Road
                              Palo Alto, California  94304
                              Attention:  President

Any notice or communication given in conformity with this Section 9.2 shall be
deemed effective when received by the addressee, if delivered by hand, and five
days after mailing, if mailed.


                                      -14-
<PAGE>

          9.3  HEADINGS.  The section headings contained in this Agreement
are included for convenience only and form no part of the Agreement between
the parties.

          9.4  SEVERABILITY.  If any provision in this Agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall continue in full force without being impaired or
invalidated in any way.

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

          9.6  AMENDMENTS.  No amendment, modification or addition hereto
shall be effective or binding on either party unless set forth in writing and
executed by a duly authorized representative of the party to be charged.

          9.7  NO EFFECT ON OTHER AGREEMENTS.  No provision of this Agreement
shall be construed so as to negate, modify or affect in any way the
provisions of any other agreement between the parties except as specifically
provided in such other agreements.

          9.8  GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the


                                      -15-
<PAGE>

State of California as applied to residents of that state entering into
contracts wholly to be performed in that state.

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

                                   ALZA TTS RESEARCH PARTNERS, LTD.
                                     by ALZA Development Corporation,
                                     its General Partner


                                   By  /s/ Peter F. Carpenter
                                     ---------------------------------
                                        Peter F. Carpenter, President


                                   ALZA Corporation


                                   By  /s/ Martin S. Gerstel
                                     ---------------------------------
                                        Martin S. Gerstel, President


                                      -16-
<PAGE>
                                                             Exhibit A
                          PARTNERSHIP LICENSE AGREEMENT

     Agreement made this * day of *, 19*, by and between ALZA
Corporation, a California corporation ("Licensee"), and ALZA TTS Research
Partners, Ltd., a California limited partnership ("Licensor").

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

     A.   Licensor and Licensee have entered into an Option Agreement and
related agreements dated December 30, 1982.

     B.   Section 2 of the Option Agreement provides for a license, the terms
of which are to be set forth herein.

     NOW THEREFORE, the parties agree as follows:

     1.   DEFINITIONS

          1.1  "Affiliate" shall mean a corporation or any other business
entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, the designated
party.  "Control" shall mean ownership of least 50% of the shares of stock
entitled to vote for the election of directors in the case of a corporation
and at least 50% of the interests in profits in the case of a business entity
other than a corporation.

* To be dated in accordance with section 2.3 of the Option Agreement.


<PAGE>
          1.2  "ALZA Proprietary Rights" shall mean Proprietary Rights to the
extent owned or controlled by ALZA and which ALZA has the right to license.

          1.3  "Confidential Information" shall mean all Partnership
Technology including, without limitation, the originals or copies of all
documents, inventories, laboratory, notebooks, drawings, specifications,
bills of materials, devices, equipment, prototype models and tangible
manifestations relating to or embodying any Partnership Technology disclosed
by Licensor to Licensee hereunder, except any of the foregoing that:

               (a)  is known to or used by Licensee prior to the time of
     disclosure hereunder;

               (b)  lawfully is disclosed to Licensee by a third party having
     the right to disclose it; or

               (c)  either before or after the time of disclosure to Licensee
     becomes known to the public other than by an unauthorized act or omission
     of Licensee or its employees or agents.

          1.4  "Development Contract" shall mean the Research and Development
Agreement between the parties dated December 30, 1982.

          l.5  "FDA" shall mean the United States Food and Drug Administration.

          1.6  "Licensed Product" shall mean the product listed on Schedule A
hereto.


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<PAGE>

          1.7  "Licensed Technology" shall mean ALZA Proprietary Rights
existing during the term of this Agreement which are necessary or useful for
the development, manufacture or commercialization of the Licensed Product.

          1.8  "Major Market Country" shall mean any one of France, Italy,
Japan, the United Kingdom, the United States or West Germany.

          1.9  "NDA" shall mean a new drug application as defined under The
United States Food, Drug and Cosmetic Act, pursuant to which FDA permission
to market a "new drug" is requested.

          1.10 "Net Sales" shall mean the amount received from commercial
sales of a Licensed Product by any person to independent, unrelated parties
in bona fide arm's-length transactions, less the following deductions: (i)
trade and/or quantity discounts actually allowed and taken in such amounts as
are customary in the trade; (ii) commissions paid or allowed to independent
brokers and agents; (iii) taxes on any sale to the extent included in the
amount billed; (iv) three percent of the amount billed or invoiced to cover
transportation charges and discounts other than those described above; and
(v) amounts repaid or credited by reason of rejections, defects or returns or
because of retroactive price reductions.

          1.11 "Option Agreement" shall mean the Option Agreement between the
parties dated December 30, 1982.


                                        3
<PAGE>

          1.12 "Partnership Technology" shall mean (i) Proprietary Rights
which are generated, developed, conceived or first reduced to practice by or
for the benefit of Licensor pursuant to the Development Contract, but solely
to the extent such Proprietary Rights are required to make, use and sell the
Licensed Product and (ii) such other rights relating to the Licensed Product
as may be acquired by Licensor from persons other than Licensee and relating
to the subject matter of this Agreement.

          1.13 "Patent Rights" shall mean any and all patents which cover
inventions included within Partnership Technology.  Copies of such patents
shall be attached to this Agreement as Schedule B, which shall be modified as
required from time to time.

          1.14 "Proprietary Rights" shall mean data, inventions, information,
processes, know how, patents, patent applications and trade secrets.

     2.   GRANT OF LICENSE

          Licensor hereby grants to Licensee the worldwide right and license
to practice, and to sublicense others to practice, the Partnership Technology
to manufacture, use, commercialize and sell the Licensed Product; provided,
however, that Licensee shall not have the right to grant any sublicense to
Ciba-Geigy Limited, a corporation of Switzerland, or any of its Affiliates.
The license granted hereunder shall be an


                                        4
<PAGE>

exclusive license until the date that is thirteen years after the actual
reduction to practice of the Licensed Product. As soon as the Licensed
Product has been actually reduced to practice, Licensor promptly shall so
notify Licensee and the date until which this License is exclusive shall be
set forth on Schedule A by each party.  On the date listed on Schedule A, the
license granted hereby automatically shall become a non-exclusive license,
but Licensee shall continue to have sublicensing rights to the extent set
forth above.

     3.   ROYALTIES AND OTHER PAYMENTS

          3.1  PAYMENTS.  In consideration of the grant of the license,
Licensee shall make the following payments to Licensor with respect to the
Licensed Product:

               (a)  A royalty of five percent (or such lesser percentage as
may be required by applicable laws of any country) of the Net Sales by
Licensee and its Affiliates for Licensed Products sold or otherwise disposed
of by Licensee and its Affiliates, but not with respect to any sales to
distributors who agree to pay royalties or make percentage of sale payments
to Licensee or such Affiliates (in which case such royalties or payments
shall be subject to Section 3(b) below).

               (b)  A payment of 50 percent of any royalties or percentage of
sales payments received by Licensee or any Affiliate under either (i) any
sublicense of the


                                        5
<PAGE>

Partnership Technology for the manufacture, use, commercialization or sale of
the Licensed Product or (ii) any distribution agreements for the Licensed
Product entered into with distributors who agree to pay royalties or make
percentage of sales payments to Licensee or any Affiliate.

               (c)  A payment of 50 percent of any "front-end" distribution
fees, prepaid royalties, or similar one-time, infrequent or special payments
not included in Section 3.1(b).

          3.2  GUARANTEED PAYMENTS.  If, at the end of any calendar year, the
aggregate payments by Licensee to Licensor pursuant to section 3.1(a), 3.1(b)
and 3.1(c) (together, the "Aggregate Payments") and the "Guaranteed
Payments", if any under this Section 3.2 are less than 4% of the aggregate
Net Sales of the Licensed Product by the sublicensees and distributors from
whom the Aggregate Payments were received, Licensee shall pay Licensor an
additional amount (a "Guaranteed Payment") equal to the difference between
(i) the Aggregate Payments and any Guaranteed Payments theretofore made and
(ii) 4% of such Net Sales to such date.  The Guaranteed Payment, if any, due
to Licensor under this Section 3.2 shall be calculated annually.  The
Guaranteed Payment, if any, due for any calendar year shall be included in
and shall be paid simultaneously with, the


                                        6
<PAGE>

last quarterly report for such year by Licensee under Section 6.

          3.3  TERM OF PAYMENTS.  The obligation to pay royalties hereunder
shall continue until (i) the expiration of the last to expire of the Patent
Rights or (ii) if there never are any Patent Rights, 20 years after the date
of the actual reduction to practice of the Licensed Product.

     4.   CREDITS AGAINST PAYMENTS DUE

          Notwithstanding the provisions of Section 3, Licensee shall
receive, as a credit against payments otherwise due under Section 3, an
amount equal to 50% of Licensee's costs and expenses of obtaining regulatory
approval of the Licensed Product in any country incurred after regulatory
approval has been obtained from either (i) the FDA or (ii) comparable
regulatory authorities in two other Major Market Countries.  Such credit with
respect to any such additional approval shall be taken against payments
otherwise due under Section 3 after the date of such additional approval.

     5.   CONFIDENTIAL INFORMATION

          Licensee agrees that it, its Affiliates and its sublicensees shall
not use Confidential Information received from Licensor hereunder for any
other purpose than for fulfilling the purpose of this Agreement.  Licensee
agrees that


                                        7
<PAGE>

it, its Affiliates and its sublicensees shall, during the term of this
Agreement and for a period of five years after its termination for any
reason, hold in confidence all Confidential Information except to the extent
that such Confidential Information (i) is required to be disclosed in
connection with the securing of necessary governmental authorization for the
marketing of the Licensed Product, (ii) is required to be disclosed by law
for the purpose of complying with governmental regulations or (iii) is
required to be disclosed for the purpose of sublicensing or distribution as
provided herein.

     6.   ACCOUNTING

          6.1  REPORTS.  Within 90 days after the end of each calendar
quarter during the term of this Agreement, Licensee shall render an
accounting to Licensor with respect to all payments due and all credits taken
for such quarter.  Such report shall indicate for such calendar quarter the
quantity and dollar amount of sales of the Licensed Product by Licensee, its
Affiliates, sublicensees and distributors with respect to which such payments
are due or credits are taken; provided, however, that if Licensee shall not
have received from any foreign sublicensee or distributor a report of its
sales, then such sales may be included in the next quarterly report.  In case
no payment is due for any calendar quarter, Licensee shall so report.
Licensee shall keep accurate records in sufficient detail to enable the
payments due hereunder to be determined.


                                        8
<PAGE>

The report for the last quarter of each calendar year also shall include the
calculation of any Guaranteed Payment due under Section 3.2.

          6.2  REVIEW BY ACCOUNTANTS.  At Licensor's request, Licensee shall
permit an independent public accountant selected by Licensor to have access,
once in each calendar year during regular business hours and upon reasonable
notice to Licensee, to such of the records of Licensee as may be necessary to
verify the accuracy of the reports and payment made under this Agreement, but
said accountant shall not disclose to Licensor any information except that
which should properly have been contained in such reports.  The right of
review of each quarterly account shall terminate two years after Licensor's
receipt thereof.

     7.   TIMES AND CURRENCIES OF PAYMENTS

           7.1  PAYMENTS.  Payments shown by each calendar quarter report to
have accrued shall be due and payable on the date such report is due and
shall be paid in United States dollars.  Any and all taxes due or payable on
such payments or with respect to the remittance thereof shall be deducted
from such payments and shall be paid by Licensee to the proper taxing
authorities, and proof of payment shall be secured and sent to Licensor as
evidence of such payment.  The rate of exchange to be used in computing the
amount of the United States dollars due to Licensor in satisfaction of


                                        9
<PAGE>

payment obligations with respect to sales in foreign countries shall be
calculated at the exchange ratio set by Citibank N.A., New York, New York for
the purchase of United States dollars with the currency of the country of
origin of such payment on the last business day of the calendar quarter for
which payment is being made. Settlement of payment obligations shall be made
by bank wire transfers.

          7.2  CERTAIN FOREIGN PAYMENTS.  If governmental regulations prevent
remittance from any foreign country of any amounts due under Section 3 in
respect of that country, Licensee shall so notify Licensor in writing, and
the obligation under this Agreement to make payments in respect of sales in
that country shall be suspended (but the amounts due but not paid shall
continue to accrue) until such remittances are possible.  Licensor shall have
the right, upon written notice to Licensee, to receive payment in any such
country in the local currency.

          7.3  LATE PAYMENTS.  Any payments due hereunder that are not made
when due shall bear interest at the lesser of 18% per annum or the maximum
rate as may be allowed by law, beginning on the date when Licensor has
notified Licensee that such payments are overdue.

     8.   PATENTS

          8.l  NOTICE OF PATENTS.  Licensor shall advise Licensee of the
issuance, lapse, revocation, surrender,


                                       10
<PAGE>

invalidation or abandonment of any patent included in Patent Rights;
provided, however, that Licensor shall not revoke, surrender, abandon or
permit to lapse any such patent without 60 days prior written notice to
Licensee of its intention to do so.  In the event of such notice, Licensee
shall have the right to continue the prosecution or maintenance of any such
patent at its own expense, and such patent shall thereafter be licensed to
Licensee on a royalty-free basis.

          8.2  PATENT INFRINGEMENT.

               (a)  If a third party infringes, by the manufacture or sale of
a Product competitive with the Licensed Product in any country, any patent
included within Patent Rights, Licensee may, at its own expense and with the
right to all recoveries, bring legal action to restrain such infringement and
for damages.  If Licensee fails to take the necessary steps to restrain such
infringement by litigation or otherwise, and if such infringing product
achieves a sales volume equal to ten percent of the sales volume of the
Licensed Product sold by Licensee, its Affiliates, sublicensees and
distributors in the country, then Licensor may institute, in its own name, at
its own expense and with the right to all recoveries, such litigation or
other appropriate action as it may deem necessary to terminate such
infringement, provided that Licensor has first given to Licensee 60 days
advance notice of its intention to take such action, and, provided further,
that Licensee has not itself taken appropriate action during such 60-day
period.


                                       11
<PAGE>

               (b)  If Licensor desires to bring such action in accordance
with this Section 8, Licensee agrees to cooperate fully with Licensor.
Licensor shall indemnify Licensee against liability for any costs awarded to
the third party.  If the third party in any such action brings a
counteraction for invalidation or misuse of a patent included within Patent
Rights, Licensor promptly shall notify Licensee and Licensee may, within 180
days of the notification, join and participate in such action at its own
expense.

               (c)  Each party agrees not to settle any action it brings in a
manner that is prejudicial to any patent included within Patent Rights
without the other party's prior written approval.

     9.   EFFECTIVE DATE AND TERM

          This Agreement will become effective on the day and year first
above written in accordance with Section 2.3 of the Option Agreement and,
unless terminated in accordance with any of the provisions hereof, shall
remain in full force and effect thereafter; provided, however, that the
obligation to make payments under Section 3 hereof shall terminate as set
forth in Section 3.

     10.  DISCLAIMERS.

          LICENSOR DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY (i) THAT THE
PARTNERSHIP TECHNOLOGY OR THE USE THEREOF OR THE LICENSED PRODUCT WILL BE
FREE FROM CLAIMS OF PATENT INFRINGEMENT, INTERFERENCE OR UNLAWFUL USE OF
PROPRIETARY INFORMATION OF ANY THIRD PARTY AND (ii) OF THE ACCURACY,


                                       12
<PAGE>

RELIABILITY, TECHNOLOGICAL OR COMMERCIAL VALUE, COMPREHENSIVENESS OR
MERCHANTABILITY OF THE PARTNERSHIP TECHNOLOGY OR THE LICENSED PRODUCT OR
THEIR SUITABILITY OR FITNESS FOR ANY PURPOSE WHATSOEVER INCLUDING, WITHOUT
LIMITATION, THE DESIGN, DEVELOPMENT, MANUFACTURE, USE OR SALE OF THE LICENSED
PRODUCT.  LICENSOR DISCLAIMS ALL OTHER WARRANTIES OF WHATEVER NATURE, EXPRESS
OR IMPLIED.

     11.  TERMINATION.

          11.1 Licensor may, in its discretion, terminate this Agreement in the
event that Licensee:

               (a)  breaches any material obligation hereunder and such
breach continues for a period of 60 days after written notice thereof; or

               (b)  enters into any proceeding, whether voluntary or
otherwise, in bankruptcy, reorganization or arrangement for the appointment
of a receiver or trustee to take possession of Licensee's assets or any other
proceedings under any law for the relief of creditors or makes an assignment
for the benefit of its creditors.

          11.2 CONSEQUENCES OF TERMINATION.  Termination of this Agreement
for any reason shall be without prejudice to:

               (i)  the obligations of confidentiality provided in Section 5;

               (ii) the rights and obligations provided for in Section 6;


                                       13
<PAGE>

               (iii)Licensor's right to receive all payments accrued under
          Section 3 prior to the effective date of such termination; and

               (iv) any other remedies which either party may then or thereafter
          have hereunder or otherwise.

If Licensor terminates this Agreement pursuant to this Section 11, Licensee
shall (i) cease to use the Partnership Technology and Confidential
Information received from Licensor hereunder, (ii) discontinue production of
the Licensed Product and (iii) return to Licensor all documents and materials
containing Confidential Information and Partnership Technology supplied by
Licensor hereunder.

     12.  ASSIGNMENT

          Licensee may assign its rights under this Agreement to any
Affiliate or any third party with which Licensee is merged or consolidated or
by which Licensee is acquired or which purchases, directly or indirectly, all
or substantially all of its assets.  Licensee may assign its rights hereunder
in whole or in part with the prior written consent of Licensor, which consent
shall not be withheld unreasonably; provided, however, that any successor
shall execute an agreement, in form reasonably satisfactory to Licensor,
assuming each of Licensee's obligations hereunder.  This Agreement shall not
otherwise be assignable by Licensee without the prior written consent of
Licensor.


                                       14
<PAGE>

     13.  ARBITRATION

          13.1 DISPUTES; SERVICE.  In case any dispute arises out of this
Agreement, the parties will endeavor to settle such dispute amicably.  If the
parties fail to agree, any such dispute shall be finally settled by
arbitration conducted in San Francisco, California in accordance with the
then existing rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.  The parties hereby agree that service of any notices
in the course of such arbitration at their respective addresses as provided
in Section 14 of this Agreement shall be valid and sufficient.

          13.2 ARBITRATORS.  In any arbitration pursuant to Section 13.1, the
award shall be rendered by a majority of the members of a board of
arbitration consisting of three members, all of whom will be appointed by the
parties jointly or, if the parties cannot agree as to three arbitrators
within 30 days after commencement of the arbitration proceeding, one
arbitrator shall be appointed by each party within 45 days after the
commencement of the arbitration proceeding, and the third shall be appointed
by mutual agreement of the two appointed arbitrators, In the event of failure
of said two arbitrators to agree upon the third arbitrator within 75 days
after commencement of the arbitration proceeding, the third arbitrator shall
be appointed by the American Arbitration


                                       15
<PAGE>

Association in accordance with its then existing rules.  Notwithstanding the
foregoing, if any party shall fail to appoint an arbitrator within the
specified time period, such arbitrator as well as the third arbitrator shall
be appointed by the American Arbitration Association in accordance with its
then existing rules.  For the purposes of this Section 13.2, the
"commencement of arbitration proceeding" shall be deemed to be the date upon
which a written demand for arbitration is received by one party from the
other.

     14.  NOTICES

          Any notice or other communication required or permitted to be given
to either party under this Agreement shall be in writing and shall be
delivered by hand or registered mail, postage prepaid and return receipt
requested, addressed to each party at the following addresses or such other
addresses as may be designated by notice pursuant to this Section 14:

     If to Licensor:               ALZA TTS RESEARCH PARTNERS, LTD.
                                   c/o ALZA Development Corporation
                                   950 Page Mill Road
                                   Palo Alto, California  94304
                                   Attention:  President

     If to Licensee:               ALZA CORPORATION
                                   950 Page Mill Road
                                   Palo Alto, California  94304
                                   Attention:  President

Any notice or communication given in conformity with this Section 14 shall be
deemed to be effective when received by the


                                       16
<PAGE>

addressee, if delivered by hand, and five days after mailing, if mailed.

     15.  COUNTERPARTS

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

     16.  GOVERNING LAW

          This Agreement shall be governed by and construed in accordance
with the laws of the State of California as applied between residents of that
state entering into contracts wholly to be performed in that state.

     17.  SEVERABILITY

          If any provision of this Agreement shall be held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless, continue in full force without being impaired or
invalidated in any way.

     18.  AMENDMENTS.

          No amendment, modification or addition hereto shall be effective or
binding on either party unless set forth in writing and executed by a duly
authorized representative of the party to be charged.

     19.  WAIVER.

          No waiver of any right under this Agreement shall be deemed
effective unless contained in a writing signed


                                       17
<PAGE>

by the party charged with such a waiver, and no waiver of any breach or
failure to perform shall be deemed to be a waiver of any future breach or
failure to perform or of any other right arising under this Agreement.

     20.  HEADINGS.

          The section headings contained in this Agreement are included for
convenience only and form no part of the agreement between the parties.


     21.  NO EFFECT ON OTHER AGREEMENTS.

          No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement between the
parties unless specifically referred to, and only as specifically provided, in
such other agreements.

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


                              ALZA TTS RESEARCH PARTNERS, LTD.
                                By Alza Development corporation
                                  its General Partner

                              By: /s/ none
                                  ---------------------------
                                  President

                              ALZA Corporation

                              By: /s/ none
                                  ---------------------------
                                  President


                                       18
<PAGE>
                                   SCHEDULE A


THE PRODUCT:

DATE ON WHICH THIS LICENSE BECOMES NONEXCLUSIVE:

<PAGE>
                                   SCHEDULE B

                                    PATENTS