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                                                                   EXHIBIT 10.29
                                  CONFIDENTIAL

***PORTIONS OF THE EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
THE COMPLETE EXHIBIT, INCLUDING THE PORTIONS FOR WHICH CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED, HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.

                             COLLABORATION AGREEMENT

               THIS AGREEMENT is made May 14, 1999, ("Effective Date") by and
between Xgene Corporation having a principal place of business at 863A Mitten
Road, Burlingame, California 94010 (hereinafter "Xgene") and Genencor
International, Inc., a Delaware company having a principal place of business at
4 Cambridge Place, 1870 South Winton Road, Rochester, New York 14618
(hereinafter "GCI") (collectively the "Parties").

               WHEREAS, GCI has developed expertise, knowledge and experience
related to, among others, specialty biochemicals for use in personal care and
skin therapies, including their production, purification, manufacture and
application;

               WHEREAS, Xgene has developed expertise, knowledge and experience
related to the development of artificial skin and assays related thereto;

               WHEREAS, the Parties have entered into discussions related to the
development of artificial skin assays by Xgene for use by GCI in developing
products for personal care and skin therapy treatments, including products
having low allergenicity;

               NOW THEREFORE, the Parties agree as follows:

                                       I.
                                   DEFINITIONS

        1.1 The "Research" shall mean the work performed under this Agreement by
one or more of the Parties as essentially detailed in Appendix A.

        1.2 "Background Technology" shall mean any technology, data, results,
biological materials, processes, reports, or other information owned or
controlled by either Party as of the Effective Date.

        1.3 "Background Patent Rights" shall mean any patent or patent
application, foreign and domestic, including any and all divisions,
continuations, continuations-in-part, reissues, re-examination applications,
extensions, supplementary protection certificates, certificates of addition,
inventor's certificates, including international counterparts thereof owned
and/or controlled as of the Effective Date by either Party.

        1.4 "Inventions" shall mean any technology, data, discoveries, results,
biological materials, processes, reports, or other information, whether
patentable or not, which result

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directly and substantially from the Research as described in Appendix A during
the Term of this Agreement.

        1.5 "Term" shall be 12 months or the achievement of Milestone 2,
whichever occurs earlier. In the event that an Elected Assay is incorporated
into the Research, the Term shall be extended for a mutually agreed upon time
period to allow for completion of the development of the Elected Assay.

        1.6 "Xgene Core Business" shall mean the ***

                                       II.
                          RESEARCH PROGRAM AND PAYMENT

        2.1 Xgene shall commence performance of the Research promptly upon the
Effective Date and shall proceed as provided for in Appendix A. Xgene agrees to
commit reasonable facilities and resources to its allocated employees as is
reasonably necessary to carry out the Research. The Research may be redirected
in accordance with modifications and extensions only to the extent that Xgene
and GCI mutually agree upon in writing.

        2.2 Payment for the Research shall be as follows:

               (a) GCI shall pay to Xgene *** within *** of the Effective Date.

               (b) If, within *** of the Effective Date, Xgene has developed an
*** assay useful for the development and testing of products having activity
against human papilloma virus (Milestone 1), GCI shall pay to Xgene ***. Payment
under this subsection shall be contingent upon receipt by GCI of a written
report from Xgene conclusively showing that Milestone 1 has been met and GCI's
agreement that the conclusions made in such written report are reasonable in
light of the results of the Research. Payment under this subsection shall be due
within *** of such agreement by GCI.

               (c) If, within *** of the Effective Date, Xgene has developed an
*** assay useful for the development and testing of products having activity
against human papilloma virus (Milestone 2), GCI shall pay to Xgene ***. Payment
under this subsection shall be contingent upon receipt by GCI of a written final
report from Xgene conclusively showing that Milestone 2 has been met and GCI's
agreement that the conclusions made in such written report are reasonable in
light of the results of the Research. Payment under this subsection shall be due
within *** of such agreement by GCI.

        2.3 Xgene agrees that it will not perform research and/or development or
enter into any commercial agreement with any third party during the Term of this
Agreement which relates to the subject matter of (i) the Research or (ii) any
Elected Assay under Article 3.2(b) hereto without GCI's written consent;
provided that Xgene may perform research and/or development or enter into a
commercial agreement with any third party which relates to *** and the effect of
*** properties of skin.

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        2.4 Xgene agrees to perform its tasks under this agreement in accordance
with standard and accepted scientific standards for such research. Xgene agrees
to submit monthly reports, in electronic and paper copy, detailing progress
relating to their responsibilities pursuant to the Research and any pertinent
findings, results, conclusions or other information resulting from the Research
to GCI. Xgene shall provide to GCI a final report summarizing the research
performed and providing conclusions and description of the developed assays
which derive from the Research within sixty (60) days of the achievement of
Milestone 2 or completion of an Elected Assay.

        2.5 Should technology, market, regulatory or other considerations
suggest to either Party that continued investment of time, resources or money
towards the Research may be unsuitable or undesirable, the Parties may elect to
hold discussions toward a mutually acceptable resolution, including alternative
target proteins, the transfer or modification between the Parties of rights to
commercialize products, or termination of the Agreement, as appropriate.

                                      III.
                     ELECTION OF ADDITIONAL RESEARCH ASSAYS

        3.1 GCI shall have the right, at any time *** thereafter, to request
that Xgene initiate the development of additional assays pursuant to this
Agreement (Elected Assays). Elected Assays may relate to the development and
testing of products for use as personal care or therapeutic treatments for
normal skin types, aging skin types, or specific clinical skin related
conditions, as will be mutually agreed upon between the parties.

        3.2 Identification of Elected Assays

               GCI may request that an Elected Assay be incorporated within the
Research by providing a written request to Xgene to develop the Elected Assay.
Elected Assays shall be incorporated into the Research pursuant to either of the
following:

               (a) Election by Mutual Agreement

               The Parties may mutually agree to the development of an Elected
Assay. In such case, subsequent to Xgene's receipt of the written request from
GCI, the Parties shall meet and discuss the specifics of the proposed Elected
Assay and come to mutual agreement regarding the identification of the assay, an
appropriate time line, a description of the condition or therapy upon which the
Elected Assay is to be based and a specific set of deliverables which are
expected to result from the research concerning the Elected Assay. Xgene shall
provide written acknowledgment to GCI of its agreement or refusal to perform the
research related to developing the Elected Assay within 30 days of GCI's
request.

               (b) GCI Elected Assays

               GCI may elect, within its sole discretion, to incorporate any of
the following as within the Research, which election is hereby agreed to by
Xgene:

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               (i) The development of an assay related to ***;

               (ii) The development of an assay related to ***;

               (iii) The development of an assay for ***.

               An election under this subsection 3.2(b) shall be considered
effective as of the date the written request from GCI is received by Xgene, who
shall then be considered to have agreed to develop the Elected Assay.

        3.3 As consideration for each Elected Assay to be developed, GCI shall
make payment to Xgene as follows:

               (a) *** within *** of the date that Xgene agrees in writing to
develop the Elected Assay under Section 3.2(a) or of GCI's election under
Section 3.2(b);

               (b) *** upon completion of the Elected Assay, provided that,
payment under this subsection shall be contingent upon receipt by GCI of a
written final report from Xgene conclusively showing that the Elected Assay has
been successfully completed and GCI's agreement that the conclusions made in
such written report are reasonable in light of the results of the Research.
Payment under this subsection shall be due within *** of such agreement by GCI.

        3.4 Notwithstanding Section 2.2, to the extent that GCI has not elected
an Elected Assay provided in Section 3.2(b), Xgene may consider offers from
third parties to participate in a development agreement related to such Elected
Assay. In the event that Xgene has received a written letter of intent from a
third party that provides for Xgene to develop an assay which includes such GCI
Elected Assay, Xgene shall provide to GCI written notice of such third party
offer explaining the assay to be developed and providing sufficient detail for
GCI to consider its interest in developing such assay (Election Notification
Letter). Within sixty (60) days of its receipt of the Notification Letter, GCI
shall exercise its option to incorporate the specific Elected Assay into the
Research. Failure of GCI to exercise its option within the relevant time frame
shall be considered as GCI's consent for Xgene to develop the assay provided in
its letter to GCI with such third party.

                                       IV.
                          INTELLECTUAL PROPERTY RIGHTS

        4.1 To the extent that either Party owns or controls Background
Technology or Background Patent Rights, such Background Technology and
Background Patent Rights shall remain the sole property of that Party to exploit
in any manner it chooses at its sole discretion, except to the extent
specifically provided for herein.

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        4.2 Ownership of Intellectual Property from the Research

               (a) Xgene shall own any Inventions produced during the Research
which relate to the Xgene Core Business or otherwise to assays *** and to file
patent applications based thereon and prosecute same.

               (b) GCI shall own all Inventions related to *** or the condition
to be reproduced by an Elected Assay.

               (c) All Inventions not falling under subsections (a) or (b) shall
be owned by the inventor thereof.

        4.3 Xgene agrees to promptly advise GCI in writing of any Invention(s)
made pursuant to this Agreement, but in any event no later than 30 days after
the submission of an invention disclosure to its legal department or counsel.

        4.4 Preparation, filing, prosecution, maintenance and taking such other
actions as are reasonably necessary or appropriate with respect to the
development of Invention(s) as well as the costs thereof shall be undertaken by
the Party owning the Invention(s) pertaining to such filed patents and/or patent
applications. Xgene shall provide GCI with a copy of any patent application
which relates to the Research, at least 20 days prior to filing the first of
such applications in any jurisdiction, for review and comment by GCI.

        4.5 Xgene represents and warrants to the best of its knowledge that with
respect to its Background Patent Rights that Xgene has title or right to its
Background Patent Rights and Background Technology, and that the grant of any
license or right to GCI contemplated in this Agreement under such rights does
not require the consent of a third party and is not encumbered by any agreement,
assignment or other encumbrance that it inconsistent with the provisions of this
Agreement.

                                       V.
                                    LICENSES

        5.1 Xgene grants to GCI a non-exclusive, royalty-free, world wide
license to use any assays or artificial skin which are conceived pursuant to
this Agreement for any purpose. Xgene further grants to GCI a non-exclusive,
royalty free, world wide license under any Inventions owned by Xgene pursuant to
this Agreement to make, sell, use, have made, have sold, import, export or offer
for sale therapeutic and/or non-therapeutic product(s) for any application. GCI
shall have the right to sublicense under the licenses granted in this Section
5.1 for the purpose of developing, testing or confirming properties of
experimental and/or commercial products produced by GCI, to the extent Xgene may
legally confer such sublicensing rights.

        5.2 Xgene shall pay to GCI a royalty based on Xgene's or its
sublicensee's commercialization of Xgene's Inventions. The royalty shall be at
least *** of the Net Revenue received by Xgene for such commercialization,
provided that, Net Revenue shall be defined

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<PAGE>   6

subject to mutual agreement of the Parties. In lieu of a royalty, the Parties
may agree to *** or such other arrangement as may be mutually agreed upon
between the Parties.

        5.3 With respect to any assay or other means of testing products
relevant to human papilloma virus or to the condition to be reproduced by an
Elected Assay which results from this Agreement, GCI shall have exclusive rights
to use such assay for the development of therapeutic or non-therapeutic
compounds for the treatment of skin for a *** period. The *** period shall
commence upon receipt by GCI from Xgene of a final written report identifying
and describing the assay and providing information sufficient to confirm that
the assay has been successfully developed.

                                       VI.
                          RENEWAL, TERM AND TERMINATION

        6.1 The Term of this Agreement shall be as provided in Section 1.5. In
the event of expiration of the Agreement due to either the non-achievement of
any milestone or expiration of Term, GCI's obligations regarding any unmet
milestones shall lapse.

        6.2 Should this Agreement expire due to failure to reach a milestone,
the Parties may agree to engage in further good faith negotiations toward a
mutually agreeable resolution or continuance of the Research, which resolution
may include redefining the direction and/or the scope of the Research.

        6.3 Termination of the Agreement may occur upon the following:

               (a) Upon a material breach of the Agreement by the other Party.
In the event that a Party wishes to terminate this Agreement due to a material
breach, the terminating Party shall serve a written notice on the other Party
thereby allowing the other Party sixty (60) days to remedy such breach. In the
event that such breach has not been remedied within the prescribed sixty (60)
days, the Agreement shall terminate automatically;

               (b) In the event that either Party becomes subject to Bankruptcy,
insolvency, liquidation or similar proceedings, the other Party shall be
entitled to terminate this Agreement forthwith.

        6.4 Expiration of Term or termination of this Agreement pursuant to this
Article shall not effect the rights of either Party under Articles 4, 5 and 7.

                                      VII.
             CONFIDENTIALITY, TREATMENT OF SAMPLES AND PUBLICATIONS

        7.1 Treatment of Confidential Information

               (a) In order for the Parties to perform the work contemplated
hereunder, it may be necessary for each Party to disclose certain proprietary
information and/or data which is necessary to achieve the objectives of the
Research (the "CONFIDENTIAL INFORMATION").


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A recipient shall protect the CONFIDENTIAL INFORMATION against unauthorized
disclosure using the same degree of care, but no less than a reasonable degree
of care, as the recipient uses to protect its own CONFIDENTIAL INFORMATION of a
like nature; provided that:

               (b) A recipient shall be obligated to protect only such
CONFIDENTIAL INFORMATION disclosed under this Agreement as is: (a) disclosed in
tangible form clearly labeled as confidential at the time of disclosure, or (b)
disclosed initially in nontangible form identified as confidential at the time
of disclosure and, within thirty days following the initial disclosure,
summarized and designated as confidential in a written memorandum delivered to
the recipient.

               (c) The obligations of non-disclosure do not apply to
CONFIDENTIAL INFORMATION disclosed under this Agreement which: (a) was in the
recipient's possession before receipt from the discloser as demonstrated by
written documentation; or (b) is or becomes a matter of public knowledge through
no fault of the recipient; or (c) is rightfully received by the recipient from a
third party without a duty of confidentiality; or (d) is disclosed by the
discloser to a third party without a duty of confidentiality on the third party;
or (e) is independently developed by the recipient as demonstrated by written
documentation; or (f) is disclosed under operation of law; or (g) is disclosed
by recipient with the discloser's prior written approval. Such "CONFIDENTIAL
INFORMATION" may be designated as such by the receiving Party upon notice to the
disclosing Party.

               (d) The obligation of non-disclosure shall continue for a period
of five (5) years from the Effective Date hereof, regardless of termination of
this Agreement.

        7.2 Treatment of Samples

               (a) GCI may supply Xgene with reasonable research quantities of
the biological material for use in the Research (Biological Material). Any
material, including any cell, vehicles, constructs, vectors, plasmids, protein
or other medium incorporating the Biological Material or a component thereof, as
well as any material that could not have been made but for the Biological
Material, are expressly understood to be part of the Biological Material,
together with all documentation and descriptions of the Biological Material.

               (b) Xgene agrees not to supply the Biological Material to other
laboratories, nor to any other individual or organization other than employees
of the Xgene, and not to use the Biological Material, directly or indirectly,
for any commercial purpose without GCI's prior written approval. Any employee of
Xgene having access to Biological Material will be previously notified of and
agree to be bound by the terms of this Agreement. No employee or third party
will be allowed access to the Biological Material unless such employee or third
party is bound by an employment, confidentiality or other agreement requiring
assignment of all invention, patents and copyrights to Xgene.

               (c) Xgene will not use, directly or indirectly, the biological
Material in any research programs other than as contemplated herein without
GCI's prior written approval.

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<PAGE>   8

               (d) Xgene acknowledges that the Biological Material is the
confidential and proprietary property of GCI and agree to take reasonable care
necessary to prevent any disclosure, unauthorized use or transfer of the
Biological Material, or any information relating to such, to any party who is
not bound by this Agreement.

               (e) Xgene will not analyze, attempt to analyze, or have analyzed
the composition or formulation of the Biological Material except as specifically
provided herein.

               (f) Xgene acknowledges that the Biological Material is
experimental in nature and is not for human use. Xgene agrees to handle the
Biological Material with appropriate safety precautions. GCI hereby disclaims
all express and implied warranties of any kind with respect to the Biological
Material. Xgene agrees to hold GCI harmless from any and all liability and/or
damages (including costs of defense) resulting from Xgene' use of the Biological
Material, including any use in violation of this Agreement.

        7.3 Neither Party will publish any material arising from the Research
without prior written approval of the other Party. Such approval shall not be
unreasonably withheld but may be subject to a delay of up to (3) months total
for assessment of the proposed publication and to enable preparation and filing
of appropriate patent application(s). Both Parties will procure that any person
involved or interested in the Research will not publish or communicate material
arising therefrom without first complying with the provisions of this Section
7.3.

                                      VIII.
                                  MISCELLANEOUS

        8.1 Hold Harmless

               With respect to GCI's rights under Article 5, Xgene shall hold
GCI harmless for any activities thereunder which would otherwise infringe
Xgene's Background Technology or Background Patent Rights. GCI shall hold Xgene
harmless for any and all claims resulting from GCI's use of Xgene technology or
products and from the use of any therapeutic or other product developed, sold or
licensed by GCI which is developed using Xgene technology or products.

        8.2 Force Majeure

               Each of the Parties hereto shall be excused from performance of
its obligations and shall not be liable for damages to the other to the extent
that such performance is prevented by circumstances beyond its effective
control. Such excuse from performance shall continue so long as the condition
responsible for such excuse continues and for a thirty (30) day period
thereafter. For purposes of this Agreement, circumstances beyond the effective
control of a Party which excuse that Party from performance shall include but
shall not be limited to, act of God, act, regulations or laws of any government,
injunction or judgment of any court, war, civil commotion, destruction of
facility or materials by fire, earthquake, storm or other casualty, labor
disturbance, epidemic and failure of public utilities or common carrier.

        8.3 Relationship

                                       8
<PAGE>   9

               Xgene and GCI are independent contractors. Nothing in this
Agreement or the course of dealing of the parties shall be construed to
constitute the parties hereto as partners, joint ventures or as agents or
distributors for one another, or as authorizing any Party to obligate the other
in any manner.


        8.4 Non-Assignment

               This Agreement and the covenants herein contained shall be
binding and inure to the benefit of Xgene and GCI hereto and their heirs,
assigns, successors and legal representatives. This Agreement shall not be
assignable by any Party without the other Parties' prior written consent.

        8.5 Entire Agreement/Amendment

               This Agreement and the attachments hereto constitute and contain
the entire agreement of the Parties respecting the subject matter hereof. This
Agreement may only be amended by mutual written agreement of the Parties.

        8.6 Warranty of Right and Authority

               Each of the Parties represents and warrants to the other that it
has the full right and authority to enter into this Agreement, and that it is
not aware of any impediment which would inhibit its ability to perform the terms
and conditions imposed on it by this Agreement. Nothing contained herein shall
be interpreted as a warranty, express or implied as to the patentability,
enforceability or validity of any patent application or patent owned or
controlled by either Party.

        8.7 Further Acts and Instruments

               Each Party agrees to execute, acknowledge and deliver such
further instruments and do all such other acts as may be necessary or
appropriate to effect the purpose and intent of this Agreement.

        8.8 Severability

               In the event any one or more of the provisions of this Agreement
should for any reason be held by any court or authority having jurisdiction over
this Agreement or either of the parties hereto to be invalid, illegal or
unenforceable, such provision shall be reformed within the jurisdiction of such
court or authority to as nearly approximate the intent of the parties as
possible, and if the provision is unreformable the parties shall meet to discuss
what steps should be taken to remedy the situation; otherwise and elsewhere this
Agreement shall not be affected.

        8.9 Captions

               The captions to this Agreement are for convenience only and are
to be of no force or effect in construing or interpreting the provisions of this
Agreement.


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        8.10 Counterparts

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

        8.11 Limitation of Liability

               No Party shall be liable to another for indirect, incidental,
consequential or special damages, including but not limited to lost profits,
arising from or relating to any breach of this Agreement, regardless of any
notice of the possibility of such damages. In no event shall either Party be
liable for damages relating to lost profits or reasonable royalties or special
damages due and payable to a third party on the basis of the other's sale of a
product developed hereunder.

        8.12 Publicity

               Either Party's use of the other Party's name or disclosure of the
existence or nature of this Agreement or the relationship created thereby to any
third party shall be only with the prior written consent of the other Party,
which consent will not be unreasonably withheld.

        8.13 Interpretation

               This Agreement has been jointly prepared by the Parties and their
respective legal counsel and shall not be strictly construed against either
Party.

        8.14 Notices

               Representatives for the receipt of payments, notices, records,
reports and other information pursuant to this agreement shall be as follows:

               For GCI:

               Attn:  Legal Department
               Genencor International, Inc.
               925 Page Mill Road
               Palo Alto CA  94304

               For Xgene:

               Xgene Corporation
               863A Mitten Road
               Burlingame, California 94010

        8.15 Controlling Law

               This Agreement shall be governed and construed in accordance with
the Laws of the State of New York, excluding any choice of law rules which may
direct the application of the law of any other jurisdiction. Questions effecting
the construction and effect of any patent rights

                                       10
<PAGE>   11

arising hereunder shall be determined by the laws of the country in which such
patent rights have been applied for and/or granted.

        8.16 Negation of Warranties

               Nothing in this Agreement shall be construed as:

               (a) an express or implied warranty or representation by Xgene as
to the validity or scope of any Background Technology, Background Patent Rights
or proprietary technology of Xgene;

               (b) a warranty or representation that anything made, used, sold
or otherwise disposed of under any license granted in this Agreement is or will
be free from infringement of patents, copyrights, and other rights of third
parties;

               (c) granting by implication, estoppel, or otherwise any licenses
or rights under patents or other rights owned or controlled by Xgene other than
those necessary for GCI to exercise its rights under Article 5 and 8.

        8.17 EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY
MAKES ANY REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER
EXPRESSED OR IMPLIED. THERE ARE NO EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR THAT THE RIGHTS OF USE
OF A LICENSED PRODUCT OR TECHNOLOGY WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR
OTHER RIGHTS OF ANY THIRD PARTIES.

               IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.



GENENCOR INTERNATONAL, INC.                    XGENE CORPORATION

By: /s/ Wayne H. Pitcher                       By:  /s/ Scott McFarlane
   ------------------------------                 -----------------------------

Name:  Wayne H. Pitcher                        Name:  Scott McFarlane
     ----------------------------                   ---------------------------

Title:  Senior VP, Technology                  Title:  Chief Financial Officer
      ---------------------------                    --------------------------

                                       11
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                                   APPENDIX A

                                XGENE CORPORATION
                DETECTION OF POSSIBLE ANTI-VIRAL ACTIVITY AGAINST
                            HUMAN PAPILLOMAVIRUSES IN
                                       ***

***

                                       12
<PAGE>   13

December 9, 1999

                                                             VIA FEDERAL EXPRESS
Warren Hoeffler
XGENE CORPORATION
P.O. Box 1310
2028 Howard Avenue
San Carlos, CA 94070

Dear Mr. Hoeffler:

Thank you for meeting with us on November 1 to review progress in our
collaboration, including the results of your Phase I efforts. The ability to
reconstitute the *** model with persistently infected HPV cells is an
encouraging step towards developing an *** screening system.

As you are aware, the Collaboration Agreement provides for payment of Milestone
1 upon development of an *** assay useful for the development and testing of
products having activity against human papilloma virus. Phase I of the research
plan attached to the Collaboration Agreement roughly corresponds to Milestone 1
and provides that work will be done which:

        ***

*** However, these test results require further analysis and validation.

Despite Xgene not having completed the testing requires for Milestone 1 under
the Collaboration Agreement, Genencor has agreed to make the payment regarding
Milestone 1. This payment was made to Xgene on November 10, 1999. In
consideration for Genencor making early payment on Milestone 1, you have agreed
that the results not met yet with respect to Milestone 1 will be incorporated
into the requirements for Milestone 2. Specifically, Xgene will provide results
in two areas to validate the interpretation of the phase I experiments: ***

All other conditions of the contract and the Milestones will remain in effect.
Thus, Xgene's achievement of Milestone 2 will continue to include the primary
objectives of Phase II, i.e., ***



<PAGE>   14
December 9, 1999
Page 2


Please provide your acknowledgement by signing below and returning the executed
copy to us.

Sincerely yours,

/s/ Michael V. Arbige

Michael V. Arbige, Ph.D.
Senior Vice President, Technology

MVB/CLS/klg
Encl.


By:     /s/ Warren Hoeffler
    ---------------------------
       Warren Hoeffler
       XGENE CORPORATION


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