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                                                                   EXHIBIT 10.39

                                     PARTIES

This Lease, executed in duplicate at Palo Alto, California, this 28th day of
June, 1999, by and between Renault & Handley Employee's Investment Co. and
Connetics Corporation, f/k/a Connective Therapeutics, Inc., hereinafter
respectively called Lessor and Lessee.

                                    PREMISES

1.   WITNESSETH: That Lessor hereby leases to Lessee, and Lessee hire from
     Lessor, those certain premises, hereinafter in this lease designated as
     "the Premises", with the appurtenances, situated in the City of Palo Alto,
     County of Santa Clara, State of California, and more particular described
     as follows, to-wit:

     An approximately 23,500 square foot building situated on approximately
     64,000 square foot lot commonly known as 3400 W. Bayshore.

                                       USE

2.   The premises shall be used and occupied by the Lessee for Research,
     Laboratory & general offices and for no other purpose without the prior
     written consent of the Lessor.

                                      TERM

3.   The term shall be for 42 months, commencing on the first day of August
     1999, and ending on the 31st day of January 2003.

                                     RENTAL

4.   Rent shall be payable to the Lessor without deduction or offset at such
     place or places as may be designated from time to time by the Lessor as
     follows:

     Fifty Thousand Nine Hundred Ninety Five and NO/100ths Dollars ($50,995.00)
     will be due on August 1, 1999 and on the first day of each and every
     succeeding month to and including December 1, 1999. Fifty One Thousand
     Seven Hundred and NO/100ths Dollars ($51,700.00) will be due on January 1,
     2000 and on the first day of each and every succeeding month to and
     including December 1, 2000. Fifty Four Thousand Fifty and NO/100ths Dollars
     ($54,050.00) will be due on January 1, 2001 and on the first day of each
     and every succeeding month to and including December 1, 2001. Fifty Six
     Thousand Four Hundred and NO/100ths Dollars ($56,400.00) will be due on
     January 1, 2002 and on the first day of each and every succeeding month to
     and including January 1, 2003.

                                     DEPOSIT

5.   [ILLEGIBLE SENTENCE] every term, provision, covenant, and condition of this
     Lease. In the event Lessee defaults in respect of any of the terms,
     provisions covenants or conditions of this Lease, including, but not
     limited to the payment of rent, Lessor may use, apply or retain the whole
     or any part of such security for the payment of any rent in default or for
     any other sum which Lessor may spend or be required to spend by reason of
     Lessee's default. Should Lessee faithfully and fully comply with all of the
     terms, provisions covenants or conditions of this Lease, the security of
     any balance thereof shall be returned to Lessee or, at the option of the
     Lessor, to the last assignee of Lessee's interest in this Lease at the
     expiration of the term hereof. Lessee shall not be entitled to any interest
     on said security deposit.



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                                   POSSESSION

6.   [INTENTIONALLY LEFT BLANK]

                 ACCEPTANCE OF PREMISES AND CONSENT TO SURRENDER

7.   By entry hereunder, the Lessee accepts the Premises as being in good and
     satisfactory condition, unless within fifteen (15) days after entry Lessee
     shall give Lessor written notice specifying in reasonable detail the
     respect in which the Premises were not in satisfactory condition. The
     Lessee agrees on the last day of the term hereof, or on sooner termination
     of this Lease, to surrender the premises, together with all alterations,
     additions, and improvements which may have been made in, to, or on the
     Premises by Lessor or Lessee, unto Lessor in the same good condition as at
     the Lessee's entry into the Premises excepting for such wear and tear that
     would be normal for the total period of the Lessee's occupancy. The Lessee,
     on or before the end of the term or on sooner termination of this Lease,
     shall remove all Lessee's personal property and trade fixtures from the
     premises, and all property not so removed shall be deemed to be abandoned
     by the Lessee. If the Premises be not surrendered at the end of the term or
     on sooner termination of this Lease, the Lessee shall indemnify the Lessor
     against loss or liability resulting from delay by the Lessee in so
     surrendering the Premises including, without limitation, any claims made by
     any succeeding tenant founded on such delay.

                                USES PROHIBITED

8.   Lessee shall not commit, or suffer to be committed, any waste on the
     Premises, or any nuisance, or other act or thing which may disturb the
     quiet enjoyment of any other tenant in or around the buildings in which the
     Premises may be located, or allow any sale by auction upon the Premises, or
     allow the Premises to be used for any improper, immoral, unlawful or
     objectionable purpose, or place any loads upon the floor, walls, or roof
     which endanger the structure, or place any harmful liquids in the drainage
     system of the building. No waste materials or refuse shall be dumped upon
     or permitted to remain upon any part of the Premises outside of the
     building proper. No materials, supplies, equipment, finished products, or
     semi-finished products, raw materials or articles of any nature shall be
     stored upon or permitted to remain on any portion of the Premises outside
     of the buildings proper.

                            ALTERATIONS AND ADDITIONS

9.   The lessee shall make no alterations, additions or improvements to the
     Premises or any part thereof without first obtaining written consent of the
     Lessor which shall not be unreasonably withheld. The Lessor may impose to
     the aforesaid consent such requirements as the Lessor may deem necessary in
     Lessor's sole discretion, including without limitation thereto, the manner
     in which the work is done, a right of approval of the contractor by whom
     the work is to be performed, the times during which it is to be
     accomplished, and the requirement that upon written request of the Lessor
     prior to the expiration or earlier termination of the Lease. Lessee will
     remove any or all improvements or additions to the Premises installed at
     Lessee's expense after August 1, 1999. All such alterations, additions, or
     improvements not specified to be removed shall at the expiration or
     termination of the lease become the property of the Lessor and remain upon
     and be surrendered with the Premises. All movable furniture, business and
     trade fixtures, and machinery and equipment shall remain the property of
     the Lessee and shall be removed by the Lessee at any time during the Lease
     term when Lessee is not in default hereunder. Items which are not to be
     deemed as movable furniture, business and trade fixtures, or machinery and
     equipment shall include heating, lighting, electrical systems, air
     conditioning, partitioning, carpeting, or any other installation which has
     become an integral part of the Premises. The Lessee will at all times
     permit notices of non-responsibility to be posted and to



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     remain posted until the completion of alterations of additions which have
     been approved by the Lessor.

                             MAINTENANCE OF PREMISES

10.  Lessee shall, at Lessee's sole cost, keep and maintain the Premises and
     appurtenances in every part thereof, including but not limited to, glazing,
     sidewalks, parking areas, plumbing, electrical systems, heating and air
     conditioning installations, any store front, roof covering - unless it is
     not feasible to repair the existing roof covering and a new roof is
     required, and the interior of the Premises in good order, condition and
     repair. Lessor, at Lessor's sole cost and expense shall maintain the
     exterior walls, and structural portions of the roof, foundations, walls,
     and floors except for repairs caused by the wrongful act of the Lessee and
     Lessee's agents. The Lessor will replace the roof covering if repairs to
     said covering are no longer economically feasible in the judgment of
     roofing experts, and provided that said replacement is not made necessary
     by acts of the Lessee or Lessee's agents. The Lessee shall water, maintain
     and replace, when necessary, any shrubbery and landscaping provided by the
     Lessor on the Premises. The Lessee expressly waives the benefits of any
     statue now or hereafter in effect which would otherwise afford the Lessee
     the right to make repairs at Lessor's expense or to terminate this lease
     because of Lessor's failure to keep the Premises in good order, conditions,
     or repair.

              FIRE AND EXTENDED COVERAGE INSURANCE AND SUBROGATION

11.  [INTENTIONALLY LEFT BLANK]  See revised insurance clause attached.

                                   ABANDONMENT

12.  Lessee shall not vacate or abandon the Premises at anytime during the term;
     and if Lessee shall abandon, vacate or surrender the premises, or be
     dispossessed by process of law, or otherwise, any personal property
     belonging to the Lessee and left on the Premises shall be deemed to be
     abandoned, at the option of the Lessor, except such property as may be
     mortgaged to the Lessor.

                                 FREE FROM LIENS

13.  Lessee shall keep the Premises and property in which the Premises are
     situated, free from liens arising out of any work performed, materials
     furnished, or obligation incurred by the Lessee.

                    COMPLIANCE WITH GOVERNMENTAL REGULATIONS

14.  Lessee shall, at his sole cost and expense, comply with all of the
     requirements of all Municipal, State and Federal authorities now in force,
     or which hereafter may be in force, pertaining to the Premises, and shall
     faithfully observe in the use of the Premises all Municipal ordinances and
     State and Federal statutes now in force or which may hereafter be in force.
     The judgment of any court of competent jurisdiction, or the admission of
     Lessee in any action or proceeding against Lessee, whether Lessor be a
     party thereto or not, that Lessee has violated any such ordinance or
     statute in the use of the Premises, shall be conclusive of that fact as
     between Lessor and Lessee.

           INDEMNIFICATION OF LESSOR AND LESSEE'S LIABILITY INSURANCE

15.  The Lessee, as a material part of the consideration to be rendered to the
     Lessor, hereby waives all claims against the Lessor for damage to goods,
     wares and merchandise, and all other personal property in, upon, or about
     the Premises and for injuries to persons in or about the Premises, from any



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     cause arising at any time, excepting claims arising from the Lessor's
     negligence or that of its agents, employees, or contractors or a breach of
     the obligations of Lessor hereunder and the Lessee will hold the Lessor
     exempt and harmless from any damage or injury to any person, or to the
     goods, wares and merchandise and all other personal property of any person,
     arising from the use of the Premises by the Lessee, or from failure of the
     Lessee to keep the Premises in good condition and repair, as herein
     provided. [SECTION INTENTIONALLY LEFT BLANK] See revised insurance clause
     attached.

                            ADVERTISEMENTS AND SIGNS

16.  Lessee will not place, or permit to be placed, in, upon, or about the
     Premises any unusual or extraordinary signs, or any signs not approved by
     the city or other governing authority. The Lessee will not place, or permit
     to be placed, upon the Premises, any signs, advertisements or notices
     without the written consent of the Lessor first had and obtained. Any sign
     so placed upon the Premises shall be so placed upon the understanding and
     agreement that Lessee will remove same at the termination of tenancy herein
     created and repair any damage or injury to the Premises caused thereby, and
     if not so removed by the Lessee then the Lessor may have same so removed at
     Lessee's expense.

                                    UTILITIES

17.  The Lessee shall pay for all water, gas, heat, light, telephone service and
     all other service supplied to the Premises. If the premises are not served
     by a separate water meter, the Lessee shall pay to the Lessor 100 percent
     of the water bill for the entire property covered by said bill and of which
     the Premises are a part.

                                 ATTORNEYS FEES

18.  In case suit should be brought for possession of the Premises, for the
     recovery of any sum due hereunder, or because of the breach of any other
     covenant herein, the losing party shall pay to the prevailing party a
     reasonable attorney's fee, which shall be deemed to have accrued on the
     commencement of such action and shall be enforceable whether or not such
     action is prosecuted to judgment.

                                     DEFAULT

19.  In the event of any material breach of this Lease by the Lessee, or an
     abandonment of the Premises by the Lessee, the Lessor has the option of 1)
     removing all persons and property from the Premises and repossessing the
     Premises in which case any of the Lessee's property which the Lessor
     removes from the Premises may be stored in a public warehouse or elsewhere
     at the cost of, and for the account of the Lessee, or 2) allowing the
     Lessee to remain in full possession and control of the Premises. If the
     Lessor chooses to repossess the Premises, the Lease will automatically
     terminate in accordance with provisions of the California Civil Code,
     Section 1951.2. In the event of such termination of the Lease, the Lessor
     may recover from the Lessee 1) the worth at the time of the award of the
     unpaid rent which has been earned at the time of termination including
     interest at 7% per annum; 2) the worth at the time of the award of the
     amount by which the unpaid rent which would have been earned after
     termination until the time of award exceeds the amount of such rental loss
     that the Lessee proves could have reasonably been avoided including
     interest at 7% per annum; 3) the worth at the time of the award of the
     amount by which the unpaid rent for the balance of the term after the time
     of award exceeds the amount of such rental loss that the Lessee proves
     could be reasonably avoided; and 4) any other amount necessary to
     compensate the Lessor for all the detriment proximately caused by the
     Lessee's failure to perform his obligations under the Lease or which in the
     ordinary course of things



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     would be likely to result therefrom. If the Lessor chooses not to repossess
     the premises, but allows the Lessee to remain in full possession and
     control of the Premises, then in accordance with provisions of the
     California Civil Code, Section 1951.4, the Lessor may treat the lease as
     being in full force and effect, and may collect from the Lessee all rents
     as they become due through the termination date of the Lease as specified
     in the lease. For the purposes of this paragraph, the following do not
     constitute a termination of the Lessee's right to possession:
     a) Acts of maintenance or preservation efforts to relet property.
     b) The appointment of a receiver on the initiative of the Lessor to protect
        his interest under this Lease.

                                  LATE CHARGES

20.  Lessee hereby acknowledges that late payment by Lessee to Lessor of rent
     and other sums due hereunder will cause Lessor to incur costs not
     contemplated by this lease, the exact amount of which will be extremely
     difficult to ascertain. Such costs include, but are not limited to,
     processing and accounting charges, and late charges which may be imposed on
     Lessor by the terms of any mortgage or trust deed covering the Premises.
     Accordingly, if any installment of rent or any other sum due from Lessee
     shall not be received by Lessor or Lessor's designee within ten (10) days
     after such amount shall be due, Lessee shall pay to Lessor a late charge
     equal to eight percent (8%) of such overdue amount. The parties hereby
     agree that such late charge represents a fair and reasonable estimate of
     the costs Lessor will incur by reason of late payment by Lessee. Acceptance
     of such a late charge by Lessor shall in no event constitute a waiver of
     Lessee's default with respect to such overdue amount, nor prevent Lessor
     from exercising and of the other rights and remedies granted hereunder.

                               SURRENDER OF LEASE

21.  The voluntary or other surrender of this Lease by Lessee, or a mutual
     cancellation thereof, shall not work a merger, and shall, at the option of
     the Lessor, terminate all or any existing subleases or subtenancies, or
     may, at the option of Lessor, operate as an assignment to him of any such
     sublease or subtenancies.

                                      TAXES

22.  The Lessee shall be liable for all taxes levied against personal property
     and trade or business fixtures. The Lessee also agrees to pay, as
     additional rental, during the term of this Lease and any extensions
     thereof, all real estate taxes plus the yearly installments of any special
     assessments which are of record or which may become of record during the
     term of this lease. If said taxes and assessments are assessed against the
     entire building and building site, and this Lease does not cover the entire
     building and building site, the taxes and assessment installments allocated
     to the Premises shall be prorated on a square footage or other equitable
     basis, as calculated by the Lessor. It is understood and agreed that the
     Lessee's obligation under this paragraph will be pro-rated to reflect the
     commencement and termination dates of the Lease.

                                     NOTICES

23.  All notices to be given to Lessee may be given in writing personally or by
     depositing the same in the United States mail, postage prepaid, and
     addressed to Lessee at the said Premises, whether or not Lessee has
     departed from, abandoned or vacated the Premises, or to Lessor at the
     address to which rent is paid.



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                                 ENTRY BY LESSOR

24.  Lessee shall permit Lessor and his agents to enter into and upon the
     Premises at all reasonable times for the purpose of inspecting the same or
     for the purpose of maintaining the building in which the Premises are
     situated, or for the purpose of making repairs, alterations or additions to
     any other portion of said building, including the erection and maintenance
     of such scaffolding, canopies, fences and props as may be required without
     any rebate of rent and without any liability to Lessee for any loss of
     occupation or quiet enjoyment of the Premises thereby occasioned; and shall
     permit Lessor and his agents, at any time within ninety days prior to the
     expiration of this Lease, to place upon the Premises any usual or ordinary
     "For Sale" or "To Lease" signs and exhibits the Premises to prospective
     tenants at reasonable hours.

                           DESTRUCTION OF THE PREMISES

25.  In the event of a partial destruction of the Premises during the said term
     from any cause, Lessor shall forthwith repair the same, provided such
     repairs can be made with ninety (90) days under the laws and regulations of
     the State, Federal, County or Municipal authorities, but such partial
     destruction shall in no way annul or void the Lease, except that Lessee
     shall be entitled to a proportionate reduction of rent while such repairs
     are being made, such proportionate reduction to be based upon the extent to
     which the making of such repairs shall interfere with the business carried
     on by Lessee in the Premises. If such repairs cannot be made in ninety (90)
     days, Lessor may, at his option, make same within a reasonable time, the
     Lease continuing in full force and effect and the rent to be
     proportionately reduced as aforesaid in this paragraph provided. In the
     event that Lessor does not so elect to make such repairs which cannot be
     made in ninety (90) days, or such repairs cannot be made under such laws
     and regulations, this Lease may be terminated at the option of either
     party. In respect to any partial destruction which Lessor is obligated to
     repair or may elect to repair under the terms of this paragraph, the
     provision of Section 1932, Subdivision 2, and of Section 1933, Subdivision
     4, of the Civil Code of the State of California are waived by Lessee. In
     the event that the building in which the Premises may be situated be
     destroyed to the extent of not less than 33 1/3% of the replacement cost
     thereof, Lessor may elect to terminate this Lease, whether the Premises be
     injured or not. A total destruction of the building in which the Premises
     may be situated shall terminate this Lease. In the event of any dispute
     between Lessor and Lessee relative to the provisions of this paragraph,
     they shall each select an arbitrator, the two arbitrators so selected shall
     select a third arbitrator and the three arbitrators so selected shall hear
     and determine the controversy and their decision thereon shall be final and
     binding upon both the Lessor and Lessee, who shall bear the cost of such
     arbitration equally between them.

                           ASSIGNMENT AND SUBLETTING

26.  The Lessee shall not assign, transfer, or hypothecate the leasehold estate
     under this Lease, or any interest therein, and shall not sublet the
     Premises, or any part thereof, or any right or privilege appurtenant
     thereto, or suffer any other person or entity to occupy or use the
     Premises, or any portion thereof, without, in each case, the prior written
     consent of the Lessor which shall not be unreasonably withheld or delayed.
     As a condition for granting its consent to any subletting the Lessor may
     require the Lessee to agree to pay to the Lessor, as additional rental 50%
     of all rents received by the Lessee from its Sublease which are in excess
     of the amount payable by the Lessee to the Lessor hereunder. The Lessee
     shall, by sixty (60) days written notice, advise the Lessor of its intent
     to sublet the Premises or any portion thereof for any term hereof. Within
     thirty (30) days after receipt of Lessee's notice, Lessor shall either give
     approval to Lessee to sublease the portion of the Premises described in
     Lessee's notice, or Lessor shall decline/deny approval. [SECTION
     INTENTIONALLY LEFT



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     BLANK] If the Lessor approves a subletting, the Lessee may sublet
     immediately after receipt of Lessor's written approval. In the event Lessee
     is allowed to assign, transfer, or sublet the whole or any part of the
     Premises, with prior written consent of Lessor, no assignee, transferee, or
     sublessee shall assign or transfer this Lease, either in whole or part, or
     sublet the whole or any part of the Premises, without also having obtained
     prior written consent of the Lessor. A consent of Lessor to one assignment,
     transfer, hypothecation, subletting, occupation or use by any other person
     shall not release Lessee from any of Lessee's obligations hereunder or be
     deemed to be a consent to any subsequent similar or dissimilar assignment,
     transfer, hypothecation, subletting, occupation or use by any other person.
     Any such assignment, transfer, hypothecation, subletting, occupation or use
     without such consent shall be void and shall constitute a breach of this
     Lease by Lessee and shall, at the option of the Lessor exercise written
     notice to Lessee, terminate this Lease. The leasehold estate under this
     Lease shall not, nor shall any interest therein, be assignable for any
     purpose by operation of the law without the written consent of Lessor. As a
     condition to its consent, Lessor may require Lessee to pay all expense in
     connection with assignment, Lessor may require Lessee's assignee or
     transferee (or other assignees or transferees) to assume in writing all of
     the obligations under this Lease.

                                  CONDEMNATION

27.  If any part of the Premises be taken for public or quasi-public use, under
     any statute or by right of eminent domain or private purchase in lieu
     thereof, and a part thereof remains which is susceptible of occupation
     hereunder, this Lease shall, as to the part so taken, terminate as of the
     date title shall vest in the condemnor or purchaser, and the rent payable
     hereunder shall be adjusted so that the Lessee shall be required to pay for
     the remainder of the term only such portion of such rent as the value of
     the part remaining after such taking bears to the value of the entire
     Premises prior to such taking; but in such event Lessor shall have the
     option to terminate this Lease as of the date when title to the part so
     taken vests in the condemnor or purchaser. If all of the premises, or such
     part thereof be taken so that there does not remain a portion susceptible
     for occupation hereunder, this Lease shall thereupon terminate. If a part
     or all of the Premises be taken, all compensation awarded upon such taking
     shall go to the Lessor and the Lessee shall have no claim thereto.

                              EFFECT OF CONVEYANCE

28.  The term "Lessor" as used in this Lease, means only the owner for the time
     being of the land and building containing the Premises, so that, in the
     event of any sale of said land or building, or in the event of a lease of
     said building, the Lessor shall be and hereby is entirely freed and
     relieved of all covenants and obligations of the Lessor hereunder, and it
     shall be deemed and construed, without further agreement between the
     parties and the purchaser at any such sale, or the Lessee of the building,
     that the purchaser or lessee of the building has assumed and agreed to
     carry out any and all covenants and obligations of the Lessor hereunder. If
     any security be given by the Lessee to secure the faithful performance of
     all or any of the covenants of this Lease on the part of the Lessee, the
     Lessor may transfer and deliver the security, as such, to purchaser at any
     such sale or the lessee of the building, and thereupon the Lessor shall be
     discharged from any further liability in reference thereto.

                                  SUBORDINATION

29.  Lessee agrees that this Lease may, at the option of the Lessor, be subject
     and subordinate to any mortgage, deed of trust or other instrument of
     security which has been or shall be placed on the land and building or land
     or building of which the Premises form a part, and this subordination is
     made effective without any further act of Lessee. The Lessee shall, at any
     time hereinafter, on demand, execute any instruments, releases, or other
     documents that may be required by mortgagee, mortgagor,



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     or trustor or beneficiary under any deed of trust for the purpose of
     subjecting and subordinating this Lease to the lien of any such mortgage,
     deed of trust or other instrument of security, and the failure of the
     Lessee to execute such instruments, releases or documents, shall constitute
     a default hereunder.

                                     WAIVER

30.  The waiver by Lessor of any breach of any term, covenant or condition,
     herein contained shall not be deemed to be a waiver of such term, covenant
     or condition or any subsequent breach of the same or any other term,
     covenant or condition therein contained. The subsequent acceptance of rent
     hereunder by Lessor shall not be deemed to be a waiver of any preceding
     breach by Lessee of any term, covenant or condition of this Lease, other
     than the failure of Lessee to pay the particular rental so accepted,
     regardless of Lessor's knowledge of such a preceding breach at the time of
     acceptance of such rent.

                                    HOLD OVER

31.  Any holding over after the expiration of said term, with the consent of
     Lessor, shall be construed to be a tenancy from month to month, at a rental
     not to exceed 110% of the last month's rent to be negotiated by Lessor and
     Lessee prior to the expiration of said term, and shall otherwise be on the
     terms and conditions herein specified, so far as applicable.

                             SUCCESSORS AND ASSIGNS

32.  The covenants and conditions herein contained shall, subject to the
     provisions as to assignment, apply to and bind the heirs, successors,
     executors, administrators and assigns of all of the parties hereto; and all
     of the parties hereto shall be jointly and severally liable hereunder.

                                      TIME

33.  Time is of the essence of this Lease.

                                MARGINAL CAPTIONS

34.  The marginal headings or titles to the paragraphs of this Lease are not a
     part of this Lease and shall have no effect upon the construction or
     interpretation of any part thereof. This instrument contains all of the
     agreements and conditions made between the parties hereto and may not be
     modified orally or in any other manner than by an agreement in writing
     signed by all the parties hereto or their respective successors in
     interest. This Lease supercedes in its entirety the Lease dated February 4,
     1994 by and between Lessor and Lessee, except as otherwise required by the
     language of paragraphs 5 and 7 of this Lease.

     THE ADDENDUM ATTACHED HERETO IS HEREBY MADE A PART OF THIS LEASE.

     THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY WHO WILL
     REVIEW THE DOCUMENT AND ASSIST YOU TO DETERMINE WHETHER YOUR LEGAL RIGHTS
     ARE ADEQUATELY PROTECTED. RENAULT & HANDLEY IS NOT AUTHORIZED TO GIVE LEGAL
     AND TAX ADVICE. NO REPRESENTATION OR RECOMMENDATION IS MADE BY RENAULT &
     HANDLEY OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, EFFECT OR
     TAX CONSEQUENCES OF THIS DOCUMENT OR ANY TRANSACTION RELATING THERETO.
     THESE ARE QUESTIONS FOR YOUR ATTORNEY WITH WHOM YOU SHOULD CONSULT BEFORE
     SIGNING THIS DOCUMENT.



<PAGE>

IN WITNESS WHEREOF, Lessor and Lessee have executed these presents, the day and
year first above written.

                 LESSOR                                    LESSEE

Renault & Handley Employees Investment Co.         Connetics Corporation fka
                                                   Connective Therapeutics, Inc.
/s/
------------------------------------------         -----------------------------
                                                       /s/ JOHN L. HIGGINS
------------------------------------------         -----------------------------
                                                               CFO
------------------------------------------         -----------------------------



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                            REVISED INSURANCE CLAUSE


This Lease Clause replaces the Insurance Clause (11.) in the Renault & Handley
Net Lease Form.

     11.  Lessee shall not use, or permit the Premises, or any part thereof, to
          be used for any purposes other than that for which the Premises are
          hereby leased; and no use shall be made or permitted to be made on the
          Premises, nor acts done, which will cause a cancellation of any
          insurance policy covering said building, or any part thereof, nor
          shall Lessee sell or permit to be kept, used or sold, in or about the
          Premises, any article which may be prohibited by the standard form of
          fire insurance policies. Lessee shall, at his sole cost and expense,
          comply with any and all requirements, pertaining to the Premises, of
          any insurance organization or company, necessary for the maintenance
          of reasonable property and commercial general liability insurance,
          covering said building and appurtenances.

     11.1 Lessee shall, at its expense, obtain and keep in force during the term
          of this Lease a policy of commercial general liability insurance
          insuring Lessee, Lessor, and any third parties named by Lessor which
          may include Lessor's lender, against any liability arising out of the
          condition, use, occupancy or maintenance of the Premises. Such
          insurance policy shall have a combine single limit for both bodily
          injury and property damage in the amount not less than One Million
          Dollars ($1,000,000.00). The limits of said insurance shall not limit
          the liability of Lessee hereunder.

     11.2 Lessee shall, at its expense, keep in force during the term of this
          Lease a policy of fire and property damage insurance in an "all risk"
          form with a sprinkler leakage endorsement, insuring Lessee's
          inventory, fixtures, equipment and personal property within the
          Premises for the full replacement value thereof.

     11.3 Lessor shall maintain a policy of fire and property damage insurance
          in an "all risk" form, with sprinkler, and at the option of the
          Lessor, earthquake endorsements, covering loss or damage to the
          building, including Lessee's leasehold improvements installed with the
          written consent of the Lessor, in such amounts and with such coverage
          as Lessor deems advisable.

     11.4 Lessee shall pay to the Lessor as additional rent, during the term
          hereof, upon receipt of an invoice therefore, 100 percent of the
          premiums for any insurance obtained by the Lessor pursuant to 11.3
          above. Lessor may obtain such insurance for the Building separately,
          or together with other buildings or improvements which Lessor elects
          to insure together under blanket policies of insurance. In such case
          Lessee shall be liable for only such portion of the premiums for such
          blanket policies as are allocable to the Premises. It is understood
          and agreed that Lessee's obligation under this paragraph shall be
          prorated to reflect the Commencement Date and Expiration Date of the
          Lease.

     11.5 Lessee and Lessor each hereby waives any and all rights of recovery
          against the other, or against the officers, directors, employees,
          partners; agents and representatives of the other, for loss of or
          damage to the property of the waiving party or the property of others
          under its control, to the extent such loss or damage is insured
          against under any insurance policy carried by Lessor or Lessee
          hereunder, including any amount of any deductible which shall be
          considered an insured amount for purposes of this paragraph. Each
          party shall notify their respective insurance carriers of this waiver.



<PAGE>

                                    ADDENDUM

         Addendum to that certain Lease dated June 28, 1999 by and between
         Renault & Handley Employees Investment Co., Lessor and Connetics
         Corporation, Lessee for 3400 West Bayshore, Palo Alto.

         Par.10. At the end of paragraph 10, insert "Lessee shall have no
         responsibility to perform or construct any item of repair, maintenance,
         or improvement (i) which would be treated as a "capital expenditure"
         under generally accepted accounting principles, unless the requirement
         for said item was mandated by improvements designed and installed by
         the Lessee, (ii) required as a consequence of any construction defect
         in the Premises or the Property on which the Premises are located as of
         the commencement date; (iii) necessitated by the acts or omissions of
         Lessor or its agents, employees, or contractors; (iv) occasioned by any
         casualty or acts of God; or (v) for which Lessor has a right of
         reimbursement from others."

         Par. 4 At the conclusion of par. 14, insert "Nothing in par. 14 shall
         require Lessee to perform or pay the cost of any of the following, (i)
         any item that would be treated as a capital expenditure under generally
         accepted accounting principles; (ii) any clean-up, removal, or
         remediation of any hazardous toxic or other potentially harmful
         substance regulated under federal, state or local law ("Hazardous
         material"), unless the hazardous material in question was used, stored,
         or disposed of by Lessee, its agents, employees or contractors.

         Par. 26 On the 6th line after "Lessor hereunder", insert "after
         deducting therefrom the reasonable costs to Lessee affecting the
         sublease transaction, including brokerage commissions, alterations to
         the portion of the Premises transferred and attorney's fees.

         At the conclusion of par. 26, insert "Lessee may without Lessor's prior
         written consent and without any participation by Lessor in assignment
         or subletting proceeds, or any right to recapture any portion of the
         Premises, sublet the Premises or assign the Lease to (i) a subsidiary,
         affiliate, division or corporation which controls, is controlled by, or
         is under common control with Lessee; (ii) a successor corporation
         related to Lessee by merger, consolidation, non-bankruptcy
         reorganization; or (iii) a purchaser of substantially all of the
         Lessee's assets located in the Premises."

                            Revised Insurance Clause

         Par. 11. At the conclusion of paragraph 11, insert "provided that the
         Lessee shall not be required to correct any condition which does not
         comply with such requirements as of the commencement date of this Lease
         or to perform or pay for any item which would properly be considered a
         capital expenditure under generally accepted accounting principles
         excepting for alterations or additions made by Lessee".

         Par. 11.3. At the conclusion of par. 11.3, insert "Lessee shall not be
         obliged to reimburse to Lessor any portion of the insurance premiums
         attributed to earthquake coverage which exceeds two times the premium
         attributable to the all risk free and property damage insurance
         maintained by Lessor on the Premises."