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                                                                    EXHIBIT 10.2

                             CO-PROMOTION AGREEMENT

THIS CO-PROMOTION AGREEMENT is effective as of April 1, 1999 by and between
Connetics Corporation ("Connetics") and MGI Pharma, Inc. ("MGI").

                               B A C K G R O U N D

     A. Connetics has marketing rights in the United States to a pharmaceutical
product known as Luxiq(TM).

     B. MGI has experience and expertise in the marketing of products to
rheumatologists and internal medicine practitioners.

     C. MGI has a professional sales force that calls on physicians and other
health care professionals in order to promote MGI products.

     D. Connetics desires to enhance its marketing of Luxiq(TM) in the United
States by enlisting the support and participation of MGI and the MGI Sales Force
(as defined below) in the marketing effort.

NOW, THEREFORE, in consideration of the Background and the mutual promises
contained in this Agreement, Connetics and MGI agree as follows:

                                A G R E E M E N T

                                    ARTICLE 1

                                   DEFINITIONS

     "Affiliate" means in respect of either party any corporation or business
entity controlled by, controlling, or under common control with Connetics or
MGI, respectively. For this purpose "control" means the direct or indirect
beneficial ownership of at least fifty percent (50%) of the voting stock of, or
at least fifty percent (50%) interest in the income of, such corporation or
other business entity, or such other relationship as, in fact, constitutes
actual control.

     "Best Efforts" means those efforts that would be made by a reasonably
prudent business person acting in good faith in the exercise of reasonable
commercial judgment.

     "Call" means a presentation of the Product by a professional sales
representative to a physician or other health care professional or organization
licensed to administer, dispense or prescribe prescription drugs during a visit
which is for the purpose of actively promoting the sale of the Product.
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     "Coordinator" means the person appointed by each of Connetics and MGI in
accordance with Section 3.1.

     "Cost of Goods" shall mean shall mean the cost of Product manufactured in
final form by or on behalf of Connetics, including without limitation, all
direct and indirect costs for material, labor and production overhead included
in manufacturing, producing and supplying Product in the Territory, royalties
paid to third parties, distribution costs, and freight and other transportation
costs, including insurance charges, and duties, tariffs, sales and excise taxes
and other governmental charges based directly on sales turnover or delivery of
such Product and actually paid and allowed by Connetics, all calculated in
accordance with U.S. generally accepted accounting principles.

     "Dermatologist" shall mean all physicians specializing in dermatology as
defined by mutually acceptable criteria and reported by a mutually acceptable
reporting service.

     "Effective Date" means the date first written above.

     "FDA" means the United States Food and Drug Administration.

     "Good Cause" means (a) the material failure of the other party to comply
with its material obligations contained in this Agreement. Material obligations
include, without limitation, the failure of MGI to provide the full level of
detailing and promotional support required by Articles 2 and 4, or the failure
of Connetics to make the payments required by Section 5.1, (b) the filing of a
petition by or against the other party under any bankruptcy, insolvency or
similar law (which petition is not dismissed within sixty (60) days after
filing); the appointment of a receiver for the other party's business or
property; or the other party's making of a general assignment for the benefit of
its creditors, or (c) any force majeure event as defined in Section 11.6
affecting the other party beyond the other party's control that lasts for a
period of at least six (6) months and which is of sufficient intensity to
interrupt or prevent the carrying out of the totality of such other party's
material obligations under this Agreement during such period.

     "Gross Margin" means Net Sales less Cost of Goods.

     "Internal Medicine Physicians" shall mean all physicians specializing in
internal medicine as defined by mutually acceptable criteria and reported by a
mutually acceptable reporting service.

     "Joint Marketing Team" means the committee appointed pursuant to Section
3.2 of this Agreement.

     "Launch Stocking" means the Net Sales of Product sold by Connetics under
its Launch Stocking Incentive Program.

     "Launch Stocking Incentive Program" means Connetics' offer to wholesalers
of special purchase terms on all Product ordered on or before April 30, 1999.

     "Luxiq Prescriptions" shall mean prescriptions for the Product as
determined using data from an agreed upon service provider.

                                     Page 2
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     "Marketing Expenses" shall mean all out-of-pocket expenses in connection
with the Product that are approved by the Joint Marketing Team and are (i)
incurred by Connetics for marketing and promotional materials and activities
produced by Connetics, or (ii) incurred by MGI for marketing and promotional
materials and activities produced by MGI, except as set forth in Section 4.1.

     "MGI Physicians" means rheumatologists and internal medicine practitioners
with a rheumatology sub-specialty as defined by mutually acceptable criteria and
reported by a mutually acceptable reporting service.

     "NDA" means Connetics' new drug application number 20-934 submitted to the
FDA on December 16, 1997 (a summary of which has been provided to MGI).

     "Net Sales" shall mean the gross amounts invoiced by Connetics for Product
in the Territory in accordance with U.S. generally accepted accounting
principles (except Launch Stocking), less the following amounts directly
chargeable to such Products: (a) customary trade, quantity or cash discounts and
rebates, actually allowed and taken; (b) allowances for estimated returns,
rebates and chargebacks; (c) uncollectible amounts; and (d) recalls.

     "Product" means the betamethasone valerate foam product, trade name Luxiq
(TM), as described in the product specifications of the NDA as it may be amended
from time to time including any improvements thereto.

     "Product Contribution" means the amount calculated, on a quarterly basis,
by application of the following formula: ***

     "Product Information" means the dossier, regulatory status and information,
data and results of clinical and other trials and investigations relating to the
Product, including the NDA and right of cross-reference to the NDA, together
with all other information relating to the specification of the Product and
information relating to the manufacture (including method, conditions, and
process equipment), testing (including quality control standards, assay methods
and stability studies), storage and use of the Product now or hereafter during
the term of this Agreement in the possession or under the control of Connetics.

     "Promotion Plan" means a plan developed by the Joint Marketing Team for the
detailing and promotion of the Product in the Territory, and shall include
promotional strategies, detailing plans, pricing and budgets for promotional
activities (including the development of materials for the detailing and
promotion of the Product) for each discrete detailing period in which MGI
participates during the Term of this Agreement.

     "Proprietary Information" means any information of value of either party,
not generally known to the public, including (but not limited to):

     (a)  the Product Information; the development status of the Product;
          Product indications and modes of administration; technical
          information, such as 


*** Denotes confidential information that has been omitted from the exhibit and 
    filed separately, accompanied by a confidential treatment request, with the
    Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
    Exchange Act of 1934.

                                     Page 3

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          clinical, biological, manufacturing, pharmaceutical and characterizing
          data; and know-how;

     (b)  business information, such as reports; records; customer lists;
          supplier lists; marketing and sales plans; financial information;
          costs; and pricing information; and

     (c)  pharmacoeconomic analyses, if any, conducted by Connetics with respect
          to the Product.

     "Representatives" means sales representatives employed by MGI for detailing
the Product in the Territory as permitted hereunder.

     "Sales Force" means all of the Representatives employed by Connetics or
MGI, as the case may be.

     "Territory" means the United States of America, including its territories
and possessions.

     "Year" means the period beginning with a given anniversary of the Effective
Date and ending at the end of the day before the next anniversary of that date.

                                    ARTICLE 2

                             GRANTS AND OBLIGATIONS

     Section 2.1. Grant to MGI. Connetics hereby grants to MGI, during the Term
of this Agreement, the (i) exclusive right to detail and promote the Product in
the Territory to MGI Physicians, and (ii) the non-exclusive right to detail and
promote the Product in the Territory to Internal Medicine Physicians other than
MGI Physicians. During the Term of this Agreement, neither Connetics nor an
Affiliate of Connetics will authorize, or grant the right to, any third party
the rights to co-detail, co-promote, or co-market the Product to MGI Physicians
in the Territory as are granted to MGI hereunder, without MGI's prior written
consent which may be granted in MGI's sole discretion.

     Section 2.2. MGI's Obligations. Subject to the provisions of and during the
Term of this Agreement, MGI shall use its Best Efforts to detail and promote the
Product in the Territory to MGI Physicians according to the Promotion Plan and
in such manner and with such expedition as MGI itself would have adopted in
detailing and promoting a product of its (or any of its Affiliates) own
invention, including but not limited to the use of its trained and qualified
Sales Force to make Calls on physicians and other persons and organizations
licensed to administer, dispense and prescribe prescription drugs with respect
to the Product. Subject to the obligations set forth in Section 2.3 and Article
4, and in particular Section 4.3, nothing in this Agreement is intended to
prevent MGI from marketing and/or promoting other products during the term of
this Agreement or thereafter.

     Section 2.3. Competition. During the term of this Agreement, MGI will not
promote any other topical corticosteroid products that competes with the Product
to MGI Physicians. 

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Nothing in this Agreement shall restrict Connetics from engaging in commercial
alliances for Product with other parties for sales promotion to physicians other
than MGI Physicians.

                                    ARTICLE 3

                                   GOVERNANCE

     Section 3.1. Coordinator. Connetics and MGI shall each appoint an
authorized and knowledgeable representative ("Coordinator") to direct
communications. Each party will promptly notify the other as to the name of the
individual so appointed. Each party may replace its Coordinator at any time,
upon prompt written notice to the other party.

     Section 3.2. Joint Marketing Team. Within thirty (30) days following the
Effective Date, the Coordinators shall establish a "Joint Marketing Team"
consisting of representatives of Connetics and representatives of MGI appointed
by the respective Chief Executive Officers of each party. The Joint Marketing
Team will be directed by Connetics' Coordinator and will meet from time to time,
at mutually agreeable times and locations but in any event at least two (2)
times in each calendar year, to discuss and coordinate the joint promotion and
detailing of the Product in the Territory and the strategies and programs that
should be developed to maximize sales of the Product. By way of example, the
Joint Marketing Team shall develop and implement the Promotion Plan, and guide
all continuing joint promotion and detailing efforts with respect to the Product
in the Territory. Connetics will have the final responsibility, with the
cooperation and assistance of MGI, for developing promotion and detailing
strategies with respect to the Product, and for developing promotional and
detailing materials. Each party shall bear its own costs associated with its
participation in the Joint Marketing Team.

     Section 3.3. Promotion Plan. From time to time, but in no event less than
once a year, the Joint Marketing Team shall develop and formulate a written
Promotion Plan for specified periods, which shall set forth promotion and
detailing strategies relating to the Product.

     Section 3.4. Recommendations. Each party shall have the right to comment
upon and make recommendations to the other party regarding the other party's
activities under this Agreement, which recommendations the other party shall
thoroughly evaluate and consider, taking into account the other party's
expertise and experience with pharmaceutical products in the Territory.

     Section 3.5. Decisions. It is expressly understood and agreed that the
Joint Marketing Team shall be led by a Connetics' representative with MGI's
participation. In the event of a disagreement among the members of the Joint
Marketing Team, the matter shall promptly be referred to the Senior Vice
President, Commercial Operations of Connetics and the Vice President, Marketing
and Sales of MGI for resolution; if the matter is still not resolved, it shall
promptly be referred to the Presidents of Connetics and MGI for resolution. If
the two Presidents cannot reach agreement, in light of the fact that Connetics
owns the Product and the regulatory approvals relating to the Product, Connetics
shall have the right to resolve any such disagreement, including without
limitation any disagreement regarding the following subjects:

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     (a)  promotional material that Connetics considers, in its reasonable
          judgment, inconsistent with the labeling of the Product or with a
          regulatory submission pertaining to the Product;

     (b)  promotional material and other promotional activities that Connetics
          regards, in its reasonable judgments, as adversely affecting
          Connetics' promotion and/or marketing of the Product in other
          countries;

     (c)  communications with the FDA concerning the Product, including but not
          limited to the reporting of adverse events associated with use of the
          Product;

     (d)  any decisions regarding programs and financial expenditures; and

     (e)  any proposed recall of the Product.

     Section 3.6. Pricing. Connetics will establish the initial ex-factory
prices for the Product. Connetics shall at its sole discretion establish all
future ex-factory prices for the Product. Connetics may offer and sell the
Product at prices below the established or published ex-factory prices to
wholesalers whenever Connetics considers that such pricing is necessary to
obtain the business of certain customers.

                                    ARTICLE 4

                                PRODUCT PROMOTION

     Section 4.1. Joint Promotion. Subject to Connetics' leadership of the Joint
Marketing Team, MGI shall have the obligations set forth in Section 2.2 for
detailing and promoting the Product in the Territory. Except as otherwise
determined by the Joint Marketing Team, MGI shall bear all costs and expense
related directly to the MGI Sales Force (e.g., salaries, incentive compensation,
bonuses, benefits, cars, travel and entertainment expenses, etc.) and associated
MGI personnel for all purposes, including attending training sessions related to
the Product; the cost of any conference facilities etc. reserved in connection
with the training of MGI's Sales Force if that training is not held in
conjunction with Connetics Sales Force Training; personnel costs of MGI's
continuing medical education ("CME") staff; MGI's personnel and travel costs
associated with meetings and conventions; and any promotional materials that MGI
prepares. Connetics shall supply to MGI, at Connetics' cost, tradepacks,
placebos and other materials which may be deemed part of the Marketing Expenses.
The Joint Marketing Team will determine the scope and nature of the Marketing
Expenses.

     Section 4.2. Promotional Activities. The Joint Marketing Team shall advise
Connetics regarding promotional activities with respect to the Product, which
may include, without limitation, the following: journal advertising, direct mail
to physicians and pharmacies, advertising agency fees, promotional literature,
Sales Force detailing aids, creative and advertising preparation, CME speaker
programs (subject to Section 4.1), exhibits, symposia, audio- and
videocassettes, clinical evaluation programs as agreed upon by the Joint
Marketing Team, and marketing support trials (limited to comparative clinical
studies against competitive products intended for differentiation of the Product
during detailing and promotion).

                                     Page 6
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     Section 4.3. Call Requirement. MGI shall detail and promote the Product at
its discretion using the MGI Sales Force in the Territory pursuant to a plan
approved by the Joint Marketing Team.

     Section 4.4. Management of Sales Forces. The MGI Sales Force shall be
directed by the senior management of MGI, subject to the Promotion Plan
developed by the Joint Marketing Team. Connetics shall not have any
responsibility for the hiring, firing or compensation of the MGI's employees or
for any employee costs or benefits associated therewith.

     Section 4.5. Promotion Activity Reporting.

     (a)  MGI shall provide Connetics with a detailed report within thirty (30)
          days after the end of each fiscal quarter during the Term of this
          Agreement, describing the specific detailing and promotion activities
          undertaken by its Sales Force during such fiscal quarter. MGI warrants
          and represents that it will maintain records of Calls made by its
          Sales Force and that the records will accurately represent the number
          of Calls made.

     (b)  Connetics shall be entitled to audit the source data and documents
          that MGI used to compile such reports during normal business hours and
          at Connetics' expense. Accordingly, during the term of this Agreement
          and for three (3) years after such records are reported to Connetics
          pursuant to Section 4.5(a), MGI shall maintain such records in
          sufficient detail to permit Connetics to determine the specific
          detailing and promotion activities undertaken by its Sales Force
          during such term, and the amount allocated to Marketing Expenses under
          this Agreement. Connetics shall have the right to nominate an
          independent firm reasonably acceptable to the MGI to verify records of
          MGI and the calculation of the specific detailing and promotion
          activities undertaken by its Sales Force under Section 4.5(a) of this
          Agreement during the time period MGI is required to maintain such
          records hereunder. Such verification shall be conducted during normal
          business hours, and Connetics shall bear the fees and expenses of the
          accountants performing such verification. The accountants appointed
          pursuant to this Section shall not be authorized to disclose to
          Connetics any information other than the accuracy or inaccuracy of the
          item(s) to be verified.

     Section 4.6. Promotional Materials. Connetics shall create and develop
promotional materials relating to the Product for distribution to independent
third parties. The Joint Marketing Team will establish the copy platform for all
promotional materials and will agree on tactical programs. Subject to the
restrictions on trademark usage set forth in Article 8, MGI may create and
develop promotional materials related to the Product using, and based on,
materials created by or for Connetics; provided, however, MGI will not, publish
or distribute any such promotional material (or other material) with respect to
the Product that the Joint Marketing Team has not approved. The Joint Marketing
Team will determine whether the expenses incurred by MGI in creating such
promotional materials shall be included in Marketing Expenses.

     Section 4.7. Exchange of Information. During the Term of and subject to any
other provision of this Agreement, each party will provide the other with any
information or summaries of information relevant to the promotion of the Product
(including but not limited to market research data, information concerning
competitive products, physician communications, and the like) within 

                                     Page 7
<PAGE>
 
a reasonable time after such information becomes known to the party. Such
information shall be considered confidential or proprietary and therefore
subject to Section 11.1.

     Section 4.8. Training Materials. Connetics shall train the MGI Sales Force
as required to detail and promote the Product in the Territory according to the
terms of this Agreement through existing in-house staff and field clinical
liaisons, including a training program commencing on April 11, 1999 in
Minneapolis, Minnesota, or at such other time and place to be agreed by the
parties. Except as otherwise provided herein, each party shall bear the expenses
associated with training its Sales Force. Connetics shall provide MGI with
initial Product training materials, as well as any Product training materials
developed subsequent to the initial Product training materials, which MGI shall
reproduce and distribute to its Sales Force at MGI's own expense. The Joint
Marketing Team shall develop programs to monitor, test and otherwise ensure that
the Connetics and MGI Sales Forces are sufficiently knowledgeable about the
Product and other information contained in Connetics' training materials.

     Section 4.9. Sampling.

     (a)  In developing the Promotion Plan to achieve the objectives of this
          Agreement, the Joint Marketing Team will consider whether and to what
          extent it is necessary to distribute the Product to health care
          personnel and the trade as trade packs or samples (e.g., starter or
          trial kits). If the Joint Marketing Team determines that sales of the
          Product would be enhanced by distributing such samples, Connetics
          shall provide to MGI a percentage of available samples of the Product,
          to be distributed by the MGI Sales Force, in accordance with the
          Promotion Plan.

     (b)  MGI shall keep records as required by the FDA or any other
          governmental authority with regard to all samples distributed by its
          Sales Force.

                                    ARTICLE 5

                                  CONSIDERATION

     Section 5.1. Consideration to MGI. Connetics shall book all sales of
Product in the Territory and, for so long as MGI is conducting detailing and
promotion activities pursuant to and in accordance with this Agreement, shall
pay to MGI *** percent (***%) of the Product Contribution, calculated on a
quarterly basis.

     Section 5.2. Payment Terms.

     (a)  Within forty-five (45) days after the close of each fiscal quarter
          during the Term of this Agreement (or, if later, fifteen (15) days
          after Connetics receives the report from the reporting service for
          that quarter) Connetics shall submit to MGI an accounting of the
          Product Contribution in the Territory, including an itemization of all
          elements of Product Contribution for such fiscal quarter and
          calculating the compensation due MGI for such fiscal Quarter under
          Section 5.1. At the time of submitting each accounting, Connetics
          shall submit to MGI all payments due thereunder net of any credits of
          amounts owed by MGI to Connetics.


*** Denotes confidential information that has been omitted from the exhibit and 
    filed separately, accompanied by a confidential treatment request, with the
    Securities and Exchange Commission pursuant to Rule 24-2 of the Securities
    Exchange Act of 1934.



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     (b)  Within thirty (30) days of December 31, 1999, Connetics shall pay to
          MGI a one time adjustment for Launch Stocking which payment shall be
          the amount calculated according to the following formula: ***

     Section 5.3. Audit Rights. During the term of this Agreement and for three
(3) years thereafter Connetics shall keep full and accurate financial and
accounting records in accordance with U.S. generally accepted accounting
principles and shall maintain such records in sufficient detail to permit
calculation of Net Sales, Cost of Goods and Product Contribution. MGI shall have
the right to nominate an independent firm of certified public accountants
reasonably acceptable to the Connetics to verify the records of Connetics and
the calculation of the payment due under Section 5.1 of this Agreement. Such
verification shall be conducted during normal business hours, and MGI shall bear
the fees and expenses of the accountants performing such verification. The
accountants appointed pursuant to this Section shall not be authorized to
disclose to MGI any information other than the accuracy or inaccuracy of the
item(s) to be verified. If the audit reveals that Connetics has over-reported
for the period of the audit, MGI shall immediately remit to Connetics any refund
due and interest calculated from the payment date on such overpayment at the
then-current prime rate. If the audit reveals that Connetics has under-reported
for the period of the audit, Connetics shall immediately remit to MGI any
balance owing and interest calculated from the date on such overdue amount at
the then-current prime rate. In addition, if the audit reveals that Connetics
under-reported and underpaid by more than 10%, Connetics shall be responsible
for paying the accountants' fees in connection with the audit.

                                    ARTICLE 6

                         MANUFACTURING AND DISTRIBUTION

     Section 6.1. Supply of Product. Connetics shall have the sole
responsibility, financially and otherwise, for manufacturing the Product, either
directly or through one or more contractors (including Affiliates of Connetics),
receiving and processing orders, distributing the Product to customers, and
handling Product inventory and receivables. Connetics shall bear all costs of
such activities, including without limitation all third party royalties
(including all payments due to Soltec Research Pty, Ltd.) and cost of goods.
Connetics shall use its best efforts to insure, but cannot guarantee, that
sufficient stock of the Product will be available in its inventory to promptly
fill orders from the trade based on reasonable, non-binding forecasts to be
provided by the Joint Marketing Team at the beginning of each fiscal quarter
during the Term of this Agreement for that fiscal quarter and the following
three (3) fiscal quarters.

     Section 6.2. Monthly Reporting. In order to aid the Joint Marketing Team to
provide the forecast to be provided under Section 6.1, Connetics within thirty
(30) days after the end of a given calendar month (or within a reasonable time
after it becomes available) will provide the Coordinators with a written report
for that calendar month. This report will set forth, if available, the quantity
and dollar amounts of all elements of Product Contribution for the given month,
including any deductions taken and corresponding comparisons for the previous
year.

*** Denotes confidential information that has been omitted from the exhibit and 
    filed separately, accompanied by a confidential treatment request, with the 
    Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities 
    Exchange Act of 1934.


                                     Page 9

<PAGE>
 
     Section 6.3. Orders. If, for any reason, MGI receives orders for the
Product, MGI shall forward such orders to Connetics as soon as practicable.

     Section 6.4. Failure to Supply Product. MGI understands and acknowledges
that only one (1) contractor (a party not an Affiliate of Connetics) is
currently approved by the FDA to manufacture the Product. If Connetics is at any
time unable to supply the Product to be sold by Connetics under this Agreement,
which failure may be due to the failure of a contract manufacturer to meet its
obligations to supply Product to Connetics, such failure will be treated as a
force majeure condition under Section 11.6 and MGI's obligations hereunder to
promote and detail the Product shall be suspended for the period of such
inability to supply. In the event that Connetics is unable to cure such
inability to supply within a period of six (6) months, MGI may immediately
terminate this Agreement for Good Cause, and Connetics shall reimburse MGI for
all Marketing Expenses incurred by MGI through the date of termination of this
Agreement.

                                    ARTICLE 7

                     REGULATORY AFFAIRS AND MEDICAL INQUIRY

     Section 7.1. FDA Approval. Connetics will maintain ownership of the NDA and
file any supplements to it. Connetics shall file, own and maintain in its name
any and all regulatory and formulary submissions pertaining to the Product and
any and all regulatory and formulary approvals that may be issued with respect
to the Product.

     Section 7.2. Complaint Handling. Connetics shall have the sole right and
responsibility, and shall bear all costs related thereto, to take such actions
as may be necessary, in accordance with accepted business practices and legal
requirements, to obtain and maintain the authorization and/or ability to market
the Product in the Territory, including without limitation the following:

     (a)  responding to customer and medical complaints relating to the quality,
          strength or purity of the Product, and MGI agrees that it shall
          promptly refer any such complaints that it receives to Connetics;

     (b)  handling all returns of the Product (if the Product is returned to MGI
          it shall be shipped to Connetics at a location to be provided by
          Connetics, with any reasonable or authorized shipping or other
          documented out-of-pocket costs to be paid by Connetics), and MGI and
          Connetics shall each advise their customers generally that they should
          make returns to Connetics; and

     (c)  handling all recalls of the Product (at Connetics' request, MGI will
          assist Connetics in receiving the recalled Product, and any documented
          out-of-pocket costs incurred by MGI with respect to participating in
          such recall shall be reimbursed by Connetics).

     Section 7.3. Adverse Event Reporting Requirements. Connetics shall be
solely responsible for submitting Adverse Event Reports to the FDA, except to
the extent (if at all) that MGI may be required by law to make such reports
itself. During the Term of this Agreement, MGI shall promptly forward to
Connetics at the address set forth in Section 11.3 any reports MGI 

                                    Page 10
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receives of adverse events (distinguished as serious and non-serious by FDA
regulations), concerning side effects, injury, toxicity or sensitivity reaction
including unexpected increased incidence and severity associated with commercial
or clinical uses, studies, investigations or test with the Product (animal or
human), throughout the world, whether or not determined to be attributable to
the Product. For purposes of this Section 7.3, "promptly" means as soon as
practicable, but in no event later than (a) five business days for serious
adverse events after receipt of complete information regarding such events, or
(b) thirty calendar days for non-serious adverse events after receipt of
complete information regarding such events. Connetics shall transmit adverse
event reports to MGI on a periodic basis, but no less often than once every six
(6) months; provided, however, that Connetics shall promptly notify MGI of any
adverse event report requiring the cessation or substantial alteration of
detailing activities by the MGI Sales Force. MGI shall hold all such
communications in the strictest confidence and subject to the terms of Section
11.1 of this Agreement.

     Section 7.4. Communications with Government Agencies. Connetics shall have
the sole right and responsibility and shall bear all costs related to
communications with any government agencies to satisfy their requirements
regarding the authorization and/or continued authorization to market the Product
in commercial quantities in the Territory. MGI shall promptly notify Connetics
of any inquiry or other communication that it receives from the FDA concerning
the Product. Connetics shall be primarily responsible for all communications
with the FDA (and state equivalent agencies) concerning the Product, including
but not limited to reporting adverse events and responding to any inquiries
concerning advertising, detailing or promotional materials. MGI, however, shall
be able to communicate with the any such governmental agency regarding the
Product if:

     (a)  such communication is necessary to comply with the terms of this
          Agreement or the requirements of any law, governmental order or
          regulation; or

     (b)  MGI, if practical, made a request of such agency to communicate with
          Connetics instead, and such agency refused such request; provided,
          however, that before making any communication under this Section 7.4,
          MGI shall, if practical, give Connetics notice as soon as possible of
          MGI's intention to make such communications, and Connetics shall, if
          practical, be permitted to accompany MGI, take part in any such
          communications and receive copies of all such communications.

     Section 7.5. Medical Inquiries. MGI shall refer to Connetics all medical
questions or inquiries relating to the Product directed to MGI or MGI's Sales
Force, except that Adverse Event Reports shall be handled as set forth in
Section 7.3. MGI's medical inquiry personnel shall instruct individuals who
contact MGI or its Sales Force to direct medical inquiries directly to
Connetics.

     Section 7.6. Post-Market Studies. Connetics shall be responsible for, and
bear the cost of, conducting any clinical study required by the FDA to maintain
the NDA for the Product or establish any new indication or dosage form of the
Product. MGI shall not conduct any clinical study nor incur any expenses in
anticipation of conducting any such study. The cost of any such study conducted
by Connetics shall not be considered Marketing Expenses, or advertising,
detailing or promotional expenses for purposes of this Agreement. Conversely,
the cost of clinical evaluation 

                                    Page 11
<PAGE>
 
programs and marketing support trials meeting the requirement of Section 4.2
shall be considered Marketing Expenses for purposes of this Agreement.

                                    ARTICLE 8

                              INTELLECTUAL PROPERTY

     Section 8.1. Trademark License. Connetics hereby grants to MGI a
non-exclusive, royalty-free license to use the following trademarks for the
advertising, promotion, marketing, distribution and sale of Product in the
Territory:

                                 Connetics name

                                    Luxiq(TM)

                                    LUXIQ(TM)

     and its Foam Dollop icon, stylized name, and c-globe design, all as set
     forth on Exhibit A

In using the trademarks in materials it generates, MGI shall display the marks
in a style or size of print distinguishing the mark from any accompanying
wording or text.

     Section 8.2. Marking. During the Term of this Agreement and if permitted by
FDA regulations, all advertising, detailing and promotional materials related to
the Product may include both Connetics' name and logo and MGI's name and logo in
a manner approved by the Joint Marketing Team. Neither party will acquire any
rights in the other party's name or logo on account of its use in advertising,
detailing and promotional materials for the Product. Nothing in this Agreement
shall be construed to give either party any rights to use the other party's name
or logo outside of the Territory or other than in accordance with this
Agreement. Neither party shall distribute information that bears the name of the
other party unless the information meets the requirements of this Section 8.2,
or the other party has consented in writing to the use of its name on the
information, except that MGI shall be permitted to distribute and use all
materials in any form provided or previously approved by Connetics or the Joint
Marketing Committee.

     Section 8.3. Ownership. All proprietary features constituting the trade
dress of the Product, including but not limited to the shape and color of the
can, cap, label design, the size and configuration of the units in cartons, etc.
shall belong exclusively to Connetics. Except as expressly set forth in this
Section 8.3, Connetics shall own all copyrights to all advertising, detailing,
promotional and training materials as well as all other written materials,
audiotapes, videotapes, or other copyrightable materials that are created during
the Term of this Agreement in connection with the advertising, detailing,
marketing and promotion of the Product, and MGI will and does waive all rights
in and to any and all such materials. To the extent necessary, Connetics will
contract with, and make all arrangements with, any and all third parties for the
creation of any such materials. Connetics shall, and does hereby, grant to MGI a
royalty-free license to use and reproduce such materials solely in conjunction
with its performance of services pursuant to this Agreement, which license MGI
shall not assign or transfer. Any copyrights on promotional and training
materials made 

                                    Page 12
<PAGE>
 
by or on behalf of MGI and funded solely by MGI shall be owned by MGI. MGI
hereby grants to Connetics a perpetual, non-exclusive royalty-free license under
such copyrights to reproduce, use and sell such promotional and training
materials.

                                    ARTICLE 9

                         REPRESENTATIONS AND WARRANTIES

     Section 9.1. Representations and Warranties of Connetics. Connetics hereby
represents and warrants to MGI as follows:

     (a)  Connetics has the corporate power and authority to execute and deliver
          this Agreement and to perform its obligations thereunder, and the
          execution, delivery and performance of this Agreement have been duly
          authorized by Connetics.

     (b)  Connetics has the right to grant to MGI the rights and licenses
          granted under this Agreement.

     (c)  To the best of Connetics' knowledge, there are no pending or
          threatened legal claims relating to the Product, and there is no
          infringement or threatened infringement of a third party's patent
          rights with respect to any use or sale of Product in the Territory.

     Section 9.2. Representation and Warranty of MGI. MGI hereby represents and
warrants to Connetics that MGI has the corporate power and authority to execute
and deliver this Agreement and to perform its obligations thereunder, and the
execution, delivery and performance of the Agreement have been duly authorized
by MGI.

     Section 9.3. Disclaimer of Warranties. TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT,
CONNETICS MAKES NO WARRANTY WITH RESPECT TO ANY TECHNOLOGY, GOODS, SERVICES,
RIGHTS, OR OTHER SUBJECT MATTER OF THIS AGREEMENT AND HEREBY DISCLAIMS ALL
WARRANTIES, CONDITIONS OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF PERFORMANCE,
MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.

     Section 9.4. Disclaimer of MGI. Connetics acknowledges that MGI disclaims
any warranty, representation or guarantee that MGI's promotion and detailing of
the Product as permitted hereunder will generate any particular level of actual
prescriptions, or any increase in sales of the Products, as a result of Calls
made to MGI Physicians.

                                    Page 13
<PAGE>
 
                                   ARTICLE 10

                                 INDEMNIFICATION

     Section 10.1. Connetics Indemnity.

     (a)  Connetics agrees to indemnify and hold harmless MGI, its Affiliates,
          and their respective officers, directors, employees and agents from
          and against any and all damages, claims, liabilities, demands,
          charges, suits, penalties, costs, expenses and obligations to third
          parties incurred or arising in connection with (i) the manufacture,
          advertising, promotion, sale, import or use of the Product, including
          without limitation, product liability and intellectual property
          infringement claims, or (ii) breach of any warranty, representation or
          covenant of Connetics contained in this Agreement; provided, however,
          Connetics' obligations to indemnify MGI in any action related to a
          claim that the Product infringes the intellectual property of a third
          party shall be limited to the amount of actual damages awarded to such
          third party by a court or arbitrator, as the case may be, and to the
          reasonable costs and expenses (including reasonable attorneys' fees)
          of MGI, its Affiliates, and their respective officers, directors,
          employees and agents in connection with such action. Connetics shall
          have no indemnification obligation under this Section 10.1(a) for any
          claim(s) arising from: (a) any modifications to the Product by MGI
          where liability would not have occurred but for such modifications; or
          (b) the negligence or wrongful act of MGI, its officers, agents or
          employees, including without limitation (i) the detailing and/or
          promotion of the Product in a manner that is inconsistent with the FDA
          approval pertaining to the Product, or (ii) any liability arising out
          of or relating to any representation or statement regarding the
          Products which is inconsistent with the specifications or product
          label claims.

     (b)  MGI shall give Connetics prompt written notice of the receipt of any
          claim or the commencement of any action, suit or proceeding for which
          MGI may seek indemnification under Section 10.1(a) (individually or
          collectively, referred to hereafter as an "Action"), and Connetics
          shall assume the defense of the Action; provided that MGI complies
          with any good faith request made by Connetics for assistance in such
          defense; and provided further that:

          (i)   MGI shall have the right at any time to participate in any such
                Action with counsel of its own choice at MGI's sole expense;

          (ii)  if MGI elects for Connetics to defend the Action, then MGI's
                counsel may participate in all discussions, but shall not be
                entitled to appear in any legal or judicial proceeding relating
                to the Action;

          (iii) if Connetics fails to assume the defense within a reasonable
                time, MGI may assume such defense, and the reasonable fees and
                expenses of MGI's attorneys will be covered by the indemnity
                provided for in Section 10.1; and

          (iv)  if a conflict with respect to legal representation arises which
                cannot be resolved, and MGI is not prepared to waive such
                conflict, then MGI shall 

                                    Page 14
<PAGE>
 
               have the right to obtain separate legal counsel at Connetics'
               expense; provided, however, Connetics shall have no obligation to
               pay MGI's expenses in connection with MGI obtaining separate
               legal counsel in any Action brought by Connetics against MGI or
               any Action brought by MGI against Connetics.

               Nothing in the foregoing discussion shall give either party the
               right or authority to settle any Action on behalf of the other
               party without the other party's written consent.

          (c)  Limitation of Liability. EXCEPT FOR (A) ANY LOSS, LIABILITY,
               DAMAGE OR OBLIGATION ARISING OUT OF OR RELATING TO THE DISCLOSURE
               OF CONFIDENTIAL INFORMATION PURSUANT TO SECTION 11.1 OR (B) THE
               INDEMNITY OBLIGATIONS OF CONNETICS SET FORTH IN SECTION 10.1, OR
               AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, IN NO EVENT
               SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY OR ANY
               OTHER THIRD PARTY FOR ANY LOST OPPORTUNITY OR PROFITS, COSTS OF
               PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT,
               INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES ARISING
               OUT OF THIS AGREEMENT, UNDER ANY CAUSE OF ACTION OR THEORY OF
               LIABILITY (INCLUDING NEGLIGENCE), AND WHETHER OR NOT SUCH PARTY
               TO THIS AGREEMENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
               DAMAGE. THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE
               OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.

     Section 10.2. MGI Indemnity.

          (a)  MGI agrees to indemnify and hold harmless Connetics, its
               Affiliates, and their respective officers, directors, employees
               and agents from and against any and all damages, claims,
               liabilities, demands, charges, suits, penalties, costs, expenses
               and obligations to third parties arising from the negligence or
               wrongful act of MGI, its officers, agents or employees, including
               without limitation the detailing and/or promotion of the Product
               in a manner that is inconsistent with the FDA approval pertaining
               to the Product.

          (b)  Connetics shall give prompt written notice of the receipt of any
               claim or the commencement of any action, suit or proceeding for
               which Connetics may seek indemnification under Section 10.2(a),
               and MGI shall assume the defense thereof; provided, however, that
               Connetics shall be entitled to participate in any such action,
               suit or proceeding with counsel of its own choice, but at its own
               expense. If MGI fails to assume the defense within a reasonable
               time, Connetics may assume such defense, and the reasonable fees
               and expenses of its attorneys will be covered by the indemnity
               provided for in Section 10.2. No such claim, action, suit or
               proceeding shall be compromised or settled in any manner that
               might adversely affect the interests of MGI without the prior
               written consent of MGI.

                                    Page 15
<PAGE>
 
     Section 10.3. Indemnity Disputes. In the event that both parties claim
indemnification for the same claim, action, suit or proceeding, the provisions
of Sections 10.1 and 10.2 shall apply, except that the cost of defense shall be
shared equally pending final resolution, at which time the party found to be
entitled to indemnification shall also be entitled to reimbursement for any
amount paid by it as defense costs, in addition to other amounts recoverable
under Sections 10.1 and 10.2, as the case may be.

                                   ARTICLE 11

                          GENERAL TERMS AND CONDITIONS

     Section 11.1. Confidentiality.

          (a)  In order to facilitate this Agreement it will be necessary for
               the parties to exchange certain Proprietary Information. Each
               party agrees to retain the Proprietary Information of the other
               party in strict confidence and not to disclose or transfer the
               Proprietary Information to any party or use the Proprietary
               Information other than as authorized by the terms of this
               Agreement or otherwise in writing by the discloser. The parties
               acknowledge that such Proprietary Information can constitute
               "inside information" for securities purposes and the
               responsibility to refrain from any unauthorized disclosure,
               trading or other such use. Each party represents to the other
               that it maintains policies and procedures designed to prevent
               unauthorized disclosure of its own Proprietary Information. All
               employees of a party performing services under this Agreement
               shall be subject to agreements prohibiting the disclosure of
               Proprietary Information except on the terms permitted in this
               Agreement.

          (b)  These obligations of confidentiality and non-use shall not apply
               to Proprietary Information: (a) that was previously known to the
               recipient as evidenced by recipient's written records, (b) that
               is lawfully obtained by recipient from a source independent of
               the disclosing party, (c) that is now or becomes public knowledge
               other than by breach of this Agreement, or (d) that is legally
               required to be disclosed under federal or state law, provided
               that the party or its Affiliate required to make the disclosure
               takes reasonable steps, consistent with protection it would seek
               for its own confidential information, to prevent the Proprietary
               Information from becoming public.

          (c)  Each party shall have the right to disclose the Proprietary
               Information of the other to those of its Affiliates that need the
               Proprietary Information for the purposes of this Agreement,
               provided that each such Affiliate agrees to be bound to the other
               party by the provisions of this Article 11 and the disclosing
               party guarantees the performance under this Agreement of any such
               Affiliate.

          (d)  These obligations of confidentiality and non-use shall survive
               the expiration or termination of this Agreement.

     Section 11.2. Arbitration and Applicable Law. Any dispute, controversy or
claim arising out of or relating to this Agreement, or the breach or termination
of this Agreement, shall be settled 

                                    Page 16
<PAGE>
 
by arbitration in accordance with the rules of the American Arbitration
Association then in effect. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction. In any arbitration pursuant to
this Section 11.2, the award shall be rendered by a majority of the members of a
board of arbitration consisting of three members, one being appointed by each
party and the third being appointed by mutual agreement of the two arbitrators
appointed by the parties. The place of arbitration shall be Chicago, Illinois.
The arbitrators shall apply the law of the State of New York (regardless of that
jurisdiction's or any other jurisdiction's choice of law principles).

     Section 11.3. Notices. Any notice required or permitted by the terms of
this Agreement shall be given by overnight carrier, or by registered mail,
prepaid and properly addressed, or delivered by hand,

     If to Connetics, to:

                  3400 West Bayshore Road
                  Palo Alto, California 94303
                  Attn.: President and Chief Executive Officer

         And if to MGI, to:

                  Suite 300 E, Opus Center
                  9900 Bren Road East
                  Minnetonka, MN 55343-9667
                  Attn.: President and Chief Executive Officer

or at such other address as either party may designate by notice pursuant to
this Section. Any such notice shall be deemed to have been given when received.

     Section 11.4. Term and Termination.

          (a)  Term. The term of this Agreement shall begin on the Effective
               Date and shall continue, unless terminated sooner in accordance
               with this Agreement, until thirty (30) months after the Effective
               Date. This Agreement may be renewed upon the mutual agreement of
               the parties.

          (b)  Termination for Good Cause. Either party may terminate this
               Agreement for Good Cause effective at any time after providing
               sixty (60) days written notice and an opportunity to cure during
               such sixty (60) day period; provided, however, that either party
               shall have the right to terminate this Agreement immediately upon
               written notice to the other party if an inability to supply (as
               described in Section 6.4) has continued for six (6) months. If a
               cure is effected, the notice with respect to such Good Cause
               shall be null and void.

          (c)  Termination for Other Reasons. Either party shall have the right
               to terminate this Agreement in the event of a large scale recall
               or withdrawal of the Product from the Territory resulting from a
               significant safety risk inherent in the Product and not due to
               tampering, a remediable manufacturing problem, or other defect
               that can be cured 

                                    Page 17
<PAGE>
 
               with respect to Product manufactured after such risk is
               discovered. Termination of this Agreement shall be without
               prejudice to (i) any remedies that any party may then or
               thereafter have under this Agreement or at law; (ii) a party's
               right to receive any payment accrued under the Agreement prior to
               the termination date but which became payable thereafter; or
               (iii) either party's right to obtain performance of any
               obligation provided for in this Agreement that survives
               termination by its terms or by a fair interpretation of this
               Agreement.

          (d)  Effect of Expiration or Termination. Unless otherwise explicitly
               stated in this Agreement, MGI shall not be entitled to
               compensation for sales of Product after termination of this
               Agreement. If either party terminates this Agreement for Good
               Cause, Connetics shall pay to MGI all of the compensation due MGI
               under Section 5.1 (up to and including any portion of the
               calendar month in which effective termination occurs, including
               sums that have accrued but have not yet been paid as of the
               effective date of termination). If MGI terminates this Agreement
               for Good Cause, or upon the natural expiration of this Agreement
               pursuant to Section 11.4(a) including any renewal, Connetics (or
               its successor) shall make payments to MGI of (i) all of the
               compensation due MGI under Section 5.1 (up to and including any
               portion of the calendar month in which effective termination
               occurs, including sums that have accrued but have not yet been
               paid as of the effective date of termination), and (ii) Fifty
               percent (50%) of the amounts due to MGI pursuant to Section 5.1
               for sales made thereafter in each quarter (or portion thereof)
               until one year from the date on which this Agreement terminates.

     Section 11.5. Announcements/Publicity. Subject to the requirements of law
and/or Nasdaq, any announcements or publicity to be made or given in respect of
this Agreement by either party shall be subject to the prior approval of the
other party (such approval not to be unreasonably withheld or delayed) where
such announcement or publicity refers to such other party.

     Section 11.6. Force Majeure. Neither party shall be liable for failure to
perform any duty or obligation that party may have under this Agreement where
such failure has been occasioned by any force majeure which shall mean and
include government regulation, fire, flood, war, public disaster, strike or
labor dispute, inevitable accident, national emergency, or any other cause
outside the reasonable control of the party having the duty so to perform. Such
failure to perform shall only be excusable under the provisions of this Section
for so long as, and to the extent that, the same is rendered impossible by force
majeure. The party claiming that force majeure has occurred shall send to the
other party within five (5) working days of the first occurrence of force
majeure full particulars including the date of first occurrence and of the cause
or event giving rise to it. Notwithstanding the relief granted to any party by
this Section, the relevant party shall nevertheless use its reasonable endeavors
in any situation where it has invoked this Section to perform its relevant
obligations as soon as possible after force majeure has ceased. If a force
majeure event lasts longer than six (6) months, the unaffected party shall have,
in addition to the right to terminate this Agreement for Good Cause under
Section 11.4, the optional right to continue the Agreement in full force and
effect without modification.

     Section 11.7. Assignment. Unless otherwise agreed this Agreement may not be
assigned by either of the parties except in the case of a merger or sale of all
the assets of the business related to this Agreement.

                                    Page 18
<PAGE>
 
     Section 11.8. Survival. The covenants and agreements set forth in Section
4.5(b) and Articles 5 (to the extent specified in Section 11.4(d)), 9, 10 and 11
shall survive any termination or expiration of this Agreement and remain in full
force and effect regardless of the cause of termination.

     Section 11.9. Nonwaiver of Rights. No failure or delay on the part of a
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right. No
waiver of any such right will be deemed a waiver of any other right hereunder.

     Section 11.10. Headings. Section headings contained in this Agreement are
included for convenience only and form no part of the agreement between the
parties.

     Section 11.11. Validity of Provisions and Severability. If any provision of
this Agreement is or becomes or is deemed to be invalid, illegal, or
unenforceable in any jurisdiction: such provision will be deemed amended to
conform to applicable laws of such jurisdiction so as to be valid and
enforceable, or, if it cannot be so amended without materially altering the
intention of the parties, it will be stricken; the validity, legality and
enforceability of such provision will not in any way be affected or impaired
thereby in any other jurisdiction; and the remainder of this Agreement will
remain in full force and effect.

     Section 11.12. No Hire. During the term of this Agreement and for six (6)
months thereafter, neither party nor its Affiliates shall solicit nor hire any
individual in the other party's Sales Force without such party's prior written
consent which consent such party may grant in its sole discretion.

     Section 11.13. Entire Agreement. This Agreement sets forth the entire
agreement of the parties with respect to the subject matter hereof. This
Agreement may not be modified except by a writing signed by the parties'
authorized representatives.

              [Remainder of this page is intentionally left blank]

                                    Page 19
<PAGE>
 
     IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date.

Connetics Corporation,                     MGI Pharma, Inc.
a Delaware corporation                     a Minnesota corporation

By         /s/ T. Wiggans                  By        /s/ C. N. Blitzer        
  -----------------------------------        ---------------------------------
  Thomas G. Wiggans                          Charles N. Blitzer
  President & Chief Executive Officer        President & Chief Executive Officer

                                    Page 20
<PAGE>
 
                                    Exhibit A

               Foam Dollop icon, stylized logo, and c-globe design

                                    Page 21