<PAGE>
 
                                                                    EXHIBIT 10.1

                               PROMOTION AGREEMENT

THIS 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 Ridaura(R).

     B. MGI has experience and expertise in the marketing of rheumatological
products and other pharmaceutical products administered, dispensed and
prescribed primarily by the same health care professionals who are expected to
administer, dispense and prescribe Ridaura(R).

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

     D. Connetics desires to enhance its marketing of Ridaura(R) 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.
<PAGE>
 
     "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 Products 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.

     "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 under Articles 2 and 4 for a period
of five (5) consecutive quarters, or the failure of Connetics to make the
payments required by Section 5.1; or (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.

     "Inability to Supply" shall have the meaning set forth in Section 6.4.

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

     "MGI Physicians" means physicians specializing in rheumatology or internal
medicine.

     "MGI Sales Force" means all of the Representatives employed by MGI.

     "NDA" means the new drug application (including supplements) for the
Product submitted to the FDA (which MGI has the right to audit at any time).

     "Net Sales" shall mean the gross amounts invoiced by Connetics for Product
in the Territory in accordance with U.S. generally accepted accounting
principles, 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.

                                     Page 2
<PAGE>
 
     "Product" means the disease-modifying antirheumatic drug product (DMARD),
trade name Ridaura(R), as described in the product specifications of the NDA, as
it may be amended from time to time including any improvements thereto.

     "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 defined detailing period in which MGI
participates during the Term of this Agreement.

     "Proprietary Information" means any information of value to 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 clinical, biological, manufacturing,
          pharmaceutical and characterizing data; and know-how;

     (b)  business information, such as reports; records; markets; 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.

     "Quarter" means a calendar quarter.

     "Representatives" means sales representatives employed by MGI for detailing
the Product in the Territory to MGI Physicians.

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

     "Visit" means a visit by a professional sales representative to a physician
or other health care professional or organization licensed to administer,
dispense or prescribe prescription drugs for the purpose of actively promoting
the sale of products.

     "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.

                                     Page 3
<PAGE>
 
                                    ARTICLE 2

                             GRANTS AND OBLIGATIONS

     Section 2.1. Grant to MGI. Connetics hereby grants to MGI, during the Term
of this Agreement, the exclusive right to detail and promote the Product in the
Territory to 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 detail, promote, or market the Product 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 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 Sections
4.3 and 4.5, nothing in this Agreement is intended to prevent MGI from marketing
and/or promoting other products either during the term of this Agreement or
thereafter.

     Section 2.3. Competition. During the term of this Agreement, MGI will not
promote products that directly compete with the Product. The Joint Marketing
Team will review and approve promotional materials of related products to
prevent direct promotion of MGI products against the Product. Subject to the
first sentence of this Section, MGI may promote other products, including
DMARDS, during the term of this Agreement and thereafter.

                                    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.

                                     Page 4
<PAGE>
 
     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:

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

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

     (d)  any proposed recall of the Product.

     Section 3.6. Pricing. Connetics will establish the ex-factory price for the
Product. Connetics shall at its sole discretion establish all future 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. 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 set forth in the
following sentence, Connetics shall bear all direct costs and expenses incurred
by Connetics and MGI in connection with the promotion of 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, 

                                     Page 5
<PAGE>
 
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 will provide up to $500,000 for marketing and sales support for the
Product in the first Year. Thereafter, the amount provided by Connetics for
marketing and sales support shall be determined by the Joint Marketing Team. All
such amounts for marketing and sales support shall be expended as determined by
the Joint Marketing Team in accordance with the Promotion Plan.

     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).

     Section 4.3. MGI Sales Force. Subject to the provisions of Section 4.5,
during the Term of this Agreement, MGI shall use its Best Efforts to commit, as
of the Effective Date, no fewer than 24 full-time equivalent Representatives to
the detailing and promotion of the Product consistent with MGI's obligations
under the Promotion Plan. Any variation with respect to MGI's commitment under
this Section 4.3 must be approved by the Joint Marketing Team.

     Section 4.4. Sales Force Vacancies. MGI may incur vacancies in its
marketing territories relating to the transfer, resignation and/or termination
of its Representatives assigned to the detailing and promotion of the Product
under this Agreement. MGI shall use Best Efforts to fill any such vacancies soon
as possible after such vacancy occurs. No vacancy shall modify the overall
obligations of Section 4.5.

     Section 4.5. Call Requirements. MGI shall be obligated to use its Best
Efforts to deliver detailing and promotion of the Product during seventy-five
percent (75%) of the Visits actually made by the MGI Sales Force to MGI
Physicians in the Territory. In the event MGI fails to perform its obligations
under this Section 4.5 such that Connetics has Good Cause to terminate this
Agreement, Connetics' remedy shall be limited to the provisions set forth in
Section 11.4(b).

     Section 4.6. 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 MGI's employees or for
any employee costs or benefits associated therewith.

     Section 4.7. 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 

                                     Page 6
<PAGE>
 
          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 4.7(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 the term of 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
          4.7(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 4.8. 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 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, that 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 materials
shall be reimbursed out of the marketing and sales support budget for that year
(as referenced in Section 4.1).

     Section 4.9. 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 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 4.10. Training Materials. Connetics shall train the MGI Sales Force
to detail and promote the Product in the Territory commencing on April 11, 1999
in Minneapolis, Minnesota and at such other places to be agreed by the parties.
Except as expressly stated herein, MGI shall bear its 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. After the Effective
Date, the Joint Marketing Team shall develop programs to monitor, test and
otherwise ensure that the MGI Sales Force is sufficiently knowledgeable about
the Product and other information contained in Connetics' training materials.

                                     Page 7
<PAGE>
 
                                    ARTICLE 5

                                  CONSIDERATION

     Section 5.1. Consideration to MGI. For so long as MGI is conducting
detailing and promotion activities pursuant to and in accordance with this
Agreement, Connetics shall compensate MGI pursuant to Subsections (a) and (b)
below:

     (a)  Connetics will pay to MGI $250,000 per Quarter as follows:

          (i) Within thirty (30) days after receiving documentation from MGI
          sufficient to support that MGI made at least 3,750 Calls in the
          Quarter, Connetics shall pay the $250,000 for that Quarter.

          (ii) For the second Quarter of 1999, Connetics shall pay MGI $250,000
          regardless of the number of Calls that MGI makes during such Quarter,
          provided that MGI documents the number of Calls it does make in such
          Quarter.

          (iii) In any Quarter after the second Quarter of 1999 in which MGI
          fails to make 3,750 Calls, Connetics shall be entitled to withhold
          payment for such Quarter, subject to the "cure" mechanism described in
          paragraph (iv) and (v) below, which is different depending on the
          number of Quarters that this Agreement has been in effect.

          (iv) For each of the third and fourth Quarters of 1999 and the first
          Quarter of 2000, if MGI makes 3,750 Calls in that Quarter, Connetics
          shall pay MGI $250,000, except that if MGI makes fewer than 3,750
          Calls in any such Quarter, and does not make up the shortfall in the
          following Quarter, then no amount shall be paid in the following
          Quarter.

          (v) Beginning with the second Quarter of 2000, the number of Calls
          made by MGI in each Quarter shall be calculated by averaging the
          number of Calls made on MGI Physicians over the current and preceding
          three Quarters, and if the rolling four-Quarter average is less than
          3,750 Calls per Quarter, Connetics shall withhold the $250,000 for
          that Quarter.

     (b)  Connetics will pay to MGI on an annual basis (net of any payments or
          credit due by MGI under this Agreement):

               (i) fifty percent (50%) of the Gross Margin on Net Sales of
          Product equal to or exceeding $7,500,000 in each Year; or

               (ii) zero percent (0%) of the Gross Margin on Net Sales of
          Product less than $7,500,000 in each Year.

                                     Page 8
<PAGE>
 
     Section 5.2. Payment Terms. Within thirty (30) days after the close of each
Quarter during the Term of this Agreement, Connetics shall submit to MGI an
accounting of the Gross Margin on Net Sales of the Product in the Territory and
itemizing all deductions under the definitions of Gross Margin and Net Sales for
such Quarter and for the Year to date, and calculating the compensation due MGI
for such Year under Section 5.1(b). At the time of submitting each accounting,
Connetics shall submit to MGI all payments due thereunder.

     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 the compensation payable to MGI pursuant to Section 5.1(b). MGI
shall have the right to nominate an independent firm of certified public
accountants reasonably acceptable to 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 SmithKline Beecham) 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 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 Net Sales and Cost of Goods for the given month, including
any deductions taken and corresponding comparisons for the previous year.

                                     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 under this Agreement, which failure
may be due to the failure of a contract manufacturer to meet its obligations to
supply Product to Connetics ("Inability to Supply"), such failure will be
treated as a force majeure condition under Section 11.6; provided, however, (i)
MGI's obligations hereunder to promote and detail the Product shall be suspended
for the period of such Inability to Supply, and (ii) Connetics shall to pay to
MGI $250,000 for any Quarter in which Connetics experiences an Inability to
Supply up to a maximum of two consecutive Quarters, notwithstanding any contrary
terms in Section 5.1(a).

                                    ARTICLE 7

                     REGULATORY AFFAIRS AND MEDICAL INQUIRY

     Section 7.1. FDA Approval. Connetics will maintain ownership of such
approval 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
<PAGE>
 
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 give Connetics notice as soon as possible of MGI's intention
          to make such communications, and Connetics shall be permitted, if
          practical, 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'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
MGI's 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 advertising, detailing or promotional
expenses for purposes of this Agreement. Conversely, the cost of clinical
evaluation programs and marketing support trials meeting the requirement of
Section 4.2 shall be considered promotional expenses for purposes of this
Agreement.

                                    Page 11
<PAGE>
 
                                    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:

                                   Ridaura(R)

                            Connetics (name and logo)

                              c-globe design (logo)

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, 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
bottle, 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 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 material.

                                    Page 12
<PAGE>
 
                                    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 Product, as a result of Calls or
Visits made to MGI Physicians.

                                   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 

                                    Page 13
<PAGE>
 
          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 attorney's 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 by 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) representation or statement
          regarding the Product which is inconsistent with the specifications or
          product label claims by MGI or an Affiliate, assignee, distributor or
          representative of MGI.

     (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 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.

     (b)  Limitation of Liability. EXCEPT FOR (A) ANY LOSS, LIABILITY, DAMAGE OR
          OBLIGATION ARISING OUT OF OR RELATING TO THE 

                                    Page 14
<PAGE>
 
          DISCLOSURE OF CONFIDENTIAL INFORMATION PURSUANT TO SECTION 11.1 OR (B)
          THE INDEMNITY OBLIGATIONS OF CONNETICS SET FORTH IN SECTION 10.1
          (EXCLUDING INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS), 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.

     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.

                                    Page 15
<PAGE>
 
                                   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 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).

                                    Page 16
<PAGE>
 
     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 the second (2nd) anniversary of the Effective Date.

     (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 has continued for six (6) months or
          more. If a cure is effected, the notice with respect to such Good
          Cause shall be null and void.

     (c)  Termination by Either Party. Either party shall have the right to
          terminate this Agreement upon six (6) months written notice to the
          other party commencing upon the first anniversary of the Effective
          Date.

     (d)  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 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 

                                    Page 17
<PAGE>
 
          obligation provided for in this Agreement that survives termination by
          its terms or by a fair interpretation of this Agreement.

     (e)  Effect of 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).

     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 to which this Agreement relates.

     Section 11.8. Survival. The covenants and agreements set forth in Section
4.7(b) and 5.3 and Articles 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.

                                    Page 18
<PAGE>
 
     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

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