<PAGE>

                                                                    EXHIBIT 10.1
                                                                    ------------


                   LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT

         THIS LICENSE, RESEARCH AND DEVELOPMENT AGREEMENT is made as of August
2, 2000, by and between MGI PHARMA, INC., a Minnesota corporation having its
principal place of business at 6300 West Old Shakopee Road, Suite 110,
Bloomington, MN, U.S.A. 55438-2318 ("MGI"); and MethylGene Inc., a corporation
organized under the laws of the Province of Quebec having its principal place of
business at Suite 200, 7220 Frederick-Banting, Montreal, Quebec, Canada, H4S 2A1
("MethylGene").

                                    Recitals
                                    --------

         A. MethylGene has acquired rights to certain patents, patent
applications and know-how, and developed certain data, relating to
pharmaceutical products containing a compound known as MG98, and relating to
pharmaceutical products resulting from MethylGene's DNA methyltransferase
research program.

         B. MGI desires to obtain, and MethylGene is willing to grant to MGI, an
exclusive license under such intellectual property for the United States and its
territories and possessions, Canada and its provinces and territories, and
Mexico, all on the terms set forth herein.

         NOW THEREFORE, in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto have agreed as follows:

Article 1         INTRODUCTORY PROVISIONS

         1.1 Defined Terms. The following terms, when used in capitalized form
in this Agreement, shall have the meanings set forth below:

                  (a) "Affiliate" when used with reference to either party shall
mean any entity controlling, controlled by or under common control with such
party. For purposes hereof, "control" shall mean ownership, directly or
indirectly, of more than fifty percent (50%) of the securities having the right
to vote for election of directors, in the case of a corporation, and more than
fifty percent (50%) of the beneficial interest in the capital, in the case of an
entity other than a corporation.

                  (b) "Best Efforts" shall mean those efforts that would be made
by a reasonably prudent business person acting in good faith and in the exercise
of reasonable commercial judgment based on acceptable practice, process and
speed found in the pharmaceutical industry and taking into account the potential
commercial market for the applicable products in the Territory.

                  (c) "Confidential Information" shall mean all information and
data, in any form, including but not limited to any information or data on
assays, chemical structures, clinical trial results, diagnostics, biological
markers, protein structures, mechanisms of action, analytical techniques,
chemical synthesis, enzymology, computational models, manufacturing processes,


                                      -1-
<PAGE>

markets, customers, suppliers, patents or patent applications, inventions,
know-how, trade secrets, products, procedures, designs, formulas, business
plans, financial projections, organizations, employees, consultants or any other
similar aspects of a party's present or future business, the secrecy of which
confers a competitive advantage upon that party.

                  (d) "DNA MT Product" shall mean any pharmaceutical compound
derived from the Research Program.

                  (e) "Effective Date" shall mean the date first above written.

                  (f) "FDA" shall mean the United States Food and Drug
Administration.

                  (g) "FTE" shall mean a minimum of forty (40) hours per week
for individual MethylGene employees assigned to the Research Program, or its
equivalent if a given employee is assigned on a less than forty (40) hours per
week basis and therefore multiple employees are added to provide a single FTE.

                  (h) "Health Registration Dossier" shall mean all documentation
which is now or shall hereafter be on file with the FDA, or any Regulatory
Authority, which comprises the information and data submitted to such agency in
support of an application made by either party, or a sublicensee of either
party, to such agency for Marketing Authorization for any Licensed Product for
treatment of any indication.

                  (i) "Hybridon" shall mean Hybridon, Inc. or its successor.

                  (j) "Hybridon Agreement" shall mean the License Agreement
between Hybridon and MethylGene effective as of January 4, 1996, as amended on
November 26, 1997, December 15, 1997 and May 5, 1998.

                  (k) "IDT" shall mean Integrated DNA Technologies Inc.

                  (l) "IDT Agreement" shall mean the Licensing Agreement between
IDT and Hybridon, bearing an effective date of March 12, 1999.

                  (m) "Licensed Know-How" shall mean all Confidential
Information which is owned or controlled by or licensed (with right of
sublicense) to MethylGene as of the Effective Date or at anytime during the term
of this Agreement and is necessary or useful to the development, use or sale of
the Licensed Products.

                  (n) "Licensed Patents" shall mean the following, which are
owned or controlled by or licensed (with right of sublicense) to MethylGene: (i)
those patents and patent applications listed on Exhibit A hereto and any patents
issuing therefrom; (ii) any patents and patent applications conceived or reduced
to practice during the term of this Agreement and covering the manufacture (with
respect only to the DNA MT Products), use, importation or sale of any of the
Licensed Products, including any jointly-owned patents and patent applications
as

                                      -2-

<PAGE>

provided in Section 7.1, and (iii) all reissues, continuations,
continuations-in-part, extensions, reexaminations, and foreign counterparts
thereof.

                  (o) "Licensed Products" shall mean the MG98 Product and all
DNA MT Products, collectively.

                  (p) "Marketing Authorization" shall mean any authorization
which is legally required under applicable laws, regulations or administrative
decisions to put a proprietary medicinal product on the market in any country
for use in treatment of any indication; including, without limitation, any
governmental price approval or reimbursement approved under a national health
insurance system.

                  (q) "McGill MG98 Agreement" means the License Agreement
between McGill University and Hybridon, bearing an effective date of October 13,
1994, as amended on December 15, 1995, February 25, 1998 and February 27, 1998.

                  (r) "McGill DNA MT Agreement" means the License Agreement
between McGill University and Hybridon, bearing an effective date of December
15, 1995, as amended, February 25, 1998 and February 27, 1998.

                  (s) "MG98 Product" shall mean any pharmaceutical compound
containing as an active ingredient the compound currently known as MG98.

                  (t) "Net Sales Revenue" shall mean (i) with respect to MGI's
obligations under Section 5.3, the gross sale price of all Licensed Products,
sold by MGI, its sublicensees and/or their respective Affiliates, to third
parties, as reflected in invoices issued by all such sellers during that period
of time, or (ii) with respect to MethylGene's obligations under Section 5.4, the
gross sale price of all Licensed Products sold by MethylGene, its sublicensees
and/or their respective Affiliates, to third parties, in the applicable country
or countries, as reflected in invoices issued by all such sellers during that
period of time; less in each case (A) credit for returns, including withdrawals
and recalls; (B) sales rebates allowed or paid; (C) volume discounts to the
extent that the same are not reflected in the invoiced price; (D) sales,
value-added and other taxes that are payable by the buyer and are included in
the invoiced price; (E) customs duties related to sales made by the seller to
its customers.

                  (u) "R&D Costs" shall mean: (i) salaries and benefits for the
MethylGene FTEs assigned to the Research Program pursuant to Section 3.4(a);
(ii) overhead allocable to such MethylGene FTEs, consisting of lease, utilities,
insurance and research & development management, but excluding general and
administrative expenses; (iii) the actual costs of third party research to the
extent approved by the R&D Steering Committee; (iv) the actual, out-of-pocket
costs of prosecuting the Licensed Patents for the Licensed Products in the
Territory; (v) equipment, materials and supplies dedicated to the Research
Program (provided that purchases of equipment in excess of $5,000 shall be
subject to approval of the R&D Steering Committee); and (vi) travel and lodging
for MethylGene's members to attend R&D Steering Committee meetings, all as in
accordance with generally accepted accounting principles.


                                      -3-
<PAGE>

                  (v) "R&D Plan" shall mean that certain research and
development plan to be determined by the R&D Steering Committee as provided in
Section 3.1(b).

                  (w) "Regulatory Authority" shall mean, in respect of any
country, any agency responsible for the issuance of Marketing Authorizations for
pharmaceutical products marketed in that country.

                  (x) "Research Program" shall mean that program of DNA
methyltransferase research being carried out by MethylGene pursuant to the terms
of the R&D Plan.

                  (y) "Supporting Data" shall mean all data and information
owned or controlled by either party or a sublicensee of either party relating to
(i) the pharmacological or toxicological properties of any Licensed Product,
(ii) any pre-clinical or clinical testing and experience in relation to any
Licensed Product and (iii) the chemical composition, manufacturing processes and
quality control testing of any Licensed Product, to the extent reasonably
required for purposes of any application for Marketing Authorization. Supporting
Data shall also include, but is not limited to, copies of annual reports,
integrated study reports, protocols for clinical research and GLP pre-clinical
studies, protocol changes and amendments, CMC sections and amendments, safety
data, CRO databases, case report forms and access to patient records, GLP
toxicity, safety and metabolism reports and data, and GLP pharmacokinetic data
and reports owned or controlled by either party or a sublicensee of either party
and relating to any Licensed Product, as well as, in general, data or
information owned or controlled by either party or a sublicensee of either party
which would be useful for a person pursuing clinical research and regulatory
approval, or which would typically be part of any submission to FDA or other
Regulatory Authority for the purpose of obtaining approval of any Licensed
Product for any indication.

                  (z) "Territory" shall mean the United States and its
territories and possessions, Canada and its provinces and territories, and
Mexico.

                  (aa) "Third Party Agreements" shall mean those agreements
listed on Exhibit B hereto and any other license agreements that the parties
from time to time mutually determine are necessary or required for the
development, manufacture (with respect only to the DNA MT Products) or sale of
the Licensed Products in the Territory, as contemplated herein.

                  (bb) "TPC Agreement" means the Technology Partnerships Canada
agreement between Her Majesty the Queen in Right of Canada, as represented by
the Minister of Industry, bearing a commencement date September 1, 1997, as
amended on March 27, 1998.

                  (cc) "UMASS" means the Worcester Foundation for Experimental
Biology Inc. in its capacity as Licensor under the UMASS Agreement and its
successors in such capacity.


                                      -4-
<PAGE>

                  (dd) "UMASS Agreement" means the License Agreement between
UMASS and Hybridon, Inc. effective February 21, 1990, as restated on September
8, 1993 and amended on December 18, 1995 and July 1, 1999.

                  1.2 Other Rules of Interpretation. Unless the context clearly
indicates otherwise, the following rules shall govern the interpretation of this
Agreement:

                  (a) The definitions of all terms defined herein shall apply
equally to the singular, plural, and possessive forms of such terms.

                  (b) All references to "Sections," or "Exhibits" shall mean the
corresponding Sections of and Exhibits to this Agreement.

Article 2         LICENSE GRANTS

         2.1 License to MG98 Product. Subject to the terms and conditions of
this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing
license for all indications, with rights to sublicense (subject to Article 16
below), under all Licensed Patents and Licensed Know-How, to develop, use,
import, sell and offer to sell the MG98 Product in the Territory.

         2.2 License to DNA MT Products. Subject to the terms and conditions of
this Agreement, MethylGene hereby grants to MGI an exclusive, royalty-bearing
license for the oncology and rheumatology indications, with rights to sublicense
(subject to Article 16 below), under all Licensed Patents and Licensed Know-How,
to develop, make, have made, use and sell DNA MT Products within the Territory.

         2.3 Transfer of Licensed Patents, Supporting Data and Confidential
Information. Promptly after the Effective Date, MethylGene shall provide to MGI
copies of all Licensed Patents, Supporting Data and Confidential Information
that is material to the management of the Research Program and not previously
disclosed to MGI.

Article 3         RESEARCH AND DEVELOPMENT

         3.1      R&D Steering Committee.
                  ----------------------

                  (a) Within sixty (60) days after the Effective Date, the
parties shall form an R&D steering committee ("R&D Steering Committee") to
manage the research and development collaboration with respect to the Licensed
Products. The R&D Steering Committee will be composed of an equal number of
members from both parties, at not less than 2 members each, and will meet on a
quarterly basis, on an alternating basis between MGI's and MethylGene's
facilities.

                  (b) The R&D Steering Committee shall establish a written R&D
Plan for the Licensed Products, to be mutually agreed by the parties within
sixty (60) days after the Effective Date. The R&D Plan will detail each party's
responsibilities in the research and development of


                                      -5-
<PAGE>

the Licensed Products, including without limitation, the Research Program to be
carried out by MethylGene, and will be updated annually. Additional
responsibilities of the R&D Steering Committee shall include overseeing the
planning, budgeting and monitoring of the research program and all clinical
development of the Licensed Products. The R&D Steering Committee shall consider
and exploit (to the extent available) any tax advantages and economic
efficiencies applying to the conduct of any clinical studies in Canada. If the
R&D Steering Committee cannot resolve an issue within its purview, the CEOs of
both parties will meet to settle such issue; provided, however, that if the CEOs
are not able to amicably settle any such issues, MGI will have the deciding vote
for the settlement of such issue.

                  (c) At MGI's request, MethylGene's Head of Research and
Director of Chemistry will be available for a reasonable amount of consulting
with MGI on acylfulvene analogs. Such consulting shall be provided at no
additional charge to MGI, provided, however, that MGI shall bear the reasonable
travel and lodging expenses incurred by MethylGene's Head of Research and
Director of Chemistry in connection with providing such consulting services.

         3.2      Development of MG98 and DNA MT Products.
                  ---------------------------------------

                  (a) MGI will use its Best Efforts to develop the MG98 Product
and one or more DNA MT Products and to obtain Marketing Authorizations therefor
in the Territory, at MGI's expense. During the term of this Agreement, MGI shall
not research, develop or commercialize, itself or with any third party, any
compound or product that directly inhibits the enzyme DNA methyltransferase or
the mRNA of DNA methyltransferase (or any replacement target chosen pursuant to
Section 3.4(b)), except with the prior written consent of MethylGene.

                  (b) The parties may determine that the MG98 Product and one or
more DNA MT Products have applications outside of the field of oncology and
rheumatology. If so, the parties shall jointly determine whether it is
commercially feasible and prudent to partner with an appropriate third party
capable of developing and commercializing the applicable compound for such
indication or indications in the Territory. Such transaction will be based on a
mutually agreed value sharing agreement between MGI and MethylGene, to be
negotiated in good faith; provided that the payments under such agreement shall
be in lieu of any royalties otherwise payable to MethylGene hereunder. If MGI
elects not to participate in such a mutually agreed value sharing agreement and
so notifies MethylGene in writing, the rights with respect to such Licensed
Product in such indication shall automatically revert to MethylGene.

                  (c) MethylGene shall perform, at a minimum, at least 40% of
the Phase II portion of the R&D Plan for the MG98 Product in the U.S. and /or
Canada, on the behalf of MGI, as set forth in the R&D Plan. The amount of work
to be funded by MGI and performed by MethylGene shall be equivalent to a minimum
of *** in R&D Costs. This amount will partially cover contracted work and
supplies already dedicated to Phase II clinical trials in the U.S. & Canada.
MethylGene shall use its Best Efforts to obtain and contribute all applicable
government support as an expenditure under the R&D Plan.

*** 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.


                                      -6-
<PAGE>

         3.3 Reimbursement for Past R&D. In order to reimburse MethylGene for
its past research and development with respect to the Licensed Products, MGI
shall pay to MethylGene the following:

                  (a) U.S. $3,475,000 for past research and development work on
the MG98 Product. Such amount will be payable as follows: U.S. $1,618,750 within
two (2) days of the Effective Date, and the balance in three equal installments
on September 28, 2000, November 28, 2000 and February 28, 2001; and

                  (b) U.S. $2,225,000 for past research and development work on
the DNA methyltransferase research program. Such amount will be payable in four
equal installments on the Effective Date hereof, September 28, 2000, November
28, 2000 and February 28, 2001. Within thirty (30) days after receipt of FDA
approval of an Investigational New Drug Application in the U.S. for the first
DNA MT Product, MGI will pay MethylGene an additional U.S. $1 million as
compensation for past research and development work on the DNA methyltransferase
research program.

         3.4      On-Going Research Support
                  -------------------------

                  (a) MethylGene will continue the Research Program and will
dedicate 8 FTEs to such research. MGI will fund MethylGene's R&D Costs for the
performance of the Research Program, up to U.S. $6 million over the two year
period starting on the Effective Date. Such funding shall be made semi-annually
in arrears, and at MGI's sole option, may be paid in cash (U.S. dollars) or
shares of MGI common stock; provided, however, that no more than U.S. $1.5
million of such funding will consist of common shares of MGI in any year.

                  (b) MGI shall have an option, exercisable no earlier than six
(6) months and no later than eighteen (18) months after the Effective Date, to
pursue another research target (other than a target under investigation by
MethylGene) agreed upon by the R&D Steering Committee in lieu of the DNA
methyltransferase target. If the option is exercised to replace the target, MGI
will continue to fund MethylGene's development work with respect to all research
targets pursued for a minimum of an additional eighteen (18) months after the
date of exercise, and a minimum of *** after the date of exercise, payable as
set forth in Section 3.4(a).

                  (c) MethylGene acknowledges that any shares received from MGI
in payment of its funding obligation under Section 3.4(a) may be "restricted
securities" within the meaning of Rule 144 under the U.S. Securities Act of
1933, that such shares will not be transferable in the U.S. markets unless and
until such shares are either registered under the U.S. Securities Act of 1933 or
an exemption from such registration requirement is available, and that, in
connection with any issuance of such shares, MethylGene will be required to make
reasonable and customary representations to MGI concerning its investment intent
and status as an "accredited investor" under U.S. securities laws. If and to the
extent that MGI elects to make such payments in shares, MGI agrees to file a
registration statement on Form S-3 to register such shares under the Securities
Act of 1933 for resale by MethylGene within 15 calendar days after delivery of

*** 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.


                                      -7-
<PAGE>

such shares to MethylGene and to use its best efforts to have such registration
statement declared effective as soon as possible after the filing thereof.
Notwithstanding any such registration, MethylGene agrees that, in connection
with any sale of such shares on the Nasdaq National Market (or on any securities
exchange or other public trading market on which MGI's common stock is then
traded), the number of shares of MGI common stock sold by MethylGene on any day
will not exceed 10% of the average daily trading volume of MGI's common shares
in that market for the preceding five trading days. MGI agrees that, if and to
the extent that MethylGene sells any shares of MGI common stock received
hereunder on the Nasdaq National Market (or on any securities exchange or other
public trading market on which MGI's common stock is then traded) at a price
that is less than the price used to determine the number of shares to be
received by MethylGene in payment of such funding obligation, then MGI shall
make a cash payment to MethylGene (within five days after receipt from
MethylGene of evidence of such sale reasonably satisfactory to MGI) in U.S.
dollars equal to the aggregate decrease in the value of such shares sold by
MethylGene; provided, however, that MGI's obligation to make such payments shall
terminate and not apply to any sale of shares by MethylGene occurring after the
day on which, assuming MethylGene were selling as many shares as possible each
day subject to the registration requirements of the U.S. Securities Act of 1933
and the volume limitations agreed to above, MethylGene could have disposed of
all of its shares in such market.

         3.5 Mutual Assistance. The parties agree to provide to each other such
assistance as the other party shall reasonably request for purposes of obtaining
Marketing Authorizations for the Licensed Products. Such assistance shall
include (i) making its personnel available, both in person and by telephone, for
reasonable periods of time, to advise personnel of the other party in connection
with its applications for Marketing Authorization for the Licensed Products;
(ii) collaborating in interpreting Supporting Data provided by either party to
the other, and (iii) providing the other party with copies of all regulatory
documentation and submissions prepared by the other party.

         3.6 Coordination of Testing and Trials. The parties shall keep one
another fully and currently informed as to all tests and trials that they intend
to carry out for purposes of compliance with regulatory requirements and shall
cooperate in the design of such tests and trials in order to ensure to the
maximum possible extent that duplication of effort will be avoided, and, that
the results will be suitable for filing with Regulatory Authorities inside and
outside of the Territory. Without limiting the generality of the foregoing, the
parties shall use their Best Efforts to ensure that all clinical trials of the
Licensed Products that they shall undertake after the Effective Date shall be
designed and conducted in accordance with good clinical practices and good
laboratory practices as established for both inside and outside of the
Territory.

         3.7 Nonsolicitation. During the term of the Research Program and for a
one (1) year period thereafter but in any event for at least three (3) years
from the Effective Date, neither party nor its Affiliates shall directly or
indirectly seek to employ any senior scientist or member of senior management
who was employed by the other party or its Affiliates during such period or any
other individual employed by the other party or its Affiliates who worked at any
time on the Research Program; provided, however, that nothing herein shall
restrict a party from making general solicitations for job applicants (e.g.,
help wanted ads).


                                      -8-
<PAGE>

         3.8 Contribution and Reimbursement. In the event that MethylGene does
not obtain acceptance of the Phase II protocol in respect of the MG98 Product
from the FDA or other Regulatory Authority in the Territory on or before October
1, 2000, MethylGene will contribute U.S. $1 million to the Research Program.
Upon MethylGene obtaining such FDA or other Regulatory Authority approval after
October 1, 2000, MGI shall reimburse MethylGene the amount of U.S. $1 million as
compensation for past research and development work for the MG98 Product.

Article 4         MARKETING AND MANUFACTURE

         4.1 Efforts to Commercialize. Once Marketing Authorization has been
received for the applicable Licensed Product and subject to the availability of
sufficient commercial supplies of such Licensed Product for commercial launch,
MGI shall use its Best Efforts to promote, market and sell the MG98 Product and
one or more DNA MT Products in the Territory. In the event MGI fails to meet its
obligations under this Section 4.1 with respect to the MG98 Product or one or
more DNA MT Products in the Territory, MethylGene may notify MGI in writing
thereof. Such notice shall specify the nature of MGI's noncompliance under this
Section 4.1, including, without limitation, the basis upon which MethylGene has
made such determination. MGI shall have sixty (60) days following receipt of
such notice to cure such non-compliance and if such non-compliance is not cured
within such period, MethylGene shall have the right within its sole discretion
to terminate MGI's licenses hereunder granted, on a product-by-product basis,
for the applicable Licensed Product, by giving written notice to MGI.

         4.2 Copromotion Option. MethylGene shall have the right and option at
its discretion to co-promote the MG98 Product or the DNA MT Products in the
Territory using its own resources and/or a third party sales force acceptable to
MGI. If MethylGene desires to so co-promote any of the Licensed Products, it
shall so notify MGI in writing. Such co-promotion shall be subject to the terms
of a separate co-promotion agreement between the parties, which agreement shall
include a co-promotion split based on the relative financial and resources
contributions of each party to the development and commercialization of the MG98
Product or the DNA MT Products (including, without limitation, research,
development, commercial launch and on-going commercial and medical support).
Such co-promotion split shall be in lieu of royalties otherwise payable by MGI
to MethylGene hereunder with respect to such Licensed Product. The parties
acknowledge that to achieve an appropriate co-promotion split, MethylGene or its
third-party sales force may be required to make an up-front payment to MGI in
partial compensation for MGI's financial and resources contribution to the
development of the MG98 Product or the DNA MT Products, as applicable.

         4.3 Compliance with Laws. MGI shall ensure that the marketing,
promotion and sale of the Licensed Products complies with the conditions and
requirements of any applicable Marketing Authorizations, and with all other
applicable legal and regulatory requirements in the Territory.


                                      -9-
<PAGE>

         4.4 Manufacture of MG98 Product. MGI acknowledges and agrees that it
shall not have the right to manufacture the MG98 Product. MGI intends to
contract for such supply directly with Hybridon, MethylGene's supplier of the
MG98 Product. At MGI's request, MethylGene shall provide reasonable assistance
in such discussions with Hybridon and shall be entitled to review and comment on
the terms of the proposed supply agreement. In addition, MethylGene shall be
entitled to obtain a copy of the final, executed supply agreement, subject to
MGI's confidentiality obligations to Hybridon; provided that MGI shall use its
Best Efforts to obtain Hybridon's consent to the disclosure of the supply
agreement to MethylGene and its sublicensees outside of the Territory. To the
extent commercially feasible and reasonable, MGI shall make reasonable efforts
to negotiate a worldwide supply agreement for the supply of MG98 Product, which
negotiations will include MethylGene. If, for any reason, MGI is unable to
negotiate a satisfactory supply agreement with Hybridon, MethylGene shall assign
and provide to MGI all rights available to it relating to the Territory under
that certain supply agreement between MethylGene and Hybridon, dated as of
January 4, 1996, as amended on December 15, 1997 and May 5, 1998, including,
without limitation, pricing terms, product warranties and contingent rights of
manufacturing. The parties acknowledge that, in any of the cases described
above, the manufacture and supply of the MG98 Product must comply with all Third
Party Agreements.

Article 5         MILESTONES AND ROYALTIES

         5.1 Milestone Payments. MGI shall pay MethylGene the following
milestone payments upon the attainment of the following milestones for the MG98
Product and the first DNA MT Product to meet the applicable milestones. Such
payments shall be made once with respect to each milestone for the MG98 Product
and once with respect to each milestone for the first DNA MT Product to meet the
applicable milestones, within thirty (30) days after the occurrence of the
applicable event:

                                                                  Amount
                           Event                              (U.S. Dollars)
                           -----                              --------------

                  Commence Phase II (DNA MT Product only)     ***
                  Commence Phase III                          ***
                  NDA filing in U.S.                          ***
                  NDA filing in Canada                        ***
                  Approval in U.S.                            ***
                  Approval in Canada                          ***
                  Approval of 2nd U.S. indication             ***
                  Approval of 2nd Canadian indication         ***
                  1st calendar year Net Sales Revenue > ***   ***

         5.2 Running Royalties. MGI shall pay MethylGene the following royalties
on Net Sales Revenue in the Territory, as set forth below, within forty five
(45) days of the end of each calendar quarter. In addition, MethylGene and MGI
will each be responsible for paying 50% of any third party royalties applicable
to the MG98 Product or any DNA MT Product from time to

*** 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.


                                      -10-
<PAGE>

time under the Third Party Agreements (the "MethylGene Third Party Royalty" and
"MGI Third Party Royalty", respectively).

         Net Sales Revenue of MG98 Product
         ---------------------------------

         *** on calendar year Net Sales Revenue of up to U.S. $ 100 million
         *** on calendar year Net Sales Revenue over U.S. $ 100 million to U.S.
             $150 million
         *** on calendar year Net Sales Revenue over U.S. $150 million to U.S.
             $250 million
         *** on calendar year Net Sales Revenue over U.S. $250 million

         Net Sales Revenue of DNA MT Products in the field of oncology and
         -----------------------------------------------------------------
rheumatology
------------

         *** on calendar year Net Sales Revenue of up to U.S. $ 150 million
         *** on calendar year Net Sales Revenue over U.S. $ 150 million

MGI's obligation to pay royalties hereunder shall expire, on a
country-by-country basis, at such time as (i) all of the Licensed Patents have
expired in such country or (ii) ten (10) years from the first commercial sale of
any Licensed Product, whichever is longer.

         5.3      Milestone Payments and Royalty Reductions.
                  -----------------------------------------

                  (a) Upon MethylGene licensing each of the MG98 Product and the
DNA MT Products outside of the Territory, the following will be payable to MGI
within thirty (30) days of the occurrence of the applicable milestone event, if
MethylGene or the third party who licenses the product in the following
territories utilizes any Supporting Data created during the collaboration and
funded by MGI:

<TABLE>
<CAPTION>
                                                                       Amount
         Event                                                     (U.S. Dollars)
         -----                                                     --------------
                                                     European Union (E.U.)     Japan
                                                     ---------------------     -----
         <S>                                         <C>                       <C>
         Execution of an Agreement with a            ***                       ***
               third party licensee
         Commencement of Phase III trials or         ***                       ***
              a pivotal trial equivalent
         1st Approval                                ***                       ***
</TABLE>

                  (b) MGI's royalty on sales of the MG98 Product and DNA MT
Products as set forth in Section 5.2 will be reduced as follows: Royalty reduced
by *** upon 1st calendar year with combined E.U. and Japanese Net Sale Revenues
of each such product between U.S. $ 25 million and U.S. $50 million and further
reduced by an additional *** (for a total reduction of ***) for combined E.U.
and Japanese Net Sales Revenues of each such product above U.S. $50 million.
MethylGene shall notify MGI in writing when combined E.U. and Japanese Net Sales
Revenues of each such product reach the foregoing levels, and MGI shall be
entitled thereafter to use such adjusted royalty rate in calculating its royalty
obligations under Section 5.2.

*** 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.


                                      -11-
<PAGE>

                  (c) If MGI's gross margin on the MG98 Product is less than
***, MGI's royalty on Net Sales Revenues of the MG98 Product shall be reduced by
the percentage amount that MGI's gross margin is less than ***, provided that in
no event shall the royalty rate payable to MethylGene be less than ***, plus an
amount equal to the MethylGene Third Party Royalty and provided that MGI shall
remain obligated to pay the MGI Third Party Royalty. Gross margin shall include
all manufacturing costs, including bulk active pharmaceutical ingredient, third
party royalties and royalties due MethylGene.

                  (d) In the event that there is Generic Competition (as defined
below) with respect to a Licensed Product in any country in the Territory, the
royalty payable by MGI on Net Sales Revenue of the applicable Licensed
Product(s) shall thereafter be reduced in such country by ***, provided that MGI
shall remain obligated to pay the MGI Third Party Royalty. In this Section
5.3(d), "Generic Competition" means the introduction in a country, in the field
of oncology or rheumatology, of a product that is identical in structure and
composition to a Licensed Product and that has achieved, in the most recent
completed calendar year, a *** market share by quantity in the relevant market
in which such Licensed Product and such other product compete.

         5.4 Reports. MGI shall provide to MethylGene, on or before the date
which shall be forty-five (45) days after the end of each calendar quarter
during the term of this Agreement, a report which shall show (a) the calculation
of Net Sales Revenue for such calendar quarter in the Territory and the
calculation of the royalties payable thereon and (b) the calculation of MGI's
gross margin on the MG98 Product. If actual Net Sales Revenue of any sublicensee
for that quarter is unavailable at the time such quarterly report is due, MGI
shall include in its report for that quarter a good faith estimate of such Net
Sales Revenue, and an appropriate adjustment for the difference between the
actual and estimated Net Sales Revenue shall be made in the report for the
following quarter, with a corresponding adjustment in the amount of royalties
payable in respect of that quarter.

         5.5 Exchange Rates. All payments hereunder shall be made in U.S.
dollars. For purposes of determining the amount of Net Sales Revenue during any
calendar quarter, the total of all sales in each other currency during such
quarter shall be converted into dollars at the rate in effect at the time such
payment is due and payable hereunder, as reported by the Wall Street Journal.

         5.6 Books and Records. During the term of the Agreement and for three
(3) years thereafter, each party shall keep accurate and complete records
showing all sales of Licensed Products by it and its sublicensees, and in the
case of MGI, its gross margin on the MG98 Product, and in the case of
MethylGene, its R&D Costs. Such records shall include all information necessary
to verify the total amount and computation of any amounts owing hereunder, and
shall be open to inspection and audit, during reasonable business hours, to the
extent necessary to verify the amount of such royalties. Such inspection and
audit shall be conducted at the request and expense of the auditing party by an
independent Certified Public Accountant appointed by the auditing party and
reasonably acceptable to the audited party. In the

*** 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.


                                      -12-
<PAGE>

normal course, such inspection and audit shall be made not more often than once
in each calendar year. Such Certified Public Accountant shall undertake a
confidentiality obligation to the audited party permitting it to disclose to the
auditing party, and only the auditing party, the amount of the sales, Net Sales
Revenue, gross margin, R&D Costs or royalties due hereunder (as applicable), and
no other information. The auditing party shall bear the costs of any such
inspection and audit; provided that if any inspection and audit reveals an
underpayment or underreporting of more than five percent (5%), the audited party
shall reimburse the auditing party for its out-of-pocket costs for such
inspection and audit.

         5.7 Taxes. All payments to be made pursuant to this Agreement represent
net amounts that the party being paid is entitled to receive and shall not be
subject to withholding or deduction for any reason whatever. In the event that
such payments become subject to duties, taxes or charges of whatever kind or
nature levied by any country other than the United States, such payments shall
be increased to such an extent as to allow the party being paid to receive the
net amounts due under this Agreement.

         5.8 Payments. Each such payment shall be made in U.S. dollars by wire
transfer to the account of the party receiving same at a bank designated in
writing by that party from time to time. Any overdue amounts hereunder shall
bear interest at the rate of twelve percent (12%) per annum, or the maximum
legal interest rate, whichever is lower.

Article 6         Regulatory Matters

         6.1 Marketing Authorizations. MGI shall be responsible for obtaining
all Marketing Authorizations for the Licensed Products in the Territory, in its
own name and at its own expense. To the extent permitted by law, MethylGene
shall promptly take all necessary actions with the FDA and the Canadian
Regulatory Authority to name MGI as the applicant on all active INDs for the
Licensed Products and shall provide MGI with a right of reference and access to
any and all Supporting Data owned or controlled by MethylGene, solely for MGI's
regulatory purposes in the Territory. MGI shall provide MethylGene with a right
of reference and access to any and all Supporting Data owned or controlled by
MGI, solely for MethylGene's regulatory purposes in and outside the Territory. A
receiving party shall treat any Supporting Data owned or controlled by and
received from the other party as Confidential Information of the other party,
provided however, such receiving party shall be permitted to disclose such
Confidential Information to its officers or employees and, with respect to
MethylGene, (a) to any Regulatory Authority outside the Territory and, (b) upon
the expiry or termination of this Agreement for any reason, to any Regulatory
Authority, whether in or outside the Territory.

         6.2 Other Information and Data. Each party shall provide to the other
party complete and accurate copies of all documentation containing Supporting
Data, Adverse Experience Data (as defined below) and other data relating to the
Licensed Products, which is prepared or acquired by such party or any of its
respective sublicensees during the term of this Agreement. Copies of Supporting
Data shall be forwarded by first class mail or faster means of transmission
within thirty (30) days after it shall have been prepared or acquired. Copies of
Adverse Experience Data shall be forwarded by facsimile or courier as quickly as
may be necessary to


                                      -13-
<PAGE>

permit the recipient to comply with any applicable legal requirements and in no
event later than the earlier of (i) seven (7) days after such Adverse Experience
Data is prepared or acquired and (ii) the date on which such Adverse Experience
Data is provided to any Regulatory Authority. Any information or documentation
is required to be provided to MGI by MethylGene hereunder shall be provided to
MGI in English. As used herein, the term "Adverse Experience Data" shall mean
all data concerning any serious or unexpected adverse effects, side-effects and
contraindications of any Licensed Product which come to the attention of either
party or its sublicensee and which is of such a nature and magnitude that it is
required under the laws of the any country in the Territory to be collected,
maintained and reported to Regulatory Authority.

         6.3 Regulatory Rights and Obligations upon Reversion of License Grant.
In the event of the license grants under Sections 2.1 and 2.2 reverting to
MethylGene, all rights to MethylGene and obligations of MGI pursuant to Sections
6.1 and 6.2 above shall survive this Agreement. MGI agrees to assign to
MethylGene any Marketing Authorizations for the Licensed Products and to name
MethylGene as the applicant for all active INDs. MGI shall take all necessary
actions with the FDA and the Canadian Regulatory Authority to effect such
assignment and naming of MethylGene.

Article 7         INTELLECTUAL PROPERTY

         7.1 Joint Inventions. Any inventions relating to the Licensed Products
or arising from the parties' efforts under this Agreement that are jointly made
by both parties (i.e., an invention in which one or more inventors from each
party, including individuals normally obliged to assign an invention to a party,
have made an inventive contribution as determined by United States Patent Law),
and any patents thereof, shall be jointly owned by the parties.

         7.2 Patent Prosecution. The parties intend that the filing, prosecution
and maintenance of any patent applications for the Licensed Patents (including
any joint inventions as set forth in Section 7.1) will be effected and remain
under the control of MethylGene and MethylGene shall have the right (but not the
obligation) to undertake such filings, prosecutions and maintenance at its sole
expense (except reimbursement as provided in the definition of R&D Costs),
provided that: (a) MethylGene notifies MGI within one (1) month prior to the
filing of any patent application by MethylGene; (b) MethylGene provides MGI
promptly with copies of all communications received from or filed in patent
office(s) with respect to such filings; and (c) MethylGene provides MGI a
reasonable time prior to taking or failing to take any action that would affect
the scope or validity of rights under any patent applications or patents
(including but not limited to substantially narrowing or canceling any claim,
abandoning any patent or not filing or perfecting the filing of any patent
application in any country), with notice of such proposed action or inaction so
that MGI has a reasonable opportunity to review and make comments. If MethylGene
decides, in its sole discretion, to abandon a patent or patent application (or
particular claims therein) within the Licensed Patents, then it shall so notify
MGI in writing at least sixty (60) days prior to any filing or bar date, and MGI
may take whatever action it deems necessary at its expense to maintain such
patent or patent application.


                                      -14-
<PAGE>

         7.3 Prosecution. On request of the party performing the filing of any
patents hereunder, the other party will cooperate in all reasonable ways, in
connection with the prosecution of all patents resulting from inventions. The
party performing the filing agrees to assign the patents to the other party,
should it no longer be interested in prosecuting or maintaining them, and should
the other party desire such assignment from case to case.

         7.4      Enforcement.
                  -----------

                  (a) MGI shall have the first right, but not the obligation, in
its discretion and at its sole expense, to prosecute any alleged infringement,
misappropriation or misuse of the Licensed Patents and Licensed Know-How in the
Territory. MethylGene shall have the right to participate in such action at its
own expense, and shall be consulted regarding any proposed settlement. In any
such legal action, any monies recovered shall be allocated as follows: (i)
first, to reimburse MGI for its costs and expenses incurred in such action, and
(ii) second, if any balance is remaining, to reimburse MethylGene for any
royalties remaining on the remaining balance, as calculated in accordance with
Section 5.2 and subject to Section 5.3. MGI shall be entitled to retain any
amounts left after payment of the foregoing.

                  (b) If MGI decides at any time not to commence or actively
continue prosecution of such a legal action, it shall so notify MethylGene in
writing, and MethylGene shall have the right, in its absolute discretion and
sole expense, to commence or continue prosecution of such action. In any such
legal action, MethylGene shall be entitled to retain all monies recovered;
provided, however, that if MGI decides, upon the recommendation of the R&D
Steering Committee, not to commence or continue prosecution of such action in
order to permit MethylGene to do so with respect to such infringement,
misappropriation or misuse both inside and outside the Territory, MGI shall have
the right to participate in such action at its own expense and shall be
consulted regarding any proposed settlement, and any monies recovered shall be
allocated as follows: (i) first, to reimburse MethylGene for its costs and
expenses incurred in such action; (ii) second, if any balance is remaining, to
reimburse MethylGene for any royalties owing on the remaining balance, as
calculated in accordance with Section 5.2 and subject to Section 5.3; and (iii)
third, if any further balance is remaining, to compensate MGI for lost profits
resulting from such infringement, misappropriation or misuse. MethylGene shall
be entitled to retain any amounts left after payment of the foregoing.

Article 8         REPRESENTATIONS & WARRANTIES

         8.1 By MethylGene. MethylGene hereby represents and warrants to MGI as
follows:

                  (a) MethylGene has been duly organized and is validly existing
as a corporation in good standing under the laws of the province of Quebec,
Canada, with corporate power to conduct any lawful business activity. MethylGene
has the corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement.


                                      -15-
<PAGE>

                  (b) The execution, delivery and performance of this Agreement,
and the consummation of the transactions contemplated by this Agreement, by
MethylGene have been duly and validly authorized by all requisite corporate
action. This Agreement has been duly executed and delivered by MethylGene and
constitutes the legal, valid and binding obligations of MethylGene, enforceable
against MethylGene in accordance with its terms, except as enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to or affecting the rights of creditors generally, and by
general principles of equity.

                  (c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by
MethylGene do not conflict with or result in any breach of any of the provisions
of, constitute a default under, result in a violation of, give rise to any right
of termination under, or require any authorization, consent (except as may have
been obtained), approval, exemption or other action by or notice to any court or
governmental body, under the provisions of MethylGene's Articles of
Incorporation or bylaws or any indenture, mortgage, lease, loan agreement,
license or other agreement or instrument to which MethylGene is a party
(including without limitation the Third Party Agreements), or of any law,
statute, rule or regulation or order, judgment or decree to which MethylGene is
subject.

                  (d) It has provided to MGI true and correct copies of each of
the Third Party Agreements, together with all amendments and modifications
thereto; MethylGene has received no notice from any of third party licensors (or
their licensors) that it is in material breach of any of its obligations under
the Third Party Agreements, and it is not aware of any material breach of the
Third Party Agreements; and MethylGene is in compliance in all material respects
with the Third Party Agreements.

                  (e) It (i) is the owner of the entire right, title and
interest in and to, or has licensed sufficient rights to, the Licensed Patents
and Licensed Know-How, free and clear of any liens or encumbrances and (ii) has
not assigned and/or granted licenses to the Licensed Patents or Licensed
Know-How, or entered into any inconsistent prior obligations, to any other
person or entity that would restrict or impair the rights granted hereunder.

                  (f) To the best of its knowledge, (i) the Licensed Patents and
Licensed Know-How are valid and enforceable and the Licensed Patents and
Licensed Know-How are not infringed by any third party and (ii) the manufacture,
use or sale of a Licensed Product in the Territory will not infringe any
patents, property or proprietary rights of any third party (the parties
acknowledging Hybridon's exclusive right to manufacture the MG98 Product).
MethylGene has not received any notice from any person or entity claiming to
have any right, title or interest in or to the Licensed Patents and Licensed
Know-How and to the best of its knowledge, there is no reason to expect that any
such notice is forthcoming. To the best of its knowledge, there are no third
party claims that would challenge or impair the license of the rights granted to
MGI herein, including, without limitation, any claims based upon patents,
copyrights or trade secret laws in the Territory.


                                      -16-
<PAGE>

                  (g) There are no actions, suits, proceedings or inquiries
pending or threatened in writing against or affecting MethylGene at law or in
equity or before or by any federal, provincial, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which may in any way materially adversely affect MethylGene
or the transactions contemplated hereby.

         8.2 By MGI. MGI hereby represents and warrants to MethylGene as
follows:

                  (a) MGI has been duly organized and is validly existing as a
corporation under the laws of Minnesota, with corporate power to conduct the
business contemplated by this Agreement. MGI has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement.

                  (b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by MGI
have been duly and validly authorized by all requisite corporate action. This
Agreement has been duly executed and delivered by MGI and constitutes the legal,
valid and binding obligations of MGI, enforceable against MGI in accordance with
its terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting the
rights of creditors generally, and by general principles of equity.

                  (c) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement by MGI
do not conflict with or result in any breach of any of the provisions of,
constitute a default under, result in a violation of, or require any
authorization, consent (except as may have been obtained), approval, exemption
or other action by or notice to any court or governmental body, under the
provisions of MGI's Restated Articles of Incorporation or bylaws or any
indenture, mortgage, lease, loan agreement, license or other agreement or
instrument to which MGI is a party, or of any law, statute, rule or regulation
or order, judgment or decree to which MGI is subject.

Article 9         INDEMNIFICATION

         9.1 Indemnification by MGI. MGI shall indemnify, defend and hold
harmless MethylGene from and against any and all liabilities, damages, losses,
costs or expenses (including attorneys' and professional fees and other expenses
of litigation and/or arbitration) ("Liabilities") resulting from a claim, suit
or proceeding made or brought by a third party against MethylGene arising from
or occurring as a result of (a) any breach of the representations and warranties
set forth in Section 8.2; (b) any research, development, testing, importation,
use, offer for sale, sale or other distribution of any Licensed Product by MGI
or its Affiliates or sublicensees (including without limitation, product
liability claims), or (c) failure of MGI or any of its Affiliates or
sublicensees to comply with any provision of this Agreement, or with any
applicable laws, regulations and/or administrative decisions relating to the
Licensed Products, except in each case to the extent caused by the negligence or
willful misconduct of MethylGene.


                                      -17-
<PAGE>

         9.2 Indemnification by MethylGene. MethylGene shall indemnify, defend
and hold harmless MGI and its sublicensees from and against any and all
Liabilities resulting from a claim, suit or proceeding made or brought by a
third party against MGI arising from or occurring as a result of (a) any breach
of the representations and warranties set forth in Section 8.1; (b) any
research, development, testing, manufacture, importation, use, offer for sale,
sale or other distribution of any Licensed Product by MethylGene or any of its
Affiliates, contract manufacturers or sublicensees (including without
limitation, product liability claims) or (c) failure of MethylGene or any of its
Affiliates, contract manufacturers or sublicensees to comply with any provision
of this Agreement, or with any applicable laws, regulations and/or
administrative decisions relating to the Licensed Products, except in each case
to the extent caused by the negligence or willful misconduct of MGI.
Notwithstanding the foregoing, MethylGene's obligation to indemnify, defend and
hold MGI and its sublicensees harmless with respect to Liabilities resulting
from the manufacture by contract manufacturers of the MG98 Product shall be
limited to the assignment and subrogation in favor of MGI or its sublicensee, as
the case may be, of MethylGene's rights against such contract manufacturers.

         9.3 Subrogation. In the event that any indemnified party intends to
claim indemnification under this Article 9 it shall promptly notify the other
party (the "indemnifying party") in writing of such alleged claim. The
indemnifying party shall have the sole right to control the defense and
settlement thereof. The indemnified party shall cooperate with the indemnifying
party and its legal representatives in the investigation of any action, claim or
liability covered by this Article 9. The indemnified party shall not, except at
its own cost, voluntarily make any payment or incur any expense with respect to
any claim or suit without the prior written consent of the indemnifying party,
which the indemnifying party shall not be required to give. In addition, the
indemnifying party shall be subrogated to the rights of the indemnified party
against any third party, and such indemnified party hereby assigns to the
indemnifying party all claims, causes of action and other rights which the
indemnified party may then have against any third party, including Affiliates
and sublicensees and, in the case of MethylGene, against any contract
manufacturer of Licensed Products, with respect to the claim, suit or
proceeding. Conversely, and without in any way limiting the obligation of either
party to indemnify the other party as herein provided, to the extent that either
party shall fail to perform its indemnification obligations under Section 9.1 or
Section 9.2, such party owing a duty of indemnification hereby assigns to the
other party all claims, cause of action and other rights which the party owing
such duty may then have against any third party, including Affiliates and
sublicensees and, in the case of MethylGene, against any contract manufacturer
of Licensed Products, with respect to the claim, suit or proceeding.

         9.4 Insurance. Each party agrees to procure and maintain in full force
and effect during the term of this Agreement valid and collectible insurance
policies in connection with its activities as contemplated hereby, which
policies shall provide coverage in an amount not less than U.S.$5 million per
calendar year. Upon request, each party shall provide to the other party a
certificate of coverage or other written evidence reasonably satisfactory to
such other party of such insurance coverage.

Article 10        CONFIDENTIALITY


                                      -18-
<PAGE>

         10.1 Non-Use and Non-Disclosure. Each party acknowledges and agrees
that all the other party's Confidential Information is confidential and
proprietary to the disclosing party. Without the consent of the other party,
neither party shall use or disclose to any third party in connection with the
other party's Confidential Information for any purpose other than as permitted
or required hereunder; provided that each party can disclose Supporting Data and
information with respect to the Health Registration Dossier to its respective
sublicensees or potential sublicensees so long as such sublicensees or potential
sublicensees have executed a non-use and non-disclosure agreement with terms
comparable to the terms hereof. Each party shall take the same reasonable
measures necessary to prevent any disclosure by its employees, agents,
contractors, or consultants of the other party's Confidential Information as it
applies to the protection of its own Confidential Information.

         10.2 Publications. Prior to the publication or presentation of any
information or data arising from the Research Program, the publishing party
shall submit to the other party (the "reviewing party") a summary of the
proposed publication or presentation at least sixty (60) days prior to the
submission thereof for publication or presentation. The purposes for such prior
submission are: (i) to provide the reviewing party with the opportunity to
review and comment on the contents of the proposed publication or presentation,
and (ii) to identify any Confidential Information of the reviewing party to be
deleted from the proposed publication or presentation. The reviewing party shall
provide any comments to the publishing party or identify any of the reviewing
party's Confidential Information to be deleted from the proposed publication or
presentation within thirty (30) days of receipt of the proposed publication or
presentation. If so requested by the reviewing party, the publishing party shall
delete any of the reviewing party's Confidential Information and shall delay
publication or presentation for an additional sixty (60) days to allow for
filing a patent application or taking such other measures as the reviewing party
deems appropriate to establish and preserve its proprietary rights. If the
reviewing party fails to comment within the thirty (30) day review period, the
publishing party shall be free to proceed with publication or presentation.

         10.3 Exclusions. Information shall not be considered Confidential
Information hereunder if it:

                  (a) was already in the possession of the receiving party prior
to its receipt from the disclosing party, as shown by the receiving party's
books and records;

                  (b) is, or becomes, part of the public knowledge or literature
through no fault, act or omission of the receiving party, provided, Confidential
Information shall not be deemed to have entered the public domain by reason of
its having been filed with any Regulatory Authority;

                  (c) is, or becomes, available to the receiving party from a
source other than the disclosing party, which source has rightfully obtained the
same information and has no obligation of confidentiality to the disclosing
party with respect to it;


                                      -19-
<PAGE>

                  (d) is made available on an unrestricted basis by the
disclosing party to a third party unaffiliated with the disclosing party; or

                  (e) is required to be revealed pursuant to law, provided,
however, the receiving party which is under any such requirement of law shall
give reasonable notice to the disclosing party of such requirement and shall
cooperate with the disclosing party in reasonable legal efforts to limit or
mitigate any such revelation so as to preserve the proprietary nature of any
Confidential Information contained therein.

         10.4 Duration; Surviving Obligation. Each party's obligations of
non-use and non-disclosure of the other party's Confidential Information shall
apply during the term of this Agreement and shall also survive its termination
or expiration for any reason.

Article 11        FORCE MAJEURE

         11.1 Definition and Notice. "Force Majeure" shall mean any event, not
existing as of the Effective Date and not reasonably within the control of the
parties as of such date, which, in whole or in material part, prevents or makes
commercially unreasonable one party's performance of its obligations under this
Agreement. Force Majeure shall include, without limitation: fire, storm,
earthquake, flood, acts of State or other governmental action, war or civil
unrest, strikes, and prolonged shortage of energy or any other supplies. A party
affected by an event of Force Majeure shall promptly provide the other party
with written notice describing the event, its cause and foreseeable duration,
and its possible consequences upon performance under this Agreement.

         11.2 Suspension of Performance. After an affected party has given
notice under Section 11.1, that party shall be relieved of any liability under
this Agreement, except for the obligation to pay amounts due and owing, but only
to the extent and only for so long as the Force Majeure prevents performance.
The other party may likewise suspend the performance of all or part of its
obligations, except for the obligation to pay any amounts due and owing, to the
extent that such suspension is commercially reasonable.

         11.3 Termination. If the period of Force Majeure continues for more
than one (1) year, either party may terminate this Agreement upon giving notice
to the other party without incurring liability other than the obligation to make
payments due to such date.

Article 12        TERM AND TERMINATION

         12.1 Term of Agreement. The term of this Agreement shall commence on
the Effective Date and unless earlier terminated in accordance with the
provisions of Article 12, shall continue in full force and effect on a
country-by-country basis and a Licensed Product-by-Licensed Product basis, until
at such time as (i) all of the Licensed Patents have expired in such country or
(ii) ten (10) years from the first commercial sale of any Licensed Product,
whichever is longer.


                                      -20-
<PAGE>

         12.2 Termination for Breach. Either party shall have the right to
terminate this Agreement by written notice to the other party, if such other
party (the "breaching party") is in material breach of its obligations under
this Agreement and has failed to cure such breach within thirty (30) days after
its receipt of written notice thereof from the non-breaching party in the case
of breach of any obligation to make payment as and when due hereunder, or within
sixty (60) days after its receipt of such written notice in the case of breach
of any other material obligation hereunder.

         12.3 Termination for Bankruptcy. If voluntary or involuntary
proceedings by or against a party are instituted in bankruptcy under any
insolvency law, or a receiver or custodian is appointed for such party, or
proceedings are instituted by or against such party for corporate reorganization
or the dissolution of such party, which proceedings, if involuntary, shall not
have been dismissed within sixty (60) days after the date of filing, or if such
party makes an assignment for the benefit of creditors, or substantially all of
the assets of such party are seized or attached and not released within sixty
(60) days thereafter, the other party may immediately terminate this Agreement
effective upon notice of such termination. The parties intend that upon
MethylGene's termination of this Agreement pursuant to this Section, all rights
granted hereunder to MGI shall be terminated and revert to MethylGene. The
parties acknowledge and agree that all rights and licenses granted pursuant to
this Agreement are, and shall otherwise be deemed to be, for purposes of Section
365(n) of the Bankruptcy Code, licenses of rights to "intellectual property" as
defined under Section 101(52) of the Bankruptcy Code, and that MGI, as a
licensee hereunder, shall retain and may fully exercise all of its rights and
elections under the Bankruptcy Code, subject to the terms of Third Party
Agreements.

         12.4 Termination without Cause. MGI may terminate this Agreement on a
Licensed Product-by-Licensed Product basis for any reason by ninety (90) days
written notice to MethylGene, which notice may not be given before the date
twenty four (24) months after the Effective Date, provided that in the event MGI
shall have exercised its option under Section 3.4(b), such notice shall not be
given before the date that is eighteen (18) months after such exercise.

                  12.5 Effect of Termination or Expiration. Upon any termination
or expiration of this Agreement, the following provisions shall apply:

                  (a) Termination or expiration of this Agreement shall not
release either party from the obligation to make payment of all amounts then or
thereafter due and payable to the other party hereunder.

                  (b) The licenses granted to MGI hereunder shall terminate on
the effective date of such termination and MethylGene shall have the right to
purchase from MGI any inventory of bulk Licensed Products at the price paid by
MGI for such inventory; provided, however, that notwithstanding any such
termination or expiration, MGI and its sublicensees shall have the right to sell
any remaining inventory of finished Licensed Products in the ordinary course of
business, subject to the payment of royalties hereunder and until such inventory
can be reasonably transferred to MethylGene.


                                      -21-
<PAGE>

                  (c) Promptly after termination or expiration of this Agreement
for any reason, in addition to the terms of Section 6.3, each party shall return
to the other party all of such other party's Confidential Information, or at the
request of the disclosing party, shall destroy such disclosing party's
Confidential Information and shall certify such destruction in writing to the
disclosing party.

                  (d) The parties' respective rights and obligations under
Article 6 (Regulatory Matters), 9 (Indemnification), 10 (Confidentiality), 13
(Limitation of Liability), 14 (Dispute Resolution) and 17(Miscellaneous) shall
survive termination or expiration of this Agreement.

Article 13        LIMITATION OF LIABILITY

         13.1 Limitation of Liability. EXCEPT FOR ANY BREACH OF ARTICLE 10
(CONFIDENTIALITY), IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY
HEREUNDER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL LOSSES OR
DAMAGES, EVEN IF SUCH PARTY SHALL HAVE BEEN ADVISED IN ADVANCE OF THE
POSSIBILITY OF SUCH POTENTIAL LOSSES OR DAMAGES.

Article 14        DISPUTE RESOLUTION

         14.1 Negotiation. The parties agree to consult and negotiate in good
faith to try to resolve any dispute, controversy or claim that arises out of or
relates to this Agreement. Except as provided in Section 14.2, no formal dispute
resolution shall be used by either party unless and until the chief executive
officers of each party shall have attempted to meet in person to achieve such an
amicable resolution.

         14.2 Reservation for Litigation. Notwithstanding Section 14.3 below,
each party expressly reserves the right to seek judicial relief from a court of
competent jurisdiction if the other party is or appears to be in violation of
such other party's obligations of non-use and non-disclosure under Article 10
above, including, without limitation, any injunction or other preliminary
relief.

         14.3 Arbitration. Subject to the reservation of the parties under
Section 14.2 above, any dispute, controversy or claim that arises out of or
relates to this Agreement that is not resolved under Section 14.1 shall be
settled by final and binding arbitration in accordance with the International
Arbitration Rules of the American Arbitration Association ("AAA") in effect on
the Effective Date, as modified by Section 14.4 below. Judgment upon the award
rendered by the arbitrators may be entered in any court of competent
jurisdiction. The place of arbitration shall be Minneapolis, Minnesota, U.S.A.
The arbitration shall be conducted in the English language by three (3) neutral
arbitrators selected by mutual agreement of the parties or, if that is not
possible within thirty (30) days of the initial demand for such arbitration, by
the AAA. At least one (1) arbitrator shall have knowledge of and experience in
the ethical pharmaceutical


                                      -22-
<PAGE>

industry, and at least one (1) arbitrator shall have knowledge of and experience
in international law and technology licensing.

         14.4 Special Rules. Notwithstanding any provision to the contrary in
the AAA's International Arbitration Rules, the parties hereby stipulate that any
arbitration hereunder shall be subject to the following special rules: (a) the
arbitrators may not award or assess punitive damages against either party; and
(b) each party shall bear its own costs and expenses of the arbitration and
one-half (1/2) of the fees and costs of the arbitrators, subject to the power of
the arbitrators, in their sole discretion, to award all such reasonable costs,
expenses and fees to the prevailing party.

         14.5 Survival. The duty of the parties to arbitrate any dispute,
controversy or claim under this Article 14 shall survive the termination of this
Agreement for any reason.

Article 15        THIRD PARTY AGREEMENTS

         15.1 Third Party Agreements. During the term of this Agreement,
MethylGene agrees fully to comply in all material respects with its obligations
under the Third Party Agreements to the extent necessary to preserve its
exclusive rights in the Territory thereunder and to preserve its rights to
supply of the MG98 Product unless and until MGI and Hybridon enter into a
separate supply agreement, except to the extent that such compliance is
dependent upon MGI and its sublicensees. MethylGene agrees to provide MGI with
copies of any amendments to or modifications of any of the Third Party
Agreements that may be proposed from time to time, sufficiently in advance of
execution to allow MGI a reasonable time to comment. MethylGene shall not
terminate any of the Third Party Agreements, or agree to any amendment to or
modification of any of the Third Party Agreements, which may adversely affect
any rights of MGI under this Agreement or the ability of MethylGene to perform
its obligations hereunder this Agreement, without the prior written consent of
MGI, which consent shall not unreasonably be withheld.

Article 16.  ACKNOWLEDGEMENTS OF SUBLICENCE

         16.1 Acknowledgement of Third Party Agreements. MGI acknowledges that
certain of the rights granted to it by MethylGene in this Agreement derive from
Third Party Agreements and are subject to the terms thereof. In particular, and
without limiting the generality of the foregoing, MGI acknowledges that:

                  (a) this Agreement is subject to Subsections 2.2(a), 2.2(b),
2.6,2.7 and 12.4(a) of the UMASS Agreement, substituting MGI for Hybridon and to
Section 6.3 of the TPC Agreement;

                  (b) it has been advised of the rights of UMASS under
Subsections 2.2(c) and 10.4 of the UMASS Agreement;


                                      -23-
<PAGE>

                  (c) in accordance with Subsection 2.2(c) of the UMASS
Agreement, in the event of the termination of the UMASS Agreement, UMASS will
recognize the rights granted under this Agreement and any sublicenses hereof
provided that UMASS has the right to receive payments or other consideration
payable to MethylGene under this Agreement or to the licensor under any
sublicense agreement, as the case may be, and UMASS shall have the right to
terminate this Agreement or the sublicense upon 60 days' notice of a material
breach by MGI or the sublicensee, as the case may be, which is not cured prior
to the expiration of such 60 day period and provided further that UMASS shall
not be responsible to MGI or any sublicensee for any representations, warranties
or obligations of MethylGene to MGI or any sublicensee other than the licenses
under the Patent Rights (as defined in the UMASS Agreement) as authorized in the
UMASS Agreement;

                  (d) McGill University retains rights under Sections 3.3 of
each of the McGill MG98 Agreement and the McGill DNA MT Agreement;

                  (e) to the extent that MethylGene does not enforce the terms
and conditions of this Agreement, Hybridon may do so; and

                  (f) this Agreement is subject to the terms of the IDT
Agreement.


         16.2 Patent Marking. MGI agrees to mark and cause any sublicensees to
mark, any Licensed Products made, used or sold by it or them with any notice of
patent rights necessary or desirable under applicable law to enable the patent
rights to be enforced to the maximum degree in any country where Licensed
Products are made, used or sold.

         16.3 Enforcement and Defense. MGI and its sublicensees shall advise
MethylGene of any claims or infringements subject to the provisions of Article
IX of the UMASS Agreement, whether MGI or the sublicensee, as the case may be,
will handle the enforcement and/or defense of such claims or infringements in
the manner provided in Article IX of the UMASS Agreement and that MGI or its
sublicensee, as the case may be, shall cooperate in the defense and/or
enforcement if such claims at the expense of the party or parties conducting
such defense or enforcement.

                  16.4 Sublicense Provisions. MGI shall not sublicense the
Licensed Patents and Licensed Know-How unless the following conditions have been
met:


                                      -24-
<PAGE>

                  (a) MGI shall provide MethylGene notice of the identity of the
sublicensee at least 14 days prior to the grant of the sublicense, and shall
provide MethylGene a copy of each such sublicense agreement within 30 days after
the grant thereof;

                  (b) All sublicenses shall be in writing and shall:

                           (i) include provisions that, in MGI's good faith
business judgment, require the sublicensee to use Best Efforts to bring the
subject matter of the sublicense into commercial use as quickly as is reasonably
possible;

                           (ii) provide for payments to MGI which, in MGI's good
faith business judgment are commercially reasonable amounts, for the rights
granted; and

                           (iii) prohibit further sublicensing except on terms
containing substantially comparable provisions to those in Section 5.6 and
Article 16.

Article 17        MISCELLANEOUS

         17.1 Entire Agreement. This Agreement, including Exhibits A through B
attached hereto and incorporated as an integral part of this Agreement,
constitute the entire agreement of the parties with respect to the subject
matter hereof, and supersede all previous agreements by and between the parties,
including, without limitation, that certain letter of intent between the parties
dated as of June 28, 2000 (the "Letter of Intent") as well as all proposals,
oral or written, and all prior or contemporaneous negotiations, conversations or
discussions between the parties related to this Agreement.

         17.2 Relationship. The parties are independent contractors and shall
not be deemed to have formed any partnership, joint venture or other
relationship. Neither party shall make, or represent to any other person that it
has the power or authority to make, any financial or other commitment on behalf
of the other party.

         17.3 Assignment. Neither party shall have the right to assign or
otherwise transfer its rights and obligations under this Agreement except with
the prior written consent of the other party, provided that a successor in
interest by merger, operation of law, assignment, purchase or otherwise of
substantially all of the business and assets of either party shall acquire all
rights and obligations of such party hereunder without any such consent. Any
prohibited assignment shall be null and void.

         17.4 Notices; Language. Except as may be otherwise provided in this
Agreement, any notice, demand or request given, made or required to be made
shall be in writing and shall be effective, unless otherwise provided herein,
when received after delivery by (a) registered air mail, postage prepaid; (b)
facsimile with electronic confirmation of receipt; or (c) a reputable
international courier such as Federal Express or DHL at the addresses set forth
below or to any other address that a party specifies in writing. All reports,
notices and communications required or permitted hereunder shall be in the
English language. The parties hereto confirm that they


                                      -25-
<PAGE>

have agreed that this Agreement and all documents relating hereto be drafted in
English only. Les parties aux presentes conferment qu'elles ont accepte que la
presente convention de meme que tous les documents s'y rattachant soient rediges
en anglais seulement.

         If to MGI:               MGI PHARMA, INC.
                                  6300 West Old Shakopee Road, Suite 110
                                  Bloomington, MN, U.S.A. 55438-2318
                                  Facsimile: 952-346-4920
                                  Attention:  Executive Vice President

                                  With copy to:
                                  Dorsey & Whitney LLP
                                  220 South Sixth Street
                                  Minneapolis, Minnesota U.S.A. 55402
                                  Facsimile: 612-340-8827
                                  Attention: Tim Hearn

         If to MethylGene:        MethylGene Inc.
                                  Suite 200
                                  7220 Frederick-Banting
                                  Montreal, Quebec, Canada, H4S 2A1
                                  Facsimile:  514-337-4194
                                  Attention:  President

                                  With copy to:
                                  Goodman Phillips & Vineberg
                                  1501, Avenue McGill College
                                  26e Etage
                                  Montreal, Quebec, Canada H3A 3N9
                                  Facsimile:  514-841-6499
                                  Attention:  Elias Benhamou

         17.5 Governing Law. This Agreement shall be governed by, and
interpreted and construed in accordance with, the law of the State of Minnesota,
USA, excluding its choice of law rules and the U.N. Convention on the
International Sale of Goods.

         17.6 Amendment. This Agreement may not be modified or amended, in whole
or in part, except by written agreement signed by both parties.

         17.7 Severability. If one or more of the provisions of this Agreement
is subsequently declared invalid or unenforceable, this Agreement shall be
treated as though that provision were not in this Agreement, and this shall not
affect the validity or enforceability of the remaining provisions of this
Agreement (unless those provisions that are invalidated or unenforceable are
clearly material and inseparable from the other provisions). The Agreement as
modified shall be


                                      -26-
<PAGE>

applied and construed to reflect substantially the good faith intent of the
parties and to achieve the economic effects originally intended by the terms
hereof.

         17.8 Counterparts. This Agreement shall be executed in two or more
counterparts, and each such counterpart shall be deemed an original hereof.

         17.9 Waiver. No failure by either party to take any action or assert
any right hereunder shall be deemed to be a waiver of such right in the event of
the continuation or repetition of the circumstances giving rise to such right.


            [The remainder of this page is left intentionally blank]


                                      -27-
<PAGE>

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

MGI PHARMA, INC.                                 METHYLGENE INC.


By /s/ Leon O. Moulder, Jr.                      By /s/ Donald F. Corcoran
   -------------------------------------            ----------------------------
   Leon O. Moulder, Jr.                             Donald F. Corcoran
   Executive Vice President                         President and CEO


By /s/ William C. Brown
   -------------------------------------
   William C. Brown
   Chief Financial Officer and Secretary

EXHIBITS
A.       Licensed Patents
B.       List of Third Party Agreements


                                      -28-