**EXHIBIT10.45****SEVERANCE AND CHANGE IN CONTROL AGREEMENT**     This**Severance and Change in Control Agreement** (the **“Agreement"**) is made and enteredinto effective as of November 20, 2006 (the **“Effective Date"**), by and between **AnadysPharmaceuticals, Inc.**, a Delaware corporation (the **“Company"**), and**Lawrence C. Fritz,Ph.D.**(the **“Executive"**). The Company and the Executive are hereinafter collectively referredto as the **“Parties"**, and individually referred to as a **“Party"**.**AGREEMENT**     In consideration of the mutual promises and covenants herein contained, and for other good andvaluable consideration, the Parties, intending to be legally bound, agree as follows:     **1. Loyalty; At Will Employment.** During the Executive’s employmentby the Company, the Executive shall devote Executive’s full business energies, interest, abilitiesand productive time to the proper and efficient performance of Executive’s duties as an officer ofthe Company, except that Executive’s service on outside boards of directors or other similaractivities may be permitted by the Company’s Board of Directors provided such activities areconsistent with the proper and efficient performance of Executive’s duties as an officer of theCompany. . Executive’s employment with the Company is at-will and not for any specified period andmay be terminated at any time, with or without cause, by either Executive or Company, subject tothe provisions of Section 2.2 below.     **2.Term; Compensation Upon Termination.**          **2.1 Term.**The term of this Agreement (the ***“Term”***) shall begin on the Effective Date and shallcontinue until Executive’s employment with the Company is terminated for any reason.          **2.2 Compensation Upon Termination**.               **2.2.1 Death or Complete Disability**. If the Executive’s employment with the Company isterminated as a result of death or Complete Disability, the Company shall pay to Executive, and/orExecutive’s heirs, the Executive’s base salary and accrued and unused vacation benefits earnedthrough the date of termination at the rate in effect at the time of termination, less standarddeductions and withholdings, and the Company shall thereafter have no further obligations to theExecutive and/or Executive’s heirs under this Agreement.               **2.2.2 With Cause or Without Good Reason.**If the Executive’s employment with the Company isterminated by the Company for Cause (as defined below) or if the Executive terminates hisemployment with the Company without Good Reason (as defined below), the Company shall pay theExecutive’s base salary and accrued and unused vacation benefits earned through the date oftermination at the rate in effect at the time of termination, less standard deductions andwithholdings, and the Company shall thereafter have no further obligations to the Executive underthis Agreement.
1.

 
               **2.2.3 Without Cause or With Good Reason.**If the Company terminates the Executive’s employmentwithout Cause or the Executive resigns with Good Reason, the Company shall pay the Executive’s basesalary and accrued and unused vacation earned through the date of termination, at the rate ineffect at the time of termination subject to standard deductions and withholdings. In addition,contingent upon the Executive’s furnishing to the Company an effective waiver and release of claims(“Release and Waiver”) (a form of which is attached hereto as **Exhibit A**), the Executive shall beentitled to:                    **(i) **The equivalent of twelve (12) months of the Executive’s annual base salary, less standarddeductions and withholdings, which shall be paid as soon as administratively practicable but nolater than sixty (60) days after termination unless Section 3.2 applies;                    **(ii) **Reimbursement for continued health insurance coverage under COBRA, provided thatExecutive elects such coverage, for the same portion of Executive’s COBRA health insurance premiumthat it paid during the Executive’s employment up until the earlier of either (i) twelve (12)months after the date of termination or, (ii) the date on which the Executive begins full-timeemployment with another company or business entity, which provides Executive with similar benefits;and                    **(iii) **Outplacement services for a period of six (6) months to be provided by an outplacementfirm mutually acceptable to the Company and Executive.                    **(iv) **In addition, in the event that Executive would otherwise owe to the Company thereimbursement of his sign-on bonus, such reimbursement shall not be required if the provisions ofthis Section 2.2.3 apply.               **2.2.4 Without Cause within First 12 Months.**If the Company terminates the Executive’semployment without Cause prior to the one-year anniversary of Executive’s employment with theCompany, then, in addition to the benefits set forth in Section 2.2.3, and contingent upon theExecutive’s furnishing to the Company an effective Release and Waiver, the vesting andexercisability of the Executive’s Initial Stock Option Grant (as defined in the Offer Letterreferenced below in Section 2.3.2 (i)) shall be accelerated such that the number of sharesdetermined by multiplying 1/48th of the Initial Stock Option Grant by the number ofmonths that Executive was employed by the Company (rounded up to the next whole month) shall bevested and fully exercisable as of the date of Executive’s termination.               **2.2.5 Termination of Obligations**. In the event of the termination of the Executive’semployment with the Company, the Company shall have no obligation to pay Executive any base salary,bonus or other compensation or benefits, except as provided in this Section 2 or for benefits dueto the Executive (and/or the Executive’s dependents) under the terms of the Company’s benefitplans. The Company may offset any amounts Executive owes it or its subsidiaries against any amountit owes Executive pursuant to this Section 2.2.
2.

 
          **2.3 Definitions**. For purposes of this Agreement, the following terms shall have the followingmeanings:               **2.3.1 Complete Disability**. **“Complete Disability”**shall mean the inability of the Executive toperform the Executive’s duties under this Agreement because the Executive has become permanentlydisabled within the meaning of any policy of disability income insurance covering employees of theCompany then in force. In the event the Company has no policy of disability income insurancecovering employees of the Company in force when the Executive becomes disabled, the term **“CompleteDisability”**shall mean the inability of the Executive to perform the Executive’s duties under thisAgreement by reason of any incapacity, physical or mental, which the Board, based upon medicaladvice or an opinion provided by a licensed physician acceptable to the Board, determines to haveincapacitated the Executive from satisfactorily performing all of the Executive’s usual servicesfor the Company for a period of at least one hundred twenty (120) days during any twelve (12) monthperiod (whether or not consecutive). Based upon such medical advice or opinion, the determinationof the Board shall be final and binding and the date such determination is made shall be the dateof such Complete Disability for purposes of this Agreement.               **2.3.2 Good Reason. “Good Reason”**for the Executive to terminate the Executive’s employmenthereunder shall mean the occurrence of any of the following events without the Executive’s consent:               **(i) **A material breach of any material provision of the offer letter entered into on November6, 2006 between Executive and the Company (the “Offer Letter”), not cured within thirty (30) daysof the breach. The Offer Letter is incorporated by reference and made a part of this Agreement asif fully set forth herein;               **(ii) **a material adverse change in the nature or scope of Executive’s job responsibilities, orin the case of a Change in Control, the failure to be offered a substantially equivalent positionwith the successor entity;               **(iii) **the relocation (or demand for relocation) of Executive’s place of employment to a pointmore than thirty (30) miles from Executive’s then current place of employment; and               **(iv) **a reduction in the annual base compensation paid to Executive, without Executive’sconsent; provided, however, that a reduction in Executive’s compensation of less than 15% occurringas part of a Company-wide similar reduction of salary for similarly-situated executives shall notconstitute Good Reason.          **2.4 For Cause**. **“Cause”**for the Company to terminate Executive’s employment hereunder shallmean the occurrence of any of the following events:               **(i) **the Executive’s willful or negligent failure to substantially perform his duties hereunder(other than any such failure resulting from a Complete Disability), which failure continues for aperiod of thirty (30) days after written demand for substantial performance is delivered by the Company to Executive specifically identifying the manner in
3.

 
which the Company believes the Executive has not substantially performed his duties. For purposesof this subparagraph, no act or failure to act on Executive’s part shall be considered “willful”unless done, or omitted to be done, by the Executive without reasonable belief that his action oromission was in the best interest of the Company;               **(ii) **the Executive’s breach of a material provision of this Agreement or a breach of amaterial provision of the Agreement for Employees dated November 20, 2006 (proprietary informationand inventions agreement) between Executive and the Company, which breach has not been cured (if itis of a nature that can be cured) by Executive within 10 days after written notice thereof from theCompany to Executive specifying the nature of such breach;               **(iii) **the Executive’s conviction of a felony involving moral turpitude; and               **(iv) **the Executive’s engaging in fraud, embezzlement or any other illegal conduct detrimentalto the Company.          **2.5 Change in Control.**For purposes of this Agreement, ***“Change in Control”***means:               **(i) **an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d)of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan,or related trust, sponsored or maintained by the Company or subsidiary of the Company or otherentity controlled by the Company) of the beneficial ownership (within the meaning of Rule 13d-3promulgated under the Exchange Act, or comparable successor rule) of securities of the Companyrepresenting more than fifty percent (50%) of the combined voting power of the Company’s thenoutstanding securities other than by virtue of a merger, consolidation or similar transaction.Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because thelevel of ownership held by a person, entity or group exceeds the designated percentage threshold ofthe outstanding voting securities as a result of a repurchase or other acquisition of votingsecurities by the Company reducing the number of shares outstanding, provided that if a Change inControl would occur (but for the operation of this sentence) as a result of the acquisition ofvoting securities by the Company, and after such share acquisition, a person, entity or groupbecomes the owner of any additional voting securities that, assuming the repurchase or otheracquisition had not occurred, increases the percentage of the then outstanding voting securitiesowned by such person, entity or group over the designated percentage threshold, then a Change inControl shall be deemed to occur;               **(ii) **there is consummated a merger, consolidation or similar transaction involving (directlyor indirectly) the Company and, immediately after the consummation of such merger, consolidation orsimilar transaction, the stockholders of the Company immediately prior thereto do not own, directlyor indirectly, outstanding voting securities representing more than fifty percent (50%) of thecombined outstanding voting power of the surviving entity in such merger, consolidation or similartransaction or more than fifty percent (50%) of the combined outstanding voting power of the parent of the surviving entityin such merger, consolidation or similar transaction; or
4.

 
               **(iii) **there is consummated a sale or other disposition of all or substantially all of theconsolidated assets of the Company and its subsidiaries, other than a sale, lease, license or otherdisposition of all or substantially all of the consolidated assets of the Company and itssubsidiaries to an entity, more than fifty percent (50%) of the combined voting power of the votingsecurities of which are owned by stockholders of the Company in substantially the same proportionsas their ownership of the Company immediately prior to such sale, lease, license or otherdisposition.          **2.6 Integration**. The parties acknowledge that the definition of “for Cause”contained within this Agreement may differ from the definitions of “for Cause” contained withinExecutive’s stock option agreement or agreements. Accordingly, the Parties agree that unless it isdetermined that Executive shall be terminated for Cause as defined in this Agreement, there shallbe no termination for Cause under any of Executive’s stock option agreements.     **3.Change in Control.          **3.1 Benefits.**               **3.1.1**In the event that Executive’s employment with the Company is terminated without Cause orfor Good Reason within the sixty (60) day period immediately preceding or the thirteen (13) monthperiod immediately following a Change in Control of the Company, then contingent upon theExecutive’s delivery to the Company of an effective Release and Waiver, the Executive shall beentitled to:               **(i) **the benefits set forth in Section 2.2.3 (i), (ii), (iii) and (iv), except that in Sections2.2.3 (i) and (ii), “twelve (12) months” will be changed to “ eighteen (18) months” ; and               **(ii) **accelerated vesting of all unvested shares subject to any outstanding stock options, suchthat all shares shall be vested and fully exercisable as of the date of Executive’s termination.          **3.2 Application of Internal Revenue Code Section 409A**. If the Company determines that thebenefits payable under Sections 2.2.3 or 3.1 of this Agreement fail to satisfy the distributionrequirement of Section 409A(a)(2)(A) of the Internal Revenue Code as a result of Section409A(a)(2)(B)(i) of the Internal Revenue Code, the payment of such benefits shall be delayed to theminimum extent necessary so that such benefits are not subject to the provisions of Section409A(a)(1) of the Internal Revenue Code.          **3.3 Parachute Payment.**If any payment or benefit Executive would receive pursuant a Change inControl or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning ofSection 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed bySection 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The “Reduced Amount” shall be either (x) thelargest portion of the Payment that would result in no portion of the Payment being subject to theExcise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever
5.

 
amount, after taking into account all applicable federal, state and local employment taxes, incometaxes, and the Excise Tax (all computed at the highest applicable marginal rate), results inExecutive’s receipt, on an after-tax basis, of the greater amount of the Payment notwithstandingthat all or some portion of the Payment may be subject to the Excise Tax. If a reduction inpayments or benefits constituting “parachute payments” is necessary so that the Payment equals theReduced Amount, reduction shall occur in the following order unless Executive elects in writing adifferent order (*provided, however,*that such election shall be subject to Company approval if madeon or after the effective date of the event that triggers the Payment): reduction of cash payments;cancellation of accelerated vesting of stock awards; reduction of employee benefits. In the eventthat acceleration of vesting of stock award compensation is to be reduced, such acceleration ofvesting shall be cancelled in the reverse order of the date of grant of Executive’s stock awardsunless Executive elects in writing a different order for cancellation.     The Company shall engage a nationally recognized accounting or consulting firm to perform theforegoing calculations. If the firm so engaged by the Company is serving as accountant or auditorfor the individual, entity or group effecting the Change in Control, then the Company shall appointanother nationally recognized accounting or consulting firm to make the determinations requiredhereunder. The Company shall bear all expenses with respect to the determinations by such firmrequired to be made hereunder.     The firm engaged to make the determinations hereunder shall provide its calculations, togetherwith detailed supporting documentation, to Executive and the Company within fifteen (15) calendardays after the date on which Executive’s right to a Payment is triggered (if requested at that timeby Executive or the Company) or such other time as requested by Executive or the Company. If thefirm determines that no Excise Tax is payable with respect to a Payment, either before or after theapplication of the Reduced Amount, it shall furnish Executive and the Company with an opinionreasonably acceptable to Executive that no Excise Tax will be imposed with respect to such Payment.Any good faith determinations of the firm made hereunder shall be final, binding and conclusiveupon Executive and the Company.     **4.General. This Agreement is made in San Diego, California. This Agreementshall be construed and interpreted in accordance with the internal laws of the State of California.This Agreement supercedes and replaces any other agreement between Executive and the Companyregarding severance benefits and cannot be amended or modified except by written agreement betweenExecutive and the Company. This Agreement may be executed in two counterparts, each of which shallbe deemed an original, all of which together shall contribute one and the same instrument.
6.

 
     **InWitness Whereof, the Parties have executed this Agreement as of the date firstabove written.     **AnadysPharmaceuticals, Inc.       **By:**********