<PAGE>

                                                                     Exhibit 4.5



                  LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT

                                  BETWEEN:

                             DRAXIS HEALTH, INC.

                                    AND

                     ELAN PHARMA (INTERNATIONAL) LIMITED

                                    AND

                        ELAN PHARMACEUTICALS, INC.




                               JUNE 17, 1999

<PAGE>

                                 CONTENTS

RECITALS

ARTICLES

<TABLE>
<S> <C>
1   DEFINITIONS
2   EXCLUSIVE LICENSE
3   LICENSE FEE; CLOSING; CONDITIONS TO CLOSING
4   PERFORMANCE INCENTIVE
5   OWNERSHIP AND JOINT DEVELOPMENTS
6   CONFIDENTIALITY
7   PROJECT COMMITTEE; PROJECT DEVELOPMENT
         AND COMMERCIALIZATION
8   SUPPLY
9   FORECASTING AND ORDERING
10  PRICE
11  SAMPLES
12  DELIVERY AND PAYMENT TERMS
13  RIGHTS OF FIRST NEGOTIATION; NON-COMPETITION
14  REPRESENTATIONS AND WARRANTIES
15  PRODUCT WARRANTY AND LIABILITY
16  PATENTS AND TRADEMARKS
17  QUALITY CONTROL
18  RIGHTS OF INSPECTION AND REPORTS
19  FORCE MAJEURE
20  TERM AND TERMINATION
21  INDEPENDENT CONTRACTOR
22  ASSIGNMENT
23  MISCELLANEOUS

</TABLE>

ATTACHMENTS

<TABLE>
<S> <C>
A   PATENT RIGHTS/TRADEMARKS
B   EARLY TERMINATION FEE RATES, SCHEDULES FOR CALCULATION,
    EXAMPLE

          NPV Schedule--Attachment B-1
          ROI Schedule--Attachment B-2

<PAGE>

          Example Calculation--Attachment B-3
C   FORECAST
D   COST OF GOODS

</TABLE>

<PAGE>


            LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT

THIS LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT is made as of the 17th day of
June, 1999 (the "Effective Date"), by and between Elan Pharma (International)
Limited, an Ireland corporation having its principal offices at WIL House,
Shannon, County Clare, Ireland and Elan Pharmaceuticals, Inc., a Delaware
corporation with its offices at 800 Gateway Boulevard, South San Francisco,
California 94080 (together, "Elan"), and Draxis Health, Inc., a Canada
corporation having its principal offices at 6780 Goreway Drive, Mississauga,
Ontario, Canada L4V 1P1 ("Draxis").

                            RECITALS

A.  Elan owns or controls the rights to develop and commercialize certain
Products in the Territory, each as defined below, and desires to enter into
an exclusive agreement with Draxis for the further development and
commercialization of those Products in the Territory on the terms and
conditions contained in this Agreement.

B. As a part of the Agreement, Elan will supply Draxis with its requirements
of Product for distribution and sale within the Territory, also on the terms
and conditions stated below.

C. Simultaneously with the execution of this Agreement, and as a condition
to the transactions described herein, the parties or their Affiliates are
entering into a Common Stock Purchase Agreement for the purchase by Elan of
common stock of Draxis.

                           AGREEMENT

NOW, THEREFORE, IT IS AGREED between the parties as follows:

<PAGE>

                                                                         Page 2

ARTICLE 1 - DEFINITIONS

1.1  "Affiliate" as applied to Elan or Draxis shall mean any legal entity
other than Elan or Draxis, as the case may be, in whatever country organized,
controlled by or under common control with Elan or Draxis. "Affiliate" shall
also mean any company which owns or controls at least fifty per cent (50%) of
the voting stock of Draxis or Elan, or any other company at least fifty per
cent (50%) of whose voting stock is owned by or controlled by such company.
The term "control" means possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such entity,
whether pursuant to the ownership of voting securities, by contract or
otherwise.

1.2  "After-Tax Contribution" shall mean the net contribution multiplied by
the income tax rate as set out in the NPV Schedule which is Attachment B-1
hereto.

1.3  "Change of Control" shall mean any agreement to acquire or actual
acquisition, by a third party not an Affiliate of such party immediately
prior to such acquisition, of ownership or control of at least fifty per cent
(50%) of the voting stock of Draxis, on the one hand, or Elan
Pharmaceuticals, Inc. or its ultimate parent company, Elan Corporation, plc,
on the other hand. For the purposes of this section, "control" shall have the
meaning given in the definition of Affiliate, above.

1.4  "Closing" and "Closing Date" shall mean, respectively, the consummation
of the transactions described herein and the date on which such consummation
occurs, as described in Section 3.1 below.

1.5  "Commercially Reasonable Efforts" shall mean reasonable efforts and
resources at least equal to those normally used by the party using such
efforts, for a compound, formulation or product owned by it or to which it
has rights, which has a similar market potential at a similar stage in its
product life, taking into account the formulation of the product, the
competitiveness of the marketplace, the proprietary position of the compound
or product, the applicable regulatory structure and requirements, the
clinical and pre-clinical study results pertaining to the Product, time and
cost of completion of development, the profitability of the Product, the size
and location of the subject market within the Territory and any other
relevant factors, as determined by the other party in its reasonable
discretion.


<PAGE>

                                                                        Page 3

1.6  "Cost of Goods" shall mean, with respect to Products supplied by Elan to
Draxis under this Agreement, Elan's actual and reasonable cost of producing
and/or supplying a Product in accordance with generally accepted accounting
principles and Elan's standard costing methodology, consistently applied.
Such costs shall include, but not be limited to, all bulk drug, work in
process (where applicable) and transfer price(s) paid by Elan, Product testing
and yield loss costs, royalties, milestone payments specific to the
Territory, costs of packaging and labelling (other than packaging and
labelling undertaken by or for the account of Draxis under Section 9.2 below)
and quality control or other testing of Products, less costs of goods
returned in accordance with a return policy approved by the Project
Committee, together with all allocated indirect costs and overhead applicable
to Elan's manufacturing, quality control or technical operations functions.

1.7  "Current Good Manufacturing Practices", or "cGMP" means that part of
pharmaceutical quality assurance with ensures that manufacturing sites are
maintained and operated and products are consistently produced and controlled
to the then current quality standards appropriate to their intended use and
as required by the Product specifications in effect from time to time and as
defined in applicable laws and regulations of the Food and Drug
Administration (FDA) and the Health Protection Branch of Canada (HPB).

1.8  "Effective Date" shall mean the date stated in the first paragraph above.

1.9  "Effective Termination Date" shall mean the applicable date stated, as
the case may be, in Section 20.2

1.10  "Factory" means the last applicable manufacturing site in the
production process for each of the Products' commercial supply for the
Territory, as notified to Draxis from time to time in writing by Elan.

1.11  "Forecast" shall have the meaning given in Section 4.2 below.

1.12  "Improvements" means technical improvements, modifications, inventions
or discoveries, whether patented or unpatented, that are developed, made or
acquired by Elan or an Affiliate during the term of this Agreement and that
are derived from or constitute additions or improvements over the Products
including, but not limited to, any new indications, new/additional dosage
forms or strengths, new oral and non-

<PAGE>

                                                                        Page 4

oral formulations, generic versions, new/additional drug delivery systems,
pro-drugs, analogues, or process improvements.

1.13  "Net Present Value" shall mean the net present value of the Products'
projected After-Tax Contribution over the remainder of the term of this
Agreement from the Effective Termination Date, determined according to the
most recent Forecast for each of the Products as approved by the Project
Committee, discounted back at the annual percentage rate contained in
Attachment B attached hereto and incorporated by this reference.

1.14  "Net Sales" shall mean the gross invoiced sales for Products sold or
commercially disposed of for value to a third party by Draxis or its
Affiliates, after deduction of the following amounts:

          (i) discounts, including cash discounts, customary trade allowances
or rebates actually taken or allowed;

          (ii) credits or allowances given or made for rejection, recall or
return of previously sold Products actually taken or allowed;

          (iii) any tax or government charge (including any tax such as a
value added or similar tax or government charge other than an income tax)
levied on the sale, transportation or delivery of a Product and borne by the
seller thereof; and

          (iv) packaging, freight, insurance and customs, duties and
brokerage fees on shipments of Product and borne by the seller thereof.

1.15  "Patent Rights" means the patents and patent applications (until such
time as such applications or any of them are denied, abandoned or issued into
patents) listed in Attachment A and any future patents and patent
applications, continuations, divisionals and reissues as part of patents and
patent applications in the Territory regarding the Products, which Elan owns
or under which Elan is licensed with the right to sublicense in the Territory.

1.16  "Performance Incentive" shall have the meaning given in Section 4.1 below.

1.17  "Product(s)" means any or all of the following products, to the extent
of the rights owned, licensed or controlled by Elan in the Territory:
Zanaflex-Registered Trademark-, Diastat-Registered Trademark-,
Mysoline-Registered Trademark-, Neurobloc-TM-, frovatriptan, Zelapar-TM-,
Zonegran-TM-, ziconotide and Zanaflex-Registered Trademark- MR, and any
Improvements to any of the Products which Elan owns or under which Elan is
licensed with the right to sublicense in the Territory.

1.18  "Project Committee" shall have the meaning given in Section 7.1 below.


<PAGE>

                                                                        Page 5

1.19  "Proprietary Information" includes, without limitation, compilations,
formulae, processes, plans, blueprints, formulations, technical information,
new product information, methods of product delivery, test procedures,
know-how, product samples, customer lists, market plans or strategies, sales
information, specifications, scientific, clinical, commercial and any other
information or data considered confidential in nature, whether communicated
in writing or orally, which is of competitive advantage to either party in
the conduct of its business.

1.20  "Regulatory Approvals" shall mean a Notice of Compliance and/or any
similar or successor approval issued from time to time by the Health
Protection Board of Canada, or any successor agency, which is required for
the marketing of a Product in the Territory.

1.21  "Return on Investment Value" shall have the meaning given in the ROI
Schedule attached as Attachment B-2.

1.22  "Termination Fee" shall have the meaning given in Section 20.2 below.

1.21  "Territory" means Canada and, as the context requires, each of its
provinces and territories.

1.22  "Trademarks" shall mean the trademarks for the Products listed in
Attachment A including any trade names and trade dress related to the
Trademarks.

1.23  "Year" shall mean any calendar year during the term of this Agreement.

ARTICLE 2 - EXCLUSIVE LICENSE

2.1  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis and Draxis hereby accepts an exclusive license to use, market, sell
and distribute the Products under the Patent Rights and the Regulatory
Approvals now or hereafter owned or controlled by Elan for the sole and
exclusive purpose of using, marketing, selling and distributing (but not
manufacturing) the Products in the Territory, for all human indications.

2.2  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis an exclusive, royalty-free, fully paid-up license to use the
Trademarks on packaging,

<PAGE>

                                                                        Page 6

labelling and other materials used in connection with commercialization of
Product in the Territory for so long as this Agreement remains in effect.
Draxis agrees that it will use the Trademarks only in promotion of the
Products, and in accordance with standard pharmaceutical industry practices
and such additional standards and practices as Elan may reasonably request.

2.3  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis the exclusive right to develop and commercialize all Improvements to
any Product for and to the extent of Elan's rights in the Territory, for the
sole and exclusive purpose of using, marketing, selling and distributing (but
not manufacturing) Product in the Territory, for all human indications, on
the same basis as described in this Agreement. It is understood and agreed
that Elan shall have no obligation to develop any Product Improvements for
the Territory.

2.4  Draxis shall not have the right to sublicense any of its rights without
the prior written approval of Elan, in its sole discretion. Any such
sublicensee shall assume in writing and be bound by all the terms and
conditions of this Agreement, and any such sublicense shall not waive or
release the obligations of Draxis hereunder.

ARTICLE 3 - LICENSE FEE; CLOSING; CONDITIONS TO CLOSING

3.1  In consideration for Elan granting the rights described in Article 2,
Draxis agrees to pay to Elan, at the Closing, the amount of Twelve Million US
Dollars (US$12,000,000.00), in immediately available funds by wire transfer
to an account designated by Elan in writing. The parties shall agree in
writing on an allocation of such fee to each of the Products on or before the
Closing Date.

3.2  The Closing shall take place as soon as practical after execution of
this Agreement by the parties, on a mutually agreed time and date, at the
offices of Elan Pharmaceuticals, Inc. in South San Fransisco, California. The
Closing shall occur simultaneously with the closing of the stock purchase
under the Common Stock Purchase Agreement described above. Unless waived in
writing, Closing of this Agreement shall be subject to the making or receipt
by the parties of all necessary notices, filings, consents or approvals to or
by third parties, governmental agencies in or outside the Territory, and
internal management, board of directors or shareholders.

<PAGE>

                                                                         Page 7


ARTICLE 4 - PERFORMANCE INCENTIVE

4.1      For each Year for which this Agreement is in effect, Elan shall pay
to Draxis a performance incentive based on Net Sales of each Product in the
Territory, calculated by Product and presentation thereof, as follows:

         (a)       For Net Sales of such Product above 100% but not more than
              115% of Forecast, a payment of * percent (*%) of Cost of
              Goods for applicable presentations of such Product sold;

         (b)       For Net Sales of such Product above 115% but not more than
              130% of forecast, a payment of * (*%) of Cost of Goods for
              applicable presentations of such Product sold; and

         (c)       For Net Sales of such Product above 130% of forecast, a
              payment of * percent (*%) of Cost of Goods for applicable
              presentations of such Product sold.

4.2      For each Year while this Agreement is in effect, Draxis shall report
to Elan on a quarterly basis its Net Sales and contribution calculation of
each presentation of Product and for all Products in the aggregate in the
Territory, and for each full Year will use audited financial statements for
that year, or other financial information acceptable to Elan in its
discretion. Quarterly reports shall be due within sixty (60) days of the end
of each quarter. Draxis will also provide a year-to-date calculation, by
Product, of the percentage amount and variance of Net Sales of each Product
compared to the current forecast or budget for that Product as approved by
the Project Committee and in effect as of the end of the period under review
(the "Forecast"). The year-end report shall include Draxis's calculation by
Product of any resulting Performance Incentive per the above formula. Each
Year-end report shall be submitted on an audited basis as with other
quarterly reports, and the final audited report no later than 140 days after
the end of each Year. The current forecast, by Product, is attached hereto as
Attachment C. The forecast may be changed only by written agreement of the
Project Committee.

4.3      Elan shall pay any Performance Incentive amounts due to Draxis
within thirty (30) days of receipt of Draxis's calculation of such amounts,
unless Elan disagrees with the calculation of the Performance Incentive, in
which case it shall notify Draxis promptly in writing (but in any event not
less than fourteen (14) days from receipt of Draxis's calculations) of such
disagreement. The parties shall make good faith efforts to discuss and
resolve any such disagreement, and shall refer it to the COO

* Material has been omitted and filed separately with the Securities and
  Exchange Commission.

<PAGE>

                                                                         Page 8


of Elan and the CEO of Draxis if not resolved within fourteen (14) days of
Elan's notice.

4.4      Any Performance Incentive payments shall be payable in and remitted
in Canadian Dollars by Elan. If amounts are calculated in other than Canadian
Dollars, such amounts shall be converted to Canadian Dollars at the closing
spot rates of exchange, as published by the WALL STREET JOURNAL for the last
business day in the Territory preceding the date of remittance. Payments
shall be made by Elan's check to Draxis's address as provided in Section 23.2
below or by wire transfer as notified in writing by Draxis.

4.5      Performance Incentive amounts shall be calculated hereunder using
Net Sales only for final sales of Product by Draxis or any Draxis Affiliate
to independent third parties in arm's-length transactions. No multiple
counting or payment shall be payable upon the sale of a given order of
Product.

4.6      Draxis shall keep complete and adequate records with respect to the
sale of Product and Performance Incentive amounts payable hereunder for at
least four (4) years after expiry of the Year concerned. Elan shall have the
right to have such records of Draxis inspected and examined, at Elan's
expense during normal business hours, for the purpose of determining
correctness of payments made and owed hereunder. If an error of more than
$5000 in Elan's favor is found in such records, the error will be corrected,
any overpaid amounts returned and any and all reasonable expenses will be
borne by Draxis. Such inspection and examination shall be made by an
independent, certified, public accountant to whom Draxis shall have no
reasonable objection. It is understood that such examination with respect to
any Year hereunder shall take place not later than three (3) Years following
the expiration of that Year, and that no more than one examination per year
shall take place under this Section.

4.7      Any withholding or other tax required to be withheld by Draxis under
the laws of the Territory for the account of Elan in respect of payments to
be made by Draxis hereunder shall be promptly paid by Draxis for and on
behalf of Elan to the appropriate tax authorities, and Draxis shall, within
sixty (60) days of making such payment, furnish Elan with proof of payment of
such tax together with tax receipts or other evidence of payment sufficient
to enable Elan to support a claim in respect of any sum so withheld. Any such
tax required to be withheld shall be borne solely by

<PAGE>

                                                                         Page 9


Elan. Draxis shall cooperate with Elan in taking reasonable and legally
authorized steps to reduce or to eliminate such withholding or other taxes.

ARTICLE 5 - OWNERSHIP AND JOINT DEVELOPMENTS

5.1      All existing or subsequently developed Proprietary Information of
Elan will be owned by Elan. All existing or subsequently developed
Proprietary Information of Draxis will be owned by Draxis. Each party will
have access to Proprietary Information of the other as is reasonable and
appropriate to carry out the intent of this Agreement.

5.2      In the event that a development or Improvement is made by either
party, or jointly; or a development is made by Draxis pursuant to its
obligations under this Agreement; such a development, whether patentable or
not (an "Invention"), will be owned by Elan if it pertains to any of the
Products, and will be owned by the party or parties making such Improvement
or development, if not related to the Products.

5.3      In case Inventions made pursuant to Article 5.2 are patentable, Elan
and Draxis each agree to fully cooperate with the other and/or its attorneys
in:
A.       preparing, filing and prosecuting patent applications;
B.       vesting title as herein provided; and
C.       providing non-financial assistance as reasonably requested by the
         other in enforcing any patents resulting from such patent applications.

5.4      The cost of patenting Inventions will be borne by the owner of the
Invention. In the event of jointly-owned Inventions, the costs will be shared
equally by both Draxis and Elan.

5.5      To the extent not owned by Elan, Elan retains the right to use all
data generated by, or arising from, further development or from studies or
clinical development and regulatory work as set out in Article 7 undertaken
separately by Draxis on any of the Products (whether before or after
Regulatory Approval for such Product) for the purpose of gaining regulatory
approval and market support in any countries outside the Territory.


<PAGE>

                                                                       Page 10


ARTICLE 6 - CONFIDENTIALITY

6.1  A party receiving Proprietary Information from the other, directly or
indirectly, will treat such information as confidential and will use efforts
at least equivalent to those used to protect its own Proprietary Information.
Except as set forth in Article 6.2 following, all information or data
communicated from one party to the other will be deemed and treated as
Proprietary Information unless otherwise agreed to in writing. All oral
communications, whether or not summarized and reduced to writing, shall also
be considered confidential. Access to such Proprietary Information will be
limited to employees, agents, advisors or consultants of the party receiving
such information, who reasonably require such information and who are bound
to said party by a like obligation of confidentiality. A party receiving
Proprietary Information will not use such information for its own benefit or
for the benefit of others or in any way not consistent with the purposes set
out in this Agreement.

6.2  Nothing contained herein will in any way restrict or impair each party's
right to use, disclose or otherwise deal with any Proprietary Information
which:
A.  at the time of disclosure is in the public domain or thereafter becomes
part of the public domain by publication or otherwise through no act of the
party receiving such information;
B.  the party receiving such information can conclusively establish was in
its possession prior to the time of the disclosure;
C.  is independently made available as a matter of right to the party
receiving such information by a third party who is not in violation of a
confidential relationship with the other party;
C.  is developed by a party independently of the Proprietary Information
received from the other party; or
D.  is information required to be disclosed by legal process; provided, in
such case, the disclosing party timely informs the other and uses its best
efforts to limit the disclosure and maintain confidentiality to the extent
possible and cooperates reasonably with the other party to attempt to limit
such disclosure.

6.3  The party receiving Proprietary Information will obtain no right of any
kind, or license under any patent application or patent, except as expressly
stated in this Agreement. All Proprietary Information will remain the sole
property of the party disclosing such information or data.

<PAGE>

                                                                       Page 11


6.4  Upon termination of this Agreement, the party to which Proprietary
Information has been disclosed will upon request within thirty (30) days
return all such information, including any copies thereof, and cease its use,
or at the request of the party transmitting such Proprietary Information,
will promptly destroy the same and certify such destruction to the
transmitting party, provided that each party may retain one copy of the
Proprietary Information for compliance and recordkeeping purposes.

6.5  Termination or expiration of this Agreement shall not relieve the
parties of their obligations under this Article 6.

6.6  Nothing in this Article 6 will prevent Draxis or Elan from disclosing to
each other the results of any work carried out by them pursuant to Article 7
and Draxis and Elan hereby agree to disclose to each other such results
promptly.

ARTICLE 7 - PROJECT COMMITTEE; PRODUCT DEVELOPMENT AND
COMMERCIALIZATION

7.1  The Project Committee shall consist of three representatives from each
party as designated by each of them from time to time. Unless otherwise
agreed by the parties, the Project Committee shall meet at least once every
six months. The Project Committee shall meet alternatively at the offices of
Elan Pharmaceuticals and Draxis, or as otherwise agreed, each party bearing
its own expenses in preparing for and attending such meetings. Meetings shall
be chaired by one of the Draxis representatives whom it selects. Between
meetings of the Project Committee, each party shall keep the other generally
informed as to its progress with its respective obligations under this
Agreement. Draxis will provide Elan's Project Committee members with advance
written reports and agenda items as the Committee reasonably determines are
appropriate, including without limitation reasonably current profit/loss
statements for each of the Products individually, and in the aggregate.

7.2  The Project Committee shall provide strategic advice and oversight for
the development and commercialization of the Products in the Territory. In
particular, the Project Committee shall have the following responsibilities:

     (a)    to review and approve an annual budget, timeline, Forecasts,
            marketing and business plans for the Products in the Territory
            and any updates or amendments thereto;

<PAGE>

                                                                       Page 12


     (b)    to review and approve all clinical, regulatory and product
            development plans, timelines and budgets for the Products
            including but not limited to clinical trial protocols, and any
            updates or amendments thereto; and

     (c)    to review the Products' performance against such plans and budget
            at each meeting of the Project Committee.

7.3  The Project Committee shall attempt to operate by consensus, and all
decisions of the Project Committee shall require majority support. In the
event of a dispute among the project Committee which cannot be resolved by
consensus, after further informal discussion, such dispute shall be referred
to the CEO of Draxis and the COO of Elan Pharmaceuticals, Nor the America, a
division of Elan Pharmaceuticals, Inc., who shall discuss the matter and
attempt to reach an amicable solution.

7.4  Draxis shall have primary responsibility, at its expense, for the
preparation, filing and pursuit of the application for Regulatory Approval of
each Product in the Territory an, as approved by the Project Committee,
formulary approval for provinces in the Territory. Draxis will use diligent
efforts to do so and to obtain and maintain, on Elan's behalf as the owner
and holder thereof, the Regulatory Approvals for the Product in the
Territory. Elan will be responsible for the payment of any third party costs
of generating any additional data required by HPB in order to obtain
Regulatory Approval for any of the Products, provided that the Project
Committee approves in advance the undertaking of any such costs as being
reasonable and necessary. Elan shall on a timely basis provide Draxis with
such assistance as Draxis may reasonably request from time to time in
obtaining or maintaining such Regulatory Approvals, including without
limitation providing Draxis with a copy of Elan's New Drug Application or
such other documents or information within Elan's possession or control as
Draxis may reasonably require for the purposes of fulfilling its obligations
hereunder. For purposes of providing information required for Regulatory
Approvals or formulary approvals, Elan will use its reasonable best efforts
to respond to Draxis requests within five business days, unless the volume or
scope of information requested makes such time unreasonable or impractical.

7.5  Once Regulatory Approval is obtained for a Product, Draxis will use
Commercially Reasonable Efforts to launch and market such Product in the
Territory for the duration of this Agreement, and to obtain such provincial
formulary approvals as may be appropriate, each in accordance with the
marketing and business plans,
























<PAGE>

                                                                        Page 13


budget and timeline approved in advance by the Project Committee. Elan will
discuss in advance with Draxis any forthcoming process or other changed or
improvement in any of the Products undertaken in the U.S., e.g., a new
formulation or delivery system or method. Draxis will use Commercially
Reasonable Efforts to supplement or update any Regulatory Approvals and take
such other action reasonably necessary or appropriate to accommodate and
adopt such changes for the affected Products in the Territory.

(a) Elan at its expense shall provide to Draxis examples of all materials
used, in available media, for marketing and promotion of the Products in the
United States together with examples of any training materials and any other
documentation or marketing aids generated in respect of the Products for the
United States. Draxis also agrees to display the Trademarks on the Products
and such promotional materials in a format or type style previously
authorized and approved in writing by Elan Pharmaceuticals, Inc. on the same
timeline as described below. Draxis shall otherwise be entitled to adapt such
materials for Canadian purposes, as it sees fit, for the marketing and
promotion of the Products in the Territory and shall provide any such
marketing or promotion materials to Elan for its approval, not to be
unreasonably withheld, at least ten (10) business days in advance of any
proposed use, publication or submission to any agency or third party unless a
longer period is required by any agreement between Elan and its licensor, in
which case (i) Elan will notify Draxis of such longer period, and (ii) the
Elan and licensor approval periods shall run concurrently. Elan shall provide
any comments on such materials within that time, and if requested by Draxis,
in written form with two (2) business days of providing oral comments. The
Project Committee shall use its good faith efforts to resolve any
disagreement over the content or form of any such proposed materials, and
shall refer any remaining disagreement to senior management for prompt
resolution as provided above. Elan's failure to timely provide any comments
to Draxis as provided above shall be deemed to be approval of such materials
for the proposed use.

(b) In addition, Elan shall share with Draxis in a timely manner any
competitive intelligence or clinical data as well as any market research Elan
may obtain or have in its possession which may be of assistance in the
marketing and promotion of the products or in obtaining Regulatory Approvals
or formulary approvals in the Territory. Draxis shall share any such
information in its possession with Elan, mutatis mutandis.

<PAGE>

                                                                        Page 14


7.6  Elan shall at its expense, as soon as practical after the Effective Date
and for the duration of this Agreement, employ and post at Draxis's
headquarters a full-time advisor or consultant. That person shall be
dedicated to assisting Draxis in fulfilling its obligations under this
Agreement and its business plan for the Products as approved by the Project
Committee, and shall assist in communicating with Elan in that regard. Through
its Management by Objective program or any successor program, Elan will
provide bonus objectives to each of its Project Committee members who
participate in any such programs (and, if applicable, the Elan full-time
employee described above) which are reasonably related to the success of the
Products in the Territory.

ARTICLE 8 - SUPPLY

8.1  During the term and in accordance with the provisions of this Agreement,
Draxis shall purchase all of its requirements for Products exclusively from
Elan.

8.2  Elan shall use Commercially Reasonable Efforts, subject to force majeure
or any other cause beyond the reasonable control of Elan, to maintain through
its suppliers a continuous supply of each of the Products to Draxis, subject
to the provisions of Article 9.

8.3  Draxis shall not sell or distribute any Product for resale or
redistribution outside the Territory.

ARTICLE 9 - FORECASTING AND ORDERING

9.1      Products shall, unless otherwise agreed in writing between the
parties, be manufactured and supplied in accordance with the specifications
designated by Elan for each Product in writing from time to time, and
thereafter as amended only by mutual written agreement of the parties. Such
specifications shall be consistent with the Regulatory Approval for marketing
of the Product in the Territory.

9.2      It is understood and agreed that it shall be Draxis's
responsibility, at its expense, to package and label or have packaged and
labelled all Product sold by Draxis in accordance with Elan's agreements with
third party contractors and suppliers, and all applicable laws and
regulations in the Territory, including without limitation regulations
requiring dual language labelling and packaging. The parties shall cooperate
reasonably to arrange for shipments of Product to any third party

<PAGE>

                                                                        Page 15


contractor designated by Draxis to provide such services. Unless otherwise
agreed, it is understood that Product shall be provided by Elan to Draxis for
Territory-specific labelling and packaging. In the alternative, Draxis shall
provide Elan with its requirements for such Territory-specific packaging and
labelling and will pay the full cost thereof. Unless prohibited by law or
regulation, all such packaging and labelling shall include, in Elan's
discretion, a reference and/or logo appropriate to the product referring to
Elan Pharmaceuticals.

9.3      It is further understood and agreed that Elan obtains each of the
Products from third party manufacturers or contractors responsible for most
if not all manufacturing processes. Elan will notify Draxis as far in advance
as is practical of any change or proposed change in Product specifications,
delays in productions, amendments to Elan's contracts with such third parties
which are material to Draxis for the Territory, or other material aspects of
Elan's relationship with such third parties and will use Commercially
Reasonable Efforts to work with Draxis to minimize the results of any such
events in the Territory. Draxis understands and agrees with the foregoing,
and will provide Elan as much advance notice as is practical of any event
reasonably requiring notice to or participation of Elan or its third party
suppliers of Product. The parties will revise forecasting and ordering time
lines and procedures and other aspects of their supply relationship as may be
reasonably necessary to allow Elan to fulfill its obligations to those third
parties on a timely basis.

9.4       Unless otherwise agreed in writing by the parties, not less than six
calendar months prior to the shipment date for the first order of each
Product, Draxis shall submit to Elan a written, non-binding forecast of the
quantities of Product which Draxis expects to purchase during each of the
four calendar quarters following such shipment date. Thereafter, not later
than fourteen (14) days prior to the beginning of each successive calendar
quarter, Draxis shall submit an updated forecast for the following four
consecutive calendar quarters ("Estimated Quantity"). The first quarter's
forecast of each Estimated Quantity shall constitute a minimum purchase
commitment for that quarter, against which Firm Orders (as defined below)
will be placed. The parties shall agree on a reasonable format for such
forecasts.

9.5      Not less than six calendar months prior to the shipment date for the
first order of each Product, Draxis shall submit to Elan a written purchase
order for its requirement of the Product ("Firm Order") with such information
and in a form to be agreed between the parties. Second and subsequent Firm
Orders shall quote a


<PAGE>

                                                                        Page 16

shipment date not less than four calendar months from the date of such order.
In case of any conflict between the terms of this Agreement and the terms set
forth in any Firm Order, the terms of this Agreement shall be controlling.
The total of Firm Orders for each Product in a calendar quarter shall be
between 75% and 125% of that quarter's Estimated Quantity of Product in the
prior forecast. For orders in excess of 125%, Elan shall make reasonable
efforts to supply such excess amount. In the case of Zanaflex, Diastat and
Mysoline, Elan shall make reasonable efforts to supply such Products as soon
as possible after receipt of forecasts of Estimated Quantity from Draxis for
launch in the Territory consistent with any third party contractual
requirements.

9.6     The parties shall cooperate to establish reasonable minimum purchase
order quantities for each presentation of Product, taking into account
minimum batch sizes or order quantities required of Elan in its orders to the
supplier of that Product, resulting Costs of Goods, dating of Product and
each presentation thereof, and other relevant factors.

ARTICLE 10 - PRICE

10.1     Unless otherwise agreed by the parties in writing, the prices for each
Product shall be Elan's Cost of Goods for such presentation of each Product
from time to time, *. Cost of Goods for each
presentation of Product may be changed only in writing by Elan to Draxis, as
provided below, for any future Firm Orders for Products.

10.2     All prices for Product shall be determined and paid in United States
Dollars unless otherwise required by Elan as a result of its underlying
supply contracts for Product.

10.3     The current prices of the Product shall be subject to review by Elan
on not more than a semi-annual basis to take into account any increases or
decreases in Elan's Cost of Goods from time to time. Draxis shall be entitled
to receive a proportionate breakdown, in reasonable detail, of the categories
making up the Cost of Goods for each Product. Adjustments to Elan's Cost of
Goods shall be communicated in writing to Draxis at least three (3) months in
advance of implementation. If within thirty (30) days of a written notice of a
price increase Draxis objects to such increase in writing, after good faith
discussion between the parties, Elan shall forthwith make available its Costs
of Goods documentation in

* Material has been omitted and filed separately with the Securities and
  Exchange Commission.

<PAGE>

                                                                        Page 17


confidence to an independent auditor appointed by Draxis and reasonably
acceptable to Elan. The auditor will check the calculations and base
information used by Elan to determine that the calculations are accurate and
in accordance with the agreed mechanism under this agreement. The auditor
will not provide any proprietary or confidential information relating to Cost
of Goods changes to Draxis, but will provide a summary of the reasons for any
change in Cost of Goods. Draxis agrees that if the auditor certifies in
writing to Draxis the correctness of the calculations it will accept the
notified price change. Elan agrees that if any error or omission occurs in
the calculation of the revised price this will be corrected and new prices
prepared. Both parties agree that such price will be effective from the
notified date, with appropriate adjustments to be made to invoices issued in
respect of shipments between the notified price change date and the date at
which prices were actually agreed. The reasonable fees and disbursements
charged by the auditor shall be paid by the party whose contention is
rejected by the auditor.

ARTICLE 11 - SAMPLES

11.1     Elan agrees that if sampling is approved by the Project Committee as
appropriate for a Product, it will provide samples of Product at a price
equal to its Cost of Goods for that presentation of Product from time to
time, as determined under Article 10 above, as follows:
         (a)     Sample prices will apply only to invoices issued for Product
            in the first twelve-month periods after launch of that Product in
            the Territory unless otherwise approved by the Project Committee.
         (b)     Sample quantities will be included in all Estimated Quantity
            forecasts, identified in separate purchase orders by Product, and
            aggregate sample quantities by Product will not exceed ten percent
            (10%) of commercial quantities of that Product ordered in each of
            the first two twelve-month periods following launch unless otherwise
            approved by the Project Committee.

11.2     Draxis shall have the sole responsibility for ensuring that all samples
are properly packaged and labelled in accordance with applicable laws, rules
and regulations in the Territory.

<PAGE>

                                                                        Page 18


ARTICLE 12 - DELIVERY AND PAYMENT TERMS

12.1     Elan shall use its diligent efforts to arrange for the delivery of
Product in accordance with Draxis's instructions as specified in writing from
time to time.

12.2     Draxis shall be responsible for all charges associated with the
shipping and delivery of Product from the Factory applicable to each Product.
Each invoice to Draxis shall be in US Dollars and shall indicate the
ex-Factory price to Draxis of the Product under Section 10.1 above. Draxis
shall make payment of each invoice to Elan within thirty (30) days of date of
invoice.

ARTICLE 13 - RIGHTS OF FIRST NEGOTIATION; NON-COMPETITION

13.1     Draxis will have a right of first negotiation on any neurologic or
pain management pharmaceutical products for which Elan obtains sublicense or
distribution rights specific for the Territory or to North America, with the
exception of Antegren-TM-.

13.2     Elan will have a right of first negotiation on any proposed sale,
transfer or sublicense by Draxis to any unaffiliated party for any of the
pharmaceutical products, assets or business of the Draxis Pharmaceutica
division of Draxis, as now or hereafter configured or defined, in the
Territory.

13.3     While this Agreement remains in effect, Draxis and its Affiliates
will not, unless approved in advance by Elan in its discretion, market or
distribute in the Territory any pharmaceutical product which is directly
competitive with any of the Products. For a period of twelve (12) months
after the expiration or termination of this Agreement, Draxis and its
Affiliates will not, unless approved in advance by Elan in its discretion,
market or distribute in the Territory any pharmaceutical product containing a
compound which is the same active ingredient or chemical moiety as any of the
Products. During and after the term of this Agreement, Draxis and its
Affiliates will not seek or promote customers or sales of Products outside
the Territory. Nothing in this Section affects the obligations of Draxis
under Article 6 above.

ARTICLE 14 - REPRESENTATIONS AND WARRANTIES

14.1     Elan hereby represents and warrants to Draxis as follows:


<PAGE>

                                                                        Page 19


A.       Elan has the full legal right to enter into the Agreement and to
perform its obligations hereunder. The Agreement is duly executed and
delivered by Elan and constitutes a legal, valid and binding obligation,
enforceable against Elan in accordance with its terms.
B.       Prior to the Closing Date, Elan will have obtained all necessary
notices, consents, approvals and authorizations of all governmental
authorities and other third parties required in connection with entering into
and performing the Agreement which were required as of the date of the
Agreement.
C.       The execution and delivery of the Agreement and the performance of
Elan's obligations hereunder (i) to Elan's best knowledge do not conflict
with or violate any requirement of applicable laws, rules or regulations, and
(ii) do not conflict with, or constitute a default under, any contractual
obligation of Elan.
D.       Elan either owns or has exclusively licensed to it in the Territory
the Products, and the Patent Rights as described in Attachment A insofar as
they pertain to the Products, and has not granted to any third party any
license or other interest of any kind (including any charge, lien or
encumbrance) for the Products under the Patent Rights in the Territory which
would affect Draxis's rights under this Agreement, except as follows:
         1)      Mysoline:  Elan has entered into a distribution agreement
           with Wyeth-Ayerst Canada Inc., which is terminable by Elan upon six
           months' prior written notice. Elan will submit that notice at or
           prior to the Closing.
E.       To the best of Elan's knowledge at the date of this Agreement,
without investigation, the manufacture, use, distribution or sale of Product
in the Territory will not infringe the issued patents of any third party.
C.       As of the Effective Date, Elan's Cost of Goods and
Territory-specific milestone payments for each Product are as set forth in
Attachment D.
D.       To Elan's best knowledge at the date of this Agreement, without
investigation, there is no patent other than the Patent Rights for which a
license would be required for the promotion, distribution and sale by Draxis
of the Products in the Territory, as contemplated by this Agreement.
E.       The Patent Rights and Trademarks listed in Attachment A identify all
patents, whether issued or pending, and all Trademarks, whether issued or
pending, with respect to any of the Products in the Territory. To Elan's best
knowledge, without investigation, it has no reason to believe that any of the
Patent Rights or Trademarks are (or, if granted or approved, would be)
invalid.
F.       To Elan's best knowledge, without investigation, there are no
investigations, third party allegations or actions, or claims against Elan or
its Affiliates, including any

<PAGE>

                                                                        Page 20


pending or threatened (in writing) action against any of them in any court or
by or before any governmental body or agency, with respect to the Products
(including without limitation, sales by Elan of the Products outside the
Territory) or its obligations set forth herein, which if successful would
materially and adversely affect Elan's ability to perform its obligations
under this Agreement.

14.2     Draxis hereby represents and warrants to Elan as follows:

A.       Draxis has the full legal right to enter into the Agreement and to
perform its obligations hereunder. The Agreement is duly executed and
delivered by Draxis and constitutes a legal, valid and binding obligation,
enforceable against Draxis in accordance with its terms.
B.       Prior to the Closing Date, Draxis will have obtained all necessary
notices, consents, approvals and authorizations of all governmental
authorities and other third parties required in connection with entering into
and performing the Agreement which were required as of the date of the
Agreement.
C.       The execution and delivery of the Agreement and the performance of
Draxis's obligations hereunder (a) to Draxis's best knowledge, do not
conflict with or violate any requirement of applicable laws, rules or
regulations, and (b) do not conflict with, or constitute a default under, any
contractual obligation of Draxis.
D.       To Draxis's best knowledge at the date of this Agreement, the
manufacture, use, distribution or sale of the Products in the Territory will
not infringe the patent rights of any third party.
E.       To Draxis's best knowledge, without investigation, except as
disclosed in writing to Elan there are no investigations, third party
allegations or actions, or claims against Draxis or its Affiliates, including
any pending or threatened (in writing) action against any of them in any
court or by or before any governmental body or agency, with respect to the
Products or its obligations set forth herein, which if successful would
materially and adversely affect Draxis's ability to perform its obligations
under this Agreement.
F.       Draxis has not granted, and subsequent to the Effective Date of this
Agreement will not grant to any third party any license or other interest of
any kind (including any charge, lien or encumbrance) in all or any part of
Draxis's rights under this Agreement, without the prior written consent of
Elan in its discretion; except that Draxis may grant a floating lien or
charge solely in the inventory of Products, any resulting accounts receivable
and any cash proceeds thereof which may be generated from time to time by
Draxis.

<PAGE>

                                                                        Page 21


ARTICLE 15 - PRODUCT WARRANTY AND LIABILITY

15.1     In addition to its representations in Article 14 above Elan warrants
that as of the delivery dates of shipments, as provided herein, Product
provided to Draxis shall be manufactured and packaged in accordance with all
specifications contained in the Regulatory Approval for the Product, from
time to time, and then-current Good Manufacturing Practices.

15.2     Elan shall promptly replace or refund the invoice price of any
quantity of the Product found not to correspond with Elan's warranties in
Article 15.1 hereof.

15.3     Except for Elan's liability pursuant to Article 15.4, Elan's
obligation to replace or refund as aforesaid shall constitute the full extent
of Elan's liability under this Agreement in respect of any loss or damage
sustained by Draxis or arising from any other cause whatsoever and Elan shall
not be liable for any consequential or indirect loss suffered by Draxis
arising therefrom. ELAN MAKES NO WARRANTIES, WHETHER EXPRESS OR IMPLIED OR OF
MERCHANTABILITY, OTHER THAN THOSE CONTAINED IN THIS ARTICLE 15. Elan shall
cooperate reasonably in providing the benefit of any warranty rights it may
have against its suppliers in connection with manufacture of any of the
Products.

15.4     Each party shall indemnify and hold the other, and their respective
employees, directors, representatives and advisors, harmless from and against
any and all liabilities, actions, suits, claims, demands, prosecutions,
damages, costs, expenses or money judgements (including reasonable attorneys'
fees but not consequential or indirect loss) which arise out of:
a)       the intentional misconduct or negligence of the indemnifying party
with respect to its acts or omissions under this Agreement or pertaining to
the Products; or
b)       the material breach by the indemnifying party of its representations
and warranties contained in this Agreement;
except to the extent of an indemnity obligation on the part of the other
party under this section. In the event of a claim which may give rise to a
right of indemnity under this section, the party intending to claim indemnity
shall give the indemnifying party notice in writing as soon as practicable of
any such claim or lawsuit and shall permit the indemnifying party to
undertake the defence thereof at its expense.

In any such claim or lawsuit:

<PAGE>

                                                                        Page 22


(i)      the party claiming indemnity will cooperate reasonably in the
defense of the third party's claim, and shall have the right to participate
in such defense to the extent that in its judgement the party claiming
indemnity may be prejudiced thereby; and
(ii)     the party claiming indemnity shall not settle, offer to settle or
admit liability in any claim or suit without the written consent of an
officer of the indemnifying party, which consent shall not be unreasonably
withheld.

15.5     Draxis and Elan shall advise each other immediately, to be confirmed
in writing, of any occurrence which involves any material complaints about the
safety or effectiveness of any of the Products, including, without
limitation, a claim for death or injury following administration of Product
supplied hereunder, or any matter arising out of this agreement which is
required to be reported other than in a routine manner to the regulatory
authorities by either party. The parties will cooperate reasonably to
facilitate and develop written procedures for the reporting of adverse events
for the Products to appropriate regulatory agencies within and outside the
Territory. It is understood that if requested by Elan, Draxis will undertake
on Elan's behalf the reporting of adverse events with the Territory.

15.6     Draxis shall, throughout the term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company,
comprehensive general liability insurance, including standard product
liability insurance designating Elan as an additional insured. Such policy
shall provide protection against any and all claims, demands and causes of
action arising out of any defects, alleged or otherwise, of any one of the
Products or any material use in connection therewith or any use thereof.

15.7     In the event that, in the Territory, (i) any governmental authority
issues a request, directive or order that any of the Products be recalled,
(ii) a court of competent jurisdiction orders that any of the Products be
recalled, or (iii) Elan or Draxis reasonably determine, after mutual
consultation, that any of the Products should be recalled, the parties shall
cooperate and take all appropriate corrective actions. To the extent that
such a recall results from a breach of Elan's obligations or warranties under
this Agreement, or the negligence or willful misconduct of Elan, its
Affiliates or contractors, Elan shall be responsible for reimbursement of
Draxis's direct out-of-pocket expenses in conducting such recall. To the
extent that such a recall results from a breach of Draxis's obligations or
warranties under this Agreement, or the negligence or willful misconduct of
Draxis, its Affiliates or

<PAGE>

                                                                        Page 23


contractors, Draxis shall be responsible for reimbursement of Elan's direct
out-of-pocket expenses in conducting such recall. For the purposes of this
Agreement, the expenses of recall shall be those of notification, return
and/or destruction of the affected Product, the inventory, shipping, and
other associated amounts for the shipments of Product recalled, and the
direct out-of-pocket costs of acquiring and distributing replacement Product.
In no event shall any recall damages or costs include lost profits,
incidental, consequential or other damages of any kind. In any events leading
to and following an actual or potential recall situation, Elan and Draxis
shall cooperate fully with each other in communicating and coordinating with
as much advance notice as is practical under the circumstances.

ARTICLE 16 - PATENTS AND TRADEMARKS

16.1     Elan shall, at its expense and in its discretion, use its
Commercially Reasonable Efforts to prepare, file, prosecute and maintain the
Patent Rights and the Trademarks in the Territory, and will provide Draxis
with an annual status report in writing and such oral reports as Draxis may
reasonable request from time to time. Elan will consult with Draxis as far in
advance as is practical prior to abandoning any Patent Rights or Trademarks.
If, at any time during the term of this Agreement, either party shall become
aware of any third party infringement or threatened infringement of any
Patent Rights or Trademarks in the Territory, the following provisions shall
apply:
(i)      The party becoming aware shall promptly give written notice to the
other and shall make no admission of liability.
(ii)     If there is a disagreement as to whether the act complained of is in
fact an infringement, as described above, the parties shall refer such issue
to a mutually acceptable independent counsel (such acceptance not to be
unreasonably withheld), and the reasonable costs of such counsel incurred in
this regard shall be borne by the party whose view does not prevail.
(iii)    With or without the advice of independent counsel, Elan shall have
the right to litigate such alleged third party infringement. Elan shall
notify Draxis within sixty (60) days after the written notice described in
(i) above (of, if later, thirty (30) days after the decision of the counsel
described in clause (ii) above) whether it intends to so litigate.
(iv)     If Elan determines not to litigate in accordance with clause (iii)
above, and the counsel described in clause (ii) above has opined that the act
complained of is, or more likely than not it, an infringement in the
Territory, then Draxis may, in its sole discretion and expense, bring suit in
its name to restrain such third party

<PAGE>

                                                                        Page 24


infringement in the Territory. In such event Draxis shall conduct such
proceedings properly and diligently and shall keep Elan timely informed of
all developments.
(v)      In the event of any action permitted under this Section 16.1 by
either party, the other party will provide the necessary and timely
assistance in such action on reasonable terms and conditions to be agreed on
at such time. In connection with any deliberations concerning the prospects
for successfully bringing suit to enjoin such infringement, the parties shall
promptly and fully make available to each other their available information
concerning the validity and enforceability of the relevant Patent Rights or
Trademarks and any other relevant information.

16.2     The party controlling any such enforcement action shall not
compromise or consent to judgement in a way that diminishes the rights or
interests of the non-controlling party without that party's prior written
consent, such consent not to be unreasonably withheld. The out-of-pocket
costs expended by the party controlling any such action will first be
deducted from any and all proceeds recovered in the action, and then the
out-of-pocket costs of the other party. The remaining proceeds of any such
action will then be divided between the parties with seventy-five percent
(75%) to the party conducting the action, and the other twenty-five percent
(25%) to the other party. Any such amounts allocated to Draxis shall be
treated as Net Sales under this Agreement, less fifteen percent (15%) of such
allocated amount, to be paid to Elan.

16.3     In the event that the manufacture by or on behalf of Elan and the
use and/or sale of Product is claimed or threatened in writing to constitute
an infringement in the Territory of the intellectual property rights of a
third party, either party shall as soon as it becomes aware of the same,
notify the other thereof in writing, giving in the same notice full details
knows to it of the rights claimed by such party and the extent of any alleged
infringement. The parties shall cooperate reasonably in assessing and
responding to any such potential infringement.
         (i)     Draxis shall defend against any such alleged third party
infringement at its expense. In such event Draxis shall conduct such
proceedings properly and diligently and shall keep Elan timely informed as
far in advance as practical of all decisions or developments. In the event of
any action required under this Section 16.3 by Draxis, Elan will provide
necessary and timely assistance at its expense. Elan may, at its option and
expense, lead any such litigation using counsel of its choice reasonably
acceptable to Draxis, and will lead such litigation if conducting a defense
of the same Product in the U.S, with costs of such joint cross-border defense
to be allocated reasonably based on the size of markets and other relevant


<PAGE>

                                                                        Page 25


factors. In connection with any deliberations concerning the prospects for
successfully defending against such alleged infringement, the parties shall
promptly and fully make available to each other their available information
concerning the validity and enforceability of the relevant third party
intellectual property and any other relevant information.

16.4     The party controlling any such enforcement action shall not
compromise or consent to judgement in a way that diminishes the rights or
interests of the non-controlling party without that party's prior written
consent, such consent not to be unreasonably withheld.

16.5     In the event that because of any court order or settlement approved
by Elan under Section 16.4, Draxis is required or requested to cease selling
one or more of the Products in the Territory because the manufacture, use or
offer for sale of such Product allegedly infringes the patent rights of a
third party in the Territory, Elan will in good faith consider negotiating
for a license, at its expense, which would allow Draxis to continue to market
and distribute the affected Product in the Territory for the term of this
Agreement, and undertakes to do so if it does the same for the United States
and reasonably similar terms are available for such a license in the
Territory.

16.6     Subject to its agreements with third parties, Elan shall disclose to
Draxis and Draxis shall disclose to Elan as far in advance as is practical
the complete texts of all patent applications filed or to be filed by either
Elan or Draxis which relate to the Products and any Improvements as well as
all material information received concerning the institution or possible
institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving Patent Rights
or Trademarks anywhere in the Territory. It is understood that such
information is highly proprietary and confidential, has great value to Elan
in its business and will be protected as such by Draxis.

16.7     Draxis acknowledges that Elan Pharmaceuticals, Inc. is the owner of
the Trademarks listed in Attachment A hereto (with the exception of Mysoline,
which is owned by Elan Pharma (International) Limited). Draxis agrees that:
(a) the use of the Trademarks by Draxis shall inure to the benefit of and be
on behalf of Elan Pharmaceuticals, Inc.; (b) nothing in this Agreement shall
give Draxis any right, title or interest in the Trademarks other than the
right to use the Trademarks in accordance with this Agreement; (c) Draxis
will not attack the title of Elan

<PAGE>

                                                                        Page 26


Pharmaceuticals, Inc. to the Trademarks or register, or attempt to register,
in its own or its Affiliates' name any of the Trademarks, or any variation
thereof, in any form in conjunction with any Product or other product, in the
Territory, or in any other country, without the prior written consent of Elan
Pharmaceuticals, Inc.; (d) the nature and quality of the Products sold by
Draxis in connection with the Trademarks; and all related advertising,
promotional and other related uses of the Trademarks by Draxis shall conform
to reasonable standards set by Elan Pharmaceuticals, Inc.; and (e) Draxis will
cooperate with Elan Pharmaceuticals, Inc. in facilitating Elan
Pharmaceuticals, Inc.'s control of such nature and quality and will supply
Elan Pharmaceuticals, Inc. with specimens of all uses of the Trademarks upon
request.

16.7     Draxis agrees that it will accept a trademark, tradename and related
trade dress adopted by Elan as a part of an international trademark and
tradename strategy for frovatriptan and ziconotide, provided that no
infringement issues are presented in the Territory for such mark, and Elan
will share with Draxis the results of any search or inquiry in that regard.
In the event Elan's mark presents infringement risks in the Territory, the
parties will cooperate reasonably to choose another acceptable mark for the
affected Product in the Territory.

ARTICLE 17 - QUALITY CONTROL

17.1     Elan shall provide or cause to be provided a Certificate of Analysis
to Draxis concurrently with each invoice for Product. Draxis agrees promptly
to inspect each delivery of Product to determine whether or not it is in
conformity with the warranties set forth in Article 15.1. In the event that
any quantity of Product delivered to Draxis hereunder fails to conform with
the said warranties, Draxis may reject the delivery concerned by giving
written notice of rejection to Elan within twenty-one (21) days of Draxis's
receipt of the Product. Such notice shall specify the manner in which the
Product fails to conform with the warranties. In the absence of such
notification, Draxis shall be deemed to have accepted the Product.

17.2     Promptly after receipt by Elan of a notice of rejection pursuant to
Article 17.1 hereof, the parties will consult with each other in an attempt
to resolve any dispute regarding the rejected delivery. If any such dispute
remains unresolved thirty (30) days after receipt by Elan of the notice of
rejection, Elan will use Commercially Reasonable Efforts to replace the
rejected delivery within thirty (30) days of expiration of such initial
thirty (30) day period, and Draxis will pay for the

<PAGE>

                                                                        Page 27


replacement delivery in accordance with the provisions hereof applicable to
sale of Product.

17.3     If within sixty (60) days after receipt by Elan of the notice of
rejection the parties agree that the Product in question did not comply with
the warranties, Elan will give credit to Draxis for Elan's invoice price of
such rejected shipment. If during such sixty (60) day period the parties
agree that the Product in question did comply with the warranties, Elan shall
be entitled to full payment and shall have no obligation to give such credit
to Draxis. If during such sixty (60) day period the parties fail to reach
agreement regarding the rejection, an expert appointed by Elan and reasonably
acceptable to Draxis shall visit the affected Factory and repeat the analysis
of the samples of the relevant shipment in the presence of the appropriate
Elan and Draxis personnel. Draxis and Elan shall supply the expert with
copies of all tests, data, documentation, standards, etc. as the expert may
reasonably require in connection with such analysis, and the expert's
decision as to whether such lot has met the Specifications for Product shall
be final and binding on the parties hereto. The expert shall execute an
appropriate confidentiality agreement. All expenses and costs of such expert
shall be borne by the party whose contention is finally rejected by the
expert. In the event that either the expert or the parties agree that the
delivery should be rejected, Draxis will return the rejected delivery to Elan.

ARTICLE 18 - RIGHTS OF INSPECTION AND REPORTS

18.1     If reasonably requested by Draxis, Elan will use reasonable efforts
to facilitate the visit by Draxis's and Elan's authorized representatives to
a Factory during normal business hours for the purposes of inspecting plant
premises, the manufacturing process and technical records insofar as they
relate to the manufacture of a Product.

18.2     Elan shall notify Draxis in writing as far in advance as practical if
it becomes aware of any intended changes to the site, location or method of
manufacture of the Product by Elan or any of its suppliers, so that Draxis
shall have as much time as possible to notify regulatory authorities and
obtain approval for such intended changes before Elan or such supplier makes
any such changes.

<PAGE>

                                                                        Page 28


ARTICLE 19 - FORCE MAJEURE

19.1     Neither party shall be liable in damages for, nor shall this
Agreement be terminable or cancellable by reason of, any delay or default in
such party's performance hereunder if such default or delay is caused by
events beyond such party's reasonable control including, but not limited to,
acts of God, regulation or law or other action or failure to act of any
government or agency thereof, war or insurrection, civil disturbance,
destruction of production facilities or materials by earthquake, fire, flood
or storm, labor disturbances, epidemic, or failure of suppliers, contractors,
public utilities or common carriers; provided however, that the party
seeking relief hereunder shall immediately notify the other party of such
cause(s) beyond such party's reasonable control. The party which may invoke
this Section 19.1 shall use all reasonable efforts to reinstate its ongoing
obligations to the other. If the cause(s) shall continue unabated for 30 days
then both parties shall meet to discuss and negotiate in good faith what
modifications to this Agreement should result from this force majeure.

19.2     Each party shall endeavour to resume its performance hereunder as
quickly as possible if such performance is delayed or interrupted by reason
of any cause set forth in 19.1 above.

ARTICLE 20 - TERM AND TERMINATION

20.1     This Agreement shall become effective on the first date written
above and shall terminate on December 31, 2008, unless earlier terminated in
accordance with the provisions of this Agreement. Beginning no later than one
year and ending not later than six (6) months prior to such expiration, the
parties will enter into good faith discussions, without obligation, about
possible renewal of this Agreement and the terms of any such renewal.

20.2     This Agreement may be terminated prior to expiration by Elan, in its
sole discretion, as follows:

         (a) On or prior to December 31, 2001, Elan may elect to terminate
this Agreement by giving Draxis as much written notice as is practical of
Elan's Change of Control. Such notice shall be effective on the date
specified therein (the "Effective Termination Date"). Within five (5)
business days of such Effective Termination

<PAGE>

                                                                        Page 29


Date, Elan shall pay or cause to be paid to Draxis, by wire transfer in
immediately available funds, an amount equal to the greater of the Net
Present Value and the Return on Investment Value; and

         (b) From January 1, 2002 through the term of this Agreement, Elan
may elect to terminate this Agreement by giving six (6) months' prior written
notice to Draxis. Within five (5) business days of the end of such six month
period (the "Effective Termination Date"), Elan shall pay or cause to be paid
to Draxis, by wire transfer in immediately available funds, an amount equal
to the greater of the Net Present Value and the Return on Investment Value;
and

         (c) Throughout the term of this Agreement, Draxis will give Elan as
much written notice as is practical of any Change of Control of Draxis. Upon
any occurrence of such a Change of Control, Elan may elect, within thirty
(30) days of such notice, to terminate this Agreement by giving six (6)
months' prior written notice to Draxis, provided that Elan has determined in
its reasonable judgement based on substantive evidence that following its
Change of Control, Draxis's capability of performing its obligations under
this Agreement will likely be materially impaired or reduced. Within five (5)
business days of the end of such six month period under this subsection (c)
(the "Effective Termination Date"), Elan shall pay or cause to be paid to
Draxis, by wire transfer in immediately available funds, Return on Investment
Value, as shown in Attachment B and Schedule B-2 for a Change of Control of
Draxis.

         The amounts payable under subsections (a), (b) or (c) shall be
referred to as the Termination Fee. In addition to the Termination Fee, Elan
shall reimburse Draxis for any unavoidable additional actual out-of-pocket
costs it may incur in terminating as of the Effective Termination Date any
third party commitments previously approved by the Project Committee. Elan
shall also purchase existing inventory of Products owned by Draxis as
provided in Section 20.6 below.

20.3     Subject to the provisions of Article 19 hereof (Force Majeure), Elan
shall have the right to terminate this Agreement as it pertains to the
relevant Product(s) or, at its option, convert the exclusive licenses and
related rights for such Product(s) to a non-exclusive license upon ninety (90)
days' written notice to Draxis, in the event Draxis shall have failed to
begin marketing (including efforts to obtain appropriate pricing and
reimbursement, as determined by the Project Committee) such Product(s) in the
Territory within six (6) months after the later of the Closing Date or
Regulatory

<PAGE>

                                                                        Page 30


Approval for such Product, in the Territory. For the avoidance of doubt,
Draxis shall be deemed to have commenced marketing when it commences
promoting the Product in accordance with this Agreement, notwithstanding that
certain pricing and formulary reimbursement issues may still be outstanding
with health regulatory authorities or that supply of Product may not yet be
available.

20.4     Either party hereto may, at its option, terminate this Agreement by
giving to the other party prior notice in writing to that effect of not less
than ninety (90) days in the event the other party shall commit a material
breach of this Agreement (thirty (30) days, in the case of any payment
default), and shall fail to cure such breach during the ninety (90) day
period or thirty (30) day period as applicable, following receipt of said
notice from the non-breaching party, or such longer period as may reasonably
be necessary, provided the breaching party continues its diligent efforts to
cure; provided, however, that any such cancellation and termination shall not
release the breaching party from any obligations hereunder incurred prior
thereto. For the avoidance of doubt, Draxis's failure to use Commercially
Reasonable Efforts to obtain Regulatory Approval on Elan's behalf for such
Product in the Territory in accordance with Article 7 shall be deemed to be a
material breach for the purposes of this Article, as to such Product, except
where such failure is due to the decision of the Project Committee not to
undertake costs to generate additional data required to obtain Regulatory
Approval.

20.5     Either party hereto may terminate this Agreement immediately if the
other party becomes insolvent, or voluntary or involuntary proceedings are
instituted against the other party under any federal, state or local
bankruptcy or insolvency laws, or a receiver or trustee of the party's
property shall be appointed or the party makes an assignment for the benefit
of its creditors.

20.6     In the event of expiration of this Agreement, or the termination of
any rights granted hereunder with respect to a given Product prior to the
expiration or termination of this Agreement in its entirety, Draxis shall
have no further rights in the affected Patent Rights, Trademarks or
Product(s), except that inventory of such Product(s) may be sold by Draxis
for up to six (6) months after the date of such termination. In the event of
any such expiration or termination, including without limitation the early
termination provided for above, Elan will purchase from Draxis, at its then
net book value, any such inventory in such usable and salable quantities as
Elan may determine. Any expiration or partial or complete termination of this

<PAGE>

                                                                        Page 31


Agreement shall not affect the right, obligations and remedies of either
party accrued as of such expiration or termination.

ARTICLE 21 - INDEPENDENT CONTRACTOR

21.1     It is understood that both parties hereto are independent
contractors and engage in the operation of their own respective businesses
and neither party hereto is to be considered the agent of the other party for
any purpose whatsoever and neither party has any authority to enter into any
contract or assume any obligation for the other party or to make any warranty
or representation on behalf of the other party. Each party shall be fully
responsible for its own employees and consultants, and the employees of one
party shall not be deemed to be employees of the other party for any purpose
whatsoever.

ARTICLE 22 - ASSIGNMENT

22.1     Upon expiration or early termination of this Agreement, Draxis shall
identify and provide to Elan copies of all agreements entered into between
Draxis and any third party relating to any of the Products and will upon
Elan's request, assign to Elan the benefit and the burden of those contracts,
to the extent selected by Elan in its discretion and as expressly permitted
under such contracts. The parties will work together in advance to
co-ordinate any discussions with such third parties regarding those contracts.

22.2     Neither party may without written approval of the other, such
approval not to be reasonably withheld:
(a)      assign this Agreement or transfer its interest or any part thereof
(including granting any lien, charge or encumbrance thereon) under this
Agreement to any third party which is not an Affiliate; or
(b)      designate or cause any third party not an Affiliate to perform all
or part of its activities hereunder, or to have the benefit of all or part of
its rights hereunder.

23.3     Either party may, upon written notice to the other, assign all or a
part of its rights or obligations hereunder to an Affiliate, provided that
such assignment shall not affect or release the prior or ongoing obligations
of the assignor to the other party to this Agreement.

<PAGE>

                                                                        Page 32


ARTICLE 23 - MISCELLANEOUS

23.1     This Agreement shall be governed by the laws of Delaware, without
regard to its choice of law principles. All disputes arising under the
Agreement shall be referred to senior management of the parties as provided
in Section 7.3 above for good faith discussion and efforts toward amicable
resolution.

23.2     Any and all notices provided for hereunder shall be sent in writing
and to the respective parties at the following addresses by express courier:

           If to Elan:      Elan Pharma (International) Limited
                            WIL House
                            Shannon Business Park
                            Shannon, County Clare
                            Ireland
                            Attention: Chief Executive Officer

                            Elan Pharmaceuticals, Inc.
                            800 Gateway Boulevard
                            South San Francisco, California 94080 USA
                            Attention: Pres. and COO, Elan Pharmaceuticals
                            North America division

           With a copy to:  Elan Pharmaceuticals, Inc.
                            800 Gateway Boulevard
                            South San Francisco, California 94080 USA
                            Attention: VP, Legal Affairs, Elan Pharmaceutical
                            North America division

           If to Draxis:    Draxis Health, Inc.
                            6870 Goreway Drive
                            Mississauga, Ontario, Canada L4V 1P1
                            Attention: President

           With a copy to:  Draxis Health, Inc.
                            6870 Goreway Drive
                            Mississauga, Ontario, Canada L4V 1P1
                            Attention: Secretary

<PAGE>

                                                                        Page 33


or to such other addresses as may be subsequently furnished by one party to
the other in writing. Any such notice shall be deemed effective from the date
of mailing.

23.3     Each party agrees to comply with all applicable laws, rules and
regulations of any government agency or authority in the performance of its
obligations under this Agreement. In the event one or more terms of this
Agreement are found to violate the provisions of any applicable law, rule or
regulation, the parties hereto shall negotiate in good faith to modify this
Agreement, but only to the extent necessary to make the terms of this
Agreement valid and enforceable, having full regard for all applicable laws
and the intent and purposes of the parties entering into this Agreement.

23.4     This Agreement includes the Attachments, whether annexed at the time
of execution of this Agreement or later, as provided herein, constitutes the
entire Agreement between parties hereto relating to the subject matter
hereof, and this Agreement may not be varied except by an instrument in
writing signed by each party hereto by a duly authorized officer.

23.5     Should any part of this Agreement be held unenforceable or in
conflict with the applicable laws or regulations of any jurisdiction, the
invalid or unenforceable part or provision shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such invalid or unenforceable part or provision in a commercially reasonable,
valid and enforceable manner, and the remainder of this Agreement shall
remain binding upon the parties hereto.

23.6     The captions of this Agreement are solely for the convenience of
reference and shall not affect its interpretation. This Agreement may be
executed in one or more counterparts, all of which shall comprise the
original instrument.

23.7     The following Articles and Sections shall survive expiration or
termination of this Agreement for any reason: 6, 13.3, 14, 15, 16, 18 and
23.1. Termination or expiration of this Agreement shall not affect any rights
previously accrued by either party.

23.8     The parties agree to take all further actions prior to and after the
Closing as may be reasonably necessary or appropriate to carry out the intent
of this Agreement, including without limitation the execution and delivery of
documents.

<PAGE>

                                                                        Page 34


23.9     Neither Draxis nor Elan (including their respective Affiliates)
shall use the name of the other party or otherwise disclose the substance or
existence of the transactions contemplated in this Agreement or the Stock
Purchase Agreement in any public statement, prospectus, annual report or
press release or other public communication (collectively "Public
Statements") without the prior written approval of the other party, which may
not be unreasonably withheld or delayed; provided, however, that both parties
shall endeavor in good faith to give the other party a minimum of two (2)
business days to review such Public Statements; provided, further, that, upon
approval of any such Public Statement, both parties may disclose to third
parties the information contained in such Public Statement without the
further approval of the other; and provided, further, that if a party hereto
does not approve such Public Statement, either party may still use the name
of the other party in any Public Statement without the prior written approval
of the other party, if such party is advised by counsel that such disclosure
is required to comply with applicable law.


                [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]





<PAGE>

                                                                       Page 35

IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into
by their duly authorized officers as of the day and year first set forth
above.



DRAXIS HEALTH INC.


By:     /s/ Martin Barkin
        -------------------------------------


Title:  President and Chief Executive Officer
        -------------------------------------


Date:   June 17, 1999
        -------------------------------------



ELAN PHARMA (INTERNATIONAL) LIMITED


By:     /s/ David Hurley
        -------------------------------------


Title:  Director
        -------------------------------------


Date:   14/7/99
        -------------------------------------



ELAN PHARMACEUTICALS, INC.


By:     [ILLEGIBLE]
        -------------------------------------


Title:  President
        -------------------------------------


Date:   7/16/99
        -------------------------------------