<PAGE>

       CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED
       AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT
       HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.

                                                                   EXHIBIT 10.10



                                LICENSE AGREEMENT
                                     BETWEEN
                    PRESIDENT AND FELLOWS OF HARVARD COLLEGE
                                       AND
                             KOSAN BIOSCIENCES, INC.

                         Effective as of December, 1998

                           Re: Harvard Case No 1185-95

In consideration of the mutual promises and covenants set forth below, the
parties hereto agrees as follows:

                                    ARTICLE I

                                   DEFINITIONS

         As used in this Agreement, the following terms shall have the following
meanings:

1.1      AFFILIATE: any company, corporation, or business in which LICENSEE owns
         or controls at least fifty percent (50%) of the voting stock or other
         ownership. Unless otherwise specified, the term LICENSEE includes
         AFFILIATES.

1.2      FIELD: polyketide production, drug discovery and screening of
         polyketides and [**], manufacture of compounds
         developed as a result of such activities, and commercialization of such
         compounds for any and all purposes.

1.3      HARVARD: President and Fellows of Harvard College, a nonprofit
         Massachusetts educational corporation having offices at the Office for
         Technology and Trademark Licensing, 124 Mt. Auburn Street, Suite 410
         South, Cambridge, Massachusetts 02138.

1.4      LICENSED PROCESSES: the processes covered by a VALID CLAIM in the
         country where such process is used, or in the country where the
         resulting product is manufactured or sold.

1.5      LICENSED PRODUCTS: products covered by a VALID CLAIM in the country of
         manufacture, use or sale, or products made or services provided in
         accordance with or by the practice of LICENSED PROCESSES.

1.6      LICENSEE: Kosan Biosciences, Inc. (Kosan) a corporation organized under
         the laws of California having its principal offices at 1450 Rollins
         Road, Burlingame, CA 94010.

1.7      NET SALES: the amount billed, invoiced, or received (whichever occurs
         first) by LICENSEE or its sublicensees, for sales, leases, or other
         transfers of LICENSED PRODUCTS, less:
         (a)      customary trade, quantity or cash discounts and non-affiliated
                  brokers' or agents' commissions actually allowed and taken;

         (b)      amounts repaid or credited by reason of rejection or return;
                  and


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>



         (c)      to the extent separately stated on purchase orders, invoices,
                  or other documents of sale, duties, taxes levied on and/or
                  other governmental charges made as to production, sale,
                  transportation, delivery or use and paid by or on behalf of
                  LICENSEE or sublicensees.

         (d)      reasonable charges for delivery or transportation provided by
                  third parties, if separately stated.

         NET SALES also includes the fair market value of any non-cash
         consideration received by LICENSEE or sublicensees for the sale, lease,
         or transfer of LICENSED PRODUCTS. In the event LICENSEE negotiates in
         good faith a sublicense with a definition of NET SALES which differs
         from the above, and provided the negotiated definition does not cause
         material changes in the royalties due HARVARD, such negotiated
         definition shall control royalties due HARVARD hereunder for such
         sublicense, provided that HARVARD shall have thirty (30) days to review
         and approve the proposed negotiated definition, which approval shall
         not be unreasonably withheld.

1.8      ACADEMIC RESEARCH PURPOSES: use of PATENT RIGHTS for academic research
         or other not-for-profit scholarly purposes which are undertaken at a
         non-profit or governmental institution, that does not use the PATENT
         RIGHTS in the production or manufacture of products for sale or the
         performance of services for a fee, or in the performance of research
         sponsored by another for-profit entity. LICENSEE acknowledges that
         HARVARD is currently receiving research support from a foundation
         entity for cloning the biosynthetic genes for a particular natural
         product and for the expression of genes once cloned to test for
         activity, and such research shall be deemed to be for ACADEMIC RESEARCH
         PURPOSES hereunder, and HARVARD represents that the foundation sponsor
         has no right to manufacture or commercialize products under the PATENT
         RIGHTS.

1.9      NON-ROYALTY SUBLICENSE INCOME: Sublicense issue fees, sublicense
         maintenance fees, sublicense milestone payments, and similar
         non-royalty payments made by sublicensees to LICENSEE on account of
         sublicenses pursuant to this Agreement, including any initial option or
         license fees for any sublicense which includes the PATENT RIGHTS, and
         rights to the LICENSED PROCESSES or LICENSED PRODUCTS. Notwithstanding
         the above, it is understood and agreed that NON-ROYALTY SUBLICENSEE
         INCOME shall not include any amounts received by LICENSEE from
         sublicensees for: the purchase of equity in LICENSEE, debt financing,
         research and development, the license or sublicense of any intellectual
         property other than the PATENT RIGHTS, products other than LICENSED
         PRODUCTS, reimbursement for patent or other expenses, or sublicense
         milestone payments and other payments for milestones achieved or other
         events that did not result from the use of LICENSED PROCESSES or are
         not for LICENSED PRODUCTS.

1.10     PATENT RIGHTS: United States patent application [**], the inventions
         described and claimed therein, and any divisions, substitutions,
         continuations thereof, and continuations-in-part thereof to the extent
         the claims are directed to subject matter specifically described in
         [**], patents issuing on any of the preceding, and reexaminations,
         reissues and extensions thereof, and any and all foreign patent
         applications and patents corresponding thereto, or corresponding to PCT
         patent application No. US96/16202, all to the extent owned or
         controlled by HARVARD.

1.11     TERRITORY: Worldwide.


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>



1.12     VALID CLAIM: means an issued claim of any unexpired patent or a claim
         of any pending patent application within the PATENT RIGHTS which has
         not been held unenforceable, unpatentable or invalid by a decision of a
         court or governmental body of competent jurisdiction, in a ruling that
         is unappealable or unappealed within the time allowed for appeal, which
         has not been rendered unenforceable through disclaimer or otherwise,
         and which has not been lost through an interference proceeding.
         Notwithstanding the foregoing, a claim of a pending patent application
         shall cease to be a VALID CLAIM if no patent has issued on such claim
         on or prior to the seventh anniversary of the date of filing of the
         corresponding parent patent application, provided that such claim shall
         once again become a VALID CLAIM on the issue date of a patent that
         subsequently issues and covers such claim.

1.13     The terms 'Public Law 96-517" and 'Public Law 98-620" include all
         amendments to those statutes.

1.14     The terms 'sold' and 'sell' include, without limitation, leases and
         other transfers and similar transactions.



                                   ARTICLE II

                                REPRESENTATIONS

2.1      HARVARD and the Regents of the University of California ('The Regents')
         are joint owners by assignment from Ralph H. Lambalot, Amy M. Gehring
         and Christopher T. Walsh (to HARVARD) and Ralph Reid (to The Regents)of
         certain rights, title and interest in United States Patent Application
         [**] entitled 'Acyl Carrier Protein Synthases and Uses Thereof'
         (H.U. Case $$1185-95), in the foreign patent applications corresponding
         thereto, and in the inventions described and claimed therein.

         The Regents have authorized HARVARD to act as their sole patent and
         licensing agent for said patent applications under a letter of
         Agreement dated April 10, 1997, a copy of which is included in Appendix
         A.

2.2      HARVARD represents and warrants that: (i) the execution, delivery and
         performance of this Agreement have been duly authorized by all
         necessary institutional action on the part of HARVARD and The Regents;
         (ii)the PATENT RIGHTS are free and clear of any lien, encumbrance,
         security interest or restriction on license, other than those specified
         in Article III of this Agreement; (iii) it has not previously granted,
         and will not grant during the term of this Agreement, any right,
         license or interest in or to the PATENT RIGHTS, or any portion thereof,
         inconsistent with the license granted to LICENSEE herein; and (iv)there
         are no threatened or pending actions, suits, investigations, claims or
         proceedings in any way relating to the PATENT RIGHTS.

2.3      HARVARD has the authority to issue licenses under PATENT RIGHTS with
         respect to the entire interest of The Regents and HARVARD therein.

2.4      HARVARD is committed to the policy that ideas or creative works
         produced at HARVARD should be used for the greatest possible public
         benefit, and believes that every reasonable incentive should be
         provided for the prompt introduction of such ideas into public use, all
         in a manner consistent with the public interest.


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


2.5      LICENSEE intends to diligently develop the invention and to bring
         LICENSED PRODUCTS to market which are subject to this Agreement.

2.6      LICENSEE is desirous of obtaining an exclusive license in the TERRITORY
         in order to practice the above-referenced invention covered by PATENT
         RIGHTS in the United States and in certain foreign countries, and to
         manufacture, use and sell in the commercial market the LICENSED
         PRODUCTS made in accordance therewith, and HARVARD is desirous of
         granting such a license to LICENSEE in accordance with the terms of
         this Agreement.

                                   ARTICLE III

                                 GRANT OF RIGHTS

3.1      HARVARD hereby grants to LICENSEE and LICENSEE accepts, subject to the
         terms and conditions hereof, in the TERRITORY and in the FIELD:

         an exclusive commercial license under PATENT RIGHTS to make and have
         made, to import, have imported, to use and have used, to offer for
         sale, to sell and have sold the LICENSED PRODUCTS, and to practice the
         LICENSED PROCESSES, for the life of the PATENT RIGHTS. Such licenses
         shall include the right to grant sublicenses under the terms outlined
         in this Agreement. In order to provide LICENSEE with commercial
         exclusivity for so long as the license under PATENT RIGHTS remains
         exclusive, HARVARD agrees that it will not grant licenses under PATENT
         RIGHTS to others except as required by HARVARD's obligations in
         paragraph 3.2(a) or as permitted in paragraph 3.2(b).

3.2      The granting and exercise of this license is subject to the
         following conditions:

         (a)      HARVARD's "Statement of Policy in Regard to Inventions,
                  Patents and Copyrights," dated August 10, 1998, Public Law
                  96-517, Public Law 98-620, and HARVARD's obligations under
                  agreements with other non-profit sponsors of research. Any
                  right granted in this Agreement greater than that permitted
                  under Public Law 96-517, or Public Law 98-620, shall be
                  subject to modification as may be required to conform to the
                  provisions of those statutes.

         (b)      HARVARD reserves the right to make and use, and grant to
                  others researchers at non-profit or governmental institutions
                  non-exclusive licenses to make and use for ACADEMIC RESEARCH
                  PURPOSES only the subject matter described and claimed in
                  PATENT RIGHTS.

         (c)      LICENSEE shall use diligent efforts to effect introduction of
                  the LICENSED PRODUCTS into the commercial market as soon as
                  practicable, consistent with sound and reasonable business
                  practice and judgment; thereafter, until the expiration of
                  this Agreement, LICENSEE shall endeavor to keep LICENSED
                  PRODUCTS reasonably available to the public.

         (d)      At any time after three (3) years from the effective date of
                  this Agreement, HARVARD may terminate or render this license
                  non-exclusive if, in HARVARD's reasonable judgment, the
                  Progress Reports furnished by LICENSEE do not demonstrate that
                  LICENSEE:



<PAGE>


                  (i)      has put the PATENT RIGHTS into commercial use in the
                           country or countries hereby licensed, directly or
                           through a sublicense, and is keeping products
                           resulting from the use of the PATENT RIGHTS
                           reasonably available to the public, or

                  (ii)     is engaged in research, development, manufacturing,
                           marketing or sublicensing activity reasonably
                           appropriate to achieving the objectives of 3.2(d)(i).
                           Such activity shall include, but not necessarily be
                           limited to, achievement of the following milestones
                           by LICENSEE:

                           (i) within twelve (12) months from the effective date
                           of this Agreement, initiate or sponsor experiments
                           designed to demonstrate heterologous expression of an
                           [**] polyketide, using a LICENSED PROCESS or
                           LICENSED PRODUCT;

                           (ii) within eighteen (18) months from the effective
                           date of this Agreement, initiate or sponsor
                           experiments designed to demonstrate heterologous
                           expression of a [**] polyketide, using a LICENSED
                           PROCESS or LICENSED PRODUCT;

                           (iii) within eight (8) years from the effective date
                           of this Agreement, file or have a sublicensee file an
                           IND or other regulatory permit for a LICENSED PROCESS
                           or LICENSED PRODUCT;

         (e)      In all sublicenses granted by LICENSEE hereunder, LICENSEE
                  shall include a requirement that the sublicensee use
                  reasonable efforts to bring the subject matter of the
                  sublicense into commercial use in a timely manner. LICENSEE
                  shall further provide in such sublicenses that such
                  sublicenses are subject and subordinate to the terms and
                  conditions of this Agreement, except (i): the sublicensee may
                  not further sublicense, except to its agents, AFFILIATES, and
                  distributors; and (ii) the rate of royalty on NET SALES paid
                  by the sublicensee to the LICENSEE. Copies of all sublicense
                  agreements shall be provided promptly to HARVARD; such copies
                  shall be treated as confidential consistent with the
                  provisions of Article 5.4(d).

         (f)      If LICENSEE is unable or unreasonably unwilling to grant
                  sublicenses, either as suggested by HARVARD or by a potential
                  sublicensee or otherwise, and LICENSEE has not previously
                  granted an exclusive license to a third party, then HARVARD
                  may directly license such potential sublicensee unless, in
                  HARVARD's reasonable judgment, such license would be contrary
                  to sound and reasonable business practice, and the granting of
                  such license would not materially increase the availability to
                  the public of LICENSED PRODUCTS. In making any such
                  determination, HARVARD agrees to take into serious
                  consideration LICENSEE's reasons for being unwilling to grant
                  the sublicense, including LICENSEE's belief that the
                  sublicense would have a material adverse impact on LICENSEE's
                  business. In any such event LICENSEE shall have the right of
                  last refusal, to be exercised within sixty (60) days after
                  notice in writing from Harvard, to sublicense such rights to
                  such sublicensee(s) on terms no less favorable to such
                  sublicensee(s) than those negotiated by Harvard.

         (g)      A license in any other territory or field of use in addition
                  to the TERRITORY and/or FIELD shall be the subject of a
                  separate agreement and shall require LICENSEE's submission of
                  evidence, satisfactory to HARVARD, demonstrating LICENSEE's
                  willingness and ability to develop and commercialize in such
                  other territory and/or field


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>



                  of use the kinds of products or processes likely to be
                  encompassed in such other territory and/or field.

         (h)      During the period of exclusivity of this license in the United
                  States, LICENSEE shall cause any LICENSED PRODUCT produced for
                  sale by LICENSEE in the United States to be manufactured
                  substantially in the United States. In the event that LICENSEE
                  cannot obtain this guarantee from a sublicensee, HARVARD
                  agrees to cooperate with LICENSEE in requesting the
                  appropriate exemption from the United States Government.

3.3      All rights reserved to the United States Government and others under
         Public Law 96-517, and Public Law 98-620, shall remain and shall in no
         way be affected by this Agreement.


                                   ARTICLE IV

                                    ROYALTIES

4.1      LICENSEE shall pay to HARVARD a non-refundable license issue fee of
         [**] dollars ($[**]). [**] of this sum ($[**]) shall be payable upon
         execution of this Agreement and the balance of the sum ($[**])
         on the first anniversary of the date of execution.

4.2      (a)      LICENSEE shall pay to HARVARD during the term of this
                  Agreement with respect to LICENSED PRODUCTS within the scope
                  of an issued VALID CLAIM in the country of manufacture, use or
                  sale, a royalty of [**] percent ([**]%) of NET SALES made
                  by LICENSEE. In the case of sublicenses, LICENSEE shall pay to
                  HARVARD a royalty of [**] percent ([**]%) of NET SALES
                  made by sublicensees with respect to LICENSED PRODUCTS within
                  the scope of an issued VALID CLAIM in the country of
                  manufacture use or sale. In the case of sublicenses, LICENSEE
                  shall also pay to HARVARD a royalty of [**] percent ([**]%)of
                  NON-ROYALTY SUBLICENSE INCOME, provided however, that this sum
                  shall not exceed [**] dollars ($[**]) for any given
                  sublicense.

         (b)      The royalty rates set forth in Paragraph 4.2(a) above shall be
                  reduced by [**] percent ([**]%) if the applicable LICENSED
                  PRODUCTS are not within the scope of an issued VALID CLAIM of
                  a patent within the PATENT RIGHTS in the country such LICENSED
                  PRODUCTS are manufactured, used or sold, but are within the
                  scope of a pending VALID CLAIM of a patent application within
                  the PATENT RIGHTS in the country such LICENSED PRODUCTS are
                  manufactured used or sold. However, this provision shall not
                  apply to NON-ROYALTY SUBLICENSE INCOME payable under Paragraph
                  4.2 (a) above.

         (c)      on sales between LICENSEE and its AFFILIATES or sublicensees
                  for resale, the royalty shall be paid on the NET SALES of the
                  AFFILIATE or sublicensee.

         (d)      In the event that a LICENSED PRODUCT is sold in combination as
                  a single product with another product, active component or
                  service whose sale and use are not covered by a VALID CLAIM of
                  the LICENSED PRODUCT in the country for which the combination
                  product is sold, NET SALES from such sales for purposes of
                  calculating the amounts due under Paragraph 4.2(a) and (b)
                  above shall be calculated by


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


                  multiplying the NET SALES of that combination by the fraction
                  A/(A + B), where A is the gross selling price of the LICENSED
                  PRODUCT sold separately and B is the gross selling price of
                  the other product, active component or service sold
                  separately; provided that pursuant to this adjustment
                  provision the applicable percentage royalty (based on NET
                  SALES or NON-ROYALTY SUBLICENSE INCOME) shall not be reduced
                  to below [**] ([**]%) of the original rate specified.
                  In the event that no such separate sales are made by LICENSEE
                  or its sublicensee, NET SALES for royalty determination shall
                  be as reasonably allocated by agreement of HARVARD and
                  LICENSEE between such LICENSED PRODUCT and such other product,
                  active component or service, based upon their relative
                  importance and proprietary protection.

         (e)      No more than one royalty payment shall be due with respect to
                  a sale of a particular LICENSED PRODUCT. No multiple royalties
                  shall be payable because any LICENSED PRODUCT, or its
                  manufacture, sale or use is covered by more than one VALID
                  CLAIM. No royalty shall be payable under this Paragraph 4.2
                  with respect to LICENSED PRODUCTS distributed for use in
                  research and/or development, or in clinical trials.

         (f)      Royalties due under this Paragraph 4.2 shall be payable on a
                  country-by-country and LICENSED PRODUCT-by-LICENSED PRODUCT
                  basis until the expiration of the last-to-expire issued VALID
                  CLAIM covering such LICENSED PRODUCT in such country.

4.3      No later than January 1 of each calendar year after the first
         commercial sale of a LICENSED PRODUCT, LICENSEE shall pay to HARVARD a
         minimum annual royalty of [**] dollars ($[**]). This minimum royalty
         payment shall be included in the Royalty Reports under Paragraph 5.4
         and credited against earned royalties for that calendar year only.

4.4      No later than January 1 of each calendar year after the effective date
         of this Agreement, and until the first commercial sale of a LICENSED
         PRODUCT, LICENSEE shall pay to HARVARD the following non-refundable
         license maintenance royalty and/or advance on royalties. [**]
         percent ([**]%) Of such payments may be credited against royalties on
         sales due for that calendar year or any subsequent calendar year and
         Royalty Reports shall reflect such a credit. However, such credits
         shall not reduce the amount of minimum royalties, royalties on sales or
         other payments due in any calendar year by more than [**] percent
         ([**]%) in any one year.

<TABLE>
                           <S>                 <C>
                           [**]                [**] dollars ($[**])
                           [**]                [**] dollars ($[**])
                           [**]                [**] dollars ($[**])
                           [**]                [**] dollars ($[**])

</TABLE>

4.5      No later than January 1 of the calendar year following achievement of
         the following milestones LICENSEE shall pay to HARVARD the following
         non-refundable milestone payments:

                           [**]                 $[**]


         No second milestone payment for an IND filing shall be made if the
         LICENSED PRODUCT for which the second IND filing is made contains an
         active ingredient that was a component of


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>


         another LICENSED PRODUCT for which a previous IND filing was made and
         the milestone payment therefor paid.

                           [**]                            $[**]

         Such payments shall be fully credited against royalties on sales due
         for any subsequent calendar year or running royalties due for that
         calendar year and Royalty Reports shall reflect such a credit. However,
         such credits shall not reduce the amount of minimum royalties,
         royalties on sales or other payments due in any calendar year by more
         than [**] percent ([**]%) in any one year.

4.6      LICENSEE shall be responsible for the payment of any amounts due to
         third parties to obtain and practice any rights necessary to exploit
         the PATENT RIGHTS. Up to [**] percent ([**]%) of any such payments by
         LICENSEE may be credited against any amounts due to HARVARD, except
         that such credits shall not reduce the amount of minimum royalties,
         royalties on sales or other payments due in any calendar year by more
         than [**] percent ([**]%) in any one year.

4.7      The total of all credits against minimum royalties, royalties on sales
         or other payments under Article IV shall not reduce the total amount of
         minimum royalties, royalties on sales or other payments due to HARVARD
         in any calendar year by more than [**] percent ([**]%) in any one year.
         Any credit which is unexpended may be carried forward until applied.

                                    ARTICLE V

                                    REPORTING

5.1      Prior to signing this Agreement, LICENSEE has provided to HARVARD a
         written research and development plan under which LICENSEE intends to
         bring the subject matter of the licenses granted hereunder into
         commercial use upon execution of this Agreement. Such plan includes
         projections of sales and proposed marketing efforts.

5.2      No later than [**] after June 30 of each calendar year, LICENSEE shall
         provide to HARVARD a written annual Progress Report describing progress
         on research and development, regulatory approvals, manufacturing,
         sublicensing, marketing and sales during the most recent twelve (12)
         month period ending June 30 and plans for the forthcoming year. This
         Progress Report may be combined with the Royalty Report due under
         Paragraph 5.4 (a). If progress differs from that anticipated in the
         plan required under Paragraph 5.1, LICENSEE shall explain the reasons
         for the difference and propose a modified research and development plan
         for HARVARD's review. LICENSEE shall also provide any reasonable
         additional data HARVARD requires to evaluate LICENSEE's performance.

5.3      LICENSEE shall report to HARVARD the date of first sale of LICENSED
         PRODUCTS (or results of LICENSED PROCESSES) in each country within [**]
         of occurrence.

5.4      (a)    LICENSEE shall submit to HARVARD within [**] after each [**], a
                Royalty Report setting forth for such [**] at least the
                following information:


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>


                  (i)      the number of LICENSED PRODUCTS sold by LICENSEE, its
                           AFFILIATES and sublicensees in each country, as
                           reported to LICENSEE, and any subsequent corrections
                           to the initial report to LICENSEE;

                  (ii)     total billings for such LICENSED PRODUCTS;

                  (iii)    an accounting for all LICENSED PROCESSES used or
                           sold;

                  (iv)     deductions applicable to determine the NET SALES
                           thereof;

                  (v)      the amount of NON-ROYALTY SUBLICENSE INCOME received
                           by LICENSEE, until the amount due under Paragraph 4.2
                           (a) has been paid; and

                  (vi)     the amount of royalty due thereon, or the amount of
                           license maintenance or milestone payments due. If no
                           royalties or other payments are due to HARVARD for
                           any reporting period, the Royalty Report shall
                           include the statement that no royalties are due.

                  Such report shall be certified as correct by an officer of
                  LICENSEE and shall include a detailed listing of all
                  deductions from royalties.

         (b)      LICENSEE shall pay to HARVARD with each such Royalty Report
                  the amount of royalty due with respect to such half year. If
                  multiple technologies are covered by the license granted
                  hereunder, LICENSEE shall specify which PATENT RIGHTS are
                  utilized for each LICENSED PRODUCT and LICENSED PROCESS
                  included in the Royalty Report.

         (c)      All payments due hereunder shall be deemed received when funds
                  are credited to HARVARD's bank account and shall be payable by
                  check or wire transfer in United States dollars. Conversion of
                  foreign currency to U.S. dollars shall be made at the
                  conversion rate existing in the United States (as reported in
                  the New York Times or the Wall Street Journal) on the last
                  working day of each royalty period. No transfer, exchange,
                  collection or other charges shall be deducted from such
                  payments.

         (d)      All such royalty reports and other reports containing
                  LICENSEE'S business terms and information shall be maintained
                  in confidence by HARVARD except as required by law, or by
                  specific reporting requirements to the Federal Government;
                  however, HARVARD may include in its usual reports annual
                  amounts of royalties paid.

         (e)      Late payments shall be subject to a charge of [**] percent
                  ([**]) per month, or [**] dollars ($[**]), whichever is
                  greater.

                                   ARTICLE VI

                                 RECORD KEEPING

6.1      LICENSEE shall keep, and shall require its AFFILIATES and sublicensees
         to keep, accurate records (together with supporting documentation) of
         LICENSED PRODUCTS made, used or sold under this Agreement, appropriate
         to determine the amount of royalties due to HARVARD


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>


         hereunder. Such records shall be retained for at least [**]
         following the end of the reporting period to which they relate. They
         shall be available during normal business hours for examination by an
         accountant selected by HARVARD, reasonably acceptable to LICENSEE for
         the sole purpose of verifying reports and payments hereunder. In
         conducting examinations pursuant to this paragraph, HARVARD's
         accountant shall have access to all records which HARVARD reasonably
         believes to be relevant to the calculation of royalties under Article
         IV.

6.2      HARVARD's accountant shall not disclose to HARVARD any information
         other than information relating to the accuracy of reports and payments
         made hereunder.

6.3      Such examination by HARVARD's accountant shall be at HARVARD's expense,
         except that if such examination shows an underreporting or underpayment
         in excess of [**] percent ([**]%) for any [**] period, then
         LICENSEE shall pay the cost of such examination as well as any
         additional sum that would have been payable to HARVARD had the LICENSEE
         reported correctly, plus interest on said sum at the rate of
         [**] percent ([**] %) per month.


                                   ARTICLE VII

               DOMESTIC AND FOREIGN PATENT FILING AND MAINTENANCE

7.1      Upon execution of this Agreement, LICENSEE shall reimburse HARVARD for
         all reasonable expenses HARVARD has incurred for the preparation,
         filing, prosecution and maintenance of PATENT RIGHTS. Thereafter,
         subject to Paragraph 7.4, LICENSEE shall reimburse HARVARD, within
         forty five (45) days from receipt of an invoice, for all reasonable
         amounts for such future expenses agreed upon by the parties under this
         Article VII, which invoice shall not precede the accrual of such future
         expenses by more than sixty (60) days. Late payment of these invoices
         shall be subject to interest charges of [**] percent ([**]%) per
         month. HARVARD shall, in its sole discretion, using patent counsel
         reasonably acceptable to LICENSEE, be responsible for the preparation,
         filing, prosecution and maintenance of any and all patent applications
         and patents included in PATENT RIGHTS. HARVARD shall consult with
         LICENSEE as to the preparation, filing, prosecution and maintenance
         of such patent applications and patents and any interference or
         opposition relating thereto and shall furnish to LICENSEE copies of
         documents relevant to any such preparation, filing, prosecution or
         maintenance.

7.2      HARVARD shall promptly provide to LICENSEE copies of any and all patent
         applications within the PATENT RIGHTS filed by HARVARD during the term
         of this Agreement and all material documents received from or sent to
         any patent office relating thereto which relate to the scope, term,
         maintenance, validity, or enforceability of any of the PATENT RIGHTS,
         or any challenge to or change to any of the preceding.

7.3      HARVARD and LICENSEE shall cooperate fully in the preparation, filing,
         prosecution and maintenance of PATENT RIGHTS and of all patents and
         patent applications licensed to LICENSEE hereunder, executing all
         papers and instruments or requiring members of HARVARD to execute such
         papers and instruments so as to enable HARVARD to apply for, to
         prosecute and to maintain patent applications and patents in HARVARD's
         name in any country. Each party shall provide to the other prompt
         notice as to all matters which come to its attention and which may
         affect the preparation, filing, prosecution or maintenance of any such
         patent applications or patents.


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


7.4      LICENSEE may elect to surrender its PATENT RIGHTS in any country
         upon sixty (60) days' written notice to HARVARD. Such notice shall
         not relieve LICENSEE from responsibility to reimburse HARVARD for
         patent-related expenses incurred prior to the expiration of the
         sixty (60)-day notice. However, LICENSEE shall not have
         responsibility to reimburse HARVARD for patent-related expenses
         incurred subsequent to expiration of the notice, and HARVARD shall
         make an effort to minimize patent-related expenses during the sixty
         (60)-day notice period.

                                  ARTICLE VIII

                                  INFRINGEMENT

8.1      With respect to any PATENT RIGHTS that are exclusively licensed to
         LICENSEE pursuant to this Agreement, LICENSEE shall have the right but
         not the obligation to prosecute in its own name and at its own expense
         any suit relating to the infringement of such patent, so long as such
         license is exclusive at the time of the commencement of such action.
         LICENSEE shall have the right to authorize sublicensees to conduct such
         actions. HARVARD agrees to notify LICENSEE promptly of each
         infringement of such patents of which HARVARD is or becomes aware,
         providing all available details relating thereto. Before LICENSEE
         commences an action with respect to any infringement of such patents,
         LICENSEE shall give careful consideration to the views of HARVARD and
         to potential effects on the public interest in making its decision
         whether or not to sue.

8.2      (a)      If LICENSEE elects to commence an action as described
                  above, HARVARD may, to the extent permitted by law, elect to
                  join as a party in that action. Regardless of whether HARVARD
                  elects to join as a party, HARVARD shall cooperate fully with
                  LICENSEE in connection with any such action.

         (b)      If HARVARD elects to join as a party pursuant to subparagraph
                  (a), HARVARD shall jointly control the action with LICENSEE.

         (c)      If HARVARD is required to join LICENSEE as a party pursuant to
                  subparagraph (a) for LICENSEE to maintain such activity,
                  HARVARD shall join and LICENSEE shall reimburse HARVARD for
                  any costs HARVARD incurs, including reasonable attorneys'
                  fees, as part of an action brought by LICENSEE, irrespective
                  of whether HARVARD becomes a co-plaintiff.

8.3      No settlement, consent judgment or other voluntary final disposition of
         the suit which imposes any obligations or costs on HARVARD may be
         entered into without the prior written consent of HARVARD, which
         consent shall not be unreasonably withheld.

8.4      Recoveries or reimbursements from actions commenced pursuant to this
         Article shall first be applied to reimburse LICENSEE and HARVARD for
         any costs of the action not previously reimbursed under Paragraph
         8.2(c) above. Any remaining recoveries or reimbursements which are paid
         in replacement of lost or forfeited sales by LICENSEE or a sublicensee
         shall be retained by LICENSEE and treated as NET SALES of LICENSED
         PRODUCTS, subject to the royalty obligations to HARVARD outlined in
         Paragraph 4.2 above. Any additional recoveries or reimbursements which
         are payments for wilful infringement or punitive damages shall be



<PAGE>


         shared by LICENSEE and HARVARD in proportion to the expenses each,
         without reimbursement from the other, incurred in conducting the suit.

8.5      If LICENSEE elects not to exercise its right to prosecute an
         infringement of the PATENT RIGHTS pursuant to this Article, HARVARD
         may do so at its own expense, controlling such action and retaining all
         recoveries therefrom. LICENSEE shall cooperate fully with HARVARD in
         connection with any such action, and subsequent to determination of
         recoveries or reimbursements, costs incurred by LICENSEE shall be
         reimbursed by HARVARD.

8.6      In the event the recoveries or reimbursements are not sufficient to
         cover the parties' costs, reimbursements shall be allocated in
         proportion to the expenses LICENSEE and HARVARD incurred in conducting
         the suit.

8.7      Without limiting the generality of Paragraph 8.5, HARVARD may, at its
         election and by notice to LICENSEE, establish a time limit of one
         hundred and twenty (120) days for LICENSEE to decide whether to
         prosecute any infringement of which HARVARD is or becomes aware. If, by
         the end of such period, LICENSEE has not commenced such an action,
         HARVARD may prosecute such an infringement at its own expense,
         controlling such action and retaining all recoveries therefrom. With
         respect to any such infringement action prosecuted by HARVARD in good
         faith, LICENSEE shall pay over to HARVARD any payments (whether or not
         designated as 'royalties') made by the alleged infringer to LICENSEE
         under any existing sublicense, where sublicensee has been notified that
         they are in default under the terms of the sublicense, or future
         sublicense entered into as a result of such infringement action
         authorizing LICENSED PRODUCTS, up to the amount of HARVARD's
         unreimbursed litigation expenses (including, but not limited to,
         reasonable attorneys' fees).

8.8      If a declaratory judgment action is brought naming LICENSEE as a
         defendant and alleging invalidity of any of the PATENT RIGHTS, and
         requiring LICENSEE to respond within twenty (20) days, HARVARD may,
         with notice to LICENSEE within ten (10) days of the commencement
         of such an action, elect to take over the sole defense of the action
         at its own expense. LICENSEE shall cooperate fully with HARVARD in
         connection with any such action. Otherwise, LICENSEE shall have the
         right to conduct such action, subject to Paragraph 8.1 above.

                                   ARTICLE IX

                            TERMINATION OF AGREEMENT

9.1      This Agreement, unless terminated as provided herein, shall remain in
         effect until the last patent or patent application in PATENT RIGHTS has
         expired or been abandoned.

9.2      HARVARD may terminate this Agreement with thirty (30) days notice
         and without cure by LICENSEE or within such other period expressly
         provided in this Paragraph 9.2, as follows:

         (a)      If LICENSEE does not make a payment due hereunder and fails to
                  cure such non-payment (including the payment of interest in
                  accordance with Paragraph 5.4(e)) within forty-five (45) days
                  after the date of notice in writing of such non-payment by
                  HARVARD.



<PAGE>


         (b)      If LICENSEE defaults in its obligations under Paragraph
                  10.4(c) and (d) to procure and maintain insurance.

         (c)      If, at any time after three (3) years from the date of this
                  Agreement, HARVARD determines that the Agreement should be
                  terminated pursuant to Paragraph 3.2(d).

         (d)      If LICENSEE shall become insolvent, shall make an assignment
                  for the benefit of creditors, or shall have a petition in
                  bankruptcy filed for or against it. Such termination shall be
                  effective immediately upon HARVARD giving written notice to
                  LICENSEE.

         (e)      If an examination by HARVARD's accountant pursuant to
                  Article VI shows an underreporting or underpayment by
                  LICENSEE in excess of twenty percent (20%) for any twelve
                  (12) month period, and LICENSEE fails to cure such
                  non-payment within forty-five (45) days after the date of
                  notice in writing of such non-payment by HARVARD.

         (f)      If LICENSEE is convicted of a felony relating to the
                  manufacture, use, or sale of LICENSED PRODUCTS.

         (g)      Except as provided in subparagraphs (a), (b), (c), (d), (e)
                  and (f) above, if LICENSEE defaults in the performance of any
                  obligations under this Agreement and the default has not been
                  remedied within ninety (90) days after the date of notice
                  in writing of such default by HARVARD.

9.3      Notwithstanding Paragraph 9.2 above, if either party materially
         breaches this Agreement, the other party may elect to give the
         breaching party written notice describing the alleged breach. If the
         breaching party has not cured such breach after receipt of such
         notice within the applicable period specific above, the notifying
         party will be entitled, in addition to any other rights it may have
         under this Agreement, to terminate this Agreement effective
         immediately; provided, however, if either party receives
         notification from the other of a material breach and if the party
         alleged to be in default notifies the other party in writing within
         thirty (30) days of receipt of such default notice that it disputes
         the asserted default, the matter will be submitted to binding
         arbitration as provided in Paragraph 11.15 of this Agreement. In
         such event, the nonbreaching party shall not have the right to
         terminate this Agreement until it has been determined in such
         arbitration proceeding that the other party materially breached this
         Agreement, and the breaching party fails to cure such breach within
         ninety (90) days after the conclusion of such arbitration proceeding.

9.4      (a)      Termination of this Agreement for any reason shall not release
                  any party hereto from any liability which, at the time of such
                  termination, has already accrued to the other party or which
                  is attributable to a period prior to such termination, nor
                  preclude either party from pursuing any rights and remedies it
                  may have hereunder or at law or in equity which accrued or are
                  based upon any event occurring prior to such termination.

         (b)      In the event this Agreement is terminated for any reason,
                  LICENSEE and sublicensees, shall for a period not to exceed
                  six (6) months or one hundred and eighty (180), have the
                  right to sell or otherwise dispose of the stock of any
                  LICENSED PRODUCTS then on hand, subject to Article III.

         (c)      LICENSEE may terminate this Agreement by giving ninety (90)
                  days' advance written notice of termination to HARVARD, and
                  paying a termination fee of five thousand dollars ($5,000).
                  Upon termination, LICENSEE shall submit a final Royalty
                  Report to

<PAGE>


                  HARVARD and any royalty payments and unreimbursed patent
                  expenses invoiced by HARVARD shall become immediately payable.

         (d)      In the event of any termination of this Agreement any
                  sublicenses granted by LICENSEE shall remain in force and
                  effect and shall be assigned by LICENSEE to HARVARD, provided,
                  that such sublicensee is currently in good standing with
                  regard to its obligations under the sublicense or has cured
                  any default or breach within the period provided in such
                  sublicense, and further provided, that the financial
                  obligations of each such sublicensee shall be limited to those
                  due HARVARD hereunder for the practice of such a sublicense,
                  and further provided that no added obligations are imposed on
                  HARVARD as a result of this assignment.

9.5      Article  X and  Paragraphs  6.1,  6.2,  6.3,  8.4,  8.5,  9.4  and  9.5
         of this  Agreement  shall  survive termination.

                                    ARTICLE X

                                     GENERAL

10.1     HARVARD does not warrant the validity of the PATENT RIGHTS licensed
         hereunder and makes no representations whatsoever with regard to the
         scope of the licensed PATENT RIGHTS or that such PATENT RIGHTS may be
         exploited by LICENSEE, an AFFILIATE, or sublicensee without infringing
         other patents.

10.2     HARVARD EXPRESSLY DISCLAIMS ANY AND ALL IMPLIED OR EXPRESS WARRANTIES
         AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
         FITNESS FOR ANY PARTICULAR PURPOSE OF THE PATENT RIGHTS OR INFORMATION
         SUPPLIED BY HARVARD, LICENSED PROCESSES OR LICENSED PRODUCTS
         CONTEMPLATED BY THIS AGREEMENT.

10.3     (a)      LICENSEE shall indemnify, defend and hold harmless HARVARD and
                  The Regents and their current or former directors, governing
                  board members, trustees, officers, faculty, medical and
                  professional staff, employees, students, and agents and their
                  respective successors, heirs and assigns (collectively, the
                  'Indemnitees'), against any liability, damage, loss or
                  expenses (including reasonable attorneys' fees and expenses of
                  litigation) incurred by or imposed upon the Indemnitees or any
                  of them in connection with any claims, suits, actions, demands
                  or judgments arising out of any theory of product liability
                  (including, but not limited to, actions in the form of tort,
                  warranty, or strict liability) concerning any product, process
                  or service made, used or sold pursuant to any right or license
                  granted under this Agreement.

         (b)      LICENSEE shall, at its own expense, provide attorneys
                  reasonably acceptable to HARVARD to defend against any actions
                  brought or filed against any Indemnitee hereunder with respect
                  to the subject of indemnity contained herein, whether or not
                  such actions are rightfully brought.

         (c)      Beginning at the time any such product, process or service is
                  being commercially distributed or sold (other than for the
                  purpose of obtaining regulatory approvals) by LICENSEE or by a
                  sublicensee, AFFILIATE or agent of LICENSEE, LICENSEE shall,
                  at its sole cost and expense, procure and maintain commercial
                  general liability

<PAGE>



                  insurance in amounts not less than two million dollars
                  ($2,000,000) per incident and two million dollars
                  ($2,000,000) annual aggregate and naming the Indemnitees as
                  additional insureds. During clinical trials of any such
                  product, process or service, LICENSEE shall, at its sole
                  cost and expense, procure and maintain commercial general
                  liability insurance in such equal or lesser amount as
                  HARVARD shall reasonably require, naming the Indemnitees as
                  additional insureds. Such commercial general liability
                  insurance shall provide (i) product liability coverage and
                  (ii) broad form contractual liability coverage for
                  LICENSEE's indemnification under this Agreement. If
                  LICENSEE elects to self-insure all or part of the limits
                  described above (including deductibles or retentions which
                  are in excess of two hundred and fifty thousand dollars
                  ($250,000) annual aggregate) such self-insurance program
                  must be acceptable to HARVARD and the Risk Management
                  Foundation of the Harvard Medical Institutions, Inc. in
                  their sole discretion. The minimum amounts of insurance
                  coverage required shall not be construed to create a limit
                  of LICENSEE's liability with respect to its indemnification
                  under this Agreement.

         (d)      LICENSEE shall provide HARVARD with written evidence of such
                  insurance upon request of HARVARD. LICENSEE shall provide
                  HARVARD with written notice at least [**] prior to the
                  cancellation, non-renewal or material change in such
                  insurance; if LICENSEE does not obtain replacement insurance
                  providing comparable coverage within such [**] period,
                  HARVARD shall have the right to terminate this Agreement
                  effective at the end of [**] period without notice or any
                  additional waiting periods.

         (e)      LICENSEE shall maintain such commercial general liability
                  insurance beyond the expiration or termination of this
                  Agreement during (i) the period that any product, process, or
                  service, relating to, or developed pursuant to, this Agreement
                  is being commercially distributed or sold by LICENSEE or by a
                  sublicensee, AFFILIATE or agent of LICENSEE and (ii) a
                  reasonable period after the period referred to in (e)(i) above
                  which in no event shall be less than fifteen (15) years.

10.4     LICENSEE shall not use HARVARD's or The Regents' name or insignia, or
         any adaptation of them, or the name of any of HARVARD's or The Regents'
         inventors in any advertising, promotional or sales literature without
         the prior written approval of HARVARD.

10.5     Without the prior written approval of HARVARD in each instance, which
         approval shall not be unreasonably withheld, neither this Agreement nor
         the rights granted hereunder shall be assigned in whole or in part by
         LICENSEE to any person whether voluntarily or involuntarily, by
         operation of law or otherwise, except that LICENSEE may assign this
         Agreement and the rights granted hereunder, in whole or in part,
         without such consent, to a successor to substantially all of the
         business or assets relating to the LICENSED PRODUCTS, and such
         succession may include but not be limited to one by acquisition,
         merger, change of corporate name or change in make-up, organization,
         state of incorporation, or identity. Any such assignment shall occur
         without any further consideration to HARVARD. This Agreement shall be
         binding upon the respective successors, legal representatives and
         assignees of HARVARD and LICENSEE.

10.6     The interpretation and application of the provisions of this Agreement
         shall be governed by the laws of the Commonwealth of Massachusetts.

10.7     LICENSEE shall comply with all applicable laws and regulations. In
         particular, it is understood and acknowledged that the transfer of
         certain commodities and technical data is


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.

<PAGE>



         subject to United States laws and regulations controlling the export of
         such commodities and technical data, including all Export
         Administration Regulations of the United States Department of Commerce.
         These laws and regulations among other things, prohibit or require a
         license for the export of certain types of technical data to certain
         specified countries. LICENSEE hereby agrees and gives written assurance
         that it will comply with all United States laws and regulations
         controlling the export of commodities and technical data, that it will
         be solely responsible for any violation of such by LICENSEE or its
         AFFILIATES or sublicensees, and that it will defend and hold HARVARD
         and The Regents harmless in the event of any legal action of any nature
         occasioned by such violation.

10.8     LICENSEE agrees (i) to use reasonable efforts to obtain all regulatory
         approvals required for the manufacture and sale of LICENSED PRODUCTS
         and LICENSED PROCESSES and (ii) to utilize appropriate patent marking
         on such LICENSED PRODUCTS, as required by applicable law. LICENSEE also
         agrees to register or record this Agreement as is required by law or
         regulation in any country where the license is in effect.

10.9     Any notices to be given hereunder shall be sufficient if signed by the
         party (or party's attorney) giving same and either (a) delivered in
         person, or (b) mailed certified mail return receipt requested, or (c)
         faxed to the other party if the sender has evidence of successful
         transmission and if the sender promptly sends the original by ordinary
         mail, in any event to the following addresses:

                  If to LICENSEE:

                  KOSAN Biosciences, Inc.
                  1450 Rollins Road
                  Burlingame, CA 94010

                  Attention: Chief Executive Officer

                  Fax No.: 650-343-2931

                  If to Harvard to:

                           Office for Technology and
                              Trademark Licensing
                           Harvard University
                           124 Mt. Auburn Street, Suite 410 South
                           Cambridge, MA 02138

                           Fax No.: 617-495-9568

                  and to:

                           Harvard Medical School
                           Office of Technology Licensing and
                              Industry-Sponsored Research
                           220 Longwood Avenue
                           Room 159
                           Boston, MA 02115

                           Fax No.: 617-432-2788


<PAGE>



         By such notice either party may change their address for future
         notices.

         Notices delivered in person shall be deemed given on the date
         delivered. Notices sent by fax shall be deemed given on the date faxed.
         Notices mailed shall be deemed given on the date postmarked on the
         envelope.

10.10    Should a court of competent jurisdiction later hold any provision of
         this Agreement to be invalid, illegal, or unenforceable, and such
         holding is not reversed on appeal, it shall be considered severed from
         this Agreement. All other provisions, rights and obligations shall
         continue without regard to the severed provision, provided that the
         remaining provisions of this Agreement are in accordance with the
         intention of the parties.

10.11    Neither party shall lose any rights hereunder or be liable to the other
         party for damages or losses (except for payment obligations) on account
         of failure of performance by the defaulting party if the failure is
         occasioned by war, strike, fire, Act of God, earthquake, flood,
         lockout, embargo, governmental acts or orders or restrictions, failure
         of suppliers, or any other reason where failure to perform is beyond
         the reasonable control and not caused by the negligence, intentional
         conduct or misconduct of the nonperforming party and the nonperforming
         party has exerted all reasonable efforts to avoid or remedy such force
         majeure; provided, however, that in no event shall a party be required
         to settle any labor dispute or disturbance.

10.12    Each party shall furnish to the other party any information related to
         the subject matter of this Agreement requested or required by that
         party during the term of this Agreement or any extensions hereof to
         enable that party to comply with the requirements of any U.S. or
         foreign federal, state and/or government agency.

10.13    NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
         CONSEQUENTIAL, INCIDENTAL OR INDIRECT DAMAGES ARISING OUT OF THE
         PERFORMANCE OF THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF
         LIABILITY.

10.14    In the event of any controversy or claim arising out of or relating to
         any provision of this Agreement or the breach thereof, the parties
         shall try to settle such conflict amicably between themselves. Subject
         to the limitation stated in the final sentence of this section, any
         such conflict which the parties are unable to resolve promptly shall be
         settled through arbitration conducted in accordance with the rules of
         the American Arbitration Association. The demand for arbitration shall
         be filed within a reasonable time after the controversy or claim has
         arisen, and in no event after the date upon which institution of legal
         proceedings based on such controversy or claim would be barred by the
         applicable statute of limitation. Such arbitration shall be held in
         Boston, Massachusetts. The award through arbitration shall be final and
         binding. Either party may enter any such award in a court having
         jurisdiction or may make application to such court for judicial
         acceptance of the award and an order of enforcement, as the case may
         be. Notwithstanding the foregoing, either party may, without recourse
         to arbitration, assert against the other party a third-party claim or
         cross-claim in any action brought by a third party, to which the
         subject matter of this Agreement may be relevant.

10.15    This Agreement constitutes the entire understanding between the parties
         and neither party shall be obligated by any condition or representation
         other than those expressly stated herein or as may be subsequently
         agreed to by the parties hereto in writing.


<PAGE>




10.16    At any time or from time to time on and after the date of this
         Agreement, HARVARD shall at the written request of LICENSEE (i) deliver
         to LICENSEE such records, data or other documents consistent with the
         provisions of this Agreement, (ii) execute, and deliver or cause to be
         delivered, all such consents, documents or further instruments of
         transfer or license, and (iii) take or cause to be taken all such
         actions, as LICENSEE may reasonably deem necessary or desirable in
         order for LICENSEE to obtain the full benefits of this Agreement and
         the transactions contemplated hereby.

10.17    This Agreement may be executed in two (2) counterparts, each of which
         shall be deemed an original and which together shall constitute one
         instrument.



<PAGE>



IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.



PRESIDENT AND FELLOWS OF
HARVARD COLLEGE


Signature:        /s/ Joyce Brinton                  11/20/98
          ---------------------------------------------------

Name:             Joyce Brinton

Title:            Director
                  Office for Technology and
                  Trademark Licensing

Date:             11/20/98
     --------------------------------------------------------


LICENSEE


Signature:        /s/ Michael Ostrach
          ---------------------------------------------------

Name:             Michael Ostrach

Title:            Chief Operating Officer
                  KOSAN Biosciences Inc

Date:             12/2/98
     --------------------------------------------------------

<PAGE>

                                                                      APPENDIX A

                   INTERINSTITUTIONAL ADMINISTRATION AGREEMENT
                               HARVARD CASE # 1185
                              U.C. CASE # SF-97-133
                                  N.D. 4/18/97


Effective this 10TH day of APRIL 1997, (the "Effective Date") the President and
Fellows of Harvard College, a charitable corporation of the Commonwealth of
Massachusetts, having an address at University Place, Fourth Floor South, 124
Mt. Auburn Street, Cambridge, MA 02138, hereinafter referred to as "Harvard,"
and The Regents of the University of California, a California corporation having
its corporate offices located at 300 Lakeside Drive, 22nd floor, Oakland, CA
94612 acting through its offices located at Office of Technology Management,
University of California San Francisco, 745 Parnassus Ave. Box 1209, San
Francisco, CA 94143-1209, hereinafter referred to as "The Regents" agree as
follows:

                                  1. BACKGROUND

1.1      Harvard and The Regents, with support from the National Institutes of
         Health, have conducted certain research in the field of isolated and
         purified natural and recombinant phosphopantethenyl transferases. Such
         research resulted in an invention, generally characterized as
         "Phosphopantethenyl Transferases and Uses Thereof", (hereinafter the
         "Invention"), and is covered by Patent Rights, as defined below.

1.2      The Invention was invented jointly by Ralph H. Lambalot, Amy M. Gehring
         and Christopher T. Walsh of Harvard and Ralph Reid of The Regents,
         hereinafter referred to as the "Inventors." Lambalot, Gehring and Walsh
         have assigned or will assign their undivided Patent Rights and interest
         in the Invention to Harvard, and Reid has assigned or will assign his
         undivided Patent Rights and interest in the Invention to The Regents.

1.3      It is the mutual desire of the parties to this Agreement that the
         Patent Rights be administered by Harvard, subject to any overriding
         obligations to the aforesaid sponsors of the research, and that Harvard
         manage the marketing and licensing efforts of said Patent Rights.

                                 2. DEFINITIONS

2.1      "Patent Rights" means the subject matter of a United States patent
         application filed October 11, 1996 entitled "Phosphopantethenyl
         Transferases and Uses Thereof" (Serial No. to be determined), assigned
         to The Regents (Case No. SF 97-133) and to Harvard (Harvard Case No.
         1185); any continuations, divisions or extensions; any patents issuing
         on said applications including reissues and reexaminations; any
         continuations-in-part for which Inventors are legally listed among the
         legal inventors on the U.S. patent application and any foreign


<PAGE>



         (non-U.S.) counterparts including continuations, divisions or
         extensions and all patents which issue therefrom in any country; all of
         which will be automatically incorporated in and added to this Agreement
         from time to time, and to the extent now existing are identified in
         Appendix A attached to the Agreement and made a part thereof.

2.2      "Sponsor" means NIH under Grant Nos. HL-43821 awarded to The Regents
         and the National Institutes of Health under Grant Nos. GM 20011 and GM
         16583 awarded to Harvard.

2.3      "Revenues" mean every receipt, royalty, commission, fee or
         reimbursement of patent prosecution costs (previously split with The
         Regents) by licensees arising from the ownership or licensing of Patent
         Rights, but excludes recoveries resulting from infringement litigation,
         less any direct expenses incurred by Harvard or The Regents in the
         licensing or marketing of Patent Rights.

2.4      "Patent Costs" mean all reasonable and actual out-of-pocket past,
         present and future costs incurred for the preparation, filing,
         prosecution, maintenance and litigation (other than infringement
         litigation) of Patent Rights, exclusive of any salaries, administrative
         or other indirect costs.

                      3. PATENT PROSECUTION AND PROTECTION

3.1      Upon execution of this Agreement, Harvard shall assume responsibility
         for the prosecution and maintenance of the Patent Rights. Such Patent
         Rights shall be held in the names of Harvard and The Regents and shall
         be obtained with counsel of Harvard's choice. Harvard shall promptly
         provide to The Regents all serial numbers and filing dates, together
         with copies of all such applications or patents, including copies of
         all Office Actions, Responses and all other Patent Office
         communications to allow The Regents to comment on such prior to filing.
         Any comments or suggestions by The Regents shall be given due
         consideration by Harvard.

3.2      Notwithstanding any other provision of this Agreement, Harvard shall
         not abandon the prosecution of any patent application (except for
         purposes of filing continuation or continuation-in-part applications)
         or the maintenance of any patent contemplated by this Agreement without
         sixty (60) days prior written notice to The Regents. Within thirty (30)
         days of receipt of notice of proposed abandonment, The Regents must, in
         writing, either (a) concur in the abandonment or (b) elect to assume
         responsibility for the prosecution and maintenance of all Patent Rights
         that Harvard proposes to abandon. Lack of written response to Harvard
         within thirty (30) days shall be deemed to constitute concurrence.

3.3      All Patent Costs shall be shared on a [**] proprtionate basis by The
         Regents and Harvard, respectively. Harvard shall submit quarterly
         itemized statements


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


         to The Regents of Patent Costs incurred by Harvard. The Regents shall
         reimburse Harvard for [**] percent ([**]%) of the incurred Patent Costs
         within [**] of receipt of such itemized statements.

3.4      Upon execution of this Agreement, Harvard shall submit statements of
         itemized Patent Costs incurred by Harvard (and not previously
         reimbursed by an optionee or licensee) prior to the Effective Date. The
         Regents shall reimburse Harvard for [**] percent ([**]%) of the Patent
         Costs within [**] of receipt of such itemized statements.

3.5      If The Regents should fail to reimburse Harvard for its share of Patent
         Costs according to Paragraph 3.3 or 3.4, Harvard may give written
         notice of default to The Regents pursuant to Article 7 (Governing Laws,
         Settling Disputes) of this Agreement. If The Regents should fail to
         repair such default within thirty (30) days from the receipt of such
         notice, Harvard may construe such default as termination pursuant to
         Article 13 (Termination by Harvard), provided that in the case where
         The Regents has identified discrepancies in billing, payment for the
         contested item(s) may be delayed pending resolution. All such disputes
         shall be resolved by good faith negotiation between the parties and, if
         that fails, then by arbitration in accordance with Article 7 (Governing
         Laws, Settling Disputes).

3.6      In the event that Harvard anticipates the possibility of any
         extraordinary expenditures arising from the preparation, filing,
         prosecution, licensing or defense of any patent application or patent
         contemplated by this Agreement, Harvard shall provide The Regents with
         full particulars and shall discuss with The Regents a mutually
         acceptable course of action prior to incurrence of such expenditures.

                                  4. LICENSING

4.1      Harvard shall use reasonable efforts to seek licensee(s) for the
         commercial development of the Patent Rights and shall administer the
         Patent Rights for the mutual benefit of the parties and in the best
         public interest. The parties shall consult and mutually agree prior to
         the granting of any licenses, which shall be signed by Harvard on
         behalf of Institution. Harvard shall promptly provide copies of all
         fully executed licenses issued on said Patent Rights to The Regents.

4.2      Harvard shall not negotiate any paid-up licenses, other than pursuant
         to the patent provisions of Sponsor's grant as cited in Paragraph 1.1
         or unless restricted to research use only. Further, Harvard shall not
         assign patent rights to any third party, notwithstanding any other
         provision of this Agreement or Sponsor consent, without prior written
         notice to The Regents.


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


4.3      Harvard shall distribute Revenues on the basis of [**] percent ([**]%)
         to the Regents and [**] percent ([**]%) to Harvard not later than [**]
         for Revenues received in the preceding calendar year.

4.4      Each party shall be solely responsible for calculating and distributing
         to its respective Inventors a share of Revenues in accordance with its
         respective patent policy.

                             5. RECORDS AND REPORTS

5.1      Harvard shall keep complete, true and accurate accounts of all Patent
         Costs and of all Revenues received by it from each licensee and, at the
         request of The Regents, shall permit a reasonably acceptable certified
         public accounting firm to examine its books and records in order to
         verify the payments due or owing under this Agreement.

                                 6. INFRINGEMENT

6.1      In the event Harvard or The Regents learns of the substantial
         infringement of any patent contemplated by this Agreement, the party
         who learned of the infringement shall promptly inform the other party
         in writing and shall provide the other party with evidence of such
         infringement. Harvard, in cooperation with The Regents and any
         licensee(s), shall attempt to terminate such infringement without
         litigation. If the efforts of Harvard are not successful in abating the
         infringement within ninety (90) days after the infringer has been
         formally notified of the infringement, the parties shall confer among
         themselves regarding mutually acceptable possible courses of action,
         with or without any licensee(s), at the discretion of Harvard. Harvard
         shall not be obligated to bring any infringement action; however, The
         Regents may not unilaterally prevent Harvard from bringing such an
         action. Any recovery resulting from a settlement or judgment on such an
         infringement action shall be divided between Harvard and The Regents
         based on the percentage of involvement by the respective parties. Both
         parties agree to do all things reasonably necessary to assist with
         litigation. In the event the terms of a license agreement conflict with
         this clause, the terms of the license agreement will prevail.

                      7. GOVERNING LAWS, SETTLING DISPUTES

7.1      This Agreement shall be governed and interpreted according to the laws
         of the Commonwealth of Massachusetts, but the scope and validity of any
         patent or patent application shall be governed by the applicable laws
         of the country of such patent or patent application.

7.2      Any controversy or any disputed claim by either party against the other
         arising under or related to this Agreement shall be settled by
         arbitration, upon the


[**] CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.


<PAGE>


         request of either party, in accordance with the then current Licensing
         Agreement Arbitration Rules of the American Arbitration Association.
         Judgment upon the award rendered by the Arbitrator(s) shall be binding
         on the parties.

         Any arbitration under Paragraph 7.2 shall be held at a place chosen by
         the party receiving the request for arbitration, and judgment upon the
         award rendered by the arbitration may be entered by any court having
         jurisdiction thereof. The costs of such arbitration shall be shared by
         the parties.

                                   8. NOTICES

8.1      Any notice required or permitted to be given to the parties shall be
         deemed to have been properly given if delivered, in writing, in person
         or by facsimile, airmail or air express delivery to the following
         addresses:

                  To Harvard:

                           Office for Technology and Trademark Licensing
                           University Plase, Fourth Floor South
                           124 Mt. Auburn Street
                           Cambridge, MA 02138
                           ATTENTION: Director

                  with a copy to:

                           Office of Technology Licensing
                              and Industry-Sponsored Research
                           Harvard Medical School
                           333 Longwood Avenue, Suite 640
                           Boston, MA 02115
                           ATTENTION: Nan Doyle

                  To The Regents:

                           Office of Technology Management
                           University of California, San Francisco
                           745 Parnassus Ave., Box 1209
                           San Francisco, CA 94143-1209
                           ATTENTION: Director


<PAGE>



                                    9. WAIVER

9.1      It is agreed that no waiver by any party hereto of any breach or
         default of any of the covenants or agreements herein set forth shall be
         deemed a waiver as to any subsequent and/or similar breach or default.

                                10. ASSIGNABILITY

10.1     This Agreement is binding upon and shall inure to the benefit of the
         parties hereto, their successors or assigns, but this Agreement may not
         be assigned by any party without the prior notification of the other
         parties and the Sponsor.

                              11. TERM OF AGREEMENT

11.1     This Agreement shall be in full force and effect from the Effective
         Date and shall remain in effect for the life of the last-to-expire
         patent contemplated by this Agreement, unless otherwise terminated by
         operation of law or by acts of the parties in accordance with the terms
         of this Agreement or Sponsor's requirements.

                                12. USE OF NAMES

12.1     No party may use the name of the other party in any way for advertising
         or publicity without the express written consent of the other party,
         provided, however, that Harvard has the right to use The Regents' name
         within the context of a licensing agreement.

                           13. TERMINATION BY HARVARD

13.1     Harvard may terminate this Agreement upon at least sixty (60) days'
         written notice to The Regents, but in any event not less than sixty
         (60) days prior to the date on which action upon any pending Patent
         Office action needs to be taken to preserve Patent Rights.

13.2     If Harvard terminates this Agreement, The Regents may elect to
         assume responsibility for administration of Patent Rights and any
         licenses. The Regents shall advise Harvard in writing of its
         election within thirty (30) days after receipt of notice of
         termination; Harvard shall thereupon convey to The Regents any
         licenses and shall do all things necessary to transfer the wrappers
         and other files related to the Patent Rights and licenses. In the
         event The Regents elects not to assume responsibility for
         administration of Patent Rights and any licenses, then Harvard shall
         be free to dispose of said Patent Rights in accordance with any
         obligations to the Sponsor, and this Agreement shall terminate, with
         Harvard having no further obligation to The Regents.



<PAGE>


13.3     Upon termination of this Agreement, Harvard shall have no further
         rights or obligations under this Agreement, except that The Regents
         shall reimburse Harvard, pursuant to Paragraph 3.3, for The Regents'
         twenty-percent share of Patent Costs incurred prior to the termination
         date and for which Harvard has not yet received reimbursement.

                         14. TERMINATION BY THE REGENTS

14.1     The Regents may terminate this Agreement for any reason upon sixty
         (60) days' written notice to Harvard. Thereafter, The Regents shall
         have no further rights or obligations under this Agreement, except
         that The Regents shall be obligated to reimburse Harvard for The
         Regents' share of Patent Costs incurred prior to the termination
         date, and for which The Regents has not yet made reimbursement, and
         to make any necessary assignments of patent and/or license rights to
         Harvard.

                             15. COMPLETE AGREEMENT

15.1     It is understood and agreed by Harvard and The Regents that this
         Agreement embodies the entire understanding of the parties and shall
         supersede all previous communications, representations or
         understanding, either oral or written, between the parties relating to
         the subject matter hereof. This Agreement shall not be amended except
         by written consent of both parties in the form of an Addendum to this
         Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate
originals by their respective officers.

<TABLE>
<S>                                                  <C>
               PRESIDENT AND FELLOWS                          THE REGENTS
                OF HARVARD COLLEGE

     /s/ Joyce Brinton                               /s/ Jeffrey Labovitz
----------------------------------------------       -----------------------------------
     Joyce Brinton, Director                                  Signature
Office for Technology and Trademark Licensing

                                                         Jeffrey Labovitz
                                                     -----------------------------------
                                                               Name

                                                     Senior Licensing Officer OTM. UCSF
                                                     -----------------------------------
                                                               Title

     3/7/97                                                   4/10/97
  -------------------------------------              -----------------------------------
      Date                                                     Date
</TABLE>