<PAGE>

                                                                   EXHIBIT 10.81
 
                               LICENSE AGREEMENT
                                   [LY213829]



     This License Agreement ("Agreement") is made as of the 5th day of November,
1996 by and between Eli Lilly and Company, an Indiana corporation ("Lilly") and
Roberts Laboratories Inc., a New Jersey corporation ("Roberts").

                                    RECITALS
                                    --------

     1.   Lilly and Roberts are in the business of discovering, developing and
marketing pharmaceutical products.

     2.   Lilly has discovered a compound internally designated as LY213829,
Tazofelone, (as defined in Section 1.02 below, the "Compound") which may be
useful in the treatment of functional gastrointestinal disorders and other
indications.  Lilly has previously engaged in certain research and development
efforts including limited clinical trials with respect to the Compound, but has
concluded that future development efforts could best be conducted by a company
with a focus on gastrointestinal products.

     3.   Roberts desires to license from Lilly certain rights of Lilly to the
Compound and to pursue development and commercialization of the Compound within
the Territory (as defined below), and Lilly is willing to grant such license,
all upon the terms and conditions set forth in this License Agreement.

                                   AGREEMENT
                                   ---------

     In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:

                                   ARTICLE 1
                                   ---------
                                  DEFINITIONS
                                  -----------

     When used in this Agreement, each of the following terms shall have the
meanings set forth below.

     Section 1.01.  "Affiliate" of a party hereto means any corporation or
     ------------                                                         
business entity which at the time in question controls, is under common control
with, or is controlled by such party.  As used herein, control shall mean the
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting stock or similar interests of the corporation or business entity or the
ability to otherwise control the management of the corporation or business
entity.
<PAGE>
 
                                      -2-


     Section 1.02.  "Compound" means (+/-)-5-[[3,5-bis(1,1-dimethylethyl)-4-
     ------------                                                          
hydroxyphenyl]methyl]-4-thiazolidinone and all pharmaceutically acceptable salts
and solvates thereof.

     Section 1.03.  "End User" means a wholesaler, distributor, pharmacy,
     ------------                                                        
hospital, health care organization or patient.

     Section 1.04.  "Know-How" means the items listed on the attached Appendix A
     ------------                                                               
which are owned by or licensed to Lilly and reasonably useful to Roberts in
developing and manufacturing the Compound and Product.

     Section 1.05.  "Lilly Intellectual Property Rights" means all patent
     ------------                                                        
rights, trade secret rights, and Know-How rights owned, licensed or otherwise
controlled by Lilly as of the date hereof which encompass Compound and Product
or are useful in preparing Compound and are effective in the Territory,
including all divisions, continuations, continuations-in-part, reissuances,
reexaminations, extensions, Supplementary Protection Certificates, and any
similar intellectual property rights, and all counterparts thereof in the
Territory.  A list of all patent rights owned, licensed or otherwise controlled
by Lilly as of the date hereof and which are encompassed hereunder is attached
as Appendix B.

     Section 1.06.  "Net Sales" means with respect to a Product, the gross
     ------------                                                         
amount invoiced by Roberts, or any sublicensee, to an End User less the
following deductions:

     1.   Trade, quantity and cash discounts actually given or allowed;

     2.   Rebates, allowances, Medicaid and Medicare reimbursements,
          chargebacks and similar deductions;

     3.   Any tax imposed on the sale, delivery or use of the product; and

     4.   Allowances or credits for returned goods or rejections of any Product
          which is unsalable.

     All amounts of Net Sales shall be determined from the books and records of
Roberts maintained in accordance with United States generally accepted
accounting principles, consistently applied.

     Section 1.07.  "Phase I Clinical Trial" means a small scale clinical study
     ------------                                                              
conducted in normal volunteers to establish Product safety.

     Section 1.08.  "Phase III Clinical Trial" means a large scale clinical
     ------------                                                          
study conducted in patients to establish Product efficacy and to support Product
Registration.
<PAGE>
 
                                      -3-

     Section 1.09.  "Product" means any pharmaceutical compositon for use as a
     ------------                                                             
therapeutic or diagnostic product that incorporates the Compound.

     Section 1.10.  "Territory" means the entire world.
     ------------                                      

                                   ARTICLE II
                                   ----------
                                    LICENSE
                                    -------

     Lilly grants to Roberts an exclusive license to make, have made, use or
sell within the Territory the Compound and Product pursuant to all Lilly
Intellectual Property Rights.  With respect to any patent rights licensed
hereunder, such license shall be limited solely to those patent claims necessary
to provide Roberts with the ability to make, have made, use or sell Product
within the Territory and shall, further, be limited solely to the right to make,
have made, use or sell Product within the Territory.  Such license shall include
the right of Roberts to sublicense, consistent with the terms of this Agreement.
All terms and provisions of this Agreement shall apply to each sublicense to the
same extent as they apply to Roberts, and Roberts shall guarantee performance by
its sublicensee of all obligations imposed under the terms of this Agreement.

                                  ARTICLE III
                                  -----------
                             PAYMENTS AND ROYALTIES
                             ----------------------

     Section 3.01.  Signing and Milestone Payments.
     --------------------------------------------- 
 
(a) As consideration for the licenses granted hereunder, Roberts shall pay Lilly
    by wire transfer to an account designated by Lilly the following amounts at
    the following times:
 
    (i)    Upon execution of this Agreement                      $1 million
 
    (ii)   Upon completion of transfer of the                    $2 million
           Know-How described in Section 1.04
           of this Agreement
 
    (iii)  Upon approval of the first clinical                   $1 million
           trial exemption or equivalent for a
           Product in the United States, Canada
           Japan or the European Community
           (i.e., a filing such as an IND that
           permits the commencement of Phase I
           Clinical Trials):
<PAGE>
 
                                      -4-

 
      (iv)   Upon commencement of the first                        $2 million
             Phase III Clinical Trial of a Product:
 
      (v)    Upon acceptance of the first New                      $2 million
             Drug Application or similar filing in
             the United States, Canada, Japan or
             the European Community that seeks
             permission to market a Product:
 
      (vi)   Upon approval of the first marketing                  $2 million
             approval of a Product in the United
             States, Canada, Japan or the European
             Community (e.g. approval by the FDA
             or similar governmental entity of an
             NDA or similar filing for a Product):

     (b) All payments described above shall be made within thirty (30) days of
the relevant event, except for the payment described in (a)(i), which shall be
made upon signing of this Agreement.  Any payment not made when due shall bear
interest at the United States prime rate on the due date as published in the
                                                                            
Wall Street Journal, plus six percent (6%).
-------------------                        

     Section 3.02.  Royalty.  As additional consideration for the licenses
     ----------------------                                               
granted hereunder, Roberts shall pay to Lilly a royalty equal to 7% of Net Sales
of Product the Territory.  Royalties shall be reported and paid quarterly in
accordance with Article VII of this Agreement.

                                   ARTICLE IV
                                   ----------
          PROSECUTION AND INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
          ------------------------------------------------------------

     Section 4.01.  Patent Term Extension and Supplementary Protection
     -----------------------------------------------------------------
Certificates.  Lilly upon request  of Roberts shall apply for (and grant Roberts
------------                                                                    
a license under) patent term extensions, Supplementary Protection Certificates
or functional equivalents thereof, in any jurisdication within the Territory
where usch items are permissable, for any Lilly Intellectual Property Rights
licensed to Roberts hereunder.  Roberts will provide Lilly with all material and
information as may be necessary to obtain any of the aforesaid rights.

     Section 4.02.  Prosecution and Maintenance of Licensed Patents.
     -------------------------------------------------------------- 
 
     (a)   Appendix B attached hereto identifies all pending patents worldwide
           which are encompassed in the applications and Lilly Intellectual
           Property Rights.
 
<PAGE>
 
                                      -5-

     (b)   Lilly shall prosecute any pending applications of which it is the
           owner that are emcompassed in the Lilly Intellectual Property Rights
           and maintain any patents that have issued or will issue thereon in
           full force and effect for the term of such patent. Should, during the
           course of prosecution of any pending claims, an official action
           rejecting the claims require that an amendment be made or action be
           taken which would limit or substantially change the scope of any
           license hereunder, Lilly will timely inform Roberts in writing. Lilly
           shall consult Roberts before responding to any such official action,
           and allow Roberts to assist in the prosecution of such claims or, at
           Lilly's option, allow Roberts to assist in the prosecution of such
           claims or, at Lilly's option, allow Roberts the opportunity at its
           time and expense to prosecute such claims to Roberts satisfaction.

     Section 4.03.  Costs of Prosecution and Maintenance of Patents.  Lilly
     --------------------------------------------------------------        
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within he Intellectual Property Rights,
provided, however, that Roberts shall pay one-half (1/2) of all reasonable
external expenses incurred by Lilly while prosecuting and maintaining such
patents and patent applications. External expenses will include patent office
fees and taxes in connection with the prosecution and maintenance of any patent
or patent application and the fees of any patent attorneys or agents, external
of Lilly, in connection with the ex parte prosecution and maintenance thereof.
                                 -- -----                                      
The allocation of such expenses will occur on an annual basis at the end of the
last quarter of each calendar year, at which time Lilly will provide Roberts
with an itemized list of external expenses denominated in United States dollars
incurred during the previous annual period.  Roberts will then reimburse Lilly's
expenses within sixty (60) days of the date of receipt of this itemized list.
Notwithstanding the foregoing, Lilly may, at its sole discretion, choose not to
prosecute or cease to maintain a patent or patent application in any country as
it so desires and to the extent that Lilly chooses not to prosecute or ceases to
maintain such patent or patent application Lilly shall not be responsible for
any patent costs associated with prosecuting and/or maintaining the patent or
patent application in such country.  If Roberts to prosecute or maintain such
patent or patent application Roberts may do so at its own expense; however,
under these circumstances, Lilly would grant Roberts all of its patent rights
associated with such patent in such country.  Similarly, upon written notice to
Lilly, Roberts may elect not to share in the prosecution or maintenance costs as
described in this Section 4.03 related to a patent or patent application in a
particular country; however, upon such election any rights that Roberts has in
such patent in such country would be granted to Lilly.

     Section 4.04  Option by Roberts to Discontinue License.  Roberts, at its
     ------------------------------------------------------                  
option, may elect to discontinue the license granted and surrender all rights
hereunder as to any patent on a country-by-country basis.  Such election must be
made by thirty (30) days written notice by simultaneous facsimile transmission
and certified mailing, 
<PAGE>
 
                                      -6-

and, with respect to the surrender of Roberts' rights, will be effective as of
the date of mailing. In the event such an election is made, Lilly's obligations
under Sections 4.01 and 4.02 and Roberts' obligations under Section 4.03 will
terminate thirty (30) days from the date of mailing with respect to the specific
patent on which the election is made.

     Section 4.05.  Infringement.  Each party shall give prompt notice to the
     ---------------------------                                             
other of any infringement, potential infringement or suspected infringement of
Lilly Intellectual Property Rights that may come to such party's attention.
Promptly thereafter, the parties shall consult and cooperate fully to determine
a course of action, including, but not limited to, the commencement of legal
action by one or both parties, to cause such infringement, potential
infringement or suspected infringement to be terminated.  Each party, at its
option, may elect to participate in or commence such legal action.  In the event
of a joint action in which both parties agree to participate, the parties will
share in the costs and the recovery of the agreed upon course of action in a
manner to be agreed upon.  Failing agreement on a course of action to abate
infringement, potential infringement or suspected infringement within sixty (60)
days of the time such infringement, potential infringement or suspected
infringement becomes known to both parties, either party shall have the right,
at its own expense, to initiate and prosecute an action against the infringer
and shall retain whatever damages are recovered.  In the event Roberts is unable
to initiate and prosecute such action solely in its own name, Lilly will execute
(and cause its Affiliates to execute) all documents necessary for Roberts to
initiate and prosecute such action.  Neither party will enter into any
settlement of any action referred to in this Section without the other party's
prior consent, which consent shall not be unreasonably withheld.

     Section 4.06.  Reexamination and Reissue.  Lilly shall defend in a
     ----------------------------------------                          
reasonable manner any patent encompassed within the Lilly Intellectual Property
Rights in any reexamination or reissue proceeding in the United States Patent
and Trademark Office and the applicable foreign equivalent.  Before Lilly
initiates a reissue proceeding, or before either party initiates a reexamination
proceeding, the parties shall consult as to the desirability or necessity of
such a proceeding.   Such proceedings will not be abandoned prior to a final
decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any
interference party (should an interference be involved), and the technological
and commercial importance of the subject matter of the claims of the application
or patent involved expenses shall be borne as provided in Section 4.03.
<PAGE>
 
                                      -7-

                                   ARTICLE V
                                   ---------
                            DISCLOSURE OF AGREEMENT
                            -----------------------

     Section 5.01.  Disclosure of Agreement.  Except as provided below, neither
     --------------------------------------                                    
Roberts nor Lilly shall release any information to any third party with respect
to the existence and terms of this Agreement without the prior written consent
of the other party to this Agreement.

     This prohibition includes, but is not limited to, press releases,
educational and scientific conferences, promotional materials, governmental
filings, and discussions with lenders, investment bankers, public officials, and
the media.

     Section 5.02.  Releases Required by Law.  If either party determines a
     ---------------------------------------                               
release of information is required by law or governmental regulation, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time of the proposed release.  The notice shall
include the exact text of the proposed release, the time and manner of the
release, and the basis for such party's belief that disclosure is required.

     At the other party's request and before the release, the party desiring to
release information shall consult with the other party on the necessity for the
disclosure and the text of the proposed release.  In no event shall a release
include information regarding the existence or terms of this Agreement that is
not required by law or governmental regulation without the consent of the other
party.

     Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or drug regulatory authorities
requested, without advance written notice or approval of the other party.

                                   ARTICLE VI
                                   ----------
                              CERTAIN UNDERTAKINGS
                              --------------------

     Section 6.01.  Lilly Warranties.  Lilly hereby warrants that it, to the
     -------------------------------                                        
best of its knowledge, is the sole owner of or is duly licensed under the Lilly
Intellectual Property Rights licensed to Roberts hereunder and has a lawful
right to grant the rights and licenses granted to Roberts hereunder.

     Section 6.02.   Roberts Efforts.  Roberts hereby agrees to use its best
     -------------------------------                                        
efforts to develop and commercialize Products throughout the Territory.  Roberts
may abandon development efforts for the Compound at any time if in the
reasonable judgment of Roberts further development efforts are not justified.
If Roberts so abandons development, if shall upon request assign to Lilly or
Lilly's designee all intellectual property, records, data, clinical trial
results and other information relating to the Compound in return for which Lilly
or its designee shall pay to Roberts an amount equal to Roberts' total
development costs (including all out of pocket costs 
<PAGE>
 
                                      -8-

and reasonable internal costs). Furthermore, upon execution of this Agreement,
Roberts shall assume all responsibilities for all adverse event reporting,
annual reporting and any other reporting responsibilities to regulatory agencies
in the Territory.

     Section 6.03.  Technical Assistance.  For a period of one hundred eighty
     -----------------------------------                                     
(180) days from the date hereof, Lilly will, through certain designated
personnel, provide Roberts with such technical assistance, information and
advice regarding the use of Lilly Intellectual Property Rights and the Know-How
that may be reasonably necessary in connection with the manufacturing and
testing of the Compound and Product.  Lilly, at its expense, also agrees that
such assistance may include one (1) visit to the Roberts facilities (not to
exceed twenty-four (24) hours) located in New Jersey by at least one (1)
qualified member of Lilly's personnel to render on-site technical assistance.
Except for the on-site visit described in this Section 6.03, all costs external
to Lilly and associated with technical assistance shall be borne entirely by
Roberts.  Furthermore, Lilly shall not be required to engage extra personnel or
to provide facilities in connection with providing technical assistance.

                                  ARTICLE VII
                                  -----------
                                   ACCOUNTING
                                   ----------
                                        
     Section 7.01.  Sales and Royalty Reports.  Roberts shall deliver to Lilly
     ----------------------------------------                                  
within sixty (60) days after the end of each calendar quarter a
written accounting of Roberts' Net Sales and the royalty payment due to Lilly
for such quarter. Such quarterly reports shall be in English and include Net
Sales of products on a country-by-country basis (expressed in United States
dollars or computed under the provisions of Section 7.04 hereof), a sales
forecast for each quarter of the current calendar year, and contain such
information as Lilly may from time to time reasonably request. Annually, October
1, Roberts shall deliver to Lilly a sales forecast, by quarter, for the
subsequent calendar year. All sales and royalty reports shall be directed to Eli
Lilly and Company, Attn: Royalty Administration, D.C. 2211, Lilly Corporate
Center, Indianapolis, Indiana 46285. In the event Roberts makes Sales of
Product(s) to persons other than End Users, Roberts shall require such persons
to provide Roberts with such information as Lilly may reasonably request to
permit Lilly to calculate and verify Net Sales and Royalties due.

     Section 7.02.  Delivery of Royalty.  When Roberts delivers the accounting
     ----------------------------------                                       
to Lilly, Roberts shall also pay by wire transfer or other method acceptable to
Lilly royalty payments due to Lilly for the preceding calendar quarter.  Any
payment not made when due shall bear interest at the United States prime rate on
due date as published in the Wall Street Journal, plus six percent (6%).
                             -------------------                        

     Section 7.03.  Audits.  Roberts shall keep accurate records in sufficient
     ---------------------                                                    
detail to enable the amounts due to Lilly hereunder to be determined.  During
the term of 
<PAGE>
 
                                      -9-

this Agreement and for two (2) years after its termination Lilly shall, not more
than once each year and upon written notice, have the right, at its expense, to
audit the books and records of Roberts has underpaid a royalty amount due under
this Agreement and for two (2) years after its termination Lilly shall, not more
than once each year and upon written notice, have the right, at its expense, to
audit the books and records of Roberts for the purpose of determining the
accuracy of royalty payments. If Roberts has underpaid a royalty amount due
under this Agreement by more than five percent (5%), Roberts shall, in addition
to paying any royalties due, also reimburse Lilly for the cost of such audit.

     Section 7.04. Exchange Rates and Currency Translation.  All payments to be
     -----------------------------------------------------                     
made by Roberts to Lilly under this Agreement shall be made and reported in
United States dollars.  The rate of exchange to be used in computing the amount
of Net Sales and the United States dollars due Lilly shall be calculated using
Roberts' then current standard exchange rate methodology, which methodology is
used by Roberts in the translation of its foreign currency operating results for
external reporting, is consistent with United States generally accepted
accounting principles and generally reviewed and approved by Roberts'
independent certified public accountants.

     Section 7.05.  Withholding Taxes.  Roberts shall have no liability for any
     --------------------------------                                          
income taxes levied against Lilly on account of royalties paid hereunder.  If a
laws or regulations require that any such taxes be withheld by Roberts, Roberts
shall deduct such taxes from the payment due Lilly, pay the taxes so withheld to
the proper taxing authority, and send proof of payment to Lilly annually within
ninety (90) days of the first day of the year following such payment.  If Lilly
desires to obtain a refund of any taxes so withheld and paid to a taxing
authority, Roberts shall cooperate in the pursuit of such refund.

ARTICLE VIII
------------
                              TERM AND TERMINATION
                              --------------------

       Section 8.01.  Term.  This Agreement shall become effective on the date
       -------------------                                                    
hereof, and shall remain in effect until the later of either:  (i) the life of
the last to expire of the patents encompassed in the Lilly Intellectual
Property, or (ii) fifteen (15) years from the date hereof.  Upon termination of
this Agreement set forth in this Section 8.01, the licenses granted to Roberts
hereunder shall be deemed to be paid up in full.

     Section 8.02.  Termination by Default.  If either party is in default of
     -------------------------------------                                   
any of its material obligations under this Agreement, or fails to remedy such a
default within sixty (60) days after the other party sends written notice
detailing the substance of the default to the defaulting party, the injured
party may terminate this Agreement by written notice.  In the event Lilly elects
to terminate this Agreement by reason of any default by Roberts, the licenses
granted hereunder shall terminate.
<PAGE>
 
                                      -10-

     Section 8.03.  Residual Obligation Upon Termination.  Termination of this
     ---------------------------------------------------                      
Agreement for any reason whatsoever will not release or discharge Lilly or
Roberts from the performance of any obligation or the payment of any debt which
may have previously accrued and remains to be performed, paid or discharged, at
the date of such termination.  However, upon termination no further obligations
under this Agreement shall be incurred by Lilly or Roberts.

                                   ARTICLE IX
                                   ----------
                            MISCELLANEOUS PROVISIONS
                            ------------------------
                                        
     Section 9.01.  Amendment.  This Agreement may not be amended, supplemented
     ------------------------                                                  
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.

     Section 9.02.  Entire Agreement.  This Agreement constitutes the complete
     -------------------------------                                          
and definitive agreement of the parties on the subject matter hereof and
supersedes, cancels and annuls all prior or subsequent agreements,
understandings and undertakings relating to the subject matter hereof including,
but without limiting the generality of the foregoing, any documents used by the
parties in making or accepting any offer.  There are no verbal agreements,
warranties, representations or understandings affecting this Agreement, and all
previous or other negotiations, representations and understandings between Lilly
and Roberts are merged herein.

     Section 9.03.  Severability.  Each party agrees that, should any provision
     ---------------------------                                               
of this Agreement be determined by a court of competent jurisdiction to violate
or contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.  The parties specifically agree
that nothing in this Agreement is intended to require either party to take, or
not take, any action which would constitute a violation of any applicable law or
regulation, including but not limited to those regarding trade.

     Section 9.04.  Notices.  Any notice required or permitted to be given under
     ----------------------                                                     
this Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail,
postage prepaid, or sent by national overnight delivery service, or by
acknowledged facsimile.  Unless otherwise specified in writing, the mailing
addresses of the parties shall be as follows:
<PAGE>
 
                                      -11-


     For Roberts:

     Roberts Laboratories Inc.
     4 Industrial Way West
     Eatontown, New Jersey  07724
     Attention:  A.A. Rascio, Vice President

     For Lilly:

     Eli Lilly and Company
     Lilly Corporate Center
     Indianapolis, IN  46285
     Attention:  General Counsel

     Section 9.05.  Governing Law.  This Agreement shall be governed by, and
     ----------------------------                                           
construed in accordance with, the laws of Indiana, excluding any choice of law
rules which may direct the application of the law of any other jurisdiction.

     Section 9.06.  Assignment.  Except as expressly provided herein, neither
     -------------------------                                               
party may assign its rights and obligations under this Agreement except to an
Affiliate without prior written consent of the other, except a party may make
such an assignment without the other party's consent in connection with any
merger or sale of all or substantially all of its assets to which this Agreement
relates.  This Agreement shall be binding upon the inure to the benefit of the
successors permitted assignees of the parties hereto.

     Section 9.7.  Consents Not Unreasonably Withheld.  Whenever provision is
     ------------------------------------------------                        
made in this Agreement for either party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

     Section 9.8.  No Strict Construction.  This Agreement has been prepared
     ------------------------------------                                   
jointly and shall not be strictly construed against either party.

     Section 9.9.  Captions.  The captions or headings of the Sections or other
     ----------------------                                                    
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     Section 9.10.  Force Majeure.  Any delay or failure in the performance of
     ----------------------------                                             
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required for such party's performance shall be extended
for a period equal to the period of such delay.  Such events shall include,
without limitation, any labor strike 
<PAGE>
 
                                      -12-

or lockout, act of God, war, fire, flood, embargo, act of any governmental
authority, riot, or any other unforeseeable cause or causes beyond the
reasonable control and without the fault or negligence of the party so affected.
The party so affected shall give prompt notice to the other party of such cause,
and shall take whatever reasonable steps are appropriate in the party's
discretion to relieve the effect of such cause as rapidly as possible.

     Section 9.11. Currency.  All references to "$" or "dollars" in this
     ----------------------                                             
agreement shall refer to United States dollars.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.

 
ROBERTS LABORATORIES INC.           ELI LILLY AND COMPANY


By: /s/ Peter M. Rogalin                 By: /s/ Charles E. Golden
    ----------------------                   ------------------------
Title:  Vice President                   Title:  Executive Vice President
    ----------------------                        and Chief Financial Officer



In order to induce Lilly to execute this Agreement, Roberts Pharmaceutical
Corporation, the parent company of Roberts Laboratories Inc., hereby
unconditionally guarantees the due payment and performance of all obligations of
Roberts Laboratories Inc. contained in this Agreement.

By:  /s/ Anthony A. Rascio
    ------------------------
Title:    Vice President
       
<PAGE>
 
                                   APPENDIX A
                                        
     Know-How shall mean all written information in the possession of Lilly
regarding the Compound of the types listed below reasonably useful to Roberts in
developing and manufacturing the compound.  Lilly shall use its reasonable
efforts to locate and furnish to Roberts all material documents representing
Know-How. Roberts acknowledges that certain records may have been lost or
destroyed or otherwise be unavailable.  Provided that Lilly has used its
reasonable efforts to locate such documents, Lilly shall have no further
obligation to Roberts with respect to such documents.
 
Marketing             .  Market research on GI markets prepared with
                         respect to the Compound.
 
                      .  Initial forecasts of market potential for the Compound
 
Toxicology            .  Written summary reports for the Compound
 
Project Management    .  For the Compound for the 2 years prior to
Status Reports           discontinuation of Lilly's development effort.
 
Regulatory            .  CTX for the Compound

                      .  All other material regulatory documents relating to the
                         Compound, including any and all clinical data
<PAGE>
 
                                   APPENDIX B

                      LY213829 (TAZOFELONE) PATENT SUMMARY
                      ------------------------------------
                                        

            Lilly Docket No.             Subject Matter
            ----------------             --------------

             X-6428                 Compound (racemate)
 
             X-7812                 Method of Treating IBD:
                                    Process for Preparing Enantiomers

             X-8830                 Process for Preparing Enantiomers

             P-9667                 Crystal Form of Racemate
 
<PAGE>

                                                                   EXHIBIT 10.81
 
                               LICENSE AGREEMENT
                                   [LY246736]

     This License Agreement ("Agreement") is made as of the 5th day of November,
1996 by and between Eli Lilly and Company, an Indiana corporation ("Lilly") and
Roberts Laboratories Inc., a New Jersey corporation ("Roberts").

                                    RECITALS
                                    --------

     1.   Lilly and Roberts are in the business of discovering, developing and
marketing pharmaceutical products.

     2.   Lilly  has discovered a compound internally designated as LY246736 (as
defined in Section 1.02 below, the "Compound") which may be useful in the
treatment of functional gastrointestinal disorders and other indications.  Lilly
has previously engaged in certain research and development efforts with respect
to the Compound, but has concluded that future development efforts could best be
conducted by a company with a focus on gastrointestinal products.

     3.   Roberts desires to license from Lilly certain rights of Lilly to the
Compound and to pursue development and commercialization of the Compound within
the Territory (as defined below), and Lilly is willing to grant such license,
all upon the terms and conditions set forth in this License Agreement.

                                   AGREEMENT
                                   ---------

     In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:

                                   ARTICLE I
                                   ---------
                                  DEFINITIONS
                                  -----------

     When used in this Agreement, each of the following  terms shall have the
meanings set forth below.

     Section 1.01.  "Affiliate" of a party hereto means any corporation or
     ------------                                                         
business entity which at the time in question controls, is under common control
with, or is controlled by such party.  As used herein, control shall mean the
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting stock or similar interests of the corporation or business entity or the
ability to otherwise control the management of the corporation or business
entity.

     Section 1.02.  "Compound" means (+)-[[2(S)-[[4(R)-(3-hydroxyphenyl)-3(R),4-
     ------------                                                              
dimethyl-1-piperidinyl]methyl]-1-oxo-3-phenylpropyl]amino]-acetic acid and all
pharmaceutically acceptable salts and solvates thereof.
<PAGE>
                                     -2-
 
     Section 1.03.  "End User" means a wholesaler, distributor, pharmacy,
     ------------                                                        
hospital, health care organization or patient.

     Section 1.04.  "Know-How" means the items listed on the attached Appendix A
     ------------                                                               
which are owned by or licensed to Lilly and reasonably useful to Roberts in
developing and manufacturing the Compound and Product.

     Section 1.05.  "Lilly Intellectual Property Rights" means all patent
     ------------                                                        
rights, trade secret rights, and Know-How rights owned, licensed or otherwise
controlled by Lilly as of the date hereof which encompass Compound and Product
or are useful in preparing Compound and are effective in the Territory,
including all divisions, continuations, continuations-in-part, reissuances,
reexaminations, extensions, Supplementary Protection Certificates, and any
similar intellectual property rights, and all counterparts thereof in the
Territory.  A list of all patent rights owned, licensed or otherwise controlled
by Lilly as of the date hereof and which are encompassed hereunder is attached
as Appendix B.

          Section 1.06.  "Net Sales" means with respect to a Product, the gross
          ------------                                                         
amount invoiced by Roberts, or any sublicensee, to an End User less the
following deductions:

     1.   Trade, quantity and cash discounts actually given or allowed;

     2. Rebates, allowances, Medicaid and Medicaid reimbursements, chargebacks
     and similar deductions;

     3.   Any tax imposed on the sale, delivery or use of the product, and

     4. Allowances or credits for returned goods or rejections of any Product
     which in unsalable.

     All amounts of Net Sales shall be determined from the books and records of
Roberts maintained in accordance with United States generally accepted
accounting principles, consistently applied.

     Section 1.07.  "Product" means any pharmaceutical composition for use as a
     ------------                                                              
therapeutic or diagnostic product that incorporates the Compound.

     Section 1.08.  "Territory" means the entire world.
     ------------                                      

                                   ARTICLE II
                                   ----------
                                    LICENSE
                                    -------

     Lilly grants to Roberts an exclusive license to make, have made, use or
sell within the Territory the Compound and Product pursuant to all Lilly
Intellectual Property Rights.  With respect to any patent rights licensed
hereunder, such license shall be limited solely to those 
<PAGE>
                                     -3-
 
patent claims necessary to provide Roberts with the ability to make, have made,
use or sell Product within the Territory and shall, further, be limited solely
to the right to make, have made, use or sell Product within the Territory. Such
license shall include the right of Roberts to sublicense, consistent with the
terms of this Agreement. All terms and provisions of this Agreement shall apply
to each sublicense to the same extent as they apply to Roberts, and Roberts
shall guarantee performance by its sublicensee of all obligations imposed under
the terms of this Agreement

                                  ARTICLE III
                                  -----------
                             PAYMENTS AND ROYALTIES
                             ----------------------

     Section 3.01.  Signing and Milestone Payments.
     --------------------------------------------- 

     (a) As  consideration for the licenses granted hereunder, Roberts shall pay
     Lilly by wire transfer to an account designated by Lilly  the following
     amounts at the following times:

          (i)  Upon execution of this Agreement         $500,000

          (v)  Upon acceptance of the first New         $500,000
               Drug Application or similar filing in
               the United States, Canada, Japan or
               the European Community that seeks
               permission to market a Product:

     (b) All payments described above shall be made within thirty (30) days of
     the relevant event, except for the payment described in (a)(i), which shall
     be made upon signing of this Agreement.  Any payment not made when due
     shall bear interest at the United States prime rate on the due date as
     published in the Wall Street Journal, plus six percent (6%).
                      -------------------                        

     Section 3.02. Royalty.   As additional consideration for the licenses
     ---------------------                                                
granted hereunder, Roberts shall pay to Lilly a royalty equal to 7% of Net Sales
of Product in the Territory.  Royalties shall be reported and paid quarterly in
accordance with Article VII of this Agreement.

                                   ARTICLE IV
                                   ----------
                                 PROSECUTION AND INFRINGEMENT OF INTELLECTUAL
                                 --------------------------------------------
PROPERTY RIGHTS
---------------

     Section 4.01.  Patent Term Extensions and Supplementary Protection
     ------------------------------------------------------------------
Certificates. Lilly upon request of Roberts shall apply for (and grant Roberts a
------------                                                                    
license under) patent term extensions, Supplementary Protection Certificates or
functional equivalents thereof, in any jurisdiction within the Territory where
such items are permissible, for any Lilly Intellectual 
<PAGE>
                                     -4-
 
Property Rights licensed to Roberts hereunder. Roberts will provide Lilly with
all material and information as may be necessary to obtain any of the aforesaid
rights.

     Section 4.02.  Prosecution and Maintenance of Licensed Patents.
     -------------------------------------------------------------- 

     (a) Appendix B attached hereto identifies all pending applications and
     patents worldwide which are encompassed in the Lilly Intellectual Property
     Rights.

     (b) Lilly shall prosecute any pending applications of which it is the owner
     that are encompassed in the Lilly Intellectual Property Rights and maintain
     any patents that have issued or will issue thereon in full force and effect
     for the term of such patent.  Should, during the course of prosecution of
     any pending claims, an official action rejecting the claims require that an
     amendment be made or action be taken which would limit or substantially
     change the scope of any license hereunder, Lilly will timely inform Roberts
     in writing.  Lilly shall consult Roberts before responding to any such
     official action, and allow Roberts to assist in the prosecution of such
     claims or, at Lilly's option, allow Roberts the opportunity at its time and
     expense to prosecute such claims to Roberts satisfaction.

     Section 4.03.  Costs of Prosecution and Maintenance of Patents.  Lilly
     --------------------------------------------------------------        
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within the Intellectual Property Rights,
provided, however, that Roberts shall pay one-half (1/2) of all reasonable
external expenses incurred by Lilly while prosecuting and maintaining such
patents and patent applications.  External expenses will include patent office
fees and taxes in connection with the prosecution and maintenance of any patent
or patent application and the fees of any patent attorneys or agents, external
of Lilly, in connection with the ex parte prosection and maintenance thereof.
                                 -- -----                                     
The allocation of such expenses will occur on a annual basis at the end of the
last quarter of each calendar year, at which time Lilly will provide Roberts
with an itemized list of external expenses denominated in United States dollars
incurred during the previous annual period.  Roberts will then reimburse Lilly's
expenses within sixty (60) days of the date of receipt of this itemized list.
Notwithstanding the foregoing, Lilly may, at its sole discretion, choose not to
prosecute or cease to maintain a patent or patent application in any country as
it so desires and to the extent that Lilly chooses not to prosecute or ceases to
maintain such patent or patent application Lilly shall not be responsible for
any patent costs associated with prosecuting and/or maintaining the patent or
patent application in such country.  If Roberts desires to prosecute or maintain
such patent or patent application Roberts may do so at its own expense; however,
under these circumstances,  Lilly would grant Roberts all of its patent rights
associated with such patent in such country.  Similarly, upon written notice to
Lilly, Roberts may elect not to share in the prosecution or maintenance costs as
described in this Section 4.03 related to a patent or patent application in a
particular country; however, upon such election any rights that Roberts has in
such patent in such country would be granted to Lilly.
<PAGE>
                                     -5-
 
     Section 4.04.  Option by Roberts to Discontinue License.  Roberts, at its
     -------------------------------------------------------                  
option, may elect to discontinue the license granted and surrender all rights
hereunder as to any patent on a country-by-country basis.  Such election must be
made by thirty (30) days written notice by simultaneous facsimile transmission
and certified mailing, and, with respect to the surrender of Roberts' rights,
will be effective as of the date of mailing.  In the event such an election is
made, Lilly's obligations under Sections 4.01 and 4.02 and Roberts' obligations
under Section 4.03 will terminate thirty (30) days from the date of mailing with
respect to the specific patent on which the election is made.

     Section 4.05.  Infringement.  Each party shall give prompt notice to the
     ---------------------------                                             
other of any infringement, potential infringement or suspected infringement of
Lilly Intellectual Property Rights that may come to such party's attention.
Promptly thereafter, the parties shall consult and cooperate fully to determine
a course of action, including, but not limited to, the commencement of legal
action by one or both parties, to cause such infringement, potential
infringement or suspected infringement to be terminated.  Each party, at its
option, may elect to participate in or commence such a legal action.  In the
event of a joint action in which both parties agree to participate, the parties
will share in the costs and the recovery of the agreed upon course of action in
a manner to be agreed upon.  Failing agreement on a course of action to abate
infringement, potential infringement or suspected infringement within sixty (60)
days of the time of such infringement, potential infringement or suspected
infringement becomes known to both parties, either party shall have the right,
at its own expense, to initiate and prosecute an action against the infringer
and shall retain whatever damages are recovered.  In the event Roberts is unable
to initiate and prosecute such action solely in its own name, Lilly will execute
(and cause its Affiliates to execute) all documents necessary for Roberts to
initiate and prosecute such action.  Neither party will enter into any
settlement of any action referred to in this Section without the other party's
prior consent, which consent shall not be unreasonably withheld.

     Section 4.06.  Reexamination and Reissue.  Lilly shall defend in a
     ----------------------------------------                          
reasonable manner any patent encompassed within the Lilly Intellectual Property
Rights in any reexamination or reissue proceeding in the United States Patent
and Trademark Office and the applicable foreign equivalent.  Before Lilly
initiates a reissue proceeding, or before either party initiates a reexamination
proceeding, the parties shall consult as to the desirability or necessity of
such a proceeding.  Such proceedings will not be abandoned prior to a final
decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any
interference party (should an interference be involved), and the technological
and commercial importance of the subject matter of the claims of the application
or patent involved expenses shall be borne as provided in Section 4.03.
<PAGE>
                                     -6-
 
                                   ARTICLE V
                                   ---------
                            DISCLOSURE OF AGREEMENT
                            -----------------------

     Section 5.01.  Disclosure of Agreement.  Except as provided below, neither
     --------------------------------------                                    
Roberts nor Lilly shall release any information to any third party with respect
to the existence and terms of this Agreement without the prior written consent
of the other party to this Agreement.

     This prohibition includes, but is not limited to, press releases,
educational and scientific conferences, promotional materials, governmental
filings, and discussions with lenders, investment bankers, public officials, and
the media.

     Section 5.02.  Releases Required by Law.  If either party determines a
     ---------------------------------------                               
release of information is required by law or governmental regulation, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time of the proposed release.  The notice shall
include the exact text of the proposed release, the time and manner of the
release, and the basis for such party's belief that disclosure is required.

     At the other party's request and before the release, the party desiring to
release information shall consult with the other party on the necessity for the
disclosure and the text of the proposed release.  In no event shall a release
include information regarding the existence or terms of this Agreement that is
not required by law or governmental regulation without the consent of the other
party.

     Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or drug regulatory authorities
requested, without advance written notice or approval of the other party.

                                   ARTICLE VI
                                   ----------
                              CERTAIN UNDERTAKINGS
                              --------------------

     Section 6.01.  Lilly Warranties.  Lilly hereby warrants that it, to the
     -------------------------------                                        
best of its knowledge, is the sole owner of or is duly licensed under the Lilly
Intellectual Property Rights licensed to Roberts hereunder and has a lawful
right to grant the rights and licenses granted to Roberts hereunder.

     Section 6.02. Roberts Efforts.  Roberts hereby agrees to use its best
     -----------------------------                                        
efforts to develop and commercialize Products throughout the Territory.  Roberts
may abandon development efforts for the Compound at any time if in the
reasonable judgment of Roberts further development efforts are not justified.
If Roberts so abandons development, it shall upon request assign to Lilly or
Lilly's designee all intellectual property, records, data, clinical trial
results and other information relating to the Compound in return for which Lilly
or its 
<PAGE>
                                     -7-
 
designee shall pay to Roberts an amount equal to Roberts' total development
costs (including all out of pocket costs and reasonable internal costs). Roberts
shall comply with all responsibilities for all adverse event reporting, annual
reporting and any other reporting responsibilities to regulatory agencies in the
Territory.

     Section 6.03.  Technical Assistance.  For a period of one hundred eighty
     -----------------------------------                                     
(180) days from the date hereof, Lilly will, through certain designated
personnel, provide Roberts with such technical assistance, information and
advice regarding the use of Lilly Intellectual Property Rights and the Know-How
that may be reasonably necessary in connection with the manufacturing and
testing of the Compound and Product.  Lilly, at its expense, also agrees that
such assistance may include one (1) visit to the Roberts facilities (not to
exceed twenty-four (24) hours) located in New Jersey by at least one (1)
qualified member of Lilly's personnel to render on-site technical assistance.
Except for the on-site visit described in this Section 6.03, all costs external
to Lilly and associated with technical assistance shall be borne entirely by
Roberts.  Furthermore, Lilly shall not be required to engage extra personnel or
to provide facilities in connection with providing technical assistance.

                                  ARTICLE VII
                                  -----------
                                   ACCOUNTING
                                   ----------

     Section 7.01.  Sales and Royalty Reports.  Roberts shall deliver to Lilly
     ----------------------------------------                                 
within sixty (60) days after the end of each calendar quarter a written
accounting of Roberts' Net Sales and the royalty payment due to Lilly for such
quarter.  Such quarterly reports shall be in English and include the Net Sales
of products on a country-by-country basis (expressed in United States dollars or
computed under the provisions of Section 7.04 hereof), a sales forecast for each
quarter of the current calendar year, and contain such other information as
Lilly may from time to time reasonably request.  Annually, by October 1, Roberts
shall deliver to Lilly a sales forecast, by quarter, for the subsequent calendar
year.  All sales and royalty reports shall be directed to Eli Lilly and Company,
Attn:  Royalty Administration, D.C. 2211, Lilly Corporate Center, Indianapolis,
Indiana  46285.  In the event Roberts makes Sales of Product(s) to persons other
than End Users, Roberts shall require such persons to provide Roberts with such
information as Lilly may reasonably request to permit Lilly to calculate and
verify Net Sales and Royalties due.

     Section 7.02.  Delivery of Royalty.  When Roberts delivers the accounting
     ----------------------------------                                       
to Lilly, Roberts shall also pay by wire transfer or other method acceptable to
Lilly royalty payments due to Lilly for the preceding calendar quarter.  Any
payment not made when due shall bear interest at the United States prime rate on
due date as published in the Wall Street Journal, plus six percent (6%).
                             -------------------                        

     Section 7.03.  Audits.  Roberts shall keep accurate records in sufficient
     ---------------------                                                    
detail to enable to amounts due to Lilly hereunder to be determined.  During the
term of this Agreement and for two (2) years after its termination, Lilly shall,
not more than once each year and upon written notice, have the right, at its
expense, to audit the books and records of 
<PAGE>
                                     -8-
 
Roberts for the purpose of determining the accuracy of royalty payments. If
Roberts has underpaid a royalty amount due under this Agreement by more than
five percent (5%), Roberts shall, in addition to paying any royalties due, also
reimburse Lilly for the cost of such audit.

     Section 7.04.  Exchange Rates and Currency Translation.  All payments to be
     ------------------------------------------------------                     
made by Roberts to Lilly under this Agreement shall be made and reported in
United States dollars.  The rate of exchange to be used in computing the amount
of Net Sales and the United States dollars due Lilly shall be calculated using
Roberts' then current standard exchange rate methodology, which methodology is
used by Roberts in the translation of its foreign currency operating results for
external reporting, is consistent with United States generally accepted
accounting principles and generally reviewed and approved by Roberts'
independent certified public accountants.

     Section 7.05.  Withholding Taxes.  Roberts shall have no liability for any
     --------------------------------                                          
income taxes levied against Lilly on account of royalties paid hereunder.  If
laws or regulations require that any such taxes be withheld by Roberts, Roberts
shall deduct such taxes from the payment due Lilly, pay the taxes to withheld to
the proper taxing authority, and send proof of payment to Lilly annually within
ninety (90) days of the first day of the year following such payment.  If Lilly
desires to obtain a refund of any taxes so withheld and paid to a taxing
authority, Roberts shall cooperate in the pursuit of such refund.

                                  ARTICLE VIII
                                  ------------
                              TERM AND TERMINATION
                              --------------------

     Section 8.01.  Term.  This Agreement shall become effective on the date
     -------------------                                                    
hereof, and shall remain in effect until the later of either:  (i) the life of
the last to expire of the patents encompassed in the  Lilly Intellectual
Property, or (ii) fifteen (15) years from the date hereof.  Upon termination of
this Agreement as set forth in this Section 8.01, the licenses granted to
Roberts hereunder shall be deemed to be paid up in full.

     Section 8.02.  Termination by Default.  If either party is in default of
     -------------------------------------                                   
any of its material obligations under this Agreement, or fails to remedy such a
default within sixty (60) days after the other party sends written notice
detailing the substance of the default to the defaulting party, the injured
party may terminate this Agreement by written notice.  In the event Lilly elects
to terminate this Agreement by reason of any default by Roberts, the licenses
granted hereunder shall terminate.

     Section 8.03.  Residual Obligation Upon Termination.  Termination of this
     ---------------------------------------------------                      
Agreement for any reason whatsoever will not release or discharge Lilly or
Roberts from the performance of any obligation or the payment of any debt which
may have previously accrued and remains to be performed, paid or discharged, at
the date of such termination. However, upon termination no further obligations
under this Agreement shall be incurred by Lilly or Roberts.
<PAGE>
                                     -9-
 
                                   ARTICLE IX
                                   ----------
                            MISCELLANEOUS PROVISIONS
                            ------------------------

     Section 9.01. Amendment.  This Agreement may not be amended, supplemented
     -----------------------                                                  
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.

     Section 9.02.  Entire Agreement.  This Agreement constitutes the complete
     -------------------------------                                          
and definitive agreement of the parties on the subject matter hereof and
supersedes, cancels and annuls all prior or subsequent agreements,
understandings and undertakings relating to the subject matter hereof including,
but without limiting the generality of the foregoing, any documents used by the
parties in making or accepting any offer.  There are no verbal agreements,
warranties, representations or understandings affecting this Agreement, and all
previous or other negotiations, representations and understandings between Lilly
and Roberts are merged herein.

     Section 9.03.  Severability.  Each party agrees that, should any provision
     ---------------------------                                               
of this Agreement be determined by a court of competent jurisdiction to violate
or contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.  The parties specifically agree
that nothing in this Agreement is intended to require either party to take, or
not take, any action which would constitute a violation of any applicable law or
regulation, including but not limited to those regarding trade.

     Section 9.04.  Notices.  Any notice required or permitted to be given under
     ----------------------                                                     
this Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail,
postage prepaid, or sent by national overnight delivery service, or by
acknowledged facsimile.  Unless otherwise specified in writing, the mailing
addresses of the parties shall be as follows:

     For Roberts:

     Roberts Laboratories Inc.
     4 Industrial Way West
     Eatontown, New Jersey  07724
     Attention:  A.A. Rascio, Vice President

     For Lilly:

     Eli Lilly and Company
     Lilly Corporate Center
     Indianapolis, IN  46285
     Attention:  General Counsel
<PAGE>
                                     -10-
 
     Section 9.05.  Governing Law.  This Agreement shall be governed by, and
     ----------------------------                                           
construed in accordance with, the laws of Indiana, excluding any choice of law
rules which may direct the application of the law of any other jurisdiction.

     Section 9.06.  Assignment.  Except as expressly provided herein, neither
     -------------------------                                               
party may assign its rights and obligations under this Agreement except to an
Affiliate without the prior written consent of the other, except a party may
make such an assignment without the other party's consent in connection with any
merger or sale of all or substantially all of its assets to which this Agreement
relates.  This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assignees of the parties hereto.

     Section 9.7.  Consents Not Unreasonably Withheld.  Whenever provision is
     ------------------------------------------------                        
made in this Agreement for either party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

     Section 9.8.  No Strict Construction.  This Agreement has been prepared
     ------------------------------------                                   
jointly and shall not be strictly construed against either party.

     Section 9.9.  Captions.  The captions or headings of the Sections or other
     ----------------------                                                    
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     Section 9.10.  Force Majeure.  Any delay or failure in the performance of
     ----------------------------                                             
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required for such party's performance shall be extended
for a period equal to the period of such delay. Such events shall include,
without limitation, any labor strike or lockout, act of God, war, fire, flood,
embargo, act of any governmental authority, riot, or any other unforeseeable
cause or causes beyond the reasonable control and without the fault or
negligence of the party so affected.  The party so affected shall give prompt
notice to the other party of such cause, and shall take whatever reasonable
steps are appropriate in the party's discretion to relieve the effect of such
cause as rapidly as possible.

     Section 9.11.  Currency.  All references to "$" or "dollars" in this
     -----------------------                                             
agreement shall refer to United States dollars.
<PAGE>
                                     -11-
 
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.

ROBERTS LABORATORIES INC.           ELI LILLY AND COMPANY



By:  /s/ Robert A. Vukovich                 By: /s/ Charles E. Golden
     -----------------------                    ------------------------------
Title:  President                           Title:  Executive Vice President
                                                    and Chief Financial Officer

In order to induce Lilly to execute this Agreement, Roberts Pharmaceutical
Corporation, the parent company of Roberts Laboratories Inc., hereby
unconditionally guarantees the due payment and performance of all obligations of
Roberts Laboratories, Inc. contained in this Agreement.

By:  /s/ Anthony A. Rascio
     -----------------------
Title:  Vice President
<PAGE>
 
                                   APPENDIX A
                                        
     Know-How shall mean all written information in the possession of Lilly
regarding the Compound of the types listed below reasonably useful to Roberts in
developing and manufacturing the compound.  Lilly shall use its reasonable
efforts to locate and furnish to Roberts all material documents representing
Know-How.  Roberts acknowledges that certain records may have been lost or
destroyed or otherwise be unavailable.  Provided that Lilly has used its
reasonable efforts to locate such documents, Lilly shall have no further
obligation to Roberts with respect to such documents.
 
Marketing               .    Market research on GI markets prepared
                             with respect to the Compound
 
                        .    Initial forecasts of market potential for the
                             Compound
 
Toxicology              .    Written summary reports for the
 Compound
 
Project Management      .    For the Compound for the 2 years prior
Status Reports               to discontinuation of Lilly's development
 effort
 
Regulatory              .    Material regulatory documents relating to
                             the Compound, if any
 
<PAGE>
                                  Appendix B

                                 Patent Status
                                 -------------

                                   LY246736
                                   --------

             
           X-8244                 Compound, Method, Formulation
           X-8847                 Intermediate, Process, Salt, Dihydrate



<PAGE>
                                                                   Exhibit 10.81
 
                               LICENSE AGREEMENT
                                   [LY353433]

     This License Agreement ("Agreement") is made as of the 5th day of November,
1996 by and between Eli Lilly and Company, an Indiana corporation ("Lily") and
Roberts Laboratories Inc., a New Jersey corporation ("Roberts").

                                    RECITALS
                                    --------

     1.   Lilly and Roberts are in the business of discovering, developing and
marketing pharmaceutical products.

     2.   Lilly has discovered a compound internally designated as LY353433 (as
defined in Section 1.02 below, the "Compound") which may be useful in the
treatment of functional gastrointestinal disorders and other indications.  Lilly
has previously engaged in certain research and development efforts including
limited clinical trials with respect to the Compound, but has concluded that
future development efforts could best be conducted by a company with a focus on
gastrointestinal products.

     3.   Roberts desires to license from Lilly certain rights of Lilly to the
Compound and to pursue development and commercialization of the Compound within
the Territory (as defined below), and Lilly is willing to grant such license,
all upon the terms and conditions set forth in this License Agreement.

                                   AGREEMENT
                                   ---------

     In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:

                                   ARTICLE 1
                                   ---------
                                  DEFINITIONS
                                  -----------

     When used in this Agreement, each of the following terms shall have the
meanings set forth below.

     Section 1.01.  "Affiliate" of a party hereto means any corporation or
     ------------                                                         
business entity which at the time in question controls, is under common control
with, or is controlled by such party.  As used herein, control shall mean the
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting stock or similar interests of the corporation or business entity or the
ability to otherwise control the management of the corporation or business
entity.

     Section 1.02.  "Compound" means 1-(1-methylethyl)-N-[2-[4-
     ------------                                             
[(tricyclo[3.3.1.1 (3,7)]-dec-1-ylcarbonyl)amino]-1-piperidinyl]ethyl]-1H-
indazole-3-carboxamide and all pharmaceutically acceptable salts and solvates
thereof.
<PAGE>
 
                                     -2-
 
     Section 1.03.  "End User" means a wholesaler, distributor, pharmacy,
     ------------                                                        
hospital, health care organization or patient.

     Section 1.04.  "Know-How" means the items listed on the attached Appendix A
     ------------                                                               
which are owned by or licensed to Lilly and reasonably useful to Roberts in
developing and manufacturing the Compound and Product.

     Section 1.05.  "Lily Intellectual Property Rights" means all patent rights,
     ------------                                                               
trade secret rights, and Know-How rights owned, licensed or otherwise controlled
by Lilly as of the date hereof which encompass Compound and Product or are
useful in preparing Compound and are effective in the Territory, including all
divisions, continuations, continuations-in-part, reissuances, reexaminations,
extensions, Supplementary Protection Certificates, and any similar intellectual
property rights, and all counterparts thereof in the Territory.  A list of all
patent rights owned, licensed or otherwise controlled by Lilly as of the date
hereof and which are encompassed hereunder is attached as Appendix B.

     Section 1.06.  "Net Sales" means with respect to a Product, the gross
     ------------                                                         
amount invoiced by Roberts, or any sublicensee, to an End User less the
following deductions:

     1.   Trade, quantity and cash discounts actually given or allowed;

     2.   Rebates, allowances, Medicaid and Medicare reimbursements, chargebacks
          and similar deductions;

     3.   Any tax imposed on the sale, delivery or use of the product; and

     4.   Allowances or credits for returned goods or rejections of any Product
          which is unsalable.

     All amounts of Net Sales shall be determined from the books and records of
Roberts maintained in accordance with United States generally accepted
accounting principles, consistently applied.

     Section 1.07.  "Product" means any pharmaceutical composition for use as a
     ------------                                                              
therapeutic or diagnostic product that incorporates the Compound.

     Section 1.08.  "Territory" means the entire world.
     ------------                                      

                                   ARTICLE II
                                   ----------
                                    LICENSE
                                    -------

     Lilly grants to Roberts an exclusive license to make, have made, use or
sell within the Territory the Compound and Product pursuant to all Lilly
Intellectual Property Rights.  With respect to any patent rights licensed
hereunder, such license shall be limited solely to those 
<PAGE>
 
                                     -3-
 
patent claims necessary to provide Roberts with the ability to make, have made,
use or sell Product within the Territory and shall, further, be limited solely
to the right to make, have made, use or sell Product within the Territory. Such
license shall include the right of Roberts to sublicense, consistent with the
terms of this Agreement. All terms and provisions of this Agreement shall apply
to each sublicense to the same extent as they apply to Roberts, and Roberts
shall guarantee performance by its sublicensee of all obligations imposed under
the terms of this Agreement.

                                  ARTICLE III
                                  -----------
                             PAYMENTS AND ROYALTIES
                             ----------------------

     Section 3.01.  Signing and Milestone Payments.
     --------------------------------------------- 

     (a) As consideration for the licenses granted hereunder, Roberts shall pay
     Lilly by wire transfer to an account designated by Lilly the following
     amounts at the following times:

          (i)  Upon execution of this Agreement              $500,000

          (ii) Upon acceptance of the first New              $500,000
               Drug Application or similar filing the
               United States, Canada, Japan or the
               the European Community that seeks
               permission to market a Product:

     (b) All payments described above shall be made within thirty (30) days of
     the relevant event, except for the payment described in (a)(i), which shall
     be made upon signing of this Agreement.  Any payment not made when due
     shall bear interest at the United States prime rate on the due date as
     published in the Wall Street Journal, plus six percent (6%).
                      -------------------                        

     Section 3.02.  Royalty.  As additional consideration for the licenses
     ----------------------                                               
granted hereunder, Roberts shall pay to Lilly a royalty equal to 7% of Net Sales
of Product in the Territory.  Royalties shall be reported and paid quarterly in
accordance with Article VII of this Agreement.

                                   ARTICLE IV
                                   ----------
          PROSECUTION AND INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS
          ------------------------------------------------------------

     Section 4.01.  Patent Term Extensions and Supplementary Protection
     ------------------------------------------------------------------
Certificates. Lilly upon request of Roberts shall apply for (and grant Roberts a
------------                                                                    
license under) patent term extensions, Supplementary Protection Certificates or
functional equivalents thereof, in any jurisdiction within the Territory where
such items are permissible, for any Lilly Intellectual 
<PAGE>
 
                                     -4-
 
Property Rights licensed to Roberts hereunder. Roberts will provide Lilly with
all material and information as may be necessary to obtain any of the aforesaid
rights.

     Section 4.02.  Prosecution and Maintenance of Licensed Patents.
     -------------------------------------------------------------- 

     (a) Appendix B attached hereto identifies all pending applications and
         patents worldwide which are encompassed in the Lilly Intellectual
         Property Rights.

     (b) Lilly shall prosecute any pending applications of which it is the owner
         that are encompassed in the Lilly Intellectual Property Rights and
         maintain any patents that have issued or will issue thereon in full
         force and effect for the term of such patent. Should, during the course
         of prosecution of any pending claims, an official action rejecting the
         claims require that an amendment be made or action be taken which would
         limit or substantially change the scope of any license hereunder, Lilly
         will timely inform Roberts in writing. Lilly shall consult Roberts
         before responding to any such official action, and allow Roberts to
         assist in the prosecution of such claims or, at Lilly's option, allow
         Roberts the opportunity at its time and expense to prosecute such
         claims to Roberts satisfaction.

     Section 4.03.  Costs of Prosecution and Maintenance of Patents.  Lilly
     --------------------------------------------------------------        
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within the Intellectual Property Rights,
provided, however, that Roberts shall pay one-half (1/2) of all reasonable
external expenses incurred by Lilly while prosecuting and maintaining such
patents and patent applications.  External expenses will include patent office
fees and taxes in connection with the prosecution and maintenance of any patent
or patent application and the fees of any patent attorneys or agents, external
of Lilly, in connection with the ex parte prosecution and maintenance thereof.
                                 -- -----                                      
The allocation of such expenses will occur on an annual basis at the end of the
last quarter of each calendar year, at which time Lilly will provide Roberts
with an itemized list of external expenses denominated in United States dollars
incurred during the previous annual period.  Roberts will then reimburse Lilly's
expenses within sixty (60) days of the date of receipt of this itemized list.
Notwithstanding the foregoing, Lilly may, at its sole discretion, choose not to
prosecute or cease to maintain a patent or patent application in any country as
it so desires and to the extent that Lilly chooses not to prosecute or ceases to
maintain such patent or patent application Lilly shall not be responsible for
any patent costs associated with prosecuting and/or maintaining the patent or
patent application in such country.  If Roberts desires to prosecute or maintain
such patent or patent application Roberts may do so at its own expense; however,
under these circumstances, Lilly would grant Roberts all of its patent rights
associated with such patent in such country.  Similarly, upon written notice to
Lilly, Roberts may elect not to share in the prosecution or maintenance costs as
described in this Section 4.03 related to a patent or patent application in a
particular country; however, upon such election any rights that Roberts has in
such patent in such country would be granted to Lilly.
<PAGE>
 
                                     -5-
 
     Section 4.04.  Option by Roberts to Discontinue License.  Roberts, at its
     -------------------------------------------------------                  
option, may elect to discontinue the license granted and surrender all rights
hereunder as to any patent on a country-by-country basis.  Such election must be
made by thirty (30) days written notice by simultaneous facsimile transmission
and certified mailing, and, with respect to the surrender of Roberts' rights,
will be effective as of the date of mailing.  In the event such an election is
made, Lilly's obligations under Section 4.01 and 4.02 and Roberts' obligations
under Section 4.03 will terminate thirty (30) days from the date of mailing with
respect to the specific patent on which the election is made.

     Section 4.05.  Infringement.  Each party shall give prompt notice to the
     ---------------------------                                             
other of any infringement, potential infringement or suspected infringement of
Lilly Intellectual Property Rights that may come to such party's attention.
Promptly thereafter, the parties shall consult and cooperate fully to determine
a course of action, including, but not limited to, the commencement of legal
action by one or both parties, to cause such infringement, potential
infringement, or suspected infringement to be terminated.  Each party, at its
option, may elect to participate in or commence such a legal action.  In the
event of a joint action in which both parties agree to participate, the parties
will share in the costs and the recovery of the agreed upon course of action in
a manner to be agreed upon.  Failing agreement on a course of action to abate
infringement, potential infringement or suspected infringement within sixty (60)
days of the time such infringement, potential infringement or suspected
infringement becomes known to both parties, either party shall have the right,
at its own expense, to initiate and prosecute an action against the infringer
and shall retain whatever damages are recovered.  In the event Roberts is unable
to initiate and prosecute such action solely in its own name, Lilly will execute
(and cause its Affiliates to execute) all documents necessary for Roberts to
initiate and prosecute such action.  Neither party will enter into any
settlement of any action referred to in this Section without the other party's
prior consent, which consent shall not be unreasonably withheld.

     Section 4.06.  Reexamination and Reissue.  Lilly shall defend in a
     ----------------------------------------                          
reasonable manner any patent encompassed within the Lilly Intellectual Property
Rights in any reexamination or reissue proceeding in the United States Patent
and Trademark Office and the applicable foreign equivalent.  Before Lilly
initiates a reissue proceeding, or before either party initiates a reexamination
proceeding, the parties shall consult as to the desirability or necessity of
such a proceeding.  Such proceedings will not be abandoned prior to a final
decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any
interference party (should an interference be involved), and the technological
and commercial importance of the subject matter of the claims of the application
or patent involved expenses shall be borne as provided in Section 4.03.

<PAGE>
 
                                     -6-


                                   ARTICLE V
                                   ---------
                            DISCLOSURE OF AGREEMENT
                            -----------------------
 
     Section 5.01.  Disclosure of Agreement.  Except as provided below, neither
     --------------------------------------                                    
Roberts nor Lilly shall release any information to any third party with respect
to the existence and terms of this Agreement without the prior written consent
of the other party to this Agreement.

     This prohibition includes, but is not limited to, press releases,
educational and scientific conferences, promotional materials, governmental
filings, and discussions with lenders, investment bankers, public officials, and
the media.

     Section 5.02.  Releases Required by Law.  If either party determines a
     ---------------------------------------                               
release of information is required by law or governmental regulation, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time of the proposed release.  The notice shall
include the exact text of the proposed release, the time and manner of the
release, and the basis for such party's belief that disclosure is required.

     At the other party's request and before the release, the party desiring to
release information shall consult with the other party on the necessity for the
disclosure and the text of the proposed release.  In no event shall a release
include information regarding the existence or terms of this Agreement that is
not required by law or governmental regulation without the consent of the other
party.

     Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or drug regulatory authorities
requested, without advance written notice or approval of the other party.

                                   ARTICLE VI
                                   ----------
                              CERTAIN UNDERTAKINGS
                              --------------------

     Section 6.01.  Lilly Warranties.  Lilly hereby warrants that it, to the
     -------------------------------                                        
best of its knowledge, is the sole owner of or is duly licensed under the Lilly
Intellectual Property Rights licensed to Roberts hereunder and has a lawful
right to grant the rights and licenses granted to Roberts hereunder.

     Section 6.02.  Roberts Efforts.  Roberts hereby agrees to use its best
     ------------------------------                                        
efforts to develop and commercialize Products throughout the Territory.  Roberts
may abandon development efforts for the Compound at any time if in the
reasonable judgment of Roberts further development efforts are not justified.
If Roberts so abandons development, it shall upon request assign to Lilly or
Lilly's designee all intellectual property, records, data, clinical trial
results and other information relating to the Compound in return for which Lilly
or its designee shall pay to Roberts an amount equal to Roberts' total
development costs (including all out of pocket costs and reasonable internal
costs).  Furthermore, upon execution of this Agreement, Roberts shall comply
with all responsibilities for all adverse 
<PAGE>
 
                                     -7-
 
event reporting, annual reporting and any other reporting responsibilities to
regulatory agencies in the Territory.

     Section 6.03.  Technical Assistance.  For a period of one hundred eighty
     -----------------------------------                                     
(180) days from the date hereof, Lilly will, through certain designated
personnel, provide Roberts with such technical assistance, information and
advice regarding the use of Lilly Intellectual Property Rights and the Know-How
that may be reasonably necessary in connection with the manufacturing and
testing of the Compound and Product.  Lilly, at its expense, also agrees that
such assistance may include one (1) visit to the Roberts facilities (not to
exceed twenty-four (24) hours) located in New Jersey by at least one (1)
qualified member of Lilly's personnel to render on-site technical assistance.
Except for the on-site visit described in this Section 6.03, all costs external
to Lilly and associated with technical assistance shall be borne entirely by
Roberts.  Furthermore, Lilly shall not be required to engage extra personnel or
to provide facilities in connection with providing technical assistance.

                                  ARTICLE VII
                                  -----------
                                   ACCOUNTING
                                   ----------

     Section 7.01. Sales and Royalty Reports.  Roberts shall deliver to Lilly
     ---------------------------------------                                 
within sixty (60) days after the end of each calendar quarter a written
accounting of Roberts' Net Sales and the royalty payment due to Lilly for such
quarter.  Such quarterly reports shall be in English and include the Net Sales
of products on a country-by-country basis (expressed in United States dollars or
computed under the provisions of Section 7.04 hereof), a sales forecast for each
quarter of the current calendar year, and contain such other information as
Lilly may from time to time reasonably request.  Annually, by October 1, Roberts
shall deliver to Lilly a sales forecast, by quarter, for the subsequent calendar
year.  All sales and royalty reports shall be directed to Eli Lilly and Company,
Attn:  Royalty Administration, D.C. 2211, Lilly Corporate Center, Indianapolis,
Indiana  46285.  In the event Roberts makes Sales of Product(s) to persons other
than End Users, Roberts shall require such persons to provide Roberts with such
information as Lilly may reasonably request to permit Lilly to calculate and
verify Net Sales and Royalties due.

     Section 7.02.  Delivery of Royalty.  When Roberts delivers the accounting
     ----------------------------------                                       
to Lilly, Roberts shall also pay by wire transfer or other method acceptable to
Lilly royalty payments due to Lilly for the preceding calendar quarter.  Any
payment not made when due shall bear interest at the United States prime rate on
due date as published in the Wall Street Journal, plus six percent (6%).
                             -------------------                        

     Section 7.03.  Audits.  Roberts shall keep accurate records in sufficient
     ---------------------                                                    
form to enable the amounts due to Lilly hereunder to be determined. during the
term of this Agreement and for two (2) years after its termination, shall not
more than once each year and upon written notice, have at its expense, to audit
the books and records of Roberts for the purpose of determining the accuracy of
royalty payments. If Roberts has underpaid a royalty amount due under this
Agreement by more than five percent (5%),
<PAGE>
 
                                     -8-
 
Roberts shall, in addition to paying any royalties due, also reimburse Lilly for
cost of such audit.

     Section 7.04.  Exchange Rates and Currency Translation.  All payments to be
     ------------------------------------------------------                     
made by Roberts to Lilly under this Agreement shall be made and reported in
United States dollars.  The rate of exchange to be used in computing the amount
of Net Sales and the United States dollars due Lilly will be calculated using
Roberts' then current standard exchange rate methodology, which methodology is
used by Roberts in the translation of its foreign currency operating results for
external reporting, is consistent with United States generally accepted
accounting principles and generally reviewed and approved by Roberts'
independent certified public accountants.

     Section 7.05.  Withholding Taxes.  Roberts shall have no liability for
     --------------------------------                                      
any income taxes levied against Lilly on account of royalties paid hereunder.
If any law regulations require that any such taxes be withheld by Roberts,
Roberts shall deduct such taxes from the payment due Lilly, pay the taxes so
withheld to the proper taxing authority, and send proof of payment to Lilly
annually within ninety (90) days of the first day of the year following such
payment. If Lilly desires to obtain a refund of any taxes so withheld and paid
from a taxing authority, Roberts shall cooperate in the pursuit of such refund.

                                  ARTICLE VIII
                                  ------------
                              TERM AND TERMINATION
                              --------------------

     Section 8.01.  Term.  This Agreement shall become effective on the date
     -------------------                                                    
hereof, and shall remain in effect until the later of either:  (i) the life of
the last to expire of the patents encompassed in the Lilly Intellectual
Property, or (ii) fifteen (15) years from the date hereof.  Upon termination of
this Agreement as set forth in this Section 8.01, the licenses granted to
Roberts hereunder shall be deemed to be paid up in full.

     Section 8.02.  Termination by Default.  If either party is in default of
     -------------------------------------                                   
its material obligations under this Agreement, or fails to remedy such default
within sixty (60) days after the other party sends written notice detailing the
substance of the default to the defaulting party, the injured party may
terminate this Agreement by written notice. In the event Lilly elects to
<PAGE>
 
                                     -9-

terminate this Agreement by reason of any default by Roberts, the licenses 
granted hereunder shall terminate.
 
   Section 8.03. Residual Obligation Upon Termination: Termination of 
   --------------------------------------------------
this Agreement for any reason whatsoever willnot release or discharge Lilly or 
Roberts from the performance of any obligationor the payment of any debt which 
may have previously accrued and remains to be performed, paid or discharged, at 
the date of such termination. However, upon termination no further obligations 
under this Agreement shall be incurred by Lilly or Roberts.

                                  Article IX
                                  ----------
                           Miscellaneous Provisions
                           ------------------------

   Section 9.01. Amendment. This Agreement may not be amended, supplemented 
   -----------------------
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.

   Section 9.02. Entire Agreement. This Agreement constitutes the complete and
   ------------------------------
definitive agreement of the parties on the subject matter hereof and supersedes,
cancels and annuls all prior or subsequent agreements, understandings and 
undertakings relating to the subject matter hereof including, but, without 
limiting the generality of the foregoing, any documents used by the parties in 
making or accepting any offer. There are no verbal agreements, warranties, 
representations or understandings affecting this Agreement, and all previous or 
other negotiations, representations and understandings between Lilly and Roberts
are merged herein.

   Section 9.03. Severability. Each party agrees that, should any provision of
   --------------------------
this Agreement be determined by a court of competent jurisdiction to violate or 
contravene any applicable law or policy, such provision will be severed or 
modified by the court to the extent necessary to comply with the applicable law 
or policy, and such modified provision and the remainder of the provisions 
hereof will continue in full force and effect. The parties specifically agree 
that nothing in this Agreement is intended to require either party to take, or 
not take, any action which would constitute a violation of any applicable law or
regulation, including but not limited to those regarding trade.

   Section 9.04. Notices. Any notice required or permitted to be given under 
   ---------------------
this Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail, 
postage prepaid, or sent by national overnight delivery



<PAGE>
 
                                     -10-
 
service, or by acknowledged facsimile.  Unless otherwise specified in writing,
the mailing addresses of the parties shall be as follows:

     For Roberts:

     Roberts Laboratories Inc.
     4 Industrial Way West
     Attention, Eatontown, New Jersey  07724
     Attention:  A.A. Rascio, Vice President

     For Lilly:

     Eli Lilly and Company
     Lilly Corporate Center
     Indianapolis, IN  46285
     Attention:  General Counsel

     Section 9.05.  Governing Law.  This Agreement shall be governed by, and
     ----------------------------                                           
construed in accordance with, the Laws of Indiana, excluding any choice of law
rules which may direct the application of the law of any other jurisdiction.

     Section 9.06.  Assignment.  Except as expressly provided herein, neither
     -------------------------                                               
party may assign its rights and obligations under this Agreement except to an
Affiliate without the prior written consent of the other, except a party may
make such an assignment without the other party's consent in connection with any
merger or sale of all or substantially all of its assets to which this Agreement
relates.  This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assignees of the parties hereto.

     Section 9.7.  Consents Not Unreasonably Withheld.  Whenever provision is
     ------------------------------------------------                        
made in this Agreement for either party to secure the consent or approval of the
other, that consent or approval shall not unreasonably be withheld, and whenever
in this Agreement provisions are made for one party to object to or disapprove a
matter, such objection or disapproval shall not unreasonably be exercised.

     Section 9.8.  No Strict Construction.  This Agreement has been prepared
     ------------------------------------                                   
jointly and shall not be strictly construed against either party.

     Section 9.9.  Captions.  The captions or headings of the Sections or other
     ----------------------                                                    
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the meaning of the provisions hereof.

     Section 9.10.  Force Majeure.  Any delay or failure in the performance of
     ----------------------------                                             
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required 
<PAGE>
 
                                     -11-
 
for such party's performance shall be extended for a period equal to the period
of such delay. such events shall include, without limitation, any labor strike
or lockout, act of God, war, fire, flood, embargo, act of any governmental
authority, riot, or any other unforeseeable cause or causes beyond the
reasonable control and without the fault or negligence of the party so affected.
The party so affected shall give prompt notice to the other party of such cause,
and shall take whatever reasonable steps are appropriate in the party's
discretion to relieve the effect of such cause as rapidly as possible.

     Section 9.11.  Currency.  All references to "$" or "dollars" in this
     -----------------------                                             
agreement shall refer to United States dollars.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.

ROBERTS LABORATORIES, INC.               ELI LILLY AND COMPANY
    
By:  /s/ Robert A. Vukovich              By:  /s/Charles E. Golden
     -----------------------                 -------------------------------
Title:  President                            
                                         Title: Executive Vice President
                                                and Chief Financial Officer


In order to induce Lilly to execute this Agreement, Roberts Pharmaceutical
Corporation, the parent company of Roberts Laboratories Inc., hereby
unconditionally guarantees the due payment and performance of all obligations of
Roberts Laboratories, Inc. contained in this Agreement.

By: /s/ Anthony A. Rascio
    ----------------------
Title: Vice President
<PAGE>
 
                                     -12-
 
                                   Appendix A

Know-How shall mean all written information in the possession of Lilly regarding
the Compound of the types listed below reasonably useful to Roberts in
developing and manufacturing the compound.  Lilly shall use its reasonable
efforts to locate and furnish to Roberts all material documents representing
Know-How.  Roberts acknowledges that certain records may have been lost or
destroyed or otherwise be unavailable.  Provided that Lilly has used its
reasonable efforts to locate such documents, Lilly shall have no further
obligation to Roberts with respect to such documents.
 
Marketing        .  Market research on GI markets prepared with respect to
                    the Compound
 
                 .  Initial forecasts of market potential for the Compound
 
Toxicology       .  Written summary reports for the Compound
 
                 .  LRL Summary Reports
 
Regulatory       .  Material regulatory documents relating to the Compound,
                    if any
<PAGE>
 
                                     -13-

 
                                   Appendix B

                                 Patent Status
                                 -------------


                                    LY353433
                                    --------
 
 
Country          Status  Appln/Patent No.
---------------  ------  ----------------
 
Philippines      Filed              52617
Philippines      Filed              52616
EPO*             Filed         96301682.9
Israel           Filed             117438
PCT              Filed     PCT/US96/03551
Taiwan           Filed           84108549
South Africa     Filed            96/1955
United States    Filed          08/485956
India            Filed         425/CAL/96
 

     * Austria, Belgium, Switzerland, Denmark, France, Germany, Spain, Greece,
     Italy, United Kingdom, Ireland, Lithuania, Latvia, Luxembourg, Netherlands,
     Portugal, Sweden, Slovenia
<PAGE>

                                                                   EXHIBIT 10.81
 
                               LICENSE AGREEMENT
                                  [LY 315535]

     This License Agreement ("Agreement") is made as of the 4th day of December,
1996 by and between Eli Lilly and Company, an Indiana corporation ("Lilly") and
Roberts Laboratories Inc., a New Jersey corporation ("Roberts").

                                    RECITALS
                                    --------

     1. Lilly and Roberts are in the business of discovering, developing and
marketing pharmaceutical products.

     2. Lilly has discovered a compound internally designated as LY315535 (as
defined in Section 1.02 below, the "Compound") which may be useful in the
treatment of functional gastrointestinal disorders and other indications.  Lilly
has previously engaged in certain research and development efforts with respect
to the Compound, but has concluded that future development efforts including
limited clinical trials could best be conducted by a company with a focus on
gastrointestinal products.

     3. Roberts desires to license from Lilly certain rights of Lilly to the
Compound and to pursue development and commercialization of the Compound in the
Field and within the Territory (both as defined below), and Lilly is willing to
grant such license, all upon the terms and conditions set forth in this License
Agreement.

     4. Concurrently with the execution of this Agreement, Lilly is attempting
to enter into a License Agreement with Societe de Conseils de Recherches et
d'Applications Scientifiques ("Third Party") pursuant to which Lilly is
licensing to Third Party certain rights to develop and commercialize the
Compound outside the Territory.  Roberts and Third Party intend to enter into a
separate agreement among themselves providing for certain joint development
activities with respect to the Compound (the "Development Agreement").

                                   AGREEMENT
                                   ---------

     In consideration of the Recitals and the mutual covenants and agreements
set forth below, the parties agree as follows:

                                   Article 1
                                   ---------
                                  Definitions
                                  -----------

     When used in this Agreement, each of the following terms shall have the
meanings set forth below.

     Section 1.01.  "Affiliate" of a party hereto means any corporation or
     -------------                                                        
business entity which at the time in question controls, is under common control
with, or is controlled by such party.  As used herein, control shall mean the
ownership, directly or indirectly, of more than fifty percent (50%) of the
voting stock or similar interests of the corporation or business 
<PAGE>
 
                                     -2-
 
entity or the ability to otherwise control the management of the corporation or
business entity.

     Section 1.02.  "Compound" means 2-di-n-propylamino-8-(isoxazol-5-yl)-
     -------------                                                       
1,2,3,4-tetrahydronaphthalene and all pharmaceutically acceptable salts and
solvates.

     Section 1.03.  "Digestive System: means any portion of a human or animal's
     -------------                                                             
body which is involved in the process of converting food into material suitable
for assimilation for synthesis of tissues or the liberation of energy or the
removal of waste from a human or animal's body.  Such term thereby encompasses
all parts of a human or animal body which come in contact with food or waste
materials, from the mouth to the anus or urethra.

     Section 1.04.  "End User" means a wholesaler, distributor, pharmacy,
     -------------                                                       
hospital, health care organization or patient.

     Section 1.05.  "Field" means products for Gastrointestinal Indications.
     --------------                                                         

     Section 1.06.  "Gastrointestinal Indications" means disease states, such as
     -------------                                                              
excess gastric acid secretion, inflammatory bowel disease, irritable bowel
syndrome, gastroesophagael reflux disease, esophagitis, dyspepsia, proctitis,
hemorrhoids, gastrointestinal ulceration, nausea and vomiting and constipation
and diarrhea, which are characterized by abnormalities of the Digestive System,
regardless of the mechanism involved in such disease states.

     Section 1.07.  "Know-How" means the items listed on the attached Appendix A
     -------------                                                              
which are owned by or licensed to Lilly and reasonably useful to Roberts in
developing and manufacturing the Compound and Product.

     Section 1.08.  "Lilly Intellectual Property Rights" means all patent
     -------------                                                       
rights, trade secret rights, and Know-How rights owned, licensed or otherwise
controlled by Lilly as of the date hereof which are useful in the Field,
encompass Compound and Product or are useful in preparing Compound and are
effective in the Territory, including all divisions, continuations,
continuations-in-part, reissuances, reexaminations, extensions, Supplementary
Protection Certificates, and any similar intellectual property rights, and all
counterparts thereof in the Territory.  A list of all patent rights owned,
licensed or otherwise controlled by Lilly as of the date hereof and which are
encompassed hereunder is attached as Appendix B.

     Section 1.09.  "Net Sales" means with respect to a Product, the gross
     -------------                                                        
amount invoiced by Roberts, or any sublicensee, to an End User less the
following deductions:

     1. Trade, quantity and cash discounts actually given or allowed;
     2. Rebates, allowances, Medicaid and Medicare reimbursements, chargebacks
        and similar deductions;
     3. Any tax imposed on the sale, delivery or use of the product; and
<PAGE>
 
                                     -3-
 
     4. Allowed or credits for returned goods or rejections of any Product which
        is unsalable.

     All amounts of Net Sales shall be determined from the books and records of
Roberts maintained in accordance with United States generally accepted
accounting principles, consistently applied.

     Section 1.10.  "Phase II Clinical Trial" means a large scale clinical study
     -------------                                                              
conducted in patients to establish Product efficacy in the Field and to support
Product Registration.

     Section 1.11.  "Product" means any pharmaceutical composition for use as a
     -------------                                                             
therapeutic or diagnostic product that incorporates the Compound.

     Section 1.12.  "Territory" means the United States and its territories
     -------------                                                         
(Puerto Rico, Guam), Canada and Mexico.

                                   Article II
                                   ----------
                                    License
                                    -------

     Lilly grants to Roberts an exclusive license to make, have made, use or
sell for use in the Field within the Territory the Compound and Product pursuant
to all Lilly Intellectual Property Rights.  With respect to any patent rights
licensed hereunder, such license shall be limited solely to those patent claims
necessary to provide Roberts with the ability to make, have made, use or sell
Product in the Field within the Territory and shall, further, be limited solely
to the right to make, have made, use or sell Product in the Field within the
Territory. Such license shall include the right of Roberts to sublicense,
consistent with the terms of this Agreement.  All terms and provisions of this
Agreement shall apply to each sublicense to the same extent as they apply to
Roberts, and Roberts shall guarantee performance by its sublicensee of all
obligations imposed under the terms of this Agreement.

                                  Article III
                                  -----------
                             Payments and Royalties
                             ----------------------

     Section 3.01.  Signing and Milestone Payments.
     --------------------------------------------- 

     (a)  As consideration for the licenses granted hereunder, Roberts shall pay
Lilly by     wire transfer loan account designated by Lilly the following
account at the     following times:

        (i)   Upon execution of this Agreement              $1 million
 
        (ii)  Upon commencement of the first Phase          $2 million
              III Clinical Trial for a Product:

        (iii) Upon acceptance for filing by the FDA of      $2 million
<PAGE>
 
                                     -4-
 
               the first New Drug Application (or its
               equivalent) for a Product:

     (b) It is anticipated that Roberts and Third Party will, pursuant to the
         Development Agreement or otherwise, jointly conduct certain development
         efforts and Clinical Trials. If pursuant to such arrangements one or
         more of the Clinical Trials referred to above shall be conducted by
         Third Party, with Roberts to utilize the results of such trials, then
         the Clinical Trials referred to above as milestones for which payments
         may be due shall mean such Clinical Trials conducted by Third Party.

     (c) All payments described above shall be made within thirty (30) days of
         the relevant event, except for the payment described in (a)(i), which
         shall be made upon signing of this agreement. Any payment not made when
         due shall bear interest at the United States prime rate on the due date
         as published in the Wall Street Journal, plus six percent (6%).
                             -------------------                        

     Section 3.02.  Royalty.  As additional consideration for the licenses
     -----------------------                                              
granted herein, Roberts shall pay to Lilly a royalty equal to 8% of Net Sales of
Products in the Territory. Royalties shall be reported and paid quarterly in
accordance with Article VII of this Agreement.

                                   Article IV
                                   ----------
          Prosecution and Infringement of Intellectual Property Rights
          ------------------------------------------------------------

     Section 4.01  Patent Term Extensions and Supplementary Protection
     -----------------------------------------------------------------
Certificates. Lilly upon request of Roberts shall apply for (and grant Roberts a
------------                                                                    
license under) patent term extensions, Supplementary Protection Certificates or
functional equivalents thereof, in any jurisdiction within the Territory where
such items are permissible, for any Lilly Intellectual Property Rights licensed
to Roberts hereunder.  Roberts will provide Lilly with all material and
information as may be necessary to obtain any of the aforesaid rights.

     Section 4.02.  Prosecution and Maintenance of Licensed Patents.
     -------------------------------------------------------------- 

     (a) Upon execution of this Agreement, Lilly shall provide to Roberts
     Appendix B attached hereto which identifies all pending applications and
     patents in the Territory which are encompassed in the Lilly Intellectual
     Property Rights.

     (b) Lilly shall prosecute any pending applications of which it is the owner
     that are encompassed in the Lilly Intellectual property Rights and maintain
     any patents that have issued or will issue thereon in full force and effect
     for the term of such patent.  Should, during the course of prosecution of
     any pending claims, an official action rejecting the claims require that an
     amendment be made or action be taken which would limit or substantially
     change the scope of any license 
<PAGE>
 
                                     -5-
 
     hereunder, Lilly will timely inform Roberts in writing. Lilly shall consult
     Roberts before responding to any such official action, and allow Roberts to
     assist in the prosecution of such claims or, at Lilly's option, allow
     Roberts the opportunity at its time and expense to prosecute such claims
     to its satisfaction.

     Section 4.03.  Costs of Prosecution and Maintenance of Patents.  Lilly
     --------------------------------------------------------------        
shall bear all costs incurred in filing, prosecuting and maintaining all patents
and patent applications encompassed within the Intellectual Property Rights,
provided, however, that Roberts shall pay one-half (1/2) of all reasonable
external expenses incurred by Lilly while prosecuting and maintaining such
patents and patent applications.  External expenses will include patent office
fees and taxes in connection with the prosection and maintenance of any patent
or patent application and the fees of any patent attorneys or agents, external
of Lilly, in connection with the ex parte prosection and maintenance thereof.
                                 -- -----                                     
The allocation of such expenses will occur on an annual basis at the end of the
last quarter of each calendar year, at which time Lilly will provide Roberts
with an itemized list of external expenses denominated in United States dollars
incurred during the previous annual period.  Roberts will then reimburse Lilly's
expenses within sixty (60) days of the date of receipt of this itemized list.
Notwithstanding the foregoing, Lilly may, at its sole discretion, choose not to
prosecute or cease to maintain a patent or patent application in any country as
it so desires and to the extent that Lilly chooses not to prosecute or ceases to
maintain such patent or patent application Lilly shall not be responsible for
any patent costs associated with prosecuting and/or maintaining the patent or
patent application in such country.  If Roberts desires to prosecute or maintain
such patent or patent application, Roberts may do so at its own expense;
however, under these circumstances, Lilly would grant Roberts all of its patent
rights associated which such patent in such country.  Similarly, upon written
notice to Lilly, Roberts may elect not to share in the prosecution or
maintenance costs as described in this Section 4.03 related to a patent or
patent application in a particular country; however, upon such election any
rights that Roberts has in such patent in such country would be granted to
Lilly.

     Section 4.04.  Option by Roberts to Discontinue License.  Roberts, at its
     -------------------------------------------------------                  
option, may elect to discontinue the license granted and surrender all rights
hereunder as to any patent on a country-by-country basis.  Such election must be
made by thirty (30) days written notice by simultaneous facsimile transmission
and certified mailing, and, with respect to the surrender of Roberts' rights,
will be effective as of the date of mailing.  In the event such an election is
made, Lilly's obligations under Section 4.01 and 4.02 and Roberts' obligations
under Section 4.03 will terminate thirty (30) days from the date of mailing with
respect to the specific patent on which the election is made.

     Section 4.05.  Infringement.  Each party shall give prompt notice to the
     ---------------------------                                             
other of any infringement, potential infringement or suspected infringement of
Lilly Intellectual Property Rights that may come to such party's attention.
Promptly thereafter, the parties shall consult and cooperate fully to determine
a course of action, including, but not limited to, the commencement of legal
action by one or both parties, to cause such infringement, potential
<PAGE>
 
                                     -6-
 
infringement or suspected infringement to be terminated.  Each party, at its
option, may elect to participate in or commence such a legal action.  In the
event of a joint action in which both parties agree to participate, the parties
will share in the costs and the recovery of the agreed upon course of action in
a manner to be agreed upon.  Failing agreement on a course of action to abate
infringement, potential infringement or suspected infringement within sixty (60)
days of the time such infringement, potential infringement or suspected
infringement becomes known to both parties, either party shall have the right,
at its own expense, to initiate and prosecute an action against the infringer
and shall retain whatever damages are recovered.  In the event Roberts is unable
to initiate and prosecute such action solely in its own name, Lilly will execute
(and cause its Affiliates to execute) all documents necessary for Roberts to
initiate and prosecute such action.  Neither party will enter into any
settlement of any action referred to in this Section without the other party's
prior consent, which consent shall not be unreasonably withheld.

     Section 4.06.  Reexamination and Reissue.  Lilly shall defend in a
     ----------------------------------------                          
reasonable manner any patent encompassed within the Lily Intellectual Property
Rights in any reexamination or reissue proceeding in the United States Patent
and Trademark Office and the applicable foreign equivalent.  Before Lilly
initiates a reissue proceeding, or before either party initiates a reexamination
proceeding, the parties shall consult as to the desirability or necessity of
such a proceeding.  Such proceedings will not be abandoned prior to a final
decision of the Patent Office Board of Appeals or Patent Office Board of
Interferences and the applicable foreign equivalent without the consent of
Roberts, which consent will not be unreasonably withheld taking into
consideration, inter alia, the merits of the action of the Patent and Trademark
Office and the applicable foreign equivalent, priority dates provable by any
interference party (should an interference be involved), and the technological
and commercial important of the subject matter of the claims of the application
or patent involved expenses shall be borne as provided in Section 4.03.

                                   Article V
                                   ---------
                            Disclosure of Agreement
                            -----------------------

     Section 5.01.  Disclosure of Agreement.  Except as provided below, neither
     --------------------------------------                                    
Roberts or Lilly shall release any information to any third party with respect
to the existence and terms of this Agreement without the prior written consent
of the other party to this Agreement, except that Roberts may disclose the
existence (but not financial terms) of this Agreement to Third Party.

     This prohibition includes, but is not limited to, press releases,
educational and scientific conferences, promotional materials, governmental
filings, and discussions with lenders, investment bankers, public officials, and
the media.

     Section 5.02.  Releases Required by Law.  If either party determines a
     ---------------------------------------                               
release of information is required by law or governmental regulations, it shall
notify the other in writing at least ten (10) days (or such shorter period where
legally required) before the time 
<PAGE>
 
                                     -7-
 
of the proposed release. The notice shall include the exact text of the proposed
release, the time and manner of the release, and the basis for such party's
belief that disclosure is required. At the other party's request and before the
release, the party desiring to release information shall consult with the other
party on the necessity for the disclosure and the text of the proposed release.
In no event shall a release include information regarding the existence of terms
of this Agreement that is not required by law or governmental regulation without
the consent of the other party.

     Notwithstanding any other terms of this Agreement, either party shall be
permitted and allowed to provide a copy of this Agreement or any terms hereof or
otherwise provide any information with respect to the existence and terms of
this Agreement to appropriate governmental taxing or drug regulatory authorities
requested, without advance written notice or approval of the other party.

                                   Article VI
                                   ----------
                              Certain Undertakings
                              --------------------

     Section 6.01.  Lilly Warranties.  Lilly hereby warrants that it, to the
     -------------------------------                                        
best of its knowledge, is the sole owner of or is duly licensed under the Lilly
Intellectual Property Rights licensed to Roberts hereunder and has a lawful
right to grant the rights and licenses granted to Roberts hereunder.

     Section 6.02.  Roberts Efforts.  Roberts hereby agrees to use its best
     ------------------------------                                        
efforts to develop and commercialize Products within the Territory.  Roberts may
abandon development efforts for the Compound at any time if in the reasonable
judgment of Roberts further development efforts are not justified.  If Roberts
so abandons development, it shall upon request, assign to Lilly or Lilly's
designee all intellectual property, records, data, clinical trial results and
other information relating to the Compound in return for which Lilly or its
designee shall pay to Roberts an amount equal to Roberts' total development
costs (including all out of pocket costs and reasonable internal costs).
Furthermore, upon execution of this Agreement, Roberts shall assume all
responsibilities for all adverse event reporting, annual reporting and any other
reporting responsibilities to regulatory agencies in the Territory.

     Section 6.03.  Technical Assistance.  For a period of one hundred eighty
     -----------------------------------                                     
(180) days from the date hereof, Lilly will, through certain designated
personnel, provide Roberts with such technical assistance, information and
advice regarding the use of Lilly Intellectual Property Rights and the Know-How
that may be reasonably necessary in connection with the manufacturing and
testing of the Compound and Product.  Lilly, at its expense, also agrees that
such assistance may include one (1) visit to the Roberts facilities (not to
exceed twenty-four (24) hours) located in New Jersey by at least one (1)
qualified member of Lilly's personnel to render on-site technical assistance.
Except for the on-site visit described in this Section 6.03, all costs external
to Lilly and associated with technical assistance shall be borne entirely by
Roberts.  Furthermore, Lilly shall not be required to engage extra personnel or
to 
<PAGE>
 
                                     -8-
 
provide facilities in connection with providing technical assistance.

                                  Article VII
                                  -----------
                                   Accounting
                                   ----------

     Section 7.01.  Sales and Royalty Reports.  Roberts shall deliver to Lilly
     ----------------------------------------                                 
within sixty (60) days after the end of each calendar quarter a written
accounting of Roberts' Net Sales and the royalty payment due to Lilly for such
quarter.  Such quarterly reports shall be in English and include the Net Sales
of products on a country-by-country basis (expressed in United States dollars or
computed under the provisions of Section 7.04 hereof), a sales forecast for each
quarter of the current calendar year, and contain such other information as
Lilly may from time to time reasonably request.  Annually, by October 1, Roberts
shall deliver to Lilly a sales forecast, by quarter, for the subsequent calendar
year.  All sales and royalty reports shall be directed to Eli Lilly and Company,
Attn: Royalty Administration, D.C. 2211, Lilly Corporate Center, Indianapolis,
Indiana 46285.  In the event Roberts makes sales of Products(s) to persons other
than End Users, Roberts shall require such persons to provide Roberts with such
information as Lilly may reasonably request to permit Lilly to calculate and
verify Net Sales and royalties due.

     Section 7.02.  Delivery of Royalty.  When Roberts delivers the accounting
     ----------------------------------                                       
to Lilly, Roberts shall also pay by wire transfer or other method acceptable to
Lilly royalty payments due to Lilly for the preceding calendar quarter.  Any
payment not made when due shall bear interest at the United States prime rate on
due date as published in the Wall Street Journal, plus six percent (6%).
                             -------------------                        

     Section 7.03.  Audits.  Roberts shall keep accurate records in sufficient
     ---------------------                                                    
detail to enable to amounts due to Lilly hereunder to be determined.  During the
term of this Agreement and for two (2) years after its termination, Lilly shall,
not more than once each year and upon written notice, have the right, at its
expense, to audit the books and records of Roberts for the purpose of
determining the accuracy of royalty payments.  If Roberts has underpaid a
royalty amount due under this Agreement by more than five percent (5%), Roberts
shall, in addition to paying any royalties due, also reimburse Lilly for the
cost of such audit.

     Section 7.04.  Exchange Rates and Currency Translation.  All payments to be
     ------------------------------------------------------                     
made by Roberts to Lilly under this Agreement shall be made and reported in
United States dollars.  The rate of exchange to be used in computing the amount
of Net Sales and the United States dollars due Lilly shall be calculated using
Roberts' then current standard exchange rate methodology, which methodology is
used by Roberts in the translation of its foreign currency operating results for
external reporting, is consistent with United States generally accepted
accounting principles and is reviewed and approved by Roberts' independent
certified public accountants.

     Section 7.05.  Withholding Taxes.  Roberts shall have no liability for any
     --------------------------------                                          
income 
<PAGE>
 
                                     -9-
 
taxes levied against Lilly on account of royalties paid hereunder. If laws or
regulations require that any such taxes be withheld by Roberts, Roberts shall
deduct such taxes from the payment due Lilly, pay the taxes so withheld to the
proper taxing authority, and send proof of payment to Lilly annually within
ninety (90) days of the first day of the year following such payment. If Lilly
desires to obtain a refund of any taxes so withheld and paid to a taxing
authority, Roberts shall cooperate in the pursuit of such refund.

                                  Article VIII
                                  ------------
                              Term and Termination
                              --------------------

     Section 8.01.  Term.  This Agreement shall become effective on the date
     -------------------                                                    
hereof, and shall remain in effect until the later of either: (i) the life of
the last to expire of the patents encompass in the Lilly Intellectual Property,
or (ii) fifteen (15) years from the date hereof. Upon termination of this
Agreement as set forth in this Section 8.01, the licenses granted to Roberts
hereunder shall be deemed to be paid up in full.

     Section 8.02.  Termination by Default.  If either party is in default of
     -------------------------------------                                   
any of its material obligations under this Agreement, or fails to remedy such a
default within sixty (60) days after the other party sends written notice
detailing the substance of the default to the defaulting party, the injured
party may terminate this Agreement by written notice.  In the event Lilly elects
to terminate this Agreement by reason of any default by Roberts, the licenses
granted hereunder shall terminate.

     Section 8.03.  Residual Obligation Upon Termination.  Termination of this
     ---------------------------------------------------                      
Agreement for any reason whatsoever will not release or discharge Lilly or
Roberts from the performance of any obligation or the payment of any debt which
may have previously accrued and remains to be performed, paid or discharged, at
the date of such termination. However, upon termination, no further obligations
under this Agreement shall be incurred by Lilly or Roberts.

                                   Article IX
                                   ----------
                            Miscellaneous Provisions
                            ------------------------

     Section 9.01.  Amendment.  This Agreement may not be amended, supplemented
     ------------------------                                                  
or otherwise modified except by an instrument in writing signed by an authorized
representative of both parties.

     Section 9.02.  Entire Agreement.  This Agreement constitutes the complete
     -------------------------------                                          
and definitive agreement of the parties on the subject matter hereof and
supersedes, cancels and annuls all prior or subsequent agreements,
understandings and undertakings relating to the subject matter hereof including,
but without limiting the generality of the foregoing, any documents used by the
parties in making or accepting any offer.  There are no verbal agreements,
warranties, representations or understandings affecting this Agreement, and all
previous or other negotiations, representations and understandings between Lilly
and Roberts 
<PAGE>
 
                                     -10-
 
are merged herein.

     Section 9.03.  Severability.  Each party agrees that, should any provision
     ---------------------------                                               
of this Agreement be determined by a court of competent jurisdiction to violate
or contravene any applicable law or policy, such provision will be severed or
modified by the court to the extent necessary to comply with the applicable law
or policy, and such modified provision and the remainder of the provisions
hereof will continue in full force and effect.  The parties specifically agree
that nothing in this Agreement is intended to require either party to take, or
not take, any action which would constitute a violation of any applicable law or
regulation, including but not limited to those regarding trade.

     Section 9.04.  Notices.  Any notice required or permitted to be given under
     ----------------------                                                     
this Agreement shall be in writing and shall be deemed to have been sufficiently
given for all purposes if mailed by first class certified or registered mail,
postage prepaid, or sent by national overnight delivery service, or by
acknowledged facsimile.  Unless otherwise specified in writing, the mailing
addresses of the parties shall be as follows:

     For Roberts:

     Roberts Laboratories Inc.
     4 Industrial Way West
     Eatontown, New Jersey 07724
     Attention: A.A. Rascio, Vice President

     For Lilly:

     Eli Lilly and Company
     Lilly Corporate Center
     Indianapolis, IN 46285
     Attention: General Counsel

     Section 9.5.  Governing Law.  This Agreement shall be governed by, and
     ---------------------------                                           
construed in accordance with, the laws of Indiana, excluding any choice of law
rules which may direct the application of the law of any other jurisdiction.

     Section 9.6.  Assignment.  Except as expressly provided herein, neither
     ------------------------                                               
party may assign its rights and obligations under this Agreement except to an
Affiliate without the prior written consent of the other, except a party may
make such an assignment without the other party's consent in connection with any
merger or sale of al or substantially all of its assets to which this Agreement
relates.  This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assignees of the parties hereto.

     Section 9.7.  Consents Not Unreasonably Withheld.  Whenever provision is
     ------------------------------------------------                        
made in this Agreement for either party to secure the consent or approval of the
other, that consent or 
<PAGE>
 
                                     -11-
 
approval shall not unreasonably be withheld, and whenever in this Agreement
provisions are made for one party to object to or disapprove a matter, such
objection or disapproval shall not unreasonably be exercised.

     Section 9.8.  No Strict Construction.  This Agreement has been prepared
     ------------------------------------                                   
jointly and shall not be strictly construed against either party.

     Section 9.9.  Captions.  The captions or headings of the Sections or other
     ----------------------                                                    
subdivisions hereof are inserted only as a matter of convenience or for
reference and shall have no effect on the naming of the provisions hereof.

     Section 9.10.  Force Majeure.  Any delay or failure in the performance of
     ----------------------------                                             
any of the duties or obligations of any party hereto caused by an event outside
the affected party's reasonable control shall not be considered a breach of this
Agreement, and the time required for such party's performance shall be extended
for a period equal to the period of such delay. Such events shall include,
without limitation, any labor strike or lockout, act of God, war, fire, flood,
embargo, act of any governmental authority, riot, or any other unforeseeable
cause or causes beyond the reasonable control and without the fault or
negligence of the party so affected.  The party so affected shall give prompt
notice to the other party of such cause, and shall take whatever reasonable
steps are appropriate in the party's discretion to relieve the effect of such
cause as rapidly as possible.

     Section 9.11.  Currency.  All references to "$" or "dollars" in this
     -----------------------                                             
agreement shall refer to United States dollars.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their respective officers thereunto duly authorized.

ROBERTS LABORATORIES INC.           ELI LILLY AND COMPANY



By: /s/ Peter M. Rogalin                 By: /s/ Charles E. Golden
    ---------------------                    -------------------------
Title: Vice President                    Title: Executive Vice President
                                         and Chief Financial Officer

In order to induce Lilly to execute this Agreement, Roberts Pharmaceutical
Corporation, the parent company of Roberts Laboratories Inc., hereby
unconditionally guarantees the due payment and performance of all obligations of
Roberts Laboratories, Inc. contained in this Agreement.


By: /s/ Anthony A. Rascio
   -----------------------
Title:  Vice President

<PAGE>
 
                                     -12-
 
                                   Appendix A

     Know-How shall mean all written information in the possession of Lilly
regarding the Compound of the types listed below reasonably useful to Roberts in
developing and manufacturing the compound.  Lilly shall use its reasonable
efforts to locate and furnish to Roberts all material documents representing
Know-How.  Roberts acknowledges that certain records may have been lost or
destroyed or otherwise be unavailable.  Provided that Lilly has used its
reasonable efforts to locate such documents, Lilly shall have no further
obligation to Roberts with respect to such documents.
 
Marketing            .  Market research on GI markets prepared with respect to
                        the Compound
 
                     .  Initial forecasts of market potential for the Compound
 
Toxicology           .  Written summary reports for the Compound
 
Project Management
Status Reports       .  For the Compound for the 2 years prior to
                        discontinuation of Lilly's development effort
 
Regulatory           .  CTX for the Compound

                     .  All other material regulatory documents relating to the
                        Compound, including any and all clinical data
<PAGE>
 
                                     -13-

 
                                   Appendix B
                                   ----------

                                Patent Position
                                ---------------

                                    LY315535
                                    --------
 
        Compound                     USSN 07/850,136
 
        Use in Treating IBS          US 5,434,174
 
        Intermediates to Compound    US 5,389,687
                                     US 5,426,229
                                     US 5,286,753
                                     US 5,426,226
                                     US 5,434,174