EXHIBIT 10.1







              LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT



                                     between

                              LABORATORIOS BAGO SA

                                       and

                               GENAERA CORPORATION





















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              LICENSE, DEVELOPMENT AND COMMERCIALIZATION AGREEMENT

     This  Agreement  is made  and  entered  into as of  August  __,  2001 ( the
"Effective Date") between Laboratorios Bago SA, a _________ corporation,  having
offices at  Bernardo de  Irigoyen  248,  Buenos  Aires,  Argentina  (hereinafter
"Bago"), and Genaera Corporation, a Delaware corporation, having offices at 5110
Campus  Drive,  Plymouth  Meeting,  Pennsylvania,   United  States  (hereinafter
"Genaera").

     WHEREAS, Bago is currently manufacturing, marketing and selling the Product
for use as an anti-inflammatory;

     WHEREAS,   Genaera  is  currently  researching  and  has  obtained  certain
information  regarding  the  use  of  the  Product  (as  defined  herein)  as  a
Mucoregulator (as defined herein); and

     WHEREAS,  Bago and Genaera desire to exchange their respective  information
regarding the Product and to  collaborate  with,  and grant certain  licenses to
each other regarding the Product upon the terms and conditions set forth herein;

     NOW THEREFORE,  in  consideration  of the foregoing  premises,  the parties
agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

For purposes of this Agreement, the following definitions shall be applicable:

     1.1  "AFFILIATE"  shall mean, with respect to any Person,  any other Person
          that  directly  or  indirectly,  by  itself  or  through  one or  more
          intermediaries,  controls,  or is controlled by, or is under direct or
          indirect  common control with,  such Person.  The term "control" means
          the  possession,  direct or indirect,  of the power to direct or cause
          the  direction of the  management  and  policies of a Person,  whether
          through the ownership of securities, by contract or otherwise. Control
          will be presumed if one Person owns, either of record or beneficially,
          more than 50% of the voting stock of any other Person.

     1.2  "BAGO  KNOW-HOW"  shall mean all Know-How  controlled  by Bago and its
          Affiliates.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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     1.3  "BAGO  ROYALTY  PERIOD"  shall mean,  with  respect to Product in each
          country in the Genaera  Territory,  and subject to the  provisions  of
          Article V of this  Agreement,  the  longer of (a) if the  manufacture,
          use, offer for sale, sale or import of such Product in such country at
          the time of the First  Commercial  Sale is covered  by a Valid  Patent
          Claim,  the royalty period  continues for as long as such Valid Patent
          Claim  remains in effect and is infringed  thereby but for the license
          granted by this Agreement,  or (b) ten (10) years from the date of the
          First Commercial Sale of such Product by Genaera,  its Affiliates,  or
          sublicensees.  "Bago  Royalty  Period"  shall  mean,  with  respect to
          Reformulated  Product,  in each country in the Genaera Territory,  and
          subject to the  provisions  of Article V of this  Agreement,  ten (10)
          years from the date of the First Commercial Sale of such  Reformulated
          Product  by  Genaera,  its  Affiliates,  or  sublicensees;   provided,
          however,  that  Reformulated  Product shall refer only to Reformulated
          Product developed by Genaera.

     1.4  "BAGO  PATENTS"  shall  mean all  Patents  controlled  by Bago and its
          Affiliates.  A list of Bago Patents is appended hereto as SCHEDULE 1.4
          and will be updated  periodically to reflect  additions thereto during
          the course of this Agreement.

     1.5  "BAGO TECHNOLOGY" shall mean all Bago Patents and all Bago Know-How.

     1.6  "BAGO  TERRITORY"  shall  mean all the  countries  of  South  America,
          Central America, Mexico and Korea.

     1.7  "BASELINE AMOUNT" shall mean the aggregate Net Sales of Product in the
          Bago  Territory  for  the  twelve  (12)  month  period  prior  to  the
          commencement of the Genaera Royalty Period.

     1.8  "CONTROLLED" shall mean the legal authority or right of a party hereto
          to grant a license or sublicense of  intellectual  property  rights to
          another party hereto,  or to otherwise  disclose  proprietary or trade
          secret information to such other party, without breaching the terms of
          any agreement  with a Third Party,  infringing  upon the  intellectual
          property rights of a Third Party, or misappropriating  the proprietary
          or trade secret information of a Third Party.

     1.9  "EFFECTIVE  DATE" shall mean the date specified in the first paragraph
          of this Agreement.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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     1.10 "FIRST COMMERCIAL SALE" shall mean, in the case of Genaera,  the first
          sale of Product or Reformulated Product to a Third Party by Genaera or
          an  Affiliate  or  sublicensee  of Genaera in a country in the Genaera
          Territory following  applicable  Regulatory Approval of the Product or
          Reformulated  Product  in such  country.  In the case of  Bago,  First
          Commercial  Sale shall mean the first sale of Product or  Reformulated
          Product to a Third Party by Bago or an  Affiliate  or  sublicensee  of
          Bago  in  a  country  in  the  Bago  Territory  following   applicable
          Regulatory  Approval  of the Product or  Reformulated  Product in such
          country.

     1.11 "GMP" shall mean the current Good Manufacturing  Practice  regulations
          promulgated by the FDA,  published at 21 CFR Part 210 et seq., as such
          regulations may be amended, and such equivalent foreign regulations or
          standards as may be applicable with respect to Talniflumate or Product
          manufactured or sold outside the United States.

     1.12 "GENAERA  KNOW-HOW" shall mean all Know-How  controlled by Genaera and
          its Affiliates.

     1.13 "GENAERA PATENTS" shall mean all Patents controlled by Genaera and its
          Affiliates.  A list of Genaera  Patents is appended hereto as SCHEDULE
          1.13 and will be updated  periodically  to reflect  additions  thereto
          during the course of this Agreement.

     1.14 "GENAERA  ROYALTY  PERIOD" shall mean, with respect to Product in each
          country in the Bago Territory and subject to the provisions of Article
          V of this Agreement, the longer of (a) if the manufacture,  use, offer
          for sale,  sale or import of such  Product in such country at the time
          of the First Commercial Sale of Product as a Mucoregulator infringes a
          Valid  Patent  Claim but for the  license  granted  by Genaera by this
          Agreement,  the  royalty  period  continues  for as long as such Valid
          Patent Claim  remains in effect and is  infringed  thereby but for the
          license granted by this Agreement, or (b) ten (10) years from the date
          Bago begins  marketing the Product as a Mucoregulator in such country.
          "Genaera  Royalty  Period"  shall mean,  with respect to  Reformulated
          Product,  in each country in the Bago Territory and subject to Article
          V of this  Agreement,  ten  (10)  years  from  the  date of the  First
          Commercial Sale of such Reformulated  Product by Bago, its Affiliates,
          or sublicensees;  provided,  however,  that Reformulated Product shall
          only refer to Reformulated Product developed by Bago.

     1.15 "GENAERA  TECHNOLOGY"  shall mean all Genaera  Patents and all Genaera
          Know-How.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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     1.16 "GENAERA  TERRITORY"  shall mean all the countries of the world except
          the countries of the Bago Territory.

     1.17 "KNOW-HOW"  shall  mean  all  proprietary   material  and  information
          including data, compositions of matter and methods,  whether currently
          existing or developed or obtained  during the course of this Agreement
          and whether or not patentable or confidential,  and that relate to the
          development,   utilization,   or  use  of  Talniflumate,   Product  or
          Reformulated   Product,   including  but  not  limited  to  processes,
          techniques, methods, products, materials and compositions.

     1.18 "MUCOREGULATOR"  shall mean a substance that regulates or inhibits the
          synthesis or secretion of glycoproteins  derived from any of the mucin
          genes  from  cells in the lung or other  organs in the body of mammals
          including man.

     1.19 "NET SALES" shall mean,  with  respect to the Product or  Reformulated
          Product,  the gross  amount  invoiced  on  account of sales by Bago or
          Genaera, as the case may be, or any of their respective  Affiliates or
          sublicensees  to Third  Parties  less the  following to the extent not
          already reflected in the invoice price (a) actual credits, allowances,
          discounts, rebates to, and chargebacks from the account of, such Third
          Parties  (including  without  limitation Third Party  distributors and
          wholesalers)  for spoiled,  damaged,  out-dated,  rejected or returned
          Product  and actual  Federal,  State or local  government  rebates for
          Product or  Reformulated  Product;  (b) actual  freight and  insurance
          costs incurred in transporting such Product or Reformulated Product to
          such Third Parties; (c) actual cash, quantity and trade discounts; and
          (d) actual sales, use and value-added  taxes and taxes or governmental
          charges  incurred in connection with the exportation or importation of
          such Product or Reformulated  Product. For purposes of determining Net
          Sales, a sale shall have occurred when an invoice  therefore  shall be
          generated  or, if  earlier,  the  Product or  Reformulated  Product is
          shipped for delivery. Sales of Product or Reformulated Product by Bago
          or Genaera to any of their  respective  Affiliates  that is a reseller
          thereof  shall  be  excluded,  and only  the  subsequent  sale of such
          Product or Reformulated Product to a Third Party by Bago or Genaera or
          any of their respective Affiliates or sublicensees shall be deemed Net
          Sales  hereunder.  In the case of any other sale or  disposal or other
          arrangement with a Third Party with respect to Product, Net Sales will
          be calculated to include the value of the consideration received.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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     1.20 "PATENTS" shall mean all existing patents and patent  applications and
          all patent applications  hereafter filed, including any continuations,
          continuations-in-part,   divisions,  provisionals  or  any  substitute
          applications,  any  patent  issued  with  respect  to any such  patent
          applications,  any  reissue,   reexamination,   renewal  or  extension
          (including any  supplemental  patent  certificate) of any such patent,
          and any  confirmation  patent  or  registration  patent  or  patent of
          addition based on any such patent, and all foreign counterparts of any
          of the foregoing that relate to Talniflumate,  Product or Reformulated
          Product.

     1.21 "PERSON"  shall  mean  any   individual,   corporation,   partnership,
          association,  joint-stock company, trust,  unincorporated organization
          or government or political subdivision thereof.

     1.22 "PRODUCT" shall mean the substance for  pharmaceutical  use containing
          Talniflumate  currently  commercialized  by  Bago  in the  tablet  and
          suspension forms currently used by Bago and specifically  described on
          SCHEDULE 1.22.

     1.23 "REFORMULATED PRODUCT" shall mean any product containing  Talniflumate
          developed by either Bago or Genaera other than Product.

     1.24 "REGULATORY  APPROVAL"  shall mean,  with  respect to a country in the
          Bago Territory or the Genaera  Territory,  all  authorizations  by the
          appropriate  governmental  entity or entities necessary for commercial
          sale of the Product or Reformulated Product in that country including,
          without limitation and where applicable,  approval of labeling, price,
          reimbursement and manufacturing.  "Regulatory  Approval" in the United
          States shall mean final approval of a new drug application pursuant to
          21 C.F.R. ss. 314, permitting marketing of the Product or Reformulated
          Product in interstate commerce in the United States.

     1.25 "TALNIFLUMATE"             shall            mean            phthalidyl
          2-(3'trifluoromethyl-anilino)-pyridine-3-carbolylate and its salts.

     1.26 "TECHNOLOGY" shall mean Genaera Technology and Bago Technology.

     1.27 "THIRD PARTY" shall mean any unincorporated body, person,  corporation
          or  other  entity  other  than  Genaera,   Bago  or  their  respective
          Affiliates or sublicensees of rights conveyed under this Agreement.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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     1.28 "VALID  PATENT  CLAIM"  shall mean either (a) a claim of an issued and
          unexpired  patent  included within the Genaera Patents or Bago Patents
          that has not been  disclaimed  or abandoned  or withdrawn  and has not
          been  held  unenforceable  or  invalid  or  permanently  revoked  by a
          decision  of  a  court  or  other  governmental  agency  of  competent
          jurisdiction,  unappealable or unappealed  within the time allowed for
          appeal, and which has not been admitted to be invalid or unenforceable
          through  reissue or disclaimer or otherwise;  (b) a claim of a pending
          patent  application  included  within the  foregoing,  which claim was
          filed in good faith and has not been  abandoned or finally  disallowed
          without the possibility of appeal or refiling of such  application and
          the  subject  matter of which has not been  pending for more than five
          (5) years,  including the pendency of any prior application;  or (c) a
          claim that has been  pending  for more than five (5) years,  including
          the pendency of any prior  application that subsequently is issued and
          satisfies the criteria of subsection (a) above.


                                   ARTICLE II
                           MUTUAL TRANSFER OF KNOW-HOW

2.1      TRANSFER OF KNOW-HOW

    2.1.1 Within  thirty  (30)  days of the  Effective  Date,  each of Bago  and
          Genaera  shall take  substantial  steps to identify  Bago Know-How and
          Genaera  Know-How,  and shall  promptly  commence  the transfer to the
          other of such Bago Know-How and Genaera  Know-How as may be requested;
          provided,  however,  that the  Know-How  intended by this  Section 2.1
          shall not include Know-How related to Reformulated Product.
    2.1.2 Promptly  after the end of each  calendar  quarter  during the term of
          this Agreement,  each of Bago and Genaera shall similarly identify and
          transfer to the other party,  the relevant  Bago  Know-How and Genaera
          Know-How;  provided  however,  in the event that the  dissemination of
          Know-How would be prohibited by law,  agreement with a Third Party, or
          otherwise,  the fact of such  prohibition  shall be  disclosed  to the
          other party but not the Know-How.

    2.1.3 During the term of this  Agreement,  Bago shall  provide  Genaera  and
          Genaera  shall provide Bago with such  technical  advice as reasonably
          requested by the other with respect to the use of the Bago  Technology
          and Genaera Technology.
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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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    2.1.4 Upon not less than two weeks prior written  notice to the other party,
          Bago and  Genaera  shall  have the right to visit the  premises  where
          Know-How  is  being  developed,   marketed  or  sold  and  shall  make
          scientists and other relevant experts reasonably  available to discuss
          the progress of the Bago  Know-How or Genaera  Know-How in  accordance
          with the terms of this Agreement.

    2.1.5 The  foregoing   transfer  of  Know-How  shall  be  for  the  purposes
          permitted  under this Agreement only and in accordance with the rights
          granted  under the licenses  hereunder.  Neither  party shall gain any
          right to use or otherwise  exploit the Know- How of the other,  except
          as expressly stated herein.

2.2      JOINT PROJECT TEAM

    2.2.1 The  parties  hereto  agree to  establish  a joint  project  team (the
          "JC"),  which  shall  consist  of no fewer  that  four  (4)  permanent
          members,   two  (2)   permanent   members   from  each   party.   Such
          representatives  shall include individuals within or designated by the
          senior  management of each party,  and those  representatives  of each
          party shall,  individually  or  collectively,  have  expertise  and/or
          responsibility  to perform under this Agreement.  Any member of the JC
          may designate a substitute to attend and perform the functions of that
          member at any  meeting of the JC and each  member of the JC may invite
          such other  non-members as deemed necessary to help explore the issues
          before the JC.

    2.2.2 The purpose of the JC shall be to ensure open  communication,  through
          telephone  conferences,  meetings and  otherwise,  and provide for the
          exchange of information  between the parties with respect to Know-How.
          The parties  shall  provide each other with an update on Know-How on a
          timely  basis,  which shall in no event be less than  quarterly.  Each
          party  shall be  responsible  for all  travel  and  related  costs and
          expenses for its members.


                                   ARTICLE III
                                  LICENSE GRANT

         3.1      GRANT TO GENAERA
                  Subject to the other provisions of this Agreement, Bago hereby
                  grants to Genaera a sole

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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                  and  exclusive license or (as appropriate) sublicense under
                  Bago Technology to the extent  necessary to permit Genaera to
                  carry out its rights and obligations  set forth in this
                  Agreement  and to  research,  develop, manufacture,  have
                  manufactured,  import, export, market, use, sell or have  sold
                  Product  in the  Genaera  Territory,  with  the  right  to
                  sublicense.  Notwithstanding  the foregoing  grant,  Bago
                  reserves the right  to  use  all  Bago   Technology
                  necessary  to  discharge  its obligations and exercise its
                  rights under this Agreement. Bago retains all rights to Bago
                  Technology except to the extent explicitly  granted to Genaera
                  hereunder.  Genaera shall not permit any subcontractors or
                  sublicensees to use Bago Technology  without  provisions
                  safeguarding confidentiality  equivalent to those provided in
                  this  Agreement.  Any such  provisions  will allow Bago the
                  right to directly enforce the obligations of confidentiality
                  with respect to Bago Know-How and other confidential
                  information  in  the  possession  of  the  Third  Party.
                  Notwithstanding the foregoing, Genaera understands and agrees
                  that the license  granted to it pursuant to this Section 3.1
                  does not include a license or sublicense under Bago Technology
                  that relates to Reformulated Product.



         3.2      GRANT TO BAGO

                  Subject to the other provisions of this Agreement, Genaera
                  hereby grants to Bago a sole and exclusive license or
                  (as appropriate) sublicense in the Bago Territory under
                  Genaera Technology to the extent necessary to allow Bago to
                  carry out its rights and obligations set forth in this
                  Agreement and to research, develop, manufacture, have
                  manufactured, import, export, market, use, sell and have sold
                  Product in the Bago Territory, with the right to sublicense.
                  Notwithstanding the foregoing grant, Genaera reserves the
                  right to use all Genaera Technology necessary to discharge its
                  obligations and exercise its rights under this Agreement.
                  Genaera retains all rights to Genaera Technology except to the
                  extent explicitly granted to Bago hereunder.  Bago shall not
                  permit any subcontractors or sublicensees to use Genaera
                  Technology without provisions safeguarding confidentiality
                  equivalent to those provided in this Agreement.  Any such
                  provisions will allow Genaera the right to directly enforce
                  the obligations of confidentiality with respect to Genaera
                  Know-How and other confidential information in the possession
                  of the Third Party.   Notwithstanding the foregoing, Bago
                  understands and agrees that the license granted to it pursuant
                  to this Section 3.2 does not include a license or sublicense
                  under Genaera Technology which relates to Reformulated
                  Product,

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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         3.3      REFORMULATED PRODUCT
                  In the event that one party develops a Reformulated Product:
    3.3.1 The developing party shall give the non-developing  party an option to
          negotiate  for an  exclusive  license to  develop,  make and sell such
          Reformulated  Product in the  non-developing  party's  territory.  The
          license shall be upon terms to be mutually  negotiated by both parties
          during a 180 day  period  beginning  upon the  non-developing  party's
          receipt of notice of the development of such Reformulated  Product and
          sufficient  information to enable the non-developing party to evaluate
          and determine  whether to exercise its option.  Both parties shall use
          commercially reasonable efforts to conclude such license. In the event
          that no agreement is reached,  the  developing  party shall not market
          such Reformulated Product in the territory of the non-developing party
          without the  non-developing  party's  written  consent,  except as set
          forth in Section 11.3 of the Agreement, and
    3.3.2 Notwithstanding   that   no   license   to  the   developing   party's
          Reformulated  Product  is  granted to the  non-developing  party,  the
          developing party shall pay royalties to the  non-developing  party for
          sales of Reformulated  Product in the developing  party's territory as
          set forth in Article V.


                                   ARTICLE IV
                          SUPPLY AND REGULATORY MATTERS



       4.1    MANUFACTURE OF TALNIFLUMATE AND PRODUCT

              Bago will be responsible for manufacturing and supply of all
              Talniflumate and Product to the extent requested by Genaera and
              without cost to Genaera as necessary for the conduct of
              preclinical testing, including without limitation toxicology and
              pharmacology testing, and clinical trials to be conducted by
              Genaera.  In the event that Genaera requires an aggregate of 100
              kg or more of Talniflumate or Product for preclinical and clinical
              trials, Genaera shall pay to Bago, an amount equal to the direct
              manufacturing cost of such excess plus reasonable overhead
              applied to such excess  plus an amount equal to 20% of such total
              cost (the

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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              "Genaera Price").   At the time the agreement is signed by both
              parties, the estimated selling price of Talniflumate by Bago to
              Genaera is one hundred fifty dollars (USD (150,=) per kilo.  The
              parties understand that material manufactured by Bago as of the
              date of this Agreement is not in accordance with United States
              Food and Drug Administration GMP. Bago may, at its option, request
              to become a non-exclusive commercial supplier of Talniflumate and
              Product for Genaera on a country-by-country basis, assuming
              compliance by Bago of all necessary regulatory manufacturing
              requirements.  In such event and solely at Genaera's request, Bago
              shall supply Genaera with Talniflumate and Product for Genaera's
              commercial use at the Genaera Price plus shipping, such shipping
              to be CIF Air USA; provided however, that allocation of supply
              shall be determined in a manner that does not unreasonably
              interfere with Bago's need for Product in the Bago Territory.

         4.2  REGULATORY FILINGS

              Each party shall have the sole right in its territory to obtain
              Regulatory Approvals, which shall be held by and in its name and
              such party shall own all submissions in connection therewith,
              provided that each party shall have a right of reference to all or
              any part of the submissions of the other party.  Notwithstanding
              the foregoing, it is understood and agreed by the parties that
              each party may conduct clinical trials in any country of the
              world, at its own cost, and that the results of all clinical
              trials shall be available to both parties for their respective
              regulatory and marketing applications in their respective
              territories.


                                    ARTICLE V
                                    ROYALTIES

         5.1  ROYALTIES TO BAGO

              Genaera will pay royalties to Bago at the following annual rates,
              on Net Sales of all Products sold in the Genaera Territory, and
              Reformulated Product developed by Genaera and sold in the Genaera
              Territory, on a country by country basis, as follows:

                  5.1.1  For the first two (2) years of the Bago Royalty Period,
                         Genaera shall pay to Bago [**] of the aggregate of Net
                         Sales of Product or Reformulated Product.

                  5.1.2  Thereafter, for the remainder of the Bago Royalty
                         Period, [**] of the aggregate of Net Sales of Product
                         or Reformulated Product; provided however, that in

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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                  no event shall the aggregate royalties paid or payable to Bago
                  by Genaera exceed [**] US Dollars.


         5.2  TAX WITHHOLDING

              Any income or other taxes which Genaera is required by law to pay
              or withhold on behalf of Bago with respect to royalties, and any
              interest thereon, payable to Bago under this Agreement shall be
              deducted from the amount of such royalties and interest due and
              paid or withheld, as appropriate, by Genaera on behalf of Bago.
              Any such tax required to be paid or withheld shall be an expense
              of, and borne solely by, Bago.  Genaera shall furnish Bago with
              reasonable evidence of such withholding payment, in electronic or
              written form, as soon as practicable after such payment is made.
              The parties hereto will reasonably cooperate in completing and
              filing documents required under the provisions of any applicable
              tax laws or under any other applicable law in connection with the
              making of any required withholding payment, or any claim to a
              refund of any such payment.



         5.3  ROYALTIES TO GENAERA

              Bago will pay royalties to Genaera at the following annual rates,
              on Net Sales of all Products sold in the Bago Territory, and
              Reformulated Product developed by Bago and sold in the Bago
              Territory, on a country by country basis, as follows:

                  5.3.1    The Genaera Royalty Period shall not commence until
                           such time as Bago begins marketing the Product or
                           Reformulated Product as a Mucoregulator.  Bago hereby
                           agrees that it shall promptly inform Genaera when it
                           begins marketing the Product or Reformulated Product
                           as a Mucoregulator and understands that failure to
                           comply with this provision shall be deemed a material
                           breach of this Agreement.

                  5.3.2    For the first two (2) years of the Genaera Royalty
                           Period, Bago shall pay to Genaera [**] of the
                           aggregate of Net Sales of Product or Reformulated
                           Product in excess of the Baseline Amount.

                  5.3.3    Thereafter, for the remainder of the Genaera Royalty
                           Period, Bago shall pay to Genaera [**] of the
                           aggregate of Net Sales of Product or

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                           Reformulated Product in excess of the Baseline
                           Amount; provided however, that in no event shall the
                           aggregate royalties paid or payable to Genaera by
                           Bago exceed [**] US Dollars.



         5.4  TAX WITHHOLDING

              Any income or other taxes which Bago is required by law to pay or
              withhold on behalf of Genaera with respect to royalties, and any
              interest thereon, payable to Genaera under this Agreement shall be
              deducted from the amount of such royalties and interest due and
              paid or withheld, as appropriate, by Bago on behalf of Genaera.
              Any such tax required to be paid or withheld shall be an expense
              of, and borne solely by Genaera.  Bago shall furnish Genaera with
              reasonable evidence of such withholding payment, in electronic or
              written form, as soon as practicable after such payment is made.
              The parties hereto will reasonably cooperate in completing and
              filing documents required under the provisions of any applicable
              tax laws or under any other applicable law in connection with the
              making of any required withholding payment, or any claim to a
              refund of any such payment.


         5.5   SALES REPORTS

           5.5.1  SUBSTANCE OF QUARTERLY REPORTS

                  During the term of this Agreement and after the First
                  Commercial Sale of the Product or Reformulated Product,
                  Genaera for the Genaera Territory and Bago for the Bago
                  Territory shall furnish or cause to be furnished to the other
                  on a quarterly basis a written report or reports covering each
                  quarter (each such quarter being sometimes referred to herein
                  as a "reporting period") showing: the Net Sales of the Product
                  and Reformulated Product in each country in the relevant
                  territory during the reporting period by such party;  the
                  royalties, payable in United States Dollars ("Dollars"), which
                  shall have accrued under this Agreement in respect of such
                  sales and the basis of calculating those royalties;  the
                  exchange rates used in converting into Dollars, from the
                  currencies in which sales were made, any payments due which
                  are based on Net Sales; and dispositions of Product and
                  Reformulated Product other than pursuant to sale for cash.

           5.5.2  TIMING

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                  Final reports shall be due on the sixtieth (60th) day
                  following the close of each reporting period.  In addition, at
                  least ten (10) days prior to the end of the calendar quarter,
                  each party shall provide the other with a draft report for the
                  quarter, based on such party's then-current forecast for that
                  quarter.

           5.5.3  RECORDS

                  Each party shall keep accurate records in sufficient detail to
                  enable the amounts due hereunder to be determined and to be
                  verified by the other party.

           5.5.4  CURRENCY EXCHANGE

                  With respect to sales of Product or Reformulated Product
                  invoiced in Dollars, the Net Sales amounts and the amounts due
                  hereunder shall be expressed in Dollars. With respect to sales
                  of Product or Reformulated Product invoiced in a currency
                  other than Dollars, the Net Sales and amounts due hereunder
                  shall be expressed in the domestic currency of the party
                  making the sale, together with the Dollar equivalent of the
                  amount payable, calculated using the arithmetic average of the
                  spot rates on the last business day of each month of the
                  calendar quarter in which the Net Sales were made.  The
                  "Closing mid-point rates" found in the "Dollar spot forward
                  against the Dollar" table published by The Financial Times or
                  any other publication as agreed to by the parties shall be
                  used as the source of spot rates to calculate the average as
                  defined in the preceding sentence.  All payments shall be made
                  in Dollars.

           5.5.5  ROYALTY PAYMENT DUE DATE; ACCRUAL

                  Royalties which have accrued during any month and are required
                  to be shown on a final quarterly sales report provided for
                  under this Agreement shall be due and payable on the date such
                  final quarterly sales report is due.

           5.5.6  AUDIT

                  Upon the written request of the receiving party, at its
                  expense and not more than once in or in respect of any
                  calendar year, the paying party shall permit an independent
                  public accountant of national prominence selected by the
                  receiving party to have access during normal business hours
                  to those records of the paying party as may be reasonably
                  necessary to verify the accuracy of the Net Sales report and
                  royalty calculation conducted by the paying party pursuant to
                  this Agreement, in respect of any calendar year ending

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                  not more than thirty-six (36) months prior to the date of such
                  notice.  The report prepared by such independent public
                  accountant, a copy of which shall be sent or otherwise
                  provided to the paying party by such independent public
                  accountant at the same time it is sent or otherwise provided
                  to the receiving party, shall contain the conclusions of such
                  independent public accountant regarding the audit and will
                  specify that the amounts paid to the receiving party pursuant
                  thereto were correct or, if incorrect, the amount of any
                  underpayment or overpayment. If such independent public
                  accountant's report shows any underpayment, the paying party
                  shall remit or shall cause its sublicensees or marketing
                  partners to remit to the receiving party within thirty (30)
                  days after receipt of such report, (i) the amount of such
                  underpayment and (ii) if such underpayment exceeds five
                  percent (5%) of the total amount owed for the calendar year
                  then being audited, the reasonable and necessary fees and
                  expenses of such independent public accountant performing the
                  audit, subject to reasonable substantiation thereof.  Any
                  overpayments shall be fully creditable against amounts payable
                  in subsequent payment periods. Each party agrees that all such
                  information is confidential and shall be retained by its
                  accountant in confidence.

           5.5.7  INTEREST DUE

                  In case of any delay in payment but not occasioned by Force
                  Majeure, interest on the overdue payment shall accrue at an
                  annual interest rate, compounded monthly, equal to the LIBOR
                  rate as reported in The Financial Times, plus four percentage
                  points (4%), as determined for each month on the last business
                  day of that month, assessed from the day payment was initially
                  due.  The foregoing interest shall be due without any special
                  notice.


                                   ARTICLE VI
                              INTELLECTUAL PROPERTY

         6.1  PATENTABLE INVENTIONS AND KNOW-HOW.

          6.1.1   Each party shall have and retain sole and exclusive title to
                  all inventions, discoveries, Know-How which are made,
                  conceived, reduced to practice or generated by its employees,
                  agents or other persons acting under its authority in the
                  course of or as a result of this Agreement.  In the event that
                  the employees, agents or other persons acting under the
                  authority of both parties jointly make, conceive, reduce to
                  practice or generate any inventions, discoveries, Know-How,
                  then (I)if such invention, discovery, Know-

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                  How relates primarily to Genaera Technology then it shall be
                  owned by Genaera, and (ii) if such invention, discovery or
                  Know-How relates primarily to Bago Technology then it shall be
                  owned by Bago.  The parties agree that if the invention,
                  discovery or Know-How relates to a Product, it shall be
                  subject to the license granted in Section 3.1 or 3.2 of this
                  Agreement; if the invention, discovery or Know-How relates to
                  Reformulated Product, it shall be subject to the provisions of
                  Section 3.3 of this Agreement.

          6.1.2   During the term of this Agreement, Bago shall be responsible
                  for the preparation, filing, prosecution, maintenance and
                  related expenses of all Bago Patents and Genaera Patents
                  approved anywhere in the Bago Territory; provided, however,
                  that Bago shall not be responsible for the preparation,
                  filing, prosecution, maintenance and related expenses of any
                  Genaera Patents which relate to Reformulated Product in the
                  Bago Territory unless such an agreement is reached pursuant to
                  Section 3.3 herein.  Genaera shall be responsible for the
                  preparation, filing, prosecution, maintenance and related
                  expenses of all Genaera Patents and Bago Patents approved
                  anywhere in the Genaera Territory; provided, however, that
                  Genaera shall not be responsible for the preparation, filing,
                  prosecution, maintenance and related expenses of any Bago
                  Patents which relate to Reformulated Product to be
                  commercialized in the Genaera Territory unless such an
                  agreement is reached pursuant to Section 3.3 herein.

          6.1.3   During the term of this Agreement, neither Bago nor Genaera
                  shall allow any Bago Patents or Genaera Patents, respectively,
                  to lapse (other than expiration of the patent term) or be
                  surrendered, or abandoned (other than those that are abandoned
                  in the ordinary course of prosecution in connection with the
                  filing of a continuation or continuation in part application
                  therefore and/or as a result of the expiration of the patent
                  term and/or as a result of a patent being determined to be
                  invalid by a court or administrative agency of competent
                  jurisdiction) without written notice of such intention to the
                  other party.  Genaera shall have the right to assume
                  responsibility for any Bago Patent approved anywhere within
                  the Genaera Territory or any part thereof which Bago intends
                  to abandon or otherwise cause or allow to be forfeited, and
                  Bago shall have the right to assume responsibility for any
                  Genaera Patent approved anywhere in the Bago Territory or any
                  part thereof which Genaera intends to abandon or otherwise
                  cause or allow to be forfeited

         6.2  PATENT PROSECUTION.

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          6.2.1   In the event of the institution of any suit by a Third Party
                  against either party, their Affiliates or sublicensees for
                  patent infringement involving the manufacture, use, sale,
                  distribution or marketing of Product or Reformulated Product
                  anywhere in the Bago Territory or Genaera Territory, the party
                  sued shall promptly notify the other party in writing.  The
                  party in whose territory the suit was instituted  (the
                  "Defending Party") shall have the right but not the obligation
                  to defend such suit at its own expense, provided that in the
                  case where the patent is not held by the Defending Party, the
                  Defending Party notifies and consults with the non-defending
                  party on its defense.  Bago and Genaera shall assist one
                  another and cooperate in any such litigation at the other's
                  request without expense to the requesting party.

          6.2.2   In the event that either party becomes aware of actual or
                  threatened infringement of a Patent anywhere in the Bago
                  Territory or the Genaera Territory, that party shall promptly
                  notify the other party in writing.  The party in whose
                  territory the infringement is threatened or has occurred (the
                  "Infringed Party") shall have the first right, but not the
                  obligation to bring, at its own expense, an infringement
                  action against the Third Party.  In the event that the patent
                  is not held by the Infringed Party and the Infringed Party
                  does not commence an infringement action within ninety (90)
                  days of receipt of notice of infringement, the non-infringed
                  party, after notifying the Infringed Party in writing, shall
                  be entitled to bring such infringement action at its own
                  expense.  The party conducting such action shall have full
                  control over its conduct, including settlement thereof.  In
                  any event, Bago and Genaera shall assist one another and
                  cooperate in any such litigation at the other's request
                  without expense to the requesting party.

          6.2.3   In any action brought pursuant to Section 6.2.2, the party
                  bringing the action shall indemnify the other party, its
                  officers, directors, shareholders, employees, agents,
                  successors and assigns from any loss, damage or liability,
                  including attorneys' fees and costs, which may result from
                  claims, counterclaims or cross-claims asserted by a defendant,
                  except to the extent that such losses, damages or liabilities
                  result from the negligence or willful misconduct of the other
                  party.

          6.2.4   Bago and Genaera shall recover their respective actual
                  out-of-pocket expenses, or equitable proportions thereof,
                  associated with any litigation or settlement thereof from any
                  recovery made by either party.  Any excess recovery shall be
                  retained by the party bringing the action.

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          6.2.5   The parties shall keep one another informed of the status of
                  and of their respective activities regarding any litigation or
                  settlement thereof concerning Product or Reformulated Product,
                  provided, however, that no settlement or consent judgment or
                  other voluntary final disposition of any suit defended or
                  action brought by a party pursuant to this Article VI may be
                  entered into without the consent of the other party if such
                  settlement would require the other party to be subject to an
                  injunction or to make a monetary payment or would adversely
                  affect the other party's rights under this Agreement.


                                   ARTICLE VII
                      NOTICE OF PHARMACEUTICAL SIDE-EFFECTS

         7.1  7.1.1.   INFORMATION

                  Genaera and Bago will provide to each other the information
                  necessary to monitor the safety of Product and Reformulated
                  Product and to meet in a timely manner, for all countries in
                  such party's territory, all regulatory requirements for
                  reporting adverse reactions or adverse events.  Each party
                  shall forward to the other on a regular basis information on
                  adverse reactions and any material difficulties associated
                  with clinical use, studies, investigations, tests and
                  prescriptions of Product and Reformulated Product. Each party
                  shall provide each other with any appropriate information
                  which enables the other party to meet its regulatory
                  obligations in the countries in which it is commercializing or
                  developing Product or Reformulated Product.



                                  ARTICLE VIII
                     REPRESENTATIONS AND WARRANTIES OF BAGO

         8.1      Bago represents and warrants to Genaera as follows:

          8.1.1    AUTHORIZATION.

                  This Agreement has been duly executed and delivered by Bago
                  and constitutes the valid and binding obligation of Bago
                  enforceable against Bago in accordance with its terms except
                  as enforceability may be limited by bankruptcy, fraudulent
                  conveyance, insolvency, reorganization, moratorium and other
                  laws relating to or affecting creditors'

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                  rights generally and by general equitable principles.  The
                  execution, delivery and performance of this Agreement have
                  been duly authorized by all necessary action on the part of
                  Bago, its officers and directors.

          8.1.2   NO THIRD PARTY RIGHTS.

                  To the best of its knowledge, as of the Effective Date, Bago
                  owns or possesses adequate licenses or other rights to use all
                  Bago Technology, and to grant the licenses herein; and to the
                  best of its knowledge as of the Effective Date, the granting
                  of the licenses to Genaera hereunder does not violate any
                  right known to Bago of any Third Party.

          8.1.3   NO THIRD PARTY PATENTS.

                  As of the Effective Date, to Bago's actual knowledge and based
                  on its current understanding of the Product and its use, in
                  the development, manufacture, use or sale of any Product
                  pursuant to this Agreement will not infringe or conflict with
                  any Third Party right or Patent, and as of the Effective Date
                  Bago is not aware of any pending patent application that, if
                  issued, would be infringed by the development, manufacture,
                  use or sale of any Product pursuant to this Agreement.

                                   ARTICLE IX
                    REPRESENTATIONS AND WARRANTIES OF GENAERA

         9.1  Genaera represents and warrants to Bago as follows:

          9.1.1   AUTHORIZATION

                  This Agreement has been duly executed and delivered by Genaera
                  and constitutes the valid and binding obligation of Genaera,
                  enforceable against Genaera in accordance with its terms
                  except as enforceability may be limited by bankruptcy,
                  fraudulent conveyance, insolvency, reorganization, moratorium
                  and other laws relating to creditors' rights generally and by
                  general equitable principles.  The execution, delivery and
                  performance of this Agreement have been duly authorized by all
                  necessary action on the part of Genaera, its officers and
                  directors.

          9.1.2   NO THIRD PARTY RIGHTS.

                  To the best of its knowledge, as of the Effective Date Genaera
                  owns or possesses adequate licenses or other rights to use all
                  Genaera Technology, and to grant the licenses

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                  herein; and to the best of its knowledge as of the Effective
                  Date, the granting of the licenses to Bago hereunder does not
                  violate any right known to Genaera of any Third Party.

          9.1.3   NO THIRD PARTY PATENTS.

                  As of the Effective Date, to Genaera's actual knowledge and
                  based on its current understanding of the Product, and its
                  use, in the manufacture, use or sale of any Product pursuant
                  to this Agreement will not infringe or conflict with any Third
                  Party right or Patent, and as of the Effective Date Genaera is
                  not aware of any pending patent application that, if issued,
                  would be infringed by the development, manufacture, use or
                  sale of any Product pursuant to this Agreement.


                                    ARTICLE X
                                 CONFIDENTIALITY

        10.1      Subject to Sections 10.7 and 10.8, during the term of this
                  Agreement, each party agrees not to provide or disclose to a
                  Third Party the Bago Technology or Genaera Technology.


        10.2      Subject to Sections 10.7 and 10.8, during the term of the
                  Agreement, it is contemplated that each party will disclose to
                  the other party confidential information and materials which
                  is owned or controlled by the party providing such information
                  and materials or which party is obligated to maintain in
                  confidence and which is designated by the party providing such
                  information and materials as confidential (such materials and
                  information is individually and collectively "Confidential
                  Information").  Each party shall have the right to refuse to
                  accept the other party's Confidential Information.  Subject to
                  Section s 10.7 and 10.8, each party agrees to retain the other
                  party's Confidential Information in confidence, and to limit
                  disclosure of any such Confidential Information to its
                  officers, director, employees and permitted assigns on a need
                  to know basis.  Each party agrees to use the other party's
                  Confidential Information only as permitted by this Agreement,
                  and subject to Sections 10.7 and 10.8, not to disclose any
                  such Confidential Information to any other person or entity
                  without the prior written consent of the party providing the
                  Confidential Information.  For the avoidance of doubt, Bago
                  Technology and Genaera Technology will be Confidential
                  Information.

        10.3      The obligations of confidentiality and non-use of Sections
                  10.1 and 10.2 will not apply to:

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                (a)      Confidential Information generally known to the public
                         prior to its disclosure hereunder; or

                (b)      Confidential Information that subsequently becomes
                         known to the public by some means other than a breach
                         of this Agreement: or

                (c)      Confidential Information that is subsequently disclosed
                         by the receiving party by a Third Party having a lawful
                         right to make such disclosure and who is not under an
                         obligation of confidentiality to the party that
                         disclosed the Confidential Information to the receiving
                         party; or

                (d)      Confidential Information that is approved for release
                         by the parties

        10.4      Neither party shall disclose any terms or conditions of this
                  Agreement to any Third Party without the prior consent of the
                  other party; provided, however, that a party may disclose the
                  terms or conditions of this Agreement, (a) on a need to know
                  basis to its legal and financial advisors to the extent such
                  disclosure is reasonably necessary in connection with such
                  party's activities expressly permitted by this Agreement and
                  ordinary and customary operations, and (b) to a Third Party in
                  connection with (i) an equity investment in such party, (ii)
                  a merger, consolidation, change in control or similar
                  transaction by such party, (iii) the transfer or sale of all
                  or substantially all of the assets of such party, or (iv) in
                  connection with the granting of a sublicense under this
                  Agreement.  Prior to the execution of this Agreement, the
                  parties have agreed upon the substance of information that may
                  be used to describe the terms and conditions of this
                  transaction, and each party may disclosed such information, as
                  modified by mutual written agreement of the parties, without
                  the consent of the other party.

        10.5     The obligations of this Article X shall not apply to the extent
                 a party is required to disclose information by applicable law,
                 regulation or bona fide legal process, provided that the party
                 required to make the disclosure takes reasonable steps to
                 restrict and maintain confidentiality of such disclosure and
                 provides reasonable prior notice to the other party.

        10.6     The parties' obligations under this Article X shall terminate
                 five (5) years after the expiration or termination of this
                 Agreement.

        10.7     Genaera may provide or disclose Genaera Patents, and Genaera
                 Know-How for use in a manner that is not inconsistent with the
                 exclusive license granted to Bago, provided that the Third
                 Party agrees to confidentiality provisions similar to those of
                 this Agreement and agrees not to use the Genaera Patents and
                 Genaera Know-How in a manner inconsistent with the exclusive
                 license granted to Bago under this Agreement.

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        10.8     Bago may provide or disclose Bago Patents and Bago Know-How for
                 use in a manner that is not inconsistent with the exclusive
                 license granted to Genaera, provided that the Third Party
                 agrees to confidentiality provisions similar to those of this
                 Agreement and agrees not to use the Bago Patents and Bago
                 Know-How in a manner inconsistent with the exclusive license
                 granted to Genaera under this Agreement.


                                   ARTICLE XI
                              TERM AND TERMINATION

        11.1     TERM

                 Except as otherwise specifically provided herein and unless
                 sooner terminated pursuant to Section 11.2 of this Agreement,
                 this Agreement and the licenses and rights granted thereunder
                 shall remain in full force and effect until the later of ten
                 (10) years from the Effective Date or until no royalties shall
                 be payable to either party pursuant to Section V of this
                 Agreement; provided, that upon the expiration of the Bago
                 Royalty Period, Genaera shall have a fully paid up, non-
                 cancelable, non-exclusive license under the Bago Know-How to
                 research, develop, manufacture, have manufactured, market, sell
                 and have sold,  Product in the Genaera Territory, and upon the
                 expiration of the Genaera Royalty Period, Bago shall have a
                 fully paid-up, non-cancelable, non-exclusive license under the
                 Genaera Know-How to research, develop, manufacture, have
                 manufactured, market, sell and have sold, Product in the Bago
                 Territory.

        11.2     TERMINATION FOR CAUSE

                 Either party may terminate this Agreement upon thirty (30) days
                 prior written notice to the other party upon the material
                 breach by such other party of any of its obligations under this
                 Agreement; provided, however, that such termination shall
                 become effective only if such other party shall fail to cure
                 the breach within such thirty (30) day period.

        11.3     REFORMULATED PRODUCT

                 In the event that an agreement is not concluded with respect to
                 Reformulated Product, as provided in Section 3.3 of the
                 Agreement, the developing party shall not market such
                 Reformulated Product in the territory of the non-developing
                 party without the non-developing party's written consent for a
                 period ending ten (10) years after the First Commercial Sale
                 of Reformulated

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                 Product to a Third Party by the developing party or an
                 Affiliate or sublicensee of such developing party in any
                 country in the developing party's territory following
                 applicable Regulatory Approval of such Reformulated Product in
                 such country.

        11.4     EFFECTS OF TERMINATION.

                 11.4.1   In the event this Agreement is terminated at any time
                 after the Effective Date of this Agreement, and a sublicense
                 has been granted under this Agreement, then this Agreement
                 shall become an agreement between Bago and Genaera's
                 sublicensee, or Genaera and Bago's sublicensee, as the case may
                 be, subject to the sublicensee agreeing to be bound under the
                 terms and conditions of this Agreement.  At the request of the
                 sublicensing party, the non-sublicensing party will acknowledge
                 to the sublicensee, the non-sublicensing party's obligations to
                 the sublicensee under this Agreement

                 11.4.2   Upon any termination of this Agreement, each party
                 shall promptly return to the other party any Know-How of such
                 other party, except that a sublicensee shall have the right to
                 retain the foregoing in the case where and to the extent that
                 the sublicensee retains rights under this Agreement pursuant to
                 Section 11.4.1.

                 11.4.3   The provisions of Article X, and Sections 11.1, 11.3,
                 11.4.1, 11.4.2, 11.4.3, 11.4.4, 12.1 and 13.1 shall survive any
                 expiration or termination of this Agreement.

                 11.4.4   Upon expiration or termination of this Agreement for
                 any reason, nothing herein shall be construed to release either
                 party from any obligation that matured prior to the effective
                 date of such expiration or termination.

                                   ARTICLE XII
                            MISCELLANEOUS PROVISIONS

        12.1     GOVERNING LAW; JURISDICTION.

        If the parties are unable to reach agreement on any matter under this
        Agreement, then such unresolved matter shall be referred to a Legal
        Representative appointed by the Chief Executive Officer of each party
        for resolution by negotiation in good faith as soon as is practicable
        but no event later than 90 days after referral.  If such Legal
        Representatives are unable reach agreement on any such matter, then both

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        parties shall try to make their best efforts to reach to an agreement in
        good faith as soon as practicable but in no event later than 60 days
        after referral.  If the parties are unable to reach agreement on any
        such matter, either party may initiate a non-binding mediation procedure
        administered by the American Arbitration Association in accordance with
        its commercial mediation rules.  The parties agree that they shall share
        equally the cost of the mediator and all filing and hearing fees, but
        each party shall bear its own expenses.  The mediation proceedings shall
        be conducted at a location chosen by the party not originally requesting
        the resolution of the dispute.  If any unresolved matter is not resolved
        by non-binding mediation pursuant to this section, then either party may
        seek any available remedy in a proceeding in the courts of France under
        French law.  This Agreement shall be construed according to the laws of
        France, except matters of patents law which shall be determined in
        accordance with the patent laws relevant to the patents in question.

        12.2     WAIVER.

                 The failure on the part of Genaera or Bago to exercise or
                 enforce any rights conferred upon it hereunder shall not be
                 deemed to be a waiver of any such rights nor operate to bar the
                 exercise or enforcement thereof at any time or times
                 thereafter. The observance of any term of this Agreement may be
                 waived (either generally or in a particular instance and either
                 retroactively or prospectively) by the party entitled to
                 enforce such term, but any such waiver shall be effective only
                 if in writing signed by the party against whom such waiver is
                 to be asserted.

        123      FORCE MAJEURE.

                 Neither party shall be held liable or responsible to the other
                 party nor be deemed to have defaulted under or breached this
                 Agreement for failure or delay in fulfilling or performing any
                 term of this Agreement, other than an obligation to make a
                 payment, when such failure or delay is caused by or results
                 from fire, floods, embargoes, government regulations,
                 prohibitions or interventions, war, acts of war (whether war be
                 declared or not), insurrections, riots, civil commotion,
                 strikes, lockouts, acts of God, or any other cause beyond the
                 reasonable control of the affected party.

        12.4     SEVERABILITY.

                 It is the intention of the parties to comply with all
                 applicable laws domestic or foreign in connection with the
                 performance of its obligations hereunder.  In the event that
                 any provision of this Agreement, or any part hereof, is found
                 invalid or unenforceable, the remainder of this Agreement will
                 be binding on the parties hereto, and will be construed as if
                 the invalid or unenforceable provision or part thereof had been
                 deleted, and the Agreement shall be deemed

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


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<PAGE>


                 modified to the extent necessary to render the surviving
                 provisions enforceable to the fullest extent permitted by law.

        12.5     ASSIGNMENT.

                 This Agreement may not be assigned or otherwise transferred by
                 either party without the prior written consent of the other
                 party; provided, however, that either party may assign this
                 Agreement, without the consent of the other party, (i) to any
                 of its Affiliates, if the assigning party guarantees the full
                 performance of its Affiliates' obligations hereunder, or (ii)
                 in connection with the transfer or sale of all or substantially
                 all of its assets or business or in the event of its merger or
                 consolidation with another company.  In all cases the assigning
                 party shall provide the other party with prompt notice of any
                 such assignment.  Any purported assignment in contravention of
                 this Section shall, at the option of the non-assigning party,
                 be null and void and of no effect.  No assignment shall release
                 either party from responsibility for the performance of any
                 accrued obligation of such party hereunder.



        12.6     COUNTERPARTS.

                 This Agreement may be executed in duplicate, both of which
                 shall be deemed to be originals, and both of which shall
                 constitute one and the same Agreement.

        12.7     NO AGENCY.

                 Nothing herein contained shall be deemed to create an agency,
                 joint venture, `amalgamation, partnership or similar
                 relationship between Bago and Genaera.

        12.8     NOTICE.

                 All communications between the parties with respect to any of
                 the provisions of this Agreement will be sent to the addresses
                 set out below, or to other addresses as designated by one party
                 to the other by notice pursuant hereto, by internationally
                 recognized courier or by prepaid certified, air mail (which
                 shall be deemed received by the other party on the tenth
                 business day following deposit in the mails), or by facsimile
                 transmission or other electronic means of communication (which
                 shall be deemed received when transmitted), with confirmation
                 by letter given by the close of business on or before the next
                 following business day:

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


                                       24
<PAGE>



                           if to Genaera, at:

                           Genaera Corporation

                           5110 Campus Drive

                           Plymouth Meeting, PA  19462  USA

                           Attention: President


                           if to Bago, at:

                           Laboratorios Bago, S.A.

                           Bernardo de Irigoyen 248

                           Buenos Aires

                           Argentina

                           Attention:  Dr. Mario A. Los

                           R & D Director

        13.9     HEADINGS.

                 The paragraph headings are for convenience only and will not be
                 deemed to affect in any way the language of the provisions to
                 which they refer.

        13.10    ENTIRE AGREEMENT.

                 This Agreement, including the Schedules appended hereto,
                 contains the entire understanding of the parties relating to
                 the matters referred to herein, and may only be amended by a
                 written document, duly executed on behalf of the respective
                 parties.

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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.


                                       25
<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their duly authorized  representatives  as of the day and year first
above written.

                                       LABORATORIOS BAGO SA



                                       By:  /s/     Juan Pablo Bago
                                            ----------------------------------
                                                    Juan Pablo Bago
                                       Title: Director and Legal Representative
                                       Date: September 7, 2001




                                       GENAERA CORPORATION



                                       By:  /s/     Roy C. Levitt, M.D.
                                            ------------------------------------

                                       Title:

                                       Date: September 14, 2001
                                             -------------------







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** Certain  portions of this exhibit have been omitted  based upon a request for
confidential  treatment  that has been filed with the  Commission.  The  omitted
portions have been filed separately with the Commission.




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