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                                                                    EXHIBIT 10.5

                          EXCLUSIVE LICENSE AGREEMENT

                  This Agreement, effective as of July 1, 1996, (the Effective
Date), is made by and between Lederle-Praxis Biologicals, a division of American
Cyanamid Company, (hereinafter together with its parent company - American Home
Products Corporation, a corporation of Delaware, having offices at Five Giralda
Farms, Madison, New Jersey, 07940 - referred to as "Cyanamid") and BioDelivery
Sciences Inc., a Delaware corporation, having a place of Business at 42 Buckman
Drive, Lexington, Massachusetts 02173 (hereinafter referred to as "BDS").

                              W I T N E S S E T H:

                  WHEREAS, BDS has rights to technology relating to cochleates,
liposomes and proteoliposomes which will elicit an antigen specific immune
response in humans and which are used in the formulation of human vaccines and
has rights to patent applications and patents related to said technology; and

                  WHEREAS, Cyanamid wishes to obtain an exclusive license in and
to the BDS Technology in the Field as hereinafter defined, and BDS is willing to
grant such a license to Cyanamid;

                           NOW, THEREFORE, it is hereby agreed as follows:

1.       Definitions

         1.1      "Affiliate" means any corporation or business entity
controlled by, controlling or under common control with Cyanamid. For this
purpose, "control" shall mean direct or indirect beneficial ownership of forty
percent (40%) or more of the voting stock of, or a forty percent (40%) or
greater interest in the income of, such corporation or other business entity, or
such other relationship as, in fact, constitutes active control.


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         1.2      "BDS Technology" shall include, without limitation, all
inventions, developments, improvements, or know-how relating to cochleates,
liposomes and proteoliposomes, owned, controlled or licensed to BDS prior to the
Effective Date of this Agreement, and shall include the patent application and
patents listed in Appendix I, and all technical information owned, controlled,
or licensed to BDS prior to the Effective Date of this Agreement which relates
to cochleates, liposomes and proteoliposomes.

         1.3      "Licensed Patents" shall mean:

                  (a) all patents and patent applications relating to BDS
Technology and shall include any patents issuing on any such application and any
extensions, reissues, divisions, continuations, continuation-in-part
applications or patents of addition and any other form of patent coverage
relating to BDS Technology;

                  (b) all patents and patent applications which BDS has or
obtains the legal cochleates, liposomes and proteoliposomes filed during
Research Support and two years thereafter; and

                  (c) all patents and patent applications directed to any
inventions or discoveries made or discovered by BDS during Research Support and
two years thereafter.

         1.4      "Licensed Information" shall mean:

                  (a) all know-how and technical information relating to
cochleates, liposomes, and proteoliposomes included in BDS Technology;

                  (b) all know-how and technical information, which is not the
subject of a patent or patent application relating to cochleates, liposomes and
proteoliposomes developed or acquired by BDS during the term of this Agreement
and shall include all formulations, uses, clinical data, manufacturing data,
biological materials, toxicity data and safety data, and any information, solely
to the extent as may be possessed by BDS,


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which may be necessary to obtain governmental approval to utilize such
cochleates, liposomes and proteoliposomes in human vaccines; and

                  (c) all know-how and technical information, which is not the
subject of a patent or patent application, relating to any inventions or
discoveries made or discovered by BDS during Research Support and two years
thereafter.

         1.5      "Field" means vaccines designed to induce (not limited to type
of immune modulation) an antigen(s) specific immune response in humans;
including vaccines to prevent or treat allergies (Type I hypersensitivity
reaction), but not including vaccines to treat autoimmunity nor vaccines made
from patient specific antigen(s) for patient specific therapy.

         1.6      "Territory" means worldwide.

         1.7      "Net Sales" means the actual gross selling price as billed by
Cyanamid for Licensed Products less the following sums actually paid or credited
by Cyanamid:

                  (a) trade, quantity or cash discounts or commissions allowed
                  in amounts customary in the trade;

                  (b) any tax, excise or other governmental charge upon or
                  measured by the production, sale, transportation, delivery or
                  use and duties imposed on the import of Licensed Products
                  included in such amount;

                  (c) outbound transportation charges prepaid or allowed on the
                  cost of shipping to customers and separately invoiced, if any;

                  (d) credits or allowances, if given or made for Licensed
                  Products, price adjustments, returns, rejections, recalls, or
                  destructions (voluntarily made by or requested or made by an
                  appropriate government agency, subdivision or department) of
                  Licensed Products previously delivered.

                  (e) Insurance premiums paid by Cyanamid to the U.S. Government
                  or an Instrumentality thereof under 42 U.S.C. 300 aa-1 et seq.
                  insuring against liability arising out of Cyanamid's
                  manufacture, use or sale of Licensed Products;

                  (f) Reserves reasonably set aside by Cyanamid on an
                  off-balance sheet basis as a self insurance fund insuring
                  against liability arising out of manufacture, use or sale of
                  Licensed Products.


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Transfer of possession and title of a Licensed Product by Cyanamid to an
Affiliate shall not give rise to a sale; instead such Affiliate having a
sublicense or direct license shall pay royalties based upon the disposition of a
Licensed Product by such Affiliate.

         1.8      "Licensed Product" or "Licensed Products" means any and all
products covered by the Valid Claim of a Licensed Patent or the making, using or
selling of which utilize Licensed Information.

         1.9      "Valid Claim" means (a) a claim of an unexpired patent which
shall not have been withdrawn, canceled or disclaimed, nor held invalid or
unenforceable by a court of competent jurisdiction in an unappealed or
unappealable decision or (b) a claim of a patent application which is either:
(i) the subject of a pending patent interference proceeding or (ii) supported by
the disclosure of such application or any prior filed patent application for a
cumulative period not exceeding seven years from the earliest date of such
supporting disclosure for such claim in any such patent application.

         1.10     "Existing Cyanamid Products" means vaccines sold commercially
by Cyanamid or its Affiliates or in human clinical studies supported by
Cyanamid, its Affiliates or collaborators as of the Effective Date of this
Agreement.

         1.11     "Target Population" means the group, defined by age or other
characteristics, intended for the ultimate label indication for a Licensed
Product or the group most highly recommended to receive the Licensed Product by
authorized health advisory bodies.

         1.12     "Product License Application" means the application submitted
to the appropriate regulatory agency (e.g. US FDA) for approval to market a
Licensed Product in the United States.

         1.13     "Research Support" shall mean that period which is defined in
Section 4.1


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of this Agreement or any mutually agreed upon extension thereof.

2.       Grant of License

         2.1      BDS grants to Cyanamid an exclusive right and license, with a
right to sublicense to Affiliates and others in accordance with the provisions
hereof, in the Territory under the Licensed Patent and Licensed Information to
make, have made, use, import, sell, have sold and offer to sell Licensed
Products in the Field.

         2.2      Notwithstanding the foregoing, BDS reserves the right to
conduct preclinical research and clinical studies up to and including Phase II
relating to Licensed Products in the Field, on its own or in association with a
non-commercial arms-length third party who is not obligated or bound to a
commercial third party. BDS acknowledges that the rights reserved herein may not
be assigned nor otherwise transferred to any third party.

3.       Consideration

         3.1      Within seven (7) business days of the Effective Date of this
License, Cyanamid shall pay an initial non-refundable and non-recoupable royalty
of Five Hundred Thousand dollars ($500,000.00) as a one-time payment as
consideration for the first year of this License.

         3.2      In consideration of BDS's research assistance to obtain
approval for sale of Licensed Products Cyanamid shall also make research
payments as follows:

         3.2.1    For the first Licensed Product in the Field formulated as an
injectable product which achieves Completion of Phase II human clinical studies
in the Target Population, Cyanamid will pay $1 million at the time of such
Completion. In addition, for the first Licensed Product in the Field formulated
as an injectable product for which Cyanamid submits a Product License
Application, Cyanamid will pay $2.5 million at the time of such submission. For
purposes of this Section 3, "Completion" shall mean "following administration of
product to subjects according to the relevant clinical protocol, the complete
collection of all data and the


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appropriate statistical analysis, leading to the conclusion that the product
would be suitable for further clinical testing in Phase III efficacy trials."

         3.2.2    For the first Licensed Product in the Field formulated as a
non-injectable product which achieves Completion of Phase II human clinical
studies in the Target Population, Cyanamid will pay $1 million at the time of
such Completion. In addition, for the first Licensed Product in the Field
formulated as a non-injectable product for which Cyanamid submits a Product
License Application, Cyanamid will pay $2.5 million at the time of such
submission.

         3.2.3    For the second Licensed Product in the Field formulated as a
non-injectable product, Cyanamid will pay to BDS payments as defined in 3.2.2,
unless payments have already been paid for a Licensed Product in the Field
formulated as an injectable product. If the second Licensed Product in the Field
is formulated as a non-injectable product, payments will not be made for any
Licensed Product formulated as an injectable product. In no instance will
Cyanamid make payments for more than two (2) Licensed Products.

         3.3      Running Royalty. Cyanamid shall pay a running royalty as
follows:

         3.3.1    If the Licensed Product incorporates an Existing Cyanamid
Product and is formulated for the same route of delivery as the Existing
Cyanamid Product, Cyanamid shall pay a running royalty of 2% of Net Sales only
for that annual period during which the following two (2) criteria are met: (1)
the Licensed Product is covered by a Valid Claim of a Licensed Patent; and (2)
an increase in market share of at least 50% over that held at the time of
product introduction, or an increase in market size (based on Net Sales) of 1.5
fold over the market size at the time of product introduction, is achieved.
Otherwise, during any annual period in which both criteria of this section are
not met, Cyanamid shall pay a running royalty of 1% of Net Sales. Furthermore,
Cyanamid shall pay a running royalty of 1% of Net Sales if criterion number (2)
herein above is not met within 36 months of introducing the Licensed Product.

         3.3.2    If the Licensed Product does not incorporate an Existing
Cyanamid Product,


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or incorporates an Existing Cyanamid Product for a new route of delivery,
Cyanamid shall pay a running royalty of 3% of Net Sales only for that annual
period during which the following three (3) criteria are met: (1) the Licensed
Product is not covered by a patent owned by Cyanamid or licensed to Cyanamid by
a party other than BDS; (2) the Licensed Product is covered by a Valid Claim of
a Licensed Patent; and (3) a market share of at least 50% is achieved.
Otherwise, during any annual period in which all three criteria of this section
are not met, Cyanamid shall pay a running royalty of 2% of Net Sales.
Furthermore, Cyanamid shall pay a running royalty of 2% of Net Sales if
criterion number (3) herein above is not met within 36 months of introducing the
Licensed Product.

         3.3.3    Cyanamid shall make such determinations of market share and
market size according to Sections 3.3.1 and 3.3.2 on an annual basis. Such
annual determinations will be made within 60 days of the end of the last
calendar quarter each year following first commercial sale of a Licensed
Product. Cyanamid shall include in the royalty payment made for the fourth
calendar quarter any additional payment owed to BDS based on achievement of
market share or market size for the full calendar year. Cyanamid shall,
simultaneously with the making of any determination under this Section 3.3 with
respect to increases in market share or market size, furnish to BDS with copies
of relevant information and data utilized by Cyanamid in making such
determination.

         3.4      Cyanamid agrees to make quarterly reports to BDS within sixty
(60) days after the end of each calendar quarter during the term of this
Agreement following first commercial sale of a Licensed Product and within 60
days after the termination or expiration of the term hereof, setting forth the
Net Sales volume of Licensed Products sold by Cyanamid during the period for
which the report is rendered, a breakdown by Licensed Product and the
computation of the royalty thereon. Simultaneously with the rendering of each
report, Cyanamid shall remit to BDS the amount of royalties due as stated in
such report. All royalties not paid in such manner


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shall bear interest at the rate of the prime rate as reported in the Wall Street
Journal plus 2% per annum.

                  3.5      All payments due hereunder from time to time shall be
paid in United States dollars. For purposes of computing such payments, the Net
Sales Value of Product sold in foreign countries for foreign (i.e. non-United
States) funds shall first be determined in the foreign funds in which the
Licensed Product was sold and then converted to its equivalent in United States
Dollars at:

                  (i)      the rate applicable to the transfer of funds arising
                           from payments as established by the exchange control
                           authority of the country of which such selling funds
                           are the national currency for the last business day
                           of the accounting period for which payment is thus
                           made; or

                  (ii)     if there is no applicable rate so established, then
                           the selling rate for such last business day for such
                           currency as published by Morgan Guaranty Trust
                           Company; or

                  (iii)    if there is no rate so published, then the buying
                           rate for such foreign funds on the last business day
                           of the accounting period for such currency as
                           published by the Wall Street Journal.

                           Notwithstanding the foregoing, if by reason of any
         restrictive exchange laws on regulations, Cyanamid shall be unable to
         convert to U.S. Dollars the amount, determined as above provided,
         equivalent to the amount due by Cyanamid hereunder, then Cyanamid shall
         notify BDS promptly with an explanation of the circumstances. In such
         event, all such payments, or the balance thereof due hereunder and not
         paid in foreign currency as hereinafter provided, shall be made in U.S.
         Dollars as soon as reasonably possible after and to the extent that
         such restrictive exchange laws or regulations are lifted to permit
         Cyanamid to convert the above-mentioned amount of U.S. Dollars, of
         which lifting Cyanamid shall promptly notify BDS. At its option, BDS
         shall meanwhile have the right to request the payment (to it or to its
         nominee), and, upon request, Cyanamid if legally permitted under the
         then existing laws or regulations shall pay or cause to be paid


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amounts due (or such portions thereof as are specified by BDS) in the currency
of any other country designated by BDS and legally available to Cyanamid.

         3.6      Any and all taxes levied on account of payments from a country
in which provision is made in the law or by regulation for withholding will be
deducted from such royalty paid BDS hereunder and proof of payment of such taxes
shall be secured and sent to BDS. The parties agree to cooperate in all respects
necessary to take advantage of the benefits of any applicable tax treaty.

         3.7      In any country where the rate of royalty provided for herein
is limited by law, the royalty payment will be made to BDS at the highest rate
permitted by law in that country for licenses of the type herein granted,
provided that such rate is equal to or less than the rate specified in this
Agreement. Such payment of royalties shall otherwise be subject to all of the
terms and conditions of this Agreement.

4.       Research Support Payments and Obligations

         4.1      During the initial five years of this Agreement, Cyanamid
shall support BDS research by making the following research payments:

         4.1.1    In year 1, Cyanamid shall make research payments totaling 2.4
million dollars. The first payment shall be of 1.5 million dollars
($1,500,000.00) and shall be made within seven (7) business days of execution of
this Agreement. The next payment shall be due six months thereafter and shall be
of four hundred and fifty thousand dollars ($450,000.00). The final payment
shall be due three months thereafter and shall be of four hundred and fifty
thousand dollars ($450,000.00).

         4.1.2    In years 2 to 5, research payments shall be made on a
quarterly basis in four (4) equal payments at the beginning of each quarter and
shall total 1.8 million for year 2 and shall total 1.3 million per year for
years 3 to 5. After year 5, no further research payments shall be made.


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         4.2      Any invention, discoveries, or improvements made or discovered
by BDS during the five years of Research Support and two years thereafter shall
be considered to be or included within the Licensed Information, if not the
subject of a patent or patent application, or within the Licensed Patents, if
made the subject of a patent or application therefor.

         4.3      BDS shall, during the time of Research Support and two years
thereafter, provide Cyanamid with semiannual written reports summarizing the
progress of BDS research.

         4.4      BDS will commence transfer of technology in the Field upon
request by Cyanamid. Such transfer shall include sufficient demonstrations and
written explanation so as to enable appropriately trained individuals of
Cyanamid to utilize the BDS Technology, Licensed Patents and Licensed
Information. BDS shall continue such transfer as set forth herein during the
five (5) years, and two (2) additional years thereafter, of the Research
Support.

         4.5      Cyanamid's obligation to make research payments shall cease
upon either of the following:

                  (a) BDS fails to conduct active research relating to
                  cochleates, liposomes, or proteoliposomes on a continuing
                  basis; or

                  (b) the assets of BDS are voluntarily or involuntarily placed
                  under the control of a bankruptcy court.

5.       Reversion Rights

                  If BDS does work on its own or in association with a
noncommercial, arms-length third party and achieves successful completion of
Phase II Human clinical studies in the Target Population in the Field wherein
there is not an Existing Cyanamid Product and Cyanamid does not have ongoing
research or development program, it may


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ascertain Cyanamid's interest in funding further development towards product
commercialization by providing written notice thereof to Cyanamid. If Cyanamid
does not agree in writing, within 180 days after the date of such notice, to
undertake commercial development, Cyanamid will grant coexclusive rights to BDS
for such specific purpose (at terms, including consideration, to be defined)
within 30 days after the expiration of such 180 day period. If Cyanamid elects
to undertake further commercial development, Cyanamid will reimburse BDS for its
total cost incurred to bring it to such point of clinical development, less any
funds used by BDS from the Research Support funding applied to these efforts.

6.       Records

         6.1      Cyanamid agrees to keep, and to contractually obligate its
sublicensees to keep, such detailed books and records as shall be necessary to
determine the royalties payable hereunder for a period of two (2) years from the
date such royalties are due. Once a year and at BDS's expense, Cyanamid will, at
the request of BDS, permit an independent public accountant selected by BDS and
to whom Cyanamid (and, as applicable, its sublicensee(s)) shall have no
reasonable objection, to have access to and to examine, under a confidentiality
agreement reasonably acceptable to Cyanamid and during ordinary business hours,
such records as may be necessary to verify or determine royalties paid or
payable under this Agreement. In the event that such audit reveals an
underpayment of royalty by more than five percent (5%), the cost of the audit
shall be paid by Cyanamid. If the underpayment is less than five percent (5%),
the cost of the audit shall be paid by BDS. If any underpayment of royalties is
revealed, Cyanamid will reimburse BDS for the difference plus interest at the
prime rate as reported in the Wall Street Journal plus 2%. The accountant shall
not disclose to BDS any other Information pertaining to Cyanamid's or its
sublicensees' business.


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7.       Representation and Warranties

         7.1      BDS covenants, represents and warrants that:

                  (a) it is the exclusive owner or exclusive licensee (with the
                  right to sublicense as provided hereunder) of all rights in
                  and to all the Licensed Patents and Licensed Information;

                  (b) BDS has no knowledge of any facts which would adversely
                  affect Cyanamid's ability to enjoy from a legal and
                  contractual perspective the licenses granted hereunder,
                  including any patents of others which would be infringed by
                  the manufacture, use or sale of Licensed Products;

                  (c) except for any entity which has granted a license to any
                  of the Licensed Patents or Licensed Information to BDS on an
                  exclusive basis with the right to sublicense the same as
                  provided herein, there is no other person, firm, corporation
                  or other entity having any right, title or interest in, or any
                  license to any or all of the Licensed Patents and Licensed
                  Information;

                  (d) except for any entity which has granted a license to any
                  of the Licensed Patents or Licensed Information to BDS on an
                  exclusive basis with the right to sublicense the same as
                  provided herein, there are no outstanding options, licenses or
                  agreements of any kind relating to the manufacture, use or
                  sale of any of the Licensed Products;

                  (e) BDS has full power to grant the rights, licenses and
                  privileges herein granted;

                  (f) there is no finders fee, commission or the like in
                  connection with this Agreement or the subject matter hereof;
                  and

                  (g) that the total cost to BDS of filing, prosecution and
                  maintenance of all Licensed Patents from January 1, 1996 to
                  the Effective Date of this


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                  Agreement does not exceed $70,000.

         7.2      BDS further warrants and represents that, during the term of
this Agreement, BDS shall be able to grant the rights set forth herein to
Cyanamid; and therefore BDS shall not convey to another any ownership interest
in any modification or improvement of the Licensed Product, Licensed Patents or
Licensed Information in the Field.

         7.3      Except for the express warranties and representations set
forth in Sections 7.1 and 7.2, all license and other rights granted pursuant to
this Agreement by BDS to Cyanamid are made without any warranties or
representations, express or implied, of any kind or nature, including, without
limitation, any WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, WHICH ARE HEREBY EXPRESSLY EXCLUDED.

         7.4      BDS hereby agrees to defend and indemnify Cyanamid and save
Cyanamid its Affiliates and its sublicensees harmless from any claim, loss,
liability, proceeding, suit, judgment or expense (including, without limitation,
reasonable attorneys' fees and disbursements) in connection with, arising out of
or relating to a breach of BDS's representations and warranties set forth in
this Section 7.

         7.5      Each party hereby warrants that the execution, delivery and
performance of this Agreement has been duly approved and authorized by all
necessary corporate actions; does not require any shareholder approval which has
not been obtained or the approval and consent of any trustee or the holders of
any indebtedness of either party; does not contravene any law, regulation, rules
or order binding on either Party, and does not contravene the provisions of or
constitute a default under any indenture, mortgage contract or other agreement
or instrument to which either party is a signatory.

8.       Term and Termination

         8.1      The term of this Agreement shall commence on the Effective
Date and shall expire on: (a) five years from the date of first commercial sale
of a Licensed Product; or (b) the


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date of expiration of the last Licensed Patent having a Valid Claim covering any
Licensed Product, whichever is later. Upon expiration of this Agreement,
Cyanamid's rights and license hereunder shall be and become fully paid-up and
irrevocable.

         8.2      The license herein granted to Cyanamid may be terminated in
whole or in part at any time and for any reason by Cyanamid, subject to and in
accordance with the following:

                  8.2.1 Such termination shall be effected by written notice to
                  BDS in accordance with this section 8.2.

                  8.2.2 If notice of termination is received by BDS prior to
                  thirty (30) months after the Effective Date, (a) Cyanamid
                  shall continue to make the research payments required under
                  Section 4 hereof until the passage of thirty-six (36) months
                  after the Effective Date (such that the total amount of
                  research support payments, inclusive of all such payments made
                  prior to any notice of termination, will, in the aggregate, be
                  5.5 million dollars), and (b) all other provisions of this
                  Agreement, except those which by their terms survive a
                  termination, shall terminate ninety (90) days after the
                  receipt of such notice by BDS.

                  8.2.3 If notice of termination is received by BDS more than
                  thirty (30) but less than thirty-six (36) months after the
                  Effective Date, (a) Cyanamid shall continue to make the
                  research payments required under Section 4 hereof until the
                  passage of thirty-nine (39) months after the Effective Date
                  (such that the total amount of research support payments,
                  inclusive of all such payments made prior to any notice of
                  termination, will, in the aggregate, be 5.825 million
                  dollars), and (b) all other provisions of this Agreement,
                  except those which by their terms survive a termination, shall
                  terminate ninety (90) days after the receipt of such notice by
                  BDS.


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                  8.2.4 Cyanamid shall have the right to terminate this
                  Agreement by no less than ninety (90) days prior written
                  notice to BDS at any time after the passage of thirty-six (36)
                  months from the Effective Date. In such event, all the
                  provisions of this Agreement (including, without limitation,
                  Section 4 hereof), except those which by their terms survive a
                  termination, shall terminate ninety (90) days after the
                  receipt of such notice by BDS.

                  8.2.5 Any expiration or termination of this Agreement shall
                  not operate to relieve Cyanamid from its liability for payment
                  of royalties due or accrued as of the date of such expiration
                  or termination.

                  8.2.6 A termination in part by Cyanamid shall only mean that
                  Cyanamid terminates its right to a portion or portions of the
                  Field or the Territory. Cyanamid can effect a partial
                  termination from time to time by at least ninety (90) days
                  prior written notice to BDS. No partial termination shall
                  affect or terminate, in whole or in part, any other provisions
                  of this Agreement, including, without limitation, Section 4
                  hereof.

         8.3      If Cyanamid shall at any time default in the payment of any
royalty or the making of any report hereunder, or shall make any false report or
shall otherwise breach this Agreement or any provision thereof, and shall fail
to remedy such default or correct such false report within thirty (30) days
after written notice thereof by BDS, BDS may at its option terminate this
Agreement and the rights and license granted hereunder, by notice in writing to
Cyanamid to such effect, but such acts shall not prejudice the right of BDS to
recover any royalties or other sums due or accrued at the time of such
termination.

9.       Confidentiality

         9.1      The parties expressly acknowledge that during the term of this
Agreement they shall be furnished with portions of each other's confidential
information and tangible


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biological materials and agree to use the same only for the proper performance
of this Agreement, to keep the confidential information received secret and
confidential and physically secure and not at any time to disclose or permit to
be disclosed the confidential information to any third party without the written
consent of the other party. All information and data developed by BDS during the
period of research support shall be considered confidential information under
this Agreement. Each party shall ensure that all employees shall be subject to
equivalent obligations of confidence as the party and each party shall take all
reasonable steps to ensure that any such employees having access to any of the
confidential information are made aware of the obligations of confidence
attached thereto. The obligations of confidence of this Section 9 shall not
extend to any information which:

                  (a) is known to BDS or Cyanamid as the case may be other than
                  pursuant to an obligation of confidentiality prior to its
                  receipt from the other and evidence of this fact is furnished
                  to the party supplying the information within 30 days of the
                  request for such evidence;

                  (b) is or shall become generally available to the public
                  otherwise than by reason of a breach of the provisions of this
                  Section 9 by BDS or Cyanamid; or

                  (c) is subsequently disclosed to the recipient party without
                  obligations of confidence by a third party owing no such
                  obligations to the furnishing party in respect thereof; or

                  (d) is necessary to disclose to the extent necessary to
                  conduct clinical studies and to develop products, to secure
                  registration thereof and secure patent protection therefor, to
                  the extent permitted in this Agreement.

         The obligations of both parties under this Section 9 shall survive for
a period of five (5)


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years from the expiration or termination of this Agreement for whatever reason.

         9.2      Cyanamid may disclose confidential information hereunder to
any governmental agency for the purpose of obtaining licensure of the Licensed
Product. Cyanamid may also disclose confidential information hereunder pursuant
to a written confidentiality agreement to any entity for the purposes of
conducting clinical trials to establish safety or efficacy of any Licensed
Product.

         9.3      Cyanamid may disclose Confidential Information hereunder
pursuant to a written confidentiality agreement to a Consultant for the purpose
of evaluating such information.

         9.4      Cyanamid may disclose Confidential Information hereunder to
secure patent protection for new Cyanamid inventions.

         9.5      Each party agrees that it shall not divulge or make any other
public statements with respect to the existence of or the terms or provisions of
this Agreement or the relationship of the parties, without the prior written
consent of the other party.

         9.6      Cyanamid shall have the right to control all of its own
publicity, and publication of all data, findings and Information related to any
Licensed Products without the approval of BDS; provided, however, that, subject
to Section 9.5, all such publicity, publications and Information incorporating
BDS's name, in whole or in part, including use of BDS's name in connection with
the Licensed Product, shall be submitted to BDS for prior review and approval.
BDS will provide Cyanamid with its endorsement of the Licensed Products upon
reasonable request.

10.      Trademark

         10.1     Cyanamid, as it deems appropriate, shall originate, select
and apply to register one or more trademarks under which Licensed Products shall
be sold and distributed by Cyanamid or its sublicensees. Such trademarks shall
be the exclusive property of Cyanamid or its designees, which shall be solely
responsible for all prosecution, defense, maintenance and costs


                                      -17-
<PAGE>   18
relating to same. All decisions relative to such trademarks shall be made by
Cyanamid. BDS shall provide such consents as are desired to obtain any trademark
registrations in the name of Cyanamid. BDS shall not use, or assert any claim
in, any of such trademarks or any trademark confusingly similar to any of such
trademarks. Cyanamid shall not use the BDS name, any trademarks of BDS or any
trademark confusingly similar thereto.

         11.      Patents

                  11. 1    BDS shall be responsible for the prosecution and
maintenance of all Licensed Patents during the term of this Agreement. Each
party shall pay fifty percent (50%) of the fees, costs and disbursements
incurred in connection therewith. BDS shall furnish Cyanamid with copies of all
bills therefor. In addition, Cyanamid shall, upon execution of this License
Agreement, pay fifty percent (50%) of any such amounts paid by BDS from January
1, 1996 to the Effective Date of this Agreement upon the presentation by BDS of
copies of the bills therefor. BDS shall provide Cyanamid with copies of all
patent applications, prosecution documents, grants and maintenance of the
Licensed Patents. In the event BDS decides to abandon any Licensed Patent, BDS
shall first offer to assign such Licensed Patent to Cyanamid before any
abandonment thereof. Cyanamid, at its sole discretion, may elect to accept the
assignment and pay assignment costs and all further amounts for such Licensed
Patent. In any event, after a Licensed Patent is offered to be assigned by BDS
to Cyanamid, all rights hereunder shall be and become fully paid up and
irrevocable to Cyanamid for such Licensed Patent.

                  11.2     Each party agrees to promptly notify the other party
upon notice to it of any industrial or intellectual property right(s) of any
third party which may be infringed upon by a Licensed Product. At Cyanamid's
request, BDS shall provide reasonable cooperation to Cyanamid in obtaining a
license under any patents held by a third party which would be infringed by the
manufacture, use or sale of the Licensed Product marketed or to be marketed
under this Agreement, and BDS shall reasonably cooperate in the defense of any
suit for infringement brought by a third


                                      -18-

<PAGE>   19

party against Cyanamid or its sublicensee as a result of the manufacture, use or
sale of the Licensed Product. Cyanamid shall have the right, with respect to
each Licensed Product, to reduce its corresponding royalty payments under this
Agreement up to a maximum of thirty-five percent (35%) during a calendar
quarter, by (1) the amount of any royalty or payment made during such calendar
quarter for obtaining from such third party a license under any patent rights
required for the manufacture, use or sale of each such Licensed Product, and (2)
the out of pocket expense of defending against the patents of such third party
for each such Licensed Product.

                  11.3     In the event of any third party infringement of any
Licensed Patents, the party having knowledge thereof shall promptly notify the
other party of such infringement. Cyanamid shall have the right at its sole
discretion to file suit against and prosecute such infringement. In the event
Cyanamid prosecutes for infringement and obtains a monetary recovery, Cyanamid
shall have the right to deduct from any such recovery an amount equal to the
actual expenses reasonable in nature and incurred by Cyanamid in connection
therewith. The amount of such recovery that exceeds the expenses shall be
referred to as the Net Recovery. The parties shall then determine the Net Sales
represented by such Net Recovery and Cyanamid shall pay BDS from such Net
Recovery an amount equal to the running royalty BDS would have received under
this Agreement had such determined amount of Net Sales actually been Net Sales
under this Agreement. However, if it is not practical for the parties to make
such determination of Net Sales, they shall mutually agree upon another method
for BDS to receive a share of such Net Recovery, it being the intent of the
parties that BDS's share should be consistent with that BDS would have received
under such determination approach. In the event Cyanamid does not commit to
prosecute such infringement within sixty (60) days after it acquired knowledge
thereof, then BDS shall have the right to bring suit against any such infringer
at its sole cost and expense and in such event shall be entitled to retain all
proceeds and benefits realized by it from bringing said lawsuit.


                                      -19-

<PAGE>   20

         12.      Assignment

                  12.1     This Agreement shall not be assignable or otherwise
transferable by BDS without the prior written consent of Cyanamid, which consent
shall not be unreasonably withheld. This Agreement shall be assignable by
Cyanamid to any Affiliate of Cyanamid or to any successor, by way of merger,
consolidation, acquisition or otherwise of all or substantially all of the
business and/or assets of Cyanamid to which this Agreement relates, provided
that such transferee shall expressly assume all of the obligations and
liabilities Cyanamid under this Agreement. Except as provided by the foregoing
in this Section 12.1, this Agreement shall be non-transferable by Cyanamid
without the prior written consent of BDS, such consent not to be unreasonably
withheld.

                  12.2     Any sublicense entered into by Cyanamid hereunder
shall be provided to BDS within ten (10) days after the execution thereof. All
such sublicenses shall contain non-financial terms and conditions consistent
with those contained in this Agreement, including, without limitation, the same
obligations with respect to the protection of confidential information of BDS
and the making of reports. The term of any such sublicenses shall automatically
terminate upon the termination of this Agreement. BDS's share of amounts paid to
Cyanamid as a result of any sublicenses shall be determined as follows:

                           12.2.1   BDS shall receive from Cyanamid the running
                           royalties specified in this Agreement on all Net
                           Sales of any sublicensee.

                           12.2.2   In the event Cyanamid receives amounts other
                           than running royalties from a sublicensee, with the
                           exception of a sublicense between Cyanamid and an
                           Affiliate, such as a license issue fee or other fixed
                           payments (but excluding reimbursements, such as for
                           patent expenses), and limited, with respect to
                           milestone payments, to one Licensed Product per
                           sublicense, the following schedule shall be
                           applicable:


                                      -20-

<PAGE>   21

                           12.2.2.1 If only the BDS Technology or a portion
                           thereof is covered by the sublicense, BDS shall
                           receive the following percentages of such amounts:

<TABLE>
<CAPTION>
                           Year After Effective Date               Percentage
                           -------------------------               ----------
                           <S>                                     <C>
                                    1                                 50
                                    2                                 45
                                    3                                 40
                                    4                                 35
                                    5                                 30
                                    6 and thereafter                  25
</TABLE>

                           12.2.2.2 If the sublicense includes Cyanamid
                           technology together with the BDS Technology or a
                           portion thereof, BDS shall receive the following
                           percentage of such amounts:

<TABLE>
<CAPTION>
                           Year After Effective Date               Percentage
                           -------------------------               ----------
                           <S>                                     <C>
                                    1                                  25
                                    2                                  22.5
                                    3                                  20
                                    4                                  17.5
                                    5                                  15
                                    6 and thereafter                   12.5
</TABLE>

                  12.3.    Cyanamid shall have the right to request, such
request not to be unreasonably withheld, that BDS grant a direct license to a
Cyanamid Affiliate at non-financial terms and


                                      -21-

<PAGE>   22

conditions consistent with those contained in this Agreement. With respect to
financial obligations, a Cyanamid Affiliate having such direct license shall
make payments only for running royalties on Net Sales.

         13.      Force Majeure

                  13.1     Neither party shall be liable for delay in
performance or non-performance caused by circumstances beyond the reasonable
control of the party affected, including, but not limited to, acts of God,
fires, floods, acts of war or violence, labor disputes or shortages, plant
shutdown, governmental actions, or inability to obtain material, equipment or
transportation.

         14.      Governing Law

                  14.1     This Agreement shall be deemed to have been made and
executed in the State of New Jersey and its form, execution, validity and
construction shall be determined in accordance with the law of that State,
without giving any effect to any conflict of laws provisions.

         15.      Modifications

                  15.1     This Agreement comprises the entire understanding of
the parties, superseding any and all prior agreements, written or oral, between
the parties, with respect to the subject matter hereof, and each party agrees,
upon request of the other, to execute and deliver such documents and take such
actions as may be reasonably requested in order to carry out the intent and
purposes of this Agreement. No amendment to or modification of this Agreement
shall be valid or binding upon a party hereto unless signed by a duly authorized
signatory of the party claimed to be bound thereby.

                  15.2     The Parties agree that subsequent to the execution of
this Agreement and no later than ninety (90) days thereafter, two (2) separate
agreements (herein referred to as "New Agreement(s)") will be executed to
substitute for this Agreement. One New Agreement will provide the rights and
obligations of the Parties for the territory of the United States of America


                                      -22-

<PAGE>   23

and the other New Agreement will provide the rights and obligations of the
Parties for the rest of the world. The economic considerations owed to BDS from
Cyanamid including royalty fee, Research Support and all other fees will be
distributed as agreed in the two (2) New Agreements, but in no event will the
total amount or timing of such payments be changed. The New Agreements in sum
will represent that which is contained in this Agreement.

         16.      Relationship

                  16.1     This Agreement does not constitute and shall not be
construed as constituting a partnership, agency, joint venture or
employer-employee relationship between BDS and Cyanamid. The parties hereto are
independent contractors. Neither party shall have the right to obligate or bind
the other party in any manner whatsoever, except as expressly provided herein,
and nothing therein contained shall give, or is intended to give, any rights of
any kind to any third persons.

         17.      Notices

                  17.1     Any notice required or permitted under this Agreement
shall be deemed to have been sufficiently provided and effectively made as of
the delivery date if hand-delivered, or as of the date received if mailed by
registered or certified mail, postage-prepaid, or if by telecopy or overnight
airmail courier the business day the sender has written confirmation such
telecopy or overnight package was received, and addressed to the receiving party
at its respective address as follows:

         If to Cyanamid:

         Lederle-Praxis Biologicals
         Division of American Cyanamid Company
         c/o Wyeth-Lederle Vaccines and Pediatrics
         280 King of Prussia Road
         Radnor, Pennsylvania 19087
         Attn: President


                                      -23-

<PAGE>   24


         with a copy to:

         American Home Products Corporation
         5 Giralda Farms
         Madison, New Jersey 07940
         Attn: Associate General Counsel, Patents and Trademarks

         If to BDS:

         BioDelivery Sciences, Inc.
         42 Buckman Drive
         Lexington, Massachusetts 02173
         Attn.: Dr. Irving Berstein


         18.      No Waiver

                  18.1     The waiver of any breach of this Agreement by either
party hereto shall in no event constitute a waiver as to any future breach,
whether similar or dissimilar in nature.

         19.      Partial Invalidity

                  19.1     Invalidity of any part of this Agreement under
applicable governing law shall not invalidate any other part or parts hereof
which are otherwise valid under applicable government law. In the event that any
provision(s), term(s) and/or condition(s) herein are determined to be invalid or
partially invalid under applicable governing law, the parties shall thereupon
negotiate in good faith to amend this Agreement so as to comply with applicable
government law. Cyanamid shall exercise all license rights granted hereunder in
full compliance with all applicable laws and regulations.

         20.      Indemnity

                  Each Party shall notify the other of any claim, lawsuit or
other proceeding related to the Licensed Products. Cyanamid shall defend,
indemnify and hold harmless BDS, and each of its employees, officers,
stockholders, directors and agents and each of them (the "Indemnified Parties"),
from and against any and all claims, causes of action, lawsuits or proceedings
filed or otherwise instituted against the Indemnified Parties by any third party
related directly or indirectly to or arising out of the design, manufacture,
sale or use of the Licensed Products or any other embodiment of BDS Technology
by Cyanamid or sublicensees, provided that such indemnification


                                      -24-

<PAGE>   25

shall not be applicable in the event such claims, causes of action, lawsuits
other proceedings arise substantially or entirely from the breach of any
representation or warranty by BDS or the gross negligence or willful misconduct
of an Indemnified Party. Cyanamid will also assume responsibility for all costs
and expenses related to such claims and lawsuits for which it is obligated to
indemnify the Indemnified Parties pursuant to this Section 20, including but not
limited to, the payment of all attorney's fees and costs of litigation or other
defense. BDS shall promptly notify Cyanamid of any such claim or action which is
to be indemnified and Cyanamid shall control the defense, settlement or
compromise thereof.

21.      Publication

         21.1     BDS may not disclose to the public through written or oral
publication (including manuscripts, abstracts and oral presentations) any
material related to Licensed Information in the Field without the prior written
approval of Cyanamid, which grant shall not be unreasonably withheld or delayed.
BDS shall furnish Cyanamid with a copy of any proposed written or oral
presentation sixty (60) days prior to submission for publication, and Cyanamid
shall respond thereto within thirty (30) days of receipt.

         IN WITNESS WHEREOF, the parties have acknowledged their consent to this
Agreement by executing it as of the day and year above written.


BioDelivery Sciences, Inc.                   Lederle-Praxis Biologicals Division
                                             American Cyanamid Company

By:   IRVING A. BERSTEIN                     By:  ROBERT ESSNER
   ------------------------                     --------------------------------
    CHAIRMAN

Name: IRVING A. BERSTEIN                     Name:  ROBERT ESSNER
     ----------------------                       ------------------------------

Date: JUNE 22, 1996                          Date:   JUNE 27, 1996
     ----------------------                      -------------------------------


                                      -25-


<PAGE>   26

                                   APPENDIX I

                     (LISTING OF PATENTS AND APPLICATIONS)


1.       Patent #4,663,161
         LIPOSOME METHODS AND COMPOSITIONS
         Issued May 5, 1987

2.       U.S. Patent #4,871,488
         RECONSTITUTING VIRAL GLYCOPROTEINS INTO LARGE PHOSPHOLIPID VESICLES
         Issued October 3, 1989

3.       U.S. APPLICATION SERIAL #08/130,986
         PROTEIN- OR PEPTIDE-COCHLEATE VACCINES AND METHODS OF IMMUNIZING
         USING THE SAME
         FILED October 4, 1993

4.       PCT/US94/10913
         PROTEIN- OR PEPTIDE-COCHLEATE VACCINES AND METHODS OF IMMUNIZING
         USING THE SAME
         FILED September 30, 1994
         Based on, and identical to, U.S. Serial No. 08/130,986, filed on
         October 4, 1993.

5.       U.S. APPLICATION SERIAL #08/394,986
         A CIP of the above-identified application entitled "STABILIZING AND
         DELIVERY MEANS OF BIOLOGICAL MOLECULES".
         FILED February 22, 1995

6.       PCT/US96/01704
         STABILIZING AND DELIVERY MEANS OF BIOLOGICAL MOLECULES.
         FILED: February 22, 1996
         Based on, and identical to, U.S. Serial No. 08/394,986 filed on
         February 22, 1995.

7.       U.S. APPLICATION SERIAL #08/629,923
         A continuation of U.S. application #08/130/986


                                      -26-