**Exhibit 10.3**

**METABASIS THERAPEUTICS, INC.**

**2004 NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN**

**Adopted by Board on May 6, 2004**

**Approved by Stockholders on May 10, 2004**

**AmendmentAdopted by Board on January 17, 2007**

**1.             PURPOSES.**

**(a)           Eligible Option Recipients**.  The persons eligible to receive Options arethe Non-Employee Directors of the Company.

**(b)           Available Options**.  The purpose of the Plan is to provide a meansby which Non-Employee Directors may be given an opportunity to benefit fromincreases in value of the Common Stock through the granting of NonstatutoryStock Options.

**(c)           General Purpose**.  The Company, by means of the Plan, seeks toretain the services of its Non-Employee Directors, to secure and retain theservices of new Non-Employee Directors and to provide incentives for suchpersons to exert maximum efforts for the success of the Company and itsAffiliates.

**2.             DEFINITIONS.**

**(a)           *“Accountant”***means the independent public accountants of the Company.

**(b)           *“Affiliate”***means any parent corporation or subsidiary corporation of the Company, whethernow or hereafter existing, as those terms are defined in Sections 424(e) and(f), respectively, of the Code.

**(c)           *“Annual Grant”***means an Option granted annually to all Non-Employee Directors who meet thespecified criteria pursuant to Section 6(b).

**(d)           *“Annual Meeting”***means the annual meeting of the stockholders of the Company.

**(e)           *“Board”***means the Board of Directors of the Company.

**(f)            *“Capitalization Adjustment”*** hasthe meaning ascribed to that term in Section 11(a).

**(g)           *“Change in Control”***means the occurrence, in a single transaction or in a series of relatedtransactions, of any one or more of the following events:

**(i)           **any Exchange ActPerson becomes the Owner, directly or indirectly, of securities of the Companyrepresenting more than 50% ofthe combined voting power of the Company’s then outstanding securities otherthan by virtue of a merger, consolidation or similar

1

----

transaction.  Notwithstandingthe foregoing, a Change in Control shall not be deemed to occur (A) on accountof the acquisition of securities of the Company by an investor, any affiliatethereof or any other Exchange Act Person from the Company in a transaction orseries of related transactions the primary purpose of which is to obtainfinancing for the company through the issuance of equity securities or (B)****solely because thelevel of Ownership held by any Exchange Act Person (the “***Subject Person***”) exceeds the designated percentagethreshold of the outstanding voting securities as a result of a repurchase orother acquisition of voting securities by the Company reducing the number ofshares outstanding, provided that if a Change in Control would occur (but forthe operation of this sentence) as a result of the acquisition of votingsecurities by the Company, and after such share acquisition, the Subject Personbecomes the Owner of any additional voting securities that, assuming therepurchase or other acquisition had not occurred, increases the percentage ofthe then outstanding voting securities Owned by the Subject Person over thedesignated percentage threshold, then a Change in Control shall be deemed tooccur;

**(ii)          **there isconsummated a merger, consolidation or similar transaction involving (directlyor indirectly) the Company and, immediately after the consummation of suchmerger, consolidation or similar transaction, the stockholders of the Companyimmediately prior thereto do not Own, directly or indirectly, either (A)outstanding voting securities representing more than 50% of the combined outstanding voting power of the survivingEntity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding votingpower of the parent of the surviving Entity in such merger, consolidation orsimilar transaction, in each case in substantially the same proportions astheir Ownership of the outstanding voting securities of the Company immediatelyprior to such transaction;

**(iii)        **there is consummateda sale, lease, license or other disposition of all or substantially all of theconsolidated assets of the Company and its Subsidiaries, other than a sale,lease, license or other disposition of all or substantially all of theconsolidated assets of the Company and its Subsidiaries to an Entity, more than50% of the combined voting powerof the voting securities of which are Owned by stockholders of the Company insubstantially the same proportions as their Ownership of the outstanding votingsecurities of the Company immediately prior to such sale, lease, license orother disposition; or

**(iv)         **individuals who, onthe date this Plan is adopted by the Board, are members of the Board (the ***“Incumbent Board”***)cease for any reason to constitute at least a majority of the members of theBoard; *provided, however,* that if the appointmentor election (or nomination for election) of any new Board member was approvedor recommended by a majority vote of the members of the Incumbent Board thenstill in office, such new member shall, for purposes of this Plan, beconsidered as a member of the Incumbent Board.

Notwithstanding the foregoing or any other provisionof this Plan, the definition of Change in Control (or any analogous term) in anindividual written agreement between the Company or any Affiliate and theOptionholder shall supersede the foregoing definition with respect to StockAwards subject to such agreement (it being understood, however, that if nodefinition of Change in Control or any analogous term is set forth in such anindividual written agreement, the foregoing definition shall apply).

2

----

**(h)           *“Code”***means the Internal Revenue Code of 1986, as amended.

**(i)            *“Committee”***means a committee of one or more members of the Board appointed by the Board inaccordance with Section 3(c).

**(j)            *“Common Stock”***means the common stock of the Company.

**(k)           *“Company”***means Metabasis Therapeutics, Inc., a Delaware corporation.

**(l)            *“Consultant”***means any person, including an advisor, (i) engaged by the Company or anAffiliate to render consulting or advisory services and who is compensated forsuch services or (ii) serving as a member of the Board of Directors of anAffiliate.  However, the term “Consultant”shall not include either Directors of the Company who are not compensated bythe Company for their services as Directors or Directors of the Company who aremerely paid a director’s fee by the Company for their services as Directors.

**(m)          *“Continuous Service”***means that the Optionholder’s service with the Company or an Affiliate, whetheras an Employee, Director or Consultant, is not interrupted or terminated.  The Optionholder’s Continuous Service shallnot be deemed to have terminated merely because of a change in the capacity inwhich the Optionholder renders service to the Company or an Affiliate as anEmployee, Consultant or Director or a change in the entity for which theOptionholder renders such service, provided that there is no interruption ortermination of the Optionholder’s Continuous Service.  For example, a change in status from aNon-Employee Director of the Company to a Consultant of an Affiliate or anEmployee of the Company will not constitute an interruption of ContinuousService.  The Board or the chiefexecutive officer of the Company, in that party’s sole discretion, maydetermine whether Continuous Service shall be considered interrupted in thecase of any leave of absence approved by that party, including sick leave,military leave or any other personal leave.

**(n)           *“Corporate Transaction”*** means theoccurrence, in a single transaction or in a series of related transactions, ofany one or more of the following events:

**(i)           **a sale or otherdisposition of all or substantially all, as determined by the Board in itsdiscretion, of the consolidated assets of the Company and its Subsidiaries;

**(ii)          **a sale or otherdisposition of at least 90% of the outstanding securities of the Company;

**(iii)        **a merger,consolidation or similar transaction following which the Company is not thesurviving corporation; or

**(iv)         **a merger,consolidation or similar transaction following which the Company is the survivingcorporation but the shares of Common Stock outstanding immediately precedingthe merger, consolidation or similar transaction are converted or exchanged byvirtue of the merger, consolidation or similar transaction into other property,whether in the form of securities, cash or otherwise.

**(o)           *“Director”***means a member of the Board of Directors of the Company.

3

----

**(p)           *“Disability”***means the inability of a person, in the opinion of a qualified physicianacceptable to the Company, to perform the major duties of that person’sposition with the Company or an Affiliate of the Company because of thesickness or injury of the person.

**(q)           *“Employee”***means any person employed by the Company or an Affiliate.  Service as a Director or payment of adirector’s fee by the Company or an Affiliate shall not be sufficient toconstitute “employment” by the Company or an Affiliate.

**(r)           *“Entity”*** means a corporation,partnership or other entity.

**(s)           *“Exchange Act”***means the Securities Exchange Act of 1934, as amended.

**(t)            *“Exchange Act Person”*** means anynatural person, Entity or “group” (within the meaning of Section 13(d) or 14(d)of the Exchange Act), except that “Exchange Act Person” shall not include (A)the Company or any Subsidiary of the Company, (B) any employee benefit plan ofthe Company or any Subsidiary of the Company or any trustee or other fiduciaryholding securities under an employee benefit plan of the Company or anySubsidiary of the Company, (C) an underwriter temporarily holding securitiespursuant to an offering of such securities, or (D) an Entity Owned, directly orindirectly, by the stockholders of the Company in substantially the sameproportions as their Ownership of stock of the Company.

**(u)           *“Fair Market Value”***means, as of any date, the value of the Common Stock determined as follows:

**(i)           **If the CommonStock is listed on any established stock exchange, the Fair Market Value of ashare of Common Stock shall be the closing sales price for such stock (or theclosing bid, if no sales were reported, and in each case rounded up wherenecessary to the nearest whole cent) as quoted on such exchange (or theexchange with the greatest volume of trading in the Common Stock) on the day ofdetermination, as reported in *The WallStreet Journal* or such other source as the Board deemsreliable.  Unless otherwise provided bythe Board, if there is no closing sales price (or closing bid, if no sales werereported) for the Common Stock on the day of determination, then the FairMarket Value shall be the closing sales price (or the closing bid, if no saleswere reported, and in each case rounded up where necessary to the nearest wholecent) on the last preceding date for which such quotation exists.

**(ii)          **In the absence ofsuch market for the Common Stock, the Fair Market Value shall be determined ingood faith by the Board.

**(v)            *“Initial Grant”***means an Option granted to a Non-Employee Director who meets the specifiedcriteria pursuant to Section 6(a).

**(w)           *“IPO Date”***means the effective date of the initial public offering of the Common Stock.

**(x)           *“Non-Employee Director”***means a Director who is not an Employee.

4

----

**(y)           *“Nonstatutory Stock Option”***means an Option not intended to qualify as an incentive stock option within themeaning of Section 422 of the Code and the regulations promulgated thereunder.

**(z)           *“Officer”***means a person who is an officer of the Company within the meaning of Section16 of the Exchange Act and the rules and regulations promulgated thereunder.

**(aa)         *“Option”***meansa Nonstatutory Stock Option granted pursuant to the Plan.

**(bb)         *“Option Agreement”***meansa written agreement between the Company and an Optionholder evidencing theterms and conditions of an individual Option grant.  Each Option Agreement shall be subject to theterms and conditions of the Plan.

**(cc)         *“Optionholder”***means a person to whom an Option is granted pursuant to the Plan or, ifapplicable, such other person who holds an outstanding Option.

**(dd)         *“Own,” “Owned,” “Owner,” “Ownership”***  A person or Entity shall be deemed to “Own,”to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” ofsecurities if such person or Entity, directly or indirectly, through anycontract, arrangement, understanding, relationship or otherwise, has or sharesvoting power, which includes the power to vote or to direct the voting, withrespect to such securities.

**(ee)         *“Plan”***means this Metabasis Therapeutics, Inc. 2004 Non-Employee Directors’ StockOption Plan.

**(ff)           *“Rule 16b-3”***means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule16b-3, as in effect from time to time.

**(gg)         *“Securities Act”***means the Securities Act of 1933, as amended.

**(hh)         *“Subsidiary”*** means, with respectto the Company, (i) any corporation of which more than 50% of the outstandingcapital stock having ordinary voting power to elect a majority of the board ofdirectors of such corporation (irrespective of whether, at the time, stock ofany other class or classes of such corporation shall have or might have votingpower by reason of the happening of any contingency) is at the time, directlyor indirectly, Owned by the Company, and (ii) any partnership in which theCompany has a direct or indirect interest (whether in the form of voting orparticipation in profits or capital contribution) of more than 50%.

**3.             ADMINISTRATION.**

**(a)           Administration by Board**.  The Plan shall be administered by the Boardunless and until the Board delegates administration of the Plan to a Committee,as provided in Section 3(c).

**(b)           Powers of Board**.  The Board shall have the power, subject to,and within the limitations of, the express provisions of the Plan:

5

----

**(i)           **To determine theprovisions of each Option to the extent not specified in the Plan.

**(ii)          **To construe andinterpret the Plan and Options granted under it, and to establish, amend andrevoke rules and regulations for its administration.  The Board, in the exercise of this power, maycorrect any defect, omission or inconsistency in the Plan or in any OptionAgreement, in a manner and to the extent it shall deem necessary or expedientto make the Plan fully effective.

**(iii)        **To amend the Plan oran Option as provided in Section 12.

**(iv)         **To terminate orsuspend the Plan as provided in Section 13.

**(v)           **Generally, toexercise such powers and to perform such acts as the Board deems necessary orexpedient to promote the best interests of the Company and that are not inconflict with the provisions of the Plan.

**(c)           Delegation to Committee. **The Board may delegateadministration of the Plan to a Committee or Committees of one or more membersof the Board, and the term ***“Committee”***shall apply to any person or persons to whom such authority has beendelegated.  If administration isdelegated to a Committee, the Committee shall have, in connection with theadministration of the Plan, the powers theretofore possessed by the Board,including the power to delegate to a subcommittee any of the administrativepowers the Committee is authorized to exercise (and references in this Plan tothe Board shall thereafter be to the Committee or subcommittee), subject, however,to such resolutions, not inconsistent with the provisions of the Plan, as maybe adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Boardthe administration of the Plan.

**(d)           Effectof Board’s Decision**.  All determinations, interpretations andconstructions made by the Board in good faith shall not be subject to review byany person and shall be final, binding and conclusive on all persons.

**4.             SHARES SUBJECT TO THE PLAN.**

**(a)           Share Reserve**.  Subject to the provisions of Section 11relating to adjustments upon changes in the Common Stock, the Common Stock thatmay be issued pursuant to Options shall not exceed in the aggregate 300,000shares of Common Stock, plus an annual increase to be added on the first day ofthe fiscal year of the Company for a period commencing on the first day of thefiscal year that begins on January 1, 2005 and ending on (and including) thefirst day of the fiscal year that begins on January 1, 2014 (each such day, a “CalculationDate”), equal to 100,000 shares of Common Stock.  Notwithstanding the foregoing, the Board mayact, prior to the first day of any fiscal year of the Company, to increase theshare reserve by such number of shares of Common Stock as the Board shalldetermine, which number shall be less than 100,000.

**(b)           Reversion of Shares to the ShareReserve**.  If any Optionshall for any reason expire or otherwise terminate, in whole or in part,without having been exercised in full, the shares of Common Stock not acquiredunder such Option shall revert to and again become available for issuance underthe Plan.  If the exercise price of any Optionis satisfied by tendering

6

----

shares of Common Stock held by the Optionholder(either by actual delivery or attestation), then the number of such tenderedshares shall revert to and again become available for issuance under the Plan.

**(c)           Source of Shares**.  The shares of Common Stock subject to thePlan may be unissued shares or reacquired shares, bought on the market orotherwise.

**5.             ELIGIBILITY.**

The Options, as set forthin Section 6, automatically shall be granted under the Plan to all Non-EmployeeDirectors who meet the criteria specified in Section 6.

**6.             NON-DISCRETIONARY GRANTS.**

**(a)           Initial Grants.  **Without any further actionof the Board, each person who is serving as a Non-Employee Director on the IPODate automatically shall, on the IPO Date, be granted, on the terms andconditions set forth herein, an Initial Grant to purchase 20,000 shares ofCommon Stock, less the number of shares of Common Stock (if any) subject to astock option or options granted by the Company to such Non-Employee Directorwithin the six month period prior to the IPO Date (if applicable, as adjustedfor the reverse stock split effected by the Company prior to the IPODate).  Additionally, without any furtheraction of the Board, each person who after the IPO Date is elected or appointedfor the first time to be a Non-Employee Director automatically shall, upon thedate of his or her initial election or appointment to be a Non-EmployeeDirector, be granted an Initial Grant to purchase 20,000 shares of Common Stockon the terms and conditions set forth herein.

**(b)          ****Annual Grants.**Without any further action of the Board, onthe date of each Annual Meeting, commencing with the first Annual Meetingfollowing the IPO Date, each person who is then a Non-Employee Directorautomatically shall be granted an Annual Grant to purchase 10,000 shares ofCommon Stock on the terms and conditions set forth herein; *provided, however,*that if the person hasnot been serving as a Non-Employee Director for the entire twelve month periodpreceding the date of grant, then the number of shares subject to such AnnualGrant shall be reduced pro rata for each full quarter prior to the date ofgrant during which such person did not serve as a Non- Employee Director.

**7.             OPTION PROVISIONS.**

Each Option shall be insuch form and shall contain such terms and conditions as required by thePlan.  Each Option shall contain suchadditional terms and conditions, not inconsistent with the Plan, as the Boardshall deem appropriate.  Each Optionshall include (through incorporation of provisions hereof by reference in theOption or otherwise) the substance of each of the following provisions:

**(a)           Term**.  No Option shall be exercisable after theexpiration of ten years from the date it was granted.

**(b)           Exercise Price**.  The exercise price of each Option shall be100% of the Fair Market Value of the stock subject to the Option on the datethe Option is granted.

7

----

**(c)           Consideration**.  The purchase price of stock acquired pursuantto an Option may be paid, to the extent permitted by applicable law, in anycombination of (i) cash or check, (ii) delivery to the Company of other CommonStock or (iii) pursuant to a programdeveloped under Regulation T as promulgated by the Federal Reserve Board that,prior to the issuance of Common Stock, results in either the receipt of cash(or check) by the Company or the receipt of irrevocable instructions to pay theaggregate exercise price to the Company from the sales proceeds.   The purchase price of Common Stock acquiredpursuant to an Option that is paid by delivery to the Company of other CommonStock acquired, directly or indirectly from the Company, shall be paid only by sharesof the Common Stock of the Company that have been held for more than six months(or such longer or shorter period of time required to avoid a charge toearnings for financial accounting purposes).

**(d)           Transferability**.  An Optionis transferable by will or by the laws of descent and distribution.  An Option also may be transferable uponwritten consent of the Company if, at the time of transfer, a Form S-8registration statement under the Securities Act is available for the exerciseof the Option and the subsequent resale of the underlying securities.  In addition, an Optionholder may, bydelivering written notice to the Company, in a form provided by or otherwisesatisfactory to the Company, designate a third party who, in the event of thedeath of the Optionholder, shall thereafter be entitled to exercise the Option.

**(e)           Vesting**.  Except as otherwise provided in Section 11herein, Options shall vest as follows:

**(i)           **Initial Grantsshall provide for vesting of 1/24th of the shares each month after the date ofthe grant.

**(ii)          **Annual Grants shallprovide for vesting of 1/12th of the shares each month after the date of thegrant.

**(f)            Termination of Continuous Service**.  In the event that an Optionholder’sContinuous Service terminates (other than upon the Optionholder’s death orDisability), the Optionholder may exercise his or her Option (to the extentthat the Optionholder was entitled to exercise such Option as of the date oftermination) but only within such period of time ending on the earlier of (i)the date three months following the termination of the Optionholder’sContinuous Service (or such longer or shorter period specified in the OptionAgreement or (ii) the expiration of the term of the Option as set forth in theOption Agreement.  If, after termination,the Optionholder does not exercise his or her Option within the time specifiedin the Option Agreement, the Option shall terminate.

**(g)           Extension of Termination Date.**  An Optionholder’s Option Agreement may alsoprovide that if the exercise of the Option following the termination of theOptionholder’s Continuous Service (other than upon the Optionholder’s death orDisability) would be prohibited at any time solely because the issuance ofshares of Common Stock would violate the registration requirements under theSecurities Act, then the Option shall terminate on the earlier of (i) theexpiration of the term of the Option set forth in the Option Agreement or (ii)the expiration of a period of three months after the termination of theOptionholder’s Continuous

8

----

Service during which the exercise of the Option wouldnot be in violation of such registration requirements.

**(h)           Disability of Optionholder.**  In the event that an Optionholder’sContinuous Service terminates as a result of the Optionholder’s Disability, theOptionholder may exercise his or her Option (to the extent that theOptionholder was entitled to exercise such Option as of the date oftermination), but only within such period of time ending on the earlier of (i)the date 12 months following such termination (or such longer or shorter periodspecified in the Option Agreement or (ii) the expiration of the term of theOption as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or herOption within the time specified herein, the Option shall terminate.

**(i)            Death of Optionholder.**  In the event that (i) an Optionholder’sContinuous Service terminates as a result of the Optionholder’s death or (ii)the Optionholder dies within the period (if any) specified in the OptionAgreement after the termination of the Optionholder’s Continuous Service for areason other than death, then the Option may be exercised (to the extent theOptionholder was entitled to exercise such Option as of the date of death) bythe Optionholder’s estate, by a person who acquired the right to exercise theOption by bequest or inheritance or by a person designated to exercise theoption upon the Optionholder’s death pursuant to Section 6(d), but only withinthe period ending on the earlier of (1) the date 18 months following the dateof death (or such longer or shorter period specified in the Option Agreement or(2) the expiration of the term of such Option as set forth in the OptionAgreement.  If, after death, the Optionis not exercised within the time specified herein, the Option shall terminate.

**8.             SECURITIESLAW COMPLIANCE.**

The Company shall seek toobtain from each regulatory commission or agency having jurisdiction over thePlan such authority as may be required to grant Options and to issue and sellshares of Common Stock upon exercise of the Options; *provided, however,*that this undertaking shall not requirethe Company to register under the Securities Act the Plan, any Option or anystock issued or issuable pursuant to any such Option.  If, after reasonable efforts, the Company isunable to obtain from any such regulatory commission or agency the authoritywhich counsel for the Company deems necessary for the lawful issuance and saleof stock under the Plan, the Company shall be relieved from any liability forfailure to issue and sell stock upon exercise of such Options unless and untilsuch authority is obtained.

**9.             USE OF PROCEEDS FROM STOCK.**

Proceeds from the sale ofstock pursuant to Options shall constitute general funds of the Company.

**10.          MISCELLANEOUS.**

**(a)           Acceleration of Exercisability andVesting.**  The Boardshall have the power to accelerate the time at which an Option may first beexercised or the time during which an Option or any part thereof will vest inaccordance with the Plan, notwithstanding the provisions in the

9

----

Plan or the Option stating the time at which it mayfirst be exercised or the time during which it will vest.

**(b)           Stockholder Rights**.  No Optionholder shall be deemed to be theholder of, or to have any of the rights of a holder with respect to, any sharessubject to such Option unless and until such Optionholder has satisfied allrequirements for exercise of the Option pursuant to its terms.

**(c)           No Service Rights**.  Nothing in the Plan or any instrumentexecuted or Option granted pursuant thereto shall confer upon any Optionholderany right to continue to serve the Company as a Non-Employee Director or shallaffect the right of the Company or an Affiliate to terminate (i) the employmentof an Employee with or without notice and with or without cause, (ii) theservice of a Consultant pursuant to the terms of such Consultant’s agreementwith the Company or an Affiliate or (iii) the service of a Director pursuant tothe Bylaws of the Company or an Affiliate, and any applicable provisions of thecorporate law of the state in which the Company or the Affiliate isincorporated, as the case may be.

**(d)           Investment Assurances**.  The Company may require an Optionholder, as acondition of exercising or acquiring stock under any Option, (i) to givewritten assurances satisfactory to the Company as to the Optionholder’sknowledge and experience in financial and business matters and/or to employ apurchaser representative reasonably satisfactory to the Company who is knowledgeableand experienced in financial and business matters and that he or she is capableof evaluating, alone or together with the purchaser representative, the meritsand risks of exercising the Option; and (ii) to give written assurancessatisfactory to the Company stating that the Optionholder is acquiring thestock subject to the Option for the Optionholder’s own account and not with anypresent intention of selling or otherwise distributing the stock.  The foregoing requirements, and anyassurances given pursuant to such requirements, shall be inoperative if (1) theissuance of the shares upon the exercise or acquisition of stock under theOption has been registered under a then currently effective registrationstatement under the Securities Act or (2) as to any particular requirement, adetermination is made by counsel for the Company that such requirement need notbe met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel tothe Company, place legends on stock certificates issued under the Plan as suchcounsel deems necessary or appropriate in order to comply with applicablesecurities laws, including, but not limited to, legends restricting thetransfer of the stock.

**(e)           Withholding Obligations**.  The Optionholder may satisfy any federal,state or local tax withholding obligation relating to the exercise oracquisition of stock under an Option by any of the following means (in additionto the Company’s right to withhold from any compensation paid to theOptionholder by the Company) or by a combination of such means:  (i) tendering a cash payment; (ii)authorizing the Company to withhold shares from the shares of the Common Stockotherwise issuable to the Optionholder as a result of the exercise or acquisitionof stock under the Option; *provided,however,*that no shares of Common Stock are withheld with a valueexceeding the minimum amount of tax required to be withheld by law; or (iii)delivering to the Company owned and unencumbered shares of the Common Stock.

10

----

**11.          ADJUSTMENTS UPON CHANGES INCOMMON STOCK.**

**(a)           Capitalization Adjustments**.  If any change is made in, or other eventsoccur with respect to, the stock subject to the Plan, or subject to any Option,without the receipt of consideration by the Company (through merger,consolidation, reorganization, recapitalization, reincorporation, stockdividend, dividend in property other than cash, stock split, liquidatingdividend, combination of shares, exchange of shares, change in corporatestructure or other transaction not involving the receipt of consideration bythe Company (each a “***CapitalizationAdjustment***”)), the Plan will be appropriately adjusted in theclass(es) and maximum number of securities subject both to the Plan pursuant toSection 4 and to the nondiscretionary Options specified in Section 6, and theoutstanding Options will be appropriately adjusted in the class(es) and numberof securities and price per share of stock subject to such outstandingOptions.  The Board shall make suchadjustments, and its determination shall be final, binding and conclusive.  (The conversion of any convertible securitiesof the Company shall not be treated as a transaction “without receipt ofconsideration” by the Company.)

**(b)           Dissolution or Liquidation**.  In the event of a dissolution or liquidationof the Company, then all outstanding Options shall terminate immediately priorto the completion of such dissolution or liquidation.

**(c)           Corporate Transaction**. In the event of a Corporate Transaction, any surviving corporation oracquiring corporation may assume or continue any or all Options outstandingunder the Plan or may substitute similar stock options for Options outstandingunder the Plan (it being understood that similar stock options include, but arenot limited to, options to acquire the same consideration paid to thestockholders of the Company, as the case may be, pursuant to the CorporateTransaction).  In the event that anysurviving corporation or acquiring corporation does not assume or continue allsuch outstanding Options or substitute similar stock options for all suchoutstanding Options, then with respect to Options that have not been assumed,continued or substituted and that are held by Optionholders whose ContinuousService has not terminated prior to the effective time of the CorporateTransaction, the vesting of such Options (and, if applicable, the time at whichsuch Options may be exercised) shall (contingent upon the effectiveness of theCorporate Transaction) be accelerated in full to a date prior to the effectivetime of such Corporate Transaction as the Board shall determine (or, if theBoard shall not determine such a date, to the date that is five days prior tothe effective time of the Corporate Transaction), such Options shall terminateif not exercised (if applicable) at or prior to such effective time.  With respect to any other Options outstandingunder the Plan that have been neither assumed nor substituted, the vesting ofsuch Options (and, if applicable, the time at which such Options may beexercised) shall not be accelerated unless otherwise provided in Section 11(d)or in a written agreement between the Company or any Affiliate and the holderof such Options, and such Options shall terminate if not exercised (ifapplicable) prior to the effective time of the Corporate Transaction.

**(d)           Change in Control.**  Notwithstanding any other provisions of thePlan to the contrary, if a Change in Control occurs and the Optionholder’sContinuous Service has not terminated as of the date immediately prior to theeffective date of such Change in Control, then the vesting and exercisabilityof the shares of Common Stock subject to the Optionholder’s Options shall beaccelerated in full as of the effective date of the Change in Control.  Following

11

----

such Change in Control and notwithstanding any otherprovision of the Plan to the contrary and provided that the Optionholder’sContinuous Service has not terminated prior to the effective date of the Changein Control, then the Optionholder’s Options shall remain exercisable pursuantto their terms until the earlier of (i) 12 months following the effective dateof such Change in Control or (ii) the Expiration Date indicated in theOptionholder’s Grant Notice.

**(e)           Parachute Payments.**  If any payment or benefit the Optionholderwould receive pursuant to a Change in Control from the Company or otherwise (a “***Payment***”) would (i)constitute a “parachute payment” within the meaning of Section 280G of theCode, and (ii) but for this sentence, be subject to the excise tax imposed bySection 4999 of the Code (the “***Excise Tax***”), then such Payment shall be reduced to theReduced Amount.  The “***Reduced Amount***” shallbe either (x) the largest portion of the Payment that would result in noportion of the Payment being subject to the Excise Tax or (y) the largestportion, up to and including the total, of the Payment, whichever amount, aftertaking into account all applicable federal, state and local employment taxes,income taxes, and the Excise Tax (all computed at the highest applicablemarginal rate), results in the Optionholder’s receipt, on an after-tax basis,of the greater amount of the Payment notwithstanding that all or some portionof the Payment may be subject to the Excise Tax.  If a reduction in payments or benefits constituting“parachute payments” is necessary so that the Payment equals the ReducedAmount, reduction shall occur in the following order unless the Optionholderelects in writing a different order (*provided, however,*that such election shall be subject to Company approval if made on or after theeffective date of the event that triggers the Payment): reduction of cashpayments; cancellation of accelerated vesting of Options; reduction of employeebenefits.  In the event that accelerationof vesting of Option compensation is to be reduced, such acceleration ofvesting shall be cancelled in the reverse order of the date of grant of theOptionholder’s Options unless the Optionholder elects in writing a differentorder for cancellation.

The accounting firm engaged by the Company for generalaudit purposes as of the day prior to the effective date of the Change inControl shall perform the foregoing calculations.  If the accounting firm so engaged by theCompany is serving as accountant or auditor for the individual, entity or groupeffecting the Change in Control, the Company shall appoint a nationallyrecognized accounting firm to make the determinations required hereunder.  The Company shall bear all expenses withrespect to the determinations by such accounting firm required to be madehereunder.

The accounting firmengaged to make the determinations hereunder shall provide its calculations,together with detailed supporting documentation, to the Optionholder and theCompany within 15 calendar days after the date on which the Optionholder’sright to a Payment is triggered (if requested at that time by the Optionholderor the Company) or such other time as requested by the Optionholder or theCompany.  If the accounting firmdetermines that no Excise Tax is payable with respect to a Payment, eitherbefore or after the application of the Reduced Amount, it shall furnish theCompany and the Optionholder with an opinion reasonably acceptable to theOptionholder that no Excise Tax will be imposed with respect to such Payment.  Any good faith determinations of theaccounting firm made hereunder shall be final, binding and conclusive upon theOptionholder and the Company.

12

----

**12.          AMENDMENT OF THE PLAN ANDOPTIONS.**

**(a)           Amendment of Plan**.  The Board, at any time and from time to time,may amend the Plan.  However, except asprovided in Section 11 relating to adjustments upon changes in Common Stock, noamendment shall be effective unless approved by the stockholders of the Companyto the extent stockholder approval is necessary to satisfy the requirements ofapplicable laws.

**(b)           Stockholder Approval**.  The Board, in its sole discretion, may submitany other amendment to the Plan for stockholder approval.

**(c)           No Impairment of Rights**.  Rights under any Option granted beforeamendment of the Plan shall not be impaired by any amendment of the Plan unless(i) the Company requests the consent of the Optionholder and (ii) theOptionholder consents in writing.

**(d)           Amendment of Options**.  The Board, at any time, and from time totime, may amend the terms of any one or more Options; *provided, however,*that the rights underany Option shall not be impaired by any such amendment unless (i) the Companyrequests the consent of the Optionholder and (ii) the Optionholder consents inwriting.

**13.          TERMINATION OR SUSPENSION OFTHE PLAN.**

**(a)           Plan Term**.  The Board may suspend or terminate the Planat any time. No Options may be granted under the Plan while the Plan issuspended or after it is terminated.

**(b)           No Impairment of Rights**.  Suspension or termination of the Plan shallnot impair rights and obligations under any Option granted while the Plan is ineffect except with the written consent of the Optionholder.

**14.          EFFECTIVE DATE OF PLAN.**

The Plan shall becomeeffective on the IPO Date, but no Option shall be exercised unless and untilthe Plan has been approved by the stockholders of the Company, which approvalshall be within 12 months before or after the date the Plan is adopted by theBoard.

**15.          CHOICE OF LAW.**

The law of the state of California shall govern allquestions concerning the construction, validity and interpretation of thisPlan, without regard to such state’s conflict of laws rules.

13

----

**METABASISTHERAPEUTICS, INC.**

**2004NON-EMPLOYEE DIRECTORS’ STOCK OPTION PLAN**

**STOCK OPTIONAGREEMENT**

Pursuant to your Stock OptionGrant Notice (“***GrantNotice***”) and this Stock Option Agreement, MetabasisTherapeutics, Inc. (the “***Company***”)has granted you an option under its 2004 Non-Employee Directors’ Stock OptionPlan (the “***Plan***”)to purchase the number of shares of the Company’s Common Stock indicated inyour Grant Notice at the exercise price indicated in your Grant Notice.  Defined terms not explicitly defined in thisStock Option Agreement but defined in the Plan shall have the same definitionsas in the Plan.

The details of your option areas follows:

**1.             VESTING**.  Subjectto the limitations contained herein, your option will vest as provided in yourGrant Notice, provided that vesting will cease upon the termination ofyour Continuous Service.

**2.             NUMBER OF SHARES AND EXERCISE PRICE**.  Thenumber of shares of Common Stock subject to your option and your exercise priceper share referenced in your Grant Notice may be adjusted from time to time forCapitalization Adjustments, as provided in the Plan.

**3.             METHOD OF PAYMENT**.  Paymentof the exercise price is due in full upon exercise of all or any part of youroption.  You may elect to make payment ofthe exercise price in cash or by check or in any other manner ***permitted by your Grant Notice***,which may include one or more of the following:

**(a)          **In the Company’s sole discretion at the time youroption is exercised and provided that at the time of exercise the Common Stockis publicly traded and quoted regularly in *The Wall Street Journal*,pursuant to a program developed under Regulation T as promulgated by theFederal Reserve Board that, prior to the issuance of Common Stock, results ineither the receipt of cash (or check) by the Company or the receipt ofirrevocable instructions to pay the aggregate exercise price to the Companyfrom the sales proceeds.

**(b)          **Provided that at the time of exercise the CommonStock is publicly traded and quoted regularly in *The Wall StreetJournal*, by delivery of already-owned shares of Common Stock eitherthat you have held for the period required to avoid a charge to the Company’sreported earnings (generally six months) or that you did not acquire, directlyor indirectly from the Company, that are owned free and clear of any liens,claims, encumbrances or security interests, and that are valued at Fair MarketValue on the date of exercise.  “Delivery”for these purposes, in the sole discretion of the Company at the time youexercise your option, shall include delivery to the Company of your attestationof ownership of such shares of Common Stock in a form approved by theCompany.  Notwithstanding the foregoing,you may not exercise your option by tender to the Company of Common Stock tothe extent such tender

1

----

would violate the provisions ofany law, regulation or agreement restricting the redemption of the Company’sstock.

**4.             WHOLE SHARES**.  You mayexercise your option only for whole shares of Common Stock.

**5.             SECURITIES LAW COMPLIANCE**. Notwithstanding anything to the contrary contained herein, you may notexercise your option unless the shares of Common Stock issuable upon suchexercise are then registered under the Securities Act or, if such shares ofCommon Stock are not then so registered, the Company has determined that suchexercise and issuance would be exempt from the registration requirements of theSecurities Act.  The exercise of youroption must also comply with other applicable laws and regulations governingyour option, and you may not exercise your option if the Company determinesthat such exercise would not be in material compliance with such laws andregulations.

**6.             TERM**.  You may not exercise your optionbefore the commencement of its term or after its term expires.  The term of your option commences onthe date of grant and expires upon the earliest of the following:

**(a)          **three months afterthe termination of your Continuous Service for any reason other than yourDisability or death, provided that if during any part of such three-monthperiod your option is not exercisable solely because of the condition set forthin Section 5, your option shall not expire until the earlier of the ExpirationDate or until it shall have been exercisable for an aggregate period of three monthsafter the termination of your Continuous Service;

**(b)          **12 months after thetermination of your Continuous Service due to your Disability;

**(c)          **18 months afteryour death if you die either during your Continuous Service or within threemonths after your Continuous Service terminates;

**(d)          **the Expiration Dateindicated in your Grant Notice; or

**(e)          **the day before thetenth anniversary of the date of grant.

**7.             EXERCISE. **You mayexercise your option during its term by delivering a Notice of Exercise (in aform designated by the Company) together with the exercise price to theSecretary of the Company, or to such other person as the Company may designate,during regular business hours, together with such additional documents as theCompany may then require.

**8.             TRANSFERABILITY**.  Youroption is not transferable, except (i) by will or by the laws of descent anddistribution, (ii) with the prior written approval of the Company, byinstrument to an inter vivos or testamentary trust, in a form accepted by theCompany, in which the option is to be passed to beneficiaries upon the death ofthe trustor (settlor) and (iii) with the prior written approval of the Company,by gift, in a form accepted by the Company, to a permitted transferee underRule 701 of the Securities Act. Notwithstanding the foregoing, by

2

----

delivering written notice to the Company, in a formsatisfactory to the Company, you may designate a third party who, in the eventof your death, shall thereafter be entitled to exercise your option.

**9.             OPTION NOT A SERVICE CONTRACT**.  Youroption is not an employment or service contract, and nothing in your optionshall be deemed to create in any way whatsoever any obligation on your part tocontinue in the employ of the Company or an Affiliate, or of the Company or anAffiliate to continue your employment. In addition, nothing in your option shall obligate the Company or anAffiliate, their respective shareholders, Boards of Directors, Officers orEmployees to continue any relationship that you might have as a Director orConsultant for the Company or an Affiliate.

**10.          NOTICES**.  Anynotices provided for in your option or the Plan shall be given in writing andshall be deemed effectively given upon receipt or, in the case of noticesdelivered by mail by the Company to you, five days after deposit in the UnitedStates mail, postage prepaid, addressed to you at the last address you providedto the Company.

**11.          GOVERNING PLAN DOCUMENT**.  Youroption is subject to all the provisions of the Plan, the provisions of whichare hereby made a part of your option, and is further subject to allinterpretations, amendments, rules and regulations which may from time to timebe promulgated and adopted pursuant to the Plan.  In the event of any conflict between theprovisions of your option and those of the Plan, the provisions of the Planshall control.

 

3

----