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                                                                    EXHIBIT 10.3



                               AMENDMENT NO. TWO
                                       TO
                                LICENSE AGREEMENT



        THIS AMENDMENT NUMBER TWO TO LICENSE AGREEMENT FOR INTERFERON GAMMA
("AMENDMENT") is entered into effective January 15, 1999, by and between
Genentech, Inc. ("Genentech") and Connetics Corporation ("Connetics").

                                 R E C I T A L S

A.      The Parties have previously entered into that certain License Agreement
        for Interferon Gamma, dated May 5, 1998, as amended on December 23, 1998
        (the "License Agreement").

B.      Pursuant to Section 2.3(c) of the License Agreement, Connetics has the
        right to sublicense certain of its rights under the Agreement to
        InterMune Pharmaceutical, Inc. ("InterMune"), and has in fact entered
        into a sublicense to that effect dated August 21, 1998

C.      On December 3, 1998, the Parties entered into a Letter Agreement to
        document the intent and agreement of Connetics and Genentech with
        respect to additional terms governing the transfer and distribution of
        Interferon Gamma-1B, pending the preparation of an amendment to the
        License Agreement.

D.      The Parties now desire to enter into a definitive amendment to the
        License Agreement, effective as of the date first written above, to
        permit a limited distribution of Interferon Gamma-1B by Connetics or its
        sublicensee under Genentech labels and to add other additional terms
        governing the transfer and distribution of Interferon Gamma-1B.


NOW THEREFORE, the Parties hereby agree as follows:


                                    AGREEMENT

1.      Terms not otherwise defined in this Amendment shall have the meanings
        defined in the License Agreement.


2.      Section 1.29 of the License Agreement is hereby deleted and replaced in
        its entirety as follows:

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               1.29 "Transfer Date" shall mean January 15, 1999, unless
               otherwise mutually agreed to in writing by the Parties.

3. A new Section 1.30 is added to the License Agreement to read in its entirety
as follows:

               1.30 "Connetics Product" shall mean Finished Product under the
               ACTIMMUNE(R) trademark and labeled under the name of Connetics or
               its sublicensee. For clarification, all terms and conditions of
               this Agreement that apply to Finished Product shall also apply to
               Connetics Product.


4. A new Section 1.31 is added to the License Agreement to read in its entirety
as follows:

               1.31   "Distribution Period" shall mean the period of time
                      beginning January 15, 1999 and ending on the earlier of:
                      (a) the first date on which Genentech supplies InterMune
                      with Connetics Product or (b) sixty (60) days after
                      InterMune's receipt of a license from the FDA to sell
                      Interferon Gamma-1B for CGD.


5. A new Section 1.32 is added to the License Agreement to read in its entirety
as follows:

               1.32 "Genentech Finished Product" shall mean Genentech's
               inventory of Interferon Gamma-1B under the ACTIMMUNE(R) trademark
               and labeled under Genentech's name. For clarification, Genentech
               Finished Product is a Licensed Product under this Agreement.


6. A new Section 1.33 is added to the License Agreement to read in its entirety
as follows:

               1.33 "Genentech Bulk Product" shall mean Genentech's inventory of
               Interferon Gamma-1B bulk protein existing as of the Transfer
               Date.

7. A new Section 1.34 is added to the License Agreement to read in its entirety
as follows:

               1.34 "Genentech Product" shall mean, together, Genentech Finished
               Product and Genentech Bulk Product.



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8. A new Section 1.35 is added to the License Agreement to read in its entirety
as follows:

               1.35 "Fully Burdened Manufacturing Cost" shall mean [*], which
        shall be comprised of the sum of: [*].


9. A new Section 1.36 is added to the License Agreement to read in its entirety
as follows:

               1.36 "Third Party Manufacturing Royalties" shall mean all
        royalties paid or incurred by Genentech to third parties under licenses
        taken by Genentech with respect to patents or patent applications that,
        but for such license(s), would be infringed by the manufacture, use,
        sale, offer for sale or importation of Genentech Finished Product or
        Genentech Bulk Product, which royalties are based on the manufacture and
        sale of Genentech Finished Product or Genentech Bulk Product by
        Genentech (or its contract manufacturer) or by Connetics or its
        sublicensees (or a contract manufacturer on their behalf). Genentech
        shall notify Connetics in writing during the term of this Agreement if
        it becomes aware of any Third Party Manufacturing Royalties.


10. A new Subsection 2.5(k) is added to the License Agreement to read in its
entirety as follows:

               2.5(k) Provided that all the activities listed on Exhibit H
        attached hereto are completed, Genentech also shall transfer to
        Connetics or its sublicensee on the Transfer Date all responsibility for
        the distribution, sales and product support of Genentech Finished
        Product, in the Territory, for the treatment of infections associated
        with CGD, subject to the provisions of Section 4.3 below and the
        following terms and conditions:

               (i) Product support of Genentech Finished Product shall include, 
        without limitation, all financial services, all reporting required by
        federal and state law or regulation, professional services, customer
        inquiries, product returns, government chargebacks, product refunds, and
        patient assistance programs,


*Certain information on this page has been omitted and filed separately with
 the Commission. Confidential treatment has been requested with respect to 
 the omitted portions.


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        except for the processing of state Medicaid invoices and certain product
        returns, as provided in Subsections 2.5(k)(iii) and (iv) below.

               (ii) Connetics or its sublicensee shall sell and distribute
        Genentech Finished Product only during the Distribution Period, after
        which time Connetics or its sublicensee shall market, sell and
        distribute Connetics Product, or other Finished Product, for CGD.
        Notwithstanding the foregoing, for a period of ten (10) business days
        after the last day of the Distribution Period, Connetics or its
        sublicensee may continue to sell and distribute its existing inventory
        of Genentech Finished Product in order to reduce or exhaust such
        existing inventory. Under no circumstances, however, will Genentech be
        required to manufacture, fill, label, package, or otherwise supply
        Genentech Finished Product to Connetics or its sublicensees after the
        end of the Distribution Period. After the Distribution Period Connetics
        or its sublicensees shall retain full responsibility, and provide all
        product support, for all Genentech Product sold or distributed by
        Genentech, Connetics or its sublicensees, prior to, during and after the
        Distribution Period, including without limitation, Genentech Product in
        distribution channels.

               (iii) Notwithstanding the above, Genentech shall remain
        responsible for processing state Medicaid invoices for Genentech
        Finished Product, in accordance with this subsection, during the
        Distribution Period and for that period of time after the Distribution
        Period during which states continue to send Medicaid rebate invoices for
        Genentech Finished Product sold under the Genentech NDC label number
        50242. Within fifteen (15) days after the end of each calendar quarter,
        Connetics or its sublicensee shall supply Genentech with a report of its
        Average Manufacturer Price ("AMP") and Best Price ("BP"), as defined in
        the U.S. Omnibus Budget Reconciliation Act of 1990 ("OBRA 90"), for
        Genentech Finished Product for such quarter, and detailed calculations
        determining such AMP and BP. The AMP, BP and supporting calculations
        shall be based on the carton price for Genentech Finished Product.
        Genentech shall report such quarterly AMP and BP to the Health Care
        Finance Administration as required by law and regulation, and will also
        process state Medicaid rebate invoices received for Genentech Finished
        Product. Genentech will pay, adjust or dispute the state Medicaid rebate
        invoices as permitted under OBRA 90. Within sixty (60) days of receipt
        of an invoice from Genentech, Connetics or its sublicensee will
        reimburse Genentech the full amounts of Medicaid rebates paid by
        Genentech. Genentech will have the right to examine, but not more than
        once every calendar year, the books of account and records of Connetics
        and its sublicensees for the purpose of determining the correctness of
        the quarterly reports provided by Connetics or its sublicensees under
        this subsection. If Genentech reasonably determines that any such
        reports(s) were incorrect, Connetics shall pay Genentech's costs of
        correcting its reports to federal agencies and will also pay any
        penalties or fees associated with such incorrect reporting.

               (iv) As of the Transfer Date, Connetics or its sublicensees will
        be responsible for processing returns and related credits for all
        Finished Product,



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        except that Genentech will process credits for returns of Genentech
        Finished Product if Genentech receives a returned Genentech Finished
        Product from a third party. Within sixty (60) days of receipt of an
        invoice from Genentech, Connetics or its sublicensees will reimburse
        Genentech for such return credits processed by Genentech.

               (v) Connetics or its sublicensees shall be responsible for all
        government chargebacks for Genentech Finished Product sold by
        wholesalers to customers on and after the Transfer Date, and for all
        government chargebacks for all Connetics Product and other Finished
        Product sold by Connetics and its sublicensees.

               (vi) Connetics and its sublicensees shall not actively market or
        promote Interferon Gamma-1B during the Distribution Period and while
        selling or distributing Genentech Finished Product. During the
        Distribution Period, Connetics and its sublicensees shall not distribute
        any notice, publication or make any presentation to any third party
        regarding Interferon Gamma-1B without Genenetch's prior review of such
        notice, publication or presentation, and receipt of Genentech's prior
        written consent. Connetics and its sublicensees shall not sell Genentech
        Finished Product at a price higher than that charged by Genentech on
        January 14, 1999.


11.     A new Section 2.5(l) is added to the License Agreement to read in its
        entirety as follows:

               2.5(l) Connetics agrees that, as of the Transfer Date and under
        the terms and conditions below, it or its sublicensee will supply
        Genentech Finished Product to those certain patients in the U.S. to whom
        Genentech has an existing contractual or regulatory obligation to supply
        Interferon Gamma-1B, including prior clinical study patients. In
        addition, Connetics or its sublicensee will supply Genentech Finished
        Product to Hoffman-LaRoche Canada Limited ("Roche Canada") for
        distribution to patients to whom there is a contractual or regulatory
        obligation to supply Interferon Gamma-1B. Connetics also agrees that it
        or its sublicensee will supply Genentech Finished Product free of charge
        to those [*] oncology study patients (including [*] National Cancer
        Institute oncology clinical trial patients) who are continuing to
        receive Interferon Gamma-1B. Genentech shall supply a list of all such
        patients, and information regarding the amount and destination of such
        Interferon Gamma-1B, as soon as reasonably possible. After the end of
        the Distribution Period, Connetics or its sublicensee shall supply
        Connetics Product, or other Finished Product, to such patients and to
        Roche Canada in the same quantities. No other right or license is
        implied or granted to Connetics or its sublicensees to distribute
        Genentech Finished Product, or any other Licensed Product, outside the
        Field of Use or outside the Territory.


*Certain information on this page has been omitted and filed separately with
 the Commission. Confidential treatment has been requested with respect to 
 the omitted portions.


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               (i) To supply the patients and Roche Canada as described above,
        Connetics or its sublicensee shall pay a price for such Genentech
        Finished Product, and such Connetics Product and other Finished Product
        supplied by Genentech, equal to [*] percent [*] of Genentech's Fully
        Burdened Manufacturing Cost, plus [*] of Third Party Manufacturing
        Royalties attributable to the manufacture or distribution of such
        Genentech Finished Product or other Finished Product.

               (ii) For U.S. CGD clinical study patients that do not qualify for
        Connetics' (or its sublicensee's) indigent patient program, Connetics
        (or its sublicensee) shall supply, at its own cost, Genentech Finished
        Product and Finished Product to such patients free of charge for a
        period of time ending not later than December 31, 1999. Connetics (or
        its sublicensee) shall notify such patients that such drug shall not
        continue to be supplied free of charge by Genentech, Connetics or its
        sublicensee, and Connetics or its sublicensee shall use its best efforts
        to terminate such supply of drug before December 31, 1999, after
        reasonable prior notice to such patients. [*]

               (iii) Roche Canada will reimburse Connetics, or its sublicensee,
        for its cost of supplying such Genentech Finished Product and Connetics
        Product to the patients in Canada under a separate agreement to be
        negotiated and executed by Roche Canada and Connetics.

               (iv) Connetics, or its sublicensee, will supply Genentech
        Finished Product and Finished Product to the [*] oncology patients
        without charge to Genentech or to such patients. If, however, Genentech
        has not extended the Field of Use of this Agreement to the field of
        oncology within six (6) months of the Effective Date of this Amendment
        No. 2, then Genentech will reimburse Connetics, or its sublicensee, for
        the cost of such Genentech Finished Product and Finished Product during
        such six month period. If Genentech thereafter extends the Field of Use
        to oncology, then as of the effective date of such extension Connetics
        or its sublicensee will provide Finished Product to such patients
        without charge to Genentech or to such patients. If Genentech does not
        extend the Field of Use to oncology, Connetics or its sublicensee will
        continue to supply such oncology patients, but Genentech will reimburse
        Connetics, or its sublicensee, for such drug in an amount equal to one
        hundred percent (100%) of the price paid to Genentech for such Genentech
        Finished Product and Finished Product and the direct administrative and
        distribution costs of providing such drug to such patients.


*Certain information on this page has been omitted and filed separately with
 the Commission. Confidential treatment has been requested with respect to 
 the omitted portions.


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12.     A new Section 4.3 is added to the License Agreement to read in its
        entirety as follows:

               4.3 (a) Genentech shall sell to Connetics, or its sublicensee,
        Genentech's existing inventory of Genentech Product for commercial sale
        solely for the treatment of infections associated with CGD. Connetics
        shall pay a price for such Genentech Product equal to [*] percent [*] of
        Genentech's Fully Burdened Manufacturing Cost, plus [*] of Third Party
        Manufacturing Royalties attributable to the manufacture or sale of such
        Genentech Product.

               (b) Genentech shall deliver Genentech Finished Product to
        Connetics to a single destination in the United States chosen by
        Connetics, by carrier identified by Connetics. Title and risk of loss as
        to all Genentech Finished Product shall pass to Connetics at point of
        origin (FOB Genentech). Connetics shall be responsible for all freight,
        freight brokerage, insurance and other costs associated with shipping
        Genentech Finished Product hereunder. As soon as reasonably possible
        after each shipment of Genentech Finished Product, Genentech shall
        forward to Connetics all customary documents concerning the shipment,
        including Genentech's invoice relating to such shipment. To the extent
        possible, a certificate of analysis will be included in each shipment.
        Where it is not possible to include a certificate of analysis with a
        shipment, Genentech shall furnish the same to Connetics as soon as
        reasonably possible.

               (c) Payment by Connetics shall be made within sixty (60) days
        after Connetics' receipt of Genentech's invoice for the supply of
        Genentech Finished Product. All payments to Genentech by Connetics under
        this Agreement shall be made in United States dollars by wire transfer
        (or such other reasonable means as Genentech may direct) to such United
        States bank account as Genentech may direct. If a wire transfer is to be
        made, Connetics shall provide notice at least five (5) days prior to the
        date of transfer of the amount of payment and the date good funds will
        be received. Such notice should be given to the Treasurer of Genentech
        at the address set forth at the beginning of this Agreement or such
        other address as Genentech may subsequently direct.

               (d) Genentech shall use its best efforts to maintain its Fully
        Burdened Manufacturing Cost for Genentech Finished Product at or below
        the benchmark costs of [*] dollars [*] per vial of Genentech Finished
        Product (the "Benchmark Costs"). All the provisions of Section 2.6(e) of
        that certain Supply Agreement, dated May 5, 1998, between Genentech and
        Connetics, shall apply to such Benchmark Costs herein.

               (e) All transfer of Genentech Finished Product to Connetics or
        its sublicensee hereunder shall be subject to the provisions hereof and
        shall not be subject to the terms and conditions contained on any
        purchase order or




*Certain information on this page has been omitted and filed separately with
 the Commission. Confidential treatment has been requested with respect to 
 the omitted portions.

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        confirmation by Genentech, except insofar as any such purchase order or
        confirmation establishes: (i) the quantity and form of Genentech
        Product; (ii) the shipment date; (iii) the shipment routes and
        destinations; or (iv) the carrier.


13.     This Amendment supersedes in its entirety the Letter Agreement dated
        December 3, 1998.

14.     All other terms and provisions of the License Agreement, including all
        exhibits to that Agreement, will continue in full force and effect as
        though fully set forth in this Amendment. Nothing in this Amendment
        shall be construed as affecting Connetics' obligations to be liable and
        responsible for the performance of all of the obligations of Connetics
        and its sublicensees under the License Agreement.


IN WITNESS WHEREOF, the parties have executed this Amendment Number Two to
License Agreement as of the date first written above.

GENENTECH, INC.                                 CONNETICS CORPORATION


By:  /s/ Nicholas J. Simon                 By:  /s/ T. Wiggans
   ---------------------------------          ----------------------------------

Name:   Nicholas J. Simon                  Thomas G. Wiggans
      ------------------------------       President and Chief Executive Officer

Title:  Vice President, Business and 
        Corporate Development
      ------------------------------

Acknowledged and agreed as to InterMune's rights and obligations hereunder as
        Connetics' sublicensee under the License Agreement:

INTERMUNE PHARMACEUTICALS, INC.


By:     /s/ Scott Harkonen           
   ---------------------------------
        Scott Harkonen, M.D.
        President



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