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                                                                   Exhibit 10.9

                            COLLABORATION AGREEMENT


This Collaboration Agreement (the "Agreement") is entered into as of the 26th
day of November, 1999 (the "Effective Date") by and between Algos Pharmaceutical
Corporation, a corporation organized and existing under the laws of Delaware
with offices at 1333 Campus Parkway, Neptune, New Jersey 07753-6815 ("Algos")
and ENDO Pharmaceuticals Inc., a corporation organized and existing under the
laws of Delaware with offices at 223 Wilmington West Chester Pike, Chadds Ford,
Pa. 19317 ("Endo").

RECITALS:

1.  Algos is the owner of certain Algos Patent Rights and Algos Know-How (each
as hereinafter defined) and has the right to grant the license set forth herein
under such Algos Patent Rights and Algos Know-How.

2.  Endo is the owner of certain Endo Patent Rights and Endo Know-How (each as
hereinafter defined) and has the right to grant the license set forth herein
under such Endo Patent Rights and Endo Know-How.

3.  Endo is the owner of the Percocet(R) and Perco(R) trademarks, as well as
certain variants thereof, and intends to use one or more of such trademarks in
connection with the commercialization of Licensed Products.

4.  Endo and Algos desire to enter into a collaboration to develop, manufacture
and commercialize Licensed Products (as hereafter defined).  Under such
collaboration, Endo will be primarily responsible for performing all necessary
formulation development and associated work on the Licensed Products, for
manufacturing the clinical and commercial supplies of the Licensed Products and
for commercializing Licensed Products.  Algos will be primarily responsible for
conducting the human clinical trials for the Licensed Products and for obtaining
appropriate regulatory approvals for the Licensed Products.  The Parties believe
that the terms and conditions set forth in this Agreement reflect an
approximately equal sharing of responsibilities and benefits of this
collaboration.

5.  In furtherance of this collaboration, Endo desires to obtain a license under
the Algos Patent Rights and Algos Know-How, and Algos desires to obtain a
license under the Endo Patent Rights and Endo Know-How, each upon the terms and
conditions set forth herein.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants herein contained, the Parties hereto, intending to be legally bound,
hereby agree as follows:

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ARTICLE I

DEFINITIONS

As used in this Agreement the following terms, whether used in the singular or
plural, shall have the respective meanings set forth below.

     1.1  "Advertising and Education" means the advertising and marketing of
Licensed Products, and related professional education (to the extent not
performed by Sales Representatives), including, without limitation, (i)
advertisements appearing in journals, newspapers, magazines or other media
including, telemarketing, mail and electronic media, (ii) exhibiting at seminars
and conventions, (iii) sample packages of Licensed Products, promotional
literature, visual aids, three dimensional promotional items, and other selling
materials, (iv) market research, (v) symposia and opinion leader development
activities, (vi) reimbursement program development, and (vii) development
information and data specifically intended for national accounts, managed care
organizations, and group purchasing organizations.

     1.2  "Advertising and Education Expense" means costs excluding corporate
and administrative overhead, incurred by a Party or for its account which are
specifically identifiable to the Advertising and Education of a Licensed Product
and consistent with the Commercialization Plan and Budget, provided however that
such term shall exclude Selling and Promotion Expenses.

     1.3  "Affiliate" means (i) any corporation or business entity of which
fifty percent (50%) or more of the securities or other ownership interests
representing the equity, the voting stock or general partnership interest are
owned, controlled or held, directly or indirectly, by Endo or Algos; or (ii) any
corporation or business entity which, directly or indirectly, owns, controls or
holds fifty percent (50%) (or the maximum ownership interest permitted by law)
or more of the securities or other ownership interests representing the equity,
the voting stock or, if applicable, the general partnership interest, of Endo or
Algos.

     1.4  "Algos Information and Inventions" shall have the meaning set forth in
Section 10.1.

     1.5  "Algos Know-How" means any Algos information and materials, including
but not limited to, discoveries, Improvements, processes, formulas, data,
inventions, know-how and trade secrets, patentable or otherwise, which during
the term of this Agreement (i) are in Algos' possession or control, (ii) are not
generally known and (iii) arise out of this Agreement or are necessary or useful
to the development, manufacture, marketing, use or sale of a Licensed Product.
"Algos Know-How" shall not include any such information or materials for which
Algos has an obligation of confidentiality to a third party.

     1.6 "Algos Patent Rights" means any and all patents and patent applications
(which for the purposes of this Agreement shall be deemed to include
certificates of invention and applications or certificates of invention)
including, but not limited to, those listed on Exhibit A attached hereto and
made a part hereof, which during the term of this Agreement are owned by Algos,
assigned to Algos, or to which Algos acquires rights (with rights to sublicense)
through license or otherwise, which:

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(i) claim the Compound or the Licensed Product, its manufacture or use, or (ii)
claim Algos Information and Inventions; or (iii) are divisions, continuations,
continuations-in part, foreign patents or patent applications or equivalents
corresponding thereto, and any patents issuing thereon, reissues, renewals,
extensions, supplementary protection certificates or the like of any such
patents and patent applications provided that such patents have not expired,
been canceled or become abandoned and have not been declared invalid by a
decision or judgment of a court of competent jurisdiction, except if such
decision is under appeal.

     1.7  "Algos Trademark" means any interest Algos has in the names
"OxycoDex" and "PercoDex".

     1.8  "Allowable Expense" means those expenses, incurred by a Party or for
its account, specifically identifiable to the commercialization of a Licensed
Product, which consist of (i) Cost of Goods Sold, (ii) Distribution Costs, (iii)
Advertising and Education Expenses, (iv) Third Party Royalties, (v) the costs of
ongoing medical studies to support such Licensed Products, including clinical
studies not included in Development Costs, (vi) expenses associated with market
withdrawals, field adjustments or recalls, (vii) Process Improvement Costs,
(viii) Selling and Promotion Expenses, (ix) expenses relating to training,
adverse event reporting, sub-licensing of Licensed Product, patents and
trademarks and (x) any other expense agreed to by the Parties. In no event will
a given expense item appear in more than one of the foregoing categories. All
Allowable Expenses described above shall be specified in the Commercialization
Plan and Budget provided for hereunder. Allowable Expenses shall not include
Development Costs.

     1.9  "Calendar Quarter" means the respective periods of three (3)
consecutive calendar months ending on March 31, June 30, September 30 and
December 31 of any given year.

     1.10  "Calendar Year" means each successive period of twelve (12) months
commencing on January 1 and ending on December 31.

     1.11 "Clinical Trial" means a Phase I, II, or III human study conducted in
the United States under an Investigational New Drug Application, unless both
Parties agree that such a human study shall be conducted outside the United
States in accordance with applicable foreign regulatory requirements.

     1.12 "Collaboration" means the collaborative efforts between Endo and Algos
to develop, manufacture and market the Licensed Products in the Field as set
forth in Articles 2, 3, 4 and 5.

     1.13 "Collaboration Information and Inventions" means Algos Information and
Inventions, Endo Information and Inventions and Joint Information and
Inventions.

     1.14   "Compound" means:

        (a) the combination of oxycodone, or any of its salts, and
     dextromethorphan, or any of its salts; or
        (b) the combination described in clause (i), together with acetaminophen
     or aspirin

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or ibuprofen or any other NSAID, including, but not limited to COX 2 inhibitors
or any of their salts

in any formulation, dosage or mode of administration.

     1.15 "Cost of Goods Sold" means the cost of Licensed Products sold in
either bulk or final therapeutic form. As used herein, the cost of the Licensed
Products sold means, as calculated on a consistent basis in accordance with
Generally Accepted Accounting Principles (GAAP), (i) in the case of products and
manufacturing services acquired from Third Parties pursuant to Section 5.3(c),
payments made to such Third Parties for the manufacture of Licensed Product, and
(ii) in the case of manufacturing services performed by Endo pursuant to Section
5.3(c), including manufacturing services in support of Third Party
manufacturing, the amount charged for such Licensed Product by Endo for
performing the work.

     1.16  "Development Costs" means the costs, incurred by a Party or for its
account, specifically identifiable to the development of a Licensed Product
which is aimed at achieving Regulatory Approval of such Licensed Product or an
expanded or significantly modified label for a Licensed Product as to which
Regulatory Approval has been previously obtained.  Development Costs include (i)
preclinical costs including, but not limited to toxicology, (ii) formulation and
manufacturing costs of producing any Licensed Product which are incurred prior
to receipt of initial Regulatory Approval for such Licensed Product, (iii) costs
associated with conducting preclinical and clinical trials and analyzing the
data arising therefrom and (iv) costs incurred in connection with regulatory
submissions.  All Development Costs described above shall be specified in the
Development Plan and Budget provided for hereunder.  Development Costs shall
exclude costs incurred prior to the Effective Date.

     1.17  "Distribution Costs" means the costs, incurred by a Party or for its
account for the distribution of Licensed Product, including (i) handling and
transportation to fulfill orders (excluding such costs, if any, treated as a
deduction in the definition of Net Sales), (ii) customer services including
order entry, billing and adjustment, inquiry and credit and collection, and
(iii) costs of facilities utilized for the storage and distribution of Licensed
Products.  If any of the foregoing costs represent expenses to be allocated
among Licensed Products and other products distributed by Endo, the percent of
such expenses to be allocated to Distribution Costs shall be agreed upon in good
faith by the Steering Committee and included in the Commercialization Plan and
Budget.

     1.18  "Endo Information and Inventions" shall have the meaning set forth in
Section 10.1.

     1.19 "Endo Know-How" means any Endo information and materials, including
but not limited to, discoveries, improvements, processes, formulas, data,
inventions, know-how and trade secrets, patentable or otherwise, which during
the term of this Agreement (i) are in Endo's possession, (ii) are not generally
known and (iii) which arise out of this Collaboration or which are necessary or
useful to the development, manufacture, marketing, use or sale of Licensed
Product. "Endo Know-How" shall not include any such information or materials for
which Endo has an obligation of confidentiality to a third party.

     1.20  "Endo Patent Right" means any and all patents and patent applications
(which for the

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purposes of this Agreement shall be deemed to include certificates of invention
and applications or certificates of invention) including, but not limited to,
those listed on Exhibit B attached hereto and made a part hereof, which during
the term of this Agreement are owned by Endo, assigned to Endo, or to which Endo
acquires rights (with rights to sublicense) through license or otherwise, which:
(i) claim the Compound or the Licensed Product, its manufacture or use; or (ii)
claim Endo Information and Inventions; or (iii) are divisions, continuations,
continuations-in-part, foreign patents or patent applications or equivalents
corresponding thereto, and any patents issuing thereon, reissues, renewals,
extensions, supplementary protection certificates or the like of any such
patents and patent applications provided that such patents have not expired,
been canceled or become abandoned and have not been declared invalid by a
decision or judgment of a court of competent jurisdiction, except if such
decision is under appeal.

     1.21  "FDA" means the United States Food and Drug Administration.

     1.22 "Field" means the administration of Licensed Product as therapy for
pain in humans.

     1.23 "First Commercial Sale" means, with respect to any Licensed Product,
the sale of the Licensed Product to a third party, including for subsequent end
use or consumption, of such Licensed Product, after all required approvals,
including marketing approvals, have been granted by the FDA or by the
appropriate foreign governmental agency for the country in which the sale is
made and, when governmental approval is not required, the first sale of the
Licensed Product to a third party in that country in connection with the
nationwide introduction of the Licensed Product in that country. Licensed
Products that are provided, free of charge, within any country as part of an
effort to market the Licensed Product shall not constitute a First Commercial
Sale.

     1.24  "Improvement" means any enhancement to a Licensed Product or the
manufacture, formulation, ingredients, preparation, presentation, means of
delivery, dosage or packaging of Licensed Product.

     1.25 "IND" means an Investigational New Drug Application filed with the
FDA.

     1.26 "Joint Information and Inventions" shall have the meaning set forth in
Section 10.1.

     1.27  "Know-How" means any and all technical and non-technical information,
expertise, knowledge and the like which relates to the Licensed Product
including, without limitation, all chemical, pharmacological, toxicological,
preclinical and clinical, assay control, manufacturing data, marketing and sales
information and any other designs or information, including information
contained in patent applications used or useful for the development, package
and/or marketing of the Licensed Product or its manufacture from Compound.

     1.28 "Licensed Product(s)" means one or more pharmaceutical products
suitable for the treatment of humans, containing as its active ingredient a
Compound.

     1.29 "Net Loss" means Net Sales of Licensed Products less reimbursement for
Allowable Expenses, where Net Sales are less than Allowable Expenses.

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     1.30 "Net Profit" means Net Sales of Licensed Products less Allowable
Expenses, but if such difference is a negative number, it shall be a Net Loss.

     1.31  "NDA" means a New Drug Application as required pursuant to the United
States Food, Drug and Cosmetic Act and the Code of Federal Regulations to be
filed with the FDA.

     1.32  "Net Sales" means (1) the actual gross amount invoiced by Endo or its
Affiliates for the sale of the Licensed Product to customers during a Calendar
Quarter plus (2) all amounts received by Endo from third party sublicensees in
connection with the development, manufacture or commercialization of Licensed
Products less:

        (a) transportation charges, including insurance, to the extent not
included as an Allowable Expense;

        (b) any sales, use, value-added and excise taxes and/or duties or
allowances based on the selling price of the Licensed Product which fall due and
are paid as a consequence of such sales;

        (c) as consistently applied under GAAP, all cash, returns and
allowances, trade, quantity and other discounts, chargebacks and rebates
actually allowed and taken to the extent customary in the trade, including
without limitation governmental rebates such as Medicaid.

     1.33 "Percocet(R) Product" means any product sold by Endo in the United
States, which contains oxycodone and acetaminophen under the name "Percocet(R)",
other than a Licensed Product.

     1.34  "Phase 4 Clinical Trial" means a human study so defined by the FDA or
which is undertaken primarily for commercial reasons and not solely to
demonstrate the safety or efficacy of a Licensed Product.

     1.35 "Pre-IND Studies" means pre-clinical, animal and other studies
necessary to submit an IND for a Licensed Product.

     1.36 "Process Improvement Costs" means the costs incurred by a Party or for
its account, excluding Development Costs, which are specifically identifiable to
an improvement in the manufacturing process for a Licensed Product aimed at
reducing the costs of producing such Licensed Product or improving the quality
of such Licensed Product. For items that would be depreciated or amortized over
more than one accounting period, only the current accounting period depreciation
or amortization for items related to such activities may be included in Process
Improvement Costs for that accounting period.

     1.37 "Proprietary Information" means all Know-How, Algos Know-How, Endo
Know-How, and all other scientific, preclinical and clinical, regulatory,
marketing, financial and commercial information or data within the Field which
is provided by one Party to the other Party in connection with this Agreement.

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     1.38  "Regulatory Approval" means any approvals (including supplements,
amendments, pre- and post-approvals, pricing and reimbursement approvals),
licenses, registrations or authorizations of any national, supra-national (e.g.,
the European Commission or the Council of the European Union), regional, state
or local regulatory agency, department, bureau, commission, council or other
governmental entity, necessary for the manufacture, distribution, use or sale of
Licensed Products in a regulatory jurisdiction.

     1.39 "Sales Representative" means an employee or party contracted with by
Endo or an Endo Affiliate who is responsible for meeting with customers and
others who can buy (or influence the buying process and decision regarding) the
applicable Licensed Product in the applicable country and shall exclude an
employee of either Party or an Affiliate solely engaged in professional
education or other indirect activities in support of selling.

     1.40  "Selling and Promotion Expenses" means, subject to the limitation set
forth in Section 4.3, (i) payments for Endo's efforts directly attributable to
the promotion of Licensed Product, plus (ii) reimbursement for Third Party
selling and promotional activities directly attributable to the promotion of
Licensed Product, such as a Third Party sales force, call targeting, call
reporting and other monitoring/tracking costs.

     1.41 "Third Party(ies)" means a person(s) or entity(ies) who or which is
(are) neither a Party nor an Affiliate of a Party.

     1.42  "Third Party Royalties" means Royalties payable to a Third Party
attributable to the manufacture, use, or sale of Licensed Products.

     1.43 "Toxicology Studies" means all toxicology studies necessary to submit
an NDA for a Licensed Product.

     1.44  "VCU License" means the License Agreement between Algos and Virginia
Commonwealth University ("VCU") dated August 16, 1993, as amended through June
13, 1996 and as may be further amended; from time to time.

ARTICLE 2

COLLABORATION OBJECTIVES; MANAGEMENT OF COLLABORATION

     2.1   General Collaboration Objectives.  Algos and Endo shall work
exclusively with each other to achieve the objectives of this Collaboration upon
the terms and conditions set forth in this Agreement.  In order to maximize
market penetration, each Party desires to enter into a collaboration which
aligns technological innovation and organizational resources (including access
to manufacturing, sales and marketing, distribution, regulatory, service and
support, management expertise, entrepreneurial acuteness and capital) to
successfully complete development, manufacturing and commercialization of a
Licensed Product.  In furtherance of these objectives, each Party shall (i)
cooperate with the other Party in good faith, in order to achieve the objectives

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of this Agreement; (ii) furnish, maintain and preserve suitable and sufficient
facilities and personnel for the work to be accomplished by each Party
hereunder, and (iii) perform its obligations hereunder in good faith in a
commercially reasonable, diligent and workmanlike manner and in compliance in
all material respects with the standards, laws, rules and regulations of each
regulatory authority having jurisdiction over the material activities of each
Party.

Algos and Endo will each undertake primary responsibility for certain aspects of
research, development, manufacturing and commercialization of the Licensed
Product as set forth in Articles 3, 4 and 5.  Each Party shall have the rights
to use Proprietary Information developed pursuant to this Agreement on the basis
provided for herein.

     2.2 Steering Committee. The Parties hereby establish a steering committee
(the "Joint Steering Committee") that will be responsible for establishing the
policy and budgetary aspects of this Collaboration as further set forth below:

        (a) Composition of the Steering Committee. The Steering Committee shall
be comprised of four (4) representatives of Endo and four (4) representatives of
Algos. Each company shall always have as members of the Steering Committee, its
employees that hold the following positions: President & CEO and Head of
Business Development. The initial representatives for each Party hereto shall be
set forth on Exhibit C attached hereto and made a part hereof. Replacement
representatives shall be appointed by the party to be represented. Additional
employees or consultants may from time to time, by mutual consent of the
Parties, be invited to attend Steering Committee meetings, subject to compliance
with Paragraph 7.1.

        (b) Decision-Making. The Steering Committee shall use its best efforts
in good faith to resolve, by majority vote, any issue brought before it by
either Party relevant to the cooperation of the Parties or the implementation of
the development, manufacture or commercialization of Licensed Product pursuant
to this Agreement. If the Steering Committee shall reach a decision on any issue
relating to work to be performed by either Party hereto or with respect to costs
or funding for work within the scope of this Agreement, such decision shall be
binding upon the Parties hereto. With respect to issues relating to (i) the
strategy for the sales and marketing of Licensed Product or (ii) the operational
aspects of the sales and marketing of Licensed Product, the President & CEO of
Endo shall have the tie-breaking vote, provided that the President & CEO of Endo
shall consider, in good faith, the input regarding these matters provided by the
Algos representatives on the Steering Committee. The President & CEO of Endo
shall not have a tie-breaking vote with respect to any budgetary matters or the
methodologies to be utilized in connection with calculations under Section 8.2.

        (c) Steering Committee Dispute Resolution. If the Steering Committee is
unable to resolve a matter as set forth in paragraph 2.2(b), notwithstanding the
exercise of its best efforts as provided therein, then such issue shall be
referred to the chief executive officer of Endo and Algos (the "CEOs") for
resolution. Any final mutual decision of the CEOs shall be conclusive and
binding on the Parties hereto with respect to such issue, and must be reached,
if practicable under the circumstances within thirty (30) days of being referred
to the CEOs. All other issues, including interpretation of this Agreement and
the activities or efforts of any Party in connection with this

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Agreement, shall be determined in accordance with the mediation and arbitration
provisions of this Agreement.

        (d) Meetings. The Steering Committee shall meet at least once each
Calendar Quarter, starting in the Calendar Quarter in which this Agreement is
executed with the location for such meetings alternating between Algos and Endo
facilities (or such other locations as is determined by the Steering Committee).
Alternatively, the Steering Committee may meet by use of conference call or
other similar communications equipment.

        (e) Steering Committee Responsibilities. Except as specifically set
forth in this Agreement, the Steering Committee shall be responsible for the
overall management of all aspect of the Collaboration, including but not limited
to the approval of all Development Plans and Budgets, Manufacturing Plans and
Budgets and Commercialization Plans and Budgets and any substantial
modifications to such plan, budgets and timetables and the determination of the
manner in which the flow of funds is managed (including manner and
responsibility for payments under the budgets). The Steering Committee is also
responsible for (i) approving the filing of the IND(s) and NDA(s) and other
registrations with regulatory bodies, both in the United States and in other
countries, on Licensed Products and (ii) approving any sublicenses to Third
Parties to sell Licensed Products.

     2.3  Project Team.  The Parties hereto shall establish a project team (the
"Project Team") that will be co-chaired by the Project Leaders for each company
both of whom shall be responsible for selecting appropriate persons to be
members of the Project Team. The Project Team shall be primarily responsible for
the implementation of the day-to-day aspects of the Collaboration.

     2.4 Project Leaders. Endo and Algos each shall appoint an employee (a
"Project Leader") to coordinate its part of the Collaboration. The Project
Leaders shall be the primary contact between the Parties with respect to
development, manufacture and commercialization of Licensed Products under the
Collaboration. Each Party shall notify the other within thirty (30) days of the
date of this Agreement of the appointment of its Project Leader and shall notify
the other Party as soon as practicable upon changing this appointment. It is
expected that prior to the first Regulatory Approval of Licensed Product, each
Project Leader shall be an employee with expertise in the development of
proprietary drugs and that after the first Regulatory Approval of Licensed
Product, each Project Leader shall be an employee with expertise in the
commercialization of proprietary drugs.


ARTICLE 3

DEVELOPMENT AND REGULATORY MATTERS

     3.1  Records; Access and Reports.

        (a) Records. Algos and Endo shall each maintain records, in sufficient
detail and in good scientific manner appropriate for patent and regulatory
purposes, which shall be complete and

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accurate and shall fully and properly reflect the relevant work done and results
achieved in the performance of Licensed Product development under the
Collaboration. Each Party shall maintain all records referred to under this
Paragraph under safe and secure conditions that protects such records from
theft, breach of confidentiality, destruction from fire, flood and other natural
disasters and, to the extent such records are maintained in an electronic
format, unauthorized and/or accidental erasure, corruption or destruction.

        (b) Access. Each Party hereto shall have the right to arrange for its
employees and outside consultants involved in Licensed Product development under
the Collaboration to visit the other Party at its respective offices and
laboratories during normal business hours and upon reasonable notice and to
discuss the development work and its results in detail with the technical
personnel and consultants of Algos or Endo, as the case may be, subject to
compliance with Paragraph 7.1. Furthermore, each Party shall provide the other
Party on-line computer access to the individual and aggregated information/data
that each Party generates under this Collaboration Agreement and shall provide
the other Party the right, during normal business hours and upon reasonable
notice, to inspect and copy all such records referred to in Paragraph 3.1(a)
above.

        (c) Reports. Within thirty (30) days following the end of each Calendar
Quarter during the term of this Agreement, the Project Team shall provide to
each Party a reasonably detailed progress report presentation which shall
describe the work performed to date on development of Licensed Products,
evaluate the work performed in relation to the agreed timetable, describe and
evaluate the results of any preclinical and clinical development or other
studies in progress, describe any regulatory submission regarding the Licensed
Products and the status of any regulatory action or communication in connection
therewith, state the recommendations of the Project Team as to adjustments or
modifications in any plan, timetable or budget and provide such other
information reasonably required by either Party relating to the progress of the
goals or performance of the development of Licensed Product under the
Collaboration.

     3.2  Development of Licensed Products.

     (a)  Allocation of Responsibilities.  Endo will be primarily responsible
for developing the formulation and other related aspects of the Licensed
Products, both for preclinical and clinical supply manufacturing and for full-
scale commercial manufacturing. This responsibility includes, but is not limited
to, formulation development, analytical method development, preclinical and
clinical supply manufacturing, analytical testing for the Licensed Product
release, stability studies, commercial manufacturing and packaging and labeling.
Endo will also be primarily responsible for preparing the chemical,
manufacturing and controls ("CMC") section of the NDA.  Algos will be primarily
responsible for conducting and overseeing all phases of the Clinical Trials for
the Licensed Product, for any preclinical studies other than those needed for
the CMC section and for preparing and submitting the appropriate applications
for regulatory approval to market and sell the Licensed Products in the United
States.

     (b) Development Plan and Budget. The development of each Licensed
Product shall be governed by a comprehensive worldwide development plan
("Development Plan") and a detailed annual development plan and budget proposed
for each Calendar Year or portion thereof prior to the

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first issuance of Regulatory Approval to market a Licensed Product ("Development
Plan and Budget"). The Development Plan shall include a description of the
preclinical studies, including, but not limited to toxicology studies and the
Clinical Trials. The Development Plan shall be subject to review, revision, and
approval by the Steering Committee before such studies are commenced. The
Development Plan and Budget for the first Calendar Year of the Agreement shall
be determined no later than ninety (90) days after the execution of this
Agreement. Periodically, the Steering Committee shall assign responsibilities
for updating and preparing the Development Plan and Budget on such schedule and
by such process as the Steering Committee shall determine, provided, however,
that the Development Plan and Budget shall be updated no later than 60 days
prior to the commencement of a new Calendar Year. The Steering Committee shall
be responsible for approving the Development Plan and Budget on a timely basis.
The Project Team will promptly report to the Steering Committee if it believes
it will exceed the budget approved in advance by the Steering Committee. Algos
and Endo shall each use diligent efforts to execute and perform the Development
Plan and Budget and to cooperate with the other in carrying out such Plans.

     (c)  Pre-IND Studies; Toxicology Studies; Human Clinical Trials.
Consistent with the Development Plan and Budget, Endo shall conduct and shall,
bear primary responsibility for conducting all  studies (these will continue
after IND filing) relating to the formulation and preclinical and clinical
supplies of the Licensed Product. Algos shall conduct and shall bear primary
responsibility for conducting all human Clinical Trials and all preclinical
studies other than those for which Endo is responsible.

     (d) Both Parties hereto hereby agreed and represent that they shall each
carry out the studies and duties for which they are responsible under this
Collaboration Agreement, in accordance with applicable current good clinical
practices ("cGCP"), current good laboratory practices ("cGLP"), current good
manufacturing practices ("cGMP"), FDA and DEA requirements

     3.3  Regulatory Matters

     (a) IND and NDA Filings. Algos shall retain primary legal responsibility
for the preparation, filing and prosecution of all filings and applications,
including but not limited to the IND directed toward the Field and the NDA
required to obtain all marketing approvals to commercially sell and use any
Licensed Products in the Field, and shall be responsible for the coordination
and selection of any contractors which may be used to assist in the preparation
and compilation of the NDA, provided; however, that Algos must notify Endo of
all FDA and other regulatory agency communications with regards to the Licensed
Product and must seek and obtain Endo's review and approval of all submissions
and/or responses to such agencies. Furthermore, Endo has the right to have at
least one Endo representative present at any meetings with such agencies with
regards to a Licensed Product, in whatever form such meetings may take, e.g.
face-to-face, telephone, videoconference, etc. Endo shall supply the Steering
Committee with materials prepared in connection with the promotion, packaging,
manufacture, adverse event experience or other activities related to Licensed
Products in order to maintain the NDA and to prosecute and complete any and all
subsequent filings or submissions required by the FDA.

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     (b) Maintenance of NDA.  Algos shall own the NDA for Licensed Products.
Upon approval by the FDA of the NDA authorizing the manufacture, use or sale of
the Licensed Product, Algos shall take all actions necessary to maintain the NDA
and shall bear legal responsibility for all aspects of ongoing maintenance of
the NDA, including but not limited to any subsequent filings, submissions,
amendments or other related matters during the term hereof.

     (c) Safety and Utility Information. During the term hereof, and for such
additional periods of time as required by law or regulation, each Party shall
promptly furnish to the other Party all information concerning safety or utility
of Licensed Products, such as adverse or unexpected side effects, injury or
other events associated with uses, studies, investigations or tests of the
Licensed Product, whether or not such Party is required to report such
information to any regulatory authority and whether or not such event is
determined to be attributable to the Licensed Products.

     (d) Regulatory Filings; Copies. Algos shall be responsible for filing
all safety and adverse event reports with regards to the Licensed Product and
shall promptly provide to Endo copies of all correspondence with, and all
documents and applications filed with or submitted by Algos to any regulatory
authority with respect to the Licensed Products, including but not limited to
copies of all safety and adverse events reports, label statements, expert
summaries and any information not previously included in the Licensed Product
NDA.


ARTICLE 4

MARKETING AND COMMERCIALIZATION

     4.1 Commercialization Responsibility. Endo shall be responsible for
marketing and selling the Licensed Product. Endo shall use its best efforts to
market and sell diligently the Licensed Product in such a manner as to maximize
Net Profits. In addition, with respect to any Percocet(R) Product dosage
strength for which there exists an AB-rated generic equivalent, Endo shall use
best efforts to convert physicians from writing prescriptions for such
Percocet(R) Product dosage strength to writing prescriptions for Licensed
Product.

     4.2 Commercialization Plan. Prior to each Calendar Year, Endo will present
to the Steering Committee its plan for commercializing each Licensed Product
(the "Commercialization Plan and Budget"). Each Commercialization Plan and
Budget shall include a comprehensive marketing, sales, pricing, manufacturing,
distribution and licensing strategy and related profit and loss forecasts for
the applicable Licensed Product. The first Commercialization Plan and Budget
shall be presented by Endo not later than 12 months prior to the expected date
of Regulatory Approval of the first Licensed Product. All activities undertaken
by either Party in connection with the commercialization of Licensed Product
shall be in accordance with the Commercialization Plan and Budget approved by
the Steering Committee.

     4.3 Determination of Selling and Promotion Expenses. The Commercialization
Plan and Budget for each Calendar Year shall include an estimate of Selling and
Promotion Expenses, allocated separately on a per call basis for Primary
Presentation sales calls and Secondary

                                       12
<PAGE>

Presentation sales calls. The Selling and Promotion Expenses per call shall be
established on the basis that the costs of each call shall be allocated
approximately 65% to a Primary Presentation and approximately 35% to a Secondary
Presentation. Once established, the rates set forth in the Commercialization
Plan and Budget shall determine the amount which Endo is allowed to charge as
Allowable Expenses for its sales force, regardless of the actual costs of
maintaining such sales force. For purposes of this Section, a "Primary
Presentation" means a face-to-face meeting between a target physician or
customer and the representative where the Licensed Product and key communication
points of the Licensed Product promotional materials are the main topics of
discussion and which consumes approximately 65% of the allotted meeting time.
For purposes of this Section, a "Secondary Presentation" means a face-to-face
meeting between a target physician or customer and the representative where the
Licensed Product and key communication points of the Licensed Product
promotional materials are the secondary topics of discussion and which consumes
approximately 35% of the allotted meeting time.

     4.4 Trademark. Endo shall, at its sole discretion, determine the
appropriate Trademark for the Licensed Product, provided that such Trademark
must contain Endo's current trademarks Perco(R), Percocet(R) or a reasonable
variant of such marks.


ARTICLE 5

MANUFACTURING

     5.1 Manufacturing Responsibility. Endo shall manufacture, or have
manufactured the required quantities of Licensed Products for pre-clinical
studies, the Clinical Trials and the commercial supply of the Licensed Product.

     5.2 Standards. All manufacturing of Licensed Products shall be conducted in
accordance with cGMPs as required by the FDA or, where applicable such standards
and practices as way be required by any non-U.S. regulatory authorities, as then
in effect.

     5.3 Recovery of Manufacturing Costs. In calculating cost of Licensed
Products sold by Endo, the following rules will apply:

     (a) The Steering Committee will review Endo's anticipated Process
Improvement Costs.  Process Improvement Costs may be recovered as a Development
Cost, if incurred prior to regulatory approval of the Licensed Product, and as
an Allowable Expense after such regulatory approval in which such costs are
incurred (in the amount that would be amortized or depreciated for the relevant
period in accordance with GAAP).

     (b) Endo shall be entitled to include in the Costs of Goods Sold costs
incurred with respect to achieving and maintaining compliance under applicable
environmental laws (and for undertaking measures which could assist in such
compliance such as pollution prevention and waste minimization) which are
attributable to the Licensed Products.

                                       13
<PAGE>

        (c) The Steering Committee shall always obtain at least two bids (each a
"Competitive Bid"), in arm's length negotiations, for the manufacture and supply
of Licensed Product, one of which may be a bid from Endo (in Endo's sole
discretion) and at least one of which shall be a bid from a Third Party other
than DuPont.  The Steering Committee shall select that Competitive Bid which is
expected to maximize Net Profit (the "Superior Competitive Bid") and shall
negotiate a supply agreement containing the terms of the Superior Competitive
Bid with the party who submitted the Superior Competitive Bid (whether Endo or a
Third Party).  In the event the party who submitted the Superior Competitive Bid
is a Third Party, Endo may take the lead role in conducting the negotiations
with such Third Party, provided that Algos shall participate in all negotiations
and the Steering Committee shall approve all deal terms and the final supply
agreement.

        (d) In the event Endo is selected by the Steering Committee to be the
supplier of Licensed Product pursuant to Section 5.3(c), Endo shall be entitled
to charge a reasonable profit, provided that, in no event shall the amount
charged by Endo for Licensed Product be greater than the amount which a Third
Party manufacturer has offered as a Competitive Bid pursuant to Section 5.3(c).

ARTICLE 6

LICENSE; EXCHANGE OF INFORMATION

     6.1  License Grant.

     (a) Sole and Exclusive License to Endo. Upon the terms and subject to the
conditions and limitations set forth herein, Algos hereby grants to Endo a sole
and exclusive worldwide right and license under the Algos Patent Rights, the
Algos Know-How and any Algos Trademark to develop, make, have made, own and sell
and offer for sale, Licensed Product(s) in the Field.

     (b) Sole and Exclusive License to Algos. Upon the terms and subject to the
conditions and limitations set forth herein, Endo hereby grants to Algos an
exclusive (except as to Endo) worldwide right and license under the Endo Patent
Rights and Endo Know-How to develop Licensed Product(s) under this
Collaboration.

     (c) Restriction on Further Licenses The Parties currently anticipate that
Third Party licensees or distributors may be engaged to market the Licensed
Products in the Field in many foreign countries.

     (d)  Sublicenses of Third Party Technology. The licenses granted herein
include sublicenses under any patent rights or other technology applicable to
the development, manufacture, use or sale of Licensed Products in the Field
which have been, or during the term of this Agreement are, licensed by either
Party from a Third Party with rights to grant sublicenses. Following the
Effective Date of this Agreement if either Party believes that Third Party
patent rights or other technology applicable to Licensed Products would be
valuable or necessary to the collaboration hereunder, the Parties will consult
regarding the licensing of such technology. Neither Party shall enter into such
Third Party license except by mutual agreement of both parties.

                                       14
<PAGE>

Each Party receiving a sublicense under this Agreement of Third Party patent
rights or other technology shall comply with the terms and conditions of such
sublicense imposed by the Third Parry, including but not limited to accounting
for and reporting Net Sales of Licensed Products in accordance with the Third
Party agreement.  Any royalties or other payments due to any Third Party
pursuant to such a Third Party license (whether entered into before or after the
effective date of this Agreement) shall be an Allowable Expense.

     6.2 Exchange of Information. Upon execution of this Agreement and subject
to compliance with Paragraph 7.1, Algos shall disclose to Endo all material
Algos Know-How not previously disclosed. During the term of this Agreement,
Algos shall also promptly disclose to Endo on an ongoing basis all material
Algos Know-How and other useful information developed in connection with the
Collaboration. During the term of this Agreement, Endo shall also promptly
disclose to Algos on an ongoing basis all material Endo Know-How and other
useful information developed in connection with the Collaboration.

ARTICLE 7

CONFIDENTIALITY AND PUBLICATION

     7.1 Nondisclosure Obligation. All Proprietary Information received from the
other Party shall be maintained in strict confidence and shall not be disclosed
by either Party to any other person, or any corporation or other business
entity, or any government or any agency or political subdivision thereof without
the prior written consent of the other Party, except to the extent that such
Proprietary Information:

     (a) is known by the receiving Party at the time of its receipt, and not
through a prior disclosure by the disclosing Party, as documented by written
records,

     (b) is properly in the public domain;

     (c) is subsequently disclosed to a receiving Party, by a Third Party who
may lawfully do so and is not under an obligation of confidentiality to the
disclosing Party:

     (d) is developed by the receiving Party independently of Proprietary
Information received from the other Party;

     (e)  is disclosed to governmental or other regulatory agencies in order to
obtain patents or to gain approval to conduct clinical trials or to market
Licensed Product, but such disclosure may be only to the extent reasonably
necessary to obtain patents or authorizations;

     (f) is necessary to be disclosed to licensees, sublicensees, agents,
consultants, affiliates and/or other Third Parties for the research and
development, manufacturing or marketing of the Compound or the Licensed Product
(or for such Parties to determine their interest in performing such activities)
in accordance with this Agreement on the condition that such Third Parties agree
to be

                                       15
<PAGE>

bound by the confidentiality obligations contained in this Agreement; provided,
however, the term of confidentiality for such Third Parties shall be no less
than five (5) years; or

     (g) is required to be disclosed by law or court order, provided that notice
is promptly delivered to the other Party in order to provide an opportunity to
challenge or limit the disclosure obligations. Without limiting any of the
foregoing provisions of this Paragraph 7.1, it is understood that either Party
hereto, including any Affiliate, may make reasonable disclosure of this
Agreement, and the terms hereof as may be required by law (including securities
laws), provided that the Party subject to such law shall seek confidential
treatment of key commercial and scientific terms to the extent such treatment is
available under law and as agreed to by the Parties; or

     (h) in connection with an assertion of its rights under this Agreement; or

     (i) under a binder of confidentiality to any person or entity who may be
interested in investing in or acquiring all or substantially all of the assets
or securities of such Party; or

     (j) to its legal and financial advisors provided such advisors are under a
duty of confidentiality that covers such disclosed Confidential Information.

Upon execution of this Agreement, the Parties may issue a mutually accepted
press release. Furthermore, the Parties hereby agree that any proposed
additional press release or communication with the public by either Party, with
regards to and/or affecting the Collaboration, shall be submitted to the other
Party for review, comment and final approval prior to release thereof, except as
permitted in this Article 7.

     7.2  Use of Proprietary Information. Each of Algos and Endo agrees that the
Proprietary Information shall only be used in connection with its obligations
under this Agreement and further agrees to keep all Algos Know-How and/or Endo
Know-How, as applicable, confidential subject to the provisions of this Article
7.

     7.3 Publication. During the term of this Agreement, both Parties
acknowledge the other Party's interest in publishing its results related to the
Licensed Product to obtain recognition within the scientific community and to
advance the state of scientific knowledge. The Parties also recognize the mutual
interest in obtaining valid patent protection and in protecting their respective
business interests and trade secret information. Consequently, either Party that
wishes to make a publication, shall deliver to the other Party a copy of the
proposed written publication or an outline of an oral disclosure at least thirty
(30) days prior to submission for publication or presentation. The reviewing
Party shall have the right (a) to propose modifications to the publication for
scientific reasons, patent reasons, trade secret reasons or business reasons or
(b) to request a reasonable delay in publication or presentation in order to
protect patentable information. Both Parties must agree to the final form of
such publication before it can be published.

     7.4 Survival. The terms of this Article shall survive and continue in
effect for five (5) years following expiration or termination of this Agreement

                                       16
<PAGE>

ARTICLE 8

PAYMENTS AND REPORTS

     8.1 Development Costs. Within thirty (30) days after the end of each
Calendar Quarter, and forty-five (45) days after the end of each Calendar Year,
Endo shall report to Algos its Development Costs incurred during such quarter
for each Licensed Product. Within fifteen (15) days after the receipt of such
report, Algos shall provide to Endo a report showing both Algos' and Endo's
Development Costs for each Licensed Product. If Endo's Development Costs for the
applicable quarter exceed Algos' Development Costs, Algos shall remit to Endo
one-half of the difference within ten (10) days after providing the report. If
Algos' Development Costs for the applicable quarter exceed Endo's Development
Costs, Algos will invoice Endo. for one-half of the difference payable in ten
(10) days.

     8.2  Calculation and Allocation of Net Profit

        (a) For purposes of the allocation of Net Profits and Net Losses, Endo
shall record sales of the relevant Licensed Product as set forth in this
Agreement, collect revenue, and calculate Net Sales in accordance with Paragraph
1.32.

        (b) In the event there is a Net Profit in a Calendar Quarter, Endo
shall, within sixty (60) days of the end of such Calendar Quarter, make payments
in the following order:

           (i) first reimburse Algos and Endo for any Allowable Expenses
incurred by each party during such Calendar Quarter;

           (ii) then reimburse Algos and Endo on a pro rata basis for any
unreimbursed Allowable Expenses incurred by each party from previous Calendar
Quarters; and

           (iii) then pay Algos fifty percent (50%) of the Adjusted Net Profits
generated from the sale of the Licensed Products during such Calendar Quarter.
"Adjusted Net Profits" shall equal Net Profits for such Calendar Quarter, net of
amounts reimbursed under clause (ii) of this Section and net of any credits for
the Lost Percocet(R) Profits Factor, as described in Section 8.2(d).

        (c) In the event there is a Net Loss in a Calendar Quarter, the full
amount of Net Sales shall be used to partially reimburse the Parties for
Allowable Expenses, such reimbursement to be in proportion to the Allowable
Expenses incurred by each Party for such Calendar Quarter. In such event, any
unreimbursed Allowable Expenses shall be carried forward to be reimbursed out of
future Net Profits under Section 8.2(b)(ii), at an annual interest rate equal to
the prime rate plus three percent (3%).

        (d) Within sixty (60) days of the end of each Calendar Quarter, Endo
shall calculate the Lost Percocet(R) Profits Factor for such Calendar Quarter.
Endo may then credit such amount against Net Profits as described in Section
8.2(b)(iii).

                                       17
<PAGE>

         (e) The Lost Percocet(R) Profits Factor is meant to compensate Endo for
profits from the sales of each existing dosage strength of Percocet(R) Product
(i.e., 2.5 mg, 5 mg, 7.5 mg and 10 mg) lost by Endo as a result of Endo's
efforts to convince physicians to prescribe Licensed Product instead of
Percocet(R) Product, less any profits which would have been lost by Endo as a
result of (i) generic erosion and (ii) an estimate of sales which would have
been generated had Algos or a Third Party promoted Licensed Product. For each
dosage strength of Percocet(R) Product, the Lost Percocet(R) Profits Factor
shall only apply with respect to the twelve (12) Calendar Quarter period of time
commencing with the first full Calendar Quarter following the date on which both
(i) a Generic Equivalent of the given Percocet(R) dosage strength is being sold
in the United States and (ii) the First Commercial Sale of Licensed Product has
occurred in the United States. For purposes of calculating the Lost Percocet(R)
Profits Factor, the following terms shall have the following meanings:

     "Generic Equivalent" means a product which is (i) an AB-rated generic
     equivalent of a given dosage strength of Percocet(R) Product and (ii) sold
     by a Third Party.  It is understood that Roxicet is a Generic Equivalent of
     the 5 mg dosage strength of Percocet(R) Product.

     "Percocet(R) Product Net Sales" means, for a given dosage strength of a
     Percocet(R) Product, the actual gross amount invoiced by Endo or its
     Affiliates for the sale of such dosage strength of Percocet(R) Product to
     customers in the United States during a Calendar Quarter less:

               (a) transportation charges, including insurance;

               (b)  any sales, use, value-added and excise taxes and/or duties
          or allowances based on the selling price of the Percocet(R) Product
          which fall due and are paid as a consequence of such sales;

               (c)  as consistently applied under GAAP, all cash, returns and
          allowances, trade, quantity and other discounts, chargebacks and
          rebates actually allowed and taken to the extent customary in the
          trade, including without limitation governmental rebates such as
          Medicaid.

     "Lost Percocet(R) Sales Factor" means, for a given Calendar Quarter and for
     a given dosage strength of Percocet(R) Product, (A minus B) minus (C plus
     D), where:

          A = Percocet(R) Product Net Sales for such dosage strength in the
          United States for the Calendar Quarter which began twelve months
          before the beginning of the given Calendar Quarter (the "Previous
          Calendar Quarter")

          B = Percocet(R) Product Net Sales for such dosage strength in the
          United States for the given Calendar Quarter

          C = Generic Erosion Factor for such Percocet(R) Product dosage
          strength

          D = 10% of A

                                       18
<PAGE>

     In the event "Lost Percocet(R) Sales Factor" is a negative number for any
     Calendar Quarter for a given dosage strength of Percocet(R) Product, it
     shall be deemed to equal zero for such Calendar Quarter.

     "Generic Erosion Factor" means (the increase in unit volume of the
     applicable dosage strength of Generic Equivalents from the Previous
     Calendar Quarter to the given Calendar Quarter) times (the average selling
     price of the applicable dosage strength of Percocet(R) Product in the given
     Calendar Quarter).  This value shall be calculated based on data supplied
     by IMS America, or a comparable data collection organization.

     "Percocet(R) Product Net Profits" means for each dosage strength of
     Percocet(R) Product, the Percocet(R) Product Net Sales less expenses
     incurred in the United States in connection with the commercialization of
     such dosage strength of Percocet(R) Product and allocated to such dosage
     strength of Percocet(R) Product, calculated on the same basis as Allowable
     Expenses are calculated for Licensed Products.

     "Lost Percocet(R) Profits Factor" means, for a given dosage strength of
     Percocet(R) Product and for a given Calendar Quarter, E times (F divided by
     G), where:

          E = Lost Percocet(R) Sales Factor
          F = Percocet(R) Product Net Profits
          G = Percocet(R) Product Net Sales

A hypothetical calculation of Lost Percocet(R) Profits Factor is included as
Exhibit H-1.

     8.3 Reports. Within 30 days after the end of each Calendar Quarter, Endo
shall report to Algos with regard to the Net Sales and Allowable Expenses for
each Licensed Products sold during such quarter. Endo will keep complete and
accurate records in sufficient detail to enable the amounts payable hereunder to
be determined by Algos and its consultants or professional advisors.

     8.4  Audits.

     (a)  Upon the written request of either Party and not more than once in
each Calendar Year, and upon reasonable notice, each Party shall permit the
other Party and its  independent certified public accounting firm of nationally
recognized standing which is reasonably acceptable to the non-requesting Party,
at the requesting Party's expense, to have access during normal business hours
to such of the records of the non-requesting Party as may be reasonably
necessary to verify the accuracy of the payment reports and other calculations
required hereunder for any year ending not more than thirty-six (36) month prior
to the date of receipt by the non-requesting Party of such request.  The
accounting firm shall disclose to the requesting Party any matter directly
related to their findings, to the extent necessary to verify the accuracy or
completeness of the information provided by the non-requesting Party to the
requesting Party. This covenant shall survive the termination of this Agreement
for a period of thirty-six (36) months, except if any licenses under Section
11.3 are

                                       19
<PAGE>

granted, in which case this covenant shall survive for thirty-six (36) months
after the termination of such license.

     (b)  If such accounting firm concludes and, the non-requesting Party agrees
with such conclusion that additional payments were owed during such period, the
non-requesting Party shall pay the additional payments within thirty (30) days
of the date the requesting Party delivers to the non-requesting Party such
accounting firm's written report; provided that, if the non-requesting Party
disagrees with such conclusion the dispute shall be submitted to the CEOs for
settlement further provided that, in the event that the CEOs are unable to
resolve the dispute, it shall be settled by the mediation and arbitration
provisions set forth in this Agreement.  In the event that such accounting firm
concludes that amounts were overpaid by the non-requesting Party, the requesting
Party shall reimburse the non-requesting Party in the amount of such overpayment
within thirty (30) days of receipt of such accounting firm's written report. The
fees charged by such accounting firm shall be paid by the requesting Party,
unless the amount of additional payments due exceeds the amount paid for any
such period by ten percent (10%), in which case the non-requesting Party shall
reimburse the requesting Party for the fees charged by such accounting firm.

     (c)  Upon the expiration of thirty-six (36) months following the end of any
year, the calculation of payments payable with respect to such year shall be
binding and conclusive upon each Party, and each Party shall be released from
any liability or accountability with respect to payments for such year.

     (d) Each Party shall treat all financial information subject to review
under this Paragraph 8.4 in accordance with the confidentiality provisions of
this Agreement, and shall cause its accounting firm to enter into a reasonable
and mutually satisfactory confidentiality agreement with the other Party
obligating it to maintain such financial information disclosed to such Party in
confidence pursuant to such confidentiality agreement.

     8.5 Tax Withholding. If any governmental authority by law, rule or
regulation requires withholding of income taxes or other taxes imposed upon
payments set forth in this Agreement, each Party shall make such withholding
payments as required and subtract withholding payments from the payments set
forth in this Agreement. Each party shall promptly submit appropriate proof of
payment of the withholding taxes to the other party together with copies of all
communications and correspondence from or with any such governmental authority
or forms filed by such Party with respect thereto. Each Party shall use
reasonable efforts to minimize any such taxes or withholding on behalf of the
other Party and shall cooperate with the other Party to the extent any challenge
to such withholding or taxes is made by the other Party.

     8.6 Foreign Exchange. For the purpose of computing the Net Sales for
Licensed Products sold in a currency other than United States Dollars, such
currency shall be converted into United States Dollars using the average of the
rates of exchange published in the Wall Street Journal, during the 5 business
days preceding the close of the Calendar Quarter, provided however, that such
rate of exchange shall approximate fair market value and, in the event of
rapidly changing exchange rates the Parties shall agree on a mechanism to assure
that exchange rates are calculated to reflect fair market values on an ongoing
basis.

                                       20
<PAGE>

ARTICLE 9

REPRESENTATIONS AND WARRANTIES

     9.1 Representations and Warranties of Algos. Algos represents and warrants
to Endo that as of the date of the execution of this Agreement: (a) it has the
full right, power and authority to enter into this Agreement, to perform its
obligations under this Collaboration and to grant the licenses granted
hereunder, (b) it has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in Algos Patent Rights or
Algos Know-How except pursuant to agreements, if any, set forth on Exhibit D
attached hereto and made a part hereof and (c) to the best of Algos' knowledge,
there are no claims, judgments or settlements pending against or owed by Algos
or pending or threatened claims or litigation relating to the Algos Patent
Rights or the Algos Know-How, except as set forth on Exhibit E attached hereto
and made a part hereof, all of which is free and clear of any liens, charges and
encumbrances and, to the best of Algos' knowledge, no other person, corporate or
other private entity, or governmental entity or subdivision thereof has any
claim of ownership with respect to the Patent Rights or the Algos Know-How,
whatsoever. Algos further represents and warrants that it is a duly organized
and validly existing corporation under the laws of its jurisdiction of
incorporation, and has taken all required corporate action to authorize the
execution, delivery and performance of this Agreement; it has the full right,
power and authority to enter into this Agreement and perform all of its
obligations hereunder, the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein do not violate, conflict
with or constitute a default under its charter or similar organization
documentation its bylaws or the terms or provisions of any material agreement
(including any licenses granted by Algos under the Algos Patent Rights) or other
instrument to which it is a party or by which it is bound, or any order, award,
judgment or decree to which it is a party or by which it is bound and upon
execution and delivery, this Agreement will constitute the legal, valid and
binding obligation of Algos.

     9.2 Representations and Warranties of Endo. Endo represents and warrants
that, as of the date of the execution of this Agreement, (a) it has the full
right, power and authority to enter into this Agreement, to perform its
obligations under this Collaboration and to grant the licenses granted
hereunder, (b) it has not previously assigned, transferred, conveyed or
otherwise encumbered its right, title and interest in Endo Patent Rights or Endo
Know-How except pursuant to an agreement granting license rights outside the
Field as set forth on Exhibit F attached hereto and made a part hereof and (c)
to the best of Endo's knowledge, there are no claims, judgments or settlements
pending against or owed by Endo or pending or threatened claims or litigation
relating to the Endo Patent Rights or the Endo Know-How, except as set forth on
Exhibit G attached hereto and made a part hereof, all of which is free and clear
of any liens, charges and encumbrances and to the best of Endo's knowledge, no
other person, corporate or other private entity, or governmental entity or
subdivision thereof has any claim of ownership with respect to the Endo Patent
Rights or the Endo Know-How, whatsoever. Endo further represents and warrants
that it is a duly organized and validly existing corporation under the laws of
its jurisdiction of incorporation, and has taken all required corporate action
to authorize the execution, delivery and performance of this Agreement, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated

                                       21
<PAGE>

herein do not violate, conflict with, or constitute a default under its charter
or similar organization document, its bylaws or the terms or provisions of any
agreement or other instrument to which it is a party or which it is bound, or
any order, award, judgment or decree to which it is a party or by which it is
bound; and upon execution and delivery, this Agreement will constitute the
legal, valid and binding obligation of Endo.

ARTICLE 10

INTELLECTUAL PROPERTY

     10.1 Collaboration Information and Inventions. Except as specifically
provided for herein, the entire right, title and interest in all discoveries,
Improvements, processes, formulas, data, inventions, know-how and trade secrets,
patentable or otherwise, developed or invented in the course of carrying out the
Collaboration:

     (a) solely by employees of Algos shall be owned solely by Algos ("Algos
Information and Inventions").

     (b) solely by employees of Endo shall be owned solely by Endo ("Endo
Information and Inventions"); and

     (c)   jointly by employees of Algos and Endo shall be owned jointly by
Algos and Endo ("Joint Information and Inventions").

     (d) Each Party shall promptly disclose to the other Parties hereto the
development making conception or reduction to practice of Collaboration
Information and Inventions as soon as practical after such information is
obtained.

     10.2 Filing, Prosecution and Maintenance of Algos and Joint Patents. Algos
agrees to file, prosecute and maintain, or cause such actions to be taken upon
appropriate consultation with Endo, the Algos Patent Rights and Algos Know-How
in accordance with Algos' prudent commercial judgment. Algos shall have the
first right to file the patent application for all Joint Information and
Inventions.  Algos may elect not to file and if so Endo shall have the right to
file the patent application for Joint Information and Inventions, provided that
in the case of patent filings based on Joint Information and Inventions,
irrespective of who the Filing Party is, such patents will be jointly owned by
the Parties in accordance with this Agreement. In each case, the filing Party
shall give the non-filing Party an opportunity to review the text of the
application before filing, shall consult with the non-filing Party with respect
thereto, and shall supply the non-filing Party with a copy of the application as
filed, together with notice of its filing date and serial number. The Filing
Party shall keep the other Party advised of the status of the actual and
prospective patent filings and upon the request of the other Party, provide
advance copies of any papers related to the filing, prosecution and maintenance
of such patent filings. The expenses and costs incurred by the Filing Party in
filing, prosecuting and maintaining such patent flings shall be divided evenly
between the Parties.

     10.3 Filing, Prosecution and Maintenance of Endo Patent. Endo agrees to
file, prosecute

                                       22
<PAGE>

and maintain, or cause such actions to be taken, upon appropriate consultation
with Algos, the Endo Patent Rights, and Endo Know-How in accordance with Endo's
prudent commercial judgment.

     10.4 Option to Prosecute and Maintain Patents. Each Party shall give at
least thirty (30) days notice to the other of any desire to cease prosecution
and/or maintenance of the notifying Party's Patent Rights' and, in such case,
shall permit the other, at its sole discretion, to continue prosecution or
maintenance at its own expense. If the other Party elects to continue
prosecution or maintenance, the notifying Party shall execute such documents and
perform such acts at its expense as may be reasonably necessary for the other
Party to perform such prosecution or maintenance. All of the expenses and costs
incurred by the Party assuming prosecution and/or maintenance responsibilities
to continue such prosecution and maintenance of Patent Rights shall be
creditable, subject to allocation by the Steering Committee based upon each
Party's relative interest in such Patent Rights, against payments due under this
Agreement. Unused credits may be carried over into subsequent payment periods.

     10.5 Enforcement. Each Party shall enforce and/or protect, where it
reasonably determines that it is commercially advisable to do so after
consultation with the other Party, its respective Patent Rights and Know-How
licensed to the other under this Agreement against any Third Party who infringes
such Patent Rights or wrongfully uses such Know-How. The Party owning the
relevant Patent Rights or Know-How shall have the first right to initiate or
prosecute litigation in the event of a Third Party claim of patent infringement
pertaining to a Licensed Product.

     10.6 Infringement Action. In the event a Party initiates an action at its
expense against Third Party infringement with respect to Licensed Product or
takes appropriate action to defend its Patent Rights or Know-How, the other
Party hereby agrees to reasonably cooperate with the initiating Party and to
fund at its option, up to one-half of the expenses incurred in connection with
any such action. Any recovery obtained by the initiating Party as a result of
such proceeding or other actions, whether obtained by settlement or otherwise,
shall be divided between the Parties in proportion to the respective percentage
of  out-of-pocket costs borne by each Party in any such suit or action.

     10.7 Option to Prosecute Infringement. If within sixty (60) days of
becoming aware of the infringement of the any Patent Rights for which a Party
retains a license under this Agreement or unauthorized use of licensed Know-How,
the licensor of such Patent Rights or Know-How decides not to institute an
infringement suit or take other reasonable action to protect the relevant Patent
Rights and Know-How, the other Party shall have the right to institute such suit
or take other appropriate action at its own expense in the name of the licensor
or licensee or both. The licensor shall cooperate fully with the licensee and
shall fund, at its option, up to one-half of the expenses incurred in connection
with any such actions, in its efforts to protect the relevant Patent Rights,
Know-How and Licensed Product. Any recovery obtained by the licensee as a result
of such proceeding, by settlement or otherwise, shall be retained by the
licensee and licensor in proportion to the respective percentage of out-of-
pocket costs borne by each Party in any such suit or action.

     10.8 Abandonment. Each party shall immediately give notice to the other of
the grant, lapse, revocation, surrender, invalidation or abandonment of any
patent rights licensed hereunder for

                                       23
<PAGE>

which the notifying party is responsible for the filing, prosecution, and
maintenance.


ARTICLE 11

TERM AND TERMINATION

     11.1 Term and Expiration. This Agreement shall be effective as of the day
first written above and unless terminated earlier pursuant to Paragraph 11.2
below, the term of this agreement shall continue in effect until (i) the Parties
mutually agree in writing to terminate this Collaboration for any reason or (ii)
the expiration of all issued patents in the Algos Patent Rights and the Endo
Patent Rights.

     11.2 Termination.

     (a) Voluntary Termination.  This Agreement may be terminated by either
Party at any time, upon 90 days' written notice delivered to the other Party, in
the event that a significantly material safety issue exists relating to a
Licensed Product such that a reasonable clinician would conclude that further
clinical studies or commercialization would not be advisable (a "Product-Related
Termination").  In the event that the other Party shall, in good faith, not be
in agreement with such determination made by the Party proposing termination,
the dispute shall be submitted to the CEOs for settlement; provided that, in the
event that the CEOs are unable to resolve the dispute, it shall be settled by
the mediation and arbitration provisions set forth in Section 13.6 of this
Agreement.

     (b) Termination for Cause. This Agreement may be terminated at any
time during the term of this Agreement:

           (i) by either Party, if the other Party is in breach of its material
obligations hereunder, other than a breach for failure to make payments or
advance funds provided for under this Agreement, by causes or reasons within its
control and has not cured such breach within ninety (90) days after notice
requesting cure of the breach, provided, however that if the breach is not
capable of being cured within ninety (90) days of such written notice, this
Agreement may not be terminated so long as the breaching Party commences and
diligently prosecutes all commercially reasonable actions to cure such breach as
promptly as practicable; or

           (ii) by either Party if the defaulting Party fails to pay the other
Party any amounts due and payable to such Party. The Party entitled to receive
payment shall give the defaulting Party written notice of such overdue payment.
If such overdue payments are not made by the defaulting Party within thirty (30)
days after receipt of such notice, the Party entitled to receive payment shall
have the right (x) to terminate this Agreement immediately and institute an
action to collect such overdue amounts and to pursue any other rights or
remedies such Party may have at law or in equity; or (y) institute an action to
collect such amounts without terminating this Agreement, provided, however, that
if the defaulting Party in good faith disputes any portion of the overdue
payment, the defaulting Party shall pay the non-disputed amounts to the Party
entitled to receive payment and

                                       24
<PAGE>

shall submit the disputed amounts in question to the CEOs for settlement of the
payment obligation related to any such amounts; or

           (iii)  by either Party, if the other Party files or institute
bankruptcy, reorganization on, liquidation or receivership proceedings, or if
the other Party assigns a substantial portion of its assets for the benefit of
creditors, provided: in the event of any, such event, the non-bankrupt Party
shall be granted a first right of refusal to license the Licensed Product from
the bankrupt Party on terms and conditions mutually acceptable to Endo and
Algos.

     11.3 Effect of Termination.

     (a) Expiration or termination of the Agreement shall not relieve the
Parties of any obligation accruing prior to such expiration or termination, and
the provisions of Articles 7 and 12 and Paragraphs 8.4 and 11.3 shall survive
the expiration or termination of the Agreement and shall continue in effect for
five (5) years or such lesser period as referred to in any such Paragraph. Any
expiration or early termination of this Agreement shall be without prejudice to
the rights of either Party against the other accrued or accruing under this
Agreement prior to termination, including the obligation to make payments for
Licensed Products sold prior to such termination.

     (b) If either Party (the "Terminating Party") delivers notice of
termination of this Agreement for any reason other than as provided under this
Article 11, or otherwise abandons or elects not to develop or market Licensed
Products, the license and all rights granted hereunder by the other Party (the
"Non-Terminating Party") to the Terminating Party shall terminate and all rights
granted hereunder in the Licensed Products shall revert to the Non-Terminating
Party, as further set forth below in this Paragraph. If this Agreement is
terminated for cause by a Party as provided in Paragraph 11.2(b), then the non-
breaching Party shall be deemed to be the "Non-Terminating Party" for purposes
of this Paragraph 11.3(b) and the breaching Party shall be deemed to be the
"Terminating Party.

     (c) If Endo is the Terminating Party as defined in Paragraph 11.3(b) and
such termination occurs prior to the First Commercial Sale of Licensed Product
in the United States, Algos shall have an exclusive, worldwide right and
license, with the right to sublicense, under the Endo Patent Rights and Endo
Know-how to develop, make, use and sell Licensed Products in the Field,
excluding the right to use any Endo trademark for the Licensed Product.  Such
license shall be subject to a 5% royalty on Net Sales of the Licensed Product.
Algos' royalty obligation under this Paragraph shall expire upon the date on
which the aggregate royalties paid by Algos to Endo equals the total Development
Costs paid by Endo for the Licensed Product.  Royalty payments will be made to
Endo on the 45th day following the close of each Calendar Quarter until the full
amount of such Development Costs have been reimbursed (without interest);
provided that no reimbursement payments will be due earlier than the date of
First Commercial Sale of Licensed Products in the United States.  In the event
of such termination, Algos shall be responsible for any royalty payments owed to
VCU under the VCU License.  Endo shall also promptly (i) return to Algos all
written confidential information and all copies thereof except such records as
may be required by any federal, state or foreign regulatory agency, (ii)
transfer to Algos all information, correspondence and materials necessary or
helpful to the maintenance of the IND or, if applicable, the NDA, (iii) transfer

                                       25
<PAGE>

in tangible form all Endo Know-how, including but not limited to preclinical and
clinical protocols and data generated or used in the course of the Collaboration
which has not previously transferred to Algos and which is necessary or useful
to Algos' continued development or marketing of Licensed Products in the Field,
(iv) to the extent possible, assign any contracts Endo has with third Parties
pertaining to the development, manufacture or marketing of Licensed Products, or
if such contracts are not unilaterally assignable or also relate to other Endo
products, use commercially reasonable efforts to make the benefits of such
contractual arrangements available to Algos for purposes of developing,
manufacturing and marketing Licensed Products in the Field.

     (d) If Endo is the Terminating Party as defined in Paragraph 11.3(b) and
such termination occurs after the First Commercial Sale of Licensed Product in
the United States, Algos shall have an exclusive, worldwide right and license,
with the right to sublicense, under the Endo Patent Rights and Endo Know-how to
develop, make, use and sell Licensed Products in the Field, and an exclusive,
worldwide right and license, with the right to sublicense, to use any Endo
trademark for the Licensed Product which was in use at the time of termination
(the "Endo Trademark").  Such license shall be subject to a 5% royalty on Net
Sales of the Licensed Product until the later of (i) the date on which Algos is
no longer selling Licensed Product under the Endo Trademark and (ii) the date on
which the aggregate royalties paid by Algos to Endo equals the total Development
Costs paid by Endo for the Licensed Product.  Royalty payments will be made to
Endo on the 45th day following the close of each Calendar Quarter until the date
set forth above.  In the event of such termination, Algos shall be responsible
for any royalty payments owed to VCU under the VCU License.  Endo shall also
promptly (i) return to Algos all written confidential information and all copies
thereof except such records as may be required by any federal, state or foreign
regulatory agency, (ii) transfer to Algos all information, correspondence and
materials necessary or helpful to the maintenance of the IND or, if applicable,
the NDA, (iii) transfer in tangible form all Endo Know-how, including but not
limited to preclinical and clinical protocols and data generated or used in the
course of the Collaboration which has not previously transferred to Algos and
which is necessary or useful to Algos' continued development or marketing of
Licensed Products in the Field, (iv) to the extent possible, assign any
contracts Endo has with third Parties pertaining to the development, manufacture
or marketing of Licensed Products, or if such contracts are not unilaterally
assignable or also relate to other Endo products, use commercially reasonable
efforts to make the benefits of such contractual arrangements available to Algos
for purposes of developing, manufacturing and marketing Licensed Products in the
Field.

     (e) If Algos is the Terminating Party as defined in Paragraph 11.3(b), Endo
shall have an exclusive, worldwide right and license, with the right to
sublicense, under the Algos Patent Rights and Algos Know-how to develop, make,
use and sell Licensed Products in the Field, subject to a (5%) royalty payable
to Algos on Net Sales of Licensed Product by Endo.  Royalty payments will be
made to Algos on the 45th day following the close of each Calendar Quarter;
provided that no payments will be due earlier than the date of First Commercial
Sale of Licensed Products in the United States.  Algos shall also transfer other
applicable information, materials and rights on the same terms set forth with
respect to Endo in the second paragraph of subsection (a) above, and shall
assign to Endo the IND and, if applicable, the NDA and notify the FDA of any
such assignment

                                       26
<PAGE>

     (f) In the event either Party terminates this Agreement under Paragraph
11.2(b)(iii), all rights and licenses granted under or pursuant to the Agreement
by the Non-terminating Party to the Terminating Party are, and shall otherwise
be deemed to be, for purposes of Paragraph 365(n) of the Bankruptcy Code,
licenses of rights to "intellectual property" as defined under Paragraph 101(52)
of the Bankruptcy Code. The Parties agree that the Terminating Party, as a
license of such rights under this Agreement, shall retain and may fully exercise
all of its rights and elections under the Bankruptcy Code. The Parties further
agree that, in the event of the commencement of a bankruptcy proceeding by or
against the bankrupt Party under the Bankruptcy Code, the Terminating Party
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property upon written request therefore by the Terminating Party.
Such intellectual property and all embodiments thereof shall be promptly
delivered to the Terminating Party (i) upon any such commencement of a '
bankruptcy proceeding upon written request therefore by the Terminating Party,
unless the Non-terminating Party elects to continue to perform all of its
obligations under this Agreement or if not delivered under (i) above, upon the
rejection of this Agreement by or on behalf of the Non-terminating Party upon
written request therefore by the Terminating Party.

ARTICLE 12

INDEMNITY

     12.1 General. For purposes of this Article "Indemnified Parties" refers to
Endo, its Affiliates and the officers, directors, employees, and agents of Endo
and its Affiliates when Algos is the indemnitor, and "Indemnified Parties"
refers to Algos, its Affiliates and officers directors, employees, and agents of
Algos and its Affiliates when Endo is the indemnitor.

     12.2 Algos Indemnity. Algos hereby indemnifies and holds harmless the Endo
Indemnified Parties and each of them from any and all liability and costs
(including reasonable attorneys' fees) arising out of any suit, action, legal
proceeding, claim or demand of whatever kind or character based upon or arising
out of this Agreement or out of the research, development testing, manufacture,
sale or use of any Licensed Product by Endo or its Affiliates which result from
the negligence or willful misconduct of Algos or any Algos Indemnified Party.

     12.3 Endo Indemnity. Endo hereby indemnifies and holds harmless the Algos
Indemnified Parties and each of them from any and all liability and costs
(including reasonable attorneys' fees) arising out of any suit, action, legal
proceeding, claim or demand of whatever kind or character based upon or arising
out of this Agreement or out of the research, development, testing, manufacture,
see of use of any Licensed Product by Algos or its Affiliates which result from
the negligence or willful misconduct of Endo or any Endo Indemnified Party.

     12.4 Joint Indemnity. Endo and Algos shall be jointly liable for all
liability and costs (including reasonable attorneys' fees), not covered by the
Provisions of Paragraph 11.2 or 11.3 herein, arising out of any suit, action,
legal proceeding, claim or demand of whatever kind or character by a Third Party
and arising out of the research, development, testing, manufacture, sale or use
of any Licensed Product by Endo, Algos or their affiliates (other than those
claims which are

                                       27
<PAGE>

subject to the indemnity provisions of Paragraph 11.2 or 11.3 herein).

     12.5 Scope of Indemnification

     (a) Survival.  Each Party acknowledges and hereby agrees that the
obligations set forth in this Article shall survive the termination or
expiration of this Agreement until the expiration of all applicable statutes of
limitations.

     (b) Cooperation of the Parties. The Indemnified Parties will cooperate with
the indemnitor, at the indemnitors' expense, in the defense of any suit. Neither
Party shall be liable for any costs resulting from any settlement made by a
Party prior to using its reasonable efforts to obtain the consent of the other
Party to such settlement.

     (c) Certain Exclusions. Neither Party shall be liable to the other for any
claim arising from or based upon (i) the combination or use of the Compound or
the Licensed Products with other items or products in a manner not agreed to by
both Parties or in any alteration or modification by the other Party of the
Compound or the Licensed Products.

     (d) Insurance. Endo and Algos each shall maintain product liability
insurance with respect to the development manufacture and sales of Licensed
Products in such amount as Endo or Algos, respectively, customarily maintains
with respect to their other products but in any event not less than (i) $10
million after clinical trials on a Licensed Product commences and prior to the
First Commercial Sale and (ii) $20 million thereafter. Each Party shall be named
as an additional insured on the other Party's external policy.

ARTICLE 13

MISCELLANEOUS

     13.1 Force Majeure. Neither Party shall be held liable or responsible to
the other Party nor be deemed to have defaulted under or breached this Agreement
for failure or delay in fulfilling or performing any term of the Agreement when
such failure or delay is caused by or results from causes beyond the reasonable
control of the affected Party including, but not limited to, fire, floods,
embargoes, war, acts of war (whether war be declared or not), insurrections,
riots, civil commotion, strikes, lockouts or other labor disturbances, acts of
God or acts, omissions or delays in acting by any governmental authority or the
other party, The affected Party shall notify the other Party of such Force
Majeure circumstances as soon as reasonably practical.

     13.2 Assignment. The Agreement may not be assigned or otherwise transferred
by either party, except as expressly provided hereunder, nor may any right or
obligations hereunder be assigned or transferred by either Party without the
written consent of the other Party; provided, however, that either Party may,
without such consent, assign the entire Agreement and its rights and obligations
hereunder to an Affiliate or in connection with the transfer or sale of all or
substantially all of its assets related to the Licensed Product or its business,
or in the event of its merger or consolidation, reorganization or change in
control or similar transaction. Any permitted assignee

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<PAGE>

shall assume all obligations of its assignor under the Agreement, and such
assignor shall remain responsible for compliance with all of its obligations
under this Agreement for the term hereof.

     13.3 Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby, unless
the absence of the invalidated provision(s) adversely affect the substantive
rights of the Parties. The Parties shall in such an instance use their best
efforts to replace the invalid, illegal or unenforceable provision(s) with
valid, legal and enforceable provision(s) which, insofar as practical, implement
the original purpose of this Agreement.

     13.4 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered personally,
sent by telecopier (and promptly confirmed by personal delivery, registered or
certified mail or overnight courier), sent by nationally-recognized overnight
courier or sent by registered or certified Mail, postage prepaid, return receipt
requested, addressed as follows:

if to Endo, to:
          Carol A. Ammon,
          President & CEO
          Endo Pharmaceuticals Inc.
          223 Wilmington West Chester Pike,
          Chadds Ford, PA  19317
          Tel:    610-558-9800
          Fax:    610-558-9683
          Email:  Ammon.Carol@endo.com

with a copy to:
          Osagie O. Imasogie
          General Counsel & Senior Vice President, Business Development
          Endo Pharmaceuticals Inc.
          223 Wilmington West Chester Pike,
          Chadds Ford, PA 19317
          Tel:    610-558-9800
          Fax:    610-558-9684
          Email:  Imasogie.Osagie@endo.com

if to Algos, to:
          John W. Lyle
          President & CEO
          Algos Pharmaceutical Corp.
          1333 Campus Parkway
          Neptune, NJ 07753
          Tel:    732-938-5959
          Fax:    732-938-2825


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<PAGE>

with a copy to:
          W. Bradford Middlekauff
          Vice President, Business Development & General Counsel
          Algos Pharmaceutical Corp.
          1333 Campus Parkway
          Neptune, NJ 07753
          Tel:    732-938-5959
          Fax:    732-938-2825


or to such other address as the Party to whom notice is to be given may have
furnished to the other Party in writing in accordance herewith. Any such
communication shall be deemed to have been given when delivered if personally
delivered or sent by telecopier on a business day, on the business day after
dispatch if sent by nationally recognized overnight courier and on the third
business day following the date of mailing if sent by mail.

     13.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware  without reference to its
rules of conflict of laws.

     13.6 Mediation and Arbitration.

     (a) Any disputes arising between the Parties relating to or arising out of
or in any way connected with this Agreement or any term or condition hereto or
the performance by either Party of its obligations hereunder, whether before or
after termination of the Agreement, shall be resolved, in the first instances by
a meeting, within thirty (30) days of the written notification of a dispute by
one Party to the other, in good faith, of the CEOs of each Party hereto. If the
CEOs are unable, in good faith, to come to a resolution of any dispute within
thirty (30) days of their initial meeting to resolve such dispute in accordance
to this Paragraph, they shall refer the matter under dispute to a single
mediator selected by them. In selecting a mediator, the two CEOs shall select a
neutral party that has relevant knowledge and experience with regards to the
subject matter of the dispute between the Parties. If the CEOs are unable to
agree on a mediator or if the mediator is unable to resolve the dispute between
the parties within forty five (45) days of his/her appointment by the CEOs, then
such dispute shall be finally resolved by binding arbitration.

     (b) Whenever a Party shall decide to institute arbitration proceedings, it
shall give written notice to that effect to the other Party. The Party giving
such notice shall refrain from instituting the arbitration proceedings for a
period of sixty (60) days following such notice. During such period, the Parties
shall make good faith efforts to resolve amicably the dispute without
arbitration. Any arbitration hereunder shall be conducted under the rules of the
American Arbitration Association. Each such arbitration shall be conducted by a
panel of three arbitrators: one arbitrator shall be appointed by each of Endo
and Algos and the third shall be appointed by the two arbitrators; provided,
however, if no mutually acceptable arbitrator can be agreed to by the first two
arbitrators, a third shall be appointed by the American Arbitration Association.
Any such arbitration shall beheld in New York, New York. The arbitrators shall
have the authority to direct the Parties as to the manner in which the Parties
shall resolve the disputed issues, to render a final decision with respect

                                       30
<PAGE>

to such disputed issues, or to grant specific performance with respect to any
such disputed issue. Judgment upon the award so rendered may be entered in any
court having jurisdiction or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. Nothing
in this Paragraph shall be construed to preclude either Party from seeking
provisional remedies, including but not limited to, temporary restraining orders
and preliminary injunctions from any court of competent jurisdiction, in order
to protect its rights pending arbitration but such preliminary relief shall not
be sought as a means of avoiding mediation and arbitration. In no event shall a
demand for mediation and arbitration be made after the date when institution of
a legal or equitable proceeding based on such claim, dispute, or other matter in
question would be barred by the applicable statute of limitations. The
prevailing Party in any legal or arbitration action shall be entitled, in
addition to any other rights and remedies it may have to reimbursement for its
out-of-pocket expenses incurred thereby, including but not limited to court
costs and reasonable attorney's fees.

     13.7 Non-Compete: The Parties hereto hereby agree not to independently
and/or in conjunction with any third party, directly or indirectly, develop
and/or work on any pharmaceutical formulation or product that contains the
Compound, provided; however, that, prior to the launch of the Licensed Product,
Endo shall be free to continue to take steps to re-protect Percocet(R).

     13.8 Independent Contractors. It is expressly agreed that Algos and Endo
shall be independent contractors and that the relationship between the two
Parties shall not constitute a partnership, joint venture, or agency. Neither
Algos nor Endo shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on the
other, without the prior written consent of the Party to do so.

     13.9 Waiver. The waiver by either Party hereto of any right hereunder or of
the failure to perform or of a breach by the other Party shall not be deemed a
waiver of any other right hereunder or of any other breach or failure by said
other Party whether of a similar nature or otherwise.

     13.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

     13.11 Entire Agreement; Amendments.  This Agreement contains the entire
agreement and understanding of the Parties with respect to the subject matter
hereof and supercedes all prior and/or contemporaneous understandings between
the parties with regards to the subject matter hereof, whether oral, written or
in any other medium. This Agreement may be amended, or any term hereof modified,
only by a written instrument duly executed by both Parties hereto.

                                       31
<PAGE>

     IN WITNESS WHEREOF, the Parties have caused their duly authorized officers
to executed this Agreement below, as of the date first above written.

     Algos Pharmaceutical Corporation         Endo Pharmaceuticals Inc.

     /S/ W. BRADFORD MIDDLEKAUFF              /s/ CAROL A. AMMON
     _____________________________            _______________________
     Name:  W. Bradford Middlekauff           Name:     Carol A. Ammon
     Title: Vice President, Business          Title:    President & CEO
            Development & General
            Counsel

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