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                                                                   Exhibit 10.12

[LETTERHEAD]

                               RESEARCH AGREEMENT

         Effective when fully executed by the parties, Oculex Pharmaceuticals
Inc., having a business address at 639 North Pastoria Avenue, Sunnyvale, CA
94086-2917 (hereinafter called "Oculex"), and Allergan Sales, Inc., having a
place of business at 2525 Dupont Drive, Irvine, California 92612,
(hereinafter called "Allergan") agree as follows:

1.       BACKGROUND

         1.01 Oculex has technology concerning proprietary biocompatable,
biodegradable polymer-based drug delivery systems (hereinafter referred to as
the DDS-Registered Trademark-) for delivery and sustained release of drugs in
the interior of the eye. Oculex is willing to formulate certain compounds
provided by Allergan with a DDS-Registered Trademark- in order to permit
Allergan to evaluate the effectiveness of such DDS-Registered Trademark- for
the treatment of ocular conditions. Once Oculex demonstrates the feasibility
of formulating the Allergan compounds in the DDS's, Allergan shall evaluate
such DDS-Registered Trademark- formulations in appropriate animal models. The
compounds shall be selected from those in which Allergan holds a proprietary
interest, and shall include a) up to 2 compounds having   [*] (referred to
herein as "[*]"; b) up to two additional  [*]  compounds; and c) up to one
additional compounds having  [*]  activity. These compounds shall hereinafter
collectively be known as the "Compounds".

         1.02 Oculex DDS-Registered Trademark- technology is fully patented.
The basic patent was granted in 1989, and seven additional patents, granted
in 1993 through 1999, extend and expand coverage of its DDS-Registered
Trademark- technology. These patents broadly cover the use of drug-ladened
particles made of biodegradable and/or biocompatible polymers for the
controlled release of any drug placed inside the eye. Additionally, the new
patents protect locations within the eye where Oculex's DDS-Registered
Trademark- drugs can be place, as well as the formulations for these new
drugs. A list of the patents covering Oculex' s DDS-Registered Trademark-
technology and for which an option is granted under this Agreement, is set
forth on Exhibit "A", attached hereto and incorporated herein.

         1.03 Allergan wishes to obtain an option to acquire an exclusive
world-wide license to use, sell, export, and offer for sale each of the
Compounds which are formulated using Oculex's DDS-Registered Trademark-
technology. With respect of each Compound/DDS formulation, this option shall
be exercisable for a period of six months after the date of delivery.

         1.04 Oculex is prepared to grant Allergan the above mentioned option
wherein Allergan shall be granted the rights to acquire exclusive licenses
under the Oculex patents (and/or patent applications, if any) to use, sell,
export and offer for sale products containing  [*]  which are formulated
using Oculex's DDS-Registered Trademark- technology.

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2.       SCOPE OF WORK

         2.01 Oculex will use reasonable efforts to formulate Compounds
provided by Allergan during the Agreement Term with respective
DDS's-Registered Trademark- in order to produce implants that can be used by
Allergan to test and evaluate in animal models (hereinafter the "Services").
These DDS-Registered Trademark- implants shall be formulated to have drug
delivery characteristics which will provide sustained release of drug for a
minimum of 30 days; other drug delivery characteristics (such as the desired
amounts of drug in each final Compound/DDS formulation) shall be agreed upon
between the parties. A more detailed description of the "Services", and the
general timetable for delivery of  [*]  formulations, is set forth in
Exhibit B, attached hereto and incorporated herein.

         2.02 Upon delivery of the required lot of each Compound/DDS
combination, Allergan shall evaluate the effectiveness of such Compound/DDS
formulations in IN VITRO or IN VIVO models of Allergan's design.

3.       AGREEMENT TERM

         3.01 This Agreement shall be effective on the date it is fully
executed by the parties (Effective Date) until midnight on the one-year
anniversary of the Effective Date (hereinafter the "Agreement Term"), unless
otherwise terminated in accordance with the terms hereof. The Agreement Term
may be extended by mutual agreement in a written amendment to this Agreement.

4.       OPTION

         4.01 Oculex hereby grants Allergan an option (hereinafter the
"Option") to acquire an exclusive world-wide license to use, sell, export and
offer for sale products comprising any one or more Compound/DDS combination
formulated by Oculex for Allergan hereunder. This Option also provides the
right of Allergan to purchase from Oculex all Compound/DDS products, and
Oculex agrees that it shall manufacture and supply, at prices to be agreed
upon, all such products required by Allergan on a world-wide basis. This
Option granting Allergan the world-wide exclusive license contemplates that
an agreement containing a variety of terms and conditions (including, but not
limited to, royalty rates, milestone payments, development costs, etc.) will
be negotiated between the parties. In addition, a supply agreement will be
negotiated between the parties (which agreement shall include, among other
things, Allergan's right to manufacture Compound/DDS products, or select a
third party manufacturer, in the event Oculex is not able to adequately
provide supply of said products). These agreements shall be negotiated on
commercially reasonable terms and in good faith between the parties;
provided, however, if the parties cannot agree to terms within six months
following the exercise of the Option by Allergan, then the Option shall
become null and void and the respective parties shall be released and
discharged from all obligations hereunder.

         4.02 With regard to each Compound/DDS formulation, the Option may be
separately exercised, at Allergan's sole discretion, by providing Oculex with
written notice of Allergan's decision to exercise the Option within a period
of six (6) months following delivery of that Compound/DDS formulation to
Allergan.

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5.       COST AND PAYMENT

         5.01 In full consideration of the grant of the Option and providing
the Services described hereunder, Allergan shall pay Oculex up to  [*] in
accordance with the schedule described in Exhibit B, attached hereto. The
amount of payment for Services, if any, beyond the six month period shall be
mutually agreed to by the parties. In addition, as soon as reasonably
possible, Allergan agrees to [*] Oculex [*] that are [*], which [*] will be
[*] Allergan upon completion of this Agreement, or upon termination as herein
provided.

         5.02 Checks will be made payable to: "Oculex Pharmaceuticals, Inc.",
and sent TO:

                                   Oculex Pharmaceuticals, Inc.
                                   639 North Pastoria Avenue
                                   Sunnyvale, CA 94086-2917
                                   Attention: Jerry Gin Ph.D.

6.       CONFIDENTIAL INFORMATION

         6.01 During the term of this Agreement, each party may provide the
other with certain information, data, or compounds, whether in physical,
written, digital, oral, or pictorial form (hereinafter "Information"), to aid
in the performance of the Services. Each party receiving such Information
from the other party hereby agrees, for itself and its employees, agents,
officers and directors, not to disclose such Information except to those of
its employees, agents, officers and directors who need to know such
Information in order to permit Oculex to perform the Services, and not to use
such Information except as permitted to fulfill the obligations of this
Agreement. A party receiving the Information of the other shall only disclose
Information to its employees, agents, officers and directors who are bound to
keep such information confidential by terms similar in scope to this Article
6. Each Party shall endeavor to prevent unauthorized disclosure of said
Information to third parties though the exercise of the same degree of care
it employs to protect its own confidential information of a similar nature,
but in no event less than a reasonable degree of care.

         6.02 Neither party shall consider Information to be subject to the
above obligations if the disclosing party can show such Information: (1) is
now, or subsequently becomes, generally known to the public through no breach
of this Agreement; (2) was lawfully in the receiving party's possession prior
to the disclosing party's disclosure thereof; (3) is or becomes disclosed to
the receiving party by an independent third party who is not under an
obligation preventing such disclosure; or (4) was independently developed by
or for the receiving party without benefit of Information received from the
other party, as demonstrated by written records.

         6.03 A receiving party shall hold all confidential Information in
confidence for a period of five (5) years after the Effective Date of this
disclosure.

7.       PATENTS AND INVENTIONS

         7.01 "New Invention or Discovery" shall mean any invention or
discovery (whether patentable or not) conceived during and as a part of the
performance of the Services conducted


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pursuant to this Agreement which involve the Compounds or their combination
with the DDS-Registered Trademark- technology. Here and throughout this
Agreement, the terms "conceived" and "reduced to practice" shall be construed
in accordance with the use of these terms in 35 United States Code Section
102(g). Inventorship of patents and patent applications claiming such New
Inventions and Discoveries shall be determined under the patent laws of the
United States.

         7.02 It is contemplated that the combinations of the DDS-Registered
Trademark- technology with the Compounds may produce respective New
Inventions and Discoveries. Allergen shall have an option to license Oculex's
interest in any New Invention and Discovery. The parties shall cooperate to
secure the broadest patent coverage possible for all New Inventions and
Discoveries. Oculex shall promptly notify Allergan, in writing, of any New
Invention or Discovery conceived or reduced to practice in whole or in part
by its Principal Investigator, faculty, staff, employees, or students. Such
notice shall provide a full written description of each New Invention or
Discovery in sufficient detail to permit its understanding by one of ordinary
skill in the art to which the invention pertains.

8.       APPLICABLE LAW

         8.01 This Agreement shall be governed by the laws of the State of
California, without regard to its conflict of laws rules.

9.       NOTICE

         9.01 Any notice required or permitted hereunder shall be in writing
and shall be deemed given as of the date it is:

                  (a) delivered by hand;

                  (b) received or refused by Registered or Certified Mail,
postage prepaid, return receipt requested; or

                  (c) received by facsimile, as can be presumptively
demonstrated by return fax or letter demonstrating successful facsimile
transmission; and addressed to the party to receive such notice at the
address(es) and/or facsimile telephone number(s) set forth below, or such other
address as is subsequently specified to the notifying party by the receiving
party in writing.

                                 IF TO ALLERGAN:

                                John Kent, Ph.D.
                     Vice President, Pharmaceutical Sciences
                                 Allergan, Inc.
                                2525 Dupont Drive
                            Irvine, California 92612
                             Telephone: 949-246-6295
                               Fax: 949-246- 6756

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                                 With a copy to:

                                 General Counsel
                                 Allergan, Inc.
                                2525 Dupont Drive
                            Irvine, California 92612

                                  IF TO OCULEX:

                          Oculex Pharmaceuticals, Inc.
                            639 North Pastoria Avenue
                            Sunnyvale, CA 94086-2917
                           Attention: Jerry Gin, Ph.D.

10.      TERMINATION

         10.01 Either party may terminate this Agreement upon immediate prior
notice if any of the following conditions occur:

                           (1) If animal, and/or toxicological test results or
business considerations, in the opinion of Allergan, support termination of the
Research; or

                           (2) If either party fails to comply with the terms of
the Agreement upon receipt of written notice of breach from the other party and
subsequent failure to cure such breach within twenty (20) days after said
written notice of breach.

         10.02 Except as otherwise indicated in this Article 10, Allergan may
terminate this Agreement for any reason upon thirty (30) days written notice.

         10.03 Termination of this Agreement by either party shall not affect
the rights and obligations of the parties accrued prior to the Effective Date of
the termination. The rights and duties under Articles 5, 6, 7, 8, 9, 12, 13, 14,
15 and 16 shall survive the termination or expiration of this Agreement.

11.      AMENDMENTS

         11.01 This Agreement may only be extended, renewed or otherwise amended
by the mutual written consent of parties hereto or as may be otherwise provided
in this Agreement.

12.      ENTIRE AGREEMENT

         12.01 This Agreement, including any Appendices, constitutes and
contains the entire agreement and final understanding between the parties
concerning the Research and all other subject matters addressed herein or
pertaining thereto. This Agreement supersedes and replaces all prior
negotiations and all prior or contemporaneous representations, promises or
agreements, proposed or otherwise between the parties, whether written or oral,
concerning the Services and all other subject matters addressed herein or
pertaining thereto, with the exception of any

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Confidential Disclosure Agreements executed between the parties before the
Effective Date hereof.

13.      ASSIGNMENT

         13.01 Neither party hereto may assign, cede or transfer any of its
rights or obligations under this Agreement without the written consent of the
other party; provided, however, Allergan Sales Inc. may assign this Agreement in
whole or in part to any of its affiliates or subsidiaries without the consent of
Oculex.

14.      INDEPENDENT CONTRACTOR

         14.01 In the performances of all Services hereunder, Oculex shall be
deemed to be and shall be an independent contractor and, as such, shall not be
entitled to any benefits applicable to employees of Allergan.

15.      DELIVERY TO ALLERGAN OF UNUSED MATERIALS

         15.01 Upon termination of this Agreement or full performance of the
Studies, any and all compounds, drugs, devices, forms, whether or not completed,
and other related materials that were furnished to Oculex by or on behalf of
Allergan shall be promptly returned to Allergan at Allergan's expense.

16.      WAIVER

         16.01 No waiver of any term, provision or condition of this Agreement
whether by conduct or otherwise in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of such term, provision or
condition, or of any other term, provision or condition of this Agreement.

17.      EXHIBITS OR ADDENDA

         17.01 This Agreement includes the following Exhibits, which is
incorporated by reference herein in its entirety.

                  (a)      Exhibit A:   List of Patents

                  (b)      Exhibit B:   Summary of Services and Payment Schedule



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         IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
duplicate by proper persons thereunto duly authorized.

ALLERGAN SALES, INC.                       OCULEX PHARMACEUTICALS, INC.

By: /s/ Larry A. Wheeler                  By:   /s/ Jerry B. Gin
   ---------------------------------          --------------------------------
                (Signature)                             (Signature)
Name:  Larry A. Wheeler                   Name:      Jerry B. Gin, Ph.D.
     -------------------------------            ------------------------------

Title:  V.P., Biological Sciences         Title:  President & CEO
       -----------------------------             -----------------------------
Date:           12/1/99                   Date:    12/15/99
       -----------------------------             -----------------------------


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                                   EXHIBIT "A"
                                   -----------

                                 LIST OF PATENTS

                                       [*]

                                       [*]

                                       [*]

                                       [*]

                                       [*]

                                       [*]

                                       [*]

                                       [*]



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                                   EXHIBIT "B"

                    SUMMARY OF SERVICES AND PAYMENT SCHEDULE

Over the ensuing one year after the Effective Date, Oculex, with the
cooperation and assistance of Allergan, will use reasonable efforts to
determine the feasibility of formulating up to five (5) Compounds with the
DDS-Registered Trademark- technology. It is understood that Oculex lacks the
resources to formulate all five Compounds at one time, therefore, Oculex
shall undertake such Services with respect to no more than two (2) Compounds
at any one time, with subsequent Compounds after the first two Compounds to
be formulated serially, upon Allergan's request, as follows. Promptly upon
execution of this Agreement Allergan shall choose two (2) Compounds for
Oculex to undertake to formulate. Following delivery of a Compound/DDS
formulation to Allergan, Allergan may request that Services be undertaken
with regard to another Compound from among the five (5) Compounds. In such
case, Oculex shall then promptly begin performance of the Services as
requested by Allergan. Beyond the first two Compounds, Oculex shall not
proceed to begin Services on any Compound without Allergan's prior written
consent. Notwithstanding any other provision hereof, Oculex shall perform all
the Services within the one (1) year period of this Agreement.

In addition to the five(5) compounds (as defined in paragraph 1.01 above),
Allergan shall have the right from time to time, during the term of this
Agreement, to request Oculex to formulate one or more compounds (herein
referred to as the "Benchmark Compounds") with DDS technology for the purpose
of comparing a particular Benchmark Compound to one of Allergan's Compounds.
The Benchmark compounds may or may not be proprietary to Allergan. It is
understood that if Allergan elects to request formulation of one or more
Benchmark Compound, this may delay the ability of Oculex to formulate one of
the five (5) Allergan proprietary Compounds. In this event the parties shall
cooperate to amend the work services schedule contemplated herein and, if
necessary, extend the term of this Agreement to complete DDS formulations for
all of the five (5) possible Compounds.

In consideration of Oculex performing the Services, beginning on the
Effective Date of this Agreement and at the beginning of each [*] period
thereafter, Allergan shall make payment of [*], for a total of [*] periods,
on each Compound and Benchmark Compound concerning which Services have been
requested and initiated, unless this Agreement is otherwise terminated by
Allergan as herein provided. Payments on Compounds or Benchmark Compounds for
which Services are requested after the Effective Date of this Agreement shall
start at the beginning of the first [*] payment period following such request
by Allergan.

These Services will include:

         -    Allergan to provide Compounds and Benchmark Compounds to Oculex
              with appropriate but limited physical/chemical information.

         -    Oculex to formulate the Compounds and Benchmark Compounds into
              DDS-Registered Trademark- implants at concentrations sufficient
              to permit an agreed-upon sustained delivery of the Compounds
              and Benchmark Compounds in animals over a minimum of 30 days.

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         -    The in vitro release testing shall be performed by Oculex to
              establish 30 day release.

         -    Oculex to monitor release curves following in vitro testing..

         -    Allergan to provide Oculex with assays for Compounds and Benchmark
              Compounds, and Oculex will provide additional analytical work on
              assays as needed.

         -    Oculex shall provide Allergan with a written progress report on
              its formulation work at the end of each 60 day period.

If Oculex is successful with its formulation work, and Allergan, at its sole
discretion, is satisfied with the results thereof, then the parties shall agree
on the funds required to proceed with the next steps, which shall include:

         -    Oculex to provide Allergan the necessary number of Compound/DDS
              implants and Benchmark Compound/DDS implants for in vivo testing.

Results will be discussed to enable enhancement/optimization of the Compound/DDS
formulations.

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