<PAGE>
                                                                   EXHIBIT 10.26


  CONFIDENTIAL MATERIAL OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
             EXCHANGE COMMISSION. ASTERISKS DENOTE SUCH OMISSIONS.

                        INVESTMENT AND ROYALTY AGREEMENT

This Investment and Royalty Agreement (this "Agreement") is made as of December
17, 2001, by and among Kos Pharmaceuticals, Inc., a Florida corporation ("Kos"),
PharmaBio Development, Inc., a North Carolina corporation ("PharmaBio"), and
Innovex LP, a New Jersey Limited Partnership ("Innovex").

BACKGROUND AND OVERVIEW

A.       Kos, Innovex and PharmaBio have executed a Master Services Agreement on
         the date hereof, pursuant to which Innovex will provide contract sales
         services in the Territory for the Products.

B.       Kos and PharmaBio have agreed that PharmaBio will fund the payments for
         certain of the services provided by Innovex under the Master Services
         Agreement pursuant to the terms and conditions set forth herein.

FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:

1.0      DEFINITIONS.

1.1      "Advicor" shall mean the product currently known as Advicor(TM), as
         such name may change from time to time, for any and all formulations
         and delivery mechanisms.

1.2      "Affiliate" shall mean, as to any person or entity, any corporation or
         business entity controlled by, controlling, or under common control
         with such person or entity. For this purpose, "control" shall mean
         direct or indirect beneficial ownership of at least fifty percent (50%)
         of the voting stock or income interest in such corporation or other
         business entity, or such other relationship as, in fact, constitutes
         actual control.

1.3      "Annual Period" shall mean a twelve-month period beginning on the
         Launch Date and each anniversary thereof.

1.4      "Commercialization Expenses" shall mean the fees and expenses payable
         to Innovex under the Master Services Agreement for providing one
         hundred and fifty (150) sales representatives, eight (8) field
         managers, and one (1) national sales manager. For purposes of the
         funding obligations of PharmaBio under this Agreement, notwithstanding
         anything to the contrary contained in this Agreement,
         "Commercialization Expenses" shall not include (i) Excess Fees payable
         under Section G(2) of the Work Order (as defined in the Master Services
         Agreement) or (ii) Pass-Through Expenses payable under Section 3.1 of
         the Master Services Agreement.



<PAGE>

1.5      "Commercialization Services" shall mean the recruitment, deployment and
         management of a sales force for the promotion of the Products pursuant
         to the terms of the Master Services Agreement.

1.6      "Royalty Term" shall mean the five (5) consecutive Annual Periods
         beginning on the Launch Date.

1.7      "FDA" shall mean the US Food and Drug Administration.

1.8      "Launch Date" shall mean January 1, 2002.

1.9      "Maximum Investment" shall mean Innovex's charges for the
         Commercialization Expenses for providing one hundred and fifty (150)
         sales representatives, eight (8) field managers, and one (1) national
         sales manager for each of the two (2) Annual Periods following the
         Launch Date.

1.10     "Minimum Sales Force Level" shall mean a Kos sales force size of not
         less than *** Kos sales representatives promoting the Products in the
         first and second detailing positions.

1.11     "Net Sales" means the amount billed by Kos or an Affiliate or any
         sublicensee (or other transferee), or on behalf of or for the benefit
         of Kos or an Affiliate or any sublicensee (or other transferee), for
         sales of the Products to a third party in the Territory, subject to any
         deferrals of such Net Sales required by generally accepted accounting
         principles ("GAAP"), less provisions for: (i) discounts, including cash
         and quantity discounts, charge-back payments, refunds and rebates
         granted to managed health care organizations or similar organizations
         or to federal, state and local governments (including, without
         limitation, Medicaid rebates), their agencies, and purchasers and
         reimbursers or to trade customers, including but not limited to,
         wholesalers and chain and pharmacy buying groups, (ii) credits or
         allowances resulting from customer claims, damaged goods, rejections or
         returns of the Products, including recalls, regardless of the party
         requesting such, (iii) freight, postage, shipping and insurance charges
         actually allowed or paid for delivery of Products, to the extent
         billed, (iv) taxes, duties or other governmental charges levied on,
         absorbed or otherwise imposed on sale of such Products, including
         without limitation value-added taxes, or other governmental charges
         otherwise measured by the billing, when included in billing, as
         adjusted for rebates, charge-backs and refunds, and (v) actual or
         expected write-offs of uncollectible customer accounts for recorded
         sales or for other reserves or provisions established consistent with
         GAAP.

1.12     "Niaspan" shall mean the product currently known as Niaspan(R), as such
         name may change from time to time, for any and all formulations and
         delivery mechanisms.

1.13     "Products" shall mean Advicor(TM)and Niaspan(R).

1.14     "Territory" shall mean the United States.



                                       2
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2.0      MASTER SERVICES AGREEMENT.

         The Master Services Agreement is in the form attached hereto as EXHIBIT
         A. All defined terms used herein but not defined in this Agreement
         shall have the meanings set forth in the Master Services Agreement.

3.0      INVESTMENT AND ROYALTIES; RELATED AGREEMENTS.

3.1      PharmaBio will support the commercialization of the Products as
         follows:

         (a)      PharmaBio shall fund one hundred percent (100%) of the
                  Commercialization Expenses for the period beginning on the
                  Launch Date and ending on the second (2nd) anniversary of the
                  Launch Date (the "Commitment Period"), subject to the Maximum
                  Investment for each such year and the other terms and
                  conditions in this Agreement.

         (b)      PharmaBio shall fund the amounts payable under Section 3.1(a)
                  by paying the invoices submitted by Innovex that correspond to
                  the applicable Commercialization Expenses that accrue during
                  the Commitment Period, which payments shall be made by
                  PharmaBio through an inter-company payment directly to
                  Innovex. Innovex shall accept such payments from PharmaBio in
                  full satisfaction of the Commercialization Expenses. In no
                  event shall Kos be responsible for the payment of the
                  Commercialization Expenses, and each of Innovex and PharmaBio
                  agree to hold Kos harmless from such expenses.

3.2      In consideration for the performance by PharmaBio of its funding
         commitments set forth in Section 3.1, Kos shall pay PharmaBio royalties
         on Net Sales during the Royalty Term. The royalty payments payable by
         Kos to PharmaBio with respect to each Annual Period are as follows:

        ------------------------------------ ------------------------------
        ANNUAL PERIOD DURING THE
        ROYALTY TERM                         ROYALTY  ON NET SALES
        ------------------------------------ ------------------------------
        1                                    **%
        ------------------------------------ ------------------------------
        2                                    **%
        ------------------------------------ ------------------------------
        3                                    **%
        ------------------------------------ ------------------------------
        4                                    **%
        ------------------------------------ ------------------------------
        5                                    **%
        ------------------------------------ ------------------------------

         Notwithstanding anything to the contrary contained in this Agreement,
         the total royalties payable to PharmaBio under this Section 3.2 shall
         not (i) exceed in the aggregate for all Annual Periods the amount of
         $75,000,000 (and, accordingly, PharmaBio's right to receive royalties
         will end upon PharmaBio's receipt of $75 Million in royalties paid by
         Kos), or (ii) be less than $45 Million in the aggregate for all Annual
         Periods, provided that there shall not be any minimum royalty
         commitment by Kos in the event that this Agreement or the Master
         Services Agreement is terminated prior to the end of the Project Term
         (as such term is defined in the Master Services Agreement) or under
         Section 3.4, 3.7, or 6.0 of this Agreement. As it relates to the
         minimum royalty commitment, at the end of the fifth (5th) Annual
         Period, if PharmaBio has not received at least $45 Million in aggregate
         royalties under this Section 3.2, then Kos will pay PharmaBio the



                                       3
<PAGE>

         difference between the amount of royalties actually received and $45
         Million. The $45 Million minimum payment shall be payable by Kos to
         PharmaBio notwithstanding the actual sales of the Product or other
         Product-related events.

         In consideration for Innovex's failure to achieve the target of one
         hundred and fifty sales representatives on or before April 1, 2002
         under the Master Services Agreement (and the expectation that the
         number of sales representatives will be below one hundred and fifty for
         much of the first quarter following the Launch Date), Kos shall be
         entitled to reduce its quarterly royalty payments to PharmaBio by the
         amount of $62,500 per quarter for the first eight quarters following
         the Launch Date. In calculating the minimum and maximum royalty
         obligations pursuant to the preceding paragraph, the parties shall use
         the net amount of the royalty payments made to PharmaBio (i.e., after
         giving effect to the reduction described in the preceding sentence). In
         no event shall PharmaBio be obligated to pay such $62,500 payments
         other than as an offset to royalties payable by Kos under this
         Agreement.

         The royalty payments under this Section 3.2 shall be paid as soon as
         reasonably practicable following the end of each calendar quarter (but
         not later than forty five (45) days following the end of each calendar
         quarter, except following the fourth quarter, in which case Kos shall
         have up to 60 days) during the five (5) Annual Periods in the Royalty
         Term. Kos shall provide PharmaBio with the sales data for the Products
         that are available to Kos.

3.3      Kos shall use its commercially reasonable efforts to commercialize the
         Products in the Territory. In this regard, Kos will provide a sales
         force of an average size, calculated on a quarterly basis, not less
         than the Minimum Sales Force Level during the Royalty Term. If, at any
         time during such period, Kos reduces the Products' average sales force
         below the Minimum Sales Force Level for a period of more than sixty
         (60) days, then Kos and PharmaBio will negotiate in good faith to
         restructure PharmaBio's commitments under Section 3.1 and the
         corresponding royalty amounts under Section 3.2, which negotiations
         will take into account the implications of the reduced sales force size
         on future sales of the Products. If the parties are unable to agree to
         such restructuring within thirty (30) days after PharmaBio gives
         written notice to Kos of its intent to pursue a remedy under this
         Section 3.3 for Kos' failure to maintain the Minimum Sales Force Level,
         then PharmaBio may, at its sole discretion by written notice to Kos,
         elect to (i) suspend all future funding obligations under Section 3.1;
         and (ii) extend the Royalty Term (including, without limitation, the
         then-current Annual Period). During the suspension and extension
         period, PharmaBio shall continue to receive royalties at the rate equal
         to the royalty amount applicable immediately prior to the effective
         date of the suspension and extension period. If PharmaBio elects this



                                       4
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         remedy, the then operating Annual Period for royalty payments under
         Section 3.2, and the funding commitments under Section 3.1, shall be
         extended until the Minimum Sales Force Level is satisfied. The funding
         commitments under Section 3.1, shall resume as soon as Kos achieves the
         Minimum Sales Force Level, and the end of the then current Annual
         Period shall be extended for the amount of the suspension and extension
         period, such that PharmaBio enjoys the full length of the five (5)
         Annual Periods described in Section 3.2 with the benefit of the Minimum
         Sales Force Level for five (5) full twelve-month periods, and the term
         "Royalty Term" shall, for all purposes under this Agreement, be
         extended accordingly. PharmaBio's remedies under this Section 3.3 shall
         not apply for any period that Innovex fails to satisfy its sales force
         staffing obligations under the Master Services.

3.4      In the event that Kos terminates the Master Services Agreement under
         Section 11.2 of the Master Services Agreement during the First or
         Second Annual Period, this Agreement shall be terminated and PharmaBio
         shall be entitled to receive royalties on Net Sales as provided in
         Section 3.2 only through the date of termination of the Master Services
         Agreement. PharmaBio shall also be entitled to receive the amount equal
         to (x) amounts funded by PharmaBio under Section 3.1 of this Agreement
         through the effective date of termination less any royalties paid to
         PharmaBio pursuant to Section 3.2, PLUS (y) interest on such net funded
         amounts at the Prime Rate plus one percent (1%), provided however, that
         Kos shall be entitled to pay such amount in equal quarterly
         installments within thirty (30) days following the end of each quarter
         over the two year period following the termination. In the event of
         termination under this section, Kos shall not be obligated to meet any
         minimum royalty commitment to PharmaBio.

3.5      As further consideration for PharmaBio's funding obligations under this
         Agreement, Kos hereby makes the representations and warranties set
         forth on Schedule 3.5.

3.6      Each Party shall keep or cause to be kept such records as are required
         to determine, in a manner consistent with GAAP, the sums or credits due
         under this Agreement. Each party shall have the right, at such party's
         expense, through a certified public accountant or like person
         reasonably acceptable to the other Party, upon execution of a
         confidentiality agreement, to examine such records during regular
         business hours upon reasonable notice during the life of this Agreement
         and for twelve (12) months after its termination; provided however,
         that (i) such examination shall not take place more than once a year
         and shall not cover such records for more than the preceding Annual
         Period, and (ii) such accountant shall report to both Parties only as
         to the accuracy of the reports or payments provided or made by the
         other Party under this Agreement. Any adjustments required as a result
         of overpayments or underpayments identified through a Party's exercise
         of audit rights, and any other adjustments that may be required from
         time to time in order to correct overpayments or underpayments under
         this Agreement, shall be made by subtracting or adding, as appropriate,
         amounts from or to the next royalty payment in accordance with Section
         3.2. The Party requesting the audit shall bear the full cost of the
         audit unless such audit correctly discloses that the discrepancy for
         the Annual Period differs by more than five (5) percent from the amount
         the accountant determines is correct, in such case the owing Party
         shall pay the reasonable fees and expenses charged by the accountant.
         In the event that a Party disputes an invoice or other payment
         obligation under this Agreement, such Party shall timely pay the amount
         of the invoice or other payment obligation, and the Parties shall
         resolve such dispute in Accordance with Section 11.



                                       5
<PAGE>

3.7      Within seventy five (75) days following the first (1st) anniversary of
         the Launch Date, if (i) actual cumulative Net Sales for the Products
         are less than $*** for the first Annual Period, and (ii) the aggregate
         Net Sales for the Products for Kos' fourth fiscal quarter of 2002 are
         less than **% greater than the aggregate Net Sales of the Products
         during Kos' third fiscal quarter of 2002, each of Kos and PharmaBio
         shall have the right to (i) terminate this Agreement and the Master
         Services Agreement upon thirty (30) days written notice to the other
         parties hereto. In the event of any such termination, Kos shall pay
         PharmaBio an amount equal to (x) amounts funded by PharmaBio under
         Section 3.1 of this Agreement through the effective date of termination
         less any royalties paid to PharmaBio pursuant to Section 3.2, PLUS (y)
         interest on such net funded amounts at the Prime Rate plus one percent
         (1%), provided however, that Kos shall be entitled to pay such amount
         in equal quarterly installments over the two year period following the
         termination. In the event of termination under this section, Kos shall
         not have any minimum royalty commitment to PharmaBio.

4.0      CONFIDENTIALITY AND OWNERSHIP OF INFORMATION.

4.1      Kos on the one part and PharmaBio on the other part each acknowledges
         that, in the course of performing its obligations hereunder, it may
         receive information from the other party which is proprietary to the
         disclosing party and which the disclosing party wishes to protect from
         public disclosure ("Confidential Information"). Each receiving party
         agrees to retain in confidence, during the Royalty Term, and thereafter
         for a period of seven (7) years, all Confidential Information disclosed
         to it by or on behalf of the other party, and that it will not, without
         the written consent of such other party, use Confidential Information
         for any purpose other than the purposes indicated herein. These
         restrictions shall not apply to Confidential Information which: (i) is
         or becomes public knowledge (through no fault of the receiving party);
         (ii) is made lawfully available to the receiving party by an
         independent third party that, to the knowledge of the receiving party,
         is under no duty of confidentiality to the disclosing party; (iii) is
         already in the receiving party's possession at the time of receipt from
         the disclosing party (and such prior possession can be demonstrated by
         competent evidence by the receiving party); (iv) is independently
         developed by the receiving party and/or Affiliates (and such
         independent development can be demonstrated by competent evidence by
         the receiving party); or (v) is required by law, regulation, rule, act
         or order of any governmental authority or agency to be disclosed by the
         receiving party, provided, however, if reasonably possible, such
         receiving party gives the disclosing party sufficient advance written
         notice to permit it to seek a protective order or other similar order
         with respect to such Confidential Information and, thereafter, the
         receiving party discloses only the minimum Confidential Information
         required to be disclosed in order to comply.

4.2      PharmaBio on the one hand and Kos on the other hand shall limit
         disclosure of the other party's Confidential Information to only those
         of their respective officers, representatives, agents and employees
         (collectively "Agents") who are directly concerned with the performance
         of this Agreement and have a legitimate need to know such Confidential
         Information in the performance of their duties.



                                       6
<PAGE>

4.3      All Kos inventions, processes, know-how, patents, trade secrets,
         copyrights, trade names, trademarks, service marks, marketing
         materials, proprietary materials or other intellectual property of any
         kind, and all improvements to any of the foregoing (collectively, "Kos
         Property"), disclosed, used, improved, modified or developed in
         connection with the relationship contemplated by this Agreement shall
         remain the sole and exclusive property of Kos. Neither PharmaBio nor
         Innovex shall have any right, title or interest in or to any Kos
         Property.

4.4      Kos acknowledges that PharmaBio (and its Affiliates) possess certain
         inventions, processes, know-how, trade secrets, improvements, other
         intellectual properties and other assets, including but not limited to
         analytical methods, procedures and techniques, computer technical
         expertise and software, and business practices, including, but not
         limited to the Innovex Territory Management System (ITMS), which have
         been independently developed by PharmaBio and/or its Affiliates
         (collectively "PharmaBio Property"). Any PharmaBio Property or
         improvements thereto which are disclosed, used, improved, modified or
         developed under or during the term of this Agreement shall remain the
         sole and exclusive property of PharmaBio or the respective Affiliate.

4.5      Neither PharmaBio, Innovex, nor Kos or any of their Affiliates shall
         make any public announcements regarding this Agreement or the terms and
         conditions thereof without the prior written approval of Kos on the one
         hand and PharmaBio or Innovex on the other hand.

5.0      INDEPENDENT CONTRACTOR RELATIONSHIP.

         For the purposes of this Agreement, Kos, PharmaBio and Innovex are
         independent contractors and nothing contained in this Agreement shall
         be construed to place them in the relationship of partners, principal
         and agent, employer and employee or joint venturers. Neither Kos,
         PharmaBio, nor Innovex shall have the power or right to bind or
         obligate the other party, nor shall either party hold itself out as
         having such authority.

6.0      TERMINATION.

         Either party may terminate this Agreement for material breach upon
         thirty (30) days written notice specifying the nature of the breach, if
         such breach (i) has not been substantially cured within the thirty (30)
         day period or (ii) is not curable within such 30-day period and the
         breaching party has not commenced and diligently continued during such
         30-day period reasonable actions to cure such breach. During the 30-day
         cure period for termination due to breach, each party will continue to
         perform its obligations under this Agreement. Either party may
         terminate this Agreement immediately upon provision of written notice
         if the other party becomes insolvent or files for bankruptcy or is not
         otherwise able to pay its obligations as they become due and payable.
         Any termination under this Section 6 shall be without prejudice to any
         claims for damages or other relief by the terminating party.



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<PAGE>

7.0      INDEMNIFICATION AND LIABILITY LIMITS.

7.1      PharmaBio shall indemnify, defend and hold harmless Kos, its Affiliates
         and its and their respective directors, officers, employees and agents
         from and against any and all losses, claims, actions, damages,
         liabilities, penalties, costs and expenses (including reasonable
         attorneys' fees and court costs) (collectively, "Losses"), resulting
         from any: (i) breach by PharmaBio (or its employees) of its obligations
         hereunder; (ii) willful misconduct or grossly negligent acts or
         omissions of PharmaBio or its employees; and (iii) violation by
         PharmaBio or its employees of any municipal, county, state or federal
         laws, rules or regulations applicable to the performance of PharmaBio's
         obligations under this Agreement; except, in each case, to the extent
         such Losses are determined to have resulted from the gross negligence
         or willful misconduct of Kos or its employees.

7.2      Kos shall indemnify, defend and hold harmless PharmaBio and its
         Affiliates and their respective directors, officers, employees and
         agents from and against any and all Losses resulting from: (i) any
         third party claim arising from the manufacture, storage, packaging,
         production, transportation, distribution, use, sale or other
         disposition of the Products; (ii) breach by Kos (or its employees) of
         its obligations hereunder; (iii) willful misconduct or grossly
         negligent acts or omissions of Kos or its employees; and (iv) violation
         by Kos or its employees of any municipal, county, state or federal
         laws, rules or regulations applicable to the performance of Kos'
         obligations under this Agreement, except, in each case, to the extent
         such Losses are determined to have resulted from the gross negligence
         or willful misconduct of PharmaBio or Innovex or any of their
         employees.

7.3      In the event of a third party claim or lawsuit, the party seeking
         indemnification hereunder (the "Indemnified Party") shall give the
         party obligated to indemnify (the "Indemnifying Party") prompt written
         notice of any claim or lawsuit (including a copy thereof), provided
         that the failure of an Indemnified Party to notify the Indemnifying
         Party on a timely basis will not relieve the Indemnifying Party of any
         liability that it may have to the Indemnified Party unless the
         Indemnifying Party demonstrates that the defense of such action is
         materially prejudiced by the Indemnified Party's failure to give such
         notice. The Indemnified Party and its employees shall fully cooperate
         with Indemnifying Party and its legal representatives in the
         investigation and defense of any matter the subject of indemnification,
         which defense shall be managed by the Indemnifying Party in a manner,
         including the selection of legal counsel, reasonably acceptable to the
         Indemnified Party. The Indemnified Party shall not unreasonably
         withhold its approval of the settlement of any such claim, liability,
         or action by Indemnifying Party covered by this indemnification
         provision; provided that such settlement does not include an admission
         or acknowledgement of liability or fault of the Indemnified Party.

7.4      Neither PharmaBio nor Kos, nor any of such party's Affiliates,
         directors, officers, employees, subcontractors or agents shall have,
         under any legal theory (including, but not limited to, contract,
         negligence and tort liability), any liability to any other party hereto
         for any loss of opportunity or goodwill, or any type of special,



                                       8
<PAGE>

         incidental, indirect or consequential damage or loss, in connection
         with or arising out of this Agreement. For the avoidance of doubt, a
         claim by PharmaBio for royalties on Net Sales payable by Kos hereunder
         or a claim by Kos for payments pursuant to Section 3.1 shall not be
         limited in any way pursuant to the provisions set forth in the
         preceding sentence.

8.0      NOTICES.

         Any notice required to be given by either party shall be in writing.
         All notices shall be to the parties and addresses listed below, and
         shall be deemed sufficiently given (i) when received, if delivered
         personally or sent by facsimile transmission with confirmed receipt, or
         (ii) one business day after the date mailed or sent by an
         internationally recognized overnight delivery service with charges
         prepaid.

         If to PharmaBio:       PharmaBio Development, Inc.
                                4709 Creekstone Drive
                                Durham, NC  27703
                                Attention:  President
                                Fax: 919-998-2090

         With a copy to:        General Counsel
                                PharmaBio Development, Inc.
                                4709 Creekstone Drive
                                Durham, NC  27703
                                Fax: 919-998-2090

         If to Kos:             Kos Pharmaceuticals, Inc.
                                1001 Brickell Bay Drive, Suite 2500
                                Miami, FL 33131
                                Attn:    President
                                         Secretary
                                         Vice President, Commercial Operations
                                Fax: 305-577-4596


         With a copy to:        Holland & Knight LLP
                                701 Brickell Avenue
                                Suite 3000
                                Miami, FL 33131
                                Attn: Rodney H. Bell, Esq.
                                Fax:  305-789-7799

9.0      ASSIGNMENT.

         No party may assign any of its rights or obligations under this
         Agreement to any third party other than an Affiliate without the
         written consent of the other party, except that Kos may assign its
         rights or obligations under this Agreement to a bona fide third party
         that acquires all of Kos' business to which this Agreement relates (a
         "Permitted Sale") provided that such party assumes all of Kos' rights
         and obligations under this Agreement. PharmaBio may at any time assign


                                       9
<PAGE>

         or transfer any of its rights or obligations under this Agreement to an
         Affiliate. Nothing in this Section 9.0 shall preclude the transfer of a
         party's rights and obligations under this Agreement in conjunction with
         a merger in which such party is not the surviving entity.

10.0     GENERAL PROVISIONS.

10.1     Section 3.6, Section 4.0, Section 7.0, and Section 11.0 shall survive
         the termination of this Agreement for any reason.

10.2     This Agreement contains the entire understanding of the parties with
         respect to the subject matter herein and cancels all previous
         agreements (oral and written), negotiations and discussions dealing
         with the same subject matter. The parties, from time to time during the
         term of this Agreement, may modify any of the provisions hereof only by
         an instrument in writing duly executed by the parties.

10.3     No failure or delay on the part of a party in either exercising or
         enforcing any right under this Agreement will operate as a waiver of,
         or impair, any such right. No single or partial exercise or enforcement
         of any such right will preclude any other or further exercise or
         enforcement thereof or the exercise or enforcement of any other right.
         No waiver of any such right will have effect unless given in a signed
         writing. No waiver of any such right will be deemed a waiver of any
         other right.

10.4     If any part or parts of this Agreement are held to be illegal, void or
         ineffective, the remaining portions of this Agreement shall remain in
         full force and effect. If any of the terms or provisions are in
         conflict with any applicable statute or rule of law, then such term(s)
         or provision(s) shall be deemed inoperative to the extent that they may
         conflict therewith, and shall be deemed to be modified or conformed
         with such statute or rule of law. In the event of any ambiguity
         respecting any term or terms hereof, the parties agree to construe and
         interpret such ambiguity in good faith in such a way as is appropriate
         to ensure its enforceability and viability.

10.5     The headings contained in this Agreement are used only as a matter of
         convenience, and in no way define, limit, construe or describe the
         scope or intent of any section of this Agreement.

10.6     The individuals signing below are authorized and empowered to bind the
         parties to the terms of this Agreement.

11.0     DISPUTE RESOLUTION:

11.1     GOVERNING LAW. This Agreement, including, without limitation, the
         interpretation, performance, enforcement, breach or termination thereof
         and any remedies relating thereto, shall be governed by and construed
         in accordance with the laws of the State of New York, United States of
         America, as applied to agreements executed and performed entirely in
         the State of New York, without regard to conflicts of law rules.



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<PAGE>

11.2     INTERNAL REVIEW. In the event that a dispute, difference, claim,
         action, demand, request, investigation, controversy, threat, Kos
         request or request for testimony or information or other question
         arises pertaining to any matters which arise under, out of, in
         connection with, or in relation to this Agreement (a "Dispute") and
         either party so requests in writing, prior to the initiation of any
         formal legal action, the Dispute will be submitted to the Chief
         Executive Officers of Kos and Quintiles Corp. For all Disputes referred
         to the Chief Executive Officers, the Chief Executive Officers shall use
         their good faith efforts to meet at least two times in person and to
         resolve the Dispute within ten (10) days after such referral.

11.3     ARBITRATION.

         (a)      If the parties are unable to resolve any Dispute under Section
                  11.2, then either party may by election within ten (10) days
                  after the end of the period set forth in Section 11.2, require
                  the matter to be settled by final and binding arbitration by
                  sending written notice of such election to the other party
                  clearly marked "Arbitration Demand". Thereupon such Dispute
                  shall be arbitrated in accordance with the terms and
                  conditions of this Section 11.3. Notwithstanding the
                  foregoing, either party may apply to a court of competent
                  jurisdiction for a temporary restraining order, a preliminary
                  injunction, or other equitable relief to preserve the status
                  quo or prevent irreparable harm.

         (b)      The arbitration panel will be composed of three arbitrators,
                  one of whom will be chosen by Kos, one by Quintiles, and the
                  third by the two so chosen. If both or either of Kos or
                  Quintiles fails to choose an arbitrator or arbitrators within
                  fourteen (14) days after receiving notice of commencement of
                  arbitration, or if the two arbitrators fail to choose a third
                  arbitrator within fourteen (14) days after their appointment,
                  the American Arbitration Association shall, upon the request
                  of both or either of the parties to the arbitration, appoint
                  the arbitrator or arbitrators required to complete the panel.
                  The arbitrators shall have reasonable experience in the matter
                  under dispute. The decision of the arbitrators shall be final
                  and binding on the parties, and specific performance giving
                  effect to the decision of the arbitrators may be ordered by
                  any court of competent jurisdiction.

         (c)      Nothing contained herein shall operate to prevent either party
                  from asserting counterclaim(s) in any arbitration commenced in
                  accordance with this agreement, and any such party need not
                  comply with the procedural provisions of this Section 11.3 in
                  order to assert such counterclaim(s).

         (d)      The arbitration shall be filed with the office of the American
                  Arbitration Association ("AAA") located in New York, New York
                  or such other AAA office as the parties may agree upon
                  (without any obligation to so agree). The arbitration shall be
                  conducted pursuant to the Commercial Arbitration Rules of AAA
                  as in effect at the time of the arbitration hearing, such
                  arbitration to be completed in a sixty (60) day period. In
                  addition, the following rules and procedures shall apply to
                  the arbitration.



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<PAGE>

         (e)      The arbitrators shall have the sole authority to decide
                  whether or not any Dispute between the parties is arbitrable
                  and whether the party presenting the issues to be arbitrated
                  has satisfied the conditions precedent to such party's right
                  to commence arbitration as required by this Section 11.3.

         (f)      The decision of the arbitrators, which shall be in writing and
                  state the findings the facts and conclusions of law upon which
                  the decision is based, shall be final and binding upon the
                  parties, who shall forthwith comply after receipt thereof.
                  Judgment upon the award rendered by the arbitrator may be
                  entered by any competent court. Each party submits itself to
                  the jurisdiction of any such court, but only for the entry and
                  enforcement to judgment with respect to the decision of the
                  arbitrators hereunder.

         (g)      The arbitrators shall have the power to grant all legal and
                  equitable remedies (including, without limitation, specific
                  performance) and award compensatory damages provided by
                  applicable law, but shall not have the power or authority to
                  award punitive damages. No party shall seek punitive damages
                  in relation to any matter under, arising out of, or in
                  connection with or relating to this Agreement in any other
                  forum.

         (h)      The parties shall bear their own costs in preparing for and
                  participating in the resolution of any Dispute pursuant to
                  this Section 11.3, and the costs of the arbitrator(s) shall be
                  equally divided between the parties; provided, however, that
                  each party shall bear the costs incurred in connection with
                  any Dispute brought by such party that the arbitrators
                  determine to have been brought in bad faith.



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<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers on the date(s) set forth below.

PHARMABIO DEVELOPMENT, INC.                KOS PHARMACEUTICALS, INC.


By:     /s/ Ronald J. Wooten               By:     /s/ Adrian Adams
        ----------------------------               ----------------------------

Name:   Ronald J. Wooten                   Name    Adrian Adams
        ----------------------------               ----------------------------

Title:  President                          Title:  President and COO
        ----------------------------               ----------------------------



INNOVEX LP

By:     /s/ Kevin D. Overs
        ----------------------------

Name:   Kevin D. Overs
        ----------------------------

Title:  Chief Financial Officer
        ----------------------------






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<PAGE>


                                  Schedule 3.5

         1. INTELLECTUAL PROPERTY. Kos owns or has valid and enforceable rights
to use all Intellectual Property (as defined below) necessary to conduct Kos'
business as described in the SEC Reports (as defined below) including without
limitation to develop, commercialize, market, make and distribute Niaspan and
Advicor as described in the SEC reports (collectively, the "Kos Intellectual
Property"). To the knowledge of Kos, none of the Kos Intellectual Property
infringes, misappropriates or makes any unauthorized use of any Intellectual
Property of any other person. Kos has received no notice or other communication
of any actual, alleged, or potential infringement, misappropriation or
unauthorized use of Intellectual Property owned or used by any other person. To
the knowledge of Kos, no person is infringing, misappropriating or making any
unauthorized use of any Kos Intellectual Property. Kos has not entered into any
agreement or arrangement, and Kos is not subject to any judgment, order or
decree of any court or governmental or regulatory body limiting Kos' ability to
exploit freely the Kos Intellectual Property or to transact business in any
market with any person. There is no pending or, to the knowledge of Kos,
threatened action, claim, suit, proceeding or investigation before any court or
any governmental or regulatory body challenging the validity, scope, ownership,
or right to use the Kos Intellectual Property, except for an opposition
proceeding that has been filed with the Trademark Trial and Appeal Board of the
U.S. Patent and Trademark Office objecting to the application for registration
of the Advicor(TM) trademark. There are no actions, claims, suits or proceedings
by Kos against any other person regarding the Kos Intellectual Property or the
Intellectual Property of such person. Kos is not aware of any Intellectual
Property owned or controlled by any other person, or of any facts, circumstances
or events, that would materially impair or prevent Kos from developing,
commercializing, marketing, making and distributing Niaspan and Advicor as
contemplated by the SEC Reports, except as described in the SEC Reports.
"Intellectual Property" shall mean all material: trade, business and product
names; trademarks; service marks; copyrights; patents; discoveries; trade
secrets; business and technical information; proprietary compilations of data or
information; know-how; inventions; formulas and techniques; methods; regulatory
filings; computer software; all intellectual property rights, registrations,
licenses and applications pertaining to any of the foregoing; and all related
documentation and goodwill. "SEC Reports" shall mean the following reports filed
by Kos with the Securities and Exchange Commission: Form 10-K for the fiscal
year ended December 31, 2000; Form 10-Q for the quarterly period ended September
30, 2001; and any documents filed with the SEC after September 30, 2001 and
prior to the date of this Agreement.

         2. CONTRACTS. All of the contracts and agreements of Kos described in
the SEC Reports (the "Material Contracts"), including without limitation
regarding Niaspan and Advicor, are in full force and effect, valid and binding,
and enforceable in accordance with their terms, in all material respects. Kos is



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<PAGE>

not and, to the knowledge of Kos, no other party is in violation, breach or
default of any Material Contract in any material respect or in any manner that
would permit a party to terminate such Material Contract. To the knowledge of
Kos, no event or condition exists or has occurred which would permit a party to
terminate any Material Contract. Kos is not a party to any agreement or
arrangement regarding the promotion by any other person of Niaspan or Advicor
and, without limiting the generality of the foregoing, any such agreement
between Kos and DuPont Pharmaceuticals Company or any affiliate thereof has been
terminated or expired. The execution, delivery and performance by Kos of this
Agreement will not violate or conflict in any material respect with any
agreement or instrument to which the Kos is a party or by which Kos or its
properties is bound.

         3. Product Launch. Advicor will be in a position to be launched,
including all reasonable components of the distribution, manufacturing and
supply chain, by February 1, 2002.; and Kos shall pursue the launch of Advicor
no later than such date.


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