<PAGE>

                                                                Exhibit 10.16(c)

                                                                    Confidential

          Amendment No. 2 to Toll Manufacturing and Packaging Agreement

         THIS Amendment No. 2 to Toll Manufacturing and Packaging Agreement is
made as of this 9th day of October, 2001, by and between Cephalon, Inc.
("Cephalon") and Catalytica Pharmaceuticals, Inc. ("Catalytica").

         WHEREAS, Cephalon and Catalytica have previously executed a Toll
Manufacturing and Packaging Agreement dated as of August 24, 1999, as amended by
Amendment No. 1 thereto dated July 3, 2001 (collectively, the "Agreement"); and

         WHEREAS, the parties desire to establish special procedures to apply to
the formulation and packaging of [**] commercial lots of Product (the
"Launch Lots"), which provisions differ from provisions in the Agreement.

         NOW THEREFORE, for and in consideration of the covenants exchanged
between the parties, including those provisions intended as inducements for
Catalytica to produce the Launch Lots, the parties hereto agree as follows:

         1.       The parties recognize that the Agreement contains the general
                  provisions for the supply of Product; however, the parties
                  hereto expressly recognize and agree that this Amendment No. 2
                  expressly supercedes any provisions of the Agreement which
                  directly or indirectly conflict with the provisions of this
                  Amendment No. 2, including by way of example and not
                  limitation Section 6.2, Section 8.1, Section 8.3, Section 9.1,
                  Section 9.3, Section 11.1, Section 11.2, Section 11.3, Section
                  14.3, and Section 20.1.

         2.       With regard to the production of the Launch Lots, the
                  following shall apply:

                  a.       Cephalon shall provide free of charge and deliver to
                           Catalytica at Catalytica's Greenville facility and
                           shall retain title to the Active Drug Substance and
                           Compressil at all times before, during and after the
                           production of the Launch Lots.

                  b.       Cephalon specifically recognizes and confirms that it
                           is seeking production the Launch Lots, and is
                           agreeing to pay for such Launch Lots, notwithstanding
                           any regulatory delay or non-approval (including by
                           way of example, actions or lack of action by the FDA)
                           associated with Product as or to be manufactured at
                           Catalytica's Greenville, North Carolina facility. No
                           Product shall be shipped from the facility until all
                           applicable regulatory approvals have been obtained.

         3.       On or before October 10, 2001 Cephalon agrees to pay a fifty
                  percent (50%) down payment of estimated costs [**] for the
                  Production of the Launch Lots (i.e. [**] batches at an
                  aggregate estimated down payment of [**]. The remainder of the
                  payment for the Launch Lots shall be due within thirty (30)
                  days of Catalytica's delivery of the applicable invoice and
                  the certificate of analysis with variances/incidents, if any,
                  for such Launch Lots.

         4.       Catalytica shall provide Cephalon with a certificate of
                  analysis with variances/ incidents, if any, as provided in
                  Section 9.1 of the Agreement, and Cephalon shall have the
                  right to inspect the Product (at Catalytica's facility and at




      **Certain portions of this document have been omitted based upon a
request for confidential treatment that has been filed with the Commission.
The omitted portions have been filed separately with the Commission.

<PAGE>

                                                                    Confidential

                  Cephalon's cost and expense) as outlined in Section 9.2 of the
                  Agreement. If Cephalon properly rejects the Product within
                  thirty (30) days of Catalytica's delivery of certificate of
                  analysis with variances/incidents, if any, for the Launch
                  Lots, subject to agreement as to the rightfulness of such
                  rejection (or in the absence thereof the opinion of a mutually
                  acceptable, third party laboratory) Catalytica shall refund to
                  Cephalon all payments made hereunder as to such rejected
                  Product and shall reimburse Cephalon for the acquisition cost
                  of the applicable portion of the lost Active Ingredients.

         5.       The parties further recognize that Product may need to be
                  stored in a special area or in special containers following
                  production. The parties shall separately and in good faith
                  negotiate the charge or charges for such storage as well as
                  any time or space limitations that may apply thereto.

         IN WITNESS WHEREOF, the undersigned parties have caused this Amendment
No. 2 to be executed as of the date first above written and further confirm by
their execution the power of the officials so shown to bind each such party.



Cephalon, Inc.                              Catalytica Pharmaceuticals, Inc.

\s\ Robert Urban                            \s\ Michel Deinum
-------------------------                   -------------------------
Robert Urban                                Michel Deinum
Senior Director, Technical Operations       Vice President and
                                            Business Manager, PPO

Date: October 9, 2001                       Date: October 12, 2001