Exhibit
4.2


Execution Copy


REGISTRATION RIGHTS
AGREEMENT


This REGISTRATION RIGHTS AGREEMENT (this “Agreement”),
dated as of November 2, 2006, is by and between Metabasis Therapeutics, Inc.
(the “Company”) and Kingsbridge Capital Limited, an entity organized and
existing under the laws of the British Virgin Islands, whose registered address
is Palm Grove House, 2nd Floor, Road Town, Tortola, British Virgin Islands (the
“Investor”).


WHEREAS, the Company and the Investor have entered
into that certain Common Stock Purchase Agreement, dated as of the date hereof
(the “Purchase Agreement”), pursuant to which the Company may issue,
from time to time, to the Investor up to $50 million worth of shares of Common
Stock as provided for therein;


WHEREAS, pursuant to the terms of, and in partial
consideration for the Investor entering into, the Purchase Agreement, the
Company has issued to the Investor a warrant, exercisable from time to time, in
accordance with its terms, within five (5) years following the six-month anniversary
of the date of issuance (the “Warrant”) for the purchase of an aggregate
of up to 260,000 shares of Common Stock at a price specified in such Warrant;


WHEREAS, pursuant to the terms of, and in partial
consideration for, the Investor’s agreement to enter into the Purchase
Agreement, the Company has agreed to provide the Investor with certain
registration rights with respect to the Registrable Securities (as defined in
the Purchase Agreement) as set forth herein;


NOW, THEREFORE, in consideration of the premises, the
representations, warranties, covenants and agreements contained herein, in the
Warrant and in the Purchase Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
intending to be legally bound hereby, the parties hereto agree as follows
(capitalized terms used herein and not defined herein shall have the respective
meanings ascribed to them in the Purchase Agreement):


ARTICLE I

REGISTRATION RIGHTS


Section 1.1.            Registration Statement.


(a)   Filing of the Registration Statement.  Upon the terms and subject to the conditions
set forth in this Agreement, the Company shall file with the Commission within
sixty (60) calendar days after the Closing Date a registration statement on
Form S-3 under the Securities Act or such other form as deemed appropriate by
counsel to the Company for the registration for the resale by the Investor of
the Registrable Securities (the “Registration Statement”).


(b)   Effectiveness of the Registration
Statement.  The Company shall use
commercially reasonable efforts (i) to have the Registration Statement declared
effective by the Commission as soon as reasonably practicable, but in any event
no later than one hundred eighty (180) calendar days after the Closing Date and
(ii) to ensure that the Registration Statement remains in effect throughout the
term of this Agreement as set forth in Section 4.2, subject to the terms and
conditions of this Agreement.


(c)   Regulatory Disapproval.  The contemplated effective date for the
Registration Statement as described in Section 1.1(b) shall be extended without
default or liquidated damages hereunder or under the Purchase Agreement in the
event that the Company’s failure to obtain the effectiveness of the
Registration Statement on a timely basis results from (i) the failure of the
Investor to timely provide the Company with information requested by the
Company and necessary to complete the Registration















 


Statement in
accordance with the requirements of the Securities Act, or (ii) the Commission’s
disapproval of the structure of the transactions contemplated by the Purchase
Agreement, or (iii) events or circumstances that are not in any way
attributable to the Company. In the event of clause (ii) above, the parties
agree to cooperate with one another in good faith to arrive at a resolution
acceptable to the Commission.


(d)   Failure to Maintain Effectiveness of
Registration Statement.  In the event
the Company fails to maintain the effectiveness of the Registration Statement
(or the Prospectus) throughout the period set forth in Section 4.2, other
than temporary suspensions as set forth in Section 1.1(e), and the
Investor holds any Registrable Securities at any time during the period of such
ineffectiveness (an “Ineffective Period”), the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to the product of (x) the total number of Registrable
Securities issued to the Investor under the Purchase Agreement (which, for the
avoidance of doubt, shall not include any Warrant Shares) and owned by the
Investor at any time during such Ineffective Period and (y) the result, if
greater than zero, obtained by subtracting the VWAP on the Trading Day
immediately following the last day of such Ineffective Period from the VWAP on
the Trading Day immediately preceding the day on which any such Ineffective
Period began; provided, however, (i) that the foregoing payments
shall not apply in respect of Registrable Securities that are otherwise freely
tradable by the Investor or if the Company offers to repurchase from the
Investor such Registrable Securities for a per share purchase price equal to
the VWAP on the Trading Day immediately preceding the day on which any such
Ineffective Period began and (ii) that the Company shall be under no obligation
to supplement the Prospectus to reflect the issuance of any Shares pursuant to
a Draw Down at any time prior to the day following the Settlement Date with
respect to such Shares and that the failure to supplement the Prospectus prior
to such time period shall not be deemed a failure to maintain the effectiveness
of the Registration Statement (or Prospectus) for purposes of this Agreement
(including this Section 1.1(d)).


(e)           Deferral
or Suspension During a Blackout Period. 
Notwithstanding the provisions of Section 1.1(d), if in the good faith
judgment of the Company, following consultation with legal counsel, it would be
detrimental to the Company or its stockholders for the Registration Statement
to be filed or for resales of Registrable Securities to be made pursuant to the
Registration Statement due to (i) the existence of a material development or
potential material development involving the Company that the Company would be
obligated to disclose in the Registration Statement, which disclosure would be
premature or otherwise inadvisable at such time or would have a Material
Adverse Effect on the Company or its stockholders, or (ii) a filing of a
Company-initiated registration of any class of its equity securities, which, in
the good faith judgment of the Company, because such filing of the Registration
Statement or continued resale would adversely affect or require premature
disclosure of the filing of such Company-initiated registration (notice
thereof, a “Blackout Notice”), the Company shall have the right to (A)
immediately defer such filing for a period of not more than sixty (60) days
beyond the date by which such Registration Statement was otherwise required
hereunder to be filed or (B) suspend use of such Registration Statement for a
period of not more than thirty (30) days (any such deferral or suspension
period, a “Blackout Period”).  The
Investor acknowledges that it would be seriously detrimental to the Company and
its stockholders for such Registration Statement to be filed (or remain in
effect) during a Blackout Period and therefore essential to defer such filing
(or suspend the use thereof) during such Blackout Period and agrees to cease
any disposition of the Registrable Securities during such Blackout Period.  The Company may not utilize any of its rights
under this Section 1.1(e) to defer the filing of a Registration Statement (or
suspend its effectiveness) more than six (6) times in any twelve (12) month
period.  In the event that, within
fifteen (15) Trading Days following any Settlement Date, the Company gives a
Blackout Notice to the Investor and the VWAP on the Trading Day immediately
preceding such Blackout Period (“Old VWAP”) is greater than the VWAP on
the first Trading Day following such Blackout Period that the Investor may sell
its Registrable Securities pursuant to an effective Registration Statement (“New
VWAP”), then the Company shall pay to the Investor, by wire transfer of
immediately



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available funds to an account designated by the
Investor, the “Blackout Amount.” 
For the purposes of this Agreement, Blackout Amount means a percentage
equal to:  (1) seventy-five percent (75%)
if such Blackout Notice is delivered prior to the fifth (5th) Trading Day
following such Settlement Date; (2) fifty percent (50%) if such Blackout Notice
is delivered on or after the fifth (5th) Trading Day following such Settlement
Date, but prior to the tenth (10th) Trading Day following such Settlement Date;
(3) twenty-five percent (25%) if such Blackout Notice is delivered on or after
the tenth (10th) Trading Day following such Settlement Date, but prior to the
fifteenth (15th) Trading Day following such Settlement Date; and (4) zero
percent (0%) thereafter of:  the product
of (i) the number of Registrable Securities purchased by the Investor pursuant
to the most recent Draw Down and actually held by the Investor immediately
prior to the Blackout Period and (ii) the result, if greater than zero,
obtained by subtracting the New VWAP from the Old VWAP; provided, however, that
no Blackout Amount shall be payable in respect of Registrable Securities (A)
that are otherwise freely tradable by the Investor, including under Rule 144,
during the Blackout Period, or (B) if the Company offers to repurchase from the
Investor such Registrable Securities for a per share purchase price equal to
the VWAP on the Trading Day immediately preceding the day on which any such
Blackout Period began.  For any Blackout
Period in respect of which a Blackout Amount becomes due and payable, rather
than paying the Blackout Amount, the Company may at is sole discretion, issue
to the Investor shares of Common Stock with an aggregate market value
determined as of the first Trading Day following such Blackout Period equal to
the Blackout Amount (“Blackout Shares”).


(f)    Liquidated Damages.  The Company and the Investor hereto
acknowledge and agree that the amounts payable under Sections 1.1(d) and
1.1(e) and the Blackout Shares deliverable under Section 1.1(e) above (i)
shall constitute the Investor’s sole remedy with respect to the Company’s
failure to maintain the effectiveness, or for any deferral or suspension, of
the Registration Statement, and (ii) shall constitute liquidated damages
and not penalties.  The parties further
acknowledge that (i) the amount of loss or damages likely to be incurred
by the Investor is incapable or is difficult to precisely estimate, (ii) the
amounts specified in such subsections bear a reasonable proportion and are not
plainly or grossly disproportionate to the probable loss likely to be incurred
in connection with any failure by the Company to obtain or maintain the
effectiveness of the Registration Statement, (iii) one of the reasons for
the Company and the Investor reaching an agreement as to such amounts was the
uncertainty and cost of litigation regarding the question of actual damages,
and (iv) the Company and the Investor are sophisticated business parties
and have been represented by sophisticated and able legal and financial counsel
and negotiated this Agreement at arm’s length.  
The Investor further agrees that, if the Company makes the payments
provided for in Section 1.1(e), the Company’s deferral or suspension of the
Registration Statement pursuant to Section 1.1(e) shall not constitute a
material breach or default of any obligation of the Company to the Investor.


(g)   Additional Registration Statements.  In the event and to the extent that the
Registration Statement fails to register a sufficient amount of Common Stock
necessary for the Company to issue and sell to the Investor and the Investor to
purchase from the Company all of the Registrable Securities to be issued, sold
and purchased under the Purchase Agreement and the Warrant, the Company shall,
upon a timetable mutually agreeable to both the Company and the Investor,
prepare and file with the Commission an additional registration statement or
statements in order to effectuate the purpose of this Agreement, the Purchase
Agreement and the Warrant.


ARTICLE II

REGISTRATION PROCEDURES


Section 2.1.            Filings; Information.  The Company shall effect the registration
with respect to the sale of the Registrable Securities by the Investor in
accordance with the intended methods of disposition thereof.  Without limiting the foregoing, the Company
in each such case will do the following



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as expeditiously as possible, but in no event later
than the deadline, if any, prescribed therefor in this Agreement:


(a)   Subject to Section 1.1(e), the Company
shall (i) prepare and file with the Commission the Registration Statement;
(ii) use commercially reasonable efforts to cause such filed Registration
Statement to become and to remain effective (pursuant to Rule 415 under the Securities
Act or otherwise); (iii) prepare and file with the Commission such
amendments and supplements to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective for the time period prescribed by Section 4.2 and in
order to effectuate the purpose of this Agreement, the Purchase Agreement and
the Warrant and (iv) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during such period in accordance with the intended methods of
disposition by the Investor set forth in such Registration Statement; provided,
however, that the Company shall be under no obligation to supplement the
Prospectus to reflect the issuance of any Shares pursuant to a Draw Down at any
time prior to the Trading Day following the Settlement Date with respect to
such Shares and, provided  further, that the Investor shall be
responsible for the delivery of the Prospectus to the Persons to whom the
Investor sells the Shares and the Warrant Shares, and the Investor agrees to
dispose of Registrable Securities in compliance with the plan of distribution
described in the Registration Statement and otherwise in compliance with
applicable federal and state securities laws.


(b)   Three (3) Trading Days prior to filing the
Registration Statement or Prospectus, or any amendment or supplement thereto
(excluding amendments deemed to result from the filing of documents
incorporated by reference therein, supplements to the Prospectus required in
respect of any particular Settlement Date, and supplements to the Registration
Statement for which consent of or notice to the Investor is not required
pursuant to Section 6.12 of the Purchase Agreement), the Company shall deliver
to the Investor and to counsel representing the Investor, in accordance with
the notice provisions of Section 4.8, copies of the Registration
Statement, Prospectus and/or any amendments or supplements thereto as proposed
to be filed, together with exhibits thereto, which documents will be subject to
review by the Investor and such counsel, and thereafter deliver to the Investor
and such counsel, in accordance with the notice provisions of Section 4.8,
such number of copies of the Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto), the
Prospectus (including each preliminary prospectus) and such other documents or
information as the Investor or counsel may reasonably request in order to facilitate
the disposition of the Registrable Securities, provided, however, that to the
extent reasonably practicable, such delivery may be accomplished via electronic
means.


(c)   After the filing of the Registration
Statement, the Company shall promptly notify the Investor of any stop order
issued or threatened by the Commission in connection therewith and take all
commercially reasonable actions required to prevent the entry of such stop
order or to remove it if entered.


(d)   The Company shall use commercially reasonable
efforts to (i) register or qualify the Registrable Securities under such other
securities or blue sky laws of each jurisdiction in the United States as the
Investor may reasonably (in light of its intended plan of distribution)
request, and (ii) cause the Registrable Securities to be registered with or
approved by such other governmental agencies or authorities in the United
States as may be necessary by virtue of the business and operations of the
Company and do any and all other customary acts and things that may be
reasonably necessary or advisable to enable the Investor to consummate the
disposition of the Registrable Securities; provided, however,
that the Company will not be required to qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but for
this Section 2.1(d), subject itself to taxation in any such jurisdiction,
consent or subject itself to general service of process in any such
jurisdiction,



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change any existing business practices, benefit plans
or outstanding securities or amend or otherwise modify the Charter or Bylaws.


(e)   The Company shall make available to the
Investor (and will deliver to Investor’s counsel), (A) subject to
restrictions imposed by the United States federal government or any agency or
instrumentality thereof, copies of all public correspondence between the
Commission and the Company concerning the Registration Statement and will also
make available for inspection by the Investor and any attorney, accountant or other
professional retained by the Investor (collectively, the “Inspectors”),
(B) upon reasonable advance notice during normal business hours all financial
and other records and pertinent corporate documents of the Company
(collectively, the “Records”) as shall be reasonably necessary to enable
them to exercise their due diligence responsibility, and cause the Company’s
officers and employees to supply all information reasonably requested by any
Inspectors in connection with the Registration Statement; provided, however,
that (i) the Company shall not be obligated to disclose any portion of the
Records consisting of either (A) material non-public information or (B)
confidential information of a third party and (ii) any such Inspectors must
agree in writing for the benefit of the Company not to use or disclose any such
Records except as provided in this Section 2.1(e).  Records disclosed hereunder that the Company
determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless the
disclosure or release of such Records is requested or required pursuant to oral
questions, interrogatories, requests for information or documents or a subpoena
or other order from a court of competent jurisdiction or other judicial or
governmental process; provided, however, that prior to any
disclosure or release pursuant to the immediately preceding clause, the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors’ obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver
by the Company permitting the disclosure or release of such Records, the
Inspectors, upon advice of counsel, are compelled to disclose such Records, the
Inspectors may disclose that portion of the Records that counsel has advised
the Inspectors that the Inspectors are compelled to disclose; provided, however,
that upon any such required disclosure, such Inspector shall use his or her
best efforts to obtain reasonable assurances that confidential treatment will
be afforded such information.  The
Investor agrees that information obtained by it solely as a result of such
inspections (not including any information obtained from a third party who,
insofar as is known to the Investor after reasonable inquiry, is not prohibited
from providing such information by a contractual, legal or fiduciary obligation
to the Company) shall be deemed confidential and shall not be used for any
purposes other than as indicated above or by it as the basis for any market
transactions in the securities of the Company or its affiliates unless and
until such information is made generally available to the public.  The Investor further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.


(f)    The Company shall otherwise comply in all
material respects with all applicable rules and regulations of the Commission,
including, without limitation, compliance with applicable reporting
requirements under the Exchange Act.


(g)   The Company shall appoint (or shall have
appointed) a transfer agent and registrar for all of the Registrable Securities
covered by such Registration Statement not later than the effective date of
such Registration Statement.


(h)   The Investor shall cooperate with the
Company, as reasonably requested by the Company, in connection with the
preparation and filing of any Registration Statement hereunder.  The Company may require the Investor to promptly
furnish in writing to the Company such information as may be required in
connection with such registration including, without limitation, all such
information as may be 



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requested by the Commission or the NASD or any state
securities commission and all such information regarding the Investor, the
Registrable Securities held by the Investor and the intended method of
disposition of the Registrable Securities. 
The Investor agrees to provide such information requested in connection
with such registration within five (5) Business Days after receiving such
written request and the Company shall not be responsible for any delays in
obtaining or maintaining the effectiveness of the Registration Statement caused
by the Investor’s failure to timely provide such information.


(i)    Upon receipt of a Blackout Notice from the
Company, the Investor shall immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until (i) the Company advises the Investor that the Blackout
Period has terminated and (ii) the Investor receives copies of a
supplemented or amended prospectus, if necessary.  If so directed by the Company, the Investor
will deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of destruction) all copies in the Investor’s
possession (other than a limited number of file copies) of the prospectus
covering such Registrable Securities that is current at the time of receipt of
such notice.


Section 2.2.            Registration Expenses.  Except as set forth in Section 10.01 of the
Purchase Agreement, the Company shall pay all registration expenses incurred in
connection with the Registration Statement (the “Registration Expenses”),
including, without limitation: 
(i) all registration, filing, securities exchange listing and fees
required by the National Association of Securities Dealers, (ii) all
registration, filing, qualification and other fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) all word processing, duplicating, printing, messenger
and delivery expenses, (iv) the Company’s internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), (v) the fees and expenses incurred
by the Company in connection with the listing of the Registrable Securities,
(vi) reasonable fees and disbursements of counsel for the Company and
customary fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any special audits or
comfort letters or costs associated with the delivery by independent certified
public accountants of such special audit(s) or comfort letter(s),  (vii) the fees
and expenses of any special experts retained by the Company in connection with
such registration and amendments and supplements to the Registration Statement
and Prospectus, and (viii) premiums and other costs of the Company for policies
of insurance against liabilities of the Company arising out of any public
offering of the Registrable Securities being registered to the extent the
Company in its discretion elects to obtain and maintain insurance.  Any fees and disbursements of underwriters,
broker-dealers or investment bankers, including without limitation underwriting
fees, discounts, transfer taxes or commissions, and any other fees or expenses
(including legal fees and expenses) if any, attributable to the sale of
Registrable Securities, shall be payable by each holder of Registrable
Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a registration
under this Agreement.


ARTICLE III

INDEMNIFICATION


Section 3.1.            Indemnification.  The Company agrees to indemnify and hold
harmless the Investor, its partners, affiliates, officers, directors, employees
and duly authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, together with the partners, affiliates,
officers, directors, employees and duly authorized agents of such controlling
Person or entity (collectively, the “Controlling Persons”), from and
against any loss, claim, damage, liability, costs and expenses (including,
without limitation, reasonable attorneys’ fees and disbursements and costs and
expenses of investigating and defending any such claim) (collectively, “Damages”),
joint or several, and any action or proceeding in respect thereof to



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which the Investor, its partners, affiliates,
officers, directors, employees and duly authorized agents, and any Controlling
Person, may become subject under the Securities Act or otherwise, as incurred,
insofar as such Damages (or actions or proceedings in respect thereof) arise
out of, or are based upon, any untrue statement or alleged untrue statement of
a material fact contained in any Registration Statement, or in any preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement
relating to the Registrable Securities or arises out of, or are based upon, any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein under the
circumstances not misleading, and shall reimburse the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, and each
such Controlling Person, for any legal and other expenses reasonably incurred
by the Investor, its partners, affiliates, officers, directors, employees and
duly authorized agents, or any such Controlling Person, as incurred, in
investigating or defending or preparing to defend against any such Damages or
actions or proceedings; provided, however, that the Company shall
not be liable to the extent that any such Damages arise out of the Investor’s
(or any other indemnified Person’s) (i) failure to send or give a copy of the
final prospectus or supplement (as then amended or supplemented) to the persons
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such person if such statement or omission was corrected in such
final prospectus or supplement or (ii) written confirmation of the sale of
Registrable Securities purchased in any specific Draw Down prior to the filing
of a supplement to the Prospectus to reflect such Draw Down (provided the
Company is in compliance with its covenants with respect to the filing of such
supplement); provided, further, that the Company shall not be
liable to the extent that any such Damages arise out of or are based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, or any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
the Investor or any other person who participates as an underwriter in the
offering or sale of such securities, in either case, specifically stating that
it is for use in the preparation thereof. 
In connection with any Registration Statement with respect to which the
Investor is participating, such Investor will indemnify and hold harmless, to
the same extent and in the same manner as set forth in the preceding paragraph,
the Company, each of its partners, affiliates, officers, directors, employees
and duly authorized agents of such controlling Person (each a “Company
Indemnified Person”) against any Damages to which any Company Indemnified
Person may become subject under the Securities Act, the Exchange Act or
otherwise, insofar as such Damages arise out of or are based upon (a) any
untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement, or in any preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement relating to the Registrable
Securities or arise out of, or are based upon, any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein under the circumstances not misleading to the
extent that such violation occurs in reliance upon and in conformity with
written information furnished to the Company by the Investor or on behalf of
the Investor expressly for use in connection with such Registration Statement,
(b) any failure by the Investor to comply with prospectus delivery requirements
of the Securities Act, the Exchange Act or any other law or legal requirement
applicable to sales under the Registration Statement, or (c) a written
confirmation of the sale of Registrable Securities purchased by such Investor
in any specific Draw Down prior to the filing of a supplement to the Prospectus
to reflect such Draw Down (provided the Company is in compliance with its
covenants with respect to the filing of such supplement).


Section 3.2.            Conduct of Indemnification
Proceedings.  All claims for
indemnification under Section 3.1 shall be asserted and resolved in accordance
with the provisions of Section 9.02 of the Purchase Agreement.


Section 3.3.            Additional Indemnification.  Indemnification similar to that specified in
the preceding paragraphs of this Article 3 (with appropriate modifications)
shall be given by the Company



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and the Investor with respect to any required
registration or other qualification of securities under any federal or state
law or regulation of any governmental authority other than the Securities
Act.  The provisions of this Article III
shall be in addition to any other rights to indemnification, contribution or
other remedies which an Indemnified Party or a Company Indemnified Person may
have pursuant to law, equity, contract or otherwise.


To the extent that any indemnification provided for
herein is prohibited or limited by law, the indemnifying party will make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Article III to the fullest extent permitted by law.  However, (a) no contribution will be
made under circumstances where maker of such contribution would not have been
required to indemnify the indemnified party under the fault standards set forth
in this Article III, (b) if the Investor is guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
the Investor will not be entitled to contribution from any Person who is not
guilty of such fraudulent misrepresentation, and (c) contribution (together
with any indemnification obligations under this Agreement) by the Investor will
be limited in amount to the proceeds received by the Investor from sales of
Registrable Securities.


ARTICLE IV

MISCELLANEOUS


Section 4.1.            No Outstanding Registration
Rights.  Except as otherwise
disclosed in accordance with the Purchase Agreement or in the Commission
Documents, the Company represents and warrants to the Investor that there is
not in effect on the date hereof any agreement by the Company pursuant to which
any holders of securities of the Company have a right to cause the Company to
register or qualify such securities under the Securities Act or any securities
or blue sky laws of any jurisdiction.


Section 4.2.            Term.  The registration rights provided to the
holders of Registrable Securities hereunder, and the Company’s obligation to
keep the Registration Statement effective, shall terminate at the earlier of
(i) such time that is two years following the termination of the Purchase
Agreement, (ii) such time as all Registrable Securities have been issued
and have ceased to be Registrable Securities, or (iii) upon the
consummation of an “Excluded Merger or Sale” as defined in the Warrant.  Notwithstanding the foregoing,
paragraph (d) of Section 1.1, Article III, Section 4.7,
Section 4.8, Section 4.9, Section 4.10 and Section 4.13
shall survive the termination of this Agreement.


Section 4.3.            Rule 144.  The Company will, at its expense, promptly
take such action as holders of Registrable Securities may reasonably request to
enable such holders of Registrable Securities to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act (“Rule
144”), as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission.  If at any time the Company is not required to
file such reports, it will, at its expense, forthwith upon the written request
of any holder of Registrable Securities, make available adequate current public
information with respect to the Company within the meaning of
paragraph (c)(2) of Rule 144 or such other information as necessary
to permit sales pursuant to Rule 144. 
Upon the request of the Investor, the Company will deliver to the
Investor a written statement, signed by the Company’s principal financial
officer, as to whether it has complied with such requirements.


Section 4.4.            Certificate.  The Company will, at its expense, forthwith
upon the request of any holder of Registrable Securities, deliver to such holder
a certificate, signed by the Company’s principal financial officer, stating
(a) the Company’s name, address and telephone number (including area
code), (b) the Company’s Internal Revenue Service identification number,
(c) the Company’s Commission file number, (d) the number of shares of each
class of Stock outstanding as shown by the most recent report or



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statement published by the Company, and
(e) whether the Company has filed the reports required to be filed under
the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual
report required to be filed thereunder.


Section 4.5.            Amendment And Modification.  Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement.  The
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may be given, only with the written consent of the
Investor and the Company.  No course of
dealing between or among any Person having any interest in this Agreement will
be deemed effective to modify, amend or discharge any part of this Agreement or
any rights or obligations of any person under or by reason of this Agreement.


Section 4.6.            Successors and Assigns; Entire
Agreement.  This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.  The Company may assign this Agreement at any
time in connection with a sale or acquisition of the Company, whether by
merger, consolidation, sale of all or substantially all of the Company’s
assets, or similar transaction, without the consent of the Investor, provided
that the successor or acquiring Person or entity agrees in writing to assume
all of the Company’s rights and obligations under this Agreement.  The Investor may assign its rights and
obligations under this Agreement only to (i) an affiliate that meets all
applicable requirements of federal and state securities laws, or (ii) with the
prior written consent of the Company, and any purported assignment by the
Investor other than as set forth above shall be null and void.  This Agreement, together with the Purchase
Agreement and the Warrant sets forth the entire agreement and understanding
between the parties as to the subject matter hereof and merges and supersedes
all prior discussions, agreements and understandings of any and every nature
among them.


Section 4.7.            Severability.  If any provision of this Agreement becomes or
is declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without said
provision; provided that if the severance of such provision materially
changes the economic benefits of this Agreement to either party as such
benefits are anticipated as of the date hereof, then such party may terminate
this Agreement on five (5) Business Days prior written notice to the other
party.  In such event, the Purchase
Agreement will terminate simultaneously with the termination of this Agreement.


Section 4.8.            Notices.  All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be
given in accordance with Section 10.04 of the Purchase Agreement.


Section 4.9.            Governing Law; Dispute Resolution.  This Agreement shall be construed under the
laws of the State of New York.


Section 4.10.          Headings.  The headings in this Agreement are for
convenience of reference only and shall not constitute a part of this
Agreement, nor shall they affect their meaning, construction or effect.


Section 4.11.          Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and
all of which together shall constitute one and the same instrument.



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Section 4.12.          Further Assurances.  Each party shall cooperate and take such
action as may be reasonably requested by another party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.


Section 4.13.          Absence of Presumption.  This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.


[Remainder of this
page intentionally left blank]



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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by the undersigned, thereunto duly authorized, as
of the date first set forth above.


	
  

  	
  METABASIS THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ PAUL
  K. LAIKIND

  	
   

  
	
   

  	
   

  	
  Paul K. Laikind, Ph.D.

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  KINGSBRIDGE CAPITAL LIMITED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARIA
  O’DONOGHUE

  	
   

  
	
   

  	
   

  	
  Maria O’Donoghue

  
	
   

  	
   

  	
  Director

  



 


SIGNATURE PAGE – REGISTRATION
RIGHTS AGREEMENT