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Exhibit 10.3    
    


METABASIS THERAPEUTICS, INC.
  


 2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
  


 Adopted by Board on May 6, 2004

Approved by Stockholders on May 10, 2004  



1.     PURPOSES.  


        (a)    Eligible Option Recipients.    The persons eligible to receive Options are the Non-Employee
Directors of the Company. 


        (b)    Available Options.    The purpose of the Plan is to provide a means by which Non-Employee Directors
may be given an opportunity to benefit from increases in value of the Common Stock through the granting of Nonstatutory Stock Options. 



        (c)    General Purpose.    The Company, by means of the Plan, seeks to retain the services of its
Non-Employee Directors, to secure and retain the services of new Non-Employee Directors and to provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates. 


2.     DEFINITIONS.  


        (a)   "Accountant" means the independent public accountants of the Company. 



        (b)   "Affiliate" means any parent corporation or subsidiary corporation of the Company, whether now or
hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code. 


        (c)   "Annual Grant" means an Option granted annually to all Non-Employee Directors who
meet the specified criteria pursuant to Section 6(b). 


        (d)   "Annual Meeting" means the annual meeting of the stockholders of the Company. 



        (e)   "Board" means the Board of Directors of the Company. 


        (f)    "Capitalization Adjustment" has the meaning ascribed to that term in Section 11(a). 


        (g)   "Change in Control" means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: 



        (i)    any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than
50% of the combined voting power of the Company's then outstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur (A) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person from the Company in a transaction or
series of related transactions the primary purpose of which is to obtain financing for the company through the issuance of equity securities or (B) solely because the level of Ownership held by
any Exchange Act Person (the "Subject Person") exceeds the designated percentage threshold of the outstanding voting securities as a result of a
repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence)
as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the
repurchase or other acquisition had not occurred, increases the 



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percentage
of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur; 


        (ii)   there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and,
immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either
(A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or
(B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction in each case in substantially the same
proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; 


        (iii) there is consummated a sale, lease, license or other disposition of all or substantially all of the consolidated assets
of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity,
more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting
securities of the Company immediately prior to such sale, lease, license or other disposition; or 


        (iv)  individuals who, on the date this Plan is adopted by the Board, are members of the Board (the  "Incumbent Board") cease for any reason to
constitute at least a majority of the members of the Board; provided,
however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent
Board then still in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board. 




        Notwithstanding
the foregoing or any other provision of this Plan, the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or
any Affiliate and the Optionholder shall supersede the foregoing definition with respect to Stock Awards subject to such agreement (it being understood, however, that if no definition of Change in
Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply). 



        (h)   "Code" means the Internal Revenue Code of 1986, as amended. 


        (i)    "Committee" means a committee of one or more members of the Board appointed by the Board in
accordance with Section 3(c). 


        (j)    "Common Stock" means the common stock of the Company. 



        (k)   "Company" means Metabasis Therapeutics, Inc., a Delaware corporation. 


        (l)    "Consultant" means any person, including an advisor, (i) engaged by the Company or an
Affiliate to render consulting or advisory services and who is compensated for such services or (ii) serving as a member of the Board of Directors of an Affiliate. However, the term
"Consultant" shall not include either Directors of the Company who are not compensated by the Company for their services as Directors or Directors of the Company who are merely paid a director's fee
by the Company for their services as Directors. 


        (m)  "Continuous Service" means that the Optionholder's service with the Company or an Affiliate,
whether as an Employee, Director or Consultant, is not interrupted or terminated. The Optionholder's Continuous Service shall not be deemed to have terminated merely because of a change in the
capacity in which the Optionholder renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the entity for which the Optionholder renders such service,
provided that 


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there
is no interruption or termination of the Optionholder's Continuous Service. For example, a change in status from a Non-Employee Director of the Company to a Consultant of an
Affiliate or an Employee of the Company will not constitute an interruption of Continuous Service. The Board or the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave. 


        (n)   "Corporate Transaction" means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events: 



        (i)    a sale or other disposition of all or substantially all, as determined by the Board in its discretion, of the
consolidated assets of the Company and its Subsidiaries; 


        (ii)   a sale or other disposition of at least 90% of the outstanding securities of the Company; 



        (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or 


        (iv)  a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other
property, whether in the form of securities, cash or otherwise. 




        (o)   "Director" means a member of the Board of Directors of the Company. 


        (p)   "Disability" means the inability of a person, in the opinion of a qualified physician acceptable
to the Company, to perform the major duties of that person's position with the Company or an Affiliate of the Company because of the sickness or injury of the person. 



        (q)   "Employee" means any person employed by the Company or an Affiliate. Service as a Director or
payment of a director's fee by the Company or an Affiliate shall not be sufficient to constitute "employment" by the Company or an Affiliate. 


        (r)   "Entity" means a corporation, partnership or other entity. 


        (s)   "Exchange Act" means the Securities Exchange Act of 1934, as amended. 



        (t)    "Exchange Act Person" means any natural person, Entity or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act), except that "Exchange Act Person" shall not include (A) the Company or any Subsidiary of the Company, (B) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (C) an
underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their Ownership of stock of the Company. 



        (u)   "Fair Market Value" means, as of any date, the value of the Common Stock determined as follows: 



        (i)    If the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq
SmallCap Market, the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or market
(or the exchange or market with the greatest volume of trading in the Common Stock) on the last market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Board deems reliable. 



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        (ii)   In the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the
Board. 




        (v)   "Initial Grant" means an Option granted to a Non-Employee Director who meets the
specified criteria pursuant to Section 6(a). 


        (w)  "IPO Date" means the effective date of the initial public offering of the Common Stock. 


        (x)   "Non-Employee Director" means a Director who is not an Employee. 



        (y)   "Nonstatutory Stock Option" means an Option not intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated thereunder. 


        (z)   "Officer" means a person who is an officer of the Company within the meaning of Section 16
of the Exchange Act and the rules and regulations promulgated thereunder. 


        (aa) "Option" means a Nonstatutory Stock Option granted pursuant to the Plan. 



        (bb) "Option Agreement" means a written agreement between the Company and an Optionholder evidencing the terms and
conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. 


        (cc) "Optionholder" means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other
person who holds an outstanding Option. 


        (dd) "Own," "Owned," "Owner," "Ownership" A person or Entity shall be deemed to "Own," to have "Owned," to be the
"Owner" of, or to have acquired "Ownership" of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares
voting power, which includes the power to vote or to direct the voting, with respect to such securities. 


        (ee) "Plan" means this Metabasis Therapeutics, Inc. 2004 Non-Employee Directors' Stock Option
Plan. 


        (ff) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time. 


        (gg) "Securities Act" means the Securities Act of 1933, as amended. 


        (hh) "Subsidiary" means, with respect to the Company, (i) any corporation of which more than 50% of the
outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of
such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership in
which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%. 


3.     ADMINISTRATION.  


        (a)   Administration by Board. The Plan shall be administered by the Board unless and until the Board delegates administration
of the Plan to a Committee, as provided in Section 3(c). 



        (b)   Powers of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the
Plan: 



        (i)    To determine the provisions of each Option to the extent not specified in the Plan. 


        (ii)   To construe and interpret the Plan and Options granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power, 



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may
correct any defect, omission or inconsistency in the Plan or in any Option Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. 


        (iii) To amend the Plan or an Option as provided in Section 12. 


        (iv)  To terminate or suspend the Plan as provided in Section 13. 



        (v)   Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best
interests of the Company and that are not in conflict with the provisions of the Plan. 




        (c)   Delegation to Committee. The Board may delegate administration of the Plan to a Committee or Committees of one or more
members of the Board, and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board,
including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan. 


        (d)   Effect of Board's Decision. All determinations, interpretations and constructions made by the Board in good faith shall
not be subject to review by any person and shall be final, binding and conclusive on all persons. 


4.     SHARES SUBJECT TO THE PLAN.  


        (a)   Share Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in the Common Stock,
the Common Stock that may be issued pursuant to Options shall not exceed in the aggregate 300,000 shares of Common Stock, plus an annual increase to be added on the first day of the fiscal year of the
Company for a period commencing on the first day of the fiscal year that begins on January 1, 2005 and ending on (and including) the first day of the fiscal year that begins on
January 1, 2014 (each such day, a "Calculation Date"), equal to 100,000 shares of Common Stock. Notwithstanding the foregoing, the Board may act, prior to the first day of any fiscal year of
the Company, to increase the share reserve by such number of shares of Common Stock as the Board shall determine, which number shall be less than 100,000. 


        (b)   Reversion of Shares to the Share Reserve. If any Option shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full, the shares of Common Stock not acquired under such Option shall revert to and again become available for issuance under the Plan. If the exercise price
of any Option is satisfied by tendering shares of Common Stock held by the Optionholder (either by actual delivery or attestation), then the number of such tendered shares shall revert to and again
become available for issuance under the Plan. 


        (c)   Source of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on
the market or otherwise. 


5.     ELIGIBILITY.  



        The Options, as set forth in Section 6, automatically shall be granted under the Plan to all Non-Employee Directors who meet the criteria
specified in Section 6. 


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6.     NON-DISCRETIONARY GRANTS.  


        (a)    Initial Grants.    Without any further action of the Board, each person who is serving as a
Non-Employee Director on the IPO Date automatically shall, on the IPO Date, be granted, on the terms and conditions set forth herein, an Initial Grant to purchase 20,000 shares of Common
Stock, less the number of shares of Common Stock (if any) subject to a stock option or options granted by the Company to such Non-Employee Director within the six month period prior to the IPO Date
(if applicable, as adjusted for the reverse stock split effected by the Company prior to the IPO Date). Additionally, without any further action of the Board, each person who after the IPO Date is
elected or appointed for the first time to be a Non-Employee Director automatically shall, upon the date of his or her initial election or appointment to be a Non-Employee
Director, be granted an Initial Grant to purchase 20,000 shares of Common Stock on the terms and conditions set forth herein. 



        (b)    Annual Grants.    Without any further action of the Board, on the date of each Annual Meeting, commencing with
the first Annual Meeting following the IPO Date, each person who is then a Non-Employee Director automatically shall be granted an Annual Grant to purchase 10,000 shares of Common Stock on
the terms and conditions set forth herein; provided, however, that if the person has not been serving as a Non-Employee Director for the
entire twelve month period preceding the date of grant, then the number of shares subject to such Annual Grant shall be reduced pro rata for each full quarter prior to the date of grant during which
such person did not serve as a Non- Employee Director. 


7.     OPTION PROVISIONS.  


        Each Option shall be in such form and shall contain such terms and conditions as required by the Plan. Each Option shall contain such additional terms and
conditions, not inconsistent with the Plan, as the Board shall deem appropriate. Each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions: 


        (a)    Term.    No Option shall be exercisable after the expiration of ten years from the date it was granted. 



        (b)    Exercise Price.    The exercise price of each Option shall be 100% of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. 


        (c)    Consideration.    The purchase price of stock acquired pursuant to an Option may be paid, to the extent
permitted by applicable law, in any combination of (i) cash or check, (ii) delivery to the Company of other Common Stock or (iii) pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. The purchase price of Common Stock acquired pursuant to an Option that is paid by delivery to the
Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six months (or such
longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). 


        (d)    Transferability.    An Option is transferable by will or by the laws of descent and distribution. An Option
also may be transferable upon written consent of the Company if, at the time of transfer, a Form S-8 registration statement under the Securities Act is available for the exercise of
the Option and the subsequent resale of the underlying securities. In addition, an Optionholder may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option. 


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        (e)    Vesting.    Except as otherwise provided in Section 11 herein, Options shall vest as follows: 



        (i)    Initial Grants shall provide for vesting of 1/24th of the shares each month after the date of the grant. 


        (ii)   Annual Grants shall provide for vesting of 1/12th of the shares each month after the date of the grant. 




        (f)    Termination of Continuous Service.    In the event that an Optionholder's Continuous Service terminates (other
than upon the Optionholder's death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i) the date three months following the termination of the Optionholder's Continuous Service (or such longer or shorter
period specified in the Option Agreement or (ii) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or
her Option within the time specified in the Option Agreement, the Option shall terminate. 


        (g)    Extension of Termination Date.    An Optionholder's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionholder's Continuous Service (other than upon the Optionholder's death or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the Securities Act, then the Option shall terminate on the earlier of (i) the expiration of the term of the Option set
forth in the Option Agreement or (ii) the expiration of a period of three months after the termination of the Optionholder's Continuous Service during which the exercise of the Option would not
be in violation of such registration requirements. 


        (h)    Disability of Optionholder.    In the event that an Optionholder's Continuous Service terminates as a result of
the Optionholder's Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within
such period of time ending on the earlier of (i) the date 12 months following such termination (or such longer or shorter period specified in the Option Agreement or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein, the Option
shall terminate. 


        (i)    Death of Optionholder.    In the event that (i) an Optionholder's Continuous Service terminates as a
result of the Optionholder's death or (ii) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder's Continuous Service for
a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the option upon the Optionholder's death pursuant to Section 6(d), but only within the
period ending on the earlier of (1) the date 18 months following the date of death (or such longer or shorter period specified in the Option Agreement or (2) the expiration of the
term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time specified herein, the Option shall terminate. 


8.     SECURITIES LAW COMPLIANCE.  


        The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Options
and to issue and sell shares of Common Stock upon exercise of the Options; provided, however, that this undertaking shall not require the Company to
register under the Securities Act the Plan, any Option or any stock issued or issuable pursuant to any such Option. If, after reasonable efforts, the Company is unable to obtain from any 


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such
regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Options unless and until such authority is obtained. 


9.     USE OF PROCEEDS FROM STOCK.  



        Proceeds from the sale of stock pursuant to Options shall constitute general funds of the Company. 


10.   MISCELLANEOUS.  


        (a)    Acceleration of Exercisability and Vesting.    The Board shall have the power to accelerate the time at which
an Option may first be exercised or the time during which an Option or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Plan or the Option stating the time
at which it may first be exercised or the time during which it will vest. 



        (b)    Stockholder Rights.    No Optionholder shall be deemed to be the holder of, or to have any of the rights of a
holder with respect to, any shares subject to such Option unless and until such Optionholder has satisfied all requirements for exercise of the Option pursuant to its terms. 


        (c)    No Service Rights.    Nothing in the Plan or any instrument executed or Option granted pursuant thereto shall
confer upon any Optionholder any right to continue to serve the Company as a Non-Employee Director or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms of such Consultant's agreement with the Company or an
Affiliate or (iii) the service of a Director pursuant to the Bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the
Affiliate is incorporated, as the case may be. 


        (d)    Investment Assurances.    The Company may require an Optionholder, as a condition of exercising or acquiring
stock under any Option, (i) to give written assurances satisfactory to the Company as to the Optionholder's knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together
with the purchaser representative, the merits and risks of exercising the Option; and (ii) to give written assurances satisfactory to the Company stating that the Optionholder is acquiring the
stock subject to the Option for the Optionholder's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (1) the issuance of the shares upon the exercise or acquisition of stock under the Option has been registered under a then currently
effective registration statement
under the Securities Act or (2) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then
applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. 


        (e)    Withholding Obligations.    The Optionholder may satisfy any federal, state or local tax withholding obligation
relating to the exercise or acquisition of stock under an Option by any of the following means (in addition to the Company's right to withhold from any compensation paid to the Optionholder by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise issuable to the
Optionholder as a result of the exercise or acquisition of stock under the Option; 


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 provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to
the Company owned and unencumbered shares of the Common Stock. 


11.   ADJUSTMENTS UPON CHANGES IN COMMON STOCK.  


        (a)    Capitalization Adjustments.    If any change is made in, or other events occur with respect to, the stock
subject to the Plan, or subject to any Option, without the receipt of consideration by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend,
dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other transaction not involving the receipt of
consideration by the Company (each a "Capitalization Adjustment")), the Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject both to the Plan pursuant to Section 4 and to the nondiscretionary Options specified in Section 6, and the outstanding Options will be appropriately adjusted in the
class(es) and number of securities and price per share of stock subject to such outstanding Options. The Board shall make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall not be treated as a transaction "without receipt of consideration" by the Company.) 



        (b)    Dissolution or Liquidation.    In the event of a dissolution or liquidation of the Company, then all
outstanding Options shall terminate immediately prior to the completion of such dissolution or liquidation. 


        (c)    Corporate Transaction.    In the event of a Corporate Transaction, any surviving corporation or acquiring
corporation may assume or continue any or all Options outstanding under the Plan or may substitute similar stock options for Options outstanding under the Plan (it being understood that similar stock
options include, but are not limited to, options to acquire the same consideration paid to the stockholders of the Company, as the case may be, pursuant to the Corporate Transaction). In the event
that any surviving corporation or acquiring corporation does not assume or continue all such outstanding Options or substitute similar stock options for all such outstanding Options, then with respect
to Options that have not been assumed, continued or substituted and that are held by Optionholders whose Continuous Service has not terminated prior to the effective time of the Corporate Transaction,
the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a
date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five days prior to the effective time
of the Corporate Transaction), such Options shall terminate if not exercised (if applicable) at or prior to such effective time. With respect to any other Options outstanding under the Plan that have
been neither assumed nor substituted, the vesting of such Options (and, if applicable, the time at which such Options may be exercised) shall not be accelerated unless otherwise provided in
Section 11(d) or in a written agreement between the Company or any Affiliate and the holder of such Options, and such Options shall terminate if not exercised (if applicable) prior to the
effective time of the Corporate Transaction. 


        (d)    Change in Control.    Notwithstanding any other provisions of the Plan to the contrary, if a Change in Control
occurs and the Optionholder's Continuous Service has not terminated as of the date immediately prior to the effective date of such Change in Control, then the vesting and exercisability of the shares
of Common Stock subject to the Optionholder's Options shall be accelerated in full as of the effective date of the Change in Control. Following such Change in Control and notwithstanding any other
provision of the Plan to the contrary and provided that the Optionholder's Continuous Service has not terminated prior to the effective date of the Change in Control, then the Optionholder's Options
shall remain exercisable pursuant to their terms until the earlier of (i) 12 months following the 


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effective
date of such Change in Control or (ii) the Expiration Date indicated in the Optionholder's Grant Notice. 


        (e)    Parachute Payments.    If any payment or benefit the Optionholder would receive pursuant to a Change in Control
from the Company or otherwise (a "Payment") would (i) constitute a "parachute payment" within the meaning of Section 280G of the Code, and
(ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then such Payment shall
be reduced to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest portion of the Payment that would result in no portion of
the Payment being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount, after taking into account all applicable federal, state
and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in the Optionholder's receipt, on an after-tax basis, of the
greater amount of the Payment notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in payments or benefits constituting "parachute payments" is
necessary so that the Payment equals the Reduced Amount, reduction shall occur in the
following order unless the Optionholder elects in writing a different order (provided, however, that such election shall be subject to Company approval
if made on or after the effective date of the event that triggers the Payment): reduction of cash payments; cancellation of accelerated vesting of Options; reduction of employee benefits. In the event
that acceleration of vesting of Option compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of the Optionholder's Options unless the
Optionholder elects in writing a different order for cancellation. 


        The
accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder. 


        The
accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Optionholder and the Company
within 15 calendar days after the date on which the Optionholder's right to a Payment is triggered (if requested at that time by the Optionholder or the Company) or such other time as requested by the
Optionholder or the Company. If the accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish
the Company and the Optionholder with an opinion reasonably acceptable to the Optionholder that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the
accounting firm made hereunder shall be final, binding and conclusive upon the Optionholder and the Company. 


12.   AMENDMENT OF THE PLAN AND OPTIONS.  



        (a)    Amendment of Plan.    The Board, at any time and from time to time, may amend the Plan. However, except as
provided in Section 11 relating to adjustments upon changes in Common Stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent stockholder
approval is necessary to satisfy the requirements of applicable laws. 


        (b)    Stockholder Approval.    The Board, in its sole discretion, may submit any other amendment to the Plan for
stockholder approval. 


        (c)    No Impairment of Rights.    Rights under any Option granted before amendment of the Plan shall not be impaired
by any amendment of the Plan unless (i) the Company requests the consent of the Optionholder and (ii) the Optionholder consents in writing. 


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        (d)    Amendment of Options.    The Board, at any time, and from time to time, may amend the terms of any one or more
Options; provided, however, that the rights under any Option shall not be impaired by any such amendment unless (i) the Company requests the
consent of the Optionholder and (ii) the Optionholder consents in writing. 


13.   TERMINATION OR SUSPENSION OF THE PLAN.  


        (a)    Plan Term.    The Board may suspend or terminate the Plan at any time. No Options may be granted under the Plan
while the Plan is suspended or after it is terminated. 



        (b)    No Impairment of Rights.    Suspension or termination of the Plan shall not impair rights and obligations under
any Option granted while the Plan is in effect except with the written consent of the Optionholder. 


14.   EFFECTIVE DATE OF PLAN.  


        The Plan shall become effective on the IPO Date, but no Option shall be exercised unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within 12 months before or after the date the Plan is adopted by the Board. 



15.   CHOICE OF LAW.  


        The law of the state of California shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such
state's conflict of laws rules. 


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   METABASIS THERAPEUTICS, INC.  


 2004 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN  


 STOCK OPTION AGREEMENT


        Pursuant
to your Stock Option Grant Notice ("Grant Notice") and this Stock Option Agreement, Metabasis Therapeutics, Inc. (the
"Company") has granted you an option under its 2004 Non-Employee Directors' Stock Option Plan (the
"Plan") to purchase the number of shares of the Company's Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant
Notice. Defined terms not explicitly defined in this Stock Option Agreement but defined in the Plan shall have the same definitions as in the Plan. 


        The
details of your option are as follows: 


        1.    VESTING.    Subject to the limitations contained herein, your option will vest as
provided in your Grant Notice, provided that vesting will cease upon the termination of your Continuous Service. 


        2.    NUMBER OF SHARES AND EXERCISE PRICE.    The number of shares of Common Stock subject to
your option and your exercise price per share referenced in your Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan. 



        3.    METHOD OF PAYMENT.    Payment of the exercise price is due in full upon exercise of all
or any part of your option. You may elect to make payment of the exercise price in cash or by check or in any other manner permitted by your Grant
Notice, which may include one or more of the following: 



        (a)   In the Company's sole discretion at the time your option is exercised and provided that at the time of exercise the
Common Stock is publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the
Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds. 


        (b)   Provided that at the time of exercise the Common Stock is publicly traded and quoted regularly in  The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period required to avoid a charge to the
Company's reported earnings (generally six months) or that you did not acquire, directly or indirectly from the Company, that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise. "Delivery" for these purposes, in the sole discretion of the Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, you may not exercise your option by tender to
the Company of Common Stock to the extent such tender would violate the provisions of any law, regulation or agreement restricting the redemption of the Company's stock. 




        4.    WHOLE SHARES.    You may exercise your option only for whole shares of Common Stock. 


        5.    SECURITIES LAW COMPLIANCE.    Notwithstanding anything to the contrary contained herein,
you may not exercise your option unless the shares of Common Stock issuable upon such exercise are then registered under the Securities Act or, if such shares of Common Stock are not then so
registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Securities Act. The exercise of your option must also comply with other
applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and
regulations. 


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        6.    TERM.    You may not exercise your option before the commencement of its term or after
its term expires. The term of your option commences on the date of grant and expires upon the earliest of the following: 



        (a)   three months after the termination of your Continuous Service for any reason other than your Disability or death,
provided that if during any part of such three-month period your option is not exercisable solely because of the condition set forth in Section 5, your option shall not expire until the earlier
of the Expiration Date or until it shall have been exercisable for an aggregate period of three months after the termination of your Continuous Service; 


        (b)   12 months after the termination of your Continuous Service due to your Disability; 



        (c)   18 months after your death if you die either during your Continuous Service or within three months after your
Continuous Service terminates; 


        (d)   the Expiration Date indicated in your Grant Notice; or 


        (e)   the day before the tenth anniversary of the date of grant. 




        7.    EXERCISE.    You may exercise your option during its term by delivering a Notice of
Exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require. 


        8.    TRANSFERABILITY.    Your option is not transferable, except (i) by will or by the
laws of descent and distribution, (ii) with the prior written approval of the Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the
option is to be passed to beneficiaries upon the death of the trustor (settlor) and (iii) with the prior written approval of the Company, by gift, in a form accepted by the Company, to a
permitted transferee under Rule 701 of the Securities Act. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate a
third party who, in the event of your death, shall thereafter be entitled to exercise your option. 


        9.    OPTION NOT A SERVICE CONTRACT.    Your option is not an employment or service contract,
and nothing in your option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option shall obligate the Company or an Affiliate, their respective shareholders, Boards of Directors, Officers or Employees to continue any
relationship that you might have as a Director or Consultant for the Company or an Affiliate. 


        10.    NOTICES.    Any notices provided for in your option or the Plan shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid,
addressed to you at the last address you provided to the Company. 


        11.    GOVERNING PLAN DOCUMENT.    Your option is subject to all the provisions of the Plan,
the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted
pursuant to the Plan. In the event of any conflict between the provisions of your option and those of the Plan, the provisions of the Plan shall control. 


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Exhibit 10.3