<PAGE>   1
                                                                   EXHIBIT 10.51


                                      IRORI
                             KEY EMPLOYEE AGREEMENT

            THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of the
17th day of April, 1998 by and between Riccardo Pigliucci ("Executive") and
IRORI, a California corporation (the "Company").

            WHEREAS, the Company desires to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his services; and

            WHEREAS, Executive wishes to be employed by the Company and provide
personal services to the Company in return for certain compensation and
benefits;

            NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein; it is hereby agreed by and between the parties hereto as
follows:

      1.    EMPLOYMENT BY THE COMPANY.

            1.1 Subject to terms set forth herein, the Company agrees to employ
Executive in the position of President and Chief Executive Officer ("CEO") of
the Company and Executive hereby accepts such employment effective as of April
17, 1998. During the term of his employment with the Company, Executive will
devote his best efforts and substantially all of his business time and attention
(except for vacation periods as set forth herein and reasonable periods of
illness or other incapacities permitted by the Company's general employment
policies) to the business of the Company. Executive will use his best efforts to
relocate to a temporary residence in the San Diego, California area (pending
relocation of his permanent residence to the San Diego, California area) on a
full-time basis by no later than August 31, 1998, and shall spend approximately
1 day per week on site at the Company prior to the completion of this
relocation.

            1.2 Executive shall serve in an executive capacity and shall perform
such duties as are customarily associated with his then current title,
consistent with the Bylaws of the Company and as required by the Company's Board
of Directors (the "Board").

            1.3 The employment relationship between the parties shall also be
governed by the general employment policies and practices of the Company,
including those relating to protection of confidential information and
assignment of inventions, except that when the terms of this Agreement differ
from or are in conflict with the Company's general employment policies or
practices, this Agreement shall control. In addition, as an executive officer of
the Company, Executive will be covered by the Company's directors and officers
liability insurance coverage, as in effect from time to time, as well as the
Company's bylaw indemnification and indemnity agreement for executive officers
and directors.
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      2.    BOARD OF DIRECTORS.

            The Company shall use its best efforts to elect Executive to the
Board for so long as Executive holds the position of President and Chief
Executive Officer of the Company. Executive agrees to serve as a director if
elected by the shareholders and the Board, as the case may be. Upon Executive's
request (no earlier than six (6) months following the Effective Date), the Board
will consider electing Executive as Chairman.

      3.    COMPENSATION.

            3.1 Salary. Executive shall receive for services to be rendered
hereunder an annualized base salary of $350,000 payable according to the
Company's regular payroll schedule.

            3.2 Bonus Plan; Bonus. No later than March 1 of each calendar year
during the term hereof, commencing with calendar year 1998 (with the exception
that the Bonus Plan, as hereinafter defined, for 1998 is to be completed and
approved by the June 1, 1998), Executive will be responsible for creating and
presenting to the Board of Directors of the Company (the "Board"), a
performance-based bonus plan (a "Bonus Plan") for such calendar year for such
employees of the Company, including Executive, as Executive believes to be
appropriate and in the best interests of the Company's business. The Board and
Executive will in good faith attempt to agree upon the Bonus Plan for 1998 no
later than June 1, 1998. If Executive has timely submitted such Bonus Plan in
the relevant calendar year, and if by April 15 of the relevant calendar year (by
June 1, 1998 for the Bonus Plan for 1998), the Board has not approved such Bonus
Plan as submitted by Executive and as discussed by the Board and Executive after
or before such submission, then the Board will approve and deliver to Executive
no later than May 15 of such year (no later than June 15 for 1998) a
performance-based Bonus Plan created by the Board, which will be the Bonus Plan
against which Executive's performance for such year will be measured as to any
bonus to which he may become entitled, provided that such Board-created Bonus
Plan will in each case be created in good faith with the goal of maintaining and
increasing shareholder value in the Company. If Executive remains an active
employee throughout the applicable calendar year and Executive and/or the
Company, as applicable, meet the performance goals set forth in the Bonus Plan
then in effect, Executive will be entitled to receive a bonus equal to at least
50% of base salary under such Bonus Plan, prorated for partial performance, if
and to the extent set forth in such Bonus Plan, in each case, as such Bonus Plan
is approved by the Board.

            3.3 Standard Company Benefits. Executive shall be entitled to all
rights and benefits for which he is eligible under the terms and conditions of
the standard Company benefits and compensation practices which may be in effect
from time to time and provided by the Company to its employees generally.

            3.4 Relocation Expenses. The Company will advance, or reimburse,
upon submission of invoices and reasonably detailed supporting documentation an
amount not to exceed $175,000 (not including the amount of the "gross up" set
forth in Section 3.4(e) below) in the aggregate in respect of:


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                  (a) Executive's reasonable moving expenses, including packing
and unpacking and any necessary in-transit or other temporary storage, in
relocating Executive's household goods from the Weston, Connecticut area to the
San Diego, California area;

                  (b) Executive's reasonable temporary housing expenses, for the
period from the Effective Date through the earlier of December 31, 1998 or the
date upon which Executive's household has been relocated to the San Diego,
California area;

                  (c) One round-trip coach airfare ticket per week for Executive
between the Connecticut/New York area and San Diego, California during the
period commencing on the Effective Date and ending upon the earlier of the date
of final relocation of Executive's household to the San Diego, California area
or August 31, 1998, and for (ii) round-trip coach airfare between the
Connecticut/New York area and San Diego, California for Executive's spouse for
up to three (3) trips in connection with the relocation of Executive's household
to the San Diego, California area; and

                  (d) All commercially reasonable closing costs (including
without limitation reasonable and customary real estate commissions to the
extent applicable) in connection with both any sale by Executive of his house in
Connecticut and any purchase by Executive of a house in the San Diego,
California area which occur, in each case, within one (1) year after the
Effective Date.

                  (e) The reimbursements set forth in this Section 3.4 shall, to
the extent appropriate, be "grossed up". For purposes of this Section 3.4 and
Section 3.5 below, "grossed up" means that in the case of a reimbursed expense
or payment that is taxable to Executive and is not deductible for Federal income
tax purposes, Executive will be paid an amount which, after taxes on such
amount, will equal the amount of the non-deductible reimbursable expenses or
payments.

            3.5 Mortgage Differential Assistance. Executive will be paid an
amount equal to the difference in interest incurred on the principal amount of
the mortgage unpaid on his current residence in Weston, Connecticut area as of
the Effective Date ("Old Mortgage") and the interest incurred on any mortgage
taken out by him in connection with his new residence in the San Diego,
California area ("New Mortgage"), limited to the excess interest payable on an
amount of up to $1,000,000 more of principal amount of mortgage (the "Excess
Mortgage Amount"). The interest differential on the Excess Mortgage Amount shall
be paid for a period ending on the earlier of (i) three (3) years from the
commencement date of the New Mortgage or (ii) the date upon which the Company
first sells securities pursuant to a registration statement filed by the Company
under the Securities Act of 1933, as amended, in connection with a firm
commitment underwritten offering of the Company's securities. The interest
differential on the Excess Mortgage Amount shall be determined without regard to
the effects of any adjustment in the interest rate that takes place following
the date the New Mortgage is funded and by calculating the interest that would
have been due on the Excess Mortgage Amount assuming the New Mortgage is
amortized over thirty (30) years. The payments to be made to Executive with
respect to the interest differential on the Excess Mortgage Amount shall be
"grossed up".


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            3.6 Compensation Review. The Board will annually review Executive's
salary, performance bonus, and incentive stock options to ensure that they are
commensurate with work performed. In addition, the Company will annually review
and mutually establish with Executive the goals to be used in evaluating
Executive's performance bonus.

            4. STOCK OWNERSHIP. Executive will be entitled to obtain stock
ownership in the Company as follows:

            4.1 Initial Stock Purchase. Within fifteen (15) days after the
Effective Date, the Company will, by action of its Board, provide to Executive
the opportunity to purchase up to 600,000 shares of the Company's Common Stock
(the "Initial Shares"), pursuant to the standard Restricted Stock Purchase
Agreement (the "Restricted Stock Purchase Agreement") approved as part of the
Company's Equity Incentive Plan (the "Plan"), as follows:

                  (a) Such Initial Shares will be sold to Executive for the fair
market value per share of the Common Stock as determined in good faith by the
Board as of the date of sale.

                  (b) The Company will provide Executive an opportunity to
acquire the Initial Shares by issuing to the Company a Note in the amount of the
purchase price for the Initial Shares bearing interest at the minimum applicable
Federal interest rate, secured by the Initial Shares.

                  (c) The Company shall have the right to repurchase, at the
purchase price per share paid by Executive, shares from Executive upon his
termination as will be specified in the Restricted Stock Purchase Agreement,
which repurchase right will lapse with respect to one hundred and twenty
thousand (120,000) shares on the first anniversary of the Effective Date and ten
thousand (10,000) shares for each month thereafter, at the end of which
Executive still is employed by the Company, as specified in the Restricted Stock
Purchase Agreement.

            4.2 Percentage Maintenance Right. During the term of his employment,
Executive will have the right to purchase further securities of the Company as
follows:

                  (a) For purposes of this Section 4.2, the following terms will
have the following meanings:

                        (i) "Equity Financing" means the issuance and sale by
the Company, at a closing which occurs after the Effective Date but during the
term of this Agreement, of the Company's Common Stock and/or Preferred Stock
and/or other securities, such as warrants or convertible debt securities,
convertible into its Common Stock or Preferred Stock ("Equity Securities"),
other than the following: (i) Common Stock (or options therefor) issued to
employees, consultants, directors or officers of the Company pursuant to plans
approved by the Board, (ii) Equity Securities issued in, or following the
consummation of, a bona fide, firmly underwritten public offering of shares of
Common Stock, registered under the Securities Act of 1933, as amended, pursuant
to a registration statement on Form S-1, (iii) Equity Securities issued pursuant
to the conversion or exercise of convertible or exercisable securities,


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(iv) Equity Securities issued in connection with a bona fide business
acquisition of or by the Company, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise or (v) stock, warrants or other
securities or rights issued to persons or entities with which the Company has or
is establishing business relationships provided such issuances are for other
than primarily equity financing purposes and involve other strategic elements
which may include without limitation, a joint marketing agreement, a license
agreement, or a technology development agreement.

                              (ii) "Executive's Minimum Proportion" means a
proportion equal to the number of shares of Common Stock issued and held, or
issuable upon conversion or exercise of any convertible or exercisable security
then held by Executive divided by the total number of shares of Common Stock of
the Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities).

                  (b) Executive's Maintenance Right. Executive may purchase, at
the closing of each Equity Financing, upon the same terms and conditions as are
applicable to the issuance to other investors at such Equity Financing of the
securities sold in such Equity Financing, an amount of such securities equal to
Executive's Minimum Proportion.

                  (c) Termination of Maintenance Right. The rights of Executive
set forth in Section 4.2(b) above shall terminate and be of no further force or
effect from and after the date of the sale of securities pursuant to a
registration statement filed by the Company under the Securities Act of 1933, as
amended, in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.

      5.    PROPRIETARY INFORMATION OBLIGATIONS.

            5.1 Agreement. Executive agrees to execute and abide by the
Company's standard form of Proprietary Information and Inventions Agreement.

            5.2 Remedies. Executive's duties under the Proprietary Information
and Inventions Agreement shall survive termination of his employment with the
Company. Executive acknowledges that a remedy at law for any breach or
threatened breach by him of the provisions of the Proprietary Information and
Inventions Agreement would be inadequate, and he therefore agrees that the
Company shall be entitled to injunctive relief in case of any such breach or
threatened breach.

      6.    OUTSIDE ACTIVITIES.

            6.1 Except with the prior written consent of the Company's Board of
Directors, Executive will not during the term of this Agreement undertake or
engage in any other employment, occupation or business enterprise, other than
ones in which Executive is a passive investor within the limitations set forth
in Section 6.3 below. Executive may engage in civic and not-for-profit
activities so long as such activities do not materially interfere with the
performance of his duties hereunder.


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            6.2 Except as permitted by Section 6.3, Executive agrees not to
acquire, assume or participate in, directly or indirectly, any position,
investment or interest known by him to be adverse or antagonistic to the
Company, its business or prospects, financial or otherwise.

            6.3 During the term of his employment by the Company, except on
behalf of the Company, Executive will not directly or indirectly, whether as an
officer, director, stockholder, partner, proprietor, associate, representative,
consultant, or in any capacity whatsoever engage in, become financially
interested in, be employed by or have any business connection with any other
person, corporation, firm, partnership or other entity whatsoever which were
known by him to compete directly with the Company throughout the world, in any
line of business engaged in (or planned to be engaged in) by the Company,
provided, however, that anything above to the contrary notwithstanding, he may
own, as a passive investor, securities of any competitor corporation, so long as
his direct holdings in any one such corporation shall not in the aggregate
constitute more than 5% of the voting stock of such corporation.

            6.4 Executive may serve as a member of the board of directors of any
other unaffiliated company that is not in competition with the Company, provided
that such service does not interfere with the performance of his duties or
responsibilities. Executive's service as a member of the board of directors of
any other company shall be subject in each case to the approval of the Board,
following consultation with Executive, which approval will not be unreasonably
withheld. For purposes of this Section 1.4, Executive serving on the board of
directors of Dionex, BioSepre and TopoMetrix shall be deemed to have been
approved by the Board. Executive may retain all benefits he receives as a
director of any unaffiliated company, and the Company shall not reduce his
compensation by the amount of such benefits.

      7.    TERMINATION OF EMPLOYMENT.

            7.1 Termination Without Cause or With Good Reason.

                  (a) The Company shall have the right to terminate Executive's
employment with the Company at any time without cause.

                  (b) In the event Executive's employment is terminated by the
Company without cause, or in the event a Constructive Termination Event, as
defined in Section 7.4 below, occurs and is not reversed within a fourteen-day
period specified in Section 7.4, and Executive, after the expiration of such
fourteen-day period, resigns in writing, delivered to the Company, stating that
his resignation is a result of, and specifying in reasonable detail the nature
of, such uncured Constructive Termination Event, the Company shall retain
executive as a consultant for up to three years as described in Section 8 below,
in consideration of Executive's execution of a unqualified unconditional release
of the Company from all liabilities and obligations (other than those provided
for in this Agreement) in form and substance acceptable to the Company.


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            7.2   Termination for Cause.

                  (a) The Company shall have the right to terminate Executive's
employment with the Company at any time for cause.

                  (b) "Cause" for termination shall be determined by the Company
based on the Board's reasonable belief that one or more of the following has
occurred: (i) Executive's indictment or conviction of any felony or of any crime
involving dishonesty; (ii) Executive's participation in any fraud against the
Company; (iii) breach of Executive's duties to the Company, whether arising
under this Agreement or by operation of law, provided that the Company has given
advance written notice to Executive for at least 30 days and Executive has not
cured such breach to the satisfaction of the Board within said 30-day period;
(iv) Executive's intentional damage to any property of the Company; or (v)
conduct by Executive or lack of performance which in the good faith and
reasonable determination of the Board demonstrates unfitness to serve.

                  (c) In the event Executive's employment is terminated at any
time with cause, he will not be entitled to severance pay, pay in lieu of notice
or any other such compensation.

            7.3 Voluntary or Mutual Termination.

                  (a) Executive may voluntarily terminate his employment with
the Company at any time upon 30 days prior written notice, after which no
further compensation will be paid to Executive. Notwithstanding the foregoing,
Executive's voluntary resignation following a Constructive Termination Event, in
accordance with Section 7.1(b), shall not be deemed to be a voluntary
termination for purposes of this Section 7.3.

                  (b) In the event Executive voluntarily terminates his
employment, he will not be entitled to severance pay, pay in lieu of notice or
any other such compensation.

            7.4 Constructive Termination Event. A "Constructive Termination
Event" will be deemed to have occurred at the Company's close of business on the
fourteenth (14th) day after, and including, the first day, that any of the
following actions is taken by the Company and such action is not reversed in
full by the Company within such fourteen-day period unless prior to the
expiration of such fourteen-day period Executive has otherwise agreed to the
specific relevant event in writing: (1) Executive's aggregate benefits
(excluding his salary compensation and already-set Bonus Plan amounts, which may
only be increased, decreased or otherwise changed by mutual written agreement of
the Company and Executive as an amendment hereto or to the relevant Bonus Plan)
are materially reduced below those in effect immediately prior to the effective
date of such Constructive Termination Event, and such reduction is not applied
as part of an overall reduction in benefits in which Executive is treated
proportionately given Executive's position, length of service, income and other
relevant factors customary within the biotechnology industry within the state in
which the Company's principal offices are located at the date of such reduction,
and/or (2) Executive's duties and/or authority are materially decreased from
those in effect immediately prior to such Constructive Termination Event, in a


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way that is adverse to Executive, and/or (3) Executive' title is changed to a
title that, under customary practice within the biotechnology industry within
the state in which the Company's principal offices are located at the date of
such reduction, would be considered to be a lower-level title than Executive's
prior title, and/or (4) Executive is required to perform his employment
obligations (other than routine travel consistent with that prior to the
effective date of such Constructive Termination) at a location more than
twenty-five (25) miles away from Executive's principal place of work for the
Company, as such place of work was in effect immediately prior to the effective
date of such Constructive Termination Event, and/or (5) this Agreement is not
assumed in full, absent the written agreement of Executive otherwise, by any
successor to the Company, including any acquiror of all or substantially all of
the assets of the Company if such acquiror does not assume this Agreement, to
whom this Agreement is not automatically assigned in full by operation of law.

      8.    POST-EMPLOYMENT CONSULTATION.

            Upon the termination of Executive's employment with the Company
pursuant to Section 7.1(b), the Company shall automatically retain Executive as
a consultant to be available to render consulting services in Executive's area
of expertise or special competence on a non-exclusive basis for three years if
Executive's employment is terminated prior to the one year anniversary date of
Executive's employment commencement date, two years if such employment is
terminated after such one year anniversary date and prior to such second
anniversary date, and one year if such employment is terminated after such two
year anniversary date ("Consulting Period"), for up to fifteen (15) hours each
month. The Company shall pay Executive a monthly consulting fee equal to
one-twelfth (1/12th) of his base salary as in effect at the time of termination,
whether or not Executive shall be called upon to render any services in any such
month. Any out-of-pocket expenses which Executive's consulting activities for
the Company may require will be reimbursed against receipts and vouchers
therefor in accordance with the Company's policies in force from time to time.
Executive may terminate the consulting arrangement contemplated by this Section
8, at anytime, but shall not be entitled to receive any consulting fees for the
period following the termination of such consulting arrangement.

      9.    POST-EMPLOYMENT ACTIVITIES.

            If the Company retains Executive as a consultant pursuant to Section
8 above, then the following restrictions shall apply so long as the Company
retains Executive as a consultant:

            9.1 Absent the Company's prior written approval upon instructions of
its Board of Directors, Executive will not directly or indirectly engage in
activities (similar or reasonably related to those in which Executive shall have
engaged hereunder during the two years immediately preceding the termination of
Executive's employment with the Company) nor render services (similar or
reasonably related to those which Executive shall have rendered hereunder during
such two years) in either case to any firm or business organization which
directly competes with the Company in any line of business engaged in (or
planned to be engaged in) by the Company, whether now existing or hereafter
established, nor shall Executive engage in such activities nor render such
services to any other person or entity engaged or about


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to become engaged in such activities to, for or on behalf of any such firm or
business organization, nor shall Executive entice, induce or encourage any of
the company's other employees to engage in any activity which, were it done by
Executive, would violate any provision of the Proprietary Information Agreement
or this Section 9.

            9.2 The Company upon instruction of its Board of Directors may give
Executive written approval(s) to engage personally in any activity or render
services referred to in Section 9.1 if it secures written assurances
(satisfactory to the Company and its counsel) from Executive and from the
prospective employer(s) that the integrity of the Proprietary Information
Agreement will not in any way be jeopardized by such activities, provided the
burden of so establishing the foregoing to the satisfaction of the Company and
said counsel shall be upon Executive and his prospective employer(s).

            9.3 The provisions of Section 6.3 shall be applicable to Executive
and Executive shall comply therewith. As applied to such consulting period, the
term "any line of business engaged in (or planned to be engaged in) by the
Company," as used in Section 6.3, shall be applied as at the date of termination
of Executive's employment.

      10.   NONSOLICITATION.

            For two (2) years immediately following the termination of
employment hereunder, Executive agrees not to interfere with the business of the
Company by soliciting, inducing, or otherwise causing any employee or consultant
of the Company to terminate his or her employment or engagement with the
Company. Notwithstanding the foregoing, if requested by an employee of the
Company, Executive shall be entitled to serve as a reference for such employee.

      11.   SPECIAL TERMINATION.

            Notwithstanding anything else set forth herein, Executive shall be
entitled to terminate this Agreement upon providing prompt written notice to the
Company at least 5 days in advance, if within forty-five (45) days following the
Effective Date (i) the Company has not entered into binding operative documents
in the establishment or continuance of a corporate partnering relationship or
strategic partnership as such terms are customarily understood in the
pharmaceuticals industry, pursuant to which the Company is entitled to receive
at least $8,000,000 following the Effective Date, through the sale of equity
securities, research and development payments, or otherwise and (ii) the Board
has not approved a business plan mutually developed with the Company and
proposed to the Board by Executive. In the event of a termination pursuant to
this Section 11, this entire Agreement shall be of no further force and effect
and Executive's sole right under this Agreement shall be to receive the
compensation set forth in Section 3.1 hereof solely for the period during which
Executive was employed by the Company.

      12.   GENERAL PROVISIONS.

            12.1 Notices. Any notices provided hereunder must be in writing and
shall be deemed effective upon the earlier of personal delivery (including
personal delivery by fax) or the


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third day after mailing by first class mail, to the Company at its primary
office location and to Executive at his address as listed on the Company
payroll.

            12.2 Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provisions had never been contained herein.

            12.3 Waiver. If either party should waive any breach of any
provisions of this Agreement, he or it shall not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.

            12.4 Complete Agreement. This Agreement and its Exhibits, constitute
the entire agreement between Executive and the Company and it is the complete,
final and exclusive embodiment of their agreement with regard to this subject
matter. It is entered into without reliance on any promise or representation
other than those expressly contained herein, and it cannot be modified or
amended except in a writing approved by the Board.

            12.5 Counterparts. This Agreement may be executed in separate
counterparts, any one of which need not contain signatures of more than one
party, but all of which taken together will constitute one and the same
Agreement.

            12.6 Headings. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

            12.7 Arbitration. Any controversy, claim or dispute between
Executive and the Company and/or the Company's parents, subsidiaries or
affiliates and/or any of their directors, officers, employees, agents,
successors, assigns, heirs, executors, administrators, or legal representatives
arising out of, in connection with, or in relation to (t) the interpretation,
validity, performance or breach of this Agreement, (u) Executive's stock options
and the underlying shares, (v) Executive's employment by the Company, (w) any
termination of such employment, (x) any actions during or with respect to
Executive's work for the Company, (y) any claims for breach of contract, tort,
or breach of the covenant of good faith and fair dealing, or (z) any claims of
discrimination or other claims under any federal, state or local law or
regulation now in existence or hereinafter enacted and as amended from time to
time concerning in any way the subject of Executive's employment with the
Company or its termination, shall, at the request of either party, be resolved
to the exclusion of a court of law by binding arbitration in San Diego,
California, in accordance with Exhibit A hereto. Each of Executive and the
Company understands and agrees that the arbitration shall be instead of any
civil litigation and that the arbitrator's decision shall be final and binding
to the fullest extent permitted by law and enforceable by any court having
jurisdiction thereof. The only claims not covered by this Section 12.7 are
claims for benefits under the workers' compensation laws, claims for


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unemployment insurance benefits, and matters within the jurisdiction of the
California Labor Commissioner, which will be resolved pursuant to those laws.

            12.8 Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by Executive and the Company, and
their respective successors, assigns, heirs, executors and administrators,
except that Executive may not assign any of his duties hereunder and he may not
assign any of his rights hereunder without the written consent of the Company,
which shall not be withheld unreasonably.

            12.9 Choice of Law. All questions concerning the construction,
validity and interpretation of this Agreement will be governed by the law of the
State of California without regard to conflict of laws principles.

                [Remainder of This Page Intentionally Left Blank]


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            IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.

                                       IRORI

                                       By:   /s/ Andrew Senyei
                                             -----------------------------------
                                                 Andrew E. Senyei, M.D.
                                                 Chairman of the Board

                                       Date: April 17, 1998

Accepted and agreed this 17th day of April, 1998.

/s/ Riccardo Pigliucci
-----------------------------------
Riccardo Pigliucci


                   [SIGNATURE PAGE TO KEY EMPLOYEE AGREEMENT]
<PAGE>   13
                                    EXHIBIT A
                             ARBITRATION PROCEDURES


      1.    Agreement to Arbitrate

      In the event that there is any dispute relating to, regarding or arising
in connection with Executive's employment with the Company which cannot be
resolved through direct discussion or mediation, regardless of the kind or type
of dispute (excluding claims for workers' compensation, unemployment insurance
or any matters within the jurisdiction of the California Labor Commissioner),
all such disputes shall be submitted exclusively to final and binding
arbitration pursuant to the provisions of the Federal Arbitration Act or, if
inapplicable, the Uniform Arbitration Act (California Code of Civil Procedure
Section 1280 et seq.), upon request submitted in writing to the President within
one year from the date the dispute first arose, or within one year of the date
of termination of employment, whichever occurs first. This procedure shall be
the exclusive method for resolving all claims relating to the termination of
Executive's employment, including but not limited to any alleged violations of
federal, state and/or local statutes; all claims based upon any purported breach
of duty arising in contract or tort, including but not limited to breach of
contract, breach of the covenant of good faith and fair dealing, or violation of
public policy; and any other alleged violation of an employee's statutory,
contractual or common law rights.

      Any failure to request arbitration in accordance with the foregoing
provisions shall constitute a waiver of all rights to raise or present any
claims in any form, in any forum, arising out of any dispute that was subject to
arbitration.

      2.    Selection of Arbitrator

      All disputes subject to arbitration will be resolved by a single
arbitrator selected from a list provided by the California Mediation and
Conciliation Service from its Employment Arbitration Panel. The parties shall
select the arbitrator by alternately striking names from the list, and the last
name remaining on the list shall be the arbitrator selected to resolve the
dispute. The arbitrator must be selected within thirty (30) days of receipt of
the written request for arbitration. The arbitration hearing shall be held in
San Diego, California, at a neutral location selected by the parties or, in the
event the parties are unable to agree, at a location designated by the
arbitrator.

      3.    Authority of Arbitrator

      The arbitrator shall only be authorized to exercise the powers
specifically enumerated by this procedure and to decide the dispute in
accordance with governing principles of law and equity. The arbitrator shall
have no authority to modify the powers granted by the terms of this procedure or
to modify the terms of the employee handbook, except as required by law. The
arbitrator shall have the authority to rule on motions by the parties, to issue
protective orders upon motion of any party or third party, and to determine only
the disputes submitted by the


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<PAGE>   14
parties based upon the grounds presented. Any dispute or argument not presented
by the parties is outside the scope of the arbitrator's jurisdiction and any
award invoking such disputes or arguments is subject to a motion to vacate;
provided, however, the arbitrator shall have exclusive authority to resolve any
dispute relating to the validity, interpretation and enforcement of these
arbitration procedures.

      4.    Discovery

      The arbitrator shall have the power, in addition to determining the merits
of the dispute submitted, to permit discovery regarding the subject matter of
arbitration and to enforce the rights, remedies, procedures, duties, liabilities
and obligations of discovery by the imposition of the same terms, conditions,
consequences, liabilities, sanctions and penalties as may be imposed in like
circumstances by a Superior Court under the California Code of Civil Procedure.
All discovery must be completed thirty (30) days prior to the date set for the
arbitration hearing.

      5.    Hearing Procedure

      The issue(s) submitted to the arbitrator must be set forth in the request
for arbitration. The arbitrator shall have no authority to frame the statement
of the issue(s). Unless otherwise agreed by the parties, the arbitration hearing
shall be governed by the formal rules of evidence contained in the California
Evidence Code. The parties shall mutually agree on the number of days required
for hearing. The hearing shall be recorded and transcribed verbatim by a
certified shorthand reporter. Each party shall bear its own costs with respect
to a copy of the transcript of the hearing; however, the parties shall each be
responsible for one-half the cost of the court reporter's fee and the
arbitrator's copy of the hearing transcript.

      6.    Post-Hearing Procedure

      Each party shall have the right to present closing argument at the
conclusion of all sworn testimony and, in addition to or in lieu of closing
argument, either party shall have the right to submit post-hearing briefs. The
due date and procedure for exchanging post-hearing briefs shall be mutually
agreed upon by the parties or as directed by the arbitrator.

      7.    Opinion and Award

      The arbitrator shall issue a written opinion and award within sixty (60)
days of closing arguments or the receipt of post-hearing briefs, whichever is
later. The arbitration award and opinion shall be signed and dated by the
arbitrator and shall decide all issues submitted and set forth the legal
principles supporting each aspect of the opinion and award. The arbitrator shall
only be permitted to award those remedies in law or equity which are requested
by the parties and which are supported by the credible, relevant evidence. The
arbitrator shall have no authority to award punitive or exemplary damages under
any circumstances or for any reason.


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      8.    Fees and Costs

      Each party shall be responsible for its own attorney's fees, except as
provided by law, and for all costs associated with discovery unless otherwise
ordered by the arbitrator. Each party shall also be responsible for one-half of
the arbitrator's fee and one-half of any costs associated with the facilities
for the arbitration hearing.

      9.    Severability

      In the event that any provision of this procedure is determined by the
arbitrator or by a court of competent jurisdiction to be illegal, invalid, or
unenforceable to any extent, such term or provision shall be enforced to the
extent permissible under law and all remaining terms and provisions hereof shall
continue in full force and effect.


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