<PAGE>

                                 EXHIBIT 10.4
                                      TO
                                   FORM 10-K
                              FOR THE YEAR ENDED
                               DECEMBER 31, 1999


"[ * ]" = omitted, confidential material, which material has been separately
filed with the Securities and Exchange Commission pursuant to a grant of
confidential treatment.
<PAGE>

                         NATIONAL INSTITUTES OP HEALTH
                          CENTERS FOR DISEASE CONTROL

                    PATENT LICENSE AGREEMENT - NONEXCLUSIVE


                                   COVER PAGE

     For Office of Technology Transfer/NIH internal use only:
     Patent License Number: L-232-92
                            -------------------------------------
     Serial Numbers of Licensed Patents: USPA SN 06/712.236 (USPN
                                         ------------------------
     4.797.368)
     ------------------------------------------------------------
     Licensee: Targeted Genetics Corporation
               --------------------------------------------------
     CRADA Number (if applicable):_______________________________
     Additional Remarks:_________________________________________


     This Patent License Agreement, hereinafter referred to as the "Agreement"
consists of this Cover Page, an attached agreement, a Signature Page, Appendix A
(Patent or Patent Application), Appendix B (Fields of Use and Territory),
Appendix C (Royalties), and Appendix D (Modifications). This Cover Page serves
to identify the Parties to this Agreement as follows:

     (1) the National Institutes of Health ("NIH") or the Centers for Disease
Control ("CDC"), hereinafter singly or collectively referred to as "PHS,"
agencies of the United States Public Health Service within the Department of
Health and Human Services ("DHHS"); and

     (2) The person, corporation, or institution identified on the Signature
Page, having offices at the address indicated on the Signature Page, hereinafter
referred to as "LICENSEE".
<PAGE>

     PHS PATENT LICENSE AGREEMENT - NONEXCLUSIVE

     PHS and LICENSEE agree as follows:

     l. BACKGROUND
        ----------

     1.01  In the course of conducting biomedical and behavioral research, PHS
investigators made inventions that may have commercial applicability.

     1.02  By assignment of rights from PHS employees and other inventors, DHHS,
on behalf of the United States Government, owns the intellectual property rights
claimed in any United States and foreign patent applications or patents
corresponding to the assigned inventions. DHHS also owns any tangible
embodiments of these inventions actually reduced to practice by PHS.

     1.03  The Assistant Secretary for Health of DHHS has delegated to PHS the
authority to enter into this Agreement for the licensing of the rights to these
inventions under the patent law, 35 U.S.C. (S)(S)200-212 and the Federal
Technology Transfer Act of 1986, 15 U.S.C. (S)3710a.

     1.04  PHS desires to transfer these inventions to the private sector
through conmmercialization licenses to facilitate the conmmercial development of
products and processes for public use and benefit.

     1.05  LICENSEE desires to acquire commercialization rights to certain of
these inventions in order to develop processes, methods or marketable products
for public use and benefit.

     2. DEFINITIONS
        -----------

     2.01  Licensed Patent Rights shall mean:

     a)  U.S. patent applications and patents listed in Appendix A, all
divisions and continuations of these applications, all patents issuing from such
applications, divisions and continuations, and any reissues, reexaminations and
extensions of all such patents,

     b)  to the extent that the following contain one or more claims to the
invention or inventions claimed in a) above:  continuations-in-part of a) above,
all divisions and continuations of these continuations-in-part, all patents
issuing from such continuations - in-part, divisions and continuations, and any
reissues, reexaminations and extensions of all such patents;
<PAGE>

     c)  to the extent that the following contain one or more claims to the
invention or inventions claimed in a) above: all counterpart foreign
applications and patents to a) and b) above, including those listed in Appendix
A.

     Licensed Patent Rights shall not include b) or c) above to the extent that
they contain one or more claims directed to new matter which is not the subject
matter of a claim in a) above.

     2.02  Licensed Product(s) means tangible materials which, in the course of
manufacture, use or sale would, in the absence of this Agreement, infringe one
or more claims of the Licensed Patent Rights that have not been held invalid or
unenforceable by an unappealed or unappealable judgement of a court of competent
jurisdiction.

     2.03  Licensed Process(es) means processes which, in the course of being
practiced would, in the absence of this Agreement, infringe one or more claims
of the Licensed Patent Rights that have not been held invalid or unenforceable
by an unappealed or unappealable judgment of a court of competent jurisdiction.

     2.04  Licensed Territory means the geographical area identified in Appendix
B.

     2.05  Net Sales means the total gross receipts for sales of Licensed
Products or practice of Licensed Processes by or on behalf of LICENSEE and from
leasing, renting, or otherwise making Licensed products available to others
without sale or other dispositions, whether invoiced or not, less returns and
allowances actually granted, packing costs, insurance costs, freight out, taxes
or excise duties imposed on the transaction (if separately invoiced), and
wholesaler and cash discounts in amounts customary in the trade. No deductions
shall be made for commissions paid to individuals, whether they be with
independent sales agencies or regularly employed by LICENSEE and on their
payroll, or for the cost of collections.

    2.06  Net Sales Price means the Net Sales divided by the quantity of
Licensed Product sold or Licensed Process practiced.

    2.07  Combined Product means a product that contains a Licensed Product
along with at least one other active component or ingredient not covered by the
Licensed Patent Rights.

     2.08  First Commercial Sale means the initial transfer by or on behalf of
LICENSEE, of Licensed products in exchange for cash or some equivalent to which
value can be assigned for the purpose of determining Net Sales, and First
Commercial Use means the initial practice of a Licensed Process by LICENSEE.
<PAGE>

     2.09  Government means the United States Government.

     2.10  Licensed Fields of Use means the fields of use identified in Appendix
B.

     3. GRANT OF RIGHTS
        ---------------

     3.01  PHS hereby grants and LICENSEE accepts, subject to the terms and
conditions of this Agreement, a Nonexclusive License to LICENSEE under the
Licensed Patent Rights in the Licensed Territory to make and have made, to use
and have used and to sell and have sold any Licensed products in the Licensed
Fields of Use and to practice and have practiced any Licensed Processes in the
Licensed Fields of Use.

     3.02  LICENSEE has no right to grant sublicenses.

     3.03  This Agreement is effective when signed by all parties and shall
extend to the expiration of the last to expire of the Licensed Patent Rights
unless sooner terminated as provided in Article 11 below.

     3.04  This Agreement confers no license or rights by implication, estoppel
or otherwise under any patent applications or patents of PHS other than Licensed
Patent Rights regardless of whether such patents are dominant or subordinate to
Licensed Patent Rights.

     4. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
        -------------------------------------------------------------

     4.01  LICENSEE agrees that products used or sold in the United States
embodying Licensed Products or produced through use of Licensed Processes shall
be manufactured substantially in the United States, unless a written waiver is
obtained in advance from PHS.

     4.02  DHHS has responsibility for funding basic biomedical research, for
funding medical treatment through programs such as Medicare and Medicaid, for
providing direct medical care and, more generally, for protecting the health and
safety of the public. Because of these responsibilities, and the public
investment in the research that culminated in the Licensed Patent Rights, PHS
may require LICENSEE to submit documentation in confidence showing a reasonable
relationship between the pricing of a Licensed Product, the public investment in
that product and the health and safety needs of the public. This paragraph shall
not restrict the right of LICENSEE to price a Licensed Product or Licensed
Process so as to obtain a reasonable profit for its sale or use. This Paragraph
4.02 does not permit PHS or any other government agency to set or dictate prices
for Licensed Products or Licensed Processes.
<PAGE>

     5.  ROYALTIES AND REIMBURSEMENT
     -------------------------------

     5.01  LICENSEE agrees to pay to PHS a noncreditable, nonrefundable license
issue royalty as set forth in Appendix C within thirty (30) days from the date
that this Agreement becomes effective.

     5.02  LICENSEE agrees to pay to PHS a nonrefundable minimum annual royalty
as set forth in Appendix C. The minimum annual royalty is due and payable on
January 1 of each calendar year, and may be credited against any earned
royalties due for sales made in that year. The minimum annual royalty for the
first calendar year of this Agreement is due and payable within thirty (30) days
from the effective date of this Agreement and may be prorated according to the
fraction of the calendar year remaining between the effective date of this
Agreement and the next subsequent January l.

     5.03  LICENSEE agrees to pay PHS earned royalties as set forth in Appendix
C.

     5.04  A claim of a patent application licensed under this Agreement shall
cease to fall within the Licensed Patent Rights for purposes of computing the
minimum annual royalty and earned royalty payments in any given country on the
earliest of the dates that it: (a)  has been abandoned but not continued, or (b)
has been pending (including the pendency time of any parent cases) but not
allowed for more than six (6) years from its effective filing date; but shall be
reinstated for purposes of computing these royalty payments on the date that a
patent issues thereon. A claim of a patent licensed under this Agreement shall
cease to fall within the Licensed Patent Rights for the purpose of computing the
minimum annual royalty and earned royalty payments in any given country on the
earliest of the dates that: (a) the patent expires, (b) the patent is no longer
maintained by the Government, or (c) all claims of the Licensed Patent Rights
have been held to be invalid or unenforceable by an unappealed or unappealable
decision of a court of competent jurisdiction or administrative agency.

     5.05  No multiple royalties shall be payable because any Licensed products
or Licensed Processes are covered by more than one of the Licensed Patent
Rights.

     5.06  On sales of Licensed products by LICENSEE in other than an arm's
1ength transaction, the Net Sales Price attributed under this Article 5 to such
a transaction shall be that which would have been received in an arm's length
transaction, based on sales of like quantity and quality products on or about
the time of such transaction.

     5.07  LICENSEE agrees to pay PHS, within (60) days of PHS's submission of a
statement and request for payment, a royalty amount
<PAGE>

equivalent to all patent expenses previously incurred by PHS in the preparation,
filing, prosecution and maintenance of Licensed Patent Rights incurred during
the previous calendar year, to be divided equally among all nonexclusive
LICENSEES of record as of the date the statement and request for payment is sent
by PHS to LICENSEE.  [*] of the cumulative amount of such payments may be
credited against royalties due under Paragraph 5.03, however, the net royalty
payment in any calendar year may not be lower than the minimum annual royalty
specified in Appendix C. LICENSEE may elect to surrender its rights in any
country of the Licensed Territory under any Licensed Patent Rights upon sixty
(60) days written notice to PHS and owe no payment obligation under this
Paragraph for subsequent patent-related expenses incurred in that country.

     6. RECORD KEEPING
        --------------

     6.01  LICENSEE agrees to keep, accurate and correct records of Licensed
Products made, used or sold and Licensed Processes practiced under this
Agreement appropriate to determine the amount of royalties due PHS. Such records
shall be retained for at least five (5) years following a given reporting
period. They shall be available during normal business hours for inspection at
the expense of PHS by an accountant or other designated auditor selected by PHS
for the sole purpose of verifying reports and payments hereunder. The accountant
or auditor shall only disclose to PHS information relating to the accuracy of
reports and payments made under this Agreement. If an inspection shows an
underreporting or underpayment in excess of ten percent (10%) for any twelve
(12) month period, then LICENSEE shall reimburse PHS for the cost of the
inspection at the time LICENSEE pays the unreported royalties.

     7. REPORTS ON PROGRESS SALES AND PAYMENTS
        --------------------------------------

     7.01  Prior to signing this Agreement, LICENSEE has provided to PHS a
written commercialization plan ("Commercial Development Plan") under which
LICENSEE intends to bring the subject matter of the Licensed Patent Rights into
commercial use upon execution of this Agreement. The Commercial Development Plan
is hereby incorporated by reference into this Agreement.

     7.02  LICENSEE shall provide written annual reports on its product
development progress or efforts to commercialize under the Commercial
Development Plan for each of the Licensed Fields of Use within sixty (60) days
after December 31 of each calendar year. These progress reports shall include,
but not be limited to: progress on research and development, status of
applications for regulatory approvals, manufacturing, marketing and sales during
the preceding calendar year, as well as plans for the present calendar

_____________________
[ * ] = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a grant of confidential
treatment.
<PAGE>

year. LICENSEE agrees to provide any additional data reasonably required by PHS
to evaluate LICENSEE's performance.

     7.03  LICENSEE shall report to PHS the date of the First Commercial Sale of
Licensed Products or the First Commercial Use of Licensed Processes in each
country in the Licensed Territory within thirty (30) days of such occurrence.

     7.04  LICENSEE shall submit to PHS within sixty (60) days after each
calendar half year ending June 30 and December 31, a royalty report setting
forth for the preceding half year period the amount of the Licensed Products
sold or Licensed Processes practiced by or on behalf of LICENSEE in each country
within the Licensed Territory, the Net Sales, and the amount of royalty
accordingly due. With each such royalty report, LICENSEE shall submit payment of
the earned royalties due. If no earned royalties are due to PHS for any
reporting period, the written report shall so state. The royalty report shall be
certified as correct by an authorized officer of LICENSEE and shall include a
detailed listing of all deductions made under Paragraph 2.05 to determine Net
Sales or made under Article 5 to determine royalties due.

     7.05  Royalties due under Article 5 shall be paid in U. S. dollars. For
conversion of foreign currency to U. S. dollars, the conversion rate shall be
the rate quoted in the Wall Street Journal on the day that the payment is due.
All checks and bank drafts shall be drawn on United States banks and shall be
payable to NIH/Patent Licensing at the address on the Signature Page below.  Any
loss of exchange, value, taxes or other expenses incurred in the transfer or
conversion to U. S. dollars shall be paid entirely by LICENSEE.

     7.06  Late charges will be applied to any overdue payments as required by
the U. S. Department of Treasury in the Treasury Fiscal Requirements Manual,
Section 8020.20. The payment of such late charges shall not prevent PHS from
exercising any other rights it may have as a consequence of the lateness of any
payment.

     7.07  All plans and reports required by this Article 7 and marked
"confidential" by LICENSEE shall be treated by PHS as commercial and financial
information obtained from a person, and as privileged and confidential, and to
the extent permitted by law, shall and not be subject to disclosure under the
Freedom of Information Act, 5 U.S.C. (S)552.


     8.  REASONABLE BEST EFFORTS
         -----------------------

     8.01  LICENSEE shall use its reasonable best efforts to introduce the
Licensed Products into the commercial market or apply the Licensed Processes to
commercial use as soon as practicable,
<PAGE>

consistent with sound and reasonable business practices and judgment.
"Reasonable best efforts" for the purpose of this provision shall include, but
not .be limited to, adherence to the Commercial Development Plan. LICENSEE
agrees to apply at least the same level of effort that it applies to the
commercial development of its own products and processes.

     8.02  Upon the First Commercial Sale of Licensed Products or the First
Commercial Use of Licensed Processes, until the expiration of this Agreement,
LICENSEE shall use its reasonable best efforts to keep Licensed Products and
Licensed Processes available to the public.


     9.  INFRINGEMENT AND PATENT ENFORCEMENT
         -----------------------------------

     9.01  PHS and LICENSEE agree to notify each other promptly of each
infringement or possible infringement, as well as any facts which may affect the
validity, scope or enforceability of the Licensed Patent Rights of which either
Party becomes aware.

     9.02  If PHS has been unable to eliminate a substantial infringement within
one year of written notification to the Office of Technology Transfer from
LICENSEE of the existence of a substantial infringement and has not instituted
infringement litigation, LICENSEE shall be excused from the payment of the
minimum annual royalty and earned royalties in any country in which the
substantial infringement occurred. Thereafter, when the substantial infringement
has ceased or an infringement suit has been initiated, PHS shall so notify the
LICENSEE in writing, at which time LICENSEE's obligation to pay such royalties
shall resume as of the date of such notification.

     9.03  In the event that a declaratory judgment action alleging invalidity
of any of the Licensed Patent Rights shall be brought against PHS, PHS agrees to
notify LICENSEE that an action alleging invalidity has been brought. PHS does
not represent that it will commence legal action to defend against a declaratory
action alleging invalidity. LICENSEE shall take no action to compel the
Government either to initiate or to join in any such declaratory judgment
action. Should the Government be made a party to any such suit by motion or any
other action of LICENSEE, LICENSEE shall reimburse the Government for any costs,
expenses or fees which the Government incurs as a result of its defending
against such motion or other action taken in response to the motion. Upon
LICENSEE's payment of all costs incurred by the Government as a result of
LICENSEE's joinder motion or other action, these actions by LICENSEE will not be
considered a default in the performance of any material obligation under this
Agreement.
<PAGE>

     10. NEGATION OF WARRANTIES AND INDEMNIFICATION

     10.01  PHS offers no warranties other than those specified in Article l.

     10.02  PHS does not warrant the validity of the Licensed Patent Rights, and
makes no representations whatsoever with regard to the scope of the Licensed
Patent Rights, or that the Licensed Patent Rights may be exploited without
infringing other patents or other intellectual property rights of third parties.

     10.03  PHS MAKE NO WARRANTIES, EXPRESSED OR IMPLIED, OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE of any subject matter defined by the claims of
the Licensed Patent Rights

     10.04  PHS does not represent that it will commence legal actions against
third parties infringing the Licensed Patent Rights.

     10.05  LICENSEE shall defend, indemnify and hold PHS and its employees,
students, fellows, agents and consultants harmless from and against all
liability, demands, damages, expenses and losses, including but not limited to
death, personal injury, illness or property damage in connection with or arising
out of (a) the use by or on behalf of LICENSEE, or its directors, employees or
third parties of any Licensed Patent Rights, or (b) the design, manufacture,
distribution or use of any Licensed Products, Licensed Processes, or other
products or processes developed in connection or arising out of the Licensed
Patent Rights. LICENSEE agrees to maintain a liability insurance program
consistent with sound business practice.


     11. TERMINATION AND MODIFICATION OF RIGHTS
         --------------------------------------

     11.01  In the event that LICENSEE is in default in the performance of any
material obligations under this Agreement, and if the default has not been
remedied within ninety (90) days after the date of notice in writing of such
default, PHS may terminate this Agreement by written notice.

     11.02  At least 30 days prior to filing a petition in bankruptcy LICENSEE
must inform PHS in writing of its intention to file the petition in bankruptcy
or of a third party's intention to file an involuntary petition in bankruptcy.

     11.03  In the event that LICENSEE becomes insolvent, makes an assignment of
Licensed Patent Rights for the benefit of creditors, files a petition in
bankruptcy, has such a petition filed against it, determine to file the petition
in bankruptcy, or receives notice of a third party's intention to file an
involuntary petition
<PAGE>

in bankruptcy, LICENSEE shall immediately notify PHS in writing. Furthermore,
PHS shall have the right to terminate this Agreement by giving LICENSEE written
notice. Termination of this Agreement is effective upon LICENSEE'S receipt of
the written notice.

     11.04  LICENSEE shall have a unilateral right to terminate this Agreement
and/or any licenses in any country by giving PHS sixty (60) days written notice
to that effect.

     11.05  PHS shall specifically have the right to terminate this Agreement,
if PHS determines that the LICENSEE: (1) is not executing the Conmmercial
Development Plan submitted with its request for a license and the LICENSEE
cannot otherwise demonstrate to PHS's satisfaction that the LICENSEE has taken,
or can be expected to take within a reasonable time, effective steps to achieve
practical application of the Licensed Products or Licensed Processes; (2) has
willfully made a false statement of, or willfully omitted, a material fact in
the license application or in any report required by the licensed agreement; (3)
has committed a substantial breach of a covenant or agreement contained in the
license; (4) is not keeping Licensed Products or Licensed Processes reasonably
available to the public after commercial use commences; (5) cannot reasonably
satisfy unmet health and safety needs; or (6) cannot reasonably justify a
failure to comply with the domestic production requirement of Paragraph 4.02
unless waived. In making this determination, PHS will take into account the
normal course of such commercial development programs conducted with sound and
reasonable business practices and judgment and the annual reports submitted by
LICENSEE under Paragraph 7.02. Prior to invoking this right, PHS shall give
written notice to LICENSEE providing LICENSEE specific notice of and a ninety
(90) day opportunity to satisfy PHS's concerns as to the previous items (1) to
(6). If LICENSEE fails to satisfy or reasonably begin to rectify such concerns
within the ninety (90) day period, PHS may terminate this Agreement.

     11.06  PHS reserves the right according to 35 U.S.C. (S)209(f) (4) to
terminate this Agreement if it is determined that such action is necessary to
meet requirements for public use specified by Federal regulations issued after
the date of the license and such requirements are not reasonably satisfied by
LICENSEE.

     11.07  Within thirty (30) days of receipt of written notice of PHS's
unilateral decision to terminate this Agreement, LICENSEE may, consistent with
the provisions of 37 C.F.R. (S)404.11, appeal the decision by written submission
to the Assistant Secretary for Health or designee. The Assistant Secretary for
Health or designee's decision shall be the final agency decision. LICENSEE may
thereafter exercise any and all administrative or judicial remedies that may be
available.
<PAGE>

     11.08  Within ninety (90) days of termination of this Agreement under this
Article 11 or expiration under Paragraph 3.03, a final report shall be submitted
by LICENSEE. Any royalty payments and unreimbursed patent expenses due to PHS
become immediately due and payable upon termination.

     11.09  Paragraphs 6.01, 7.05, 7.06, 10.05 and 11.08 of this Agreement shall
survive termination of this Agreement.


     12. GENERAL PROVISIONS
         ------------------

     12.01  Neither Party may waive or release any of its rights or interests in
this Agreement except in writing. The failure of the Government to assert a
right hereunder or to insist upon compliance with any term or condition of this
Agreement shall not constitute a waiver of that right by the Government or
excuse a similar subsequent failure to perform any such term or condition by
LICENSEE.

     12.02  This Agreement constitutes the entire agreement between the Parties
relating to the subject matter of the Licensed Patent Rights, and all prior
negotiations, representations, agreements and understandings are merged into,
extinguished by and completely expressed by this Agreement.

     12.03  The provisions of this Agreement are severable, and in the event
that any provision of this Agreement shall be determined to be invalid or
unenforceable under any controlling body of law, such determination shall not in
any way affect the validity or enforceability of the remaining provisions of
this Agreement.

     12.04  If either Party desires a modification to this Agreement, the
Parties shall, upon reasonable notice of the proposed modification by the Party
desiring the change, confer in good faith to determine the desirability of such
modification. No modification will be effective until a written amendment is
signed by the signatories to this Agreement or their designees.

     12.05  The construction, validity, performance and effect of this Agreement
shall be governed by Federal law as applied by the Federal Courts in the
District of Columbia.

     12.06  All notices required or permitted by this Agreement shall be given
by prepaid registered or certified mail properly addressed to the other Party at
the address designated on the following signature page, or to such other address
as may be designated in writing by such other Party, and shall be effective as
of the date of the postmark of such notice.
<PAGE>

     12.07  This Agreement shall not be assigned by LICENSEE except (a) with the
prior written consent of PHS, such consent to be reasonably given; or (b) as
part of a sale or transfer of substantially the entire business of LICENSEE
relating to operations which concern this Agreement.

     12.08  LICENSEE agrees in its practice of the Licensed Patent Rights to
comply with all applicable Government regulations and guidelines including, for
example, those relating to research involving human or animal subjects or
recombinant DNA.

     12.09  LICENSEE acknowledges that it is subject to and agrees to abide by
the United States laws and regulations (including the Export Administration Act
of 1979 and Arms Export Control Act) controlling the export of technical data,
computer software, laboratory prototypes, biological material and other
commodities. The transfer of such items may require a license from the cognizant
agency of the U. S. Government or written assurances by LICENSEE that it shall
not export such items to certain foreign countries without prior approval of
such agency. PHS neither represents that a license is or is not required or
that, if required, it shall be issued.

     12.10  LICENSEE agrees to mark the Licensed Products or their packaging
sold in the United States with all applicable U. S. patent numbers and similarly
to indicate "Patent Pending" status. All Licensed Products manufactured in,
shipped to or sold in other countries shall be marked in such a manner as to
preserve PHS patent right in such countries.

     12.11  By entering into this Agreement, PHS does not directly or indirectly
endorse any product or service provided, or to be provided, by LICENSEE whether
directly or indirectly related to this Agreement. LICENSEE shall not state or
imply that this Agreement is an endorsement by the Government, PHS, any other
Government organizational unit, or any Government employee. Additionally,
LICENSEE shall not use the names of PHS, NIH, CDC or ADAMHA or their employees
in any advertising, promotional or sales literature without the prior written
consent of PHS.

     12.12  The Parties agree to attempt to settle amicably any controversy or
claim arising under this Agreement or a breach of the Agreement, except for
appeals of modification or termination decisions provided for in Article 11.
LICENSEE agrees first to appeal any such unsettled claims or controversies to
the Director of NIH, whose decision shall be considered the final agency
decision. Thereafter, LICENSEE may exercise any administrative or judicial
remedies that may be available.

     12.13  Nothing relating to the grant of a license, nor the grant itself,
shall be construed to confer upon any person any
<PAGE>

immunity from or defenses under the antitrust laws or from a charge of patent
misuse and the acquisition and use of rights pursuant to this part shall not be
immunized from the operation of state or Federal law by reason of the source of
the grant.


                         SIGNATURES BEGIN ON NEXT PAGE
<PAGE>

                  PHS PATENT LICENSE AGREEMENT - NONEXCLUSIVE
                  -------------------------------------------

                                 SIGNATURE PAGE
                                 --------------

FOR PHS


/s/ Reid G. Adler, J.D.                         July 13, 1993
-----------------------                         -------------
Reid Adler, J.D.                                Date
Director, Office of Technology Transfer


Mailing Address for Notices and Payments:

Director
Office of Technology Transfer
Box OTT
National Institutes of Health
Bethesda, Maryland 20892
(301) 496-7735
FAX (301) 402-0220


FOR LICENSEE (Upon information and belief, the undersigned expressly certifies
or affirms on information and belief that the contents of any statements of
LICENSEE made or referred to in this document are truthful and accurate.)



/s/ H. Stewart Parker                        July 7, 1993
---------------------                        ------------
H. Stewart Parker                            Date
President


Mailing Address for Notices:

President
Targeted Genetics Corporation
1100 Olive Way, Ste 100
Seattle, WA 98101
(206) 623-7612
<PAGE>

                   APPENDIX A - Patent or Patent Application

Patent or Patent Application:  USPA SN 06/712,236 (USPN 4,797,368)
"Adeno-Associated Virus as Eukaryotic Expression Vector"
<PAGE>

APPENDIX B - Licensed Fields of Use and Territory

Licensed Territory:  The United States, its territories and possessions.

Licensed Fields of Use: Diagnosis and treatment of human disease.
<PAGE>

APPENDIX C - Royalties

[*]


_____________________
[ * ] = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a grant of confidential
treatment.
<PAGE>

                           APPENDIX D - Modifications


PHS and LICENSEE agree to the following modifications to the Articles and
Paragraphs of this Agreement:

ARTICLE TWO

     2.01(c) (Deleted in its entirety).

     2.07    (Deleted in its entirety)

     2.08    (amended) First Commercial Sale means the initial transfer by or on
behalf of LICENSEE, of Licensed Products in exchange for cash or some equivalent
to which value can be assigned for the purpose of determining Net Sales
following approval of a Product License Application by the U.S. Food and Drug
Administration, and First Commercial Use means the initial practice of a
Licensed Process by LICENSEE.

ARTICLE FIVE

     5.02    (amended) LICENSEE agrees to pay to PHS a nonrefundable minimum
annual royalty as set forth in Appendix C. The minimum annual royalty is due and
payable on January 1 of each calendar year that this Agreement is in force, and
may be credited against any earned royalties due for sales made in that year.
The minimum annual royalty for the first calendar year of this Agreement is due
and payable within thirty (30) days from the effective date of this Agreement
and may be prorated according to the fraction of the calendar year remaining
between the effective date of this Agreement and the next subsequent January l.

     5.07    (amended) LICENSEE agrees to pay PHS, within (60) days of PHS's
submission of a statement and request for payment ("Statement Date"), a royalty
amount equivalent to all patent expenses incurred by PHS prior to the effective
date of this Agreement in the preparation, filing, prosecution and maintenance
of Licensed Patent Rights, to be divided equally among all nonexclusive
LICENSEES of record as the Statement Date.

     5.08    (new paragraph) Beginning the first subsequent January 1 after the
effective date of this Agreement, LICENSEE agrees to pay PHS, within (60) days
of PHS's submission of a statement and request for payment, a royalty amount
equivalent to all patent expenses incurred by PHS in the previous calendar year
in the preparation, filing, prosecution and maintenance of Licensed Patent
Rights, to be divided equally among all nonexclusive LICENSEES of record as of
the date the request for payment is sent by PHS to LICENSEE. Such request for
payment for the first calendar year shall exclude the patent expenses incurred
by PHS prior to the
<PAGE>

effective date of this Agreement which are payable under Paragraph 5.07.

     5.09  (new paragraph) [*] of the cumulative amount of payments due under
Paragraphs 5.07 and 5.08 may be credited against royalties due under Paragraph
5.03, however, the net royalty payment in any calendar year may not be lower
than the minimum annual royalty specified in Appendix C. LICENSEE may elect to
surrender its rights in any country of the Licensed Territory under any Licensed
Patent Rights upon sixty (60) days written notice to PHS and owe no payment
obligation under this Paragraph for subsequent patent-related expenses incurred
in that country.

     5.10  (New Paragraph) LICENSEE agrees to pay PHS benchmark royalties as set
forth in Appendix C.

     5.11  (New Paragraph) PHS agrees that any licenses granted to Licensed
Patent Rights after the earlier of: a) the Statement Date; or b) December 31,
1993, shall provide for earned royalty rates of [*] in excess of those set forth
in Appendix C.

ARTICLE SEVEN

     7.03  (amended) LICENSEE shall report to PHS the date of the First
Commercial Sale of Licensed products or the First Commercial Use of Licensed
Processes in the Licensed Territory within thirty (30)days of such occurrence.

     7.04  (amended) Beginning after the date of First Commercial Use or First
Commercial Sale, LICENSEE shall submit to PHS within sixty (60) days after each
calendar half year ending June 30 and December 31, a royalty report setting
forth for the preceding half year period the amount of the Licensed products
sold or Licensed Processes practiced by or on behalf of LICENSEE in each country
within the Licensed Territory, the Net Sales, and the amount of royalty
accordingly due. With each such royalty report, LICENSEE shall submit payment of
the earned royalties due. If no earned royalties are due to PHS for any
reporting period, the written report shall so state. The royalty report shall be
certified as correct by an authorized officer of LICENSEE and shall include a
detailed listing of all deductions made under Paragraph 2.05 to determine Net
Sales or made under Article 5 to determine royalties due.

     7.08  (New Paragraph) LICENSEE shall report to PHS the date of its first
human use for Licensed products or the approval of any Product License
Application (PLA) with the Food and Drug Administration for Licensed Products
within thirty (30) days of such occurrence.

_____________________
[ * ] = omitted, confidential material, which material has been separately filed
with the Securities and Exchange Commission pursuant to a grant of confidential
treatment.
<PAGE>

     ARTICLE NINE

     9.02  (amended) If PHS has been unable to eliminate a substantial
infringement within one year of written notification to the Office of Technology
Transfer from LICENSEE of the existence of a substantial infringement and has
not instituted infringement litigation, LICENSEE shall be excused from the
payment of the minimum annual royalty and earned royalties as of one year after
written notification. Thereafter, when the substantial infringement has ceased
or an infringement suit has been initiated, PHS shall so notify the LICENSEE in
writing, at which time LICENSEE's obligation to pay such royalties shall resume
as of the date of such notification.

     9.03  (amended) In the event that a declaratory judgment action alleging
invalidity of any of the Licensed Patent Rights shall be brought against PHS,
PHS agrees to notify LICENSEE that an action alleging invalidity has been
brought. PHS does not represent that it will commence legal action to defend
against a declaratory action alleging invalidity. LICENSEE shall take no action
to compel the Government either to initiate or to join in any such declaratory
judgment action. Should the Government be made a party to any such suit by
motion or any other action of LICENSEE, LICENSEE shall reimburse the Government
for any costs, expenses or fees which the Government incurs as a result of its
defending against such motion or other action taken in response to the motion.
Such reimbursement amount shall be fully creditable against earned royalties
payments due PHS hereunder. Upon LICENSEE's payment of all costs incurred by the
Government as a result of LICENSEE's joinder motion or other action, these
actions by LICENSEE will not be considered a default in the performance of any
material obligation under this Agreement.

ARTICLE TWELVE

     12.10  LICENSEE agrees to mark the Licensed products or their packaging
sold in the United States with all applicable U. S. patent numbers and similarly
to indicate "Patent Pending" status.

NEW ARTICLE (THIRTEEN)

                     13.  MOST FAVORED LICENSEE
                          ---------------------

     13.01  Except as provided for in Paragraph 5.11, PHS intends that the
royalty terms of all other licenses under Licensed Patent Rights will be
essentially similar to the terms of this Agreement. PHS will advise LICENSEE as
to those terms in other agreements under Licensed Patent Rights in the Licensed
Fields of Use in the Licensed Territory signed after the effective date of this
Agreement that are different from this Agreement as to Minimum Annual Royalty,
Benchmark Royalty or Earned Royalty or the basis on
<PAGE>

which these royalties are computed. LICENSEE may determine whether such package
of royalty terms are more favorable than those granted under this Agreement, and
shall be entitled upon written notice to PHS, within sixty (60) days after
receipt from PHS of the different terms, to have this Agreement amended to
substitute this package of terms as of the date upon which more favorable
license terms become effective.

  13.02  PHS may have entered into prior license agreement for Licensed Patent
Rights.  The Article 13 does not apply to the royalty terms for past sales or
any settle agreements of infringement suits.