EXHIBIT 10.2

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [***], have been
separately filed with the Securities and Exchange Commission.

                       INVESTMENT AND COMMISSION AGREEMENT

This Investment and Commission Agreement (the "Agreement") is made as of
December 10, 2001, by and between Discovery Laboratories, Inc., a Delaware
corporation ("Discovery"), and PharmaBio Development, Inc., a North Carolina
corporation ("PharmaBio").

Background and Overview

A.    Discovery and Quintiles Transnational Corp. ("Quintiles"), an Affiliate of
      PharmaBio, have executed a Commercialization Agreement (herein so called)
      on the date hereof, pursuant to which Quintiles will provide exclusive
      Commercialization Services in the Territory for the Product.

B.    Discovery and PharmaBio have agreed that PharmaBio will fund the payments
      for the Commercialization Services, pursuant to the terms and conditions
      set forth herein.

For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1.0   Definitions.

1.1   "Affiliate" shall mean, as to any person or entity, any corporation or
      business entity controlled by, controlling, or under common control with
      such party or entity. For this purpose, "control" shall mean direct or
      indirect beneficial ownership of at least fifty percent (50%) of the
      voting stock or income interest in such corporation or other business
      entity.

1.2   "Annual Period" shall mean a twelve-month period beginning on the Launch
      Date and each anniversary thereof.

1.3   "Commercialization Expenses" shall mean the fees and expenses payable to
      Quintiles for the Commercialization Services.

1.4   "Commercialization Services" shall mean (i) sales and marketing services
      provided by Quintiles under the Commercialization Agreement after the
      Launch Date (including, but not limited to, services provided after the
      Launch Date related to the deployment and management of a dedicated sales
      force for the promotion of the Product), and (ii) services provided under
      the Commercialization Agreement before the Launch Date for the following
      specific activities: (x) recruitment, hiring and training for the sales
      force; (y) establishing sales force targets, territory alignments, mapping
      and sales
<PAGE>

      force optimization, and validation of practitioner's state license; and
      (z) conducting launch meetings and the national, regional and district
      meetings.

1.5   "Commission Term" means the ten (10) consecutive Annual Periods beginning
      on the Launch Date.

1.6   "FDA" shall mean the US Food and Drug Administration.

1.7   "JCC" shall mean the joint commercialization committee established under
      the Commercialization Agreement. If for any reason the Commercialization
      Agreement is terminated or the JCC is otherwise disbanded under the
      Commercialization Agreement, then Discovery and PharmaBio shall in good
      faith, as promptly as practicable, form an advisory body composed of an
      equal number of designees of Discovery and PharmaBio (the "Advisory
      Board"); provided, that Discovery shall have at least the same rights and
      authority with respect to such advisory body as it had with respect to the
      JCC (and PharmaBio shall have at least the same rights and authority with
      respect to such advisory body as Quintiles had with respect to the JCC).
      In such event, (i) the Advisory Board shall perform all of the obligations
      under this Agreement that would otherwise have been performed by the JCC,
      and all references to the JCC herein shall thereafter be deemed references
      to the Advisory Board, and (ii) PharmaBio shall appoint members to the
      Advisory Board who are at least as experienced in pharmaceutical marketing
      and sales activities as Quintiles' members of the JCC.

1.8   "Launch Date" shall mean the date upon which the Product is first shipped
      in the United States for commercial sale.

1.9   "Maximum Investment" shall mean $[***] per year for each of the seven (7)
      years following the Launch Date. (All dollar references in this Agreement
      shall refer to United States Dollars).

1.10  "Minimum Sales Force Level" shall mean the sales force size for the
      Product recommended by the JCC from time to time as provided for in the
      Commercialization Agreement (provided that, for purposes of such
      calculation, the recommended sales force size will not exceed the sales
      force size that could be reasonably supported by the amount of
      Commercialization Expenses funded by PharmaBio under this Agreement). If
      the parties are not able to unanimously agree to such sales force size
      calculation, then such calculation shall be made in accordance with the
      dispute resolution process set forth in Section 11 of this Agreement.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.


                                       2
<PAGE>

1.11  "Net Sales" means the amount billed by Discovery or an Affiliate or any
      sublicensee, or on behalf of or for the benefit of Discovery or an
      Affiliate or any sublicensee, for sales of the Product to a third party in
      the Territory less: (i) discounts, including cash and quantity discounts,
      charge-back payments, refunds and rebates granted to managed health care
      or similar organizations or to federal, state and local governments
      (including, without limitation, Medicaid rebates), their agencies, and
      purchasers and reimbursers or to trade customers, including but not
      limited to, wholesalers and chain and pharmacy buying groups, (ii) credits
      or allowances actually granted upon claims, damaged goods, rejections or
      returns of such Product, including recalls, regardless of the party
      requesting such, (iii) freight, postage, shipping and insurance charges
      actually allowed or paid for delivery of Product, to the extent billed,
      (iv) taxes, duties or other governmental charges levied on, absorbed or
      otherwise imposed on sale of such Product, including without limitation
      value-added taxes, or other governmental charges otherwise measured by the
      billing, when included in billing, as adjusted for rebates, charge-backs
      and refunds, and (v) bad debts related to Product sales (defined as any
      bills unpaid for 120 days after due), provided that (a) any subsequent
      collection by Discovery on such bad debt shall be restored as Net Sales at
      the time of collection, and in the amount, of such collection, and (b)
      Discovery shall follow commercially reasonable practices of collecting and
      otherwise administering debt related to Product sales. Provided, however,
      in no event shall Net Sales be less than [***] of the gross sales of the
      Product in the Territory.

1.12  "Product" shall mean the product currently known as Surfaxin, as such name
      may change from time to time, for any and all formulations and delivery
      mechanisms (i) for the indications of (x) idiopathic respiratory distress
      syndrome ("IRDS") and (y) meconium aspiration syndrome ("MAS"); and (ii)
      solely for the purposes of Section 1.11, include all "off-label" uses.

1.13  "Territory" shall mean the United States (including Puerto Rico).

2.0   Commercialization Agreement.

      The Commercialization Agreement is in the form attached hereto as Exhibit
      A. All defined terms used herein but not defined in this Agreement shall
      have the meanings set forth in the Commercialization Agreement.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.


                                       3
<PAGE>

3.0   Investment and Commission; Related Agreements.

3.1   PharmaBio will support the commercialization of the Product as follows:

      (a)   PharmaBio shall fund one hundred percent (100%) of the
            Commercialization Expenses for the period ending on the seventh
            anniversary of the Launch Date (the "Commitment Period"), subject to
            the Maximum Investment for each such year and the other terms and
            conditions in this Agreement.

      (b)   PharmaBio shall fund the amounts payable under Section 3.1(a) by
            paying the invoices submitted by Quintiles that correspond to the
            applicable Commercialization Expenses that accrue during the
            Commitment Period, which payments shall be made by PharmaBio within
            twenty (20) days of PharmaBio's receipt of the invoice. As directed
            by Discovery, PharmaBio shall make such payment through either (i) a
            payment to Discovery, or (ii) an inter-company payment directly to
            Quintiles.

3.2   In consideration for the performance of PharmaBio of its funding
      commitments set forth in Section 3.1, Discovery shall pay PharmaBio a
      commission on Net Sales during the Commission Term. The commission
      payments payable by Discovery to PharmaBio with respect to each Annual
      Period are as follows:

           -------------------------------------------------------
           Annual Period during the              Commission on Net
                Commission Term                        Sales
           -------------------------------------------------------
                       1                               [***]
           -------------------------------------------------------
                       2                               [***]
           -------------------------------------------------------
                       3                               [***]
           -------------------------------------------------------
                       4                               [***]
           -------------------------------------------------------
                       5                               [***]
           -------------------------------------------------------
                       6                               [***]
           -------------------------------------------------------
                       7                               [***]
           -------------------------------------------------------
                       8                               [***]
           -------------------------------------------------------
                       9                               [***]
           -------------------------------------------------------
                      10                               [***]
           -------------------------------------------------------

      The commission payments under this Section 3.2 shall be paid as soon as
      reasonably practicable following the end of each calendar quarter (but not
      later than thirty (30) days following the end of each calendar quarter)
      during the ten (10) Annual Periods in the Commission Term.

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.


                                       4
<PAGE>

3.3   The JCC shall take the following actions a reasonable time prior to the
      Launch Date: (i) prepare a marketing plan for the Product, including a
      sales forecast; (ii) agree to the Commercialization Services reasonably
      necessary to support sales of the Product in the Territory at the levels
      set forth in such sales forecast (including the optimum sales force size
      to support such sales of the Product); and (iii) agree to a related budget
      for Commercialization Expenses. On or about each anniversary of the Launch
      Date, the JCC shall update such items. The above actions will be taken by
      the JCC with due regard to the size and value of the market for the
      Product in the Territory, taking into account, among other variables, the
      clinical safety and efficacy of the Product (and related labeling claims),
      the competitive environment in which the Product is being promoted, and a
      reasonable budget for the sales and marketing activities. Notwithstanding
      anything to the contrary in this Agreement or the procedures for JCC
      decisions set forth in the Commercialization Agreement, the parties agree
      to the following:

      (a)   Discovery shall have the final decision on the marketing plan for
            the Product and the activities (including the Commercialization
            Services) necessary to implement such marketing plan.

      (b)   Notwithstanding anything to the contrary in this Agreement,
            PharmaBio shall have the final decision on the amount of
            Commercialization Expenses that will be funded by PharmaBio under
            Section 3.1 of this Agreement, provided that PharmaBio shall not act
            unreasonably or in bad faith in determining such amount. For
            purposes of the preceding sentence, PharmaBio shall be deemed to
            have acted unreasonably or in bad faith if PharmaBio sets the amount
            of Commercialization Expenses that PharmaBio is willing to fund
            under Section 3.1 at a level that cannot reasonably be justified in
            light of the size and value of the market for the Product.
            Notwithstanding anything to the contrary in this Agreement,
            PharmaBio cannot be deemed to have acted unreasonably or in bad
            faith for purposes of this Section 3.3(b) by failing to fund
            Commercialization Expenses in excess of the Maximum Investment.
            Further, PharmaBio shall not be deemed to have acted unreasonably or
            in bad faith for purposes of this Section 3.3(b) by failing to fund
            Commercialization Expenses (or suspending such funding) upon certain
            events impacting the marketing of the Product that are not within
            PharmaBio's control, which is defined as: (i) a material breach by
            Discovery of any obligation or representation or warranty under this
            Agreement; (ii) withdrawal of Product caused by actual or threatened
            regulatory action by the FDA or other governmental entity, safety
            concerns relating to Product, the loss of Discovery's license rights
            or other rights to Product, or similar cause; (iii) significant
            unforeseen new information regarding the safety or efficacy of
            Product which has a material adverse effect on the sales of Product;
            or (iv) other material factors adversely impacting Net Sales of the
            Product that were not reasonably foreseeable by, or within the
            control of, PharmaBio as of the date hereof. If PharmaBio shall
            decide not to fund some amount of the Commercialization Expenses,
            then (i) Discovery shall be entitled to fund such amounts


                                       5
<PAGE>

            directly, and (ii) subject to prior termination as provided for in
            Section 7.0, PharmaBio's right to receive the commission payments
            set forth in Section 3.2 shall not be reduced.

3.4   Discovery shall use commercially reasonable efforts to commercialize the
      Product in the Territory. In this regard, Discovery will provide a sales
      force of a size not less the Minimum Sales Force Level during the
      Commitment Period. If, at any time during such period, Discovery reduces
      the Product sales force below the Minimum Sales Force Level for a period
      of more than [***], then Discovery and PharmaBio will negotiate in good
      faith to restructure PharmaBio's commitments under Section 3.1 and the
      corresponding commission amounts under Section 3.2 , which negotiations
      will take into account the implications of the reduced sales force size on
      future sales of the Product. If the parties are unable to agree to such
      restructuring within thirty (30) days after PharmaBio gives written notice
      to Discovery of its intent to pursue a remedy under this Section 3.4 for
      Discovery's failure to maintain the Minimum Sales Force Level, then
      PharmaBio may, at its sole discretion by written notice to Discovery,
      elect to suspend the following: (i) all future funding obligations under
      Section 3.1; and (ii) the running of the Commission Term (including,
      without limitation, the then-current Annual Period). During the suspension
      period, PharmaBio shall continue to receive royalties at the rate equal to
      the commission amount applicable immediately prior to the effective date
      of the suspension period. If PharmaBio elects this remedy, the then
      operating Annual Period for commission payments under Section 3.2, and the
      funding commitments under Section 3.1, shall be suspended until the
      Minimum Sales Force Level is satisfied. Such Annual Period, and the
      funding commitments under Section 3.1, shall restart when the Minimum
      Sales Force Level is satisfied, at the same time point such Annual Period
      was suspended, such that PharmaBio enjoys the full length of the ten (10)
      Annual Periods described in Section 3.2 with the benefit of the Minimum
      Sales Force Level for seven (7) full twelve-month periods, and the term
      "Commission Term" shall, for all purposes under this Agreement, be
      extended accordingly. PharmaBio's remedies under this Section 3.4 shall
      not apply for any period that Quintiles fails to satisfy its sales force
      staffing obligations under the Commercialization Agreement.
      Notwithstanding anything herein to the contrary, PharmaBio's rights under
      this Section 3.4 shall be expressly subject to the provisions of Section
      3.5.

3.5   In the event that Discovery terminates the Commercialization Agreement
      under Section 12.3 thereof, then:

      (a)   Discovery shall use commercially reasonable efforts in good faith to
            identify, retain and train a new sales force (the "New Sales Force")
            as soon as practicable to perform substantially similar functions as
            were to have been provided by Quintiles under the Commercialization
            Agreement;

Information marked by [***] has been omitted pursuant to a request for
confidential treatment. The omitted portion has been separately filed with the
Securities and Exchange Commission.


                                       6
<PAGE>

      (b)   During the period (the "Transition Period") beginning on the
            effective date of Discovery's termination of the Commercialization
            Agreement and ending on the first day of the month next following
            the date on which the New Sales Force begins detailing physicians:

            (i)   Discovery's obligation to provide the Minimum Sales Force
                  Level shall be suspended;

            (ii)  PharmaBio shall have none of the suspension or other remedial
                  rights that it would otherwise have under Section 3.4 as a
                  result of Discovery's failure to provide the Minimum Sales
                  Force Level or otherwise;

            (iii) in lieu of the commission rate set forth in Section 3.2,
                  Discovery's commission obligation to PharmaBio hereunder shall
                  equal the product of (A) the commission rate set forth in
                  Section 3.2 multiplied by (B) the percentage that Net Sales is
                  during the Transition Period of projected Net Sales for the
                  Transition Period (based on the JCC's most recent Net Sales
                  forecast, prorated, to the extent necessary, on a reasonable,
                  good faith basis); and

            (iv)  the Commission Term shall continue to run during the
                  Transition Period such that it will continue to expire on the
                  tenth (10th) anniversary of the Funding Date.

      (c)   PharmaBio's funding commitments under Section 3.1 shall continue in
            full force and effect, and all references hereunder to Quintiles
            shall be deemed to refer to the New Sales Force (and all references
            to (i) the Commercialization Agreement hereunder shall be deemed to
            refer to the agreement, if any, pursuant to which Discovery retains
            the New Sales Force and (ii) Quintiles hereunder shall be deemed to
            refer to the New Sales Force or the contract provider of the New
            Sales Force, as applicable).

3.6   As of the date hereof, the parties have entered into a Common Stock and
      Warrant Purchase Agreement. The representations and warranties set forth
      in Article IV of the Stock Purchase Agreement with respect to Discovery
      (excluding Sections 4.02, 4.14 through 4.18 and 4.20, and after modifying
      Section 4.04 so that "Transaction Documents" shall mean this Agreement)
      and in Article V with respect to PharmaBio (excluding Section 5.03 through
      5.06 and after modifying Section 5.02 so that "Transaction Documents"
      shall mean this Agreement) are incorporated in this Agreement by reference
      and form part of the consideration given to each party in exchange for the
      other party's commitments set forth herein. Discovery agrees to continue
      to exercise diligent efforts to submit the NDA (as defined in the
      Commercialization Agreement) for the Product to the FDA and to reasonably
      diligently seek FDA approval for the Product. Upon the approval of either
      the MAS or the IRDS indication, Discovery shall continue to use
      commercially reasonable


                                       7
<PAGE>

      efforts to submit the NDA for the other indication to the FDA and to seek
      FDA approval of such.

3.7   Each Party shall keep or cause to be kept such records as are required to
      determine, in a manner consistent with generally accepted accounting
      principles in the United States, the sums or credits due under this
      Agreement. Upon the written request of either party, the other party shall
      permit an independent certified public accountant appointed by such party
      and reasonably acceptable to the other party, accompanied by
      representatives of the financial department of such party at reasonable
      times and upon reasonable notice, to audit only those records as may be
      necessary to determine the correctness or completeness of any report or
      payment made under this Agreement. Results of any such audit shall be (i)
      limited to information relating to the Product, (ii) made available to
      both parties and (iii) subject to the confidentiality protections set
      forth herein. The party requesting the audit shall bear the full cost of
      the performance of any such audit, unless such audit discloses a variance
      of more than five percent (5%) from the amount of the original report,
      royalty or payment calculation. In such case, the party being audited
      shall bear the full cost of the performance of such audit.

3.8   Without the prior approval of PharmaBio, Discovery shall not, nor shall it
      allow any Affiliate or third party acting on behalf of or for the benefit
      of Discovery or any Affiliate to, commercialize a product that would
      reasonably be expected to compete with the Product in the Territory during
      the Commission Term.

3.9   The parties acknowledge and agree that (i) Discovery may pursue additional
      formulations and/or delivery technologies for the Product, which may
      result in pre-launch and launch promotional activities for the additional
      formulations and/or delivery technologies, (ii) such pre-launch and launch
      promotional activities are within the scope of the Commercialization
      Agreement, and (iii) the expenses associated with such pre-launch and
      launch promotional activities will be considered "Commercialization
      Expenses" for purposes of this Agreement and shall be subject to
      PharmaBio's funding obligations hereunder in accordance with the terms and
      limitations set forth herein.

3.10  PharmaBio shall make milestone payments to Discovery pursuant to the terms
      set forth in this Section 3.10. The "First Milestone" (herein so called)
      shall be paid on the earlier to occur of the receipt of FDA approval ("FDA
      Approval") to commercialize (x) the MAS Indication or (y) the IRDS
      Indication. The amount of the First Milestone shall be seventy percent
      (70%) of the outstanding principal (as of the controlling FDA Approval)
      under the Loan Agreement (herein so called), dated as of the date hereof,
      between PharmaBio and Discovery. The "Second Milestone" (herein so called)
      shall be paid on the earlier to occur of (x) the completion by Quintiles
      or an appropriate Affiliate of a written assessment and report in
      customary form indicating the "approvability" by the FDA of Discovery's
      NDA for the Product for the indication that was not approved as a
      condition for the First Milestone, which shall include without limitation
      an assessment and report as to the quality of the documentation comprising
      such NDA and the clinical data included in such NDA, or


                                       8
<PAGE>

      (y) the issuance by the FDA of a letter in customary form indicating that
      Discovery's NDA for the Product for such indication is "approvable." The
      amount of the Second Milestone payment shall be the remaining principal
      amounts outstanding under the Loan Agreement. PharmaBio shall have the
      right to apply the First Milestone and Second Milestone payments against
      any amounts then outstanding under the Loan Agreement.

4.0   Confidentiality and Ownership of Information.

4.1   Discovery on the one part and PharmaBio on the other part each
      acknowledges that, in the course of performing its obligations hereunder,
      it may receive information from the other party which is proprietary to
      the disclosing party and which the disclosing party wishes to protect from
      public disclosure ("Confidential Information"). Each receiving party
      agrees to retain in confidence, during the Commission Term, and thereafter
      for a period of seven (7) years, all Confidential Information disclosed to
      it by or on behalf of the other party, and that it will not, without the
      written consent of such other party, use Confidential Information for any
      purpose other than the purposes indicated herein. These restrictions shall
      not apply to Confidential Information which: (i) is or becomes public
      knowledge (through no fault of the receiving party); (ii) is made lawfully
      available to the receiving party by an independent third party that, to
      the knowledge of the receiving party, is under no duty of confidentiality
      to the disclosing party; (iii) is already in the receiving party's
      possession at the time of receipt from the disclosing party (and such
      prior possession can be demonstrated by competent evidence by the
      receiving party); (iv) is independently developed by the receiving party
      and/or Affiliates (and such independent development can be demonstrated by
      competent evidence by the receiving party); or (v) is required by law,
      regulation, rule, act or order of any governmental authority or agency to
      be disclosed by the receiving party, provided, however, if reasonably
      possible, such receiving party gives the disclosing party sufficient
      advance written notice to permit it to seek a protective order or other
      similar order with respect to such Confidential Information and,
      thereafter, the receiving party discloses only the minimum Confidential
      Information required to be disclosed in order to comply.

4.2   PharmaBio on the one hand and Discovery on the other hand shall limit
      disclosure of the other party's Confidential Information to only those of
      their respective officers, representatives, agents and employees
      (collectively "Agents") who are directly concerned with the performance of
      this Agreement and have a legitimate need to know such Confidential
      Information in the performance of their duties.

4.3   All Discovery inventions, processes, know-how, patents, trade secrets,
      copyrights, trade names, trademarks, service marks, marketing materials,
      proprietary materials or other intellectual property of any kind, and all
      improvements to any of the foregoing (collectively, "Discovery Property"),
      disclosed, used, improved, modified or developed in connection with the
      relationship contemplated by this Agreement shall remain the sole and
      exclusive property of Discovery. PharmaBio shall not have any right, title
      or interest in or to any Discovery Property.


                                       9
<PAGE>

4.4   Discovery acknowledges that PharmaBio (and its Affiliates) possess certain
      inventions, processes, know-how, trade secrets, improvements, other
      intellectual properties and other assets, including but not limited to
      analytical methods, procedures and techniques, computer technical
      expertise and software, and business practices, including, but not limited
      to the Innovex Territory Management System (ITMS), which have been
      independently developed by PharmaBio and/or its Affiliates (collectively
      "Quintiles Property"). Any Quintiles Property or improvements thereto
      which are disclosed, used, improved, modified or developed by Quintiles
      under or during the term of this Agreement shall remain the sole and
      exclusive property of PharmaBio or the respective Affiliates.

5.0   Independent Contractor Relationship.

      For the purposes of this Agreement, Discovery and PharmaBio are
      independent contractors and nothing contained in this Agreement shall be
      construed to place them in the relationship of partners, principal and
      agent, employer and employee or joint venturers. Neither Discovery nor
      PharmaBio shall have the power or right to bind or obligate the other
      party, nor shall either party hold itself out as having such authority.

6.0   Termination.

      Either party may terminate this Agreement for material breach upon thirty
      (30) days written notice specifying the nature of the breach, if such
      breach (i) has not been substantially cured within the thirty (30) day
      period or (ii) is not curable within such 30-day period and the breaching
      party has not commenced and diligently continued during such 30-day period
      reasonable actions to cure such breach. During the 30-day cure period for
      termination due to breach, each party will continue to perform its
      obligations under this Agreement. Either party may terminate this
      Agreement immediately upon provision of written notice if the other party
      becomes insolvent or files for bankruptcy or is not otherwise able to pay
      its obligations as they become due and payable.

7.0   Indemnification and Liability Limits.

7.1   PharmaBio shall indemnify, defend and hold harmless Discovery, its
      Affiliates and its and their respective directors, officers, employees and
      agents from and against any and all losses, claims, actions, damages,
      liabilities, penalties, costs and expenses (including reasonable
      attorneys' fees and court costs) (collectively, "Losses"), resulting from
      any: (i) material breach by PharmaBio (or its employees) of its
      obligations hereunder; (ii) willful misconduct or grossly negligent acts
      or omissions of PharmaBio or its employees; and (iii) material violation
      by PharmaBio or its employees of any municipal, county, state or federal
      laws, rules or regulations applicable to the performance of PharmaBio's
      obligations under this Agreement; except, in each case, to the extent such
      Losses are determined to have resulted from the gross negligence or
      willful misconduct of Discovery or its employees.

7.2   Discovery shall indemnify, defend and hold harmless PharmaBio and its
      Affiliates and their respective directors, officers, employees and agents
      from and against any and all


                                       10
<PAGE>

      Losses resulting from: (i) any third party claim arising from the
      manufacture, storage, packaging, production, transportation, distribution,
      use, sale or other disposition of the Product; (ii) material breach by
      Discovery (or its employees) of its obligations hereunder; (iii) willful
      misconduct or grossly negligent acts or omissions of Discovery or its
      employees; and (iv) material violation by Discovery or its employees of
      any municipal, county, state or federal laws, rules or regulations
      applicable to the performance of Discovery's obligations under this
      Agreement, except, in each case, to the extent such Losses are determined
      to have resulted from the gross negligence or willful misconduct of
      PharmaBio or any of its employees.

7.3   In the event of a third party claim or lawsuit, the party seeking
      indemnification hereunder (the "Indemnified Party") shall give the party
      obligated to indemnify (the "Indemnifying Party") prompt written notice of
      any claim or lawsuit (including a copy thereof), provided that the failure
      of an Indemnified Party to notify the Indemnifying Party on a timely basis
      will not relieve the Indemnifying Party of any liability that it may have
      to the Indemnified Party unless the Indemnifying Party demonstrates that
      the defense of such action is materially prejudiced by the Indemnified
      Party's failure to give such notice. The Indemnified Party and its
      employees shall fully cooperate with Indemnifying Party and its legal
      representatives in the investigation and defense of any matter the subject
      of indemnification, which defense shall be managed by the Indemnifying
      Party in a manner, including the selection of legal counsel, reasonably
      acceptable to the Indemnified Party. The Indemnified Party shall not
      unreasonably withhold its approval of the settlement of any such claim,
      liability, or action by Indemnifying Party covered by this indemnification
      provision; provided that such settlement does not include an admission or
      acknowledgement of liability or fault of the Indemnified Party.

7.4   Neither PharmaBio nor Discovery, nor any of such party's Affiliates,
      directors, officers, employees, subcontractors or agents shall have, under
      any legal theory (including, but not limited to, contract, negligence and
      tort liability), any liability to any other party hereto for any loss of
      opportunity or goodwill, or any type of special, incidental, indirect or
      consequential damage or loss, in connection with or arising out of this
      Agreement. For the avoidance of doubt, a claim by PharmaBio for
      commissions on Net Sales payable by Discovery hereunder or a claim by
      Discovery for payments pursuant to Section 3.1 shall not be limited in any
      way pursuant to the provisions set forth in the preceding sentence.

8.0   Notices.

      Any notice required to be given by either party shall be in writing. All
      notices shall be to the parties and addresses listed below, and shall be
      deemed sufficiently given (i) when received, if delivered personally or
      sent by facsimile transmission with confirmed receipt, or (ii) one
      business day after the date mailed or sent by an internationally
      recognized overnight delivery service with charges prepaid.


                                       11
<PAGE>

      If to PharmaBio:  PharmaBio Development, Inc.
                        4709 Creekstone Drive
                        Durham, NC 27703
                        Attention: President
                        Fax: 919-998-2090

      With a copy to:   General Counsel
                        PharmaBio Development, Inc.
                        4709 Creekstone Drive
                        Durham, NC 27703
                        Fax: 919-998-2090

      If to Discovery:  Discovery Laboratories, Inc.
                        350 South Main Street, Suite 307
                        Doylestown, PA 18901
                        Attention: Robert J. Capetola, Ph.D., President and CEO
                        Fax: 215-340-3940

      With a copy to:   Roberts, Sheridan & Kotel
                        The New York Practice of
                        Dickstein Shapiro's Corporate & Finance Group
                        1177 Avenue of the Americas
                        New York, NY 10036-2714
                        Attn: Ira L. Kotel
                        Facsimile: (212) 835-1400

9.0   Assignment.

      No party may assign any of its rights or obligations under this Agreement
      to any third party without the written consent of the other party, except
      that Discovery may assign its rights or obligations under this Agreement
      to a bona fide third party that (i) acquires all of Discovery's business
      (a "Permitted Sale") provided that such party assumes all of Discovery's
      rights and obligations under this Agreement. Other than pursuant to a
      Permitted Sale, Discovery may not, without the written approval of
      PharmaBio, assign any of its rights in the Product in the Territory to a
      third party. PharmaBio may at any time assign or transfer any of its
      rights or obligations under this Agreement to an Affiliate so long as such
      Affiliate agrees in an enforceable written instrument to be bound by all
      the terms and conditions of this Agreement as if it were PharmaBio and a
      party thereto, which instrument shall be delivered a reasonably
      practicable time prior to such assignment. Nothing in this Section 9.0
      shall preclude the transfer of a party's rights and obligations under this
      Agreement in conjunction with a merger in which such party is not the
      surviving entity.

10.0  General Provisions.

10.1  This Agreement shall be construed, governed, interpreted, and applied in
      accordance with the laws of the State of Delaware, without giving effect
      to the principles of conflict of laws.


                                       12
<PAGE>

10.2  The provisions of Articles 1 (except for Section 1.7), 2, 45, 7, 8, 10 and
      11 shall survive the termination of this Agreement for any reason.

10.3  This Agreement contains the entire understandings of the parties with
      respect to the subject matter herein and cancels all previous agreements
      (oral and written), negotiations and discussions dealing with the same
      subject matter. The parties, from time to time during the term of this
      Agreement, may modify any of the provisions hereof only by an instrument
      in writing duly executed by the parties.

10.4  No failure or delay on the part of a party in either exercising or
      enforcing any right under this Agreement will operate as a waiver of, or
      impair, any such right. No single or partial exercise or enforcement of
      any such right will preclude any other or further exercise or enforcement
      thereof or the exercise or enforcement of any other right. No waiver of
      any such right will have effect unless given in a signed writing. No
      waiver of any such right will be deemed a waiver of any other right.

10.5  If any part or parts of this Agreement are held to be illegal, void or
      ineffective, the remaining portions of this Agreement shall remain in full
      force and effect. If any of the terms or provisions are in conflict with
      any applicable statute or rule of law, then such term(s) or provision(s)
      shall be deemed inoperative to the extent that they may conflict
      therewith, and shall be deemed to be modified or conformed with such
      statute or rule of law. In the event of any ambiguity respecting any term
      or terms hereof, the parties agree to construe and interpret such
      ambiguity in good faith in such a way as is appropriate to ensure its
      enforceability and viability.

10.6  The headings contained in this Agreement are used only as a matter of
      convenience, and in no way define, limit, construe or describe the scope
      or intent of any section of this Agreement.

10.7  The individuals signing below are authorized and empowered to bind the
      parties to the terms of this Agreement.

10.8  Whenever provision is made in this Agreement for either Party to secure
      the consent or approval of the other, that consent or approval shall not
      unreasonably be withheld or delayed, and whenever in this Agreement
      provisions are made for one Party to object to or disapprove a matter,
      such objection or disapproval shall not unreasonably be exercised. For the
      avoidance of doubt, PharmaBio's funding decisions under Section 3.3(b)
      shall not be deemed a "consent or approval" for purposes of this Section
      10.8.

11.0  Dispute Resolution:

11.1  Governing Law. This Agreement, including, without limitation, the
      interpretation, performance, enforcement, breach or termination thereof
      and any remedies relating thereto, shall be governed by and construed in
      accordance with the laws of the State


                                       13
<PAGE>

      of Delaware, United States of America, as applied to agreements executed
      and performed entirely in the State of Delaware, without regard to
      conflicts of law rules.

11.2  Internal Review. In the event that a dispute, difference, claim, action,
      demand, request, investigation, controversy, threat, discovery request or
      request for testimony or information or other question arises pertaining
      to any matters which arise under, out of, in connection with, or in
      relation to this Agreement (a "Dispute") and either party so requests in
      writing, prior to the initiation of any formal legal action, the Dispute
      will be submitted to the JCC, which will use its good faith efforts to
      resolve the Dispute within ten (10) days. If the JCC is unable to resolve
      the Dispute in such period, the JCC will refer the Dispute to the Chief
      Executive Officers of Discovery and Quintiles Corp. For all Disputes
      referred to the Chief Executive Officers, the Chief Executive Officers
      shall use their good faith efforts to meet at least two times in person
      and to resolve the Dispute within ten (10) days after such referral.

11.3  Arbitration.

      (a)   If the parties are unable to resolve any Dispute under Section 11.2,
            then either party may require the matter to be settled by final and
            binding arbitration by sending written notice of such election to
            the other party clearly marked "Arbitration Demand". Thereupon such
            Dispute shall be arbitrated in accordance with the terms and
            conditions of this Section 11.3 Notwithstanding the foregoing,
            either party may apply to a court of competent jurisdiction for a
            temporary restraining order, a preliminary injunction, or other
            equitable relief to preserve the status quo or prevent irreparable
            harm.

      (b)   The arbitration panel will be composed of three arbitrators, one of
            whom will be chosen by Discovery, one by Quintiles, and the third by
            the two so chosen. If both or either of Discovery or Quintiles fails
            to choose an arbitrator or arbitrators within 14 days after
            receiving notice of commencement of arbitration, or if the two
            arbitrators fail to choose a third arbitrator within 14 days after
            their appointment, the American Arbitration Association shall, upon
            the request of both or either of the parties to the arbitration,
            appoint the arbitrator or arbitrators required to complete the
            panel. The arbitrators shall have reasonable experience in the
            matter under dispute. The decision of the arbitrators shall be final
            and binding on the parties, and specific performance giving effect
            to the decision of the arbitrators may be ordered by any court of
            competent jurisdiction.

      (c)   Nothing contained herein shall operate to prevent either party from
            asserting counterclaim(s) in any arbitration commenced in accordance
            with this agreement, and any such party need not comply with the
            procedural provisions of this Section 11.3 in order to assert such
            counterclaim(s).


                                       14
<PAGE>

      (d)   The arbitration shall be filed with the office of the American
            Arbitration Association ("AAA") located in Wilmington, Delaware or
            such other AAA office as the parties may agree upon (without any
            obligation to so agree). The arbitration shall be conducted pursuant
            to the Commercial Arbitration Rules of AAA as in effect at the time
            of the arbitration hearing, such arbitration to be completed in a
            sixty (60) day period. In addition, the following rules and
            procedures shall apply to the arbitration:

      (e)   The arbitrators shall have the sole authority to decide whether or
            not any Dispute between the parties is arbitrable and whether the
            party presenting the issues to be arbitrated has satisfied the
            conditions precedent to such party's right to commence arbitration
            as required by this Section 11.3.

      (f)   The decision of the arbitrators, which shall be in writing and state
            the findings the facts and conclusions of law upon which the
            decision is based, shall be final and binding upon the parties, who
            shall forthwith comply after receipt thereof. Judgment upon the
            award rendered by the arbitrator may be entered by any competent
            court. Each party submits itself to the jurisdiction of any such
            court, but only for the entry and enforcement to judgment with
            respect to the decision of the arbitrators hereunder.

      (g)   The arbitrators shall have the power to grant all legal and
            equitable remedies (including, without limitation, specific
            performance) and award compensatory damages provided by applicable
            law, but shall not have the power or authority to award punitive
            damages. No party shall seek punitive damages in relation to any
            matter under, arising out of, or in connection with or relating to
            this Agreement in any other forum.

      (h)   The parties shall bear their own costs in preparing for and
            participating in the resolution of any Dispute pursuant to this
            Section 11.3, and the costs of the arbitrator(s) shall be equally
            divided between the parties; provided, however, that each party
            shall bear the costs incurred in connection with any Dispute brought
            by such party that the arbitrators determine to have been brought in
            bad faith.

      (i)   Except as provided in the last sentence of Section 11.3(a), the
            provisions of this Section 11.3 shall be a complete defense to any
            suit, action or proceeding instituted in any federal, state or local
            court or before any administrative tribunal with respect to any
            Dispute arising with regard to this Agreement. Any party commencing
            a lawsuit in violation of this Section 11.3 shall pay the costs of
            the other party, including, without limitation, reasonable
            attorney's fees and defense costs.


                                       15
<PAGE>

11.4  Costs. The parties shall bear their own costs in preparing for and
      participating in the resolution of any Dispute, and the costs of
      mediator(s) and arbitrator(s) shall be equally divided between the
      parties.


                                       16
<PAGE>

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
through their duly authorized officers on the date(s) set forth below.

PHARMABIO DEVELOPMENT, INC.             DISCOVERY LABORATORIES, INC.


By:     /s/ Thomas C. Perkins           By      /s/ David L. Lopez
       -------------------------------         ---------------------------------

Name:   Thomas C. Perkins               Name:   David L. Lopez
       -------------------------------         ---------------------------------

Title:  Vice President and General      Title:  Vice President and
        Counsel                                 General Counsel
       -------------------------------         ---------------------------------


                                       17