Exhibit 10.1


***Text
Omitted and Filed Separately

with the Securities and Exchange Commission.

Confidential Treatment Requested

Under 17 C.F.R. Sections 200.80(b)(4)

and 240.24b-2.


May 1, 2006


Metabasis
Therapeutics, Inc.

11119 North Torrey Pines Road

La Jolla, CA 92037


Re:                             Exclusive
License and Research Collaboration Agreement dated as of December 23,
2003, as amended from time to time prior to the date hereof (as so amended, the ”Collaboration Agreement”) between Merck & Co., Inc. (“Merck”) and
Metabasis Therapeutics, Inc. (“Metabasis”)


Ladies and Gentlemen:


This Letter (this “Letter”)
will confirm the understanding of Merck and Metabasis regarding certain matters
relating to the Collaboration Agreement and is intended to be legally binding
on both parties.  Capitalized terms used
but not otherwise defined in this Letter
shall have the meanings provided in the Collaboration Agreement.  Whereas the Research Program Term under the
Collaboration Agreement was scheduled to have terminated on December 23, 2005 and
the Parties have extended the Research Program Term under the terms and
conditions specified in this Letter.


The Parties hereby acknowledge and agree to perform
additional research of Collaboration Compounds and amend the Collaboration
Agreement as follows:


1.                                      Pursuant
to Section 2.7.1 of the Collaboration Agreement, the Research Program Term
has been extended from December 23, 2005 until May 31, 2006 (such extended time
period being referred to herein as the “Extended Research Period”).
Notwithstanding anything to the contrary in Section 2.4 of the Collaboration
Agreement, the Committee is not required to meet during the Extended Research
Period unless mutually agreed by the Parties.


2.                                      Notwithstanding
anything to the contrary in Sections 2.3, 2.7 and/or 5.2 of the Collaboration
Agreement, during the Extended Research Period [***], and [***].


3.                                      The
Research Plan has been modified and is fully set forth in its entirety in its
current form in Exhibit A to this Letter (provided that Schedules I, II, III, IV and V
to the Research Plan shall remain in the forms in effect immediately prior to
the effective date of this Letter).


4.                                      The
term “MB09084” shall mean that certain
Collaboration Compound designated as MB09084, the structure of which is set
forth in the Research Plan[***].






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5.                                      During
the Extended Research Period, Metabasis agrees to perform the research
activities with respect to MB09084 described in the Research Plan under the
heading Research to Be Performed by Metabasis During the
Extended Research Period (the ”Extended
Research”), which shall include, without limitation, [***].  On or before April 30, 2006, Metabasis shall
deliver to Merck [***] (the ”Deliverable”)
which shall [***].


6.                                      As promptly as commercially reasonable after
Merck’s receipt of the Deliverable [***] from Metabasis, Merck shall initiate
the series of studies of MB09084 described in the Research Plan under the
heading Research to Be Performed by Merck Upon Receipt of
Deliverable (each, a ”Merck Study”
and collectively, the ”Merck Studies”);
provided that Merck is not required to [***].  If the results of a Merck Study meet or
exceed the applicable success criteria for such Merck Study as set forth in the
Research Plan, Merck shall promptly initiate the next Merck Study specified in
the Research Plan, and provided that each preceding Merck Study meets or
exceed the applicable success criteria as set forth in the Research Plan, Merck
shall [***].  Promptly following
completion of each Merck Study that Merck conducts, Merck shall disclose to
Metabasis in writing a report of the results of such Merck Study.


7.                                      Merck
shall pay Metabasis the amount of [***] only in the event that: (a) the
Deliverables satisfy the Deliverable Specifications; and (b) (i) the results of
all of the Merck Studies meet or exceed the applicable success criteria set
forth in the Research Plan, (ii) Merck [***], or (iii) Merck [***]. This Paragraph 7 shall be Merck’s only
obligation to reimburse Metabasis for its FTE work during the Extended Research
Period.


8.                                      For
purposes of Section 11.4 of the Collaboration Agreement, Metabasis’
address for delivery of notices shall be amended as follows:


Metabasis Therapeutics, Inc.

11119 North Torrey Pines Road

La Jolla, CA 92037

Attention: Chief Executive Officer

Facsimile No.: (858) 587-2770


9.                                      For
the purposes of clarity (a) Merck acknowledges that its diligence obligations
under Section 3.3 of the Collaboration Agreement apply to MB09084 as they would
to any other Collaboration Compound, and (b) Merck and Metabasis each
acknowledge and agree that the initiation, performance and/or completion of any
and/or all of the Merck Studies shall [***].


This Letter shall become effective as of December 23, 2005.  Except as amended by this Letter, together
with the Schedules and Exhibits attached hereto, the terms and conditions of
the Collaboration Agreement shall remain in full force and effect in all other
respects, unless further amended by written agreement in accordance with
Section 11.7 of the Collaboration Agreement.  On and after the effectiveness of this
Letter, each reference in the Collaboration Agreement to “this Agreement”, “hereunder”,
“hereof”, “herein” or words of like import referring to the Collaboration
Agreement shall mean and be a reference to the Collaboration Agreement as
amended by this Letter.  The Parties
hereby further agree that the terms and conditions set forth in Article 11 of
the Collaboration Agreement, including without limitation the Assignment and
Change of Control provisions of Section 11.2, the Applicable Law
provisions of Section 11.5






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and the Dispute Resolution provisions of Section 11.6, shall apply
to this Letter as if fully set forth herein;


This Letter may be executed (including, without limitation, by
facsimile signature) in two counterparts, each of which shall be deemed an
original, but both of which together shall constitute one and the same
instrument.


If the foregoing is acceptable to you, please sign this Letter in the space provided below
and return it to me.


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  MERCK
  & CO., INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ M. J.
  Turner, Ph.D.

  	
   

  
	
   

  	
  Name: 

  	
  M. J. Turner,
  Ph.D.

  	
   

  
	
   

  	
  Title: 

  	
  Senior Vice
  President Worldwide

  	
   

  
	
   

  	
  Licensing and
  External Research

  	
   

  
						



 


Agreed to and accepted as of the date first set
forth above:


	
  METABASIS THERAPEUTICS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Paul K. Laikind

  	
   

  
	
  Name:

  	
  Paul K. Laikind

  	
   

  
	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
					



 



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EXHIBIT A


Amended
Research Plan


The Research Plan may be
revised to include a similar series of experiments with other Merck-owned or
controlled compounds, subject to mutual agreement by the Parties and subject to
availability of FTEs within the Research Program as described in the
Collaboration Agreement.


[***] of the Research
Program significant progress has been made in the [***]. In summary, [***].


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


[***]


The
achievement of [***]


An
important [***]


Research to Be Performed by Metabasis During the Extended Research
Period


MTI
has [***]


[***]






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Research
to Be Performed by Merck Upon Receipt of Deliverable


Activities
[***]


[***]


[***]






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