Document:

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                                                                   EXHIBIT 10.15

                                                                 CERYLID PTY LTD
                                                            (ABN 92 061 632 684)

                                                                             and

                                                      ANADYS PHARMACEUTICALS INC

                                                             SCREENING AGREEMENT

                                                            Arnold Bloch Leibler
                                                            Ref: SGS:01- 1105573
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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                          <C>
1     DEFINITIONS AND INTERPRETATION......................................    1
2     FEES................................................................   12
3     SUPPLY OF SAMPLE EXTRACTS...........................................   13
4     USE OF SAMPLE EXTRACTS..............................................   13
5     SCREENS / TARGETS...................................................   13
6     SCREENING...........................................................   14
7     DEREPLICATION AND CHARACTERISATION..................................   15
8     TERM................................................................   16
9     REPORTING...........................................................   16
10       IDENTIFIED COMPOUNDS.............................................   16
11       EVALUATION COMPOUNDS.............................................   17
12       LICENCE OF SELECTED COMPOUNDS....................................   18
13       INVENTIONS.......................................................   18
14       PRIOR RIGHTS.....................................................   21
15       MANAGEMENT COMMITTEE AND REPORTING...............................   22
16       TERMINATION......................................................   23
17       DISPUTE RESOLUTION...............................................   24
18       CONFIDENTIAL INFORMATION.........................................   25
19       PUBLICITY........................................................   27
20       REPRESENTATIONS AND WARRANTIES...................................   27
21       LIMITATION OF LIABILITY..........................................   28
22       INDEMNITY........................................................   29
23       UNCONTROLLABLE EVENTS............................................   29
24       NOTICES..........................................................   31
25       GENERAL PROVISIONS...............................................   32
26       GOVERNING LAW AND JURISDICTION...................................   34
</TABLE>

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                  *** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
                  DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
                  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17
                  C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

                               SCREENING AGREEMENT

DATE

This Agreement is made on the date specified in Item 1 of Schedule 1.

PARTIES

This Agreement is made between the parties described in Item 2 of Schedule 1.

BACKGROUND

A.       Cerylid has an extensive library of natural product extracts and
         conducts screening of its library to identify compounds of possible
         therapeutic interest.

B.       Anadys wishes to receive samples from Cerylid's library and conduct
         screens using those samples and to engage Cerylid to conduct
         dereplication and characterisation of hits obtained by Anadys on the
         terms of this Agreement.

AGREEMENT

1        DEFINITIONS AND INTERPRETATION

         1.1      DEFINITIONS

                  In this Agreement:

                  "ACCESS FEE" means the amount specified in Item 3 of Schedule
                  1;

                  "AFFILIATE" means, in relation to a Party, any person,
                  organization, corporation or other entity controlled by,
                  controlling or under common control with that Party; For the
                  purposes of this definition, "control" means that an entity
                  owns, directly or indirectly, at least 50% of the voting
                  shares or other ownership interest of another entity, or has
                  the actual ability to control and direct the management of
                  another entity, whether by contract or otherwise;

                  "AGREEMENT" means this agreement;

                  "ANADYS" means Anadys Pharmaceuticals, Inc.;

                  "ANADYS INVENTIONS" means all:

                  (a)      Inventions created or developed by or conceived of
                           and reduced to practice as part of the Screening
                           Activities solely by Anadys' employees and
                           contractors; and

                  (b)      Targets and Screens,

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                                        2

                  including, without limitation, Intellectual Property Rights
                  claiming Anadys Inventions specified in paragraph (a) or (b)
                  of this definition, but excluding Identified Compounds and
                  Evaluation Compounds arising during and out of the Screening
                  Activities;

                  "ANADYS PATENTS" means all patents and patent applications
                  claiming Anadys Inventions;

                  "ANADYS SCREENING DATA" means, with respect to each Screen
                  conducted by or on behalf of Anadys, data generated in the
                  conduct of that Screen regarding assay validation and assay
                  completion and information regarding the biological activity
                  of each of the Wells;

                  "ASSESSMENT PERIOD" means, in respect of an Identified
                  Compound, the period specified in Item 5 of Schedule 1
                  commencing on the date on which Cerylid provides to Anadys the
                  last of the items it is required to provide to Anadys pursuant
                  to clause 10.1;

                  "BUSINESS DAY" means a day on which banks are open for
                  business in Melbourne other than a Saturday, a Sunday or a
                  public holiday;

                  "CERYLID" means Cerylid Pty Limited;

                  "CERYLID GROUP" means Cerylid and each Related Body Corporate
                  of Cerylid;

                  "CERYLID INVENTIONS" means all:

                  (a)      Inventions created or developed by or conceived of
                           and reduced to practice as part of the Screening
                           Activities solely by Cerylid's employees and
                           contractors; and

                  (b)      Identified Compounds and Evaluation Compounds arising
                           during and out of the Screening Activities,

                  including, without limitation, Intellectual Property Rights
                  claiming Cerylid Inventions described in paragraph (a) or (b)
                  of this definition;

                  "CERYLID LIBRARY" means natural product extracts Controlled by
                  Cerylid during the Term;

                  "CERYLID PATENTS" means all patents and patent applications
                  claiming Cerylid Inventions;

                  "CHARACTERISATION" means chemical isolation and determination
                  of chemical structure;

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                                       3

                  "CHARACTERISATION FEE" means the characterisation fee
                  specified in Item 7 of Schedule 1;

                  "CLAIM" means any claim, cost, damages, debt, expense,
                  liability, loss, suit, action, demand, cause of action or
                  proceeding of any kind initiated by a third party irrespective
                  of:

                  (a)      how or when it arises;

                  (b)      whether it is actual or contingent;

                  (c)      whether or not it is in respect of legal or other
                           costs, damages, expenses, fees or losses;

                  (d)      whether or not it is in respect of a breach of trust
                           or of a fiduciary or other duty or obligation; and

                  (e)      whether or not it arises at law or otherwise;

                  "COMMENCEMENT DATE" means the date of this Agreement;

                  "COMPOUND SAMPLE" means a sample comprising sufficient
                  material to conduct reasonable follow-up biological and
                  chemical characterization of activity (typically [...***...]
                  mg) of an Identified Compound;

                  "CONFIDENTIAL INFORMATION" means all of the Information, other
                  than any part of the Information that:

                  (a)      is or becomes generally available to the public other
                           than as a result of a breach by the Recipient of this
                           Agreement;

                  (b)      was known to the Recipient or any of its officers,
                           representatives, employees or advisers (as evidenced
                           by written records of the Recipient made prior to the
                           time the Information is disclosed to the Recipient)
                           on a non-confidential basis before the Recipient
                           received the Information; or

                  (c)      became available to the Recipient or any of its
                           officers, representatives, employees or advisers on a
                           non-confidential basis from another source not in
                           breach of an obligation of confidence owing by that
                           source to the Discloser (of which the Recipient was
                           aware or ought to have been aware);

                  "CONTROLLED" means, with respect to any material, information
                  or Intellectual Property Right, that the Party owns or has a
                  licence to such material, information or Intellectual Property
                  Right and has the ability to grant access, a licence or a
                  sublicence to such material,

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       4

                  information or intellectual property right to the other Party
                  as provided for in this Agreement without violating an
                  agreement with a Third Party as of the time the Party would be
                  first required under this Agreement to grant the other Party
                  such access, licence or sublicense.

                  "CONTROLLER" has the meaning given to it in the Corporations
                  Act;

                  "CORPORATIONS ACT" means the Corporations Act 2001 (Cth);

                  "DEFAULT RATE" means the aggregate of the Interest Rate and
                  [...***...]% per annum;

                  "DEREPLICATION" means the process by which the number of
                  confirmed Hit Extracts from a Screen are reduced to a
                  sub-population thought to encapsulate all chemical species of
                  potential interest;

                  "DEREPLICATION FEE" means the dereplication fee specified in
                  Item 7 of Schedule 1;

                  "EVALUATION COMPOUND" means an Identified Compound in respect
                  of which Anadys has given Cerylid an Evaluation Notice;

                  "EVALUATION COMPOUND FEE" means the amount specified in Item 8
                  of Schedule 1;

                  "EVALUATION NOTICE" means a notice in writing which identifies
                  an Identified Compound in respect of which Anadys wishes to
                  undertake further evaluation;

                  "EVALUATION NOTICE DATE" means the date on which Anadys gives
                  Cerylid an Evaluation Notice;

                  "EVALUATION PERIOD" means, in respect of an Evaluation
                  Compound, the period specified in Item 6 of Schedule 1
                  commencing on the Evaluation Notice Date in respect of that
                  Evaluation Compound;

                  "EVENT OF DEFAULT" means, in relation to a Party:

                  (a)      an Insolvency Event occurs; or

                  (b)      a Party commits a material breach of its obligations
                           under this Agreement which:

                           (i)      if capable of being remedied, is not
                                    remedied within 30 Business Days of notice
                                    from the other Party, specifying the breach
                                    and requiring it to be remedied; or

                           (ii)     is not capable of remedy;

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       5

                  "EXTRACT" means a solution or suspension of chemicals derived
                  from a specimen of biota or the residue from the evaporation
                  of solvent from such a solution or suspension;

                  "FIELD" means the field described in Item 4 of Schedule 1;

                  "FINAL REPORT" means a comprehensive research report prepared
                  by Cerylid setting forth the results of the Dereplication and
                  the Characterisation undertaken by Cerylid in accordance with
                  this Agreement;

                  "FTE" means the equivalent of 12 months' (including normal
                  vacation days, sick days and holidays) work of a person,
                  carried out by 1 or more employees or consultants of a Party,
                  who devotes a portion of his or her time to the Research;

                  "GOVERNMENTAL AGENCY" means:

                  (a)      a government, whether foreign, federal, state,
                           territorial or local;

                  (b)      a department, office or minister of a government
                           acting in that capacity; or

                  (c)      a commission, delegate, instrumentality, agency,
                           board, or other governmental, semi-governmental,
                           judicial, administrative, monetary or fiscal
                           authority, whether statutory or not;

                  "HIT EXTRACT" means a Sample Extract with evidence of
                  biological activity in a Screen, which the Management
                  Committee (and ultimately Anadys, pursuant to Clause 15.2)
                  considers warrants progression to further evaluation;

                  "HPLC FRACTIONATION" means fractionation of Hit Extracts using
                  high pressure liquid chromatography gradients tailored to the
                  relevant polarity ranges in which bioactivities are localised,
                  yielding 40 fractions per parent extract in which active
                  compounds will be in Substantially Pure form;

                  "IDENTIFIED COMPOUND" means a compound, or group of related
                  compounds, that has been Characterised by Cerylid as a result
                  of the Screening Activities, and that, as of the Structural
                  Disclosure Date, is not:

                  (a)      already licensed to or subject to an option to
                           licence (which Cerylid does not have the unilateral
                           right to terminate) by a Third Party to whom Cerylid
                           is contractually bound; or

                  (b)      then under active development by Cerylid or any of
                           its Related Bodies Corporate;
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                  "INFORMATION" means the terms of this Agreement and all
                  information in any way relating to a Party or the business of
                  that Party including without limitation:

                  (a)      marketing and technical information;

                  (b)      customer, supplier, sales and receivables
                           information;

                  (c)      the processes, mechanisms and methodologies used by
                           the Party in its business; and

                  (d)      all financial information relating to that Party,

                  which is or has been disclosed (whether in writing, orally or
                  by any other means and whether directly or indirectly) to or
                  otherwise ascertained by the Recipient or its officers,
                  representatives, employees or advisers;

                  "INSOLVENCY EVENT" means, in relation to a Party, the
                  occurrence of any one or more of these events in relation to
                  that Party:

                  (a)      except for the purpose of a solvent reconstruction or
                           amalgamation which has the prior written consent of
                           the other Party:

                           (i)      process is filed in a court seeking an order
                                    that it be wound up or that a Controller be
                                    appointed to it or any of its assets, unless
                                    the application is withdrawn, struck out or
                                    dismissed within 15 Business Days of it
                                    being filed; or

                           (ii)     an order is made that it be wound up or that
                                    a Controller be appointed to it or any of
                                    its assets; or

                           (iii)    a resolution that it be wound up is passed
                                    by such Party;

                  (b)      a liquidator, provisional liquidator, administrator,
                           Controller or any similar official is appointed to,
                           or takes possession or control of, all or any of its
                           assets or undertaking;

                  (c)      it enters into an arrangement, compromise or
                           composition with any class of its creditors, or
                           process is filed in a court seeking approval of any
                           such arrangement, compromise or composition;

                  (d)      any action is taken by a Governmental Agency with a
                           view to cancelling its registration or to dissolving
                           it, or an application is made to the Governmental
                           Agency that any such action be taken;

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                                       7

                  (e)      it is insolvent within the meaning of section 95A of
                           the Corporations Act, or it otherwise states that it
                           is unable to pay its debts, or it is presumed to be
                           insolvent under any applicable law;

                  (f)      it stops or suspends the payment of all or a class of
                           its debts;

                  (g)      it stops or suspends the conduct of all or
                           substantially all of its business; or

                  (h)      anything having a substantially similar effect to any
                           of the events specified in the preceding paragraphs
                           happens to it under the law of any jurisdiction;

                  "INTELLECTUAL PROPERTY RIGHTS" means patents, copyright,
                  registered and unregistered design rights, registered and
                  unregistered trade marks, rights in know-how and confidential
                  information and all other intellectual and industrial property
                  rights (without limitation) and similar or analogous rights
                  existing under the laws of any country and all rights to apply
                  for or register such rights;

                  "INTEREST RATE" means, for any day, the rate percent per annum
                  that is described as the "Average Mid Rate" and appears on the
                  page entitled "BBSY" on the Reuters monitor system at or about
                  10.00 am on that day for a bank accepted bill of exchange
                  having a tenor of 30 days.

                  "INVENTIONS" means all Intellectual Property Rights created or
                  developed in the course of conducting the Research under this
                  Agreement or conceived of and reduced to practice as part of
                  the activities contemplated by this Agreement;

                  "JOINT INVENTIONS" means all Inventions created or developed
                  by or conceived of and reduced to practice as part of the
                  Screening Activities jointly by employees or contractors of
                  Cerylid and employees or contractors of Anadys including,
                  without limitation, Intellectual Property Rights claiming such
                  Inventions;

                  "JOINT PATENTS" means all patents and patent applications
                  claiming Joint Inventions;

                  "LC/MS ANALYSIS" means the technique of liquid
                  chromatography-mass spectroscopy;

                  "LICENCE" means a licence in the form of Schedule 3;

                  "LICENCE FEE" means the licence fee specified in Item 13 of
                  Schedule 1;

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                                       8

                  "MANAGEMENT COMMITTEE" means the committee established
                  pursuant to clause 14.2;

                  "PARTY" means a party to this Agreement;

                  "PERMITTED PURPOSE" means testing Sample Extracts for
                  biological activity against one or more Targets in the Field,
                  conducting LC/MS Analysis and all other activities
                  contemplated by this Agreement or the Research Plan;

                  "PRIMARY ASSAY" means an in vitro or biological assay
                  developed for the purpose of initial testing of Sample
                  Extracts to identify a sub-population of Sample Extracts which
                  show biological activity in the assay;

                  "PRIORITY HIT EXTRACTS" means those Hit Extracts, following
                  Dereplication, identified by the Management Committee on a
                  sound scientific basis as warranting further analysis, and
                  that are successfully regenerated by Refermentation of the
                  Producing Organism (or if not successfully regenerated by
                  Refermentation, such other Hit Extract nominated by Anadys on
                  a sound scientific basis) provided, however, that Anadys
                  shall, at its reasonable discretion have the final right to
                  determine whether the Priority Hit Extracts are advanced in
                  accordance with the Research Plan;

                  "PRODUCING ORGANISM" means a microbial isolate, the
                  fermentation and extraction of which yields a Hit Extract;

                  "QUARTER" means a period of 3 months ending on 31 March, 30
                  June, 30 September and 31 December respectively;

                  "RECIPIENT" means a Party that has received Confidential
                  Information of the other Party from the other Party;

                  "REFERMENTATION" means the process of repeating the
                  fermentation of a Producing Organism to yield a larger
                  quantity of a Hit Extract for the purpose of Characterisation;

                  "RELATED BODY CORPORATE" of a body corporate means another
                  body corporate which is related to the first body corporate
                  within the meaning of Section 50 of the Corporations Act;

                  "RESEARCH" means the collaborative research efforts of the
                  Parties to be conducted pursuant to this Agreement and the
                  Research Plan;

                  "RESEARCH PLAN" means the plan attached as Schedule 2;

                  "SAMPLE EXTRACTS" means the number of Extracts specified in
                  Item 9 of Schedule 1 from the Cerylid Library, of a Standard
                  Volume, the composition of which is as agreed by the Parties;

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                                       9

                  "SCREENING ACTIVITIES" means undertaking:

                  (a)      Screens pursuant to Clause 5;

                  (b)      Dereplication pursuant to Clause 7.1;

                  (c)      Characterisation pursuant to Clause 7.2; and

                  (d)      LC/MS Analysis;

                  "SCREENING DATA" means all data arising from the Screening
                  Activities;

                  "SCREENING EVENT" means the exposure of a Primary Assay to one
                  Extract on a single occasion;

                  "SCREENS" means the assays to be utilised for identification
                  of molecules by screening the Cerylid Library against Targets
                  in the Field, being any Primary Assay determined by Anadys and
                  approved by Cerylid in accordance with this Agreement and
                  Secondary Tests determined by Anadys for the purposes of this
                  Agreement;

                  "SECONDARY TESTS" means a combination of re-testing a Sample
                  Extract in the Primary Assay to confirm that the biological
                  activity of the Sample Extract observed on a single occasion
                  can be reproduced, and testing of the Sample Extract, or
                  additional samples derived therefrom, in any additional
                  biological assays which, at Anadys' reasonable discretion, are
                  deemed to be necessary in order to confirm biological activity
                  or rule out trivial or non-specific explanations for the
                  biological activity of the Sample Extract in the Primary
                  Assay;

                  "SECURITY INTEREST" means any mortgage, pledge, lien,
                  hypothecation, charge or other form of security interest or
                  interest in the nature of a security interest whatsoever;

                  "SELECTED COMPOUND" means an Evaluation Compound in respect of
                  which Anadys has given Cerylid a Selected Compound Notice;

                  "SELECTED COMPOUND NOTICE" means a notice in writing
                  identifying an Evaluation Compound in respect of which Anadys
                  wishes to obtain a Licence;

                  "SPE FRACTIONATION" means crude fractionation of Hit Extracts
                  by solid phase extraction yielding 10 fractions from each
                  parent extract to localise bioactivities to specific polarity
                  ranges;

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                                       10

                  "STANDARD VOLUME" means, in respect of a Sample Extract, a
                  dried amount of that Extract which was derived from at least
                  20 microlitres of initial extract;

                  "STRUCTURAL DISCLOSURE DATE" means, with respect to any
                  "Identified Compound", the date on which Cerylid provides to
                  Anadys the results of Characterisation of such Identified
                  Compound, including without limitation, structures of such
                  Identified Compound.

                  "SUBSTANTIALLY PURE" means consisting of approximately
                  [...***...]% or more of a single substance;

                  "TARGET" means targets which are selected by Anadys in
                  relation to which it proposes to conduct the Screens;

                  "TERM" means the period of 24 months (which may be extended if
                  an Uncontrollable Event (as defined below) occurs or upon
                  mutual agreement by the Parties) commencing on the
                  Commencement Date;

                  "THIRD PARTY" means any person or entity other than the
                  Parties or their respective Affiliates;

                  "UNCONTROLLABLE EVENT" means an event or cause beyond the
                  reasonable control of a Party including, without limitation:

                  (a)      act of God, lightning, storm, flood, fire, earthquake
                           or explosion, cyclone, tidal wave, landslide, adverse
                           weather conditions;

                  (b)      strike, lockout or other labour difficulty;

                  (c)      act of public enemy, war (declared or undeclared),
                           sabotage, blockade, revolution, riot, insurrection,
                           civil commotion, epidemic;

                  (d)      the effect of any applicable laws, orders, rules or
                           regulations or any government or other competent
                           authority;

                  (e)      embargo, inability to obtain any necessary materials,
                           equipment, facilities or qualified employees, power
                           or water shortage, lack of transportation; and

                  (f)      breakage or accident or other damage to machinery or
                           equipment; and

                  "WELL" means a well from any of the:

                  (a)      Sample Extracts;

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       11

                  (b)      fractions arising from the SPE Fractionation;

                  (c)      fractions arising from the HPLC Fractionation; or

                  (d)      Assay plates from a Screen.

         1.2      INTERPRETATION

                  In this Agreement, unless the context requires otherwise:

                  1.2.1    reference to any legislation or to any provision of
                           any legislation includes any modification or
                           re-enactment of, or any legislative provision
                           substituted for, and all legislation and statutory
                           instruments issued under, such legislation or such
                           provision and includes the corresponding legislation
                           in such other State or Territory of the Commonwealth
                           of Australia as may be relevant from time to time;

                  1.2.2    words (including words defined in this Agreement)
                           denoting the singular number include the plural and
                           vice versa;

                  1.2.3    words denoting individuals include corporations and
                           vice versa;

                  1.2.4    words denoting gender include all genders;

                  1.2.5    "written" and "in writing" include any means of
                           visible reproduction of words in a tangible and
                           permanently visible form;

                  1.2.6    reference to Clauses and Schedules are references to
                           clauses and schedules of this Agreement;

                  1.2.7    reference to any document or agreement includes
                           references to such document or agreement as novated,
                           supplemented, varied or replaced from time to time;

                  1.2.8    references to any party to this Agreement or any
                           other document or agreement includes its successors
                           or permitted assigns;

                  1.2.9    where the due date for payment of any moneys is not a
                           Business Day such moneys shall be due for payment on
                           the immediately preceding Business Day;

                  1.2.10   references to "$" or "dollars" are references to
                           currency of the United States of America;

                  1.2.11   references to time are references to Australian
                           Eastern Standard Time;

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                                       12

                  1.2.12   a reference to something being done by a given date
                           or within a certain time frame includes that thing
                           being done by any other date or within any other time
                           frame agreed by the parties;

                  1.2.13   the meaning of general words is not limited by
                           specific examples introduced by including for example
                           or other expressions.

         1.3      HEADINGS

                  The headings in this Agreement are the purpose of more
                  convenient reference only and shall not form part of this
                  Agreement or effect its construction or interpretation.

2        FEES

         2.1      ACCESS FEE

                  Anadys will pay the Access Fee to Cerylid, within 10 Business
                  Days of receipt by Anadys of the Sample Extracts, but no later
                  than 20 July 2002, in consideration of access to:

                  2.1.1    Cerylid's library of Extracts; and

                  2.1.2    Cerylid's expertise and assistance in selecting
                           Extracts for use in the Research..

                  Anadys must immediately notify Cerylid of its receipt of the
                  Sample Extracts.

         2.2      PROJECT-RELATED FEES

                  Anadys will pay to Cerylid:

                  2.2.1    the Dereplication Fee in respect of each Screen from
                           which Hit Extracts progress to Dereplication, within
                           10 Business Days of commencement of Dereplication in
                           respect of those Hit Extracts; and

                  2.2.2    the Characterisation Fee in respect of each Screen
                           from which Priority Hit Extracts progress to
                           Characterisation, within the first to occur of the
                           expiration of 20 Business Days after completion of
                           the Characterisation process in respect of those
                           Priority Hit Extracts and the expiration of 6 months
                           after completion of Characterisation of the first
                           Priority Hit Extract.

         2.3      INTEREST

                  Anadys must pay interest to Cerylid on all overdue amounts
                  under this Agreement:

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                                       13

                  2.3.1    on a daily basis from the date that amount fell due
                           until the date of payment (inclusive); and

                  2.3.2    at the Default Rate.

3        SUPPLY OF SAMPLE EXTRACTS

         3.1      SUPPLY

                  Cerylid will, within 20 Business Days of the Parties agreeing
                  on the composition of the Sample Extracts, dispatch the Sample
                  Extracts to Anadys.

         3.2      FREIGHT AND INSURANCE

                  Anadys will be responsible for the cost of freight and
                  insurance of the Sample Extracts.

4        USE OF SAMPLE EXTRACTS

         4.1      Anadys may only use the Sample Extracts for the Permitted
                  Purpose.

         4.2      Anadys may not:

                  4.2.1    sell or assign the Sample Extracts to any other
                           person other than an Affiliate of Anadys;

                  4.2.2    use the Sample Extracts other than for the Permitted
                           Purpose; or

                  4.2.3    deal with the Sample Extracts in a manner
                           inconsistent with the Permitted Purpose.

5        SCREENS / TARGETS

         5.1      NOTIFICATION OF SCREENS / TARGETS

                  Anadys will notify Cerylid of each Screen it proposes to
                  conduct and the Targets against which it intends to conduct
                  that Screen before conducting that Screen.

         5.2      CERYLID APPROVAL

                  Subject to Clause 5.3, Cerylid may, within 10 Business Days of
                  receiving a notification from Anadys under Clause 5.2, approve
                  or reject that Screen and the Targets.

         5.3      CIRCUMSTANCES OF REJECTION

                  Cerylid may only reject a Screen and Targets pursuant to
                  Clause 5.2 if at the time Cerylid receives notification from
                  Anadys pursuant to Clause 5.1:

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                                       14

                  5.3.1    a Third Party with whom Cerylid has an existing
                           contractual arrangement, has delivered to Cerylid
                           written notice nominating that Target as a target
                           against which it wishes to conduct screens using
                           Extracts from the Cerylid Library;

                  5.3.2    any of those Targets were the subject of an active
                           screening or drug development program by Cerylid or
                           any of its Related Bodies Corporate.

         5.4      EXCLUSIVITY

                  Cerylid will not conduct or authorise an Affiliate or Third
                  Party to conduct a screen using any of the Extracts from
                  Cerylid's library against:

                  5.4.1    any Target approved by Cerylid pursuant to Clause 5.2
                           during the Term;

                  5.4.2    any Target from which an Identified Compound or
                           Evaluation Compound has been derived, for the period
                           of the Assessment Period and Evaluation Period
                           respectively in relation to that compound; and

                  5.4.3    any Target from which a Selected Compound has been
                           derived:

                           5.4.3.1  for the period of [...***...] months; or

                           5.4.3.2  upon additional payment of $[...***...] by
                                    Anadys to Cerylid, [...***...] months,

                           from the commencement of the Licence in respect of
                           that Selected Compound.

6        SCREENING

         Anadys will:

         6.1      conduct each Screen accepted pursuant to Clause 5.2, (in
                  accordance with the Research Plan) within [...***...] days of
                  acceptance of that Screen by Cerylid ; and

         6.2      following completion of each Screen, provide Cerylid with the
                  Anadys Screening Data for such Screen and a list of all
                  Extracts in which bioactivity has been confirmed by retest.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       15

7        DEREPLICATION AND CHARACTERISATION

         7.1      DEREPLICATION

                  7.1.1    Within 90 days following receipt of all of the Anadys
                           Screening Data as to each Screen, the Management
                           Committee will agree upon a list of Hit Extracts, and
                           Cerylid will commence Dereplication (in accordance
                           with the Research Plan) on up to, the number of Hit
                           Extracts for each Screen conducted by Anadys
                           specified in Item 10 of Schedule 1 and complete that
                           Dereplication as soon as reasonably practicable.

                  7.1.2    Dereplication will occur in a 2 stage process
                           involving:

                           7.1.2.1  SPE Fractionation; and

                           7.1.2.2  HPLC Fractionation.

                  7.1.3    Notwithstanding Clause 7.1.1, if after providing
                           Anadys Screening Data to Cerylid and discussing such
                           data with Cerylid representatives, Anadys determines,
                           in its sole discretion, that it does not desire for
                           Cerylid to initiate Dereplication with respect to the
                           Hit Extracts resulting from a particular Screen,
                           Anadys may at the time it provides the Anadys
                           Screening Data to Cerylid in accordance with Clause
                           5.2 above, inform Cerylid of its desire to initiate a
                           replacement Screen, in which case it shall select
                           another target and initiate the procedures set forth
                           in Clause 5 and complete them within a further 90
                           days, with no additional payment owed to Cerylid. At
                           its discretion, Anadys may conduct any number of
                           replacement Screens, provided that it provides
                           Cerylid with the final set of screening data within
                           180 days from the receipt of Sample Extracts, and
                           that all Hit Extracts specified are derived from
                           screening of the same target.

         7.2      CHARACTERISATION

                  The Parties will work together to conduct Characterisation in
                  accordance with the Research Plan of up to the number of
                  Priority Hit Extracts specified in Item 11 of Schedule 1 for
                  each Screen conducted by Anadys and complete that
                  Characterisation as soon as practicable following
                  Dereplication pursuant to Clause 7.1. The Parties acknowledge
                  that, for the purpose of determining the number of Priority
                  Hit Extracts in respect of which Characterisation has been
                  conducted, compounds or groups of related compounds that are
                  Characterised by Cerylid but which are determined following
                  Characterisation to come within paragraph (a) or (b) of the
                  definition of "Identified Compound" are excluded.

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                                       16

8        TERM

         This Agreement will commence on the Commencement Date and, unless
         terminated earlier in accordance with its terms, will expire upon the
         expiry of the Term. The Parties may from time to time agree to extend
         this Agreement to allow sufficient time to conduct additional Screens.

9        REPORTING

                  Cerylid:

                  9.1      and Anadys will have regular teleconferences at
                           intervals and with timing to be agreed upon by the
                           parties with mutually approved minutes for the
                           purpose of discussing the progress of Cerylid's
                           Dereplication and Characterisation activities;

                  9.2      will provide to Anadys a Final Report at the
                           conclusion of its Dereplication and Characterisation
                           activities for each Screen (and in any event within
                           20 Business Days of completion of Characterisation);

                  9.3      will provide to Anadys prompt written notification of
                           any change in Cerylid's contractual arrangement with
                           any Third Party which has the effect of eliminating
                           or modifying the restriction on antibacterial targets
                           as contemplated by the initial definition of the
                           Field; and

                  9.4      will, upon shipping the Extracts and at each time
                           Cerylid ships fractions to Anadys, inform Anadys, in
                           writing, whether any of the Wells, or any of the
                           compounds derived from any of the Wells, are subject
                           to any exclusive option or license with any Third
                           Party.

10       IDENTIFIED COMPOUNDS

         10.1     NOTIFICATION BY CERYLID

                  Cerylid will, as soon as reasonably practicable after
                  identifying an Identified Compound:

                  10.1.1   notify Anadys in writing of the identity of that
                           Identified Compound;

                  10.1.2   unless it has already done so, provide to Anadys, all
                           information and data generated by Cerylid in respect
                           of that Identified Compound; and

                  10.1.3   at the request of Anadys, use commercially reasonable
                           efforts to provide to Anadys a Compound Sample of
                           that Identified Compound.

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                                       17

         10.2     ASSESSMENT PERIOD

                  Anadys may during the Assessment Period:

                  10.2.1   conduct further assessment and analysis of an
                           Identified Compound; and

                  10.2.2   nominate an Identified Compound as an Evaluation
                           Compound by giving an Evaluation Notice to Cerylid
                           and paying to Cerylid the Evaluation Compound Fee (if
                           an Evaluation Compound Fee is required in respect of
                           that Identified Compound nominated as an Evaluation
                           Compound in accordance with Item 8 of Schedule 1).

11       EVALUATION COMPOUNDS

         11.1     RIGHTS OF CUSTOMER

                  Anadys may, during the Evaluation Period for any Evaluation
                  Compound:

                  11.1.1   conduct further medicinal or combinatorial chemistry
                           and biological and pharmacological analysis of
                           Evaluation Compounds; and

                  11.1.2   subject to Clause 12, obtain a Licence of an
                           Evaluation Compound, by giving to Cerylid a Selected
                           Compound Notice and paying the Licence Fee to
                           Cerylid.

         11.2     SUPPLY OF EVALUATION COMPOUNDS

                  Anadys may, during the Evaluation Period for any Evaluation
                  Compound, request Cerylid to provide to Anadys additional
                  amounts of such Evaluation Compound. Cerylid will, if it has
                  not already provided a Compound Sample in respect of such
                  Evaluation Compound to Anadys pursuant to Clause 10.1.3, use
                  commercially reasonable efforts to supply to Anadys the
                  amounts of the Evaluation Compound requested by Anadys, and,
                  in any event, at least [...***...] of such Evaluation
                  Compound, at no charge to Anadys. If Cerylid is unable to
                  obtain amounts requested in excess of [...***...] of the
                  Evaluation Compound without incurring additional expense or
                  without being required to undertake additional activities,
                  Cerylid will notify Anadys in writing of the costs of
                  supplying such amount before supplying that amount to Anadys.
                  The costs of supplying such amount will be calculated on the
                  basis that Cerylid will charge Anadys for the preparation and
                  provision of additional amounts of an Evaluation Compound that
                  exceed [...***...] at the FTE rate of $[...***...] per annum,
                  plus any out of pocket costs incurred by Cerylid that are
                  approved in advance by Anadys in writing. Anadys must pay
                  these amounts to Cerylid within 30 days of receipt of an
                  invoice from Cerylid.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       18

12       LICENCE OF SELECTED COMPOUNDS

         With respect to any Evaluation Compound, upon Anadys:

         12.1     giving Cerylid a Selected Compound Notice; and

         12.2     paying Cerylid the Licence Fee,

         Cerylid shall automatically grant Anadys the Licence in respect of such
         Selected Compounds.

13       INVENTIONS

         13.1     OWNERSHIP OF INVENTIONS

                  13.1.1   Except as expressly set forth in this Clause 13.1,
                           ownership of Inventions will be determined in
                           accordance with the rules of inventorship under
                           United States patent laws.

                  13.1.2   Cerylid will own all Cerylid Inventions.

                  13.1.3   Anadys will own all Anadys Inventions.

                  13.1.4   Except as set forth above, Cerylid and Anadys will
                           jointly own all Joint Inventions.

         13.2     PATENT PROSECUTION AND MAINTENANCE

                  13.2.1   Cerylid will be responsible for the preparation,
                           filing, prosecution and maintenance of all Cerylid
                           Patents at Cerylid's sole expense.

                  13.2.2   Anadys will be responsible for the preparation,
                           filing, prosecution and maintenance of all Anadys
                           Patents at Anadys' sole expense.

                  13.2.3   Cerylid will consider in good faith the requests and
                           suggestions of Anadys with respect to strategies for
                           filing and prosecuting Cerylid Patents claiming
                           Identified Compounds and Evaluation Compounds and
                           will keep Anadys informed of progress with regard to
                           such filing, prosecution, maintenance, enforcement
                           and defence of such Cerylid Patents. If Cerylid
                           desires to abandon any Cerylid Patent claiming any
                           Identified Compound or Evaluation Compound (except to
                           the extent the Evaluation Period for such Evaluation
                           Compound has expired unexercised), Cerylid will
                           provide reasonable prior written notice to Anadys of
                           such intention to abandon (which notice will, in any
                           event, be given no later than 30 days prior to the
                           next deadline for any action that may be taken with
                           respect to such Cerylid

<PAGE>
                                       19

                           Patent with the relevant patent office) and provide
                           Anadys an opportunity to discuss with Cerylid the
                           possibility of assuming responsibility for such
                           Cerylid Patent, provided that any such assumption of
                           responsibility by Anadys will be subject to the prior
                           written consent of Cerylid, which must not be
                           unreasonably withheld or delayed.

                  13.2.4   The Parties will agree, on a case-by-case basis,
                           which Party will be primarily responsible for the
                           preparation, filing, prosecution and maintenance of
                           any Joint Patents, and the parties will share the
                           reasonable expenses of such Joint Patents equally.
                           The responsible Party will consult with the other
                           Party as to the preparation, filing, prosecution and
                           maintenance of such Joint Patents reasonably prior to
                           any deadline or action with the relevant patent
                           office, and will furnish to the other Party copies of
                           all relevant documents reasonably in advance of such
                           consultation.

         13.3     COOPERATION OF THE PARTIES

                  Each Party agrees to cooperate fully in the preparation,
                  filing, prosecution and maintenance of any patent rights under
                  this Agreement. Such cooperation includes, but is not limited
                  to:

                  13.3.1   executing all papers and instruments, or requiring
                           its employees or contractors, to execute such papers
                           and instruments, so as to effectuate the ownership of
                           Inventions specified in Clause 13.1, and patents
                           claiming or disclosing such Inventions, and to enable
                           the other Party to apply for and to prosecute patent
                           applications in any country; and

                  13.3.2   promptly informing the other Party of any matters
                           coming to such Party's attention that may affect the
                           preparation, filing, prosecution or maintenance of
                           any such patent applications.

         13.4     INFRINGEMENT BY THIRD PARTIES

                  13.4.1   Anadys and Cerylid must promptly notify the other in
                           writing of any alleged or threatened infringement of
                           any Anadys Patent, Cerylid Patent or Joint Patent of
                           which they become aware. Both parties shall use their
                           commercially reasonable efforts in cooperating with
                           each other to terminate such infringement without
                           litigation.

                  13.4.2   Anadys will have the sole right to bring and control
                           any action or proceeding with respect to infringement
                           of any

<PAGE>
                                       20

                           Anadys Patent at its own expense and by counsel of
                           its own choice.

                  13.4.3   Subject to Clause 13.4.4, Cerylid will have the sole
                           right to bring and control any action or proceeding
                           with respect to infringement of any Cerylid Patent at
                           its own expense and by counsel of its own choice.

                  13.4.4   With respect to infringement of any Cerylid Patent
                           claiming any Identified Compound or Evaluation
                           Compound (except to the extent the Evaluation Period
                           for such Evaluation Compound has expired
                           unexercised), Anadys will have the right, at its own
                           expense, to be represented in any such action by
                           counsel of its own choice, and if Cerylid fails to
                           bring an action or proceeding within:

                           13.4.4.1 60 days following the notice of alleged
                                    infringement; or

                           13.4.4.2 10 days before the time limit, if any, set
                                    forth in the appropriate laws and
                                    regulations for the filing of such actions,

                           whichever comes first, Anadys will have the right to
                           bring and control any such action at its own expense
                           and by counsel of its own choice, and Cerylid will
                           have the right, at its own expense, to be represented
                           in any such action by counsel of its own choice.

                  13.4.5   With respect to infringement of any Joint Patent, the
                           Parties will agree, on a case-by-case basis, which
                           party will be responsible for bringing and
                           controlling any infringement action.

                  13.4.6   If a Party brings an infringement action in
                           accordance with this Clause 13.4, the other Party
                           will shall cooperate fully, including, if required to
                           bring such action, the furnishing of a power of
                           attorney or being named as a Party.

                  13.4.7   Neither Party will shall have the right to settle any
                           patent infringement litigation under this Clause 13.4
                           in a manner that diminishes the rights or interests
                           of the other Party without the prior written consent
                           of that other Party (which must not be unreasonably
                           withheld).

                  13.4.8   Except as otherwise agreed to by the Parties as part
                           of a cost-sharing arrangement, any recovery realized
                           as a result of any litigation under this Clause 13.4,
                           after reimbursement of any litigation expenses of
                           Anadys and

<PAGE>
                                       21

                           Cerylid, will be retained by the Party that brought
                           and controlled such litigation for purposes of this
                           Agreement.

         13.5     INFRINGEMENT OF THIRD PARTY RIGHTS

                  13.5.1   Each Party must promptly notify the other in writing
                           of any allegation by a Third Party that the activity
                           of either of the Parties pursuant to this Agreement
                           infringes or may infringe the Intellectual Property
                           Rights of that Third Party.

                  13.5.2   Anadys will have the sole right to control any
                           defence of any such claim involving alleged
                           infringement of Third Party rights by Anadys'
                           activities at its own expense and by counsel of its
                           own choice, and Cerylid will have the right, at its
                           own expense, to be represented in any such action by
                           counsel of its own choice.

                  13.5.3   Cerylid will have the sole right to control any
                           defence of any such claim involving alleged
                           infringement of Third Party rights by Cerylid's
                           activities at its own expense and by counsel of its
                           own choice, and Anadys will have the right, at its
                           own expense, to be represented in any such action by
                           counsel of its own choice.

                  13.5.4   Neither Party shall have the right to settle any
                           patent infringement litigation under this Clause 13.5
                           in a manner that diminishes the rights or interests
                           of the other Party without the written consent of
                           such other Party (which must not be unreasonably
                           withheld).

14       PRIOR RIGHTS

         14.1     PRIOR THIRD PARTY RIGHTS

                  Anadys acknowledges and agrees that:

                  14.1.1   Cerylid has various screening agreements and
                           collaboration agreements with other parties;

                  14.1.2   other parties may obtain exclusive rights to a
                           compound pursuant to other screening agreements or
                           collaboration agreements that Cerylid has entered;
                           and

                  14.1.3   Anadys will have no right to obtain a Licence or any
                           other right in relation to a compound if:

                           14.1.3.1 any other party has acquired prior rights or
                                    an option in relation to that same compound
                                    or family of compounds; or

<PAGE>
                                       22

                           14.1.3.2 that compound is then under active
                                    development by Cerylid or any of its Related
                                    Bodies Corporate.

         14.2     CERYLID NOT TO GRANT OTHER RIGHTS

                  Notwithstanding Clause 14.1, except to the extent that Cerylid
                  is required to do so pursuant to an agreement with a Third
                  Party that was in existence as at the date of this Agreement:

                  14.2.1   commencing on the Structural Disclosure Date with
                           respect to any Identified Compound and continuing for
                           the duration of the Assessment Period with respect to
                           such Identified Compound, Cerylid will not grant to
                           any Third Party any license or other rights in such
                           Identified Compound, or take any other action that
                           would prohibit or restrict Cerylid from granting a
                           Licence to Anadys with respect to such Identified
                           Compound in accordance with this Agreement; and

                  14.2.2   during the Evaluation Period with respect to any
                           Evaluation Compound, Cerylid will not grant to any
                           Third Party any license or other rights in such
                           Evaluation Compound, or take any other action that
                           would prohibit or restrict Cerylid from granting a
                           Licence to Anadys with respect to such Evaluation
                           Compound in accordance with this Agreement.

15       MANAGEMENT COMMITTEE AND REPORTING

         15.1     ESTABLISHMENT OF MANAGEMENT COMMITTEE

                  Cerylid and Anadys will establish a joint committee consisting
                  of the number of representatives specified in Item 12 of
                  Schedule 1, with each of Cerylid and Anadys appointing half of
                  that number of representatives or such other agreed equal
                  number of representatives from Cerylid and Anadys. One member
                  appointed by each party will be a business person.

         15.2     PURPOSE OF THE MANAGEMENT COMMITTEE

                  The Management Committee will meet by teleconference at
                  intervals to be agreed by the Parties and at such other times
                  and in such other manner as may be determined by the
                  Management Committee for the purpose of:

                  (a)      co-ordinating the activities to be undertaken
                           pursuant to this Agreement;

                  (b)      considering the composition of the Sample Extracts
                           which should be accessed for the Screens;

<PAGE>
                                       23

                  (c)      assessing and determining Hit Extracts and Priority
                           Hit Extracts; and

                  (d)      reviewing the progress and the results of the
                           Screening Activities and discussing the progression
                           of Hit Extracts, Priority Hit Extracts and Identified
                           Compounds emanating from the Screens,

                  (e)      The business person member of the management
                           committee will be responsible for ensuring that any
                           contractual modifications and/or amendments,
                           necessary and mutually agreed upon, are implemented
                           in a timely manner

                  Notwithstanding the foregoing, Anadys shall have the ultimate
                  authority to determine, based upon sound scientific, financial
                  or commercial bases, in its sole discretion, the outcome with
                  respect to all decisions falling within subsection 15.2 above.
                  In making any such determination Anadys must act reasonably
                  and may not require Cerylid to undertake Dereplication on any
                  Hit Extracts that are obviously spurious or of no interest.

         15.3     ANADYS' AUTHORITY

                  The Parties acknowledge and agree that Anadys, as the paying
                  Party under this Agreement, shall, within the terms of this
                  Agreement, have the ultimate authority (which authority shall
                  override any determination or recommendation of the Management
                  Committee or Cerylid) to direct and control the Research,
                  including, without limitation, having the ultimate
                  determination of the identity and number of Hit Extracts and
                  Priority Hit Extracts, and the ability to determine whether
                  the Research Plan is progressed with respect to any given
                  Target or Extract.

16       TERMINATION

         16.1     TERMINATION BY NOTICE

                  A Party may immediately terminate this Agreement by notice in
                  writing to the other Party, if an Event of Default occurs in
                  relation to that other Party.

         16.2     CONSEQUENCES OF TERMINATION

                  Termination of this Agreement will not affect any rights or
                  liabilities that the Parties accrued prior to termination.

<PAGE>
                                       24

         16.3     SURVIVAL

                  The rights of the Parties under Clauses 4, 1.1, 11, 1, 13, 17,
                  18, 21, 22, 24, 25.1, 25.2, 25.3 and 26 shall survive
                  termination or expiration of this Agreement, except that
                  Clauses 1.1, 11 and 1 will not survive a termination of this
                  Agreement pursuant to Clause 16.1.

17       DISPUTE RESOLUTION

         17.1     COMPULSORY ALTERNATIVE DISPUTE RESOLUTION

                  The Parties must comply with the dispute resolution procedure
                  described in clause 17.2. Subject to clause 17.5 neither Party
                  will be entitled to commence any litigation or arbitration in
                  relation to any matter arising directly or indirectly out of
                  this Agreement until they have complied with clause 17.2.

         17.2     PRIMARY DISPUTE RESOLUTION PROCEDURE

                  The Parties recognize that disputes as to certain matters may
                  from time to time arise which relate to either Party's rights
                  and/or obligations hereunder. It is the objective of the
                  Parties to establish procedures to facilitate the resolution
                  of such disputes in an expedient manner by mutual cooperation.
                  To accomplish this objective, the parties agree to follow the
                  primary dispute resolution procedures set forth in this Clause
                  17 if and when such a dispute arises between the Parties. If
                  any claim, dispute, or controversy of whatever nature arising
                  out of or relating to this Agreement, including, without
                  limitation, any action or claim based on tort, contract, or
                  statute, or concerning the interpretation, effect,
                  termination, validity, performance and/or breach of this
                  Agreement ("DISPUTE"), arises between the Parties and the
                  Parties, through the Management Committee, cannot resolve the
                  dispute within 30 days of a written request by either Party to
                  the other Party, the Parties agree to refer the Dispute to the
                  Chief Executive Officer of each Party for resolution. If,
                  after 45 days, the respective Chief Executive Officers have
                  not succeeded in negotiating a resolution of the dispute, then
                  the Parties may proceed to the secondary dispute resolution
                  procedures set forth in Clause 17.3.

         17.3     SECONDARY DISPUTE RESOLUTION PROCEDURE

                  If the Parties are not successful in resolving a Dispute
                  pursuant to the Primary Dispute Resolution Procedures set
                  forth in Clause 17.2, then the secondary dispute resolution
                  procedure required to be complied with prior to the
                  commencement of litigation or arbitration is as follows:

<PAGE>
                                       25

                  17.3.1   where a dispute arises between the Parties, a Party
                           may serve a written notice (the "Dispute Notice") on
                           the other Party detailing the nature of the dispute;

                  17.3.2   the Parties must make reasonable efforts to resolve
                           the dispute by negotiation;

                  17.3.3   if the Parties are unable to resolve the dispute
                           within 28 days of the receipt of the Dispute Notice,
                           either Party may by notice in writing to the other
                           Party (the "Mediation Notice") require that the
                           dispute be referred to mediation;

                  17.3.4   within 28 days of receipt of the Mediation Notice the
                           dispute will be referred to a mediator as agreed
                           between the Parties, and failing agreement, to a
                           mediator appointed by the President of the Law
                           Institute of Victoria on the application of either
                           Party;

                  17.3.5   the costs of the mediator will be paid equally by the
                           Parties but otherwise the Parties must pay their own
                           costs of the mediation;

                  17.3.6   the Parties must approach the mediation in good faith
                           and make a reasonable attempt to settle the dispute
                           by mediation and within the framework determined by
                           the mediation.

         17.4     RIGHT TO LITIGATE

                  If the mediation fails to settle the dispute, the Parties may
                  institute litigation or arbitration.

         17.5     URGENT RELIEF

                  Nothing in this clause will prevent either Party from seeking
                  urgent interlocutory relief where failure to obtain such
                  relief would cause irreparable damage to that Party.

18       CONFIDENTIAL INFORMATION

         18.1     OBLIGATION TO MAINTAIN CONFIDENTIALITY

                  Each Party must keep all Confidential Information of the other
                  Party strictly confidential and must not, and must ensure that
                  its respective officers, employees, agents and auditors do
                  not, without the prior written consent of the other Party,
                  disclose any of such Confidential Information to any third
                  party except for a permitted disclosure pursuant to clause
                  18.2.

         18.2     PERMITTED DISCLOSURE

<PAGE>
                                       26

                  A Party may disclose Confidential Information of the other
                  Party:

                  18.2.1   if required to make such disclosure by any court of
                           competent jurisdiction or in order to enforce any
                           rights under this instrument in any proceedings;

                  18.2.2   pursuant to any court order;

                  18.2.3   pursuant to any law or regulation having the force of
                           law;

                  18.2.4   pursuant to any requirements of any stock exchange on
                           which securities in a Party are listed;

                  18.2.5   on a confidential basis, to a professional adviser
                           (acting in that capacity) if the adviser has agreed
                           in writing to observe the requirements of clause
                           18.1; and

                  18.2.6   to another Party.

                  18.2.7   in the case of Cerylid, to the extent reasonably
                           necessary to register any Intellectual Property
                           Rights in relation to any of the Confidential
                           Information; and

                  18.2.8   to a potential financier, investor or purchaser of a
                           Party, if that financier, investor or purchaser has
                           first agreed in writing to observe the requirements
                           of clause 18.1.

         18.3     NOTICE; PROTECTIVE ORDER

                  Notwithstanding the foregoing, in the event a Party is
                  required to make a disclosure of the other Party's
                  Confidential Information pursuant to Clause 18.2.1, 18.2.2,
                  18.2.3 or 18.2.4, it will give reasonable advance notice to
                  the other Party of such disclosure and endeavour in good faith
                  to secure confidential treatment of such information or a
                  protective order related to such information requiring that
                  the information so disclosed be used only for the purpose for
                  which disclosure was required. In any event, the Parties agree
                  to take all reasonable action to avoid disclosure of
                  Confidential Information hereunder.

         18.4     INJUNCTIVE RELIEF

                  Each Party acknowledges that monetary damages alone would not
                  be adequate compensation to any other Party for a breach of
                  clause 18.1 and that any other Party is entitled obtain an to
                  seek an injunction from a court of competent jurisdiction (in
                  addition to other relief that may be available) if a Party
                  fails to comply or threatens to fail to comply with clause
                  18.1.

<PAGE>
                                       27

19       PUBLICITY

         19.1     ANNOUNCEMENTS

                  No public announcement of this Agreement may be made by either
                  Party otherwise than in a form approved by both Parties.

         19.2     ANNOUNCEMENTS TO STOCK EXCHANGE

                  If, despite the provisions of Clause 18.3, the Parties are
                  unable to agree a joint announcement in a form reasonably
                  acceptable to each Party on or before the day on which a Party
                  is required to make disclosure to any stock exchange (a
                  "Listed Party"), the Listed Party may make an announcement to
                  the stock exchange containing the minimum amount of
                  information necessary to comply with its disclosure
                  requirements. The Listed Party must, unless otherwise required
                  by any listing rules or law applicable to that Party or it is
                  not reasonably practicable, provide the other Party with a
                  copy of the announcement at least 48 hours prior to the
                  announcement.

20       REPRESENTATIONS AND WARRANTIES

         20.1     REPRESENTATIONS OF BOTH PARTIES

                  Each Party represents and warrants to the other Party as at
                  the Commencement Date that:

                  20.1.1   it is duly incorporated and the execution, delivery
                           and performance of this Agreement does not violate
                           its constitution or charter documents, as applicable;

                  20.1.2   it has the power and has taken all corporate and
                           other action required to enter into this Agreement
                           and to authorise the execution and delivery of this
                           Agreement and the performance of its obligations
                           under this Agreement;

                  20.1.3   this Agreement constitutes a valid and legally
                           binding obligation of it in accordance with its
                           terms; and

                  20.1.4   to its knowledge, the execution, delivery and
                           performance of this Agreement does not violate any
                           existing law or any document or agreement to which it
                           is a party or which is binding on it or any of its
                           assets.

         20.2     STATUS OF REPRESENTATIONS

                  All representations and warranties in this Agreement:

                  20.2.1   survive the execution and delivery of this Agreement;

<PAGE>
                                       28

                  20.2.2   remain in full force and effect for the term of this
                           Agreement; and

                  20.2.3   are given with the intent that liability under those
                           representations and warranties will not be confined
                           to breaches discovered prior to the date of this
                           Agreement.

21       LIMITATION OF LIABILITY

         21.1     EXCLUSION OF TERMS AND WARRANTIES

                  To the maximum extent permitted by law all terms and
                  warranties expressed or implied by any legislation, the common
                  law, equity, trade, custom or usage or otherwise in connection
                  with this Agreement are expressly excluded.

         21.2     REQUIRED STATUTORY WARRANTIES

                  If any legislation implies in this Agreement any term or
                  warranty and also prohibits provisions in a contract excluding
                  or modifying the application of or liability under that term
                  or warranty, that term or warranty is deemed to be included in
                  this Agreement.

         21.3     LIMITATION OF LIABILITY

                  If any legislation implies in this Agreement any term or
                  warranty and also prohibits provisions in a contract excluding
                  the application of that term or warranty then, to the maximum
                  extent permitted by law, the liability of each Party for a
                  breach of such a term or warranty will be limited, at the
                  option of such Party, to any one or more of the following:

                  21.3.1   if the breach relates to goods:

                           21.3.1.1 the replacement of the goods or the supply
                                    of equivalent goods;

                           21.3.1.2 the repair of such goods;

                           21.3.1.3 the payment of the cost of replacing the
                                    goods or of acquiring equivalent goods; or

                           21.3.1.4 the payment of the cost of having the goods
                                    repaired; and

                  21.3.2   if the breach relates to services:

                           21.3.2.1 the supplying of the services again; or

                           21.3.2.2 the payment of the cost of having the
                                    services supplied again.

<PAGE>
                                       29

                  In addition, subject to the Parties' obligations under clause
                  22 and except for liability for breach of clause 18, neither
                  Party shall be entitled to recover from the other Party any
                  special, incidental, consequential or punitive damages in
                  connection with this Agreement.

22       INDEMNITY

         22.1     CERYLID'S INDEMNITY

                  Anadys indemnifies Cerylid, its servants and agents against
                  all Claims (including the cost of defending or settling any
                  Claim) which may be instituted against or incurred by Cerylid
                  arising out of:

                  22.1.1   a breach of this Agreement by Anadys; or

                  22.1.2   the gross negligence or wilful misconduct of Anadys,
                           its agents, employees or sub-contractors.

         22.2     ANADYS' INDEMNITY

                  Cerylid indemnifies Anadys, its servants and agents against
                  all Claims (including the cost of defending or settling any
                  Claim) which may be instituted against or incurred by Anadys
                  arising out of:

                  22.2.1   a breach of this Agreement by Cerylid; or

                  22.2.2   the gross negligence or wilful misconduct of Cerylid,
                           its agents, employees or sub-contractors.

         22.3     STATUS OF INDEMNITY

                  Each indemnity in this Agreement:

                  22.3.1   is a continuing obligation;

                  22.3.2   constitutes a separate and independent obligation of
                           the Party giving the indemnity from its other
                           obligations under this Agreement; and

                  22.3.3   survives termination of this Agreement.

23       UNCONTROLLABLE EVENTS

         23.1     UNCONTROLLABLE EVENT

                  If a Party is prevented in whole or in part from carrying out
                  its obligations under this Agreement as a result of an
                  Uncontrollable Event, it must promptly notify the other Party
                  accordingly. The notice must:

                  23.1.1   specify the obligations it cannot perform;

<PAGE>
                                       30

                  23.1.2   reasonably describe the Uncontrollable Event;

                  23.1.3   estimate the time during which the Uncontrollable
                           Event will continue; and

                  23.1.4   specify the measures proposed to be adopted to remedy
                           or abate the Uncontrollable Event.

         23.2     SUSPENSION OF OBLIGATIONS

                  Following the notice under clause 23.1, and while the
                  Uncontrollable Event continues, the obligations of a Party
                  which cannot be performed because of the Uncontrollable Event
                  will be suspended.

         23.3     OBLIGATIONS OF PARTIES

                  Each Party must:

                  23.3.1   use its reasonable endeavours to remedy the
                           Uncontrollable Event to the extent reasonably
                           practicable and resume performance of its obligations
                           as soon as reasonably possible; and

                  23.3.2   take all action reasonably practicable to mitigate
                           any loss suffered by the other Party as a result of
                           its failure to carry out its obligations under this
                           Agreement.

         23.4     LIMIT OF OBLIGATIONS

                  A Party is not required, under clause 23.3, to settle any
                  labour dispute against its will or to test the validity or
                  refrain from testing the validity of federal, state or local
                  law, order, rule or regulation.

         23.5     EXTENDED EXISTENCE OF UNCONTROLLABLE EVENT

                  If a Party is prevented from carrying out its obligations
                  under this Agreement as a result of an Uncontrollable Event
                  for a period of 3 months:

                  23.5.1   the Parties must consult with each other in good
                           faith with a view to assessing the likelihood of the
                           Uncontrollable Event continuing; and

                  23.5.2   if in the reasonable opinion of a Party substantial
                           performance of the other Party's obligations under
                           this Agreement (having regard to the remaining term
                           of the Agreement) is unlikely because of the
                           Uncontrollable Event that Party may terminate this
                           Agreement by 30 days written notice to the other
                           Party without prejudice to the rights of either Party
                           accrued prior to the date of termination.

<PAGE>
                                       31

         23.6     EXTENSION

                  Subject to Clause 23.5, the term of this Agreement will be
                  extended by the period of the Uncontrollable Event.

         23.7     PAYMENT OF MONEY

                  This Clause 23 does not affect a Party's obligation to make a
                  payment to the other Party.

24       NOTICES

         Any notice required to be given under this Agreement by any party to
         another shall be:

         24.1     in writing addressed to the address of the intended recipient
                  shown in this Agreement below or to such other address as has
                  been most recently notified by the intended recipient to the
                  Party giving the notice:

                  in the case of Cerylid:

                  Address:        576 Swan Street
                                  Richmond Victoria 3121
                                  Australia

                  Fax:            [...***...]

                  E-mail          businessdevelopment@cerylid.com.au

                  Attention:      Vice President, Business Development

                  in the case of Anadys:

                  in accordance with Item 14 of Schedule 1.

         24.2     signed by a person duly authorised by the sender; and

         24.3     deemed to have been given and served:

                  24.3.1   where delivered by hand, at the time delivery;

                  24.3.2   where sent by facsimile transmission, 24 hours after
                           the time recorded on the transmission report unless:

                           24.3.2.1 within those 24 hours the intended recipient
                                    has informed the sender that the
                                    transmission was received in an incomplete
                                    or garbled form; or

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
                                       32

                           24.3.2.2 the transmission result report of the sender
                                    indicates a faulty or incomplete
                                    transmission;

                  24.3.3   where sent by e-mail, 24 hours after the time the
                           e-mail was sent; and

                  24.3.4   where sent by registered mail, on acknowledgment of
                           receipt by or on behalf of the recipient,

                  but if such delivery or receipt is on a day on which
                  commercial premises are not generally open for business in the
                  place of receipt or is later than 4.00 p.m. (local time) on
                  any day, the notice shall be deemed to have been given and
                  served on the next day on which commercial premises are
                  generally open for business in the place of receipt.

25       GENERAL PROVISIONS

         25.1     INVALID OR UNENFORCEABLE PROVISIONS

                  If a provision of this Agreement is invalid or unenforceable
                  in a jurisdiction:

                  25.1.1   it is read down or severed in that jurisdiction to
                           the extent of the invalidity or unenforceability; and

                  25.1.2   it does not affect the validity or enforceability of:

                           25.1.2.1 that provision in another jurisdiction; or

                           25.1.2.2 the remaining provisions;

         25.2     REPLACEMENT OF INVALID PROVISION

                  The Parties will seek to replace any invalid provision with a
                  provision which is valid, legal and enforceable having the
                  same effect as the provision which is severed pursuant to
                  clause 25.1 of this Agreement. If the Parties cannot agree on
                  such a provision, clause 16.3 will apply.

         25.3     WAIVER

                  25.3.1   No right or obligation under this Agreement will be
                           waived except by notice in writing signed by each
                           Party.

                  25.3.2   A waiver by a Party pursuant to Clause 25.3 will not
                           prejudice that Party's rights in respect of any
                           subsequent breach of this Agreement by the other
                           Party.

                  25.3.3   Subject to Clause 25.3.1, any failure by a Party to
                           enforce any of the provisions of this Agreement, or
                           any

<PAGE>
                                       33

                           forbearance, delay or indulgence granted by a Party
                           to another Party, will not be construed as a waiver
                           of that Party's rights pursuant to this Agreement.

         25.4     ENTIRE AGREEMENT

                  This Agreement constitutes the entire agreement between the
                  Parties with respect to the subject matter of this Agreement
                  and supersedes all previous negotiations, commitments,
                  representations and agreements between the Parties.

         25.5     COUNTERPARTS

                  This Agreement may be signed in counterparts and all
                  counterparts taken together constitute one document.

         25.6     AMENDMENTS

                  This Agreement may be amended only by a written document
                  signed by both Parties.

         25.7     SUCCESSORS AND ASSIGNS

                  This Agreement will be binding on and inure to the benefit of
                  the Parties and their permitted successors and assigns:

         25.8     ASSIGNMENT

                  Neither Party may assign any of its rights or obligations
                  under this Agreement without the prior written consent of the
                  other Party, except as incident to the merger, consolidation,
                  reorganization or acquisition of stock or assets affecting all
                  or substantially all of the assets or actual voting control of
                  the assigning Party to which this Agreement pertains.

         25.9     ATTORNEYS

                  Each attorney executing this Agreement on behalf of a Party
                  acknowledges that it has not received notice of the revocation
                  of the powers of attorney under which it executes this
                  Agreement.

         25.10    FURTHER ASSURANCES

                  Each Party must do or cause to be done, all things reasonably
                  required by notice from another Party to give full effect to
                  this Agreement and each of the transactions contemplated by
                  this Agreement.

<PAGE>
                                       34

         26       GOVERNING LAW AND JURISDICTION

                  26.1     GOVERNING LAW

                           This Agreement is governed by and is to be
                           interpreted under the laws of Victoria.

                  26.2     JURISDICTION

                           The Parties irrevocably and unconditionally:

                           26.2.1   submit to the non-exclusive jurisdiction of
                                    the courts of Victoria; and

                           26.2.2   waive any claim or objection based on
                                    absence of jurisdiction or inconvenient
                                    forum.

                  26.3     SERVICE OF PROCESS

                           A document required to be served in proceedings about
                           this Agreement may be served:

                           26.3.1   by being delivered to or left at its address
                                    for service of notices under Clause 24; or

                           26.3.2   in any other way permitted by law.

<PAGE>
                                       35

EXECUTED AS AN AGREEMENT

Signed for and on behalf of CERYLID PTY   )
LTD (ABN 92 061 632 684) by a duly        )
authorised officer:                       )

   /s/ JACKIE FAIRLEY                     Signature
-----------------------------------------
       JACKIE FAIRLEY                     Name (Print)

           C.E.O.                         Position

Signed for and on behalf of THE           )
CUSTOMER by a duly authorised officer:    )

   /s/ MICHAEL J. KAMDAR                  Signature
-----------------------------------------

       MICHAEL KAMDAR                     Name (Print)

        Vice President                    Position

<PAGE>

                                   SCHEDULE 1

ITEM 1

Date:

ITEM 2

Parties:           1.     Cerylid Pty Ltd (ABN 92 061 632 684) ("Cerylid")

                   2.     Anadys Pharmaceuticals Inc. ("Anadys")

ITEM 3

Access Fee:               $[...***...]

ITEM 4

Field:                    With the exception of Screens designed to identify
                          compounds with antibacterial activity or otherwise
                          active against bacterial targets, which is expressly
                          forbidden by an existing contractual arrangement
                          between Cerylid and a Third Party, Anadys may screen
                          the Sample Extracts against any other targets for any
                          other therapeutic indication. If during the Term, the
                          existing contractual relationship between Cerylid and
                          such Third Party is amended or terminated so as to no
                          longer prohibit Cerylid from authorising Anadys to
                          conduct screens against antibacterial targets, Cerylid
                          will negotiate in good faith with Anadys to develop an
                          arrangement acceptable to the Parties that authorises
                          Anadys to conduct screens against antibacterial
                          targets.

ITEM 5

Assessment Period:        [...***...]

ITEM 6

Evaluation Period:        [...***...]

ITEM 7

Dereplication Fee:        $[...***...]

Characterisation Fee:     $[...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

ITEM 8

Evaluation Compound
Fee:                      No fee in respect of the first [...***...] Identified
                          Compounds nominated by Anadys as Evaluation Compounds,
                          and $[...***...] for the [...***...] and each
                          subsequent Identified Compound so nominated

ITEM 9

Sample Extracts:          [...***...]

ITEM 10

Dereplication:            Up to [...***...] Hit Extracts per Screen conducted
                          by Anadys

ITEM 11

Characterisation:         Up to [...***...] Priority Hit Extracts per Screen
                          conducted by Anadys

ITEM 12

Number of Management
  Committee Representatives: 6

ITEM 13

Licence Fee:              $[...***...] for each compound

ITEM 14

Notices:                  ANADYS

                          Address:     9050 Camino Santa Fe, San Diego, CA 92121

                          Fax:         [...***...]

                          E-mail:      mkamdar@anadyspharma.com

                          Attention:   Michael J Kamdar

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                   SCHEDULE 2

Research Plan

           SCREENING COLLABORATION BETWEEN CERYLID PTY LTD AND ANADYS
                              PHARMACEUTICALS, INC

                                  6 JUNE, 2002

THIS RESEARCH PLAN IS INTENDED AS A GUIDANCE DOCUMENT ONLY. IN THE EVENT THAT
ANY STATEMENTS CONTAINED WITHIN THIS RESEARCH PLAN CONFLICT WITH ANY TERMS OF
THE AGREEMENT, THE TERMS OF THE AGREEMENT SHALL CONTROL. REFERENCES HEREIN TO
"CLAUSES" REFER TO CLAUSES OF THE AGREEMENT. CAPITALIZED TERMS USED BUT NOT
DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE AGREEMENT.

     1.  Provision of Sample Extracts (Cerylid)

     -   Cerylid will supply Anadys with an agreed set of at least [...***...]
         samples from its library of microbIaL fermentation extracts (Sample
         Extracts) for testing at Anadys in the selected screens. If agreed to
         by Anadys, the Sample Extracts may also include some plant extracts.
         The precise breakdown of the sample set will be defined by mutual
         agreement but, for indicative purposes, it is anticipated that the set
         will include extracts of taxonomically-diverse microbial isolates
         (actinomycetes, fungi and eubacteria) sourced from a diverse range of
         marine, terrestrial and Antarctic environments and microhabitats, and
         fermented under diverse conditions (combination of different growth
         media and different physical conditions, eg shaken liquid, static
         liquid and solid substrate fermentations). Cerylid will provide
         Analysis with a written statement detailing its proposal for sample
         selection, prior to dispatch of the Sample Extracts.

     2.  Primary Screening (Anadys)

     -   Anadys will conduct primary screening of the Sample Extracts against
         its target(s). Responsibility for nominating targets, and for
         developing and running primary screens, will reside with Anadys.

     3.  REPORT OF DATA (ANADYS)

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

     -   Anadys will provide Cerylid with a list of all Extracts in which
         bioactivity has been confirmed by retest including information on the
         number of hits against each particular target.

     -   If, based on the data and upon consultation with Cerylid, Anadys
         determines, that the target initially selected for the Screen should
         not continue to Dereplication and with the subsequent steps of the
         Research Plan, then Anadys shall so inform Cerylid, and shall designate
         a second target to initiate through the Research Plan, commencing with
         Step 2 above.

     4.  DEREPLICATION - STEP 1 - SPE FRACTIONATION (CERYLID)

     -   Cerylid will conduct crude fractionation of hits by solid phase
         extraction (SPE) chromatography (yielding ten fractions from each
         parent extract) to localise bioactivities to specific polarity ranges.

     5.  SHIPMENT OF FRACTIONS (CERYLID)

     -   Cerylid will ship fractions resulting from the SPE Fractionation
         process to Anadys

     6.  ASSAY DEVELOPMENT (ANADYS)

     -   Anadys will assay the fractions to localise bioactivities

     7.  REPORT OF DATA (ANADYS)

     -   Anadys will report Anadys Screening Data to Cerylid

     8.  DEREPLICATION - STEP 2 - HPLC FRACTIONATION (CERYLID)

     -   Cerylid will conduct HPLC Fractionation using gradients tailored to the
         relevant polarity ranges in which bioactivities are localised, yielding
         forty to eighty fractions per parent extract in which active compounds
         will be in Substantially Pure form.

     9.  SHIPMENT OF FRACTIONS (CERYLID)

     -   Cerylid will ship fractions resulting from the HPLC Fractionation
         process to Anadys

     10. SECONDARY ASSAY DEVELOPMENT (ANADYS)

<PAGE>

     -   At its discretion, Anadys may develop and use secondary assays to
         eliminate and/or prioritise hits identified in the Screen

     11. ASSAY DEVELOPMENT (ANADYS)

     -   Anadys will assay the fractions to localise bioactivities

     12. LC/MS ANALYSIS (ANADYS)

     -   For selected HPLC fractions showing bioactivity, as determined by
         Anadys, Anadys may conduct an LC/MS analysis to help prioritize hits
         for structure determination.

     -   Cerylid and Anadys will jointly use the resultant package of data on
         Substantially-Pure active fractions (chromatographic, physicochemical,
         LC/MS and biological activity) to prioritise hit extracts for full
         chemical isolation and characterisation, with ultimate decisionmaking
         authority as to which hits are pursued into structure determination
         residing with Anadys.

     13. PURIFY AND STRUCTURE DETERMINATION (CERYLID)

     -   Cerylid will purify active compounds from prioritised hits (supported
         by bioassays conducted at Anadys) and elucidate their chemical
         structures. The number of such hits taken to characterisation of
         compound structures will be up to [...***...] for each specific target
         screened at Anadys.

     14. PROVISION OF 10mg PURE IDENTIFIED COMPOUND AND FINAL REPORT (CERYLID)

     -   At the request of Anadys, Cerylid will provide Anadys with a sample of
         each Identified compound in sufficient quantity (typically [...***...]
         mg) to carry out basic biological and chemical characterizatiON.

                                             ***CONFIDENTIAL TREATMENT REQUESTED<PAGE>

                                                                   EXHIBIT 10.16

                              *** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN
                              THIS DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN
                              OMITTED AND FILED SEPARATELY WITH THE SECURITIES
                              AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
                              CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS
                              200.80(B)(4), 200.83 AND 230.406.

                                    AGREEMENT

This Agreement effective as of August 7, 2002 ("Effective Date") is made between
Anadys Pharmaceuticals, Inc. having a place of business at 9050 Camino Santa Fe
San Diego, CA 92121 ("Anadys") and Hoffmann-La Roche Inc. having a place of
business at 340 Kingsland Street, Nutley, New Jersey 07110 ("Roche").

WHEREAS, Anadys has expertise in designing, synthesizing, and optimizing small
molecule inhibitors of targets;

WHEREAS, Roche has expertise in pharmaceutical research and development,
including in vitro and in vivo testing of inhibitors [...***...];

WHEREAS, Roche has discovered and synthesized certain lead molecules that are
small molecule inhibitors of [...***...]; and

WHEREAS, Anadys and Roche desire to enter into an agreement for Anadys to design
and synthesize molecules optimized for inhibition of [...***...] based on the
lead molecules provided by Roche and input obtained from the in vitro and in
vivo testing of the molecules to be synthesized by Anadys as inhibitors of
[...***...];

NOW, THEREFORE, the parties agree as follows:

1.       TARGET. The target that is to be inhibited is [...***...] ("Target").

2.       LEAD MOLECULES. Roche shall provide Anadys with lead molecules that
         will be used by Anadys to design and synthesize molecules optimized for
         inhibition of the Target.

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -2-

3.       PLAN AND MOLECULES. Anadys and Roche have agreed on an initial research
         plan ("Plan") under which Anadys shall use commercially reasonable
         efforts to design, synthesize and deliver molecules that are optimized
         for inhibition of the Target ("Molecules") based on the lead molecules
         provided by Roche. A final version of the Plan will be memorialized in
         writing before Roche makes the first payment for research funding to
         Anadys, although the Plan may be later revised by the JRC, as defined
         in Paragraph 4. Once Molecules have been synthesized by Anadys, they
         will be subject to in vitro screening by Anadys to determine the extent
         to which such Molecules inhibit the Target. Thereafter, the Molecules
         that meet certain minimum requirements in the in vitro screening, as
         determined by the JRC, will be delivered by Anadys to Roche for testing
         via cell-based assays, ADME in vitro screens, pharmacokinetic ("PK")
         experiments, in vivo studies and/or toxicology work. Such Molecules
         shall be initially provided to Roche in amounts between [...***...]
         milligrams ([...***...] mg) and [...***...] milligrams ([...***...]
         mg). Anadys shall provide Roche with the structure of each Molecule and
         any information about the Molecule that is available to Anadys. If the
         JRC determines that one or more Molecules are suitable for further
         development, then such Molecules may serve as lead molecules and be
         used to design and synthesize additional Molecules that are further
         optimized for inhibition of the Target as above. All activities
         referred to above shall constitute the "Project." To aid in
         understanding the goal of the Project, the desired attributes of
         Molecules are as follows:

         POTENCY: in cell-based assays, [...***...] ~[...***...] (mu)M,
         Selectivity >[...***...] ([...***...]/[...***...])

         IN VITRO ADME PROPERTIES:

         Solubility: > [...***...] mg/ml and can be formulated relatively
         easily. Permeability: [...***...] (for both oral bioavailability and
         cell permeability).

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -3-

         [...***...] incubation stability: >[...***...]% remaining at
         [...***...]. [...***...] and [...***...] inhibition: [...***...].

         SINGLE DOSE PK:

         [...***...] PK - can deliver the drug at [...***...] > [...***...] x
         [...***...] at dose <[...***...] mg/kg within a reasonable period of
         time ([...***...]-[...***...] hours) via [...***...] route. No
         significant change in exposure with continued dosing over
         [...***...]-[...***...] days.

         TOXICITY:

         Maximum tolerated dose significantly higher than therapeutic doses. No
         potential drug-drug interaction.

         EFFICACY: [...***...] inhibition (>[...***...]%) in at least
         [...***...] models

         CHEMICAL TRACTABILITY:

         Molecules stable and reasonable to synthesize.
         Molecules can be patented.

         Terms used above are further described in the Plan.

4.       JOINT RESEARCH COMMITTEE. Roche and Anadys shall establish a joint
         research committee ("JRC") to oversee, review, manage and direct the
         activity under the Plan. The responsibilities of the JRC shall include:
         (i) monitoring and reporting the progress of the activity of the
         Project, (ii) revising the Plan as necessary, and (iii) resolving any
         conflicts between the parties. The JRC shall include three (3)
         representatives of each party that are selected by that party. Roche
         representatives can include representatives that are employees of an
         Affiliate. "Affiliate" means (i) a business entity which owns a
         controlling interest in Roche, (ii) a business

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -4-

         entity which is owned by Roche, or (iii) a business entity, the
         majority ownership of which is common to the majority ownership of
         Roche. Each party may replace its representatives at any time, upon
         written notice to the other party. During the Collaboration Term (as
         defined below), unless otherwise agreed to by the Parties, the JRC
         shall meet at least quarterly, at such locations or by such
         teleconferencing means as the parties may decide. Each party shall be
         responsible for all of its expenses associated with attending the JRC
         meetings. Anadys shall prepare written minutes of each JRC meeting and
         shall prepare a written record of all JRC voting and decisions, whether
         made at a JRC meeting or otherwise. Anadys shall submit the written
         minutes of each JRC meeting and the written record of all JRC voting
         and decisions to Roche for review within one (1) week after the JRC
         meeting, and upon signature by Roche, the minutes and written voting
         and decision record shall become final. Decisions of the JRC shall be
         made by unanimous vote, with each Party having a single vote. If there
         is a dispute between the parties with respect to a specific matter that
         cannot be resolved by the JRC, such matter shall be referred for
         resolution to an officer of each party, then if still unresolved, Roche
         shall make the final decision.

5.       TERM. The term of the Project shall begin on the Effective Date and
         continue until the one (1) year anniversary of Roche making the first
         research funding payment, unless mutually extended by the Parties
         ("Collaboration Term"). The term of the Agreement shall begin on the
         Effective Date and continue until the latter of (i) the date on which
         the Collaboration Term ends or (ii) the date on which no payments are
         due under this Agreement.

6.       EXCLUSIVITY. For a period beginning on the Effective Date and
         continuing until a date [...***...] following the date on which the
         Collaboration Term

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -5-

         ends, Anadys will not work on the Target and the Molecules (other than
         as permitted pursuant to Section 7) except as a part of the Project.

7.       OWNERSHIP AND LICENSES. Roche shall own all Molecules and all
         intellectual property related to the Molecules. Anadys shall promptly
         assign to Roche all such intellectual property and shall ensure that
         all persons working for Anadys and on the Project have such an
         obligation to assign all intellectual property to Roche. Any invention
         that is conceived and reduced to practice during the Project but is not
         related to the Molecules shall be owned by the party that made the
         invention or, in the case of a joint invention, by both parties.
         Inventorship shall be determined in accordance with U.S. patent law.
         Anadys grants to Roche a non-exclusive, worldwide, fully paid up,
         royalty-free, license under any other intellectual property that is
         created before or during the Collaboration Term that it may own or
         control to the extent necessary for Roche to make, have made, use,
         sell, offer for sale, and import the Molecules or Compounds. Anadys
         shall have the right to use the Molecules for screening purposes,
         except against the Target. Roche grants to Anadys a non-exclusive,
         worldwide, fully paid up, royalty-free, license under the intellectual
         property generated during the Project to the extent necessary for
         Anadys to use the Molecules for screening purposes, except against the
         Target.

8.       RESEARCH FUNDING. Roche shall fund [...***...] full time equivalents
         (FTEs) at $[...***...] per FTE to work exclusively on the Project:

<TABLE>
<CAPTION>
Functional Area   Initial Number of FTEs    Number of FTEs w/assay
---------------   ----------------------    ----------------------
<S>               <C>                       <C>
Chemistry *             [...***...]               [...***...]
Biochemistry            [...***...]               [...***...]
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -6-

         * Chemistry includes synthetic chemistry, structural chemistry and
         computational chemistry. "W/assay" refers to the portion of the
         Collaboration Term after a screening assay has been put in place by
         Anadys.

         It is envisaged that the FTEs will be from the functional areas
         designated above. However, the final selection of functional areas is
         subject to the discretion of the JRC. Funding for the FTEs shall be on
         a quarterly basis, payable in advance. The first payment for research
         funding by Roche to Anadys shall be made within [...***...] after the
         Effective Date. Anadys shall provide Roche with an invoice for each
         payment due and Roche shall pay Anadys within thirty (30) days after
         receiving such invoice.

9.       MILESTONE PAYMENTS.

         "Product" means a pharmaceutical product that contains (i) a Molecule
         (or any salt, ester, acid, base, or pro-drug of a Molecule) or (ii) a
         compound (or any salt, ester, acid, base, or pro-drug of a compound)
         that is conceived as a part of the Project, considered by the JRC for
         synthesis as a Molecule, and which could have been reduced to practice
         by Anadys but for the Project ending ("Compound"). If a Product is
         being developed by Roche, an Affiliate or a sub-licensee and reaches a
         following milestone event ("Milestone Event"), then Roche shall pay to
         Anadys within thirty (30) days after receiving an invoice from Anadys
         the corresponding milestone payment:

         Start Phase I                       US$ [...***...]
         Start Phase II                      US$ [...***...]
         Start Phase III                     US$ [...***...]

         NDA Filing                 USA      US$ [...***...]
                                    EU       US$ [...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED
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Roche - Anadys Agreement
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         First Commercial Sale      USA      US$ [...***...]
                                    EU       US$ [...***...]

         The terms "Phase I," "Phase II," and "Phase III" have the meaning
         ascribed in 21 C.F.R. Section 312.21(a), (b), and (c), respectively, as
         may be amended. "Start" with reference to Phase I, Phase II or Phase
         III means the dosing of the first patient in that phase's first
         clinical trial. "NDA" means a New Drug Application having the meaning
         ascribed in 21 C.F.R. Section 314.50 or its equivalent in the European
         Union. "First Commercial Sale" means the first sale of a Product by or
         on behalf of Roche after receiving approval from the U.S. Food and Drug
         Administration or its equivalent in the European Union.

         Roche shall have no obligation to commercialize or otherwise pursue any
         Molecule or Product. However, if Roche develops Product that reaches a
         Milestone Event, then Roche shall notify Anadys promptly after the
         occurrence of such Milestone Event.

10.      ROYALTIES. If a Product is sold by or on behalf of Roche, then Roche
         shall pay to Anadys during the Royalty Term a royalty on Net Sales of
         any such Product, calculated on a country by country basis, as follows:

         Net sales ($ million)              Royalty rate (%)

         [...***...]                            [...***...]
         [...***...]                            [...***...]

         "Royalty Term" means, in the case of any Product, in any country, the
         period of time commencing on the First Commercial Sale of such Product
         in such country and ending upon the later of (a) ten (10) years after
         the

                                             ***CONFIDENTIAL TREATMENT REQUESTED
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Roche - Anadys Agreement
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         date of First Commercial Sale in such country, and (b) the expiration
         of the last to expire of the patent rights claiming the Molecule or
         Compound per se contained in such Product, either specifically or
         generically, in such country.

                  a. NET SALES "Net Sales" means (i) the amount of gross sales
         of the Product invoiced by Roche, its Affiliates and its sub-licensees
         to independent third parties less deductions of returns and return
         reserves (including allowances actually given for spoiled, damaged,
         out-dated, rejected, returned Product sold, withdrawals and recalls),
         rebates (price reductions, rebates to social and welfare systems,
         charge backs or reserves for chargebacks, cash sales incentives,
         government mandated rebates and similar types of rebates, e.g.
         Pharmaceutical Price Regulation Scheme, Medicaid), volume (quantity)
         discounts, taxes (value added or sales taxes, government mandated
         exceptional taxes and other taxes directly linked to the gross sales
         amount) ("Adjusted Gross Sales") minus (ii) a lump sum deduction of
         [...***...] percent ([...***...]%) of Adjusted Gross Sales in lieu of
         those sales related deductions which are not accounted for within Roche
         on a product by product basis (e.g. outward freights, postage charges,
         transportation insurance, packaging materials for dispatch of goods,
         custom duties, bad debt, discounts granted later than at the time of
         invoicing, and cash discounts). Notwithstanding the foregoing, amounts
         received by Roche, its Affiliates and sublicensees for the sale of
         Product among Roche, its Affiliates or sublicensees for resale shall
         not be included in the computation of Adjusted Gross Sales and Net
         Sales.

                  b. COMBINATION PRODUCT If the Product, in addition to the
         Molecule, contains other pharmaceutically active agent(s) ("Combination
         Product"), then the parties shall meet approximately one (1) year prior
         to commercial launch of such Combination Product to negotiate in good
         faith

                                             ***CONFIDENTIAL TREATMENT REQUESTED
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Roche - Anadys Agreement
Page -9-

         and agree to an appropriate adjustment to Net Sales to reflect the
         relative significance of the Molecule and the other pharmaceutically
         active agent(s) contained in the Combination Product.

                  c. CALCULATION Roche shall calculate royalties on Net Sales
         quarterly as of March 31, June 30, September 30, and December 31 (each
         being the last day of an "Accounting Period") and shall pay royalties
         on Net Sales quarterly within the ninety (90) days after the end of
         each Accounting Period in which such Net Sales occur. "Accounting
         Period" means a calendar quarter commencing respectively on January 1,
         April 1, July 1, and October 1, each being the first day of an
         Accounting Period, and finishing respectively on March 31, June 30,
         September 30, and December 31, each being the last day of an Accounting
         Period.

                  d. CURRENCY Royalties on Net Sales shall be paid by Roche in
         U.S. Dollars. Whenever calculating royalties requires conversion from
         any currency, Roche shall make such conversion as follows:

         When calculating the Adjusted Gross Sales for countries other than the
         United States of America, Roche shall convert the amount of such sales
         in currencies other than Swiss Francs into Swiss Francs as computed in
         Roche's central Swiss Francs Sales Statistics for the countries
         concerned, using for internal foreign currency translation Roche's then
         current standard practices actually used on a consistent basis in
         preparing its audited financial statements. Upon converting the amount
         of Adjusted Gross Sales into Swiss Francs, Roche shall convert into US
         Dollars (or other currency), using the daily rate (Reuters) at the last
         working day for the applicable period.
<PAGE>

Roche - Anadys Agreement
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                  e. REPORTS With each payment Roche shall provide in writing
         for the relevant Accounting Period at least the following information
         split by U.S. and rest of world:

                  (i)      Adjusted Gross Sales;

                  (ii)     Net Sales; and

                  (iii)    Total Royalty payable.

                  f. TAXES Anadys shall pay all sales, turnover, income,
         revenue, value added, and other taxes levied on account of milestones,
         royalties and any other payments accruing or made to Anadys under this
         Agreement. If provision is made in law or regulation of any country for
         withholding of taxes of any type, levies or other charges with respect
         to any royalty or other amounts payable under this Agreement to Anadys,
         then Roche shall promptly pay such tax, levy or charge for and on
         behalf of Anadys to the proper governmental authority, and shall
         promptly furnish Anadys with receipt of payment. Roche shall be
         entitled to deduct any such tax, levy or charge actually paid from
         royalty or other payment due Anadys or be promptly reimbursed by Anadys
         if no further payments are due Anadys. Each party agrees to assist the
         other party in claiming exemption from such deductions or withholdings
         under double taxation or similar agreement or treaty from time to time
         in force and in minimizing the amount required to be so withheld or
         deducted.

                  g. RECORDS Roche and its Affiliates shall keep, and shall
         require its licensees and sublicensees to keep, full, true and accurate
         books of account containing all particulars that may be necessary for
         the purpose of calculating all royalties payable under this Agreement.
         Such books of accounts shall be kept at their principal place of
         business. At Anadys' expense, Anadys has the right to engage Roche's
         officially
<PAGE>

Roche - Anadys Agreement
Page -11-

         appointed worldwide independent public accountant to perform, on behalf
         of Anadys an audit, conducted in accordance with international
         accounting standards (IAS), of such books and records of Roche and its
         Affiliates, its licensees and sublicensees, that are deemed necessary
         by Roche's independent public accountant to report on Net Sales of
         Product for the period or periods requested by Anadys and the
         correctness of any report or payments made under this Agreement.

                  h. AUDIT Upon timely request and at least sixty (60) working
         days' prior written notice from Anadys, such audit shall be conducted
         as an additional audit work during Roche's annual audit of the
         countries specifically requested by Anadys, during regular business
         hours in such a manner as to not unnecessarily interfere with Roche's
         normal business activities, and shall be limited to results in the two
         (2) calendar years prior to audit notification. Such audit shall be an
         Anadys' cost and shall not be performed more frequently than once per
         calendar year nor more frequently than once with respect to records for
         a particular Product covering any specific period of time. All
         information, data documents and abstracts herein referred to shall be
         used only for the purpose of verifying royalty statements or compliance
         with this Agreement, shall be treated as Roche Confidential Information
         subject to the obligations of this Agreement and need neither be
         retained more than one (1) year after completion of an audit hereof, if
         an audit has been requested; nor more than two (2) years from the end
         of the calendar year to which each shall pertain; nor more than one (1)
         year after the date of termination of this Agreement. Audit results
         shall be shared by Roche and Anadys. If the audit reveals an
         overpayment, Anadys shall promptly reimburse Roche for the amount of
         the overpayment. If the audit reveals an underpayment, Roche shall
         promptly make up such underpayment. If the audit reveals that the
         royalties owed by Roche to Anadys for the countries specifically
         requested and for any calendar year in total have been understated by
<PAGE>

Roche - Anadys Agreement
Page -12-

         more than [...***...] percent ([...***...]%), Roche shall, in addition,
         pay the reasonable costs of such additional audit worK. The failure of
         Anadys to request verification of any royalty calculation within the
         period during which corresponding records must be maintained will be
         deemed to be acceptance of the royalty reporting.

11.      INTELLECTUAL PROPERTY. Since (i) Roche owns all intellectual property
         related to the Molecules and (ii) Anadys must assign to Roche all such
         intellectual property, Roche shall have the sole and exclusive right to
         obtain and defend any such intellectual property at its sole
         discretion. Anadys shall use commercially reasonable efforts assist
         Roche, at Roche's cost, by executing documents related to such
         intellectual property and providing a reasonable amount of technical
         input as may be requested by Roche.

12.      TERMINATION. This Agreement shall remain in effect for the Term, except
         in the event of material breach or bankruptcy, in which case the
         non-breaching/non-bankrupt party shall notify the breaching party in
         writing. If the breach/bankruptcy is not corrected within ninety (90)
         days after receipt of such notice, then the non-breaching party may
         terminate the Agreement. In addition, during the Collaboration Term,
         Roche may terminate the Project at will, provided that Roche pays to
         Anadys an amount equal to [...***...] dollars (US$[...***...]) minus
         the amount of research funding payments previously made By Roche to
         Anadys under the Agreement. Termination of the Project during the
         Collaboration by Roche shall not impact upon the other terms and
         conditions of the Agreement, which shall remain in effect. Termination
         of this Agreement shall not relieve the parties of any obligation
         accruing prior to such expiration or termination, including the payment
         of milestones and royalties.

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -13-

13.      CONFIDENTIALITY AND PUBLICATION. During the Collaboration Term and for
         [...***...] years thereafter, the receiving party shall not publish or
         otherwise disclose to a third party, other than an Affiliate, and shall
         not use for any purpose other than as expressly provided for in this
         Agreement any Information furnished to it by the other party through
         the end of the Collaboration Term (collectively, "Confidential
         Information"). For the purpose of this Section 13, the term "receiving
         party" with respect to Roche shall include Affiliates that agree to be
         bound by the terms and conditions of this Agreement. Each receiving
         party may use Confidential Information of the other party only to the
         extent required to accomplish the purposes of this Agreement. Each
         receiving party will use at least the same standard of care as it uses
         to protect proprietary or confidential information of its own to ensure
         that its employees, agents, consultants and other representatives do
         not disclose or make any unauthorized use of the other party's
         Confidential Information. Confidential Information shall not include
         information which the receiving party can prove by competent tangible
         evidence: (i) is now, or hereafter becomes, through no act or failure
         to act on the part of the receiving party, generally known or
         available; (ii) is known by the receiving party at the time of
         receiving such information, as evidenced by its tangible records; (iii)
         is hereafter furnished to the receiving party by a third party, as a
         matter of right and without restriction on disclosure; (iv) is
         independently discovered or developed by the receiving party without
         the use of Confidential Information of the disclosing party; or (v) is
         the subject of a written permission to disclose provided by the
         disclosing party. The terms of this Agreement shall be considered
         Confidential Information, except to the extent that the parties
         authorize otherwise. Notwithstanding the foregoing, (i) each Party
         shall have the right to disclose the material terms of this Agreement
         in confidence to any bona fide potential investor, investment banker,
         acquirer, merger partner or other potential financial partner, and
         where

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

Roche - Anadys Agreement
Page -14-

         reasonably practicable, hall obtain an adequate agreement of
         confidentiality consistent with the terms of this Agreement, and (ii)
         if a Party is required to make a disclosure of this Agreement in a
         regulatory filing, then it will be permitted to do so, provided that it
         gives reasonable advance notice to the other Party of such disclosure
         and endeavors in good faith to secure confidential treatment of
         sensitive information or a protective order related to such
         information. The parties agree that the press release attached hereto
         is an authorized disclosure.

         Roche may disclose Anadys Confidential Information to the extent such
         disclosure is reasonably necessary for (i) filing or prosecuting
         patents in accordance with this Agreement or (ii) complying with
         applicable court orders or governmental regulations.

14.      WARRANTIES AND INDEMNIFICATION. The parties warrant and represent that
         they have the full right and authority to enter into this Agreement and
         that they have no obligations or commitments inconsistent with this
         Agreement. Anadys warrants and represents that its FTEs have the
         training and expertise required to conduct the activities set forth in
         the Plan and will do so in a professional manner. Each party
         ("Indemnitor") shall indemnify and hold harmless the other party
         ("Indemnitee") from any and all losses, costs, claims, demands,
         judgments and liability, including reasonable attorney fees
         (collectively, "Losses") to which the Indemnitee may become subject as
         a result of any claim, demand, action or other proceeding by any third
         party to the extent such Losses result from the Indemnitor's
         performance under this Agreement, except to the extent that such
         losses, costs, claims, demands, judgments or liability are due to the
         negligence or wrongful act(s) of the Indemnitee.

         NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY
         SPECIAL, INCIDENTAL, CONSEQUENTIAL OR
<PAGE>

Roche - Anadys Agreement
Page -15-

         PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE
         GRANTED HEREUNDER.

15.      ASSIGNMENT. The services to be provided by Anadys cannot be assigned or
         transferred by Anadys without the prior written consent of Roche,
         except that an Affiliate of Anadys may perform all or a portion of the
         services to be provided by Anadys, upon Roche's prior written consent,
         which shall not be unreasonably denied.

16.      COMPLIANCE WITH LAWS. It is the policy of both parties to comply with
         all applicable laws, regulations, permits and consent orders and to act
         in a proper and ethical manner. Accordingly, in connection with the
         services provided hereunder each party agrees to comply with all
         applicable laws, regulations, permits and consent orders.

17.      SEVERABILITY AND WAIVER. The provisions of this Agreement are
         severable, and any judicial determination that one or more such
         provision is invalid or unenforceable shall not affect the validity or
         enforceability of any other provision, but rather shall cause this
         Agreement first to be construed in all respects as if such invalid or
         unenforceable provision(s) were modified to terms which are valid and
         enforceable and provide the greatest temporal, geographic and other
         protection to Roche's business interests; but if necessary, shall cause
         this Agreement to be construed as if such invalid or unenforceable
         provision(s) were omitted. No failure to exercise any right or demand
         performance of any obligation under this Agreement shall be deemed a
         waiver of such right or obligation.

18.      INDEPENDENT CONTRACTORS. Anadys understands and agrees that, in its
         relationship with Roche under this Agreement, Anadys is acting in the
         capacity of an independent contractor and that it has no authority to
         represent or act on behalf of Roche without Roche's prior consent.
<PAGE>

Roche - Anadys Agreement
Page -16-

         Nothing in this agreement should be construed to create an
         employee/employer relationship between Roche and Anadys or any of its
         employees, agents, principles or other individuals providing services
         to Roche on behalf of Anadys.

19.      ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
         between Roche and Anadys with respect to the services contemplated
         herein and supersedes all previous negotiations, commitments and
         writings. No modifications or amendments hereof shall be effective
         unless made in writing and signed by Anadys and an authorized
         representative of Roche.

20.      CHOICE OF LAW. This Agreement shall be governed by the laws of the
         State of New Jersey, without giving effect to New Jersey's choice of
         law principles.

21.      NOTICES. Official notices shall be in writing and delivered in person,
         by mail (postage prepaid), by overnight courier or by facsimile as
         follows:

                  If to Anadys:         Anadys Pharmaceuticals, Inc.
                                        9050 Camino Santa Fe
                                        San Diego, CA 92121
                                        Tel: [...***...]
                                        Fax: [...***...]
                                        Attn: Vice President, Corporate
                                        Development and Strategy, with a copy to
                                        Director of Legal Affairs

                  If to Roche:          Hoffmann-La Roche Inc.
                                        340 Kingsland Avenue
                                        Nutley, New Jersey 07110
                                        Attn.:  Corporate Secretary
                                        Fax:  [...***...]

         Invoices shall be sent to: Hoffmann-La Roche Inc.

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

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                                            340 Kingsland Street
                                            Nutley, New Jersey 07110
                                            Attention: Corporate Accounting
                                            Fax: [...***...]

22.      COUNTERPARTS. This Agreement may be executed in any number of
         counterparts, each of which shall be deemed an original document, and
         all of which together shall be deemed one instrument.

IN WITNESS WHEREOF, the parties hereto, intending to be bound hereby, have
caused this Agreement to be executed as of the dates indicated here:

HOFFMANN-LA ROCHE INC.                  ANADYS PHARMACEUTICALS, INC.

By /s/ LEE E. BABISS                    By /s/ MICHAEL J. KAMDAR
   -----------------------------           ------------------------------------

Name LEE E. BABISS, PH.D.               Name MICHAEL J. KAMDAR

Title Vice President Preclinical        Title Vice President, Corporate
      Research & Development                   Development

Date 8/7/02                             Date 8/7/02

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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