Document:

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                                                                    EXHIBIT 10.4

                         PENINSULA PHARMACEUTICALS, INC.

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

                                DECEMBER 11, 2003

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<S>                                                                           <C>
SECTION 1.      GENERAL...................................................     1

     1.1    Amendment and Restatement of Prior Agreement..................     1

     1.2    Definitions...................................................     2

SECTION 2.      REGISTRATION; RESTRICTIONS ON TRANSFER....................     3

     2.1    Restrictions on Transfer......................................     3

     2.2    Demand Registration...........................................     4

     2.3    Piggyback Registrations.......................................     6

     2.4    Form S-3 Registration.........................................     7

     2.5    Expenses of Registration......................................     8

     2.6    Obligations of the Company....................................     8

     2.7    Termination of Registration Rights............................    10

     2.8    Delay of Registration; Furnishing Information.................    10

     2.9    Indemnification...............................................    11

     2.10   Assignment of Registration Rights.............................    13

     2.11   Amendment of Registration Rights..............................    13

     2.12   Limitation on Subsequent Registration Rights..................    13

     2.13   "Market Stand-Off" Agreement..................................    13

     2.14   Agreement to Furnish Information..............................    14

     2.15   Rule 144 Reporting............................................    14

SECTION 3.      COVENANTS OF THE COMPANY..................................    14

     3.1    Basic Financial Information and Reporting.....................    15

     3.2    Inspection Rights.............................................    15

     3.3    Confidentiality of Records....................................    15

     3.4    Reservation of Common Stock...................................    16

     3.5    Stock Vesting.................................................    16

     3.6    Visitation Rights.............................................    16

     3.7    Proprietary Information and Inventions Agreement..............    17

     3.8    Assignment of Right of First Refusal..........................    17

     3.9    Qualified Small Business......................................    17

     3.10   Directors' Compensation and Expenses..........................    17

     3.11   Director and Officer Liability Insurance......................    17

     3.12   Bylaws........................................................    17

     3.13   Drag-Along Right..............................................    18
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     3.14   Termination of Covenants......................................    18

SECTION 4.      RIGHTS OF FIRST REFUSAL...................................    18

     4.1    Subsequent Offerings..........................................    18

     4.2    Exercise of Rights............................................    18

     4.3    Issuance of Equity Securities to Other Persons................    18

     4.4    Termination and Waiver of Rights of First Refusal.............    19

     4.5    Transfer of Rights of First Refusal...........................    19

     4.6    Excluded Securities...........................................    19

SECTION 5.      RIGHT OF FIRST OFFER......................................    20

     5.1    Restrictions on Voluntary Transfers of Preferred Stock........    20

     5.2    Termination...................................................    21

     5.3    Exceptions....................................................    21

     5.4    Transfer of Right of First Offer..............................    21

     5.5    Legend........................................................    21

SECTION 6.      DRAG-ALONG RIGHT..........................................    21

     6.1    Drag-Along Notice.............................................    21

     6.2    Conditions to Drag-Along......................................    22

     6.3    Termination...................................................    22

SECTION 7.      MISCELLANEOUS.............................................    22

     7.1    Governing Law.................................................    22

     7.2    Successors and Assigns........................................    23

     7.3    Entire Agreement..............................................    23

     7.4    Severability..................................................    23

     7.5    Amendment and Waiver..........................................    23

     7.6    Delays or Omissions...........................................    23

     7.7    Notices.......................................................    24

     7.8    Attorneys' Fees...............................................    24

     7.9    Titles and Subtitles..........................................    24

     7.10   Counterparts..................................................    24

     7.11   Aggregation of Stock..........................................    24

     7.12   Pronouns......................................................    24
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                         PENINSULA PHARMACEUTICALS, INC.

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

         THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement")
is entered into as of December 11, 2003, by and among Peninsula Pharmaceuticals,
Inc., a Delaware corporation (the "Company"), and the investors listed on
EXHIBIT A hereto, referred to hereinafter as the "Investors" and each
individually as an "Investor."

                                    RECITALS

         WHEREAS, certain of the Investors are purchasing shares of the
Company's Series C Preferred Stock (the "Series C Stock"), pursuant to that
certain Series C Preferred Stock Purchase Agreement (the "Purchase Agreement")
of even date herewith (the "Financing");

         WHEREAS, the obligations in the Purchase Agreement are conditioned upon
the execution and delivery of this Agreement;

         WHEREAS, certain of the Investors (the "Prior Investors") are holders
of the Company's Series A Preferred Stock (the "Series A Stock") and Series B
Preferred Stock (the "Series B Stock") (the Series A Stock, the Series B Stock
and the Series C Stock shall be referred to herein collectively as the
"Preferred Stock");

         WHEREAS, the Prior Investors and the Company are parties to an Investor
Rights Agreement dated as of August 29, 2002, as amended by that certain
Amendment No. 1 to Amended and Restated Investor Rights Agreement, dated as of
November 14, 2003 (the "Prior Agreement");

         WHEREAS, the parties to the Prior Agreement desire to amend and restate
the Prior Agreement and accept the rights and covenants hereof in lieu of their
rights and covenants under the Prior Agreement; and

         WHEREAS, in connection with the consummation of the Financing, the
Company and the Investors have agreed to the registration rights, information
rights, and other rights as set forth below.

         NOW, THEREFORE, in consideration of these premises and for other good
and valid consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

SECTION 1. GENERAL.

         1.1      AMENDMENT AND RESTATEMENT OF PRIOR AGREEMENT. The Prior
Agreement is hereby amended in its entirety and restated herein. Such amendment
and restatement is effective upon the execution of this Agreement by the Company
and the holders of sixty-six and two-thirds percent (66 2/3%) of the Series A
Stock and Series B Stock held by the Prior Investors outstanding as of the date
of this Agreement. Upon such execution, all provisions of, rights

                                       1.
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granted and covenants made in the Prior Agreement are hereby waived, released
and superseded in their entirety and shall have no further force or effect,
including, without limitation, all rights of first refusal and any notice period
associated therewith otherwise applicable to the transactions contemplated by
the Purchase Agreement.

         1.2      DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:

                  (a)      "Exchange Act" means the Securities Exchange Act of
1934, as amended.

                  (b)      "Form S-3" means such form under the Securities Act
as in effect on the date hereof or any successor or similar registration form
under the Securities Act subsequently adopted by the SEC which permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC.

                  (c)      "Holder" means any person owning of record
Registrable Securities that have not been sold to the public or any assignee of
record of such Registrable Securities in accordance with Section 2.10 hereof.

                  (d)      "Initial Offering" means the Company's first firm
commitment underwritten public offering of its Common Stock registered under the
Securities Act.

                  (e)      "Register," "registered," and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.

                  (f)      "Registrable Securities" means (a) Common Stock of
the Company issuable or issued upon conversion of the Shares, (b) any shares of
Common Stock of the Company hereafter acquired by any Holder, (c) any shares of
Common Stock of the Company now held or hereafter acquired by Domain
Anti-Bacterial Acquisition Corporation ("DAAC"), and (d) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities (i) sold by a person to the public either pursuant to a
registration statement or Rule 144, (ii) sold in a private transaction in which
the transferor's rights under Section 2 of this Agreement are not assigned or
(iii) acquired by any Holder or DAAC pursuant to a registration statement or
Rule 144 or in any open market transaction following the Initial Offering.

                  (g)      "Registrable Securities then outstanding" shall be
the number of shares of the Company's Common Stock that are Registrable
Securities and either (a) are then issued and outstanding or (b) are issuable
pursuant to then exercisable or convertible securities.

                  (h)      "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Sections 2.2, 2.3 and 2.4 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company, reasonable fees and
disbursements not to exceed $25,000 of a single special counsel for the Holders,
blue sky fees and expenses and the expense of any special audits incident to or
required

                                       2.
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by any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).

                  (i)      "SEC" or "Commission" means the Securities and
Exchange Commission.

                  (j)      "Securities Act" shall mean the Securities Act of
1933, as amended.

                  (k)      "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale.

                  (l)      "Shares" shall mean (a) the Company's Preferred Stock
held by the Investors listed on EXHIBIT A hereto and their permitted assigns and
(b) the Company's Common Stock held by DAAC and its permitted assigns.

                  (m)      "Special Registration Statement" shall mean (i) a
registration statement relating to any employee benefit plan or (ii) with
respect to any corporate reorganization or transaction under Rule 145 of the
Securities Act, including any registration statements related to the issuance or
resale of securities issued in such a transaction or (iii) a registration
related to stock issued upon conversion of debt securities.

SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.

         2.1      RESTRICTIONS ON TRANSFER.

                  (a)      Each Holder agrees not to make any disposition of all
or any portion of the Shares or Registrable Securities unless and until:

                           (i)      There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or

                           (ii)     (A) The transferee has agreed in writing to
be bound by the terms of this Agreement, (B) such Holder shall have notified the
Company of the proposed disposition and shall have furnished the Company with a
detailed statement of the circumstances surrounding the proposed disposition,
and (C) if reasonably requested by the Company, such Holder shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144, except in unusual
circumstances. After its Initial Offering, the Company will not require the
transferee to be bound by the terms of this Agreement.

                  (b)      Notwithstanding the provisions of subsection (a)
above, no such restriction shall apply to a transfer by a Holder that is (A) a
partnership transferring to its partners or former partners in accordance with
partnership interests, (B) a corporation transferring to a wholly-owned
subsidiary or a parent corporation that owns all of the capital stock of the
Holder, (C) a limited liability company transferring to its members or former
members in accordance with their interest in the limited liability company, (D)
an entity transferring to an affiliate as such

                                       3.
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term is defined in Rule 144 of the Securities Act (an "Affiliate"), or (E) an
individual transferring to the Holder's family member or trust for the benefit
of an individual Holder; provided that in each case the transferee will agree in
writing to be subject to the terms of this Agreement to the same extent as if he
were an original Holder hereunder.

                  (c)      Each certificate representing Shares or Registrable
Securities shall be stamped or otherwise imprinted with legends substantially
similar to the following (in addition to any legend required under applicable
state securities laws):

                  THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
                  UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
                  OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR
                  HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR
                  UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL
                  SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH
                  REGISTRATION IS NOT REQUIRED.

                  THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
                  REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
                  CONDITIONS OF A CERTAIN INVESTOR RIGHTS AGREEMENT BY AND
                  BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF SUCH
                  AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
                  SECRETARY OF THE COMPANY.

                  (d)      The Company shall be obligated to reissue promptly
unlegended certificates at the request of any Holder thereof if the Company has
completed its Initial Offering and the Holder shall have obtained an opinion of
counsel (which counsel may be counsel to the Company) reasonably acceptable to
the Company to the effect that the securities proposed to be disposed of may
lawfully be so disposed of without registration, qualification and legend.

                  (e)      Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.

         2.2      DEMAND REGISTRATION.

                  (a)      Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders of a majority of the
Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding with an anticipated aggregate offering price of at least $5,000,000
(a "Qualified Public Offering"), then the Company shall, within thirty (30) days
of the receipt thereof, give

                                       4.
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written notice of such request to all Holders, and subject to the limitations of
this Section 2.2, effect, as expeditiously as reasonably possible, the
registration under the Securities Act of all Registrable Securities that all
Holders request to be registered.

                  (b)      If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 or any request pursuant to Section 2.4 and the Company shall
include such information in the written notice referred to in Section 2.2(a) or
Section 2.4(a), as applicable. In such event, the right of any Holder to include
its Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.2 or Section 2.4, if the underwriter advises the Company that marketing
factors require a limitation of the number of securities to be underwritten
(including Registrable Securities) then the Company shall so advise all Holders
of Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares that may be included in the underwriting shall be
allocated to the Holders of such Registrable Securities on a pro rata basis
based on the number of Registrable Securities held by all such Holders
(including the Initiating Holders). Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from the registration.

                  (c)      The Company shall not be required to effect a
registration pursuant to this Section 2.2:

                           (i)      prior to the earlier of (A) the fifth
anniversary of the date of this Agreement or (B) the first anniversary of the
effective date of the registration statement pertaining to the Initial Offering;

                           (ii)     after the Company has effected two (2)
registrations pursuant to this Section 2.2, and such registrations have been
declared or ordered effective;

                           (iii)    during the period starting with the date of
filing of, and ending on the date one hundred eighty (180) days following the
effective date of the registration statement pertaining to a public offering,
other than pursuant to a Special Registration Statement; provided that the
Company makes reasonable good faith efforts to cause such registration statement
to become effective and provided, in the case of a public offering other than
the Initial Offering, that the Initiating Holders were permitted to register
such shares as requested to be registered pursuant to Section 2.3 hereof without
reduction by the underwriter thereof;

                           (iv)     if within thirty (30) days of receipt of a
written request from Initiating Holders pursuant to Section 2.2(a), the Company
gives notice to the Holders of the Company's intention to file a registration
statement for a public offering within ninety (90) days, other than pursuant to
a Special Registration Statement;

                                       5.
<PAGE>

                           (v)      if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 2.2, a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer such filing
for a period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided that such right to delay a request
shall be exercised by the Company not more than once in any twelve (12) month
period;

                           (vi)     if the Initiating Holders propose to dispose
of shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 2.4 below; or

                           (vii)    in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.

         2.3      PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least fifteen (15) days prior to the
filing of any registration statement under the Securities Act for purposes of a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding Special Registration Statements) and will afford each
such Holder an opportunity to include in such registration statement all or part
of such Registrable Securities held by such Holder. Each Holder desiring to
include in any such registration statement all or any part of the Registrable
Securities held by it shall, within fifteen (15) days after the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.

                  (a)      UNDERWRITING. If the registration statement under
which the Company gives notice under this Section 2.3 is for an underwritten
offering, the Company shall so advise the Holders of Registrable Securities. In
such event, the right of any such Holder to be included in a registration
pursuant to this Section 2.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Agreement, if the underwriter
determines in good faith that marketing factors require a limitation of the
number of shares to be underwritten, the number of shares that may be included
in the underwriting shall be allocated, first, to the Company; second, to the
Holders on a pro rata basis based on the total number of Registrable Securities
held by the Holders; and third, to any stockholder of the Company (other than a
Holder) on a pro rata basis. If any Holder disapproves of the terms of any such

                                       6.
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underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter, delivered at least ten (10) business days prior
to the effective date of the registration statement. Any Registrable Securities
excluded or withdrawn from such underwriting shall be excluded and withdrawn
from the registration. For any Holder which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "Holder,"
and any pro rata reduction with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "Holder," as defined in this sentence.

                  (b)      RIGHT TO TERMINATE REGISTRATION. The Company shall
have the right to terminate or withdraw any registration initiated by it under
this Section 2.3 prior to the effectiveness of such registration whether or not
any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.5 hereof.

         2.4      FORM S-3 REGISTRATION. In case the Company shall receive from
any Holder or Holders of Registrable Securities a written request or requests
that the Company effect a registration on Form S-3 (or any successor to Form
S-3) or any similar short-form registration statement and any related
qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:

                  (a)      promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders
of Registrable Securities; and

                  (b)      as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance pursuant to this Section 2.4:

                           (i)      if Form S-3 is not available for such
offering by the Holders, or

                           (ii)     if the Holders, together with the holders of
any other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $2,000,000, or

                           (iii)    if within thirty (30) days of receipt of a
written request from any Holder or Holders pursuant to this Section 2.4, the
Company gives notice to such Holder or Holders of the Company's intention to
make a public offering within ninety (90) days, other than pursuant to a Special
Registration Statement;

                           (iv)     if the Company shall furnish to the Holders
a certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment

                                       7.
<PAGE>

of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such Form S-3 registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than one
hundred twenty (120) days after receipt of the request of the Holder or Holders
under this Section 2.4; provided, that such right to delay a request shall be
exercised by the Company not more than once in any twelve (12) month period, or

                           (v)      if the Company has, within the twelve (12)
month period preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 2.4, or

                           (vi)     in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.

                  (c)      Subject to the foregoing, the Company shall file a
Form S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the requests of the Holders. Registrations effected pursuant to this Section 2.4
shall not be counted as demands for registration or registrations effected
pursuant to Section 2.2.

         2.5      EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2 or any registration under
Section 2.3 or Section 2.4 herein shall be borne by the Company. All Selling
Expenses incurred in connection with any registrations hereunder, shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of shares so registered. The Company shall not, however, be required to
pay for expenses of any registration proceeding begun pursuant to Section 2.2 or
2.4, the request of which has been subsequently withdrawn by the Initiating
Holders unless (a) the withdrawal is based upon material adverse information
concerning the Company of which the Initiating Holders were not aware at the
time of such request or (b) the Holders of a majority of Registrable Securities
agree to forfeit their right to one requested registration pursuant to Section
2.2 or Section 2.4, as applicable, in which event such right shall be forfeited
by all Holders. If the Holders are required to pay the Registration Expenses,
such expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.

         2.6      OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:

                  (a)      Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use commercially
reasonable efforts to cause such registration statement to become effective,
and, upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to
thirty (30) days or, if earlier, until the Holder or Holders have completed the
distribution related

                                       8.
<PAGE>

thereto; provided, however, that at any time, upon written notice to the
participating Holders and for a period not to exceed sixty (60) days thereafter
(the "Suspension Period"), the Company may delay the filing or effectiveness of
any registration statement or suspend the use or effectiveness of any
registration statement (and the Initiating Holders hereby agree not to offer or
sell any Registrable Securities pursuant to such registration statement during
the Suspension Period) if the Company reasonably believes that the Company may,
in the absence of such delay or suspension hereunder, be required under state or
federal securities laws to disclose any corporate development the disclosure of
which could reasonably be expected to have a material adverse effect upon the
Company, its stockholders, a potentially significant transaction or event
involving the Company, or any negotiations, discussions, or proposals directly
relating thereto. In the event that the Company shall exercise its right to
delay or suspend the filing or effectiveness of a registration hereunder, the
applicable time period during which the registration statement is to remain
effective shall be extended by a period of time equal to the duration of the
Suspension Period. The Company may extend the Suspension Period for an
additional consecutive sixty (60) days with the consent of the holders of a
majority of the Registrable Securities registered under the applicable
registration statement, which consent shall not be unreasonably withheld. If so
directed by the Company, all Holders registering shares under such registration
statement shall use their best efforts to deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holders' possession, of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. The Company shall not be required
to file, cause to become effective or maintain the effectiveness of any
registration statement that contemplates a distribution of securities on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act.

                  (b)      Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement for the period set forth in
subsection (a) above.

                  (c)      Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.

                  (d)      Use its reasonable efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.

                  (e)      In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering. Each
Holder participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

                                       9.
<PAGE>

                  (f)      Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing. The Company will use reasonable efforts to amend or supplement such
prospectus in order to cause such prospectus not to include any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.

                  (g)      Use its reasonable efforts to furnish, on the date
that such Registrable Securities are delivered to the underwriters for sale, if
such securities are being sold through underwriters, (i) an opinion, dated as of
such date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter, dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.

         2.7      TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Section 2 shall terminate and be of no further force and
effect six (6) years after the date of the Company's Initial Offering. In
addition, a Holder's registration rights shall expire if the Company has
completed its Initial Offering and all shares of Common Stock of the Company
issuable or issued upon conversion of the Shares held by and issuable to such
Holder (and its Affiliates) may be sold pursuant to Rule 144 during any ninety
(90) day period.

         2.8      DELAY OF REGISTRATION; FURNISHING INFORMATION.

                  (a)      No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.

                  (b)      It shall be a condition precedent to the obligations
of the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.

                  (c)      The Company shall have no obligation with respect to
any registration requested pursuant to Section 2.2 or Section 2.4 if, due to the
operation of subsection 2.2(b), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in Section 2.2 or Section 2.4,
whichever is applicable.

                                      10.
<PAGE>

         2.9      INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:

                  (a)      To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, members, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement or incorporated reference therein, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law in connection with the offering covered by such
registration statement; and the Company will reimburse each such Holder,
partner, member, officer, director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, member,
officer, director, underwriter or controlling person of such Holder.

                  (b)      To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any of the following statements:
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement or incorporated reference therein,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or

                                      11.
<PAGE>

alleged violation by the Company of the Securities Act (collectively, a "Holder
Violation"), in each case to the extent (and only to the extent) that such
Holder Violation occurs in reliance upon and in conformity with written
information furnished by such Holder under an instrument duly executed by such
Holder and stated to be specifically for use in connection with such
registration; and each such Holder will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, controlling
person, underwriter or other Holder, or partner, officer, director or
controlling person of such other Holder in connection with investigating or
defending any such loss, claim, damage, liability or action if it is judicially
determined that there was such a Holder Violation; provided, however, that the
indemnity agreement contained in this Section 2.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9 exceed the net proceeds from the offering
received by such Holder.

                  (c)      Promptly after receipt by an indemnified party under
this Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.

                  (d)      If the indemnification provided for in this Section
2.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any losses, claims, damages or liabilities
referred to herein, the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or

                                      12.
<PAGE>

omission; provided, that in no event shall any contribution by a Holder
hereunder exceed the net proceeds from the offering received by such Holder.

                  (e)      The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.

         2.10     ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 2 may be
assigned by a Holder to a transferee or assignee of Registrable Securities that
(a) is a subsidiary, parent, general partner, limited partner, retired partner,
member or retired member of a Holder, (b) is a Holder's family member or trust
for the benefit of an individual Holder, (c) is an Affiliate of a Holder, or (d)
acquires at least twenty-five percent (25%) of the Registrable Securities of
such Holder; provided, however, (i) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned, (ii) such transferee shall agree to
be subject to all restrictions set forth in this Agreement and (iii) such
transfer will not require the registration of such Registrable Securities under
the Securities Act.

         2.11     AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Section 2 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least a majority of the Shares then outstanding. Any amendment or waiver
effected in accordance with this Section 2.11 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.

         2.12     LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of at least a majority of the Registrable Securities then
outstanding, enter into any agreement with any holder or prospective holder of
any securities of the Company that would grant such holder registration rights
on a parity with or senior to those granted to the Holders hereunder or that
would grant such holder the right to a demand registration that could result in
a registration statement being declared effective prior to twelve (12) months
after the Initial Offering or within one hundred eighty (180) days after the
effective date of a registration statement effected pursuant to Section 2.2,
other than the right to a Special Registration Statement.

         2.13     "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that
such Holder shall not sell, transfer, make any short sale of, grant any option
for the purchase of, or enter into any hedging or similar transaction with the
same economic effect as a sale, any Common Stock (or other securities) of the
Company held by such Holder (other than those included in the registration) for
a period specified by the representative of the underwriters of Common Stock (or
other securities) of the Company not to exceed one hundred eighty (180) days
following the

                                      13.
<PAGE>

effective date of a registration statement of the Company filed under the
Securities Act; provided that:

                  (i)      such agreement shall apply only to the Company's
Initial Offering; and

                  (ii)     all officers and directors of the Company and holders
of at least one percent (1%) of the Company's voting securities enter into
similar agreements.

         2.14     AGREEMENT TO FURNISH INFORMATION. Each Holder agrees to
execute and deliver such other agreements as may be reasonably requested by the
Company or the underwriter that are consistent with the Holder's obligations
under Section 2.13 or that are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in Section 2.13 and this
Section 2.14 shall not apply to a Special Registration Statement. The Company
may impose stop-transfer instructions with respect to the shares of Common Stock
(or other securities) subject to the foregoing restriction until the end of said
one hundred eighty (180) day period. Each Holder agrees that any transferee of
any shares of Registrable Securities shall be bound by Sections 2.13 and 2.14.
The underwriters of the Company's stock are intended third party beneficiaries
of Sections 2.13 and 2.14 and shall have the right, power and authority to
enforce the provisions hereof as though they were a party hereto.

         2.15     RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:

                  (a)      Make and keep public information available, as those
terms are understood and defined in SEC Rule 144 or any similar or analogous
rule promulgated under the Securities Act, at all times after the effective date
of the first registration filed by the Company for an offering of its securities
to the general public;

                  (b)      File with the SEC, in a timely manner, all reports
and other documents required of the Company under the Exchange Act; and

                  (c)      So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company filed with the Commission; and such other
reports and documents as a Holder may reasonably request in connection with
availing itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.

SECTION 3. COVENANTS OF THE COMPANY.

                                      14.
<PAGE>

         3.1      BASIC FINANCIAL INFORMATION AND REPORTING.

                  (a)      The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied
(except as noted therein or as disclosed to the recipients thereof), and will
set aside on its books all such proper accruals and reserves as shall be
required under generally accepted accounting principles consistently applied.

                  (b)      So long as an Investor (with its Affiliates) shall
own not less than one million (1,000,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), as soon as
practicable after the end of each fiscal year of the Company, and in any event
within ninety (90) days thereafter, the Company will furnish such Major Investor
a balance sheet of the Company, as at the end of such fiscal year, and a
statement of income and a statement of cash flows of the Company, for such year,
all prepared in accordance with generally accepted accounting principles
consistently applied (except as noted therein or as disclosed to the recipients
thereof) and setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail. Such financial statements shall
be accompanied by a report and opinion thereon by independent public accountants
of national standing selected by the Company's Board of Directors.

                  (c)      The Company will furnish each Major Investor: (i) at
least sixty (60) days prior to the beginning of each fiscal year an annual
budget and operating plans for such fiscal year (and as soon as available, any
subsequent written revisions thereto); and (ii) as soon as practicable after the
end of each month, and in any event within twenty (20) days thereafter, a
balance sheet of the Company as of the end of each such month, and a statement
of income and a statement of cash flows of the Company for such month and for
the current fiscal year to date, including a comparison to plan figures for such
period, prepared in accordance with generally accepted accounting principles
consistently applied (except as noted thereon), with the exception that no notes
need be attached to such statements and year-end audit adjustments may not have
been made.

         3.2      INSPECTION RIGHTS. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential or attorney-client privileged and should not, therefore, be
disclosed.

         3.3      CONFIDENTIALITY OF RECORDS. Each Investor agrees to keep
confidential any information furnished to such Investor that the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain) and to use the same degree of care as such Investor
uses to protect its own confidential information, except that such Investor may
disclose such proprietary or confidential information (i) to any partner,
member, Affiliate, subsidiary or parent of such Investor for the purpose of
evaluating its investment in the

                                      15.
<PAGE>

Company or as necessary for the performance or satisfaction of their duties,
rights or obligations as long as such partner, member, Affiliate, subsidiary or
parent is advised of the confidentiality provisions of this Section 3.3; (ii) at
such time as it enters the public domain through no fault of such Investor;
(iii) that is communicated to it free of any obligation of confidentiality; (iv)
that is developed by Investor or its agents independently of and without
reference to any confidential information communicated by the Company; (v) as
required to disclose information pursuant to any law, statute, rule or
regulation or any order of any court or jurisdiction process or (with written
notice to the Company) pursuant to any direction, request or requirement
(whether or not having the force of law but if not having the force of law being
of a type with which institutional investors in the relevant jurisdiction are
accustomed to comply) of any self-regulating organization or any governmental,
fiscal, monetary or other authority; (vi) to any Investor's counsel, accountants
or other professional advisors; (vii) to the extent that an Investor needs to
disclose information for the protection of any of such Investor's rights or
interest against the Company, whether under this Agreement or otherwise; or
(viii) to the disclosure of information to a prospective transferee of
securities who agrees to be bound by the provisions of this Section 3.3 in
connection with the receipt of such information, provided that such prospective
transferee is not a competitor of the Company.

         3.4      RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.

         3.5      STOCK VESTING. Unless otherwise approved by the Board of
Directors, all stock options and other stock equivalents issued after the date
of this Agreement to employees, directors, consultants and other service
providers shall be subject to vesting as follows: (a) twenty-five percent (25%)
of such stock shall vest at the end of the first year following the earlier of
the date of issuance or such person's services commencement date with the
Company, and (b) seventy-five percent (75%) of such stock shall vest over the
remaining three (3) years. With respect to any shares of stock purchased by any
such person, the Company's repurchase option shall provide that upon such
person's termination of employment or service with the Company, with or without
cause, the Company or its assignee shall have the option to purchase at cost any
unvested shares of stock held by such person.

         3.6      VISITATION RIGHTS. The Company shall allow one representative
designated by Domain Associates, L.L.C., one representative designated by A. M.
Pappas Life Science Ventures, II, LP, one representative appointed by Montreux
Equity Partners II SBIC, L.P. and one representative appointed by OrbiMed
Advisors LLC on behalf of Caduceus Private Investments II, L.P. and Caduceus
Private Investments II (QP), L.P to attend all meetings of the Company's Board
of Directors in a nonvoting capacity, and in connection therewith, the Company
shall give such representatives copies of all notices, minutes, consents and
other materials, financial or otherwise, which the Company provides to its Board
of Directors; provided, however, that the Company reserves the right to exclude
such representatives from access to any material or meeting or portion thereof
if the Company believes upon advice of counsel that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect highly
confidential information or for other similar reasons. The decision of the Board
with respect to the privileged or confidential nature of such information shall
be final and binding.

                                      16.
<PAGE>

         3.7      PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement substantially in a form approved by the
Company's counsel.

         3.8      ASSIGNMENT OF RIGHT OF FIRST REFUSAL. In the event the Company
elects not to exercise any right of first refusal or right of first offer the
Company may have on a proposed transfer of any of the Company's outstanding
capital stock pursuant to the Company's charter documents, by contract or
otherwise, the Company shall, to the extent it may do so, assign such right of
first refusal or right of first offer to each Major Investor. In the event of
such assignment, each Major Investor shall have a right to purchase its pro rata
portion of the capital stock proposed to be transferred. Each Major Investor's
pro rata portion shall be equal to the product obtained by multiplying (i) the
aggregate number of shares proposed to be transferred by (ii) a fraction, the
numerator of which is the number of shares of Registrable Securities held by
such Major Investor at the time of the proposed transfer and the denominator of
which is the total number of shares owned by all Major Investors at the time of
such proposed transfer.

         3.9      QUALIFIED SMALL BUSINESS. For so long as any of the Shares are
held by an Investor (or a transferee in whose hands such Shares are eligible to
qualify as "Qualified Small Business Stock" as defined in Section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "Code")), the Company will use
its reasonable efforts to comply with the reporting and recordkeeping
requirements of Section 1202 of the Code, any regulations promulgated thereunder
and any similar state laws and regulations, and agrees not to repurchase any
stock of the Company if such repurchase would cause the Shares not to so qualify
as "Qualified Small Business Stock," so long as the Company's Board of Directors
determines that it is in the best interests of the Company to comply with the
provisions of Section 1202 of the Code.

         3.10     DIRECTORS' COMPENSATION AND EXPENSES. For so long as the
holders of Preferred Stock are entitled to appoint any members of the Board of
Directors pursuant to the Company's Certificate of Incorporation, all
non-employee directors will be compensated by the Company identically and the
reasonable out-of-pocket and travel expenses of the directors and any
representatives appointed pursuant to Section 3.6 hereof incurred in attending
Board meetings (or meetings of committees thereof) or in connection with the
performance of their duties as directors shall be paid or reimbursed promptly by
the Company.

         3.11     DIRECTOR AND OFFICER LIABILITY INSURANCE. Following the
Closing (as defined in the Purchase Agreement), the Company will use
commercially reasonable efforts to maintain director and officer liability
insurance with levels of coverage as deemed appropriate by the Board of
Directors.

         3.12     BYLAWS. The Company shall at all times cause its bylaws to
provide that the number of directors fixed in accordance with therewith shall in
no event conflict with any terms or provisions of the Company's Certificate of
Incorporation. The Company shall at all times maintain provisions in its bylaws
and/or Certificate of Incorporation indemnifying all directors against liability
and absolving all directors from liability to the Company and its stockholders
to the maximum extent permitted under the laws of the State of Delaware.

                                      17.
<PAGE>

         3.13     DRAG-ALONG RIGHT. Following the Closing, the Company shall use
its reasonable best efforts to make all holders of more than one percent (1%) of
the Company's outstanding capital securities subject to the terms and conditions
of the drag-along right set forth in Section 6 of this Agreement.

         3.14     TERMINATION OF COVENANTS. All covenants of the Company
contained in Section 3 of this Agreement (other than the provisions of Section
3.3) shall expire and terminate as to each Investor upon the earlier of (i) the
effective date of the registration statement pertaining to the Initial Offering
or (ii) upon an acquisition of the Company by another corporation or entity by
consolidation, merger or other reorganization in which the holders of the
Company's outstanding voting stock immediately prior to such transaction own,
immediately after such transaction, securities representing less than fifty
percent (50%) of the voting power of the corporation or other entity surviving
such transaction (a "Change in Control"), provided that this Section 3.14(ii)
shall not apply to a merger effected exclusively for the purpose of changing the
domicile of the Company.

SECTION 4. RIGHTS OF FIRST REFUSAL.

         4.1      SUBSEQUENT OFFERINGS. Subject to applicable securities laws,
each Major Investor shall have a right of first refusal to purchase its pro rata
share of all Equity Securities, as defined below, that the Company may, from
time to time, propose to sell and issue after the date of this Agreement, other
than the Equity Securities excluded by Section 4.6 hereof. Each Major Investor's
pro rata share is equal to the ratio of (a) the number of shares of the
Company's Common Stock (including all shares of Common Stock issuable or issued
upon conversion of the Shares) which such Major Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (b) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible into or exercisable or exchangeable for, with or without
consideration, any Common Stock, Preferred Stock or other security (including
any option to purchase such a convertible security), (iii) any security carrying
any warrant or right to subscribe to or purchase any Common Stock, Preferred
Stock or other security or (iv) any such warrant or right.

         4.2      EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Major Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Major
Investor shall have fifteen (15) days from the giving of such notice to agree to
purchase its pro rata share of the Equity Securities for the price and upon the
terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Investor who would cause the Company to
be in violation of applicable federal securities laws by virtue of such offer or
sale.

         4.3      ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of
the Major Investors elect to purchase their pro rata share of the Equity
Securities, then the Company shall

                                      18.
<PAGE>

promptly notify in writing the Major Investors who do so elect and shall offer
such Major Investors the right to acquire such unsubscribed shares. The Major
Investors shall have five (5) days after receipt of such notice to notify the
Company of its election to purchase all or a portion thereof of the unsubscribed
shares. If the Major Investors fail to exercise in full the rights of first
refusal, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Major Investor's rights were not exercised,
at a price and upon general terms and conditions not materially more favorable
to the purchasers thereof than specified in the Company's notice to the Major
Investors pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within ninety (90) days of the notice provided pursuant to
Section 4.2, the Company shall not thereafter issue or sell any Equity
Securities, without first offering such securities to the Major Investors in the
manner provided above.

         4.4      TERMINATION AND WAIVER OF RIGHTS OF FIRST REFUSAL. The rights
of first refusal established by this Section 4 shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Initial Offering or (ii) a Change in
Control. As to each Major Investor, the rights of first refusal established by
this Section 4 shall terminate when such Major Investor fails to purchase its
pro rata share of any Equity Securities issued by the Company pursuant to this
Section 4. The rights of first refusal established by this Section 4 may be
amended, or any provision waived with the written consent of Major Investors
holding at least a majority of the Shares held by all Major Investors, or as
permitted by Section 7.5.

         4.5      TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal of each Major Investor under this Section 4 may be transferred to the
same parties, subject to the same restrictions as any transfer of registration
rights pursuant to Section 2.10.

         4.6      EXCLUDED SECURITIES. The rights of first refusal established
by this Section 4 shall have no application to any of the following Equity
Securities:

                  (a)      shares of Common Stock and/or options, warrants or
other Common Stock purchase rights and the Common Stock issued pursuant to such
options, warrants or other rights issued or to be issued after the Original
Issue Date (as defined in the Company's Certificate of Incorporation) to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board of Directors;

                  (b)      stock issued or issuable pursuant to any rights or
agreements, options, warrants or convertible securities outstanding as of the
date of this Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, so long as the rights of
first refusal established by this Section 4 were complied with or were
inapplicable pursuant to any provision of this Section 4.6 with respect to the
initial sale or grant by the Company of such rights or agreements;

                  (c)      any Equity Securities issued for consideration other
than cash pursuant to a merger, consolidation, strategic alliance, acquisition
or similar business combination approved by the Board of Directors;

                                      19.
<PAGE>

                  (d)      shares of Common Stock issued in connection with any
stock split, stock dividend or recapitalization by the Company;

                  (e)      shares of Common Stock issued upon conversion of or
as a dividend or distribution on shares of the Company's Preferred Stock;

                  (f)      any Equity Securities issued pursuant to any
equipment loan or leasing arrangement, real property leasing arrangement, or
debt financing from a bank or similar financial or lending institution approved
by the Board of Directors;

                  (g)      any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and

                  (h)      any Equity Securities issued in connection with
strategic transactions involving the Company and other entities, including (i)
joint ventures, manufacturing, marketing or distribution arrangements, (ii)
research and development arrangements, (iii) licensing or collaborative
arrangements or (iv) similar arrangements, any of which are approved by the
Board of Directors.

SECTION 5. RIGHT OF FIRST OFFER.

         5.1      RESTRICTIONS ON VOLUNTARY TRANSFERS OF PREFERRED STOCK.

                  (a)      Prior to the Initial Offering, pursuant to an
effective registration statement under the Securities Act, and except as
provided in Section 5.3, no Investor shall transfer any of its Preferred Stock
(or Common Stock issued upon conversion thereof) to any individual, corporation,
partnership, joint venture, university, or unincorporated organization, or a
government agency or a political subdivision thereof (a "Person"), unless (i)
such Person to whom the Investor proposes to transfer such Preferred Stock is a
ready and willing buyer who is able to consummate such transfer within ninety
(90) days and who has delivered to the Investor a written offer to do so, and
(ii) the Investor shall first have given written notice ("Offer Notice") to each
other Investor of its intention to transfer such shares to such Person. The
Offer Notice must include the name and address of the proposed transferee and
specify the number of shares of Preferred Stock (or Common Stock issued upon
conversion thereof) to be transferred (the "Offered Securities"), the price and
the terms of payment.

                  (b)      For ten (10) days following its receipt of the Offer
Notice, each Investor shall have the option, but not the obligation, to purchase
their pro rata share (relative to the other Investors) of the Offered
Securities. Each Investor who elects to exercise its option within the specified
period shall give written notice of that fact to the offering Investor and shall
pay the purchase price and acquire the Offered Securities in the manner provided
in the Offer Notice, subject to the time periods set forth in this Section 5.

                  (c)      That portion of all the Offered Securities not
purchased by the Investors may be transferred to the proposed transferee on the
terms specified in the Offer Notice, at any time within sixty (60) days after
expiration of the options granted to the Investors. The transferee will hold the
Offered Securities subject to the provisions of this Agreement and any transfer
shall be ineffective unless the transferee executes and delivers an agreement to
be

                                      20.
<PAGE>

bound by the provisions hereof. No transfer of the Offered Securities shall be
made after the end of the sixty (60) day period, nor shall any change in the
terms of transfer be permitted without the delivery of a new Offer Notice and
compliance with the requirements of this Section 5.1.

                  (d)      Any transfer by any Investor in violation of this
Section 5 shall be null and void and of no effect.

         5.2      TERMINATION. This right of first offer shall not apply to, and
shall terminate upon the earlier of (i) immediately before the closing of the
Company's Initial Offering or (ii) a Change in Control.

         5.3      EXCEPTIONS. This Section 5 shall not apply to transfers of
Preferred Stock (or the Common Stock issued upon conversion thereof) by a Holder
that is (A) a partnership transferring to its partners or former partners in
accordance with partnership interests, (B) a corporation transferring to a
wholly-owned subsidiary or a parent corporation that owns all of the capital
stock of the Holder, (C) a limited liability company transferring to its members
or former members in accordance with their interest in the limited liability
company, (D) an entity transferring to an Affiliate of the Holder, or (E) an
individual transferring to the Holder's family member or trust for the benefit
of an individual Holder.

         5.4      TRANSFER OF RIGHT OF FIRST OFFER. The right of first offer of
each Investor under this Section 5 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.

         5.5      LEGEND. Each certificate representing Preferred Stock held now
or hereafter acquired by any Major Investor or issued to any person in
connection with a transfer pursuant to Section 5.3 hereof shall be stamped or
otherwise imprinted with the following legend:

                  "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
                  RIGHT OF FIRST OFFER OPTION AS SET FORTH IN A CERTAIN INVESTOR
                  RIGHTS AGREEMENT BY AND BETWEEN THE STOCKHOLDER AND THE
                  COMPANY. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN
                  REQUEST TO THE SECRETARY OF THE COMPANY."

SECTION 6. DRAG-ALONG RIGHT.

         6.1      DRAG-ALONG NOTICE. Notwithstanding anything contained in this
Agreement to the contrary, if holders of in excess of eighty percent (80%) of
the then outstanding shares of Common Stock issued or issuable upon conversion
of the Shares (a "Controlling Group"), acting jointly, intend to effect a
transaction that would constitute an "Acquisition" or an "Asset Transfer" under
the terms of the Company's Certificate of Incorporation (a "Drag Transaction")
with a third party (a "Buyer") and elect to exercise their rights under this
Section 6, such Controlling Group shall deliver written notice (a "Drag-Along
Notice") to the Company, the Investors and any other parties subject to the
terms and conditions of this Section 6 (such parties, together with the
Investors, shall be referred to herein collectively as the "Drag Holders"),
which notice shall (a) state (i) that the Controlling Group wishes to exercise
its rights under this Section 6 with respect to such Drag Transaction, (ii) the
name and address of the Buyer, (iii) the amount

                                      21.
<PAGE>

and form of consideration payable to the Company or its stockholders in
connection with the Drag Transaction and (iv) the terms and conditions of
payment of such consideration and all other material terms and conditions of
such Drag Transaction, and (b) state the anticipated time and place of the
closing of such Drag Transaction (a "Drag-Along Closing"), which (subject to
such terms and conditions) shall occur not fewer than five (5) business days nor
more than ninety (90) days after the date such Drag-Along Notice is delivered;
provided, however, that if such Drag-Along Closing shall not occur prior to the
expiration of such ninety (90) day period, the Controlling Group shall be
required to deliver another Drag-Along Notice with respect to such Drag
Transaction. Upon request of a Controlling Group, the Company shall provide the
Controlling Group with a current list of the names and addresses of the Drag
Holders.

         6.2      CONDITIONS TO DRAG-ALONG. Upon delivery of a Drag-Along
Notice, each of the Drag Holders shall have the obligation to transfer all
securities of the Company held by such Drag Holder to the Buyer and/or vote all
voting securities of the Company held such Drag Holder in favor of such Drag
Transaction and shall take any and all other actions reasonably requested by the
Controlling Group which are necessary or desirable to complete such Drag
Transaction in a timely manner. If the Drag Transaction is structured as a
consolidation or merger, each Drag Holder shall waive any dissenters' rights,
appraisal rights or similar rights in connection with such merger or
consolidation. The Controlling Group, in exercising their rights under this
Section 6, shall have complete discretion over the terms and conditions of any
Drag Transaction effected thereby, including, without limitation, price, nature
of consideration, payment terms, conditions to closing, representations,
warranties, affirmative covenants, negative covenants, indemnification,
holdbacks and escrows; provided, however, that the proceeds from any Drag
Transaction shall be allocated pursuant to the terms of the Company's
Certificate of Incorporation. In the event the Drag Holders are required to
provide any representations or indemnities in connection with the proposed Drag
Transaction (other than representations and indemnities concerning each Drag
Holder's valid ownership of the shares being sold by such Drag Holder, free of
all liens and encumbrances (other than those arising under applicable securities
laws), and each Drag Holder's authority, power and right to enter into and
consummate such transaction without violating any other agreement), then each
Drag Holder shall not be liable for more than such Drag Holder's pro rata share
(based upon the amount of consideration received) of any liability for
misrepresentation or indemnity and such liability shall not exceed the total
purchase price received by such Drag Holder in connection with the Drag
Transaction.

         6.3      TERMINATION. This drag-along right shall terminate upon the
earlier of (i) the closing of the Company's Initial Offering or (ii) a Change in
Control.

SECTION 7. MISCELLANEOUS.

         7.1      GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California in all respects as such laws
are applied to agreements among California residents entered into and to be
performed entirely within California. The parties agree that any action brought
by either party under or in relation to this Agreement, including without
limitation to interpret or enforce any provision of this Agreement, shall be
brought in, and each party agrees to and does hereby submit to the jurisdiction
and venue of, any state or federal court located in the County of San Mateo,
California.

                                      22.
<PAGE>

         7.2      SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the parties hereto and their respective successors, assigns, heirs,
executors, and administrators and shall inure to the benefit of and be
enforceable by each person who shall be a holder of Registrable Securities from
time to time; provided, however, that prior to the receipt by the Company of
adequate written notice of the transfer of any Registrable Securities specifying
the full name and address of the transferee, the Company may deem and treat the
person listed as the holder of such shares in its records as the absolute owner
and holder of such shares for all purposes, including the payment of dividends
or any redemption price.

         7.3      ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Purchase Agreement and the other documents delivered pursuant
thereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and no party shall be liable or bound
to any other in any manner by any oral or written representations, warranties,
covenants and agreements except as specifically set forth herein and therein.
Each party expressly represents and warrants that it is not relying on any oral
or written representations, warranties, covenants or agreements outside of this
Agreement.

         7.4      SEVERABILITY. In the event one or more of the provisions of
this Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

         7.5      AMENDMENT AND WAIVER.

                  (a)      Except as otherwise expressly provided, this
Agreement may be amended or modified only upon the written consent of the
Company and the holders of at least a majority of the then-outstanding Shares.

                  (b)      Except as otherwise expressly provided, the
obligations of the Company and the rights of the Holders under this Agreement
may be waived only with the written consent of the holders of at least a
majority of the then-outstanding Shares.

                  (c)      For the purposes of determining the number of Holders
or Investors entitled to vote or exercise any rights hereunder, the Company
shall be entitled to rely solely on the list of record holders of its stock as
maintained by or on behalf of the Company.

         7.6      DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any party's part of any breach, default or noncompliance under the Agreement or
any waiver on such party's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only

                                      23.
<PAGE>

to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law, or otherwise afforded to any party, shall be cumulative
and not alternative.

         7.7      NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on the signature
pages hereof or Exhibit A hereto or at such other address or electronic mail
address as such party may designate by ten (10) days advance written notice to
the other parties hereto.

         7.8      ATTORNEYS' FEES. In the event that any suit or action is
instituted under or in relation to this Agreement, including without limitation
to enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

         7.9      TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.

         7.10     COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         7.11     AGGREGATION OF STOCK. All shares of Registrable Securities
held or acquired by affiliated entities or persons or persons or entities under
common management or control shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

         7.12     PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                      24.
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.

COMPANY:                                    INVESTORS:

PENINSULA PHARMACEUTICALS, INC.             SHIONOGI & CO., LTD.

                                            By: /s/ Kiyoshi Miyamoto
                                                --------------------------------

By: /s/ Paul F. Truex
    --------------------------------------
    Paul F. Truex                           Name: Kiyoshi Miyamoto
    President and Chief Executive Officer
                                            Title: Senior Managing Director and
                                            Representative Director

                                            DOMAIN PARTNERS V, L.P.
                                              By: One Palmer Square Associates
                                                   V, L.L.C.
                                              Its: General Partner

                                            By: /s/ Kathleen K. Schoemaker
                                                --------------------------------
                                                Kathleen K. Schoemaker,
                                                Managing Member

                                            DP V ASSOCIATES, L.P.

                                              By: One Palmer Square Associates
                                                  V, L.L.C.
                                              Its: General Partner

                                              By: /s/ Kathleen K. Schoemaker
                                                  ------------------------------
                                                  Kathleen K. Schoemaker,
                                                  Managing Member

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  CANAAN EQUITY III L.P.
                                      By: Canaan Equity Partners III LLC

                                      By: /s/ Eric A. Young
                                          ----------------------------------
                                          Member/Manager:

                                  CANAAN EQUITY III ENTREPRENEURS LLC
                                      By: Canaan Equity Partners III LLC

                                      By: /s/ Eric A. Young
                                          ----------------------------------
                                          Member/Manager:

                                  MONTREUX EQUITY PARTNERS II SBIC, L.P.
                                      By: Montreux Equity Management II
                                          SBIC, L.P.
                                      Its: General Partner

                                      By: /s/ Daniel K. Turner III
                                         -------------------------
                                         Daniel K. Turner III
                                         Managing Member

                                  MONTREUX EQUITY PARTNERS III SBIC, L.P.
                                      By: Montreux Equity Management II
                                          SBIC, L.P.
                                      Its: General Partner

                                      By: /s/ Daniel K. Turner III
                                          -------------------------
                                          Daniel K. Turner III
                                          Managing Member

                                  A.M. PAPPAS LIFE SCIENCE VENTURES II, L.P.
                                      By: AMP&A Management II, LLC
                                      Its: General Partner

                                      By: /s/ Ford S. Worthy
                                          -----------------------------
                                          Ford S. Worthy
                                          Partner

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  THE SEARS TRUST DTD 3/11/91

                                  By: /s/ Lowell E. Sears
                                      -----------------------------------
                                      Lowell E. Sears, Trustee

                                  INCLIN, INC.

                                  By: /s/ Taylor T. Kilfoil
                                      --------------------------
                                  Name: Taylor T. Kilfoil
                                  Title: President / CEO

                                  GC&H INVESTMENTS LLC

                                  By: /s/ John L. Cardoza
                                      -------------------------
                                  Name: John L. Cardoza

                                  Title: Managing Member

                                  CDIB BIOSCIENCE VENTURES I, INC.

                                  By: /s/ Benny T. Hu
                                      -------------------------
                                      Benny T. Hu, Chairman

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  EGS PRIVATE HEALTHCARE PARTNERSHIP II, L.P.
                                      By: EGS Private Healthcare Investments,
                                      L.L.C.,
                                      Its: General Partner

                                      By: /s/ Terry Vance
                                         ------------------------------
                                          Terry Vance
                                          Member of Board of Managers

                                  EGS PRIVATE HEALTHCARE INVESTORS II, L.P.
                                      By: EGS Private Healthcare Investments,
                                      L.L.C.,
                                      Its: General Partner

                                      By: /s/ Terry Vance
                                         ------------------------------
                                          Terry Vance
                                          Member of Board of Managers

                                  EGS PRIVATE HEALTHCARE CANADIAN PARTNERS, L.P.
                                      By: EGS Private Healthcare Investments,
                                      L.L.C.,
                                      Its: General Partner

                                      By: /s/ Terry Vance
                                         ------------------------------
                                          Terry Vance
                                          Member of Board of Managers

                                  EGS PRIVATE HEALTHCARE PRESIDENTS FUND, L.P.
                                      By: EGS Private Healthcare Investments,
                                      L.L.C.,
                                      Its:  General Partner

                                      By: /s/ Terry Vance
                                         ------------------------------
                                          Terry Vance
                                          Member of Board of Managers

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  CADUCEUS PRIVATE INVESTMENTS II, L.P.
                                      By: OrbiMed Capital II LLC
                                      Its: General Partner

                                  By: /s/ Eric A. Bittelman
                                      ----------------------------------------
                                  Name: Eric A. Bittelman

                                  Title: CFO, OrbiMed Capital II, General
                                  Partner

                                  CADUCEUS PRIVATE INVESTMENTS II (QP), L.P.
                                      By: OrbiMed Capital II LLC
                                      Its: General Partner

                                  By: /s/ Eric A. Bittelman
                                      ---------------------------------------
                                  Name: Eric A. Bittelman

                                  Title: CFO, OrbiMed Capital II, General
                                  Partner

                                  UBS JUNIPER CROSSOVER FUND, LLC
                                      By: OrbiMed Advisors LLC
                                      Member of UBS Juniper Management,
                                      L.L.C., Managing Member

                                  By: /s/ Eric A. Bittelman
                                      ---------------------------------------
                                  Name: Eric A. Bittelman

                                  Title: CFO, OrbiMed Capital II, General
                                  Partner

                                   /s/ Stephen L. Green
                                  --------------------------------------------
                                  Stephen L. Green

                                  /s/ Gregory Kopchinsky
                                  --------------------------------------------
                                  Gregory Kopchinsky

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                                  /s/ Deepak Kamra
                                  -------------------------------------
                                  Deepak Kamra

                                  /s/ Stephen M. Bloch
                                  -------------------------------------
                                  Stephen M. Bloch

                                  /s/ Eric A. Young
                                  -------------------------------------
                                  Eric A. Young

                                  /s/ Brenton Ahrens
                                  -------------------------------------
                                  Brenton Ahrens

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                                 SIGNATURE PAGE

<PAGE>

                              SCHEDULE OF INVESTORS

Domain Partners V, L.P.

DP V Associates, L.P.

Canaan Equity III L.P.

Canaan Equity III Entrepreneurs LLC

A. M. Pappas Life Science Ventures II, L.P.

Montreux Equity Partners II SBIC, L.P.

Montreux Equity Partners III SBIC, L.P.

Mitsubishi International Corporation

The Sears Trust Dtd 3/11/91

InClin, Inc.

Kazuaki Yonemoto

Anne T. and Keith H. Thye

Lowell E. Sears

Anton Leighton, M.D.

Paul F. Truex

Joaquim Trias

Shionogi & Co., Ltd.

GC&H Investments LLC

CDIB BioScience Ventures I, Inc.

EGS Private Healthcare Partnership II, L.P.

EGS Private Healthcare Investors II, L.P.

EGS Private Healthcare Canadian Partners, L.P.

EGS Private Healthcare Presidents Fund, L.P.

                                       A-1
                              SCHEDULE OF INVESTORS

<PAGE>

Caduceus Private Investments II, L.P.

Caduceus Private Investments II (QP), L.P.

UBS Juniper Crossover Fund, LLC

Stephen L. Green

Gregory Kopchinsky

Deepak Kamra

Stephen M. Bloch

Eric A. Young

Brenton Ahrens

                                       A-1
                              SCHEDULE OF INVESTORS<PAGE>

                                                                    EXHIBIT 10.5

                         PENINSULA PHARMACEUTICALS, INC.

                               INDEMNITY AGREEMENT

         THIS AGREEMENT is made and entered into this ____ day of __________,
2003 by and between PENINSULA PHARMACEUTICALS, INC., a Delaware corporation (the
"Company"), and __________ ("Agent").

                                    RECITALS

         WHEREAS, Agent performs a valuable service to the Company as __________
of the Company;

         WHEREAS, the stockholders of the Company have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Company, including persons serving at the
request of the Company in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");

         WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Company and its agents, officers, employees and other
agents with respect to indemnification of such persons; and

         WHEREAS, in order to induce Agent to continue to serve as __________ of
the Company, the Company has determined and agreed to enter into this Agreement
with Agent.

         NOW, THEREFORE, in consideration of Agent's continued service as
__________ after the date hereof, the parties hereto agree as follows:

                                    AGREEMENT

         1.       SERVICES TO THE COMPANY. Agent will serve, at the will of the
Company or under separate contract, if any such contract exists, as __________
of the Company or as a director, officer or other fiduciary of an affiliate of
the Company (including any employee benefit plan of the Company) faithfully and
to the best of his ability so long as he is duly elected and qualified in
accordance with the provisions of the Bylaws or other applicable charter
documents of the Company or such affiliate; provided, however, that Agent may at
any time and for any reason resign from such position (subject to any
contractual obligation that Agent may have assumed apart from this Agreement)
and that the Company or any affiliate shall have no obligation under this
Agreement to continue Agent in any such position.

         2.       INDEMNITY OF AGENT. The Company hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Company to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).

                                       1.

<PAGE>

         3.       ADDITIONAL INDEMNITY. In addition to and not in limitation of
the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Company hereby further agrees to
hold harmless and indemnify Agent:

                  (a)      against any and all expenses (including attorneys'
fees), witness fees, damages, judgments, fines and amounts paid in settlement
and any other amounts that Agent becomes legally obligated to pay because of any
claim or claims made against or by him in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in the
right of the Company) to which Agent is, was or at any time becomes a party, or
is threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Company, or is
or was serving or at any time serves at the request of the Company as a
director, officer, employee or other agent of another company, partnership,
joint venture, trust, employee benefit plan or other enterprise; and

                  (b)      otherwise to the fullest extent as may be provided to
Agent by the Company under the non-exclusivity provisions of the Code and
Section 43 of the Bylaws.

         4.       LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Company:

                  (a)      on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Company pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;

                  (b)      on account of Agent's conduct that is established by
a final judgment as knowingly fraudulent or deliberately dishonest or that
constituted willful misconduct;

                  (c)      on account of Agent's conduct that is established by
a final judgment as constituting a breach of Agent's duty of loyalty to the
Company or resulting in any personal profit or advantage to which Agent was not
legally entitled;

                  (d)      for which payment is actually made to Agent under a
valid and collectible insurance policy or under a valid and enforceable
indemnity clause, bylaw or agreement, except in respect of any excess beyond
payment under such insurance, clause, bylaw or agreement;

                  (e)      if indemnification is not lawful (and, in this
respect, both the Company and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

                  (f)      in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Company or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Company, (iii) such indemnification

                                       2.

<PAGE>

is provided by the Company, in its sole discretion, pursuant to the powers
vested in the Company under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.

         5.       CONTINUATION OF INDEMNITY. All agreements and obligations of
the Company contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Company (or is or was serving
at the request of the Company as a director, officer, employee or other agent of
another company, corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.

         6.       PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Company for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Company shall indemnify Agent for the portion thereof to which
Agent is entitled.

         7.       NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Company under this Agreement, notify the Company of the commencement thereof;
but the omission so to notify the Company will not relieve it from any liability
which it may have to Agent otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which Agent notifies the Company of
the commencement thereof:

                  (a)      the Company will be entitled to participate therein
at its own expense;

                  (b)      except as otherwise provided below, the Company may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Company to Agent of its
election to assume the defense thereof, the Company will not be liable to Agent
under this Agreement for any legal or other expenses subsequently incurred by
Agent in connection with the defense thereof except for reasonable costs of
investigation or otherwise as provided below. Agent shall have the right to
employ separate counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Company of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Company, (ii)
Agent shall have reasonably concluded, and so notified the Company, that there
is an actual conflict of interest between the Company and Agent in the conduct
of the defense of such action or (iii) the Company shall not in fact have
employed counsel to assume the defense of such action, in each of which cases
the fees and expenses of Agent's separate counsel shall be at the expense of the
Company. The Company shall not be entitled to assume the defense of any action,
suit or proceeding brought by or on behalf of the Company or as to which Agent
shall have made the conclusion provided for in clause (ii) above; and

                                       3.

<PAGE>

                  (c)      the Company shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Company shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.

         8.       EXPENSES. The corporation shall advance to an Agent who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding provided, however, that if
the Code requires, an advancement of expenses incurred by a director or
executive officer in his or her capacity as a director or executive officer (and
not in any other capacity in which service was or is rendered by such Agent,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such Agent, to repay all amounts so advanced
if it shall ultimately be determined by final judicial decision from which there
is no further right to appeal (hereinafter a "final adjudication") that such
Agent is not entitled to be indemnified for such expenses under Section 43 of
the Bylaws or otherwise.

         Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of Section 43 of the Bylaws, no advance shall be made by the
corporation to an Agent (except by reason of the fact that such Agent is or was
a director of the corporation in which event this paragraph shall not apply) in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by a
majority vote of directors who were not parties to the proceeding, even if not a
quorum, or (ii) by a committee of such directors designated by a majority vote
of such directors, even though less than a quorum, or (iii) if there are no such
directors, or such directors so direct, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.

         9.       ENFORCEMENT. Any right to indemnification or advances granted
by this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Company) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Company (including its Board of Directors or
its stockholders) to have made a determination prior to the commencement of such

                                       4.

<PAGE>

enforcement action that indemnification of Agent is proper in the circumstances,
nor an actual determination by the Company (including its Board of Directors or
its stockholders) that such indemnification is improper shall be a defense to
the action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise.

         10.      SUBROGATION. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Agent, who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.

         11.      NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by
this Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Company's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.

         12.      SURVIVAL OF RIGHTS.

                  (a)      The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Company or to serve at the request of the Company as a director,
officer, employee or other agent of another company, corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.

                  (b)      The Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.

         13.      SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Company shall nevertheless indemnify Agent to
the fullest extent provided by the Bylaws, the Code or any other applicable law.

         14.      GOVERNING LAW. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of Delaware.

         15.      AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.

         16.      IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.

                                       5.

<PAGE>

         17.      HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

         18.      NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery if delivered by hand to the party to whom such
communication was directed or (ii) upon the third business day after the date on
which such communication was mailed if mailed by certified or registered mail
with postage prepaid:

                  (a)      If to Agent, at the address indicated on the
signature page hereof.

                  (b)      If to the Company, to:

                           Peninsula Pharmaceuticals, Inc.
                           1701 Harbor Bay Parkway
                           Alameda, CA 94502
                           Attn: Kate Shephard, Esq.

or to such other address as may have been furnished to Agent by the Company.

                            [SIGNATURE PAGE FOLLOWS]

                                       6.

<PAGE>

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

                                                 PENINSULA PHARMACEUTICALS, INC.

                                                 By:____________________________

                                                 Name:__________________________

                                                 Title:_________________________

                                                 AGENT

                                                 By:____________________________

                                                 Name:__________________________

                                                 Title:_________________________

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