Document:

EXHIBIT 10.2

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

                                SUPPLY AGREEMENT

                  SUPPLY AGREEMENT dated as of March 6, 2002, by and between
      DISCOVERY LABORATORIES, INC. ("Seller") and LABORATORIOS DEL DR. ESTEVE,
      S.A., a company organized and existing under the laws of Spain ("Buyer").

            WHEREAS, Seller and Buyer are parties to a Sublicense and
Collaboration Agreement (the "Collaboration Agreement") dated as of the date
hereof pursuant to which Buyer and Seller have agreed to collaborate in a
product development, commercialization and marketing effort for the Licensed
Products (such term and other capitalized terms used and not otherwise defined
herein having the meanings assigned to them in the Collaboration Agreement); and

            WHEREAS, Buyer hereby agrees to purchase one hundred percent (100%)
of its requirements of Licensed Products from Seller, and Seller hereby agrees
to supply one hundred percent (100%) of Buyer's requirements of Licensed
Products, pursuant to the terms and conditions of this Agreement.

            NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises and covenants set forth below, Seller and Buyer mutually agree
as follows:

                                    ARTICLE I

                                   DEFINITIONS

      As used in this Agreement, the following terms shall have the following
meanings:

            "Current Good Manufacturing Practices" or "cGMP" shall mean (i) with
respect to the United States, the good manufacturing practices required by the
FDA and set forth in the Federal Food, Drugs and Cosmetics Act or FDA
regulations, policies or guidelines in effect at a particular time for the
manufacture, testing and quality control of pharmaceutical materials and (ii)
with respect to any other country of the Licensed Territory, the standards for
the manufacture and testing of pharmaceutical materials that are imposed by any
regulatory authority having jurisdiction.

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            "Facility" means an Owned Facility or a Contract Facility (in each
case as defined in Section 3.1).

            "First Commercial Sale" shall mean the first commercial sale by
Buyer, its Affiliates or sublicensees of any Licensed Product following final
EMEA or other regulatory approval required to market such Licensed Product
commercially in the Licensed Territory for use in humans.

            "Specifications" shall mean the Licensed Product specifications
contained in the registration dossier of the Licensed Product as approved by the
EMEA and the other regulatory authorities having jurisdiction in the Licensed
Territory, as the same may be amended from time to time in accordance with
applicable regulatory procedures.

            "Transfer Price" shall mean the price for each Licensed Product
established in accordance with the pricing system as set forth in Section 2.2.

            "Unrelated Third Parties" shall mean Persons other than Buyer and
Seller and Affiliates and sublicensees of Buyer and Seller or any other related
Persons and shall include hospital formularies and other similar critical and
therapeutic care providers who typically purchase and administer products and
therapies such as the Licensed Products.

                                   ARTICLE II

                          PURCHASE AND SALE OF PRODUCTS

            Section 2.1. Purchase and Sale; Delivery; Acceptance or Rejection.

                        (a) Seller agrees to sell to Buyer such quantities of
      Licensed Products, manufactured in conformity with cGMP and meeting the
      Specifications, as Buyer may order in accordance with the terms and
      conditions of this Agreement. Subject to the provisions of Section 7.2
      hereof, so long as this Agreement shall remain in effect, Buyer agrees,
      for itself and its Affiliates and sublicensees, to satisfy solely through
      the purchase of Licensed Products from Seller under this Agreement one
      hundred percent (100%) of Buyer's and its Affiliates' and sublicensees'
      requirements for Licensed Products.

                        (b) Purchase orders issued by Buyer to Seller with
      respect to purchases of Licensed Products shall be subject to, and
      governed exclusively by, the terms of this Agreement. Buyer agrees not to
      issue to Seller any purchase order containing terms different from those
      set forth herein and further agrees that no shipment of Licensed Product
      by Seller in accordance with a nonconforming purchase order shall be
      deemed to be acceptance of any terms of such purchase order conflicting
      with the terms of this Agreement except to the extent such conflicting
      terms are initialed by Seller with the words "change

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      accepted" written thereon by Seller. Except as aforesaid, this Agreement
      shall override all other conflicting terms of purchase and/or sale
      contained in any purchase and/or sale document generated by Seller or
      Buyer.

                        (c) Subject to paragraph (d) below, all Licensed Product
      sold to Buyer hereunder shall be delivered FCA Seller's Facility or
      distribution warehouse (Incoterms 2000). Seller shall assist Buyer in
      arranging transportation in the manner specified by Buyer, in accordance
      with applicable regulatory requirements, to any destinations specified in
      writing from time to time by Buyer; provided that all costs and expenses
      relating to such transportation and delivery (including without limitation
      customs, duties, taxes, insurance premiums and all expenses relating to
      validation of temperature-controlled shipment conditions) shall be at
      Buyer's expense.

                        (d) Seller will include with each shipment copies of all
      applicable quality and testing records, which shall be in a form
      acceptable for any applicable EMEA or other regulatory submission in the
      Licensed Territory. Product shipments for sale by Buyer in European
      countries of the Licensed Territory shall originate from such European
      Union member state and shall be accompanied, as required, by a certificate
      of analysis made in such state. Seller shall certify in writing, to
      Buyer's reasonable satisfaction, that each delivery of Licensed Product
      was produced and tested in compliance with (i) the Specifications, (ii)
      cGMP requirements and (iii) all applicable regulatory documents.

                        (e) Buyer may reject any portion of any shipment of
      Licensed Product which does not conform with the Specifications. In order
      to reject a shipment, Buyer must (i) give notice to Seller of Buyer's
      intent to reject the shipment within thirty (30) days of receipt together
      with a detailed written indication of the reasons for such possible
      rejection, and (ii) as promptly as reasonably possible thereafter, but in
      any event within an additional thirty (30) days, provide Seller with
      notice of final rejection and the full basis therefor. After notice of
      intent to reject is given, Buyer shall cooperate with Seller in
      determining whether rejection is necessary or justified. If such notices
      of intent to reject and final rejection are not timely received, Buyer
      shall be deemed to have accepted such delivery of Licensed Product and to
      have waived all claims for non-conformity with the Specifications, damage,
      defect or shortage, other than claims for latent defects not capable of
      discovery by Buyer upon physical examination. In the event of latent
      defects not capable of discovery by Buyer upon physical examination, Buyer
      shall inform Seller within fifteen (15) days of discovering any such
      defect. Buyer shall be entitled to a refund of the purchase price
      (together with insurance, freight charges and, where applicable, custom
      duties) of properly rejected Licensed Products at the time they are
      ultimately rejected, provided that if Seller disputes the rejection,
      refund shall be made, if at all, at the time the dispute is finally
      resolved. Seller shall notify Buyer as promptly as reasonably possible
      (but in any event no later than thirty (30) days after receipt of Buyer's

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      final rejection notice) whether it accepts Buyer's basis for any
      rejection. In the event Seller disputes Buyer's rejection, the parties
      will select a mutually agreeable independent third party laboratory which
      shall determine whether the rejected Licensed Products meet the applicable
      Specifications and shall confirm or dissent from Buyer's rejection of
      Licensed Products. If the parties are unable to agree on a laboratory firm
      within thirty (30) days after receipt of Buyer's final rejection notice,
      the laboratory shall be appointed by computer generation of a random
      number, with an even number signifying Seller's right to designate the
      laboratory and an odd number designating Buyer's right to designate the
      laboratory. If the independent tester confirms Buyer's rejection, Seller
      will pay the fees of the tester, and if the tester dissents from Buyer's
      rejection, Buyer will pay the fees.

                        (f) Whether or not Seller accepts Buyer's basis for
      rejection, promptly on receipt of a notice of rejection, Seller shall use
      its commercially reasonable efforts, at Buyer's request, to provide
      replacement Licensed Product, which shall be purchased by Buyer as
      provided in this Agreement as soon as reasonably practicable.

                        (g) Unless Seller requests the return to it of a
      rejected batch within sixty (60) days of receipt of Buyer's final notice
      of rejection, Buyer shall, at Seller's cost, destroy such batch promptly
      and provide Seller with certification of such destruction. Buyer shall,
      upon receipt of Seller's request for return, promptly dispatch said batch
      to Seller, at Seller's cost.

                        (h) No change to the Specifications shall be effective
      unless the same shall be required or permitted by any regulatory agency
      having jurisdiction over (i) any country in the Licensed Territory, (ii)
      Buyer or (iii) the Licensed Products (and if not required, shall be agreed
      to in writing by Buyer and Seller). Seller shall give Buyer advance notice
      of any change to the Specifications required by a regulatory agency.

            2.2 Transfer Price; Method of Payment. (a) Buyer shall purchase
Licensed Products from Seller hereunder at the applicable Transfer Price. The
Transfer Price for each unit of Licensed Product shall equal [***] of the Base
Integrated Price (as such term is hereinafter defined) for any such Licensed
Product in the Licensed Territory, subject to paragraph (d) below. The "Base
Integrated Price" shall mean, with respect to each unit of Licensed Product
purchased by Licensee, that price that is determined prior to the first
commercial sale of any such Licensed Product in any country of the Licensed
Territory by mutual agreement between Buyer and Seller in their best good faith
efforts (and as such price may be amended from time to time by mutual agreement
of the parties); provided, however, that should the parties fail to agree on any
such price prior to the first commercial sale of any such Licensed Product in
the Licensed Territory such price shall equal the gross amount invoiced to
Unrelated Third Parties for such Licensed Product in the Licensed Territory,
less: (i) trade and reasonable and customary cash

----------

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

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      discounts allowed; (ii) refunds, rebates, chargebacks, retroactive price
      adjustments and any other allowances which effectively reduce the net
      selling price; (iii) returns, credits and allowances and (iv) sales taxes
      paid or absorbed by Buyer in respect of such sales. Except as set forth in
      subsections (i)-(iv) in the immediately preceding sentence, no deductions
      or offsets shall be made against any such gross amount invoiced including,
      without limitation, on account of any commissions paid to employees of
      Buyer, its Affiliates or sublicensees, cost of collections, bad debts or
      sales, marketing and promotional expenses of any kind. Such amounts shall
      be determined from books and records maintained in accordance with
      generally accepted accounting principles applied in each country of the
      Licensed Territory, consistently applied.

                  (b) Seller shall invoice Buyer for each shipment of Licensed
      Products delivered by Seller to Buyer, its Affiliates or sublicensees at
      the Transfer Price converted into U.S. Dollars at the exchange rate of the
      last Business Day of the calendar month immediately preceding the month
      when the Licensed Product is shipped to Buyer, as quoted by the Wall
      Street Journal.

                  (c) Buyer shall pay Seller's invoices in U.S. Dollars not
      later than ninety (90) days following the date of the applicable invoice
      by wire transfer to the bank account designated by Seller.

                  (d) For the avoidance of doubt, the parties hereby acknowledge
      and agree that the Base Integrated Transfer Price for Licensed Products
      shall be determined by the parties in good faith and shall be based upon a
      mutually agreeable pricing schedule for such Licensed Products that is
      intended to ensure that both Buyer and Seller achieve reasonable profits
      with respect to sales thereof.

                  (e) All payments under this Section 2.2 shall be free of all
      withholdings of any nature whatsoever (including, without limitation,
      withholding taxes, monetary transfer fees, or similar taxes and charges),
      and in the event any withholding is required, Buyer shall pay the same
      together with such additional amount as is required so that each such
      payment shall be, under any circumstances and in any event, in the amount
      as set forth or referred to herein.

                                   ARTICLE III

                             PRODUCTION OF PRODUCTS

            Section 3.1. Manufacturing of Licensed Products.

                  (a) Until such time, if any, as a Seller-owned manufacturing
      facility (an "Owned Facility") is qualified for the manufacture of
      Licensed Products sold to Buyer hereunder, Seller shall manufacture or
      have manufactured the Licensed Products sold to Buyer hereunder at a
      contract manufacturing facility

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      (a "Contract Facility") selected by Seller and reasonably acceptable to
      Buyer. Commencing sixty (60) days prior to the First Commercial Sale of
      any Licensed Product in a country of the Licensed Territory (provided that
      such date of First Commercial Sale has been communicated to Seller at
      least one hundred and eighty (180) days in advance) Seller shall maintain
      at least one alternate production site for Licensed Products sold to Buyer
      hereunder, which alternate production site, if a Contract Facility, shall
      also be selected by Seller and reasonably acceptable to Buyer. Seller's
      obligation to maintain an alternate manufacturing facility may also be
      satisfied through a sublicensing arrangement complying with Section 3.2.

                  (b) Seller shall be responsible for obtaining and maintaining
      all necessary licenses, registrations, authorizations and approvals (other
      than such licenses, registrations, authorizations and approvals that are
      required to be obtained or made by an owner or operator of a Contract
      Facility) which are necessary to manufacture, handle, store, label,
      package, transport and ship Licensed Products under cGMP conditions and in
      accordance with other regulatory requirements.

                  (c) Seller shall provide Buyer with copies of any
      correspondence sent from Seller to governmental entities relating to the
      manufacturing, handling, storage, labeling, packaging, transportation or
      shipment of Licensed Products at the time such correspondence is sent by
      Seller, purged of Seller proprietary and/or confidential information and
      trade secrets. Seller shall provide Buyer with copies of any comments,
      responses, notices or other correspondence received by Seller from any
      governmental entity relating to the foregoing matters within five (5)
      Business Days of receipt of such correspondence by Seller, purged of any
      Seller proprietary information and/or trade secrets.

                  (d) Seller shall furnish to Buyer (i) a summary of any report
      or correspondence issued by a governmental entity (or a third party
      authorized by a governmental entity) in connection with a visit or inquiry
      relating to any Owned Facility or, to the extent Seller is provided with
      such information, any Contract Facility, including but not limited to, any
      FDA Form 483 or warning letter and (ii) not later than ten (10) Business
      Days after the time Seller provides such to a governmental entity,
      summaries of any and all proposed responses or explanations relating
      thereto, in each case purged of trade secrets or other confidential or
      proprietary information of Seller. After the filing of a response with the
      appropriate governmental entity, Seller will notify Buyer of any further
      oral and/or written contacts with a governmental entity (or a third party
      authorized by a governmental entity) relating to the manufacturing,
      handling, storage, labeling, packaging, transportation or shipment of
      Licensed Products.

                  (e) If requested in writing by Buyer, Seller shall permit
      Buyer to inspect, once per year, during normal business hours, Seller's
      Facilities and

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      manufacturing records to the extent Buyer deems it reasonably necessary to
      enable Buyer to verify compliance with any statutory or regulatory
      requirements to which Buyer is subject and which are applicable to the
      manufacture and/or packaging of Licensed Products. Notwithstanding the
      foregoing, Buyer shall have the right to inspect Seller's Facilities and
      manufacturing records at any time, in the event that there is a quality or
      regulatory problem with any Licensed Product. If, as a result of any such
      inspection, Buyer reasonably and in good faith concludes that Seller is
      not in compliance with any regulatory obligations or requirements
      applicable to Buyer, Buyer shall so notify Seller in writing, specifying
      such areas of noncompliance in reasonable detail and Seller shall remedy
      the problems identified.

                  (f) Seller agrees to use all reasonable efforts to promptly
      rectify or resolve any deficiencies noted by a governmental entity (or
      third party authorized by a governmental entity) in a report or
      correspondence issued to Seller with respect to an Owned Facility or a
      Contract Facility.

            Section 3.2. Subcontracting.

            It is understood and agreed that Seller shall have the right in
connection with its performance hereunder to contract with such third parties as
Seller deems advisable to manufacture Licensed Products, provided that (i)
manufacture and/or quality control by any such third party has been authorized
by the competent regulatory authorities in the Licensed Territory, (ii) Seller
shall provide Buyer with not less than fifteen (15) Business Days' advance
notice of its intent to contract with any third party and shall identify such
third party to Buyer, (iii) Buyer may audit Seller's contractor's qualifications
and (iv) Seller shall remain fully liable for its performance hereunder to the
same extent as if such contractor had not been engaged.

            Section 3.3. Exclusivity.

            On a country-by country basis, for so long as the Collaboration
Agreement remains in effect with respect to any such country in the Licensed
Territory, until such time as Buyer has a fully paid-up license in such country
in accordance with the terms of the Collaboration Agreement, Seller shall supply
Licensed Products only to Buyer for distribution within such country.

            Section 3.4. Allocation of Supplied Licensed Products

      In the event of shortage or inability to timely supply the required
      Licensed Product, Licensor undertakes and agrees that the amounts of
      Licensed Products available shall be allocated on an equitable basis
      according to forecasts received and that Licensee shall not be treated
      less favorably than Licensor, its Affiliates and other distributors and/or
      sublicensees.

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                                   ARTICLE IV

                           QUANTITY FORECASTS; ORDERS

            Section 4.1. Forecasts.

      (a) In order to assist Seller in planning its production, commencing sixty
      (60) days prior to the calendar month in which the First Commercial Sale
      of Licensed Products takes place in any country in the Licensed Territory,
      Buyer shall provide Seller with a twelve (12) month rolling forecast of
      the quantities of such Licensed Product required by Buyer, by month, for
      the following twelve (12) months. The first three (3) months of such
      projections shall constitute a binding commitment to order the quantity of
      such Licensed Product forecast for such period, provided that with respect
      to the first twelve (12) months following such First Commercial Sale of
      Licensed Products in any country in the Licensed Territory, only the first
      month's forecast with respect to such country shall be binding provided
      that the portion of such forecast relating to such country is separately
      stated and is so indicated. Projections for months four (4) through twelve
      (12) (or, as provided above with respect to product launches in the
      Licensed Territory, months two (2) through twelve (12)) shall be made in
      good faith and shall constitute Buyer's best estimates of future orders,
      but shall not be binding on Buyer. Updated twelve (12) month forecasts
      will be provided at the beginning of each succeeding calendar month for
      the twelve (12) month period commencing sixty (60) days thereafter.
      Buyer's forecast shall also describe anticipated regulatory modifications
      to any English language version of Licensed Product labeling proposed by
      Seller. Seller shall, no later than fifteen (15) Business Days after
      receipt of each such forecast, notify Buyer in writing of any prospective
      problems of which Seller is aware of that might prevent Seller from
      meeting Buyer's forecast order quantities or estimated delivery dates.

            (b) Notwithstanding Buyer's obligation to provide forecasts as set
      forth in Section 4.1(a), Buyer hereby agrees that it shall provide Seller
      with its firm purchase orders for Licensed Product in accordance with the
      lead-times and batch size increments to be specified by Seller in writing
      as soon as reasonably practicable but in any event before Buyer places its
      first order for Licensed Products, such lead-times and batch sizes to be
      applicable during the term of this Agreement unless otherwise agreed in
      writing by the parties; provided, however, that Buyer shall have the
      right, up to the date of manufacture, to issue binding change orders to
      increase or decrease such purchase orders with the consent of Seller,
      which shall not be unreasonably withheld so long as Buyer agrees to
      compensate Seller for any damages suffered by Seller as a consequence of
      such change order (including damages attributable to loss of allocable
      overhead recoupment, but excluding loss of profit), provided that Seller
      shall advise Buyer before carrying out any change order of Seller's
      estimated increased cost of doing so. Buyer agrees to accept partial
      shipments of Licensed Products should, for any reason, it become necessary
      to ship in advance of order completion, provided that

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      Seller shall (i) give advance written notice to Buyer of such shipment and
      (ii) bear any additional cost to Buyer of receiving Licensed Products in
      partial shipments. Seller shall make all commercially reasonable efforts
      to comply with any revisions to purchase order requirements consistent
      with the provisions of Section 4.1(a) and this Section 4.1(b). Seller,
      within ten (10) Business Days after the date that a purchase order is
      issued to it, shall acknowledge receipt of Buyer's order and confirm in
      writing that the order can be supplied. For purposes hereof, a purchase
      order will be deemed issued on the earlier of (i) the date that Seller
      receives the purchase order via mail and (ii) the date of receipt of the
      telecopied purchase order.

            Section 4.2. Purchase Order Contents.

                        (a) Each purchase order shall specify the quantity,
      concentration and container size of Licensed Product ordered within the
      Specifications, and the required delivery schedule. Seller shall use
      reasonable commercial efforts to deliver each shipment of Licensed Product
      within five (5) days of the delivery dates specified in the delivery
      schedule set forth in Buyer's purchase order relating thereto (provided
      that in no event shall any such delivery dates be less than the lead time
      established pursuant to Section 4.1(b), unless otherwise consented to by
      Seller) using carriers mutually agreeable to Buyer and Seller. Seller
      shall use commercially reasonable efforts to accommodate "Rush" orders
      from Buyer.

                        (b) When all appropriate validation and quality control
      release criteria for a particular shipment of Licensed Product have been
      met (the "Release Date"), Seller shall notify Buyer in writing of the
      expected delivery dates (including details of destination, date and time)
      to enable delivery and receipt to be coordinated. Title and risk of loss
      to Licensed Products shall pass to Buyer upon delivery of Licensed
      Products by Seller to the carrier.

            Section 4.3. Packaging.

                        (a) Licensed Products shall be delivered to Buyer as
      finished goods in final packaged and labeled form, quality controlled in
      accordance with Section 2.1 (d) and ready for resale to the ultimate
      customer and in accordance with the packaging requirements set forth in
      the Marketing Regulatory Approvals.

                        (b) Buyer shall distribute all Licensed Products as
      packaged by Seller in accordance with Section 4.3(a). In no event shall
      any Licensed Products be repackaged or reconfigured by Buyer without
      Seller's prior written consent.

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            Section 4.4. Labeling.

            With respect to each country in the Licensed Territory, prior to
distribution of a Licensed Product, Buyer shall provide Seller with evidence of
the regulatory approval of labeling specifications for such Licensed Product in
such country and any variations required by the applicable regulatory agency.
All such materials shall be provided to Seller together with a proper English
translation. Seller shall distribute Licensed Products bearing only labeling
supplied or approved by Buyer and in accordance with such regulatory
requirements.

                                    ARTICLE V

                          CERTAIN OBLIGATIONS OF BUYER

        Buyer agrees to ascertain and comply with all applicable laws and
regulations and standards of industry or professional conduct in connection with
 the use, distribution or promotion of the Licensed Products, including without
      limitation, those applicable to product claims, labeling, approvals,
   registrations and notifications, and also to obtain Seller's prior written
   consent to all claims, labels, instructions, packaging or the like, which
                  consent shall not be unreasonably withheld.

                                   ARTICLE VI

                               REGULATORY MATTERS

            Section 6.1. Information Regarding Regulatory Approvals. Seller
shall promptly advise Buyer in matters pertaining to U.S. regulatory
requirements relating to Seller's activities hereunder. Seller shall also
provide to Buyer reasonable advance notice of any regulatory submission
containing information or data provided by Buyer to Seller which Seller intends
to disclose to regulatory agencies under this Agreement.

            Section 6.2. Quality Control Program; Additional Testing Programs.
Seller shall maintain a quality control program consistent with cGMP, as
required by the FDA and/or any other governmental entity in the Licensed
Territory, with respect to Seller's manufacture of Licensed Products hereunder.
In addition, Seller will perform such additional testing programs, and provide
Buyer with documentation arising from such testing programs, as may be agreed to
by Buyer and Seller or required by any applicable regulatory authority.

            Section 6.3. Retention of Samples. Seller shall retain as samples
such quantities of Licensed Products from each batch of Licensed Product as
Buyer shall reasonably request. Retained samples shall be maintained in a
suitable storage facility for one (1) year past the product's expiration date.
All such samples shall be available for inspection and testing by Buyer at
reasonable times and upon reasonable notice.

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            Section 6.4. Recalls. Buyer shall notify Seller promptly if any
Licensed Product is the subject of a recall, market withdrawal or correction
within the Licensed Territory (a "Recall"), and Buyer and/or its designee shall
have sole responsibility for the handling and disposition of such Recall. Buyer
and/or its designee shall bear the costs of all Recalls of Licensed Products
except to the extent that such Recall shall have been the result of Seller's
breach of any of the warranties set forth in this Agreement and/or the
Collaboration Agreement, in which case Seller will promptly reimburse Buyer to
such extent for actual, direct costs sustained as a result of the Recall. In the
event that Seller disputes Buyer's determination that the fault is due to Seller
and/or to its agent, the Parties will select a mutually agreeable outside
consulting firm which will be instructed to review the applicable information
and data and to confirm or dissent from Buyer's determination. If the consulting
firm confirms Buyer's determination, Seller will pay the fees of such consulting
firm. Buyer and/or its designee shall maintain records of all sales of Licensed
Products and customers sufficient to adequately administer a Recall, market
withdrawal or correction for a period of three (3) years after termination or
expiration of this Agreement. Except as required by law, Buyer and/or its
designee shall serve as the sole point of contact with the applicable
governmental entity concerning any Recall within the Licensed Territory with
respect to Licensed Products and Seller shall serve as the sole point of contact
with the FDA with respect to any Recall. In the event that Seller is required to
communicate with the FDA with respect to Recall of Licensed Products, Seller
shall within one (1) Business Day notify Buyer of such communication.

                                   ARTICLE VII

                    TERMINATION; RIGHTS AND OBLIGATIONS UPON
                                   TERMINATION

            Section 7.1. Term. This Agreement shall commence on the date hereof
and shall continue in effect with respect to each Licensed Product in each
country in the Licensed Territory, unless the parties mutually agree to extend
such term, for so long as the Collaboration Agreement remains in effect with
respect to such Licensed Product in such country(ies).

            Section 7.2. Termination for Default. If either party materially
defaults in the performance of any material agreement, condition or covenant of
this Agreement and such default or noncompliance shall not have been remedied,
or steps initiated to remedy the same to the other party's reasonable
satisfaction, within ninety (90) days (or thirty(30) days in the case of
non-payment) after receipt by the defaulting party of a notice thereof from the
other party, the party not in default may terminate this Agreement. A material
breach or default of this Agreement shall be considered as a material breach or
default under the Collaboration Agreement, and Section 7.2 of the Collaboration
Agreement shall apply.

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            Section 7.3 Rights and Obligations on Expiration or Termination.
Except to the extent expressly provided to the contrary, the following
provisions shall survive the termination of this Agreement: Sections 6.3 and 6.4
and Articles I and VIII through X. Any rights of Seller to payments accrued
through termination as well as obligations of the parties under firm orders for
purchase and delivery of Licensed Products at the time of such termination shall
remain in effect, except that in the case of termination under Section 7.2, the
terminating party may elect whether obligations under firm orders will remain in
effect and except that Seller will have no obligation with respect to delivery
dates more than three (3) months after termination.

                                  ARTICLE VIII

                 WARRANTIES; REPLACEMENT OF PRODUCTS; INSURANCE

            Section 8.1. Warranties. Seller warrants to Buyer for itself and on
behalf of its subcontractors and agents who assume any of Seller's obligations
hereunder that (i) when shipped to Buyer by Seller, the Licensed Products will
conform to the Specifications, as then in effect, and will not be (A)
adulterated or misbranded within the meaning of the Food, Drugs & Cosmetic Act
or (B) be an article which may not, under the provisions of the Food, Drugs &
Cosmetic Act, be introduced into interstate commerce, and (ii) any Facility used
by Seller will remain in compliance with cGMP at all times during the term of
this Agreement and (iii) Seller shall obtain and maintain all necessary permits,
registrations and licenses necessary to carry out its obligations pursuant to
this Agreement. The foregoing warranties are the only warranties made by Seller
with respect to the Licensed Products delivered hereunder, and may only be
modified or amended by a written instrument signed by a duly authorized officer
of Seller and duly authorized officer of Buyer. THE EXPRESS WARRANTIES CONTAINED
IN THIS ARTICLE 8 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION ANY WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A
PARTICULAR USE.

            Section 8.2. Replacement of Licensed Products. Any Licensed Products
delivered to Buyer by Seller which do not conform to the Specifications and are
properly rejected as set forth in Article 2, or which are otherwise not in
compliance with the warranties made in Section 8.1, shall be replaced, or
Buyer's account may be credited, at Buyer's election. The remedy of replacement
or credit shall not be available if and to the extent that such nonconformance
was caused by Buyer's misuse, unauthorized modification, neglect, improper
testing or improper storage, including without limitation storage at
inappropriate temperatures, transportation, use beyond any dating provided, by
accident, fire or other hazard. THE EXPRESS OBLIGATIONS STATED IN THIS SECTION
8.2 AND IN SECTIONS 2.1 AND 8.3 ARE IN LIEU OF ALL OTHER LIABILITIES OR
OBLIGATIONS OF SELLER FOR DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT OR
CONSEQUENTIAL DAMAGES, ARISING OUT OF

                                       12
<PAGE>

OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF THE PRODUCTS.

            Section 8.3. Insurance.

            Buyer and Seller shall maintain during the term of this Agreement
products liability insurance policies, covering their respective obligations
under this Agreement, issued by reputable insurance companies under ordinary
terms and conditions in the pharmaceutical industry and will prove the existence
thereof to the other party if so requested.

                                   ARTICLE IX

                                  MISCELLANEOUS

            Section 9.1. Entire Agreement This Agreement constitutes the entire
agreement and understanding between the parties as to the subject matter hereof.
All prior negotiations, representations, agreements, contracts, offers and
earlier understandings of whatsoever kind, whether written or oral between
Seller and Buyer in respect of the subject matter of this Agreement, are
superseded by, merged into, extinguished by and completely expressed by this
Agreement (including, without limitation, the Supply Agreement dated October 26,
1999, between Buyer and Seller). No aspect, part or wording of this Agreement
may be modified except by mutual agreement between the Seller and Buyer taking
the form of an instrument in writing signed and dated by duly authorized
representatives of both Seller and Buyer. The representation and warranties made
by Licensor (i.e. Seller) in the Collaboration Agreement are incorporated herein
by reference, provided that no breach of such representations and warranties
shall be the basis for the termination of this Agreement unless the
Collaboration Agreement is terminated simultaneously.

            Section 9.2. Notices Any notice or communication or permitted to be
given by this Agreement shall be given by post-paid, first class, registered or
certified mail or reputable courier service addressed to:

            In the case of Seller: Discovery Laboratories, Inc.
                                   350 South Main Street, Suite 307
                                   Doylestown, Pennsylvania 18901
                                   Attention: Robert J. Capetola, Ph.D.
                                              Chief Executive Officer

            With a copy to:        Roberts, Sheridan & Kotel
                                   The New York Practice of
                                   Dickstein Shapiro's Corporate & Finance Group
                                   1177 Avenue of the Americas, 41st Floor
                                   New York, NY 10036-2714

                                       13
<PAGE>

                                   Attn: Ira L. Kotel
                                   Facsimile: (212) 997-9880

            In the case of Buyer:  Laboratorios del Dr. Esteve, S.A.
                                   Av. Mare de Deu de Montserrat, 221
                                   08041 Barcelona (Spain)
                                   Attention:  Development Director
                                   Facsimile: (34) 93 433 00 72

            Such addresses may be altered by notice so given. If no time limit
is specified for a notice required or permitted to be given by this Agreement,
the time limit therefor shall be ten (10) Business Days, not including the day
of mailing. Notice shall be considered made as of the date of deposit with the
appropriate Post Office or courier service.

            Section 9.3. Governing Law. This Agreement and its effect are
subject and shall be construed and enforced in accordance with the laws of the
State of New York, United States (without giving effect to the principles of
conflict of laws), except as to any issue which depends upon the validity, scope
or enforceability of any patent within the Patent Rights, which issue shall be
determined in accordance with the applicable patent laws of the country of such
patent.

            Section 9.4. Representations regarding Authorization; Organization;
Corporate Action; No Conflicts. Each party hereto severally represents and
warrants that it is a duly organized and validly existing corporation and/or
partnership under the laws of its jurisdiction of incorporation, and has taken
all required corporate action to authorize the execution, delivery and
performance of this Agreement, the Collaboration Agreement and the Stock
Purchase Agreement and perform all of its obligations hereunder and thereunder;
the execution and delivery of this Agreement the Collaboration Agreement and the
Stock Purchase Agreement and the consummation of the transactions contemplated
herein and therein do not violate, conflict with, or constitute a default under
its charter or similar organization document, its by-laws or the terms or
provisions of any material agreement or other instrument to which it is a party
or by which it is bound, or any order, award, judgment or decree to which it is
a party or by which it is bound; and upon execution and delivery, this Agreement
the Collaboration Agreement and the Stock Purchase Agreement will constitute the
legal, valid and binding obligation of it. The persons signing on behalf of each
of the parties hereby warrant and represent that they have the authority to
execute this Agreement the Collaboration Agreement and the Stock Purchase
Agreement on behalf of the party for whom they have signed.

            Section 9.5. Registration. Buyer shall take all reasonable and
necessary steps to register this Agreement in any country where such is required
to permit the transfer of funds and/or payment of royalties to Seller hereunder
or is otherwise required by the government or law of such country to effectuate
or carry out this Agreement.

                                       14
<PAGE>

Notwithstanding anything contained herein but subject to Section 9.4 hereof,
Buyer shall not be relieved of any of its obligations under this Agreement by
any failure to register this Agreement in any country, and, specifically, Buyer
shall not be relieved of its obligation to make any payment due to Seller
hereunder at Seller's address specified in Section 9.2 hereof, where such
payment is blocked due to any failure to register this Agreement.

            Section 9.6. Headings. As used in this Agreement, singular includes
the plural and plural includes the singular, wherever so required by the
context. The headings appearing at the beginning of the numbered Articles and
Sections hereof have been inserted for convenience only and do not constitute a
part of this Agreement.

            Section 9.7. Agency. Nothing herein shall be deemed to create an
agency, joint venture or partnership between the parties hereto.

            Section 9.8 Dispute Resolution.

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

                  (b) Arbitration.

      If, pursuant to Section 9.8(a), within such ten (10) Business Days or such
other period as may be agreed upon between the parties, the dispute remains
unresolved, it shall be settled on application by either party by arbitration
conducted in the English language, in Stockholm (Sweden) in accordance with the
Rules of Arbitration of the International Chamber of Commerce by one or more
arbitrators appointed in accordance with the said rules. The parties expressly
agree to abide the award rendered. This provision shall not prevent either party
from addressing any competent court or tribunal in order to seek interim
measures.

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

                                       15
<PAGE>

            Section 9.9. Force Majeure. Notwithstanding any other provisions of
this Agreement, neither of the parties hereto shall be liable in damages for any
delay or default in performing hereunder if such delay or default is caused by
conditions beyond its control including but not limited to acts of God,
governmental restrictions, wars, or insurrections, strikes, floods, work
stoppages and/or lack of materials; provided, however, that the party suffering
such delay or default shall notify the other party in writing of the reasons for
the delay or default. If such reasons for delay or default continuous exist for
six (6) months, this Agreement may be terminated by either party.

            Section 9.10. Assignment. Except as otherwise set forth in Sections
2.1 and 2.3 of the Collaboration Agreement with respect to Buyer's right to
grant sublicenses, neither party hereto may assign or transfer this Agreement or
any rights or obligations hereunder without the prior written consent of the
other, except that a party may make such an assignment without the other party's
consent to Affiliates or to a successor to substantially all of the business of
such party, whether in a merger, sale of stock, sale of assets or other
transaction. Any permitted successor or assignee of rights and/or obligations
hereunder shall, in a writing to the other party, expressly assume performance
of such rights and/or obligations. Any permitted assignment shall be binding on
the successors of the assigning party. Any assignment or attempted assignment by
either party in violation of the terms of this Section 9.10 shall be null and
void and of no legal effect.

            Section 9.11. Successors and Assigns. Subject to Section 9.10, this
Agreement shall be binding upon and inure to the benefit of the permitted
successors or permitted assigns of Seller and Buyer respectively.

            Section 9.12. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

                                    ARTICLE X

                                BASIS OF BARGAIN

            EACH PARTY RECOGNIZES AND AGREES THAT THE WARRANTY DISCLAIMERS AND
LIABILITY AND REMEDY LIMITATIONS IN THIS AGREEMENT ARE MATERIAL, BARGAINED FOR
BASES OF THIS AGREEMENT AND THAT THEY HAVE BEEN TAKEN INTO ACCOUNT AND REFLECTED
IN DETERMINING THE CONSIDERATION TO BE GIVEN BY EACH PARTY UNDER THIS AGREEMENT
AND IN THE DECISION BY EACH PARTY TO ENTER INTO THIS AGREEMENT.

            IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.

                                       16
<PAGE>

                                    DISCOVERY LABORATORIES, INC.

                                    By: /s/ Robert J. Capetola
                                       -----------------------------------------
                                    Name: Robert J. Capetola, Ph.D.
                                    Title: President and Chief Executive Officer

                                    LABORATORIOS DEL DR. ESTEVE, S.A.

                                    By: /s/ Joan Esteve
                                      ------------------------------------------
                                    Name: Mr. Joan Esteve
                                    Title: Vice-President

                                       17EXHIBIT 10.3

                         COMMON STOCK PURCHASE AGREEMENT

            THIS COMMON STOCK PURCHASE AGREEMENT (this "Agreement") is dated and
      entered into as of March 6, 2002, by and between DISCOVERY LABORATORIES,
      INC., a Delaware corporation (the "Company"), and LABORATORIOS DEL DR.
      ESTEVE S.A., a corporation organized and existing under the laws of Spain
      ("Purchaser").

      WHEREAS, the Company and Purchaser, have entered into a (i) Sublicense and
Collaboration Agreement (the "Collaboration Agreement") and (ii) a Supply
Agreement (the "Supply Agreement," both dated as of the date hereof, and
collectively with this Agreement, the "Transaction Agreements"); and

      WHEREAS, in connection with the foregoing, the Company wishes to issue and
sell and Purchaser desires to purchase a number of shares (the "Shares") of
common stock, par value $.001 per share, of the Company ("Common Stock"),
determined by dividing $4,000,000 by the Purchase Price (as defined below). The
"Purchase Price" shall mean the average Closing Sales Price for the 30
consecutive trading days immediately preceding March 5, 2002, multiplied by 1.5,
i.e., 150% of such number. The "Closing Sales Price" shall be the reported per
share closing sales price of the Common Stock on the Nasdaq SmallCap Market (the
"SmallCap Market") at 4PM on the applicable trading day.

      NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties, the parties agree
as follows:

      1. Purchase and Sale of Shares and Warrants.

            1.1 At the Closing (as hereinafter defined), subject to the terms
and conditions contained in this Agreement, in payment of the full purchase
price for the Shares, Purchaser shall provide a wire transfer of immediately
available funds to the Company in an amount equal to Four Million Dollars
($4,000,000) using the following wire transfer instructions (all amounts
referred to in this Agreement shall be in United Stated Dollars):

                    Bank Name:       First Union Bank
                                     401 Tryon Street
                                     Charlotte, NC (USA) 28288
                    ABA No.:         053000219
                    Beneficiary:     Discovery Laboratories, Inc
                    Account No.:     9070293484
                    Swift Code:      PNBPUS3NNYC

<PAGE>

      2. Closing; Deliveries at Closing.

            2.1 Closing. The purchase and sale of the Shares shall take place at
a closing (the "Closing") to be held at the offices of Roberts, Sheridan &
Kotel, The New York Practice of Dickstein Shapiro's Corporate & Finance Group at
1177 Avenue of the Americas, 41st Floor, New York, NY 10036-2714 within twenty
four (24) hours after the date of this Agreement, or at such other location,
time and date as may be mutually agreed upon by the parties (the "Closing
Date").

            2.2 Deliveries at Closing. After the Closing, the Company shall
deliver a stock certificate evidencing the Shares, all issued in the name of
Purchaser and dated as of the Closing Date.

      3. Conditions to Closing.

            3.1 Conditions to Purchaser's Obligations at Closing. The obligation
of Purchaser to purchase and pay for the Shares at the Closing is subject to
each of the following conditions precedent:

            (a) Officer's Certificate. Purchaser shall have received at the
Closing, a certificate, executed by the appropriate officer of the Company and
dated as of the Closing Date, together with and certifying: (i) the names of the
officers of the Company authorized to sign this Agreement together with the true
signatures of such officers; (ii) a copy of the certificate of incorporation of
the Company, as amended and in effect as of the Closing Date; (iii) a copy of
the bylaws of the Company, as amended and in effect as of the Closing Date; (iv)
that the representations and warranties contained in Section 4 hereof are true
and correct as of the Closing Date; and (v) that the Company has complied with
all the agreements and satisfied all the conditions herein on its part to be
performed or satisfied on or prior to the Closing Date;

            (b) Transaction Agreements. Purchaser shall have received at the
Closing the Transaction Agreements, duly executed by an authorized officer of
the Company; and

            (c) Instruction Letter. The Company shall have transmitted an
instruction letter to its stock transfer agent directing it to issue to
Purchaser the stock certificate for the Shares, and Purchaser shall have
received a copy of such letter.

            3.2 Conditions to Company's Obligations at Closing. The obligation
of the Company to issue and sell the Shares at the Closing is subject to each of
the following additional conditions precedent:

            (a) Transaction Agreements. The Company shall have received at the
Closing the Transaction Agreements, duly executed by an authorized officer of
Purchaser; and

            (b) Payment. Purchaser shall have delivered Four Million Dollars
($4,000,000) in immediately available funds to Company's specified account in
accordance with Section 1.1.

                                       2
<PAGE>

      4. Representations and Warranties by the Company. The Company represents
and warrants to the Purchaser as of the date hereof that:

            4.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is qualified to do business and is in good standing as a foreign
corporation in every jurisdiction in which the failure to so qualify would have
a material adverse effect on the financial condition or business of the Company.

            4.2 No Actions. There are no legal or governmental actions, suits,
proceedings or investigations pending or, to the Company's knowledge, threatened
to which the Company is or may be a party or of which property owned or leased
by the Company is or may be the subject, or related to environmental or
discrimination matters, which actions, suits, proceedings or investigations,
individually or in the aggregate, might prevent or might reasonably be expected
to have a material adverse affect on the transactions contemplated by this
Agreement. The Company is not a party to or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.

            4.3 Compliance with Other Instruments. Except for such matters
which, either individually or in the aggregate, would not have a material
adverse effect on the financial condition or business of the Company, the
execution and delivery of, and the performance and compliance with this
Agreement and the transactions contemplated hereby, with or without the giving
of notice, will not (i) result in any breach of, or constitute a default under,
or result in the imposition of any lien or encumbrance upon any asset or
property of the Company pursuant to any agreement or other instrument to which
the Company is a party or by which it or any of its properties, assets or rights
is bound or affected, (ii) violate the Certificate of Incorporation or Bylaws of
the Company, or, subject to the accuracy of the representations and warranties
of the Purchasers contained in Article 5 of this Agreement, any law, rule,
regulation, judgment, order or decree or (iii) except for the registration of
the Shares under the Securities Act of 1933 (the "Securities Act"), the listing
of the Shares on the SmallCap Market and such consents, notifications,
approvals, authorizations, registrations or qualifications as may be required
under the Securities Exchange Act of 1934 (the "Exchange Act") and applicable
state securities or "blue sky" laws in connection with the purchase of the
Shares by the Purchaser, require any consent, notification, approval,
authorization or order of or filing with any court or governmental agency or
body. The Company is not in violation of its Certificate of Incorporation or
Bylaws nor in violation of, or in default under, any lien, mortgage, lease,
agreement or instrument, except for such defaults which would not, individually
or in the aggregate, have a material adverse effect on the financial condition
or business of the Company. The Company is not subject to any restriction which
would prohibit the Company from entering into or performing its obligations
under this Agreement, except for such restrictions which would not, individually
or in the aggregate, have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement.

            4.4 Shares. The Shares, when issued and paid for pursuant to the
terms of this Agreement, will be duly and validly authorized, issued and
outstanding, fully paid, nonassessable and free and clear of all pledges, liens,
encumbrances and restrictions (other than arising herein

                                       3
<PAGE>

or under federal or state securities or "blue sky" laws). The issuance of the
Shares shall not be subject to any preemptive or other similar rights.

            4.5 Securities Laws. Subject to the accuracy of the representations
and warranties of the Purchasers contained in Section 5 of this Agreement, the
offer, sale and issuance of the Shares as contemplated by this Agreement is
exempt from the registration requirements of the Securities Act, and from the
registration or qualifications requirements of the laws, rules and regulations
of any applicable state or other U.S. jurisdiction.

            4.6 Authorized Capital Stock.

            (a) As of the Closing Date, 25,563,818 shares of Common Stock and no
shares of the Company's preferred stock, par value $.001 per share ("Preferred
Stock"), were issued and outstanding. All of the outstanding shares of the
Company's capital stock are duly authorized, validly issued, fully paid and
nonassessable.

            (b) Except as set forth on Schedule 4.6(b) and in Section 5.12,
there are no outstanding subscriptions, options, warrants, rights, calls,
contracts, demands, commitments, conversion rights or other agreements or
arrangements of any character or nature whatever under which the Company is or
may be obligated (x) to issue or sell shares of its Common Stock or Preferred
Stock or (y) to register shares of its Common Stock or Preferred Stock. No
holder of any security of the Company is entitled to any preemptive or similar
rights to purchase any securities of the Company.

            4.7 Corporate Acts and Proceedings. This Agreement has been duly
authorized by the requisite corporate action and has been duly executed and
delivered by an authorized officer of the Company, and is a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and as to limitations on the enforcement of the remedy of
specific performance and other equitable remedies. The requisite corporate
action necessary to the authorization, issuance and delivery of the Shares has
been taken by the Company.

            4.8 No Implied Representations. All of the Company's representations
and warranties are contained in this Agreement, and no other representations or
warranties by the Company shall be implied.

            4.9 Filing of Reports. Since the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2000, the Company has filed with
the SEC all reports and other material required to be filed by it therewith
pursuant to Section 13, 14 or 15(d) of the Exchange Act and the Company is
eligible to register the offer and resale of the Shares and the Warrant Shares
on a Registration Statement on Form S-3, or a successor form.

            4.10 Compliance with Laws. The business and operations of the
Company have been conducted in accordance with all applicable laws, rules and
regulations of all governmental authorities, except for such violations which
would not, individually or in the aggregate, have a material adverse effect on
the financial condition or business of the Company.

                                       4
<PAGE>

            4.11 Proprietary Rights. The Company does not have any actual
knowledge of, and the Company has not given or received any notice of, any
pending conflicts with or infringement of the rights of others with respect to
any patents, patent applications, inventions, trademarks, trade names,
applications for registration of trademarks, service marks, service mark
applications, copyrights, know-how, manufacturing processes, formulae, trade
secrets, licenses and rights in any thereof and any other intangible property
and assets (herein called the "Proprietary Rights") which are material to the
business of the Company, as now conducted or as proposed to be conducted. To the
Company's actual knowledge, no action, suit, arbitration, or legal,
administrative or other proceeding or investigation is pending or threatened
which involves any Proprietary Rights. To the Company's knowledge, the Company
is not subject to any judgment, order, writ, injunction or decree of any court
or any Federal, state, local, foreign or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
any arbitrator, and the Company has not entered into and is not a party to any
contract which restricts or impairs the use of any such Proprietary Rights in a
manner which would have a material adverse effect on the financial condition or
business of the Company. The Company has not received written notice of any
pending conflict with or infringement upon any third-party proprietary rights by
the Company.

            4.12 Closing Date. Except as to representations and warranties that
speak of a specific date or period, all the representations and warranties made
by the Company in this Section 4 shall be true and complete from the date of
this Agreement through the Closing Date.

            4.13 Permits, Licenses, Etc. The Company owns, possesses or has
obtained, and is operating in compliance with, all governmental, administrative
and third party licenses, permits, certificates, registrations, approvals,
consents and other authorizations (collectively, "Permits") necessary to own or
lease (as the case may be) and operate its properties, whether tangible or
intangible, and to conduct its businesses or operations as currently conducted,
except such Permits the failure of which to obtain would not have a material
adverse effect on the business, properties, operations, financial condition or
results of operations of the Company, and the Company has not received any
notice of proceedings relating to the revocation, modification or suspension of
any Permits), if such proceedings would have a material adverse effect on the
Company, or any circumstance which would lead it to believe that such
proceedings are reasonably likely.

            4.14 Insurance. The Company maintains insurance of the type and in
the amount reasonably adequate for its business, including, but not limited to,
insurance covering all real and personal property owned or leased by the Company
against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against by similarly situated companies, all of which
insurance is in full force and effect.

            4.15 Changes. Since the Company last filed its Current Report on
Form 8-K on January 14, 2002, the Company has not, to the extent material to the
Company, (i) incurred any debts obligations or liabilities, absolute, accrued or
contingent, whether due or to become due, other than in the ordinary course of
business, (ii) mortgaged, pledged or subjected to lien, charge, security
interest or other encumbrance any of its assets, tangible or intangible, (iii)
waived any debt owed to the Company or its subsidiaries, (iv) satisfied or
discharged any lien, claim, or encumbrance or paid any obligation other than in
the ordinary course of business, (v) declared or

                                       5
<PAGE>

paid any dividends or (vi) entered into any transaction other than in the usual
and ordinary course of business.

            4.16. Reports and Financial Statements. Prior to the execution
hereof, the Company has delivered to the Purchasers true and complete copies of
the Company's most recently filed Form 10-KSB, as amended, and the Proxy
Statement in connection with the Company's most recent Annual Meeting of
Stockholders and all Forms 10-QSB, 8-K and 8-K/A filed by the Company with the
Securities and Exchange Commission (collectively, the "SEC") after January 1,
2001, in each case without exhibits thereto (the "SEC Reports"). As of their
respective filing dates, the SEC Reports were prepared in all material respects
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC thereunder
applicable to such SEC Reports. The SEC Reports, when read as a whole, as they
may be updated or amended, do not contain any untrue statements of a material
fact and do not omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
financial statements of the Company included in the SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto) and fairly present, in all material respects, the
financial position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments and any
other adjustments described in such financial statements.

      5. Representations and Warranties by, and Covenants of, the Purchaser.

      The Purchaser represents and warrants to, and covenants and agrees with,
the Company, as of the Closing Date, as follows:

            5.1 Authorization. Purchaser is duly organized and in good standing
in the jurisdiction of its organization and has all requisite legal and
corporate or other power and capacity and has taken all requisite corporate or
other action to execute and deliver the Agreement, to purchase the Shares to be
purchased by it and to carry out and perform all of its obligations under the
Agreement. This Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding obligation of Purchaser, enforceable in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and as to limitations
on the enforcement of the remedy of specific performance and other equitable
remedies. If Purchaser is an entity, the person(s) signing on behalf of such
entity hereby warrant and represent that they have the authority to execute this
Agreement on behalf of each party for whom they have signed.

            5.2 Investor Status. Purchaser is an "Accredited Investor" as
defined in Rule 501 of Regulation D promulgated under the Securities Act.
Purchaser acknowledges receiving and reviewing the documents comprising the SEC
Reports, including the documents filed with the SEC included as exhibits
thereto. Purchaser is aware of the Company's business affairs and financial
condition and has had access to and has acquired sufficient information about
the Company to reach an informed and knowledgeable decision to acquire the
Shares. Purchaser has such business and financial experience as is required to
give it the capacity to utilize the

                                       6
<PAGE>

information received, to evaluate the risks involved in purchasing the Shares,
to make an informed decision about purchasing the Shares and to protect its own
interests in connection with the purchase of the Shares and is able to bear the
risks of an investment in the Shares. Purchaser is not itself a "broker" or a
"dealer" as defined in the Exchange Act and is not an "affiliate" of the Company
as defined in Rule 405 promulgated under the Securities Act.

            5.3 Investment Intent. Purchaser is purchasing the Shares for its
own account as principal, for investment purposes only and not with a present
view to or for resale, distribution or fractionalization thereof, in whole or in
part, within the meaning of the Securities Act. Purchaser understands that its
acquisition of the Shares has not been registered under the Securities Act or
registered or qualified under any state securities or "blue sky" laws in
reliance on specific exemptions therefrom, which exemptions may depend upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein. Purchaser has, in connection with its decision to purchase the
number of Shares set forth in this Agreement, relied solely upon the SEC Reports
and the representations and warranties of the Company contained herein.
Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Shares, except in compliance with the
Securities Act and the rules and regulations promulgated thereunder and under
this Agreement.

            5.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares may not be resold or otherwise
transferred except in a transaction registered under the Securities Act or
unless an exemption from such registration is available. Purchaser is able to
bear the economic risk of holding the Shares for an indefinite period of time
and can afford a complete lost of its investment. Purchaser understands that
until the Shares have been registered for resale by the Purchasers in compliance
with applicable securities laws, the certificates evidencing the Shares will be
imprinted with the legend set forth in Section 5.5 that prohibits the transfer
of the Shares unless (a) such transaction is registered or such registration is
not required or (b) if the transfer is pursuant to an exemption from
registration, an opinion of counsel reasonably satisfactory to the Company is
obtained to the effect that the transaction is not required to be registered or
is so exempt.

            5.5 Legend. Until and unless the Registrable Securities (as such
term is hereinafter defined) are registered under the Securities Act and any
applicable state securities or "blue sky" laws and regulations, and as permitted
by law, each certificate representing the Registrable Securities shall bear
substantially the following legend (in addition to any legends required under
applicable state securities or "blue sky" laws):

            "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
            THE SECURITIES ACT OF 1933, OR ANY APPLICABLE STATE SECURITIES OR
            "BLUE-SKY" LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED,
            ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER SUCH ACT
            OR UNDER SUCH LAWS, OR PURSUANT TO AN EXEMPTION FROM SUCH
            REGISTRATION, AND ARE SUBJECT TO THE TERMS AND CONDITIONS OF THE
            COMMON STOCK PURCHASE AGREEMENT DATED MARCH __, 2002, BETWEEN

                                       7
<PAGE>

            DISCOVERY LABORATORIES, INC., AND LABORATORIOS DEL Dr. esteve S.A.,
            A COPY OF WHICH IS AVAILABLE UPON WRITTEN REQUEST OF THE CORPORATE
            SECRETARY OF DISCOVERY LABORATORIES, INC."

            "Registrable Securities" shall mean (i) the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Shares; provided, however, that
"Registrable Securities" shall not include any securities sold by a person
either pursuant to a registration statement or Rule 144 as promulgated by the
SEC under the Securities Act, as such Rule may be amended from time to time, or
any similar successor rule that may be promulgated by the SEC.

            5.6 No Legal, Tax Or Investment Advice. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Shares constitutes legal, tax or
investment advice. Purchaser has consulted, at its own risk and expense, such
legal, tax and investment advisors as it, in its sole discretion, has deemed
necessary or appropriate in connection with its purchase of the Shares.

            5.7 Closing Date. All the representations and warranties made by the
Purchaser in this Section 5 shall be true and complete from the date of this
Agreement through the Closing Date and the Purchaser shall provide the Company,
before the Closing, with any documents or information necessary for such
representations and warranties to remain true and complete as of the Closing
Date.

            5.8 Compliance with Other Instruments. The execution and delivery of
this Agreement, the purchase of the Shares and the performance by the Purchaser
of all other obligations of the Purchaser contemplated hereby will not (i)
violate any law, rule, regulation, judgment, order or decree applicable to
Purchaser or (ii) require any consent, approval, authorization or order of, or
filing with, any court or governmental agency or body. Purchaser is not subject
to any restriction which would prohibit it from entering into or performing its
obligations under this Agreement, except for such restrictions which would not,
individually or in the aggregate, have a material adverse effect on the ability
of Purchaser to perform its obligations under this Agreement.

            5.9 Compliance with Insider Trading Rules. Purchaser acknowledges
and agrees that it is aware, and that it will advise each of its affiliates and
representatives that is provided any confidential information of the Company
that the United States securities laws provide that any person who has received
directly or indirectly from an issuer such as the Company material, non-public
information is prohibited from purchasing or selling securities of such issuer
or from communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell such securities, and that violation of such prohibition may involve severe
civil and criminal penalties. Accordingly, Purchaser will not directly or
indirectly, through related parties or otherwise, purchase, trade, offer,
pledge, sell, contract to sell or to purchase or sell or "short" or "short
against the box" (as those terms are generally understood in the securities
markets), or otherwise dispose of or acquire, any securities of the Company or
options in respect of such securities. Purchaser further agrees not to provide
any person with material, nonpublic information, received from the Company or
its representatives, including any relative, associate, or other

                                       8
<PAGE>

individual who intends to, or may, (a) trade securities with respect to the
Company which is the subject of such information or (b) otherwise directly or
indirectly benefit from such information.

            5.10 No Brokers. Purchaser represents and warrants that it has not
"engaged," "consented to" or "authorized" any broker, finder or intermediary to
act on its behalf, directly or indirectly, as a broker, finder or intermediary
in connection with the transactions contemplated by this Agreement. Purchaser
agrees to indemnify and hold the Company harmless from and against all fees,
commissions or other payments owing to any such person or firm acting on behalf
of such Purchaser hereunder.

            5.11 Reliance on Representations. Purchaser acknowledges that the
Company and its counsel are entitled to rely on the representations and
warranties made above.

            5.12 Pre-existing Registration Rights. Purchaser acknowledges that
1,765,608 shares of Common Stock (subject to adjustment in the case of a stock
split or recapitalization of the Company and, potentially additional shares that
shall be issuable upon the exercise of certain warrants which are issuable upon
the certain contractual obligations of the Company) that have been previously
issued by the Company, or are issuable by the Company upon the exercise of
certain warrants, are subject to "piggyback" registration rights and that the
holder(s) thereof may elect to exercise such rights in connection with any
registration statement to be filed by the Company pursuant to Section 6, and
that the exercise of any such rights, and the performance by the Company of its
obligations in connection therewith shall not be a violation of the terms of
this Agreement.

      6. Registration Rights, Indemnification. As used herein, "Holder" shall
mean the Purchaser or any subsequent valid transferee of the Registrable
Securities of the Purchaser in accordance with the terms of this Agreement.

            6.1 Required Registration.

            (a) At any time following one hundred eighty (180) days after the
date of this Agreement, the Holders of Registrable Securities who hold and
propose to sell Registrable Securities with an aggregate value of at least
$500,000 shall have the right to require the Company to register under the
Securities Act on Form S-3, or other comparable or successor form, such shares
by delivering written notice thereof to the Company. All such registrations
shall be non-underwritten. For so long as the Company may be obligated to effect
a registration statement pursuant to this Section 6.1, the Company shall use
reasonable efforts to be and remain eligible to use Form S-3 or other
appropriate comparable or successor form under the Securities Act.

            (b) The Company shall be obligated to register Registrable
Securities pursuant to this Section 6.1 on not more than one occasion during any
twelve-month rolling period, or on more than two occasions in the aggregate;
provided, however, that such obligation shall be deemed satisfied only when a
registration statement covering all shares of Registrable Securities requested
to be included in such registration statement by the Holders thereof, for sale
in accordance with the method of disposition specified by the requesting
Holders, shall have become effective or if the Holders participating in the
registration withdraw from the registration.

                                       9
<PAGE>

            (c) The Company shall be entitled to include in any registration
statement referred to in this Section 6.1, for sale in accordance with the
method of disposition specified by requesting holders, shares of Common Stock to
be sold by the Company for its own account or for the account of other security
holders of the Company, but, with respect to shares to be sold by the Company,
only to the extent that such inclusion will not adversely affect, in the
Company's good faith determination, the offering for the account of the Holders
of Registrable Securities.

            (d) If, in the event of an offering pursuant to this Section 6.1,
the Company, in its good faith discretion, or, in the event the offering is
underwritten, the managing underwriter, shall be of the opinion that the
inclusion of the Registrable Securities would adversely affect the marketing of
the securities to be sold pursuant to such registration statement or would
otherwise have a material adverse effect on the Company, the number of shares of
Registrable Securities to be included in such registration statement may be
limited and the number of shares of securities that are entitled to be included
in the registration and underwriting shall be allocated in the following manner:
(I) first, pro rata among the holders of Registrable Securities demanded to be
registered therein by the Holders in proportion, as nearly as practicable, to
the respective amounts of shares of Common Stock requested to be registered
therein by such holders at the time of filing the registration statement; and
(II) second, other securities requested to be registered in such registration,
including, without limitation, securities requested to be registered therein by
the Company and by any holders of "piggyback" registrations rights.

            6.2 Incidental Registration. If the Company at any time (other than
pursuant to Section 6.1) proposes to register any of its securities under the
Securities Act for sale to the public, whether for its own account or for the
account of other security holders or both (except with respect to registration
statements on Forms S-4, S-8 or another form not available for registering the
Registrable Securities for sale to the public, or which relate to employee
benefit plans or with respect to corporate reorganizations or other transactions
subject to Rule 145 of the Securities Act), each such time it will give written
notice to all Holders of outstanding Registrable Securities of its intention so
to do. Upon the written request of any such Holder, received by the Company
within thirty (30) days after the giving of any such notice by the Company, to
register any of its Registrable Securities, the Company will use its reasonable
efforts to cause such Registrable Securities to be included in the registration
statement proposed to be filed by the Company, all to the extent requisite to
permit the sale or other disposition of such Registrable Securities so
registered. If, in the event of an offering pursuant to this Section 6.2, the
Company, in its good faith discretion, or, in the event the offering is
underwritten, the managing underwriter, shall be of the opinion that the
inclusion of the Registrable Securities would adversely affect the marketing of
the securities to be sold pursuant to such registration statement or would
otherwise have a material adverse effect on the Company, the number of shares of
Registrable Securities to be included in such registration statement may be
limited and the number of shares of securities that are entitled to be included
in the registration and underwriting shall be allocated in the following manner:
(I) first, the securities requested to be registered therein by the Company
shall be included; (II) second, the securities demanded to be registered therein
by the holders of "demand" registration rights; (III) third, pro rata among the
other holders of shares of Common Stock, including the Registrable Securities,
in proportion, as nearly as practicable, to the respective amounts of shares of
Common Stock requested to be registered by such holders at the time of filing
the registration statement.

                                       10
<PAGE>

            6.3 Registration Procedures. If and whenever the Company is required
by the provisions of Section 6.1 or 6.2 to effect the registration of any
Registrable Securities under the Securities Act, the Company will, as
expeditiously as reasonably possible:

            (a) prepare and file with the SEC a registration statement with
respect to such securities as soon as reasonably practicable after delivery of
the applicable notice, and in any event within thirty (30) days thereof, and use
reasonable efforts to cause such registration statement to become effective
within ninety (90) days after delivery of such notice and remain effective for
the period of the distribution contemplated thereby (determined as hereinafter
provided); provided, however, that that Company's obligation to file a
registration statement, or cause such registration statement to become and
remain effective, shall be suspended for a period not to exceed ninety (90) days
in any twelve-month period if in the reasonable judgment of the Company's Board
of Directors it would be detrimental to the Company to effect a registration at
such time;

            (b) prepare and file with the SEC such amendments and supplements to
such registration statement and the related prospectus as may be necessary to
keep such registration statement effective for the period specified in paragraph
(a) above and comply with the provisions of the Securities Act with respect to
the disposition of all Registrable Securities covered by such registration
statement in accordance with the sellers' intended method of disposition set
forth in such registration statement for such period; provided, however, the
Holders hereby acknowledge that the Company may notify the Holders of the
suspension of the use of the prospectus forming a part of the registration
statement until such time as an amendment to such registration statement has
been filed by the Company and declared effective by the SEC or until the Company
has otherwise amended or supplemented such prospectus, and upon receipt of such
notice the Holders shall immediately suspend the use of the prospectus and shall
not offer or sell any securities pursuant to said prospectus during the period
commencing at the time at which the Company gives the Holders notice of the
suspension of the use of said prospectus and ending at the time the Company
gives the Holders notice that Holders may thereafter effect sales pursuant to
said prospectus. Notwithstanding anything herein to the contrary, the Company
(i) shall not suspend use of the registration statement by Holders unless such
suspension is in the good faith opinion of the Company and its counsel advisable
under the federal securities laws and the rules and regulations promulgated
thereunder; and (ii) shall use its best efforts to amend to such registration
statement or amend or supplement such prospectus as soon as practicable to again
permit sales pursuant to said prospectus;

            (c) furnish to each seller of Registrable Securities and to each
underwriter, if applicable, such number of copies of the registration statement
and the prospectus included therein (including each preliminary prospectus) as
such persons reasonably may request in order to facilitate the public sale or
other disposition of the Registrable Securities covered by such registration
statement;

            (d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions as the sellers of Registrable Securities or, in
the case of an underwritten public offering, the managing underwriter reasonably
shall request; provided, however, that the Company shall not for any such
purpose be required to qualify generally to transact business as a foreign
corporation in any

                                       11
<PAGE>

jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;

            (e) promptly notify each seller of Registrable Securities and each
underwriter, if applicable, under 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 of which the Company has knowledge as a
result of which the prospectus contained 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 light of the circumstances then existing; and

            (f) if the offering is underwritten and at the request of any seller
of Registrable Securities, use its best efforts to furnish on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) an opinion dated such date of counsel representing the
Company for the purposes of such registration, addressed to the underwriters and
to such seller, in form and substance as is customarily given in an underwritten
public offering; and (ii) a letter dated such date from the independent public
accountants retained by the Company, addressed to the underwriters and to such
seller, in form and substance as is customarily given in an underwritten public
offering.

            For purposes of Section 6.3(a) and (b), the period of distribution
of Registrable Securities in any registration shall be deemed to extend until
the earlier of the sale of all Registrable Securities covered thereby and one
hundred twenty (120) days after the effective date thereof (the "Registration
Period").

            6.4 Expenses. All expenses incurred by the Company in complying with
Sections 6.1 and 6.3 (to the extent applicable), including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the NASD, transfer taxes, fees of
transfer agents and registrars, but excluding Selling Expenses, are called
"Registration Expenses". All underwriting discounts and selling commissions
applicable to the sale of Registrable Securities are called "Selling Expenses".
The Company will pay all Registration Expenses in connection with each
registration statement under Section 6.1. All (i) Selling Expenses, (ii) fees
and disbursements of counsel for the sellers of Registrable Securities and (iii)
any expenses incurred in complying with Section 6.2, in connection with each
such registration statement shall be borne by the participating sellers on a pro
rata basis based on the number of Registrable Securities included in such
registration statement.

            6.5 Indemnification and Contribution.

            (a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 6.1 or 6.2, to the
extent permitted by applicable law, the Company will indemnify and hold harmless
each seller of such Registrable Securities thereunder, each underwriter of such
Registrable Securities thereunder and each other person, if any, who controls
such seller or underwriter within the meaning of Section 15 of the Securities
Act, against any losses, claims, damages, actions or liabilities, joint or
several, to which such seller, underwriter or controlling person may become
subject under the Securities Act or other

                                       12
<PAGE>

applicable Federal or State securities or "blue sky" laws, to the extent that
such losses, claims, damages, actions or liabilities arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or any amendment or supplement thereof, or arise
out of or are based upon 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, and will reimburse each such seller, each such
underwriter and each such 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
Company will not be liable, to any such indemnitee if and to the extent that any
such loss, claim, damage, action or liability arises out of or is based upon an
(i) untrue statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by or on behalf of such
indemnitee in writing or (ii) such untrue statement or alleged untrue statement
or omission or alleged omission was contained in a preliminary or earlier
effective prospectus and corrected in a final or amended prospectus, and such
indemnitee failed to deliver a copy of the final or amended prospectus at or
prior to the confirmation of the sale of the Registrable Securities to the buyer
of such Registrable Securities; provided, further, that the indemnity agreement
contained in this Section 6.5(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.

            (b) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Section 6.1 or 6.2, to the
extent permitted by applicable law, each seller of such Registrable Securities
thereunder, severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company, each director of
the Company, each underwriter and each person who controls any underwriter
within the meaning of the Securities Act, against all losses, claims, damages,
actions or liabilities, joint or several, to which the Company or such officer,
director, underwriter or controlling person may become subject under the
Securities Act or other applicable Federal or State securities or "blue sky"
laws, to the extent that such losses, claims, damages, actions or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof, or arise out of or are based upon 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, and will reimburse the Company and each
such officer, director, underwriter and 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 such seller will be liable hereunder in any such case if and only to the
extent that any such loss, claim, damage, action or liability arises out of or
is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with information
pertaining to such seller, as such, furnished in writing to the Company by or on
behalf of such seller specifically for use in such registration statement or
prospectus; provided, further, that the indemnity agreement contained in this
Section 6.5(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 such seller, which consent shall not be

                                       13
<PAGE>

unreasonably withheld; provided, that such consent shall not be required if the
settlement shall 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 of such claim or litigation.

            (c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 6.5 and shall only
relieve it from any liability which it may have to such indemnified party under
this Section 6.5 if and to the extent the indemnifying party is prejudiced by
such omission. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 6.5 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that, if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have provided the Company with a legal opinion of counsel reasonably
satisfactory to the Company and its counsel that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the reasonable expenses and fees of such separate counsel and
other expenses related to such participation to be reimbursed by the
indemnifying party as incurred; provided, further, that the Company shall not
have any reimbursement obligation for the expenses and fees of more than one
such separate counsel for all indemnitees.

            (d) In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any Holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 6.5 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 6.5 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 6.5; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) 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, as
well as any other relevant equitable considerations. The relative fault of the
parties shall be determined 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

                                       14
<PAGE>

information and opportunity to correct or prevent such statement or omission;
provided, however, that, in any such case, (A) no such Holder will be required
to contribute any amount in excess of the public offering price of all such
Registrable Securities offered by it pursuant to such registration statement;
and (B) no person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any person or entity who was not guilty of such fraudulent
misrepresentation.

            6.6 Changes in Common Stock. If, and as often as, there is any
change in the Common Stock by way of a stock split, stock dividend, combination
or reclassification, or through a merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof so that the rights and privileges granted hereby shall
continue with respect to the Common Stock as so changed.

            6.7 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the SEC that may at any time permit the sale
of the Registrable Securities to the public without registration, the Company
agrees to:

            (a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

            (b) use commercially reasonable efforts to file with the SEC in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and

            (c) furnish to each Holder of Registrable Securities forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed by the Company as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any Registrable Securities without registration.

            6.8 Certain Holder Obligations. (a) As a condition to the inclusion
of its Registrable Securities in a registration effected pursuant to Section 6.1
or 6.2, the Holders will promptly provide the Company with such information as
the Company shall reasonably request in order to prepare the applicable
registration statement for such registration, including, but not limited to,
information regarding the Holders, the securities of the Company owned
beneficially or of record by the Holders, the distribution proposed by the
Holders, a customary selling securityholders questionnaire and, upon the
Company's request, the Holders shall provide such information in writing and
signed by the Holders and stated to be specifically for inclusion in the
applicable registrations. In the event that the distribution of the Common Stock
covered by the applicable registration statement shall be effected pursuant to
an underwritten offering as contemplated by Section 6.2, the inclusion of the
Registrable Securities shall be conditioned on the Holders' execution and
delivery of a customary underwriting agreement with terms and conditions
reasonably satisfactory to the Company with respect thereto.

            (b) The Holders shall not take any action with respect to any
distribution deemed to be made pursuant to any registration statement pursuant
to Section 6.1 or 6.2, which would constitute a violation of Regulation M under
the Exchange Act.

                                       15
<PAGE>

            (c) If, at the end of the Registration Period, the Holders have
Registrable Securities which were included in such registration statement, the
Holders shall discontinue sales of such securities pursuant to the registration
statement and prospectus upon receipt of notice from the Company of its
intention to remove from registration the shares covered by registration
statement which remain unsold (as permitted under the provisions of this Section
6), and the Holders shall notify the Company of the number of shares registered
which remain unsold promptly upon receipt of such notice from the Company.

            (d) The Holders shall have no right to take any action to restrain,
enjoin or otherwise delay any registration as a result of any controversy that
may arise with respect to the interpretation or implementation of the terms of
this Section 6.

            (e) The Registrable Securities shall not be transferable in the
absence of registration under the Securities Act and any applicable state
securities or "blue sky" laws and regulations or an exemption therefrom or in
the absence of compliance with any term of the Agreement.

            (f) Purchaser hereby covenants with the Company not to make any sale
of the Registrable Securities except either (i) a sale of Registrable Securities
in accordance with the Registration Statement, in which case the Purchaser
covenants to comply with the requirement of delivering a current prospectus,
(ii) a sale of Registrable Securities in accordance with Rule 144, in which case
the Purchaser covenants to comply with Rule 144 and to deliver such additional
certificates and documents as the Company may reasonably request or (iii) in
accordance with another exemption from the registration requirements of the
Securities Act. The legend set forth in Section 5.5 will be removed from a
certificate representing Registrable Securities following and in connection with
any sale of Registrable Securities or pursuant to subsection (i) or (ii) hereof
but not in connection with any sale of Registrable Securities pursuant to
subsection (iii) hereof.

            6.9 Termination of Registration Rights. Notwithstanding Section 6.3,
the obligations of the Company to register shares of Registrable Securities
under Section 6.1 or 6.2 for a Holder of Registrable Securities shall terminate
on the date on which such Holder can, in the reasonable opinion of counsel to
the Company, sell all shares of its Registrable Securities in a three-month
period without registration under the Securities Act pursuant to Rule 144 under
the Securities Act.

      7. Additional Agreements.

            7.1 Short Sales, etc. Purchaser represents and agrees that, during
the period from February 1, 2002 through the date of this Agreement, Purchaser
and its Affiliates (as hereinafter defined) did not and, from the date hereof
until the second anniversary of the date of this Agreement, Purchaser will not,
and shall cause its Affiliates not to, execute or effect or cause to be executed
or effected any "short sale" (as defined in Rule 3b-3 of the Exchange Act) of
Common Stock or any hedging transaction in which the other party to such
transaction is reasonably likely to engage in such a short sale as a direct
result of such transaction. For the purposes of this Agreement, "Affiliate"
shall have the meaning given such term in Rule 12b of the Exchange Act.

                                       16
<PAGE>

            7.2 Restriction on Purchase of Common Stock. Until the expiration or
termination of the Collaboration Agreement, Purchaser will not, and shall cause
its Affiliates not to, purchase or become the beneficial owner of any shares of
Common Stock which results in Purchaser and its Affiliates beneficially owning
more than nineteen percent (19%) of the issued and outstanding shares of Common
Stock; provided, however, that (a) nothing in this Section shall prevent
Purchaser and its Affiliates from acquiring Common Stock contemplated by the
Transaction Agreements and (b) Purchaser shall not be deemed to violate this
Section as a result of any reorganization, recapitalization, stock repurchase,
stock combination or other similar transaction effected by the Company with
respect to the Common Stock if Purchaser and its Affiliates beneficially owned
less than 19% of the issued and outstanding shares of Common Stock before giving
effect to such transaction. For the purposes of this Section 7.2, "beneficial
ownership" shall be determined in accordance with Rule 13d-3 promulgated under
the Exchange Act.

            7.3 Restrictions on Sale of Shares.

            (a) Until one hundred eighty (180) days after the date of this
Agreement, Purchaser will not sell or otherwise transfer the Shares.

            (b) If, at any time prior to the third anniversary of the date of
this Agreement, Purchaser proposes to sell Shares constituting one percent
(1.0%) or more of the outstanding shares of Common Stock, then Purchaser shall
first offer to sell such Shares of the Company, and the parties agree to
negotiate in good faith to reach an agreement on the purchase price and other
terms of the sale of such Shares to the Company. If the parties are not able to
reach such an agreement within 30 business days (a business day shall be any day
other than a Saturday, Sunday or legal holiday on which banks in New York and
Spain are open for the conduct of their banking business), then Purchaser shall
be free to proceed with such sale to a third party so long as it complies with
any other applicable terms of this Agreement.

            (c) Until the expiration or termination of the Collaboration
Agreement, Purchaser will not knowingly sell the Shares to a person or entity
which actively sells, distributes, markets, develops, or produces a
pharmaceutical product which directly competes with the Company. In any event,
this subsection (c) shall not prevent Purchaser from selling the Shares in
open-market transactions.

            (d) The restrictions under this Section shall not be applicable to
any transfers of the Shares to any Affiliate of Purchaser, so long as such
Affiliate agrees in advance of such transfer in an enforceable written
instrument to be bound by all the terms and conditions of this Agreement as if
it were Purchaser and a party hereto, which instrument shall be delivered a
reasonably practicable time prior to such sale or transfer.

            7.4 Voting Agreement. Until the earlier of (i) such time that
Purchaser beneficially owns less than 1.5% of the issued and outstanding shares
of Common Stock of the Company, and (ii) the completion of the Company's annual
meeting of shareholders for the calendar year 2003, at each annual meeting of
the shareholders of the Company or in connection with any other meeting or
action by written consent in lieu of a meeting of the shareholders of the
Company, Purchaser shall vote or act with respect to all shares of Common Stock
beneficially owned by it (x) in favor of all persons nominated by the then
current Board of

                                       17
<PAGE>

Directors of the Company for election to the Board of Directors of the Company
and (y) in accordance with the recommendations of the Board of Directors with
respect to any other issue; provided, that this clause (y) shall not apply to
any issue that is directly related to the matters which are subject to the
Transaction Agreements. The voting agreement contained in this Section 7.4 is
irrevocable to the extent permitted by applicable law and is coupled with an
interest. Until the earlier of (i) such time that Purchaser beneficially owns
less than 2.5% of the issued and outstanding shares of Common Stock of the
Company, and (ii) three years after the date of this Agreement, at and in
relation to each annual meeting of the shareholders of the Company or in
connection with any other meeting or action by written consent in lieu of a
meeting of shareholders of the Company, Purchaser will not actively oppose any
items referred to in clauses (x) and (y) above.

            7.5 Continuation of Certain Restrictions. If at any time prior to
the third anniversary of the date of this Agreement, Purchaser transfers Shares
in accordance with the provisions of this Agreement, Purchaser shall not effect
such transfer unless the transferee agrees in an enforceable written instrument
to be bound by the terms and conditions of Sections 7.1, 7.3(c), and 7.4;
provided, however, that (i) such transferee shall not be bound to any greater
extent as to duration of time or otherwise than Purchaser is bound under such
Sections on the date of this Agreement and (ii) this Section 7.5 shall not apply
to any transfer by Purchaser to a transferee that will own one-half of one
percent (.5%) or less of the Company's outstanding shares of Common Stock after
giving effect to such transfer.

      8. Miscellaneous.

            8.1 Headings. The headings of the sections of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement.

            8.2 Choice of Law; Venue. (a) Notwithstanding the place where this
Agreement may be executed by any of the parties hereto, the parties expressly
agree that all the terms and provisions hereof shall be construed in accordance
with and governed by the laws of the State of New York without regard to
principles of conflicts of law. In the event that a judicial proceeding is
necessary, the sole forum for resolving disputes arising out of or relating to
this Agreement is the Supreme Court of the State of New York in and for the
County of New York or the Federal Courts for such state and county, and all
related appellate courts (collectively, the "New York Courts"). The parties
hereby irrevocably and unconditionally consent to the jurisdiction of such
courts.

            (b) Each of the parties hereby irrevocably and unconditionally
consents to venue in the New York Courts, and hereby irrevocably and
unconditionally waives any objection to the laying of venue of any judicial
proceeding in the New York Courts, and agrees not to plead or claim in any such
New York Court that any such judicial proceeding brought in any such court has
been brought in an inconvenient forum.

            (c) Each of the parties waives the right to a trial by jury in any
action under this Agreement or any judicial proceeding arising out of the
transactions contemplated hereby, regardless of which party initiates such
judicial proceeding.

                                       18
<PAGE>

            8.3 Counterparts. This Agreement may be executed concurrently in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

            8.4 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Company and Purchaser and their respective
successors and assigns, provided that neither the Company nor Purchaser may
assign or transfer any or all of its rights or obligations under this Agreement
without the prior written consent of the other party and any attempted
assignment without such consent shall be null and void.

            8.5 Amendments. No amendment, modification, waiver, discharge or
termination of any provision of this Agreement nor consent to any departure by
the Purchasers or the Company therefrom shall in any event be effective unless
the same shall be in writing and signed by the party to be charged with
enforcement, and then shall be effective only in the specific instance and for
the purpose for which given. No course of dealing between the parties hereto
shall operate as an amendment of, or a waiver of any right under, this
Agreement.

            8.6 Severability. The holding of any provision of this Agreement to
be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Agreement, which shall remain in full force
and effect. If any provision of this Agreement shall be declared by a court of
competent jurisdiction to be invalid, illegal or incapable of being enforced in
whole or in part, such provision shall be interpreted so as to remain
enforceable to the maximum extent permissible consistent with applicable law and
the remaining conditions and provisions or portions thereof shall nevertheless
remain in full force and effect and enforceable to the extent they are valid,
legal and enforceable, and no provisions shall be deemed dependent upon any
other covenant or provision unless so expressed herein.

            8.7 Notices. All notices and other communications provided for
hereunder shall be in writing, shall specifically refer to this Agreement, shall
be addressed to the receiving party's address set forth below or to such other
address as a party may designate by notice hereunder, and shall be deemed to
have been sufficiently given for all purposes if (a) mailed by first class
certified or registered mail, postage prepaid, (b) sent by nationally recognized
overnight courier for next Business Day delivery, (c) personally delivered, or
(d) made by telecopy or facsimile transmission with confirmed receipt.

         If to Company:    Discovery Laboratories, Inc.
                           350 South Main Street, Suite 307
                           Doylestown, PA 18901-4874
                           Attn:  President
                           Facsimile: (215) 340-3940

         with a copy to:   Roberts, Sheridan & Kotel
                           The New York Practice of
                           Dickstein Shapiro's Corporate & Finance Group
                           1177 Avenue of the Americas, 41st Floor
                           New York, NY 10036-2714
                           Attn: Ira L. Kotel
                           Facsimile: (212) 997-9880

                                       19
<PAGE>

         In the case of Buyer:   Laboratorios del Dr. Esteve, S.A.
                                 Av. Mare de Deu de Montserrat, 221
                                 08041 Barcelona (Spain)
                                 Attention:  Development Director
                                 Facsimile: 34.93.433.00.72

            8.8 Waiver. It is agreed that a waiver by either party of a breach
of any provision of this Agreement shall not operate, or be construed, as a
waiver of any subsequent breach by that same party.

            8.9 Other Documents. The parties agree to execute and deliver all
such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes and
intent of this Agreement.

            8.10 Publicity. Except as otherwise required by applicable law or by
obligations pursuant to any listing agreement with or rules of any securities
exchange or automated quotation system, neither party shall, and shall cause its
respective Affiliates not to, not, issue any press release or make any other
public statement relating to, connected with or arising out of this Agreement or
the matters contained herein without the other parties' prior written approval
of the contents and the manner of presentation and publication thereof (which
approval shall not be unreasonably withheld or delayed).

            8.11 No Third Party Beneficiaries. Nothing in this Agreement shall
create or be deemed to create any rights in any person or entity not a party to
this Agreement, except for the Holders of Registrable Securities and certain
indemnitees.

            8.12 Survival. The representations, warranties, covenants and
agreements made herein by the Company and Purchaser shall survive the Closing.

            8.13 HSR Filings. Purchaser acknowledges and agrees that if any of
the transactions contemplated by this Agreement or any other Transaction
Agreement shall require compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), and the antitrust,
competition, foreign investment or similar laws of any foreign countries or
supranational commissions or boards that require pre-merger notifications or
filings by either the Company or Purchaser, neither party shall have breached in
any material respect its obligations under this Agreement if the closing of any
such transaction is delayed to allow the parties to comply with any such laws,
rules and regulations, and any waiting periods required thereunder, including,
but not limited to compliance with any "Second Requests" as provided for, and
defined in, the HSR Act.

            8.14 Entire Agreement. This Agreement and the other Transaction
Agreements embody the entire agreement and understanding between the parties
hereto with respect to the subject matter thereof and supersede all prior oral
or written agreements and understandings relating to the subject matter thereof.
No statement, representation, warranty, covenant or agreement of any kind not
expressly set forth in the Transaction Agreements shall affect, or be

                                       20
<PAGE>

used to interpret, change or restrict, the express terms and provisions of the
Transaction Agreements.

                 REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

                                       21
<PAGE>

      IN WITNESS WHEREOF, Company and Purchaser have caused this Common Stock
Purchase Agreement to be executed in their names by their duly authorized
officers or representatives effective as of the date first above written.

                                    DISCOVERY LABORATORIES, INC.

                                    By: /s/ Robert J. Capetola
                                       -----------------------------------------
                                    Name: Robert J Capetola, Ph.D.
                                    Title: President and Chief Executive Officer

                                    LABORATORIOS DEL DR. ESTEVE S.A.

                                    By: /s/ Joan Esteve
                                       -----------------------------------------
                                    Name: Mr. Joan Esteve
                                    Title: Vice-President

                                       22
<PAGE>

                                                                 SCHEDULE 4.6(b)

Options:
        ATI Plan, available & unexercised                               157,040
        1996 Plan, available & unexercised                               58,374
        1998 Plan, available & unexercised                            3,931,926
        Non-Plan, issued & unavailable                                  120,000
Common Placement Warrants                                                55,621
Common Placement Warrants                                               164,911
Preferred B Placement Warrants                                          654,911
Unit Options                                                            394,959
Common Placement Warrants                                               348,341
Class C Warrants                                                         56,907
Class E Warrants                                                        580,569
Class F Warrants                                                        712,552
Class G Warrants                                                        357,143
Class H Warrants*                                                       564,706
Other Warrants:
        Leerink Swann                                                    65,000
        Shipley Raidy                                                    50,000
                                                                      ---------
                                                                      8,272,960
                                                                      =========

*Includes 244,706 Class H Warrants that may be issued in conjunction with the
PharmaBio Development Inc. Class H Warrant Agreement.

                                       23

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