Document:

<PAGE>
                                                                   EXHIBIT 10.18
                                                 ****denotes information omitted
                                                       pursuant to a request for
                                           confidential treatment under Rule 406

Besse Medical
Attn: Mr. Michael E. Besse
9075 Centre Pointe Dr.
Suite 140
West Chester, OH 45069

                         Re: Fee for Services Agreement

Dear Mr. Besse:

      This letter will memorialize the agreement between Valera Pharmaceuticals,
Inc. ("Valera") and Besse Medical ("Besse") with respect to Besse's distribution
of certain products purchased from Valera and delivered to Besse's customers.

      Pursuant to Group Purchasing Agreements (the "GPO Agreements") between
Valera and International Physician Networks, LLC d/b/a/ International Urology
Network ("IPN"), certain specified persons and entities ("Eligible Purchasers")
may purchase Valera products at prices set forth in the GPO Contracts, plus any
markup, other fee or markdown charged or allowed by Besse. With respect to such
purchases:

      1. Valera hereby designates Besse as an authorized specialty distributor
of Valera to sell its products to Eligible Purchasers. Form time to time, Valera
or IPN will advise Besse of the Eligible Purchasers.

      2. Eligible Purchasers may purchase Valera products at the Contract Prices
set forth on Exhibit A, plus any markup or other fee, and less any markdown,
charged or allowed by Besse to the Eligible Purchaser. The amount of any such
markup, fee or markdown is strictly a matter between Besse and the Eligible
Purchaser and is not a part of this letter agreement.

      3. The purchase price to be paid by Besse to Valera for Valera products
covered by this Agreement shall be **** per unit; provided that Besse shall be
entitled to submit chargebacks ("Chargebacks") for each Valera product sold to
an Eligible Purchaser equal to the difference between the **** per unit cost
and the Contract Price applicable to the Eligible Purchaser to whom Besse sold
the product as set forth Exhibit A. Besse and Valera will mutually agree on the
method and timing for the submission by Besse to Valera, and the payment by
Valera to Besse, of Chargebacks, provided that credit memoranda for Chargebacks
shall be provided by Valera to Besse no more than 30 days after the submission
of such Chargebacks by Besse.

      4. Valera shall extend payment terms to Besse of **** under the
Agreements. Products may be returned under the standard Valera Returned Goods
Policy, a copy of which will be supplied to Besse on request. All other general
terms and conditions of product
<PAGE>
Besse Medical
Attn: Mr. Michael E. Besse
Page 2

purchases by Besse from Valera shall be those in effect on the effective date of
this letter agreement.

      5. Besse shall enter into such agreements that will allow it to accept
credit card purchases of Valera products from Eligible Purchasers, and shall
provide Valera a monthly report of all credit card purchases of Valera products
by Eligible Purchasers.

      6. Besse shall perform all other distribution and related services
customarily provided by a wholesale distributor, including but not limited to
the stocking, packing and shipment of products, credit and billing processing,
and contracts and chargeback administration.

      In consideration of the services to be provided by Besse under this letter
agreement, the receipt and sufficiency of which are hereby acknowledged, Valera
shall pay the following amounts to Besse (collectively, the "Distribution
Services Fee"):

      A. Valera shall pay Besse a fee equal to **** of the purchases of Valera
products through Besse under the GPO Agreements, calculated based on Contract
Prices

      B. Valera shall reimburse Besse for ****.

      C. Valera agrees that it shall reimburse Besse for ****.

      The amount of the Distribution Services Fee shall be deducted or billed on
a monthly basis (as may be agreed by the parties) within 30 days after the end
of a calendar month; provided, however, that with respect to amounts due under
Section C above for a particular Eligible Purchaser, Valera shall make such
payments to Besse no less than thirty days after Besse has provided Valera
documentation that: (i) the Eligible Purchaser's account is at least ninety days
past due and (ii) Besse has exhausted commercially reasonable collection efforts
to collect such account.

      The effective date of this letter agreement shall be December 1, 2004, and
the term of this letter agreement will expire on November 30, 2005. Either party
may terminate this letter agreement if the other party breaches any of its
obligations or provisions of this letter agreement; provided, however, that the
defaulting party will be given not less than thirty days' prior written notice
of such default and the opportunity to cure the default during such period.

      Notwithstanding anything to the contrary herein, Valera, at its sole
discretion, may at any time modify or vary the Wholesale Acquisition Cost
referenced on Exhibit A on not less than ten days' advance written notice to
Besse, and this letter agreement shall automatically be amended, without further
action by the parties to reflect such new Wholesale Acquisition Cost. Valera
<PAGE>
Besse Medical
Attn: Mr. Michael E. Besse
Page 3

agrees to perform a floor stock adjustment in the event of a decrease in
Wholesale Acquisition Cost. Besse agrees to provide an inventory count of
product on hand as of the first business day following a price decrease. Valera
agrees to issue a credit based on the difference of previous Wholesale
Acquisition Cost and new Wholesale Acquisition Cost and the number of vials or
other units on hand at such time.

      The parties will keep all the terms, conditions and prices in this letter
agreement confidential. The obligations of either party hereunder will be
suspended in the event that such party is hindered or prevented from complying
therewith because of labor disturbances (including strikes and lockouts), wars,
fires, storms, accidents, or interference or any other cause beyond such party's
reasonable control. Any failure of either party to require the other party to
comply with any provision of this letter agreement will not be deemed a waiver
of such provision or any other provision of this letter agreement. Each party
represents that its performance under this letter agreement will be in full
compliance with any and all applicable laws and regulations, and neither party
will be deemed agents of the other party.

      This letter agreement will be construed in accordance with the laws of the
state of Delaware with the exception of its choice of law principles. Any
clause, section or paragraph of this letter agreement that is determined by a
court of competent jurisdiction to be illegal, invalid or unenforceable will be
deemed severed from the remainder of this letter agreement and will have no
effect on the legality, validity or enforceability of the remaining provisions.

      This letter agreement, including Exhibit A, represents the entire
understanding between the parties with respect to the subject matter hereof.
Each party expressly agrees and acknowledges that, other than those statements
expressly set forth in this letter agreement, it is not relying on any
statement, whether oral or written, of any person or entity with respect to its
entry into this letter agreement or to the consummation of the transactions
contemplated by this letter agreement. Any amendment or renewal of this letter
agreement or Exhibit A shall be in writing and signed by both parties.

      If this letter accurately sets forth our agreement, please indicate your
acceptance by signing this letter in the space provided below and returning the
letter to me at your earliest convenience.

                                          Very truly yours,

                                          Valera Pharmaceuticals, Inc.

                                          By:   /s/ DAVID S. TIERNEY
                                                --------------------------------
                                          Name: David S. tierney
                                                --------------------------------
                                          Title:President and CEO
                                                --------------------------------
<PAGE>
Besse Medical
Attn: Mr. Michael E. Besse
Page 4

Agreed and accepted:

Besse Medical

By:   /s/ Michael E. Besse
      -------------------------------
      Michael E. Besse
      General Manager
<PAGE>
Besse Medical
Attn: Mr. Michael E. Besse
Page 5

                                    Exhibit A

    Products covered by this letter agreement and related Contract Price

<TABLE>
<CAPTION>
                                                  Q1/05
      VANTAS                                  CONTRACT PRICE   DISCOUNT OF WAC
      ------                                  --------------   ---------------
<S>                                           <C>              <C>
      IUN Physician Members                          ****           ****
      U.S. Urology Practices                         ****           ****
      US Bioservices                                 ****           ****
</TABLE>

<TABLE>
<CAPTION>
                                                  Q2/05
      VANTAS                                  CONTRACT PRICE   DISCOUNT OF WAC
      ------                                  --------------   ---------------
<S>                                           <C>              <C>
      IUN Physician Members                          ****           ****
      U.S. Urology Practices                         ****           ****
      US Bioservices                                 ****           ****
</TABLE><PAGE>

                                                      Exhibit 10.19
                                                      **** denotes information
                                                      omitted pursuant to a
                                                      request for confidential
                                                      treatment under Rule 406.

                     COLLABORATION AND DEVELOPMENT AGREEMENT

      Collaboration and Development Agreement (this "AGREEMENT") made as of
March __, 2005, by and between VALERA PHARMACEUTICALS, INC., a Delaware
corporation, with its principal offices at 8 Clarke Drive, Cranbury, New Jersey
08512 ("Valera") and ALPEX PHARMA S.A., a Switzerland Societe Anonyme with its
principal offices at via Cantonale, Mezzovico-Vira, Switzerland ("Alpex").
Valera and Alpex are sometimes referred to herein individually as a "Party" and
collectively as the "Parties").

                                   BACKGROUND

      The following sets forth the background for this Agreement:

      Alpex conducts pharmaceutical research and development and develops,
acquires, and licenses proprietary drug delivery technologies that have
application to a variety of pharmaceutical products, including fast-melt drug
formulation processes and techniques applicable to pharmaceutical compounds
including the Product (as hereinafter defined).

      Valera, among other things, conducts marketing, sales, and distribution of
pharmaceutical products for the treatment of a variety of disorders.

      Valera and Alpex share a mutual interest in a collaboration aimed at the
further development and commercialization of the Product incorporating Alpex
Intellectual Property (as hereinafter defined).

      Valera and Alpex intend to utilize their capabilities, capitalize on each
other's expertise, and put forth commercially reasonable efforts to achieve the
objectives of this collaboration.

      NOW, THEREFORE, in consideration of the mutual promises, covenants,
agreements, representations and warranties hereinafter set forth, and intending
to be legally bound, the Parties hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      "AB RATED EQUIVALENT" means a product which has been approved by the FDA
with an approved drug application that contains adequate scientific evidence
establishing the bioequivalence of the Product to be developed pursuant to this
Agreement to the applicable referenced brand product.

      "AFFILIATE" means any entity that directly or indirectly Owns, is Owned
by, or is under common Ownership with a Party to this Agreement. "Owns" or
"Ownership" means direct or indirect possession of more than fifty percent (50%)
of the votes of holders of a corporation's voting securities or a comparable
equity interest in any other type of entity.

      "AGENCY" means the FDA or any successor governmental regulatory authority
responsible for granting approvals for the sale of the Product in the Territory.
<PAGE>
      "AGREEMENT" means this Agreement, together with all exhibits and
attachments.

      "ALPEX IMPROVEMENTS" means any improvements to the Alpex Platform Patents
and Alpex Know-How, in each case owned by Alpex as of the date hereof, that are
conceived, created, developed, and/or otherwise invented by Alpex, by Valera, or
jointly by Alpex and Valera, under the Research and Development Plans pursuant
to this Agreement.

      "ALPEX INTELLECTUAL PROPERTY" means the Alpex Patents, Alpex Improvements,
and the Alpex Know-how.

      "ALPEX KNOW-HOW" means Technical Information owned, developed, or
Controlled by Alpex as of the date of this Agreement or during the Term of this
Agreement, including, without limitation, the Platform Technology, concerning
the development, manufacture, production, quality control, storage,
distribution, and sale of the Product.

      "ALPEX PATENTS" means any valid claim of any Alpex Platform Patent or any
Patents and patent applications based on Alpex Improvements as set forth in
Annex C.

      "ALPEX PLATFORM PATENTS" means Patents and applications therefor relating
to the Platform Technology issued based on a patent application previously or
hereafter filed by or on behalf of Alpex or subsequently assigned, licensed, or
granted to, or acquired by Alpex relating to the Platform Technology as set
forth in Annex C.

      "ANDA" means an "abbreviated new drug application," as defined in the
United States Food, Drug, and Cosmetic Act, as amended, and applicable FDA rules
and regulations.

      "ARTICLE" means any article of this Agreement.

      "BANKRUPTCY EVENT" has the meaning set forth in Section 13.5(b).

      "BUSINESS DAY" means a day other than a Saturday, Sunday or day on which
banking institutions are not required to be open in New Jersey.

      "CLINICAL STUDIES" means all the studies of the intake of the Product on
humans such as pivotal and non-pivotal bioequivalence or clinical studies
performed by Valera for any purpose including without limitation for purposes of
obtaining Regulatory Approval in the Territory, taste, and marketing of the
Product.

       "COMPETING PRODUCT" means in relation to a compound a bona fide ongoing
project being conducted or to be conducted by or on behalf of Alpex to apply the
Alpex Know-How to such compound: (a) pursuant to a written agreement between
Alpex and a Third Party, (b) which project has commenced and is in circumstances
where Alpex is engaged in bona fide discussions with a Third Party with a view
to entering into such an agreement or an agreement for further development or
commercialization of such compound, or (c) which is being conducted by Alpex or
an Affiliate of Alpex with a bona fide view to commercialization of such product
by Alpex, its Affiliates, or other licensees.

                                       2
<PAGE>
      "CONFIDENTIAL INFORMATION" has the meaning set forth in Section 10.1.

      "CONTROL" means, with respect to an item of information or intellectual
property right, the possession of the ability to grant a license or sublicense
as provided for herein under such item or right without violating the terms of
any agreement or other arrangement, express or implied, with any Third Party.

      "DEFAULT" means the material breach of a material term of this Agreement.

      "DISCONTINUED PRODUCT" has the meaning set forth in Section 4.5(a).

      "DISPUTE" has the meaning set forth in Section 14.3(b).

      "FDA" means the United States Food and Drug Administration, or any
successor thereto.

      "FISCAL QUARTER" means each period of three (3) months ending on March 31,
June 30, September 30, or December 31.

      "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, with respect to Valera, and in Switzerland,
with respect to Alpex.

      "IMPROVEMENT" means, as to the Product, any improvement, line extension,
or modification (including in any such case whether to the same active
ingredient molecule comprising the Product or to the same active ingredient
molecule in conjunction with other active ingredient molecules comprising the
Product in such combination), superior development of the Product, and/or
delivery technologies (for example, faster onset of action), and other
enhancements to the Product or any non-AB Rated Equivalent of the Product.

      "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" have the meanings set forth
in Section 12.2.

      "LAUNCH" means the date of first commercial shipment of the Product by
Valera, its Affiliates, distributors, or sublicensees to Third Party customers
in the Territory after receipt of Regulatory Approval for the Product from the
FDA or other relevant Agency, as may be necessary in the Territory.

      "LOSS" has the meaning set forth in Section 12.1.

      "MANUFACTURING AND SUPPLY AGREEMENT" means an agreement to be entered into
between Valera and Alpex to set forth the circumstances, terms, and conditions
under which Alpex shall manufacture the Products for sale by Valera in the
Territory.

      "NDA" means a "new drug application," as defined in the United States
Food, Drug, and Cosmetic Act, as amended (the "Act"), and applicable FDA rules
and regulations, including an application of the type described in Section
505(b)(2) of the Act.

                                       3
<PAGE>
      "NET SALES" means the total gross proceeds to Valera on sales to Third
Parties representing sales actually collected by Valera and its Affiliates of
the Product in the Territory, less deductions for the following to the extent
actually paid or allowed with respect to the Product sales:

            (a) sales and excise taxes and duties (including import duties) paid
            or allowed by a selling party and any other governmental charges
            imposed upon the manufacture or sale of the Product, after giving
            effect to any rebates or refunds relating to such taxes or duties
            received by Valera;

            (b) rebates and chargebacks (including rebates to social and welfare
            systems) actually paid;

            (c) allowances, chargebacks, and credits to Third Parties on account
            of rejected, damaged, outdated, returned, withdrawn, or recalled
            Product or on account of retroactive price reductions affecting the
            Product; and

            (d) amounts paid to Third Parties on account of rebate payments,
            including Medicaid rebates.

      Taxes, the legal incidence of which is on the purchaser and separately
shown on Valera's or its Affiliates' invoices, and transportation, insurance and
postage charges, if prepaid by Valera or its Affiliates and billed on Valera's
or its Affiliates' invoices as a separate item, shall not be considered a
component of Net Sales. Components of Net Sales shall be determined in the
ordinary course of business in accordance with Valera's historical practice and
using the accrual method of accounting in accordance with GAAP.

      The supply of the Product as commercial samples or for use in Clinical
Studies shall not be included within the computation of Net Sales. Where (i) the
Product is sold by Valera or an Affiliate as one of a number of items without a
separate price; or (ii) the consideration for the Product shall include any
non-cash element; or (iii) the Product is transferred by Valera or an Affiliate
in any manner other than an invoiced sale, the Net Sales price applicable to any
such transaction shall be deemed to be Valera's average Net Sales price for the
applicable quantity of Products to the relevant class of customers at that time
in the Territory.

      For purposes of Sections 4.5(d) and 6.5, Net Sales shall refer to sales by
Alpex to Third Parties.

      "PATENTS" means all valid claims in all patent applications, and all
continuing and divisional patent applications, continuations-in-part and reissue
applications claiming priority to such applications and all patents issuing
therefrom in the Territory together with all re-examinations and foreign
equivalents of any of the foregoing.

      "PLATFORM TECHNOLOGY" means the technology developed and owned by Alpex as
of the date hereof relating to fast-melt drug formulation processes and
techniques.

      "PRODUCT" means the finished pharmaceutical form of Desmopressin Acetate
manufactured by Alpex for Valera.

                                       4
<PAGE>
      "PRODUCT PATENT" means Patents and applications therefore issued based on
a patent application previously or hereafter filed relating to the Product,
including finished dosage form and its manufacture, or improvements thereof.

      "PRODUCT SUCCESS CRITERIA" means, with respect to the Product, those
criteria agreed between the Parties and set forth in the Research and
Development Plan.

      "PRODUCT TERMINATION NOTICE" has the meaning set forth in Section 4.5(a).

      "REGULATORY APPROVAL" means the Product license or marketing approval
necessary as a prerequisite for marketing the Product in a country of the
Territory.

      "RESEARCH AND DEVELOPMENT PLAN" means the development program for the
Product as provided in Section 4.1 hereof.

      "SECTION" means any section of this Agreement.

      "TECHNICAL INFORMATION" means all techniques and data and other know-how
and technical information, including inventions (including patentable
inventions), practices, methods, concepts, know-how, trade secrets, documents,
computer data, source code, apparatus, clinical and regulatory strategies and
data, test data, analytical and quality control data, manufacturing data or
descriptions, development information, drawings, specifications, designs, plans,
proposals and technical data and manuals and all other proprietary information
concerning the development, manufacture, production, quality control, storage,
distribution and sale of the Product.

      "TERM" means the period of time specified in Section 2.3.

      "TERRITORY" means the United States, Canada, Mexico, and all of their
states, territories and possessions.

      "THIRD PARTY" means any entity other than Alpex or Valera.

                                   ARTICLE II
               OWNERSHIP OF INTELLECTUAL PROPERTY; LICENSE GRANTS

            2.1.  OWNERSHIP OF INVENTIONS.

                  (A) Except as provided in Sections 2.2 and 2.3 below Alpex
shall own all right, title, and interest in and to the Alpex Intellectual
Property.

                  (B) To the extent Valera obtains any right, title, or interest
in any intellectual property or Technical Information with respect to the
Platform Technology, Valera hereby assigns, and, to the extent such assignment
cannot be made at present, agrees promptly to assign, to Alpex all of Valera's
right, title, and interest in and to the same. Without limiting the foregoing,
with respect to any patent applications included in Alpex Patents and in which
Valera

                                       5
<PAGE>
employees or consultants are named as inventors, Valera shall, and shall use
reasonable efforts to cause such employees and consultants to, at Alpex's
expense, cooperate in the filing, prosecution, and maintenance of such Alpex
Patents, including making any assignments as Alpex may reasonably deem
necessary, joining in any applications for letters patent on any invention
deemed patentable included in such Alpex Patents, taking all steps as reasonably
requested by Alpex to prosecute all pending and new patent applications included
within such Alpex Patents, and responding to oppositions, nullity actions,
re-examinations, revocation actions, and similar proceedings filed by Third
Parties against the grant of letters patent for such applications.

                  (C) Valera shall own all right, title, and interest in and to
the Product and Product Patents in the Territory. Alpex shall own all right,
title, and interest in and to the Product Patents outside of the Territory.

                  (D) To the extent Alpex obtains any right, title, or interest
in any intellectual property or Technical Information with respect to the
Product or Product Patents in the Territory, Alpex hereby assigns, and, to the
extent such assignment cannot be made at present, agrees promptly to assign, to
Valera all of Alpex's right, title, and interest in and to the same. Without
limiting the foregoing, with respect to any patent applications included in
Product Patents and in which Alpex employees or consultants are named as
inventors, Alpex shall, and shall use reasonable efforts to cause such employees
and consultants to, at Valera's expense, cooperate in the filing, prosecution,
and maintenance of such Product Patents in the Territory, including making any
assignments as Valera may reasonably deem necessary, joining in any applications
for letters patent on any invention deemed patentable included in such Product
Patents, taking all steps as reasonably requested by Valera to prosecute all
pending and new patent applications included within such Product Patents, and
responding to oppositions, nullity actions, re-examinations, revocation actions,
and similar proceedings filed by Third Parties against the grant of letters
patent for such applications.

            2.2.  LICENSE GRANT

                  (A) Subject to the terms and conditions of this Agreement,
Alpex hereby grants to Valera, and Valera hereby accepts from Alpex, a sole and
exclusive, royalty-bearing right and license, including the right to sublicense,
under and to Alpex Intellectual Property to use, import, export, sell, offer to
sell and otherwise commercialize the Product in the Territory.

                  (B) In the event Alpex is not able to provide Valera with the
requested amounts of the Product pursuant to the terms and conditions of the
Manufacturing Agreement (including without limitation the price, forecast and
ordering terms) Valera will have the right to have Product made for Valera by a
Third Party. This have made right shall extend to the amounts and time periods
as to which Alpex is not able to supply Product to Valera and shall not
constitute a license to any Third Party to make or sell Products to a party
other than Valera; provided, however, that Alpex shall not bring any action
against such a Third Party for making Product for Valera for amounts and time
periods for which Alpex is not able to supply Product to Valera.

                                       6
<PAGE>
                  (C) Upon the expiration of the Agreement, Valera shall have a
fully paid-up, perpetual, royalty-free, non-exclusive, irrevocable license,
including the right to sublicense, under and to Alpex Intellectual Property to
make, have made, use, import, export, sell, offer to sell and otherwise
commercialize the Product in the Territory;

                  (D) Subject to the terms and conditions of this Agreement,
Valera hereby grants to Alpex, and Alpex hereby accepts from Valera, a non-
exclusive, royalty-free right and license, under and to the Valera Product
Patents to make, use and sell the Product to Valera in the Territory as provided
for herein, and for its own account as provided for in Sections 4.5 and 6.5
hereof.

            2.3. MAINTENANCE OF RECORDS. Each Party shall maintain full and
accurate records concerning their activities under this Agreement for the
purpose of documenting any intellectual property developed hereunder. Such
records shall be maintained for the later of either three (3) years after the
end of the Term or for the pendency of any patent application covering any such
Intellectual Property.

            2.4.  CERTAIN RIGHTS; NO IMPLIED LICENSES

                  (A) The Parties acknowledge and agree that the licenses
granted by Alpex to Valera pursuant to Section 2.2 are limited solely to enable
Valera to use, import, export, sell, offer to sell and otherwise commercialize
the Product in the Territory and Alpex does not hereby grant to Valera a license
to any Alpex Intellectual Property outside the Territory or for any other
purpose in the Territory.

                  (B) Except as otherwise provided in this Agreement, under no
circumstances shall a Party as a result of this Agreement obtain any ownership
interest or other right in any technology, know-how, trade secrets, patents,
pending patent applications, products, or other Technical Information of the
other Party, including items owned, Controlled, developed by the other, or
transferred by the other to such Party at any time pursuant to this Agreement.

                                   ARTICLE III
                            OVERVIEW OF COLLABORATION

            3.1. SCOPE OF COLLABORATION. The Parties shall work together to
research and develop the Product pursuant to this Agreement. All such research
and development work shall be conducted under Alpex's direction and shall be
allocated between the Parties according to the Research and Development Plan (as
further described in Article IV hereof) included as Exhibit A to this Agreement.

            3.2. RECORDKEEPING. Each Party shall record, to the extent
practical, all Technical Information relating to its research and development
activities under the Research and Development Plan in written form, which
writing shall be consistent with standard practices of each Party and what is
normal and customary in the pharmaceutical industry in the United States or as
may be required by applicable law or regulation. All such written records of the
Parties shall be maintained in a form sufficient to satisfy all Agencies.

                                       7
<PAGE>
                                   ARTICLE IV
                            RESEARCH AND DEVELOPMENT

            4.1. RESEARCH AND DEVELOPMENT PLAN. The Research and Development
Plan for the Product (including tasks, allocation of responsibilities, estimated
development timelines, and estimated development budgets) is set forth on
Exhibit A. The Parties may periodically modify the Research and Development
Plan, within the scope of and in a manner consistent with this Agreement,
further detail the responsibilities of each Party within the general scope of
responsibilities set forth herein, and revise the Research and Development Plan
accordingly. The Parties acknowledge that the timelines, dates and budgeted
costs set forth in the Research and Development Plan are good faith estimates.
However, in the event that an estimated development timeline will not be met,
the Party with responsibility for meeting that timeline shall notify the other
Party and the Parties shall work together in good faith to bring the project
back on schedule. Each Party shall be responsible for its own cost overruns, if
any.

            4.2.  JOINT OBLIGATIONS.

                  (A) Each Party will fund its own costs and expenses in the
performance of its research and development obligations provided pursuant to
this Agreement and the Research and Development Plan.

                  (B) Parties shall keep each other fully informed of the status
of the development of the Product including, without limitation, providing
written reports as requested throughout the performance of the Research and
Development Plan, stating in reasonable detail all efforts made and in process,
and all significant progress achieved.

                  (C) The Parties will each designate a primary project contact
with respect to the Product throughout the performance of the Research and
Development Plan.

            4.3.  ALPEX OBLIGATIONS.

                  (A) Alpex shall use commercially reasonable efforts to
diligently perform its obligations under this Agreement, including, without
limitation, those set forth in the Research and Development Plan, all in
accordance with all applicable laws, ordinances, rules, regulations, orders,
licenses and other requirements now or hereafter in effect.

                  (B) Alpex shall make available to Valera all Alpex
Intellectual Property and Technical Information and assistance as may reasonably
be necessary for Valera's development, submission for applicable Regulatory
Approval, and commercialization of the Product, including formulation and
process development, development of stability indicating methods (including
methods for dissolution, assay and stability), and achievement of stability
under accelerated stability conditions for two months or under ambient
conditions for six months, stability data, methods validation, formulation
trials, in-process and finished Products specifications, Product development
reports for the Product, and identification and sourcing of any excipients used
in the formulation of the Product, all as more particularly described herein and
in the Research and Development Plan.

                                       8
<PAGE>
                  (C) Alpex shall maintain records in sufficient detail and
otherwise in accordance with good laboratory practices or current good
manufacturing practices, as the case may be, and as are required to properly
reflect, and will document in a manner appropriate for purposes of supporting
any Agency filings, and pre-approval inspections, all work done and results
achieved by Alpex in the performance of the Research and Development Plan
(including all data in a form required under any applicable governmental
regulations). Subject to the confidentiality provisions of Article X hereof,
Alpex shall provide Valera with copies of all such records relating to the
Product.

            4.4.  VALERA OBLIGATIONS.

                  (A) Valera shall use commercially reasonable efforts to
diligently perform its obligations under this Agreement, including, without
limitation, those set forth in the Research and Development Plan, all in
accordance with all applicable laws, ordinances, rules, regulations, orders,
licenses and other requirements now or hereafter in effect.

                  (B) Valera shall maintain records in sufficient detail and
otherwise in accordance with good laboratory practices, good clinical practices,
or current good manufacturing practices, as the case may be, and as are required
to properly reflect, and will document all work done and results achieved in the
performance of the Research and Development Plan including all records of any
Clinical Studies. Subject to the confidentiality provisions of Article X hereof,
Valera shall provide Alpex with the right to inspect such records relating to
the Product.

                  (C) Valera shall keep Alpex fully informed as to the
continuing status of its Clinical Studies and development efforts for the
Product pursuant to the Research and Development Plan, including the status of
the preparation and filing of any Regulatory Approvals with applicable Agencies
as well as the anticipated Launch of the Product and the status of the conduct
and completion of Clinical Studies. In connection therewith, Valera shall
provide to Alpex quarterly reports during the Term, stating in reasonable detail
all efforts made and in process, and significant progress achieved. In addition,
Valera shall promptly communicate to Alpex any material issues or problems.
Valera shall include in such reports information concerning the status of the
regulatory filings for the Product in the Territory and shall notify Alpex of
the substance of all material written communications with any Agencies relating
to the Product.

                  (D) Valera will provide Alpex, at no cost other than routine
costs of photocopy and shipping, all Valera documentation with respect to the
Product and Clinical Studies as may be requested by Alpex including without
limitation all documentation necessary for the purpose of Alpex obtaining
marketing approval for the Product outside of the Territory. Such documentation
will be provided to Alpex at Valera's facility or an Alpex facility as
designated by Alpex.

            4.5.  DISCONTINUATION OF THE PRODUCT.

                                       9
<PAGE>
                  (A) Valera may terminate the continuation of the obligations
of Alpex and Valera relating to the Product if Valera in its sole discretion
should it determine that the development and/or commercialization of the Product
has been impaired due to (i) difficulties in the development and/or formulation
of the Product, (ii) unfavorable action by the FDA relating to the Product,
(iii) the likelihood of failing to obtain applicable Agency approvals for the
Product (regardless of further steps or submissions that could be made), (iv)
concerns with possible infringement claims of Third Parties relating to the
Product, and (v) unfavorable market conditions for the Product, including,
without limitation, the entry of other competing products and/or price erosion.
Upon making such a determination, Valera shall provide written notice to Alpex
(a "Product Termination Notice"), which shall provide in reasonable detail the
basis on which Valera has elected to discontinue and terminate any further
continued efforts relating to the Product (a "Discontinued Product").

                  (B) Upon provision of a Product Termination Notice, (i) the
licenses granted to Valera pursuant to Section 2.2 hereof with respect to the
Discontinued Product shall terminate and (ii) Valera shall pay to Alpex all
accrued license and milestone payments earned by Alpex up to the date of such
termination but not previously paid that relate to the Discontinued Product.
Other than as provided in Section 4.5(c) and Section 13.6 hereof, Valera shall
have no further obligations to Alpex under this Agreement relating to the
Discontinued Product including, without limitation, any milestone or royalty
payment obligations.

                  (C) In the event that Alpex elects to continue or resume the
development, commercialization or sale, alone or with others, of a Discontinued
Product, then (i) it shall reimburse Valera for all development costs and raw
material costs associated therewith that were previously incurred by Valera,
including any license or milestone payments received from Valera pursuant to
Article VIII hereof ("Development Reimbursement"), and (ii) Valera shall (A)
deliver and assign to Alpex all Technical Information, test data, bioequivalence
study results, regulatory filings, Regulatory Approvals, pending patent
applications, reports, records, and materials in Valera's possession or control
that relate to the Discontinued Product, and (B) return to Alpex all relevant
records and materials in Valera's possession or control containing Confidential
Information of Alpex that relate to the Discontinued Product.

                  (D) If Alpex elects to pursue development of the Discontinued
Product (i) in the Territory, then Alpex's payment of the Development
Reimbursement to Valera shall be made in monthly installments over a period of
time equivalent to the period from the date of Valera's first milestone payment
in respect of the Discontinued Product to the date of the Product Termination
Notice, (ii) outside the Territory, then Alpex's payment of the Development
Reimbursement shall be limited to payment by Alpex of 6% of the Net Sales of the
Product made by Alpex anywhere in the world. The payments provided for in (i)
and (ii) of the preceding sentence shall both be made, as applicable, until such
time as Valera has received the entire reimbursement amount.

                                    ARTICLE V
                          MANUFACTURING OF THE PRODUCT

                                       10
<PAGE>
            5.1. MANUFACTURING OF THE PRODUCT. Alpex shall manufacture and
supply sufficient quantities of the Product for the Clinical Trials and
commercial sale in the Territory to meet Valera's needs during the Term in
accordance with current good manufacturing practices (cGMP). Prior to Launch of
the Product, Alpex and Valera shall use their best efforts to enter into a
Manufacturing and Supply Agreement on terms agreed in good faith on the basis of
the principles set forth in Exhibit B hereto.

                                   ARTICLE VI
                         HEALTH REGISTRATION OBLIGATION

            6.1. REGULATORY APPROVALS. Valera shall use its commercially
reasonable efforts to prepare, file, and prosecute all Agency filings and
applications to obtain all Regulatory Approvals for the Product in each country
of the Territory which are required to sell, use, and market the Product in the
Territory, all at Valera's sole expense. Valera shall own all right, title, and
interest in any FDA or other Regulatory Approvals which are obtained for the
Product, including all data generated in the course of Clinical Trials and all
applications and data submitted to the FDA or other Agency.

            6.2. MAINTENANCE OF REGULATORY APPROVALS. Valera shall use
commercially reasonable efforts to maintain the Regulatory Approvals for use,
sale and marketing of the Product in each country of the Territory at Valera's
sole expense.

            6.3. ALPEX ASSISTANCE. Alpex shall provide such assistance to Valera
in obtaining and maintaining Regulatory Approvals in the Territory as reasonably
requested by Valera.

            6.4. TIMING OF AGENCY FILINGS. Valera shall use commercially
reasonable efforts to file an NDA or ANDA, as determined in the sole discretion
of Valera, to seek Regulatory Approval to use and sell the Product in the
Territory upon satisfaction of the Product Success Criteria within six (6)
months after such satisfaction; provided, however, that if in Valera's
reasonable determination there shall exist in the Territory a patent or other
intellectual property of a Third Party that would prevent or substantially
impair the manufacture, use, sale, offer for sale, or importation by or on
behalf of Valera of the Product, then Valera may in its discretion elect not to
file for Regulatory Approval until the date that is six (6) months after the
expiry of such patent or other right.

            6.5. FAILURE TO FILE NDA OR ANDA. In the event Valera fails to file
an NDA or ANDA within six (6) months after satisfaction of the Product Success
Criteria, the license granted by Alpex to Valera pursuant to Section 2.2
relating to the Product shall, at the election of Alpex by 60 days written
notice to Valera, during which time Valera shall be entitled to cure such
failure, become a non-exclusive, perpetual, royalty-free license in the
Territory upon Alpex's election and Alpex's reimbursing Valera all milestone
payments received for the Product up to the date of such election ("Milestone
Reimbursement"), provided that if Alpex elects to pursue commercialization of
the Product (i) in the Territory then Alpex's payment of the Milestone
Reimbursment shall be made in monthly installments over a period of time
equivalent to the period from the date of Valera's first milestone payment in
respect of the

                                       11
<PAGE>
Product in question to the effective date of the conversion of Valera's license
into a royalty-free non-exclusive license and (ii) outside the Territory, then
Alpex's payment of the Milestone Reimbursment shall be limited to 6% of the Net
Sales of the Product by Alpex anywhere in the world. The payments provided for
in (i) and (ii) of the preceding sentence shall both be made, as applicable,
until such time as Valera has received the Milestone Reimbursement.

                                   ARTICLE VII
                        MARKETING AND SALE OF THE PRODUCT

            7.1.  MARKETING AND SALE OF THE PRODUCT.

                  (A) Upon the Launch of the Product, Valera, either itself or
through its Affiliates, or distributors, shall use its commercially reasonable
efforts to market, distribute, and sell the Product in the Territory and shall
exercise such diligence in this regard as shall be reasonable in light of the
size of the market and potential market for the Product and in a manner
consistent with which it markets other Valera products of comparable market size
in the particular country of the Territory.

                  (B) Valera shall control and make all decisions regarding the
strategy and tactics of marketing, selling, and otherwise commercializing the
Product, including, without limitation, the method of sales and distribution,
organization and management of sales and marketing, packaging and labeling,
appointment of distributors pursuant to Section 7.2, and other terms and
conditions for such sales and marketing, and shall exercise commercially
reasonable efforts in such regard to maximize the economic opportunity for the
Product.

            7.2.  DISTRIBUTORS; SUBLICENSEES.  Valera may designate and
appoint one or more Third Parties to act as its agent(s) or sublicensees
in connection with the marketing, sale and distribution of the Product in
the Territory.

            7.3. REGULATORY COMPLIANCE. Valera shall use commercially reasonable
efforts to comply with applicable regulations regarding procedures for reporting
to appropriate Agencies in the Territory, and to report, investigate, issue
responses and execute any corrective action plan to post-marketing Product
complaints/field reports in a timely manner in accordance with applicable
regulations.

            7.4. SALES WITHIN THE TERRITORY. Alpex shall not, and Alpex shall
use commercially reasonable efforts to cause its Affiliates or licensees not to,
directly or indirectly, without the prior written consent of Valera, sell the
Product inside the Territory, or knowingly manufacture, supply or sell the
Product to any Person outside the Territory for resale or use inside of the
Territory.

            7.5. NO COMPETING PRODUCTS. Alpex shall not, and shall cause its
Affiliates or licensees not to, directly or indirectly, jointly or in
conjunction with any other Person, whether as principal, agent, shareholder,
employee, independent contractor, or in any other manner whatsoever, develop,
market, distribute or sell in the Territory any products that contain the same
active ingredient as that which is contained in the Product, during the Term.

                                       12
<PAGE>
            7.6. NO RESTRICTIONS ON BUSINESS. Alpex agrees that Valera is in the
business of developing, and selling pharmaceutical products and that nothing in
this Agreement shall be construed as restricting such business or imposing on
Valera the duty to develop, register, market, and/or to sell the Product
hereunder to the exclusion of or in preference to any other product or otherwise
preclude Valera from developing or practicing any Valera Intellectual Property
or developing pharmaceutical products which are independent of the Alpex
Intellectual Property. Correspondingly, except as expressly set forth herein,
nothing herein shall be construed as restricting the business of Alpex.

                                  ARTICLE VIII
               MILESTONES, FEES, AND ROYALTY PAYMENTS; ACCOUNTING

            8.1.  MILESTONES.

                  (A) In consideration of Alpex's commitment to provide its
research and development obligations as provided herein, including, without
limitation, under the Research and Development Plan, Valera agrees to pay to
Alpex, for the Product developed hereunder, the following one-time milestone
payments:

                        (I)   **** upon execution of this
Agreement, such payment being intended to cover in advance feasibility studies
and analytical work by Alpex for the Product;

                        (II)  **** within thirty (30) days of
completion of Phase II of the Research and Development Plan for the
Product;

                        (III) **** within thirty (30) days of
completion of Phase IV of the Research and Development Plan for the
Product; and

                        (IV)  **** within thirty (30) days of
completion of Phase VI of the Research and Development Plan for the
Product.

                  (B) Notwithstanding anything to the contrary contained herein,
in the event Valera exercises its right to terminate the continued development
and commercialization of the Product pursuant to Sections 13.2 or 13.3 hereof
prior to the achievement of any or all of the applicable milestones provided in
Section 8.1 relating to the Product, Valera shall be required to make payment to
Alpex only with respect to the milestones which were achieved prior to the
Termination Date and no further milestone payments relating to the Product shall
accrue after the Termination Date.

            8.2.  LICENSE FEE.  In consideration for the license granted
to Valera under Section 2.1 of this Agreement, Valera agrees to pay to
Alpex, the following:

                  (A) **** within thirty (30) days of the NDA or ANDA for
the Product, as the case may be, being filed with the FDA; and

                                       13
<PAGE>
                  (B) **** within thirty (30) days of the receipt of
final approval by the FDA of the NDA or ANDA, as the case may be, relating to
the Product.

            8.3.  ROYALTY PAYMENTS.

                  (A) In addition to the foregoing milestone payments, during
the Term, Valera will pay to Alpex a royalty equal to the percentage set forth
below on all Net Sales of the Product sold by Valera and its Affiliates in the
Territory, as follows:

<TABLE>
<CAPTION>
                     NET SALES                  ROYALTY PERCENTAGE
<S>                                             <C>
                       ****                      **** of Net Sales
                       ****                      **** of Net Sales
                     **** and above              **** of Net Sales
</TABLE>

                  (B) Unless terminated by mutual agreement or pursuant to
Article XIII hereof, Valera's royalty payment obligations for the Product shall
expire on the date that is twenty (20) years following Launch of the Product in
the Territory, whereupon the license shall become a royalty-free, non-exclusive,
perpetual, worldwide license pursuant to the terms of Section 2.2(b).

                  (C) In the event Valera is required to pay patent royalties to
a Third Party with respect to the sale of the Product, and the claims of such
Third Party patents cover either a process used by Alpex in making the Product
or an aspect of the Product other than the active ingredient, then Valera may
reduce the amount of royalty paid to Alpex pursuant to this Section by the
amount of royalties paid to such Third Party; provided, however, that the amount
of such reduction shall in no event exceed fifty percent (50%).

                  (D) If no valid claim of an issued Alpex Patent covers the
Product (including the process used by Alpex in manufacturing the Product) in a
country of the Territory or all such claims covering the Product expire or are
held invalid in a country of the Territory, then the royalties shall be reduced
by fifty percent (50%) for Net Sales in such country of the Territory.

                  (E) The Parties acknowledge and agree that other than the
royalty payments provided in this Section 8.3, the license payments provided in
Section 8.2 hereof and the milestone payments provided in Section 8.1 hereof,
and all other payment, indemnity and reimbursement obligations set forth in this
Agreement, Alpex shall not be entitled to any amounts received by Valera or its
Affiliates and sublicensees from the use, commercialization, license or sale of
its rights under this Agreement, regardless of the form or manner of payment
(including milestones, royalties or other amounts).

            8.4.  SUBLICENSE PAYMENTS.

                  (A) In the event Valera elects to sublicense its rights to use
or sell the Products, Valera will pay to Alpex **** of all payments received by
Valera from such sublicensees. Any sublicense will be on commercially
reasonable terms with the intent of

                                       14
<PAGE>
creating the greatest overall return to Valera and Alpex. In the event the
royalties to be paid by a sublicensee will result in Alpex receiving an amount
less than 50% of the royalties it would receive pursuant to Section 8.3 (a),
Valera will provide Alpex notice of such sublicense no later than thirty (30)
days following its execution. Alpex shall have right, exercisable within thirty
(30) days of its receipt of notice from Valera to reject such sublicense, in
which event Valera will terminate the sublicense. By way of example, if Valera
sublicenses sales of Products in exchange for a **** royalty, Alpex's **** share
of such royalty would be **** or **** of the 8.3(a) royalty for sales up to
****, in which event Alpex would not have the right to reject the
sublicense. If Valera sublicenses sales of Products in exchange for a ****
royalty, Alpex's **** share of such royalty would be **** or **** of the 8.3(a)
royalty for sales up to ****, in which event Alpex would have the right to
reject the sublicense. In no event will sublicensees have the right to have
Product made for such sublicensees by Third Parties.

            8.5.  PAYMENTS.

                  (A) The license and milestone payments payable under Section
8.1 will be paid within the time period specified for such payment.

                  (B) The Party having primary responsibility for the completion
of the applicable milestone shall provide written notice to the other Party not
later than fifteen (15) days following the satisfaction of such milestone
trigger.

                  (C) Royalties payable under Section 8.3 will be paid not later
than forty-five (45) days following the end of each Fiscal Quarter, or not later
than forty-five (45) days from the date that is as soon thereafter as may be
practicable in order for Valera to determine the royalty payable. All payments
shall be accompanied by a report in writing showing for the quarter for which
such royalty payment applies: (i) the Net Sales (along with a reasonably
detailed description of the calculation thereof); (ii) the royalties payable
pursuant to Section 8.3 in United States dollars; and (iii) the withholding
taxes, if any, required by law to be deducted with respect to such royalties and
the amounts paid to the appropriate governmental authority with respect to such
royalties.

            8.6. WITHHOLDING TAXES. Valera shall be entitled to deduct from its
payments to Alpex the amount of any withholding taxes, value-added taxes or
other taxes, levies or charges with respect to such amounts payable by Valera,
or any taxes in each case required to be withheld by Valera to the extent Valera
pays the appropriate governmental authority on behalf of Alpex such taxes,
levies or charges. Valera shall deliver to Alpex, upon reasonable request, proof
of payment of all such taxes, levies and other charges and appropriate
documentation which is necessary to obtain a tax credit, to the extent such tax
credit can be obtained.

            8.7. AUDIT. Valera shall maintain and shall require its Affiliates
and sublicensees to maintain, at their respective offices accurate and complete
books and records of the Net Sales of the Product, consistent with sound
business and accounting practices. Upon the written request Alpex, but not more
than once in any calendar year, Valera shall permit an independent certified
public accounting firm of nationally recognized standing, selected by Alpex and
acceptable to Valera, to have access during normal business hours to such
records of Valera as

                                       15
<PAGE>
shall be necessary to verify the accuracy of the royalty reports provided
hereunder for any year ending not more than thirty-six (36) months prior to the
date of such request. The accounting firm shall disclose to Alpex only whether
the records are accurate or not and the specific details concerning any
discrepancies, and shall provide a copy of its report to Valera. No other
information shall be shared. If the audit of royalties shows an underpayment of
royalty payments by Valera of more than the greater of (i) $25,000 or (ii) five
percent (5%), then the expenses of the audit of royalties shall be borne by
Valera; otherwise the expenses of the audit of royalties shall be borne by
Alpex. If such accounting firm concludes that additional royalties were owed or
that royalties were overpaid during such period, then Valera shall pay the
additional royalties or Alpex shall credit or pay Valera such overpayment within
thirty (30) days of the date that such accounting firm's written report is
delivered to the Parties.

            8.8.  CONFIDENTIAL FINANCIAL INFORMATION.  Each Party shall
treat all financial information of the other Party as Confidential
Information of the other Party, and shall retain and shall cause its
employees and agents to retain, all such financial information in
confidence.

                                   ARTICLE IX
                      CERTAIN PROVISIONS REGARDING PATENTS

            9.1. PATENT FILINGS, PROSECUTION AND MAINTENANCE IN THE TERRITORY

                  (A) Each of Alpex and Valera shall use commercially reasonable
efforts in the filing, prosecution and maintenance of any Alpex Patents as
provided in this Section 9.1.

                  (B) Alpex shall have the first right, using in-house or
outside legal counsel selected at Alpex's sole discretion, to prepare, file,
prosecute, maintain and extend patent applications and patents concerning all
such Alpex Patents in each country of the Territory, for which Alpex shall bear
the costs relating to such activities. Alpex shall solicit Valera's advice and
review of the nature and text of any such patent applications in reasonably
sufficient time prior to filing thereof, and Alpex shall take into account
Valera's reasonable comments related thereto. Alpex and Valera shall treat all
information disclosed to it under this Section 9.1 as Confidential Information
(as herein defined).

                  (C) If Alpex or a customer of Alpex to whom Alpex has granted
the rights described in this Section prior to the date hereof elect not to file,
prosecute or maintain any Alpex Patents or any ensuing Patents or claims
encompassed by any Alpex Patents in any country of the Territory, Alpex shall
give Valera notice thereof within a reasonable period prior to allowing such
patent applications or Patents or such claims encompassed by such patent
applications or Patents to lapse or become abandoned or unenforceable, and
Valera shall thereafter have the right, at its sole expense and in the name of
Alpex, to prepare, file, prosecute and maintain patent applications and patents
or divisional applications related to such claims encompassed by such patent
applications or patents concerning all such inventions and discoveries in
countries of its choice throughout the world. In such case, all costs incurred
by Valera pursuant to this Section 9.1(c) may be deducted by Valera against
milestones and/or royalty payments (but not to exceed 50% of any single
milestone or royalty payment) payable to

                                       16
<PAGE>
Alpex under this Agreement, until such time as Alpex has fully reimbursed Valera
and its Affiliates, or Valera has fully recovered such amounts from milestone
and/or royalty payment deduction.

            9.2.  ENFORCEMENT OF ALPEX PLATFORM PATENTS.

                  (A) In the event that Valera becomes aware of actual or
threatened infringement of any of the Alpex Platform Patents, the Valera shall
promptly notify Alpex in writing of such infringement or action and supply Alpex
with all evidence possessed by Valera pertaining to and establishing said
infringement or other action.

                  (B) All monies recovered upon the final judgment or settlement
of any action to enforce Alpex Platform Patents shall be the sole property of
Alpex.

            9.3. INJUNCTION AND/OR FAILURE TO OBTAIN THIRD PARTY License.
Without limiting any other remedy that may be available to Valera under this
Agreement, Valera shall have the right to terminate this Agreement in its
entirety or only as to the affected country, immediately upon written notice to
Alpex if at any time during the Term: (i) a permanent injunction is issued by a
court of competent jurisdiction enjoining Valera's sale of the Product in a
country of the Territory, or (ii) Valera ceases the sale of the Product in a
country of the Territory as a result of a failure of either Party to obtain,
upon commercially reasonable terms, a license (or immunity from suit) from a
Third Party alleging infringement in such country.

                                    ARTICLE X
                                 CONFIDENTIALITY

             10.1. CONFIDENTIALITY AND NON-USE OBLIGATIONS. (a) During the Term
of this Agreement and for five (5) years thereafter without regard to the means
of termination, neither Valera nor Alpex shall use, for any purpose other than
the purposes of this Agreement, reveal or disclose to any Third Party
information and materials disclosed by the other Party (whether prior to or
during the Term of this Agreement), and marked as confidential or for which the
receiving Party knows or has reason to know are or contain trade secrets or
other proprietary information of the other Party (the "Confidential
Information") without first obtaining the written consent of the other Party.

                  (B) The Parties shall take all reasonable precautions to
prevent the use or disclosure of such Confidential Information without first
obtaining the written consent of the other Party, except (i) as may be required
for securing Regulatory Approval, including pricing approval in the Territory,
or as may otherwise be required to be disclosed to an Agency in the Territory;
or (ii) as required in connection with any filings made by the Securities and
Exchange Commission or similar non-U.S. regulatory authorities or by the
disclosure policies of a major stock exchange. Each Party agrees that prior to
the release or dissemination of the other Party's Confidential Information to
any Affiliate or sublicensee, such Party shall cause the person to whom such
Confidential Information is to be released to be bound by a confidentiality
agreement providing for a level of protection of such Confidential Information
at least equivalent to the terms of this Article X.

                                       17
<PAGE>
                  (C) These restrictions upon disclosure and use of Confidential
Information shall not apply to any specific portion of Confidential Information
which:

                        (I)   is Confidential Information that can be
demonstrated by the written records of the recipient to have already been in the
possession of the recipient free of any restrictions as to its use or disclosure
at the time of disclosure by the other Party;

                        (II)  is or later becomes available to the public,
as evidenced by documents which were generally published, other than by
fault of the recipient;

                        (III) is received from a Third Party having
legitimate possession thereof and the independent legal right to make such
disclosure and such Third Party does not place any restriction as to the use or
disclosure on the recipient; or

                        (IV)  is information developed by the Party
entirely without reference to or use of Confidential Information, as established
by the written records of such Party.

                  (D) Any patent applications and information therein filed or
to be filed by either Party shall be deemed (i) to be Confidential Information
of that Party subject to the provisions of this Article X and (ii) to have been
disclosed in confidence to the other Party.

                  (E) Notwithstanding the foregoing, the recipient may disclose
any Confidential Information to the extent required by an order of any court or
other governmental authority having competent jurisdiction, but only after the
other Party is (i) notified in writing and provided with a copy of such order;
and (ii) given an opportunity to prevent such disclosure or obtain reasonable
protection for such Confidential Information. In any such event, the recipient
shall cooperate fully with other Party in connection with obtaining any
protective order or other appropriate remedy to prevent disclosure of
Confidential Information.

            10.2. PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Party to this
Agreement shall issue any press release or other publicity materials, or make
any public presentation with respect to the terms or conditions of this
Agreement without the prior written consent of the other Party (such consent not
to be unreasonably withheld or delayed). The restrictions provided in this
Section 10.2 shall not apply to disclosures deemed by Valera in its discretion
to be required by law or regulation, including as may be required in connection
with any filings made with the Securities and Exchange Commission or any similar
non-U.S. regulatory authority, or by the disclosure policies of the Nasdaq Stock
Market, Inc.

                                   ARTICLE XI
                         REPRESENTATIONS AND WARRANTIES

            11.1. LEGAL AND GOVERNMENTAL COMPLIANCE. Each Party shall comply
with all laws, rules and regulations applicable to the activities undertaken by
such Party hereunder.

                                       18
<PAGE>
            11.2. ALPEX REPRESENTATIONS AND WARRANTIES. Alpex represents and
warrants to Valera that the following are true and correct as of the date
hereof:

                  (A) Alpex is a Societe Anonyme duly organized, validly
existing, and in good standing under the laws of Switzerland and has full
corporate power to own its properties and conduct the business presently being
conducted by it, and is duly qualified to do business in, and is in good
standing under, the laws of all jurisdictions in which its activities or assets
require such status, except in any case where the failure to be so qualified and
in good standing would not be material.

                  (B) Alpex has full corporate right, power and authority to
perform its obligations pursuant to this Agreement, and this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Alpex. This Agreement has been duly
and validly executed by Alpex. Upon execution and delivery of this Agreement, it
will be the valid and binding obligation of Alpex, enforceable in accordance
with its terms, subject to equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditor's
right and remedies generally.

                  (C) The execution, delivery and performance of this Agreement
does not, and the consummation of the transactions herein contemplated will not
violate any law, rule, regulation, order, judgment or decree binding on Alpex,
or result in a breach of any term of the certificate of incorporation or by-laws
of Alpex or any contract, agreement or other instrument to which Alpex is a
party, except in each case to an extent not material.

                  (D) Alpex is the sole owner of the entire right, title and
interest in and to the Alpex Platform Patents and the Alpex Know-how and no
other Person (including any government) has any license, claim or other right or
interest in or to the Alpex Platform Patents or the Alpex Know-how.

                  (E) To Alpex's knowledge, the use of the Alpex Intellectual
Property in the development, manufacture and sale of the Product will not
infringe, misappropriate or otherwise conflict with any intellectual property or
other rights of any Third Party.

                  (F) Alpex is not aware of any infringement of the Alpex
Platform Patents or any misappropriation of the Alpex Know-How by any Third
Party.

                  (G) There are no judicial, arbitral, regulatory or
administrative proceedings or investigations, claims, actions or suits relating
to the Alpex Platform Patents, or the Alpex Know-how pending against or, to
Alpex's knowledge, threatened against Alpex or its Affiliates in any court or by
or before any governmental body or agency in the Territory.

            11.3. REPRESENTATIONS AND WARRANTIES OF VALERA. Valera represents
and warrants to Alpex that the following are true and correct as of the date
hereof:

                  (A) Valera is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full
corporate power to own its

                                       19
<PAGE>
properties and conduct the business presently being conducted by it, and is duly
qualified to do business in, and is in good standing under, the laws of all
states in which its activities or assets require such status, except in any case
where the failure to be so qualified and in good standing would not be material.

                  (B) Valera has full corporate right, power and authority to
perform its obligations pursuant to this Agreement, and this Agreement and the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Valera. This Agreement has been duly
and validly executed by Valera. Upon execution and delivery of this Agreement,
it will be the valid and binding obligation of Valera enforceable in accordance
with its terms, subject to equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditor's
rights and remedies generally.

                  (C) The execution, delivery and performance of this Agreement
does not, and the consummation of the transactions therein contemplated will not
violate any law, rule, regulation, order, judgment or decree binding on Valera
or result in a breach of any term of the certificate of incorporation or by-laws
of Valera or any contract, agreement or other instrument to which Valera is a
party, except in each case to an extent not material. No authorization is
required by Valera for the execution, delivery, or performance of this Agreement
by Valera, except in each case to an extent not material.

            11.4. LIMITATION ON WARRANTIES. Except as expressly provided in this
Agreement, neither Party makes any representation or warranty to the other,
whether express or implied, either in fact or by operation of law, by statute or
otherwise, and both Parties specifically disclaim any and all implied or
statutory warranties, including, without limitation, any warranty of
merchantability or warranty of fitness for a particular purpose. In addition,
each Party understands and agrees that neither Party warrants or commits that
the Product will be successfully developed, be submitted for applicable
Regulatory Approval (except as expressly required under this Agreement), receive
applicable Regulatory Approval or be successfully marketed or commercialized.
Without limiting the indemnity obligations set forth in Article XII for the
items described therein, neither Party shall have liability or responsibility to
the other Party for any such failure in the research and development, Agency
approval, manufacturing, marketing or sales efforts, except to the extent such
failure results from the Party's willful misconduct or gross negligence.

                                   ARTICLE XII
                           INDEMNIFICATION; INSURANCE

            12.1.  INDEMNIFICATION.

                  (A) Valera Indemnification. Valera agrees to indemnify and
hold forever harmless Alpex and its Affiliates and each of their agents,
directors, officers and employees from and against any loss, damage, action,
proceeding, expense, liability, physical or emotional injury or death, or loss
of service or consortium, including reasonable attorney's fees ("Loss") arising
from or in connection with (i) the offer for sale, sale or importation by Valera
or its Affiliates in the Territory of the Product developed under this
Agreement, except for any Loss

                                       20
<PAGE>
for which Alpex has agreed to indemnify Valera pursuant to Section 12.1(b) below
or pursuant to a manufacturing agreement referred to in Section 5.1; (ii) the
breach or inaccuracy of any representations, warranties or covenants made by
Valera in this Agreement; and (iii) the gross negligence or willful misconduct
of Valera or its Affiliates or any of their agents, directors officers or
employees.

                  (B) Alpex Indemnification. Alpex agrees to indemnify and hold
forever harmless Valera and its Affiliates and each of their agents, directors,
officers, and employees from and against any Loss arising from or in connection
with: (i) Alpex's or its Affiliates' research and development activities in
connection with the Product or the activities of any Alpex personnel in
connection with the development, manufacture, use, sale, storage or handling of
the Products; , except for any Loss for which Valera has agreed to indemnify
Alpex pursuant to Section 12.1(a) above; (ii) the breach or inaccuracy of any
representations, warranties or covenants made by Alpex in this Agreement, (iii)
any allegation by a Third Party that that use of the Alpex Intellectual Property
in the development, manufacture or sale of the Product in the Territory
infringes a Third Party's intellectual property (an "Infringement Claim"); (iv)
the gross negligence or willful misconduct of Alpex or its Affiliates or any of
their agents, directors, officers or employees; and (v) the development,
manufacture, use, offer for sale, sale or importation of the Product outside the
Territory by Alpex or any of its Affiliates or any of their distributors,
sublicensees or agents, or the pharmacological use of the Product outside the
Territory, in each case.

            12.2. PROCEDURE. A Party seeking indemnity hereunder (an
"Indemnified Party") shall promptly notify the other Party (the "Indemnifying
Party") upon being notified or otherwise made aware of a suit, action or claim;
provided that failure to provide such notice shall not affect the obligation of
the Indemnifying Party to indemnify except to the extent that the Indemnifying
Party is materially prejudiced thereby. The Indemnifying Party shall defend and
control any proceedings, and the Indemnified Party shall be permitted to
participate at its own expense, unless there shall be a conflict of interest
which would prevent representation by joint counsel, in which event the
Indemnifying Party shall pay for the Indemnified Party's separate counsel
pursuant to Section 12.1 above. The Indemnifying Party may not settle the suit
or otherwise consent to any judgment in such suit without the written consent of
the Indemnified Party (such consent not to be unreasonably withheld or delayed).
The Parties shall cooperate in the defense of any Third Party claim.

            12.3. LIMITATION OF LIABILITY. In no event shall Alpex be liable to
Valera under Section 12.1(b)(iii) for any amount greater than the sum of (a)
royalties paid or payable under Section 8.3 above and (b) CHF 350,000. NEITHER
PARTY SHALL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL, INCIDENTAL OR INDIRECT
DAMAGES OR EXPENSES, INCLUDING DAMAGES FOR LOST PROFITS, LOSS OF OPPORTUNITY OR
USE OF ANY KIND, SUFFERED BY THE OTHER PARTY, WHETHER IN CONTRACT, TORT OR
OTHERWISE.

            12.4.  INSURANCE.

                                       21
<PAGE>
                  (A) During the Term and for a period of five (5) years after
its expiration or earlier termination, each Party shall obtain, at its sole cost
and expense, liability insurance applicable to its performance under this
Agreement that meets the following requirements:

                        (I)   the insurance shall insure such Party
against all liability related to its activities relating to the development,
manufacture, use or sale of Products (whether such Party's liability arises from
its own conduct or by virtue of its participation in this Agreement), including
liability for bodily injury, property damage, wrongful death, and any
contractual indemnity obligations imposed by this Agreement; and

                        (II)  the insurance shall be in amounts that are
reasonable and customary in the United States in the pharmaceutical industry,
but in no event shall liability insurance relating to manufacture, use, sale or
distribution of a marketed Product maintained by such Party cover less than five
million U.S. dollars (U.S. $5,000,000) per occurrence (or claim) and an annual
aggregate of five million U.S. dollars (U.S. $5,000,000). All such policies
shall include a contractual endorsement naming the other Party to this Agreement
as an additional insured and require the insurance carriers to provide such
other Party with no less than thirty (30) days' written notice of any change in
the terms or coverage of the policies or their cancellation; provided, however,
that Alpex shall not be obligated to obtain insurance with respect to its own
manufacture, sale, or distribution of Product outside the Territory unless and
until it elects to manufacture and sell Product outside of the Territory.

                                  ARTICLE XIII
                                TERM; TERMINATION

            13.1. TERM. This Agreement shall take effect as of the date hereof
and shall continue in effect as to the Product until the expiration of all Alpex
Platform Patents covering the Product, unless earlier terminated in accordance
with the provisions of this Article XIII (such date being referred to as the
"Termination Date").

            13.2.  VALERA PRODUCT SPECIFIC TERMINATION.   Valera may
terminate this Agreement, in whole or on a country-by-country basis upon
the occurrence of any of the following:

                  (A) Alpex shall have failed to comply with its research and
development obligations for the Product in accordance with the terms of this
Agreement and the Research and Development Plan; or

                  (B) The Product fails to meet the Product Success Criteria for
the Product following the completion of the pilot bioequivalence studies
provided in the Research and Development Plan; or

                  (C) Valera shall have determined to terminate or discontinue
the Research and Development Plan for the Product in accordance with Section 4.5
or

                                       22
<PAGE>
                  (D) Valera shall have reasonably determined to terminate or
discontinue the development and/or commercialization of the Product as a result
of an Infringement Claim having been filed, or threatened, against Valera or
Alpex relating to Alpex or Valera's development of the Product, Alpex or
Valera's manufacturing of the Product or Valera's marketing and/or sale of the
Product in the Territory in accordance with Section 4.5

                  (E) Upon 60 days prior written notice in the event Valera
determines that the Product is not commercially viable.

            13.3. NOTIFICATION OF TERMINATION BY VALERA. Valera shall exercise
its right of termination by the provision of written notice to Alpex within
sixty (60) days of the occurrence of any of the events set forth in Section
13.2, such notice to contain the details supporting such termination. Upon the
provision of such notice, the Parties' rights and obligations under this
Agreement (exclusive of the confidentiality obligations of Article X and
indemnity obligations of Article XII hereof, each of which shall survive the
termination) shall terminate as to the countries so terminated and be of no
further force or effect as to the countries so terminated and the license grant
made by Alpex to Valera pursuant to Section 2.2 of this Agreement shall
terminate as to the countries so terminated, subject to the provisions of
Section 4.5.

            13.4.  VALERA TERMINATION RIGHT.  Valera may terminate this
Agreement in accordance with the provisions of Section 9.2 hereof.

            13.5.  TERMINATION OF AGREEMENT BY THE PARTIES.  This
Agreement may be terminated:

                  (A) By mutual written consent of each of Alpex and Valera; or

                  (B) Upon written notice by a Party if (i) the other Party
shall have been dissolved, ceased active business operations or liquidated,
unless such dissolution, cessation or liquidation results from reorganization,
acquisition, merger or similar event, or (ii) bankruptcy or insolvency
proceedings, including any proceeding under Title 11 of the U.S. Code, have been
brought by or against the other Party and, in the event such a proceeding has
been brought against the other Party, remains undismissed for a period of sixty
(60) days, or an assignment has been made for the benefit of such Party's
creditors or a receiver of such Party's assets has been appointed (a "Bankruptcy
Event"); or

                  (C) By Alpex if Valera fails to pay Alpex amounts due and
payable to Alpex hereunder and fails to cure such breach within sixty (60) days
after written notice by Alpex of its intention to terminate, unless any such
amount is being contested by Valera in good faith; or

                  (D) By either Valera or Alpex, upon sixty (60) days prior
written notice, if the other Party is in Default, and fails to cure such breach
within sixty (60) days following receipt of written notice from the
non-breaching Party specifying the breach to be cured.

                                       23
<PAGE>
            13.6.  CONSEQUENCES OF TERMINATION.

                  (A) At the time of any termination of this Agreement as to the
Product in whole or as to a country of the Territory, the provisions of Section
4.5 shall apply to the Product as a Discontinued Product in whole or only as to
such country terminated, as the case may be.

                  (B) At the time of any termination of this Agreement under
Section 13.5 other than termination by Alpex under 13.5(c) or (d), if the
Product has been launched in the affected country prior to such termination,
then Valera shall have the option to maintain in effect the license granted
hereunder respecting the Product, subject to Valera's obligation to pay
royalties under Section 8.3 above.

                  (C) Except as otherwise provided in Section 4.5 or in this
Section 13.6, upon termination of this Agreement in whole each Party shall
return to the other all relevant records and materials in its possession or
control containing Confidential Information of the other Party.

            13.7.  SURVIVING RIGHTS.  Termination of this Agreement for
any reason shall be without prejudice to:

                  (A) The rights and obligations of the Parties provided in
Sections 8.7 and Articles X and XII hereof, all of which shall survive such
termination;

                  (B) Any other rights, obligations or liabilities which shall
have accrued to the benefit of either Party prior to such termination (including
without limitation Valera's rights under Sections 4.5 and 13.6 and Valera's
obligation to pay all milestone and royalty payments which shall have accrued
hereunder up to and including the effective date of such termination), all of
which shall survive such termination; and

                  (C) Any other rights of remedies provided at law or in equity
which either party may otherwise have against the other.

                                   ARTICLE XIV
                                  MISCELLANEOUS

            14.1. FORCE MAJEURE. Neither Party shall lose any rights hereunder
or be liable to the other Party for damages or loss on account of failure of
performance by the defaulting Party if the failure is occasioned by government
action, war, fire, explosion, flood, strike, lockout, embargo, act of God, or
any other similar cause beyond the reasonable control of the defaulting Party,
provided that the Party claiming force majeure has exerted all reasonable
efforts to avoid or remedy such force majeure and given prompt notice to the
other Party.

            14.2. NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via overnight courier, sent

                                       24
<PAGE>
by facsimile, or mailed by first class certified or registered mail, return
receipt requested, postage prepaid:

      Notices for Alpex shall be sent to:

            Alpex Pharma S.A.
            Via Cantonale
            CH-6805
            Mezzovico-Vira, Switzerland
            Attn:  Managing Director
            Telephone:  ++ 41 91 935 51 11
            Telecopier: ++ 41 91 935 51 20

      Notices for Valera shall be sent to:

            Valera Pharmaceuticals, Inc.
            8 Clarke Drive
            Cranbury, New Jersey 08512
            Attn:  President
            Telephone: (609) 409-9010
            Telecopier: (609) 409-1650

or to such other person or entity or at such other address as any party shall
designate by notice to the other in accordance herewith.

      Notices provided in accordance with this Section 14.2 shall be deemed
delivered (i) upon personal delivery with signature required, (ii) one Business
Day after they have been sent to the recipient by reputable overnight courier
service (charges prepaid and signature required) (iii) upon confirmation, answer
back received, of successful transmission of a facsimile message containing such
notice if sent between 9 a.m. and 5 p.m., local time of the recipient, on any
Business Day, and as of 9 a.m. local time of the recipient on the next Business
Day if sent at any other time, or (iv) three Business Days after deposit in the
mail.

            14.3.  GOVERNING LAW; DISPUTE RESOLUTION

                  (A) This Agreement shall be governed by the laws of the State
of New York, as such laws are applied to contracts entered into and to be
performed within such state, as though made and to be fully performed therein
without regard to conflicts of law principles thereof. The United Nations
Convention on Contracts for the International Sale of Goods will not apply to
this Agreement. The Parties agree to submit to the personal jurisdiction in any
Federal or State court of competent jurisdiction seated in the State of New
York, and waive any objection as to venue or inconvenience of forum.

                  (B) The Parties shall initially attempt in good faith to
resolve any significant controversy, claim, allegation of a Default or dispute
arising out of or relating to this Agreement (hereinafter collectively referred
to as a "Dispute") through negotiations between senior executives of Valera and
Alpex. If the Dispute is not resolved within thirty (30) days (or such other
period of time mutually agreed upon by the Parties) of notice of the Dispute,
then the

                                       25
<PAGE>
Parties agree to submit the Dispute to non-binding mediation on terms and
procedures to be mutually agreed to for a period of sixty (60) days. Any
mediation proceedings shall be treated as settlement discussions and therefore
shall be confidential, and no mediator may testify for either Party in any later
proceeding relating to the dispute. No recording or transcript shall be made of
the mediation proceedings. Each Party shall bear its own costs and expenses of
mediation, and the Parties shall share equally the fees and expenses of the
mediator.

                  (C) If the Dispute is not resolved through negotiations or
mediation as set forth above, then either Party may commence litigation;
provided, that this Section 14.3 shall not be construed to prevent a Party from
seeking injunctive relief without observing the requirements of Section 14.3(b).

            14.4. NON-WAIVER OF RIGHTS. Except as specifically provided for
herein, the waiver from time to time by any of the Parties of any of their
rights or their failure to exercise any remedy shall not operate or be construed
as a continuing waiver of same or of any other of such Party's rights or
remedies provided in this Agreement.

            14.5.  NO AGENCY.  Neither Party shall by virtue of this
Agreement have any power to bind the other to any obligation nor shall
this Agreement create any relationship of agency, partnership or joint
venture.

            14.6. SEVERABILITY. If any term, covenant, or condition of this
Agreement or the application thereof to any Party or circumstance shall, to any
extent, be held to be invalid or unenforceable, then (i) subject to clause (ii)
of this Section 14.6 the remainder of this Agreement, or the application of such
term, covenant or condition other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant, or
condition of this Agreement shall be valid and be enforced to the fullest extent
permitted by law and (ii) the Parties hereto covenant and agree to renegotiate
any such term, covenant, or application thereof in good faith in order to
provide a reasonably acceptable alternative to the term, covenant, or condition
of this Agreement or the application thereof that is invalid or unenforceable.

            14.7. ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto as in effect from time to time pursuant to the terms hereof,
sets forth all the covenants, promises, agreements, warranties, representations,
conditions, and understandings between the Parties hereto in the scope of the
collaboration, and supersedes and terminates all prior agreements and
understanding between the Parties under this Agreement. No subsequent
alteration, amendment, change, or addition to this Agreement shall be binding
upon the Parties hereto unless reduced to writing and signed by the respective
authorized officers of the Parties.

            14.8. ASSIGNMENT. No Party shall, without the prior written consent
(not to be unreasonably withheld or delayed) of the other Party having been
obtained, assign or transfer this Agreement to any Third Party, provided,
however, that any Party may assign or transfer this Agreement to any Affiliate,
provided that the assigning Party shall guarantee the performance of that
Affiliate, or to any successor by merger of such Party of its pharmaceutical
business, or to the Purchaser of all or substantially all of such assets of its
pharmaceutical business, without the

                                       26
<PAGE>
prior written consent of the other Party hereto. This Agreement shall be binding
upon and shall inure to the benefit of the Parties and their successors and
permitted assigns.

            14.9.  FACSIMILE EXECUTION.  This Agreement may be executed in
facsimile counterparts each of which is hereby agreed to have the legal
binding effect of an original signature.  The Parties hereto agree to
forward the original signatures by overnight mail to the other Party upon
execution.

            14.10. LICENSE SURVIVAL DURING BANKRUPTCY. All rights and licenses
granted under or pursuant to this Agreement to the Alpex Intellectual Property
are, and shall otherwise be deemed to be, for purposes of Paragraph 365(n) of
the U.S. Bankruptcy Code, licenses of rights to "Intellectual Property" as
defined under Paragraph 101(35A) of the U.S. Bankruptcy Code. The Parties agree
that Valera, as a licensee of such rights under this Agreement, shall retain and
may fully exercise all of its rights and elections under the U.S. Bankruptcy
Code, subject to performance by Valera of its obligations under this Agreement.
The Parties further agree that, in the event Alpex elects to terminate this
Agreement because of a Bankruptcy Event and Valera elects to continue the
licenses under this Agreement as contemplated by the preceding sentence, then
Valera shall be entitled, upon reasonable request, to have access, in
confidence, to such of Alpex Intellectual Property not already in Valera's
possession, as shall be reasonably necessary to make use of the license rights
under this Agreement without participation by Alpex.

                                       27
<PAGE>
            IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
indicated above.

                                    VALERA PHARMACEUTICALS, INC.

                                    By:/s/ DAVID S. TIERNEY
                                       ---------------------------------
                                          Name : David S. Tierney
                                          Title: President and CEO

                                    ALPEX PHARMA S.A.

                                    By:/s/ SHAHBAZ ARDALAN
                                       ---------------------------------
                                          Name:  Shahbaz Ardalan
                                          Title: Managing Director

                                    ALPEX PHARMA S.A.

                                    By:/s/ FEDERICO STRUPPOLO
                                       ---------------------------------
                                          Name:  Federico Struppolo
                                          Title: Technical  Director
<PAGE>
                                    EXHIBIT A

             PRODUCT SUCCESS CRITERIA/RESEARCH AND DEVELOPMENT PLAN

                          PROTOTYPE DEVELOPMENT PROGRAM
                                ALPEX FMT PROJECT

            Each of the Parties recognize the need to be flexible in the
development schedule for the Product, and agrees to cooperate in good faith as
to any extensions as may reasonably be required in the development timelines set
forth above.

            The Parties shall pursue completion of the milestones set forth in
Section 8.1 of the Agreement by following the plan set forth below with respect
to the Product, with the cost not to exceed the amounts set forth in said
Section 8.1.

<TABLE>
<CAPTION>
    PHASE                              TASKS                                          DURATION         RESPONSIBILITY
---------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                              <C>                    <C>
               Preliminary prototype development

               Preliminary prototype evaluation.

               Sample preparation.

                    -    Physical characterization of the sample
                         including drug loading, tablet hardness,
     IA                  friability and disintegration time, in
                         vitro and in vivo.

                    -    Report on results.                                           4 weeks

                    -    Samples will be provided to Client for
                         preliminary evaluation (20-30 tablets).

---------------------------------------------------------------------------------------------------------------------
               Compatibility studies

                    -    Development of an analytical method
                         suitable for compatibility studies
                         API/Excipient (linearity, accuracy,
                         recovery, specificity, system suitability,
                         sensitivity) for API and related
                         substances.

     IB             -    Accelerated stability test in stressed                       6 weeks
                         condition of API/most important excipients
                         (i.e.  poly-alcohols, citric acid, PEB,
                         -binary combination and in presence and in
                         absence of water-tertiary combination -up
                         to 50(degree) or 60(degree)C degrees) will be
                         conducted
                         up to 30 days.
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
    PHASE                              TASKS                                          DURATION         RESPONSIBILITY
---------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                              <C>                    <C>
               Prototype development

               The study will be carry out on 1 prototype which
               will meet the following specifications:

                    -    Dosage form      FMT tablet

                    -    Active ingredientto be defined

                    -    Strengthto be defined

                    -    Aspect/shape     round tablet, with

                         toroidal shape

                    -    Diameterto be defined

                    -    Hardnessto be defined

                    -    Weight  to be defined

                    -    Disintegration time in vitro      to be
                         defined

                    -    Disintegration time in vivo       to be
     IC                  defined                                                      2 weeks

                    -    Flavor  to be defined (grapefruit, orange,
                         cherry, etc.)

               Taste Evaluation

               3 (or more) different FMT prototype formulations
               will be evaluated, on a laboratory scale, and, based
               on results obtained with an internal panel test,
               will present the best 2 prototypes to Client

                    -   In vitro characterization

               The characteristics of the finished product
               including drug loading, tablet hardness, friability,
               disintegration time and dissolution will be
               evaluated.

---------------------------------------------------------------------------------------------------------------------
               Analytical Method development

               -    Developed of an analytical method stability
               indicating for the FMT formulation (linearity, accuracy,
               recovery, specificity, system suitability, sensitivity) for API
     Id        and related substances.

               -    Development of the dissolution method (if                         5 weeks
               required)

---------------------------------------------------------------------------------------------------------------------
               Cleaning Analytical Method development

               -    Developed of an analytical method cleaning
     Ie        (recovery, specificity, system suitability,                            2 weeks
               stability of the swabbed solution and limit of
               detection) for API.
</TABLE>

                                   A-2
<PAGE>
<TABLE>
<CAPTION>
    PHASE                              TASKS                                          DURATION         RESPONSIBILITY
---------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                              <C>                    <C>
               Preliminary stability studies in accelerated ICH
               conditions

               -    Preliminary Stability studies will be conducted
               on 1 batch of the selected formula at ICH conditions
               for 6 months at the following conditions.

     If                  40(degree)C / 75% RH    1,2,3,6 Months                      24 weeks
                        (30(degree)C / 65% RH   1,2,3,6 Months as
                        back-up in case of failure on the stability
                        at 40(degree)C / 75%RH)
                        25(degree)C / 60% RH     3,6 Months
---------------------------------------------------------------------------------------------------------------------
               Reporting

               -    All the activities described in the document
               will be described into a protocol subject to
               preliminary approval by the Client.

     Ig        -    All the activities performed will be summarized                     N/A
               into a report that will be approved by the Client.

               -    All protocols and reports will be in English,
               when internal documentation is in Italian.

---------------------------------------------------------------------------------------------------------------------
               GMP batches

               Technical activities

               -    Preparation of the protocol for regulatory
               batches.

               -    Preparation of the master batch record.

               -    Manufacturing of regulatory batches

               -    Packaging of the finished product.

               -    Reporting on performed activities.

               -    Release of the clinical supply and stability
               purposes

     II        Analytical activities                                                 12 weeks

               -    Development and validation of the analytical
               method, including content uniformity of API,
               dissolution, etc.

               -    Tentative specifications sheet.

               -    ICH pivotal stability study on pilot  batches
               (36 months regulatory submission)
</TABLE>

                                      A-3
<PAGE>
<TABLE>
<CAPTION>
    PHASE                              TASKS                                          DURATION         RESPONSIBILITY
---------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                              <C>                    <C>
               -    Preparation of the protocol analytical and
               cleaning validation.

               -    Cleaning method validation.

               -    Reporting on performed activities

---------------------------------------------------------------------------------------------------------------------
               Validation of manufacturing activities

               Technical activities

               -    Preparation of the validation manufacturing
               protocol for one commercial batch.

               -    Preparation of the master batch record.

               -    Manufacturing of commercial batch (one batch at
               full production scale - about 700 Kg).

               -    Packaging of the finished product.

     III       -    Reporting on performed activities.                                4 weeks

               Analytical activities

               -    Specifications sheet for the finished product.

               -    Internal release of the clinical supply.

               -    ICH pivotal stability studies on commercial
               batches (36 months regulatory submission).

               -    Reporting on performed activities.

---------------------------------------------------------------------------------------------------------------------
     IV        Regulation activity support                                      4 weeks (technical

               -    Collection of documentation                                   documentation)

---------------------------------------------------------------------------------------------------------------------
               Validation of commercial batches

               Technical activities

               -    Preparation of the validation manufacturing
               protocol for two commercial batches

               -    Manufacturing of additional commercial batches
               (two batches at full production scale -- about 700
               Kg).

      V        -    Packaging of the finished product.                                4 weeks

               -    Reporting on performed activities.

               Analytical activities
</TABLE>

                                      A-4
<PAGE>
<TABLE>
<CAPTION>
    PHASE                              TASKS                                          DURATION         RESPONSIBILITY
---------------------------------------------------------------------------------------------------------------------
<S>            <C>                                                              <C>                    <C>
               -    Internal release

               -    ICH pivotal stability studies on commercial
               batches (36 months regulatory submission).

               -    Reporting on performed activities.

---------------------------------------------------------------------------------------------------------------------
     VI        Regulation activity support                                      2 weeks (technical

               -    Collection of documentation                                   documentation)

</TABLE>

PRODUCT SUCCESS CRITERIA

<TABLE>
<CAPTION>
ITEM #  PARAMETER           DESCRIPTION
<S>     <C>                 <C>
1       Taste               Taste should be evaluated and agreed mutually by
                            Valera and Alpex

2       Diameter of         Maximum 16mm in diameter
        tablets

3       Weight of tablets   Maximum 1,6 g per tablet

4       Disintegration of   Less than 1 minute in-vivo
        tablets

5       Stability           Desmopressine  in the FMT should be stable at least
                            2 years at RT, in the market packaging stored in
                            correct conditions.

6       Bioavailability     Desmopressine FMT should be bioequivalent to
                            regular tablets at the same strength
</TABLE>

                                      A-5
<PAGE>
                                    EXHIBIT B

                PRINCIPLES OF MANUFACTURING AND SUPPLY AGREEMENT

      1. Product will be supplied by Alpex in bulk tablets or packed in finished
form to be mutually agreed during the Development Program.

      2. Valera will be responsible for marketing and the sale of the Product in
the Territory.

      3. The transfer price will be no less than 140% of Alpex's direct cost of
manufacturing the Product (as more specifically defined in Annex B-1), but
specifically excluding Indirect Costs, all calculated in accordance with the
Swiss generally accepted accounting principles and consistent with Alpex's
accounting practices for other products manufactured by Alpex.

      4. Indirect Costs means those costs described in Annex B-1, provided that
such Indirect Costs shall only include such costs which are directly
attributable or allocable to the manufacture or production of the Product, based
solely on the ratio that the number of units of the Product produced during a
given period of time bears to (i.e., as divided by) the aggregate unit
production of the Facility for such period of, all calculated in accordance with
the Swiss generally accepted accounting principles and consistent with Alpex's
accounting practices for other products manufactured by Alpex.

      5. Valera shall provide to Alpex a rolling forecast consisting of (i) a
good faith estimate of the quantity of the Product to be purchased by Valera
during the upcoming twelve (12) months, and (ii) a binding purchase order for
Valera's requirements of the Product over the upcoming three (3) months.

      6. Alpex shall maintain an adequate supply of the Product based upon
Valera's rolling forecast of its anticipated purchase requirements with respect
to the Product.

      7. Alpex may engage any Third Party to satisfy its manufacture, packaging,
and supply obligations hereunder as and to the extent provided in the License
Agreement; provided that subcontracting shall not relieve Alpex of its
obligations under the Manufacturing Agreement.

                                      B-1
<PAGE>
                                    ANNEX B-1

                               MANUFACTURING COSTS

  The following expenses are included in Direct Costs:

      1. Direct Materials . Materials used in the manufacturing process that are
used directly in the production of the Product and include:

-  Inert raw materials or excipients

-   Active substances/ingredients

- Packaging components such as bottles, caps, labels, master shippers, cotton,
preservatives, outserts, inserts, etc. - Yield loss

      8. Direct Labor . The cost of employees engaged in production activities,
which are directly identifiable with the Product. Direct Labor costs include:

- Base pay, overtime, vacation and holidays, illness, personal leave with pay
and shift differential. - Cost of employee fringe benefits such as health and
life insurance, payroll taxes, welfare, pension and profit sharing.

- Cost of direct labor employees not utilized for the manufacturing of a Product
such as training, downtime and general duties.

      9. Third Party Testing Costs. Costs associated with Third Party testing
(such as microbial, etc) and the preparation and filing of an annual report for
the FDA (including stability testing, sample retentions, etc) in connection
with, or relating to, a Product.

      10. Miscellaneous Costs, including all other costs and expenses incurred
by Valera in direct satisfaction of its obligations hereunder (e.g., all
freight, insurance charges, taxes, import and export duties, inspection fees and
other charges applicable to the manufacture, storage, sale and transport of the
Product purchased by Alpex).

      The following expenses are included in Indirect Costs (provided that only
the allocable portion of Indirect Costs which is directly related or
attributable to the manufacture or production of the Covered Products, based
solely on the actual utilization and time of utilization of the Facility, shall
be included in Indirect Costs):

      1. Indirect Manufacturing Costs

      Costs which are ultimately allocated to a Product based on standard direct
labor hours of the manufacturing teams and/or operating departments. These costs
include:

- Indirect Production Labor - salaries of employees engaged in production
activities who are not classified as direct labor including supervision,
clerical, etc.

- Indirect Materials - supplies and chemicals which are used in the
manufacturing process and are not assigned to specific products but are included
in manufacturing overhead costs. Includes

                                      B-2
<PAGE>
supplies which are either common to several products or for which direct
assignment to products is not practical.

- Rent expense -- allocated based on the square footage of area used for
manufacturing and packaging operations as well as support serviced.

- Utilities -- expenses incurred for fuel, electricity and water in providing
power for production and other plant equipment including IT expenses, telephone
and communications expenses.

- Maintenance and repairs -- amount of expense incurred in-house or purchased to
provide services for plant maintenance and repairs of facilities and equipment
including machine and other parts, waste disposal and pest control.

- Other Services -- purchased outside services, rentals and leases, such as the
cost of security, ground maintenance, uniforms, equipment, etc. - Depreciation
of plant and equipment utilizing the straight-line method of calculation.

- Insurance - cost of comprehensive and other insurance necessary for the
safeguard of manufacturing plant and equipment.

- Taxes -- expenses incurred for taxes on real and personal property
(manufacturing site, buildings and the fixed assets of equipment, furniture and
fixtures, etc.). If manufacturing site includes other operations (marketing,
research, etc.), taxes shall be allocated on the basis of total real and
personal property.

- Other expenses relating to production, including licenses and permits,
professional fees, dues and subscriptions

- Cost of manufacturing service departments, such as:

         -  Packaging Engineering

         -  Manufacturing Maintenance and Supplies

         -  Industrial Engineering

         -  Receiving and Warehousing

         -  Purchasing and Accounting

         -  Production Scheduling

         -  Inventory Management

         -  Plant Materials Management

         -  Central Weigh

         -  Manufacturing Administration

- Allocated costs of services provided to manufacturing, including:

         -  Cafeteria

         -  Personnel Operations

         -  Health and Safety Services

         -  Division Engineering and Operations Services

         -  Plant Services (housekeeping)

         -  Manufacturing Information Systems

         -  Plant Power

         -  Office of V.P.  Manufacturing

                                      B-3
<PAGE>
            Depending on the facts and circumstances, various bases may be used
for allocating these costs to manufacturing operating departments including
headcount, square feet, metered utilities use, estimated services rendered, EDP
computer hours, etc. The method or methods of allocation shall be commercially
reasonable in view of the nature and amount of allocated costs and the total
manufacturing operations conducted by Valera.

      11. Quality Assurance/Quality Control Costs, means direct labor and
indirect costs for Quality Assurance and Quality Control departments' testing
and approving materials used in manufacturing and completed manufacturing
Covered Products (including in-coming, in-processing and finished product
testing and release). Includes QA samples, outside assay costs, supplies,
service contracts, artwork and label design and other related costs.

                                      B-4
<PAGE>
                                     ANNEX C

                                  ALPEX PATENTS

<TABLE>
<S>                    <C>
     US Patent No.     Process for the preparation of a granulate suitable to
     6,149,338         the preparation of rapidly disintegrable mouth soluble
                       tablets and compositions obtained thereby.

     PCT WO 03/053410  Particulate compositions

     PCT/GB 01/05212   Oral Pharmaceutical compositions containing
                       Cyclodextrins as taste masking agent

     PCT WO            Improved blister packaging
     2004/031050

     PCT WO 03/053415  Pharmaceutical composition comprising skim milk powder
</TABLE>

                                      B-5

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