Document:

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                                                                   Exhibit 10.32

[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT. THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

                                LICENSE AGREEMENT

This Agreement is entered into and effective as of October 17, 2003 by and

between

Bayer HealthCare AG
D-51368 Leverkusen
Federal Republic of Germany

     - hereinafter referred to as "BAYER" -

and

deCode Genetics, Ehf.
Sturlugotu 8
IS-101 Reykjavik
Iceland

     - hereinafter referred to as "deCODE" -.

WHEREAS, BAYER has identified and pre-clinically and clinically developed to a
certain degree - including most of the requirements to fulfill the criteria of
Phase II - the pharmaceutically active compound having BAYER's code numbers BAY
X 1005, and pharmaceutical products containing such compound;

WHEREAS, BAYER is the exclusive owner of proprietary rights including
patents/patent applications and know how concerning BAY X 1005 and the
pharmaceutical products containing such compound;

WHEREAS, deCODE has received and evaluated confidential information upon BAYER's
compound under a Secrecy AGREEMENT dated October 29, 2002, concluded between
BAYER and deCODE and deCODE wishes to acquire from

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BAYER an exclusive worldwide license under BAYER's proprietary rights related to
BAY X 1005 for use in the defined field of application;

WHEREAS, BAYER is willing to grant to deCODE such licenses, subject to the terms
of and conditioned upon the provisions of this AGREEMENT;

NOW, THEREFORE, BAYER and deCODE agree as follows:

ARTICLE 1 - DEFINITIONS

1.1      AFFILIATE shall mean any business entity which directly or indirectly
         controls, is controlled by, or is under common control with a PARTY of
         this AGREEMENT, for only so long as such control exists. A business
         entity shall be deemed to "control" another business entity, if it (i)
         owns directly or indirectly at least fifty percent of the outstanding
         voting security, capital stock, or other comparable equity or ownership
         interest of such business entity, or (ii) possess, directly or
         indirectly, the power to direct the management or policies of an
         entity, whether through the ownership of voting securities, by contract
         or otherwise. If the laws of the jurisdiction in which such entity
         operates prohibit ownership by a PARTY of more than 50% "control" shall
         be deemed to exist at the maximum level of ownership allowed by such
         jurisdiction.

1.2      AGREEMENT means this formal agreement, all written amendments and
         supplements to this agreement and all schedules to this agreement,
         including but not limited to the following:

         Schedule A - BAYER PATENTS
         Schedule B - Specifications of COMPOUND and Certificate of Analysis
         Schedule C - deCODE's DEVELOPMENT PLAN for Asthma and new indications;
         Schedule D - Study plan for evaluation of QTc interval prolongation in
                      dog
         Schedule E - BAYER BAY X1005 Regulatory Filings

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1.3      BAYER IND shall mean the IND filed previously by BAYER with the FDA and
         comparable regulatory filings in any other country of the TERRITORY, as
         specified in Schedule E hereof.

1.4      BAYER KNOW HOW shall mean the scientific and technical information,
         trade secrets, inventions (whether patentable or not), data (including
         Confidential Information), improvements, discoveries, claims, formulae,
         processes, , copyright and know how, including, without limitation, all
         chemical, pharmacological, toxicological, preclinical, clinical data
         studies, manufacture, formulation, handling and control information
         relating to COMPOUND and PRODUCT that is required and/or useful within
         the FIELD (i) for manufacture, formulation, and handling COMPOUND, and
         (ii) developing, registering, marketing and selling PRODUCT in the
         TERRITORY, which information is or will be in the possession of BAYER
         and which BAYER is free to disclose during the term of this AGREEMENT.

1.5      BAYER PATENTS shall mean any and all patents and patent applications
         owned or licensed by BAYER in the TERRITORY covering COMPOUND and
         PRODUCT, and process for manufacturing COMPOUND and PRODUCT, and any
         reissues or extension thereof, including respective supplementary
         protection certificates; BAYER PATENTS existing at the EFFECTIVE DATE
         being specified and included without limitation , in Schedule A to this
         AGREEMENT.

1.6      CALENDAR QUARTER means any of the three-months periods beginning
         January 1, April 1, July 1, and October 1 in any year;

1.7      COMPOUND shall mean
         R-(-)-2-[4-quinolin-2-yl-methoxy)-phenyl]-2-cyclopentyl acetic acid]
         having the molecular formula C23H23NO3 (BAY X 1005). The specification
         of the COMPOUND (which may be modified after the date hereof) is
         identified in Schedule B attached to this AGREEMENT.

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1.8      DEVELOPMENT PLAN means the identification of the development targets
         and topics to be performed for the development of PRODUCTS including
         the definition of milestones and timelines to be fulfilled, as outlined
         in Schedule C, and potential adjustments thereof made from time to
         time. In case of the development of additional indications in the
         FIELD, the corresponding DEVELOPMENT PLANS will be added to this
         AGREEMENT as Schedule C1, C2, etc.

1.9      EFFECTIVE DATE shall mean the date first written above.

1.10     FDA shall mean the United States Food and Drug Administration.

1.11     FIELD shall mean the use of PRODUCT for the inhibition of leukotrienes
         in humans in connection with the prevention or treatment of any
         condition or indication, e.g. for treatment of inflammatory diseases
         such as Asthma, rheumatoid arthritis and inflammatory Bowel disease,
         etc.

1.12     FIRST COMMERCIAL SALE shall mean the first sale of PRODUCT in
         commercial quantities by deCODE and/or its SUBLICENSEEs to THIRD
         PARTIES in the first country of the TERRITORY.

1.13     IND shall mean any filing made with an appropriate Regulatory Authority
         in the respective jurisdiction within the TERRITORY for initiating
         clinical trials in such jurisdiction with respect to a PRODUCT.

1.14     LICENSE has the meaning ascribed to it in Art. 2 of this AGREEMENT.

1.15     NET SALES shall mean the total gross sales (number of units shipped
         times the invoiced price per unit) of PRODUCT sold by deCODE and/or its
         SUBLICENSEEs (which term does not include distributors) to unaffiliated
         THIRD PARTIES in bona fide arms-length commercial transactions less
         certain deductions explained below, but only to the extent that such

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         deductions are in the amount invoiced or received, borne by deCODE and
         related to PRODUCT sold under the terms of this AGREEMENT:

         (a)      Allowances actually granted such as ordinary and customary
                  trade discounts, quantity and cash discounts, rebates
                  (including rebates to social and welfare systems and
                  administrative fees in lieu of rebates paid to managed care
                  and similar institutions, wholesaler charge-backs and
                  retroactive price adjustments). Allowances and discounts on
                  PRODUCT sold as part of a multi-product transaction or
                  agreement shall be proportionally allocated to the value of
                  all products included in such transaction or agreement.
         (b)      Government mandated rebates.
         (c)      Sales taxes, excise taxes, and consumption taxes, which are
                  imposed on PRODUCT and borne by the seller of the PRODUCT.
         (d)      Credits and/or allowances actually given for rejection, return
                  or recall of previously sold PRODUCT, but not in excess of the
                  original selling price of the PRODUCT rejected, returned or
                  recalled,
         (e)      Amounts equivalent to [**] of said gross sales as an allowance
                  for expenses such as transportation, insurance and the like.
         (f)      chargebacks and other amounts paid on sale or dispensing of
                  PRODUCT,
         (g)      retroactive price reductions that are actually allowed or
                  granted, and
         (h)      sales commissions paid to distributors and/or selling agents.

1.16     NDA shall mean a New Drug Application for PRODUCT as required under the
         U.S. Food, Drug and Cosmetics Act and the regulations promulgated
         thereunder, or a comparable filing for marketing approval for PRODUCT
         in any other country, including pricing approvals where applicable.

1.17     PARTIES shall mean deCODE and BAYER, and PARTY means any one of them.

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1.18     PHASE II (IIa, IIb) means that part of the clinical development program
         which provides for the first use of PRODUCT on sufficient numbers of
         patients in pilot studies (IIa) and controlled studies (IIb) to
         establish the dose range for single dose, repeated dose, and
         administration intervals, tolerability, specific pharmaco-kinetic and
         pharmaco-dynamic data of such product for the desired claims and
         indications, as more closely defined by the rules and regulations of
         the FDA and corresponding rules and regulations in other major
         countries. It finally implies the decision whether to continue the
         clinical investigation.

1.19     PHASE III means a wide-ranging clinical investigation of PRODUCT on
         sufficient numbers of patients with the target indications under the
         conditions of general practice in clinics and with general
         practitioners in controlled and uncontrolled studies to establish the
         dose-response relationship, indications and contraindications, the
         type, duration and frequency of adverse drug events known, the safety
         profile, the relationship (comparable or superior) of PRODUCT to
         standard treatments, as more closely defined by the rules and
         regulations of the FDA and corresponding rules and regulations in other
         major countries. It finally implies the application for drug
         approval/registration at the respective authority, e.g. FDA.

1.20     PRODUCT shall mean any pharmaceutical preparation for use in the FIELD,
         containing COMPOUND as an active ingredient.

1.21     [CONFIDENTIAL TREATMENT REQUESTED].

1.22     SUBLICENSEE shall mean any THIRD PARTY acting pursuant to a sublicense
         (including a distribution agreement) granted to it by deCODE under the
         terms of this AGREEMENT.

1.23     TERRITORY shall mean all countries in the world.

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1.24     THIRD PARTY means any party other than PARTY and their AFFILIATES.

1.25     US $ shall mean United States dollars, the official currency of the
         United States of America.

ARTICLE 2 - GRANT OF LICENSES, DELIVERY OF COMPOUND AND TRANSFER OF BAYER
       KNOW-HOW.

2.1      BAYER hereby grants to deCODE the following LICENSES and rights

2.1.1    regarding BAYER PATENTS:

         (i)    an exclusive LICENSE for the TERRITORY to perform research, to
                make, have made, develop, sell, have sold and use the COMPOUND
                in the FIELD.

         (ii)   an exclusive LICENSE for the TERRITORY, to develop, to register,
                to make, have made, use, import, sell and have sold PRODUCTS in
                the FIELD.

2.1.2    regarding BAYER KNOW HOW:

         an exclusive LICENSE for the TERRITORY to make, have made, develop,
         sell, have sold and use the COMPOUND and PRODUCT in the FIELD .

2.1.3    regarding Sublicensing:

         (i)    the right to sublicense in the FIELD all or any portion of the
                rights to the BAYER PATENTS, the BAYER KNOW-HOW, granted to it

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                pursuant to this AGREEMENT to any or all of its AFFILIATES or
                THIRD PARTIES. deCODE will identify its SUBLICENSEE to BAYER and
                will inform BAYER on the principles of the collaboration, the
                development strategy and the TERRITORY, in writing, within a
                reasonable time.

         (ii)   Except as otherwise set forth herein, deCODE may grant
                sublicenses, in its sole discretion, informing BAYER, to such
                THIRD PARTIES on such terms and conditions as it deems
                appropriate; provided, that deCODE for itself and its
                SUBLICENSEEs shall at all times remain obligated to comply with
                terms hereof.

2.2      Delivery of COMPOUND:
         BAYER will deliver to deCODE existing batches of COMPOUND at no costs
         to deCODE within a reasonable time following the EFFECTIVE DATE.

2.3      Transfer of Know-How:
         Within 90 days of the Effective Date, BAYER shall transfer such items
         of BAYER Know-How to deCODE as requested by deCODE and reasonably
         practicable and available.

ARTICLE 3 - DEVELOPMENT AND COMMERCIALIZATION

3.1      Development and Commercialization Efforts

3.1.1    deCODE shall exercise diligent efforts at its own cost to have the QT
         PROLONGATION EVALUATION completed as soon as possible after receipt of
         COMPOUND and BAYER KNOW HOW according to the timeline and study plan
         contained in Schedule D.

3.1.2    deCODE shall exercise reasonable development efforts ("reasonable
         development efforts" shall mean the same degree of diligence that
         deCODE, in its business judgment, would exercise in pursuing the
         development and registration of comparable products for comparable

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         indications with comparable sales potential in comparable markets, it
         being understood that reasonable development efforts will in no event
         require deCODE to take any action that would be reasonably likely to
         result in a breach of any other provision of this Agreement or any
         other agreement to which deCODE is a party existing on the Effective
         Date, or that deCODE in good faith believes may violate any applicable
         law, regulation, rule, order, permit, direction or license of any court
         or governmental authority having appropriate jurisdiction over deCODE)
         to obtain necessary approvals to market PRODUCT (including, as the case
         may be, pricing approval).

3.1.3    deCODE shall use reasonable efforts to comply with all applicable Good
         Laboratory-, Good Clinical- and Good Manufacturing Practices in the
         development of PRODUCT, and shall commit its AFFILIATES and
         SUBLICENSEEs and subcontractors to do the same.

3.1.4    To support deCODE in achieving approvals and registrations for clinical
         trials and PRODUCTS, BAYER will transfer ownership of the BAYER IND and
         corresponding documents to deCODE effective as of the signature of the
         Agreement.

3.2      Development and Approval Reports for PRODUCT(s)

3.2.1    During the term of this AGREEMENT, deCODE will regularly inform BAYER,
         not less frequently than semi-annually, through written reports (in a
         form to be agreed between the parties in good faith), of progress of
         the PRODUCT development and provide a summary of results achieved
         according to the Development Plan which is incorporated by reference
         and made part of this AGREEMENT as Schedule C for [CONFIDENTIAL
         TREATMENT REQUESTED] in additional Schedules C1, C2 , etc.

3.2.2    deCODE will promptly inform BAYER in writing, if and when its
         development of a PRODUCT has met a milestone according to Article 4.1
         and Schedule C hereinafter.

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3.2.3    Moreover, deCODE will inform BAYER within thirty (30) days of receipt
         by deCODE of an approval for registration and/or marketing of PRODUCT
         in any individual country.

3.3      Commercialization of PRODUCT

3.3.1    deCODE shall exercise reasonable commercial efforts ("reasonable
         commercial efforts" shall mean the same degree of diligence that
         deCODE, in its business judgment, would exercise in pursuing the
         commercialization of comparable products with comparable sales
         potential in comparable markets, it being understood that reasonable
         commercial efforts will in no event require deCODE to take any action
         that would be reasonably likely to result in a breach of any other
         provision of this Agreement or any other agreement to which deCODE is a
         party existing on the Effective Date, or that deCODE in good faith
         believes may violate any applicable law, regulation, rule, order,
         permit, direction or license of any court or governmental authority
         having appropriate jurisdiction over deCODE ) to market PRODUCT in the
         TERRITORY.

ARTICLE 4 - MILESTONES AND ROYALTIES

4.1    License Fee and Milestone Payments

4.1.1. In consideration of the rights and licenses granted hereunder to deCODE,
       deCODE shall pay BAYER the following license fee:

         [CONFIDENTIAL TREATMENT REQUESTED] will be due upon signature of this
         AGREEMENT within 30 days, and the remaining balance [**] will be due
         within 30 days at satisfaction or removal of the contingencies set
         forth in Article 11.2.3;

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4.1.2    deCODE shall further make to BAYER the following milestone payments
         within thirty (30) days after the first occurrence of each event set
         forth below with respect to the first PRODUCT for [CONFIDENTIAL
         TREATMENT REQUESTED] for which such event is achieved, irrespective of
         whether such events are achieved by deCODE, or its SUBLICENSEEs in any
         country of the TERRITORY:

         (ii)     [**] at initiation of clinical PHASE III trial;
         (iii)    [**] at NDA filing;
         (iv)     [**] at NDA approval;

4.1.3    The milestone payments set forth in Article 4.1.2 (ii) through (iv)
         above shall be payable for each individual event with respect to the
         first PRODUCT for each new indication within the FIELD for which such
         event is achieved and shall be non-refundable and non-creditable
         against royalties payable by deCODE to BAYER under the Article 4.2
         hereinafter.

4.2      Running Royalty Payments

4.2.1    Subject to Article 4.2.2, from the FIRST COMMERCIAL SALE until the
         expiration or termination of this AGREEMENT, deCODE shall pay to BAYER
         the following royalties on the NET SALES obtained for each PRODUCT
         during the term of this AGREEMENT, irrespective of whether such NET
         SALES are achieved by deCODE or SUBLICENSEEs in any country of the
         TERRITORY:

         (i)      [**] of NET SALES of marketed PRODUCTS in the indications
         [CONFIDENTIAL TREATMENT REQUESTED].

         (ii)     [**] of NET SALES of marketed PRODUCTS in the indications
         [CONFIDENTIAL TREATMENT REQUESTED].

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         (iii)    [**] of NET SALES of marketed PRODUCTS in all indications in
the FIELD other than those identified under Article 4.2.1 (i) and (ii) .

4.2.2    deCODE may deduct from the royalties it would otherwise owe pursuant to
         Article 4.2.1 (i) through (iii), an amount equal to [CONFIDENTIAL
         TREATMENT REQUESTED] paid by deCODE, its AFFILIATES and SUBLICENSEES to
         THIRD PARTIES with respect to commercially reasonable licenses to
         intellectual property rights pertaining to the development,
         manufacture, sale or use of the COMPOUND or the PRODUCT (but excluding
         licenses to trademarks and tradedresses pertaining thereto), but
         excluding intellectual property rights specifically pertaining to the
         condition or indication for which the COMPOUND or the PRODUCT receives
         NDA approval. Notwithstanding the previous sentence, the minimum
         royalty rate paid by deCODE pursuant to Article 4.2.1 (i) through (iii)
         shall be [CONFIDENTIAL TREATMENT REQUESTED] of the applicable rate of
         NET SALES.

4.2.3    If the sum of competing products containing the COMPOUND will gain a
         market share of [**] or more in a specific country, the corresponding
         royalty rate owed to BAYER will be reduced for the applicable time by
         [**] for such country.

4.2.4    If the events envisioned under Article 4.2.3 have not materialized, and
         if the sum of competing products representing the same mode of action
         [CONFIDENTIAL TREATMENT REQUESTED] compounds) will gain a market share
         of at least [**] in a specific country, there will be proportionate
         reduction in the corresponding royalty rate owed to BAYER until a
         maximum reduction of [**] is reached, e.g., if competing products gain
         a market share of [**] there will be a [**] reduction in royalty, for
         [**] market share a [**] reduction in royalty etc., up to a maximum of
         [**] reduction in royalty for competing products that gain market share
         of [**] or greater. However, the foregoing reduction described in this
         Article 4.2.4 will only become effective in the country in question,
         AFTER the expiry of the applicable BAYER PATENT covering COMPOUND in
         such country. For the avoidance of doubt; the

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         reduction may take place while the BAYER PATENT covering the process
         for manufacturing COMPOUND is still in effect, as long as the BAYER
         PATENT covering COMPOUND has expired.

ARTICLE 5 - ROYALTY REPORTS AND ACCOUNTING

5.1      Reports, Exchange Rates

5.1.1    Following the FIRST COMMERCIAL SALE and for the remaining term of this
         AGREEMENT, deCODE shall furnish to BAYER, with respect to each Calendar
         Quarter, a written report showing in reasonably specific detail, on a
         country-by-country basis and based on local currency,

         (a)      the gross sales of each PRODUCT sold by deCODE and its
                  SUBLICENSEES in the TERRITORY during the corresponding
                  Calendar Quarter and the calculation of NET SALES from such
                  gross sales;
         (b)      the royalties payable in local currency, if any, which shall
                  have accrued hereunder based upon NET SALES of PRODUCT;
         (c)      the withholding taxes, if any, required by law;
         (d)      the date of the FIRST COMMERCIAL SALE of each PRODUCT in each
                  country in the TERRITORY during the applicable Calendar
                  Quarter,

         The exchange rates to be used with respect to this Article 5.1.1 shall
         be the official closing buying rates against US Dollars (US $) for such
         currencies reported by the Wall Street Journal for the last business
         day of the applicable calendar quarter.

         Reports shall be due within forty five (45) days following the close of
         each Calendar Quarter. deCODE shall keep complete and accurate records
         in sufficient detail to properly reflect all gross sales and NET SALES
         and to

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         enable the royalties payable hereunder to be determined for a period of
         five (5) years after the year in which the sales occurred.

5.1.2    In the event payment of all or part of the payments is not made by
         deCODE within ten (10) days of the due date of the reports according to
         Article 5.1.1, under this AGREEMENT, an interest rate per annum for
         late payment at two (2) percent points above the interbank offering
         rate of the US Federal Reserve Bank of the unpaid amount shall be
         automatically due and become payable by deCODE without further notice.
         The interbank offering rate of the US Federal Reserve Bank shall be
         derived from the Wall Street Journal of the due date.

5.2      AUDITS

5.2.1    Upon the written request of BAYER, deCODE shall permit an independent
         certified public accounting firm of internationally recognized
         standing, selected by BAYER and reasonably acceptable to deCODE, and
         subject to the confidentiality provisions of this AGREEMENT, to have
         access during normal business hours and upon reasonable notice to such
         of the records of deCODE as may be reasonably necessary to verify the
         accuracy of the value and execution of NET SALES and royalty reports
         hereunder for any year ending not more than five (5) years prior to the
         date of such request. The accounting firm shall disclose to BAYER only
         whether the records are correct or not and the specific details
         concerning any discrepancies. No other information shall be shared.

5.2.2    If such accounting firm concludes that additional royalties were owed
         during such period, deCODE shall pay the additional royalties within
         thirty (30) days of the date BAYER delivers to deCODE such accounting
         firm's written report so concluding. The fees charged by such
         accounting firm shall be paid by BAYER; provided, however, that if the
         audit discloses that the royalties payable by deCODE differ by more
         than [**] of the royalties actually paid for such period, then deCODE
         shall pay the reasonable

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         expenses as well as duties and fees charged by such accounting firm. In
         the event that such audit discloses an overpayment of royalties by
         deCODE, deCODE shall deduct the amount of such overpayment from
         subsequent royalty payments.

5.2.3    deCODE shall include in each AGREEMENT with a SUBLICENSEE granted by it
         pursuant to this AGREEMENT a provision requiring the SUBLICENSEE to
         make reports to deCODE to keep and maintain records of sales made
         pursuant to such AGREEMENT and to grant access to such records by
         BAYER's independent accountant to the same extent required with respect
         to deCODE's records and obligations under this Article 5 and under this
         AGREEMENT.

5.2.4    Upon the expiration of three (3) calendar years following the end of
         the most recent full calendar year, the calculation of royalties
         payable with respect to such year shall be binding and conclusive upon
         BAYER, and deCODE, the respective SUBLICENSEEs shall be released from
         any liability or accountability with respect to royalties for such
         year.

ARTICLE 6 - PAYMENTS

6.1      Payment Terms

         Milestones will be paid in accordance with Article 4.1.2. Royalties
         accrued in each CALENDAR QUARTER presented by the corresponding royalty
         report according to Art. 5 of this AGREEMENT shall be due and effected
         ten (10) days after the date such royalty report according to Article
         5.1.1 is to be transmitted to BAYER. Payments of royalties in whole or
         in part may be made in advance of such due date.

         All payments to be made to the account:
         [CONFIDENTIAL TREATMENT REQUESTED]

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6.2      Exchange Control

         If at any time legal restrictions prevent the prompt remittance of part
         or all royalties with respect to any country in the TERRITORY where
         PRODUCT is sold, payment shall be made through such lawful means or
         method as the PARTIES reasonably shall determine.

6.3      Withholding Taxes

         deCODE shall have the right to withhold from the royalty payments the
         tax which BAYER is liable to under the appropriate local tax laws and
         for the payments of which deCODE is responsible. BAYER shall
         immediately be sent tax receipts by deCODE certifying the payments of
         the tax, so that BAYER may use it for claiming a credit on the tax
         payable by BAYER in Germany on such payments. No deduction shall be
         made or a reduced amount shall be deducted if BAYER furnishes a
         document from the appropriate tax authorities to deCODE by the time of
         the payments certifying that the payments are exempt from tax in the
         country of the TERRITORY or subject to a reduced tax rate according to
         the convention for the avoidance of double taxation between the Federal
         Republic of Germany and the respective country. Except for such
         withholding taxes, any taxes, assessments, fees and charges imposed
         against payments due BAYER hereunder shall be borne by deCODE.

ARTICLE 7- RIGHTS OF AND OPTION TO BAYER

7.1      Rights of BAYER

7.1.1    BAYER receives the right to review of deCODE's results and know-how
         achieved under the LICENSE AGREEMENT, these results to be kept
         confidential by BAYER for use solely in connection with the
         back-license referenced in Article 7.2 below, and, moreover, to use
         COMPOUND for internal research purposes only excluding human clinical
         trials.

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7.1.2    deCODE agrees to give BAYER the first right and opportunity to be
         deCODE's primary supplier of COMPOUND and to negotiate the terms and
         conditions of a supply and manufacturing agreement, which terms and
         conditions shall be documented in separate SUPPLY & MANUFACTURING
         AGREEMENT, subject to meeting deCODE's needs with regards to local
         government reimbursement and regulatory issues, timeline, quantity and
         quality assurance certification at a reasonable price structure. In the
         event the PARTIES cannot reach an agreement with respect to supply and
         manufacture of COMPOUND, deCODE may contract with a THIRD PARTY to be
         the primary supplier of COMPOUND, provided that: (i) the terms and
         conditions of any such supply and manufacturing agreement are equally
         or more favorable to deCODE than those last offered in writing by BAYER
         to deCODE, and (ii) if the terms and conditions of any such supply and
         manufacturing agreement are equally or more favorable to deCODE
         considered as a whole than those last offered in writing by BAYER,
         BAYER shall have a right of first refusal, exercisable within thirty
         (30) days after deCODE provides notice to BAYER of such equally or more
         favorable terms and conditions, to supply and manufacture COMPOUND on
         such terms and conditions. Nothing in this AGREEMENT shall prevent
         deCODE from contracting with more than one supplier of COMPOUND.

7.2      Option and Right to BAYER

7.2.1    deCODE agrees to give BAYER the first right and opportunity to market
         PRODUCTS and to negotiate the terms and conditions of a marketing
         agreement, which terms and conditions shall be documented in separate
         MARKETING AGREEMENT to be executed within six (6) months after BAYER's
         receipt of a corresponding written notice, if deCODE elects to contract
         with a THIRD PARTY that is not a SUBLICENSEE to co-market a PRODUCT or
         PRODUCTS in certain countries of the TERRITORY.

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7.2.2    If deCODE elects not to market PRODUCT in certain countries of the
         TERRITORY either directly, by AFFILIATE, or by establishment of a
         competent SUBLICENSEE(s) to do so, deCODE shall notify BAYER to that
         effect, and, BAYER will then have the right to market such PRODUCT in
         such countries of the TERRITORY.

7.2.3    BAYER shall have the right to a grant-back of the LICENSE including the
         right in using and exploiting the results, inventions and PRODUCTS
         generated under this AGREEMENT including corresponding patent
         applications and granted patents and formal approvals generated under
         the LICENSE, if deCODE materially breaches a material term of the
         AGREEMENT and does not cure or take steps to cure such breach within
         ninety (90) days after BAYER's notice on such breach.

7.2.4    In the event BAYER elects to exercise its right to market any PRODUCT
         in any country as permitted under Articles 7.2.2 or 7.2.3, it shall pay
         to deCODE a running royalty on its NET SALES at a reasonable rate to be
         negotiated based upon the relative efforts made by BAYER and deCODE in
         the development and marketing of such PRODUCT, which rate shall be no
         less than [**], on the same terms and conditions and for the same term
         as otherwise contemplated by this AGREEMENT (if BAYER were the licensee
         and deCODE were the licensor).

ARTICLE 8 - INFRINGEMENT ACTIONS OF THIRD-PARTIES

8.1      In the event that BAYER, deCODE, deCODE AFFILIATES or SUBLICENSEES,
         practicing of BAYER PATENTS licensed hereunder in connection with the
         development or the making, having made, importing, using, distributing,
         marketing, promoting, offering for sale or selling PRODUCT will
         infringe or is alleged to infringe a THIRD PARTY'S patent, the PARTY
         becoming aware of same shall promptly notify the other PARTY.

<Page>

                                       18

8.2      BAYER shall negotiate with said THIRD PARTY for a suitable license, if
         the THIRD PARTY's claim is related to the manufacture of COMPOUND
         and/or Compound's use for the manufacture of PRODUCT. In the event that
         such negotiations result in a consummated agreement, then any lump sum
         payment made thereunder shall be paid by BAYER. Should such agreement
         require the payment of royalties, deCODE shall continue to pay
         royalties due BAYER hereunder and BAYER shall pay any royalties due
         said THIRD PARTY.

8.3      Except as set forth in Article 8.2, above, deCODE shall negotiate with
         said THIRD PARTY for a suitable license, if the THIRD PARTY's claim is
         related to making, having made, importing, using, distributing,
         marketing, promoting, offering for sale or selling PRODUCT. In the
         event that such negotiations result in a consummated agreement, then
         any lump sum payment made thereunder shall be paid by deCODE. Should
         such agreement require the payment of royalties, deCODE shall continue
         to pay royalties due BAYER hereunder and deCODE shall pay any royalties
         due said THIRD PARTY. Notwithstanding the foregoing, no license
         agreement or other settlement shall be entered into by deCODE without
         the prior consultation of BAYER.

8.4      If deCODE, BAYER, their respective AFFILIATES, or SUBLICENSEES, is
         (are) sued by a THIRD PARTY for infringement of a THIRD PARTY's patent
         because of the manufacture, use or sale of PRODUCT or manufacture or
         use of COMPOUND, the PARTY which has been sued shall promptly notify
         the other PARTY in writing of the institution of such suit. deCODE
         shall have the first right, but not the duty, in its sole discretion,
         to control the defense of such suit at its own expense, in which event
         BAYER shall have the right to be represented by advisory counsel of its
         own selection, at its own expense, and shall cooperate in the defense
         of such

<Page>

                                       19

         suit and furnish to deCODE reasonable evidence and assistance in its
         control.

ARTICLE 9 - CONFIDENTIALITY

9.1      Non-disclosure Obligation and Use Restriction

         Except as otherwise provided in this Article 9, during the term of this
         AGREEMENT and for a period of ten (10) years thereafter, each PARTY
         shall maintain in confidence, and use only for purposes as expressly
         authorized and contemplated by this AGREEMENT, all information and data
         supplied by the other PARTY under THE CONFIDENTIALITY AGREEMENT OF
         OCTOBER 29, 2002 and under this AGREEMENT. The provisions of this
         Article 9 supercede and replace, in their entirety, the provisions of
         the said CONFIDENTIALITY AGREEMENT, between the PARTIES. For purposes
         of this Article 9 the information and data exchanged under said
         agreement and information regarding the terms and performance of this
         AGREEMENT, shall be hereinafter included and referred to as
         "CONFIDENTIAL INFORMATION".

9.2      Permitted Disclosures

9.2.1    To the extent it is reasonably necessary or appropriate to fulfill its
         obligations or exercise its rights under this AGREEMENT, (a) a PARTY
         may disclose CONFIDENTIAL INFORMATION it is otherwise obligated under
         this Article 9 not to disclose, to its AFFILIATES, SUBLICENSEES,
         consultants, outside contractors and clinical investigators
         (hereinafter collectively referred to as PERSONS), on a need-to-know
         basis, provided that such PERSONS agree to keep the CONFIDENTIAL
         INFORMATION confidential and not use the CONFIDENTIAL INFORMATION to
         the same extent as such PARTY is required pursuant to this AGREEMENT;
         and (b) a PARTY may disclose such CONFIDENTIAL INFORMATION to
         government

<Page>

                                       20

         or other regulatory authorities to the extent that such disclosure is
         required by applicable law, regulation of court order, or is reasonably
         necessary to obtain patents copyrights or authorizations to conduct
         clinical trials with, and the commercially market PRODUCT, provided
         that the disclosing PARTY shall provide written notice to the other
         PARTY and sufficient opportunity to object to such disclosure or to
         request confidential treatment thereof.

9.2.2    Following the EFFECTIVE DATE, each of the PARTIES shall have the right
         to issue press releases and similar public announcements about the
         relationship of the PARTIES, with the prior consent of the other Party,
         which shall not be unreasonably withheld. The PARTY making such
         announcement shall exercise reasonable efforts not to divulge
         CONFIDENTIAL INFORMATION, and provide the other PARTY with a copy of
         the proposed text prior to such announcement, sufficiently in advance
         of the scheduled release, to afford such other PARTY a reasonable
         opportunity to review and comment upon the proposed text.

9.2.3    The obligation not to disclose or use CONFIDENTIAL INFORMATION shall
         not apply to any part of such CONFIDENTIAL INFORMATION that

         (i)      is or becomes published or otherwise part of the public domain
                  or publicly available other than by acts of the PARTY
                  obligated not to disclose such CONFIDENTIAL INFORMATION, or of
                  its AFFILIATES or SUBLICENSEES in contravention of the
                  AGREEMENT;
         (ii)     is disclosed to the receiving PARTY or its AFFILIATES or
                  SUBLICENSEES by a THIRD PARTY, provided such CONFIDENTIAL
                  INFORMATION was not obtained by such THIRD PARTY directly or
                  indirectly from the other PARTY under this AGREEMENT on a
                  confidential basis;
         (iii)    prior to disclosure under the AGREEMENT, was already in the
                  possession of the receiving PARTY or its AFFILIATES or
                  SUBLICENSEES, provided such CONFIDENTIAL INFORMATION was

<Page>

                                       21

                  not obtained directly or indirectly from the other PARTY under
                  the AGREEMENT; or

         (iv)     both PARTIES have agreed in writing to publish certain
                  CONFIDENTIAL INFORMATION.

ARTICLE 10 - INVENTIONS AND PATENTS

10.1     Patent Prosecution, Maintenance, and Extension

10.1.1   BAYER shall be responsible for and shall control the preparation,
         filing, prosecution, grant and maintenance of all BAYER PATENTS. BAYER
         shall prepare, file, prosecute and maintain such BAYER PATENTS in good
         faith consistent with its customary patent policy and its reasonable
         business judgment, and shall consider in good faith the interests of
         deCODE in so doing. BAYER shall not delegate such responsibility or
         control to any party other than deCODE without deCODE's prior written
         consent. BAYER shall inform deCODE of all actions taken or pending
         under Article 10.1.1. and Article 10.1.2., furnishing deCODE with
         copies of patent documents, e.g., draft applications and office actions
         from patent authorities.

10.1.2   As soon as deCODE obtains NDA approval, deCODE shall so inform BAYER,
         obligating BAYER to ensure the complete and timely filing and
         prosecution of application for extension of BAYER PATENTS as specified
         under the Drug Price Competition and Patent Term Restoration Act of
         1984 (Hatch-Waxman Act) in the United States, and in other
         jurisdictions and countries in TERRITORY as permissible under such the
         laws and regulation as may apply in such countries and jurisdictions,
         e.g. European Supplementary Protection Certificates.

10.1.3   BAYER shall give deCODE notice of any decision by BAYER to cease
         prosecution, maintenance, and or extension of BAYER PATENTS and in

<Page>

                                       22

         such case permit deCODE, at its sole discretion, to continue
         prosecution, maintenance and/or extension at its sole expense. Such
         notice shall be sufficiently far in advance of the abandonment or lapse
         of a BAYER PATENT to permit deCODE reasonable time to continue
         prosecution, maintenance and/or extension. If deCODE elects to continue
         prosecution, maintenance and/or extension, BAYER shall execute such
         documents and perform such acts, at deCODE's expense, as may reasonably
         be necessary to effect an assignment of such BAYER PATENTS to deCODE.
         Any such assignment shall be completed in a timely manner to allow
         deCODE to continue such prosecution, maintenance and/or extension. Any
         patents or patent applications so assigned hereunder shall not be
         considered BAYER PATENTS under this AGREEMENT.

10.2     Enforcement of BAYER PATENTS

10.2.1   deCODE shall have the first right, but not obligation, at its sole
         expense, to determine the appropriate course of action to enforce the
         BAYER PATENTS or otherwise abate the infringement by THIRD PARTIES
         thereof, to take (or refrain from taking) appropriate action to enforce
         the BAYER PATENTS, to control any litigation or other enforcement
         action and to enter into, or permit, the settlement of any such
         litigation or other enforcement action with respect to the BAYER
         PATENTS, and in good faith shall consider the interests of BAYER in so
         doing.

10.2.2   In the event that deCODE does not decide within ninety (90) days after
         notice of any such infringement to take appropriate legal action to
         protect BAYER PATENTS and deCODE license rights hereunder, or does not
         diligently pursue such action after making a decision to take such
         action, BAYER, at BAYER's cost, shall have the right, in its sole
         discretion, and at its expense to take such action as BAYER deems
         necessary to prevent any such infringement of BAYER PATENTS and recover
         any damages realized by or threatened to BAYER as a result of such
         infringement, and deCODE agrees to cooperate with and assist BAYER in
         its so doing.

<Page>

                                       23

10.2.3   Notwithstanding the foregoing, deCODE and BAYER shall fully cooperate
         with each other in any action to enforce the BAYER PATENTS. Any award
         paid by THIRD PARTIES as a result of such an infringement action
         (whether by way of settlement or otherwise) shall be applied first to
         reimburse both PARTIES for [**] of all costs and expenses incurred by
         the PARTIES with respect to such action on a pro rata basis and, if
         after such reimbursement any funds shall remain from such award, deCODE
         shall be entitled to retain same; provided, however, that such
         remaining funds shall be deemed to constitute NET SALES for purposes of
         this Agreement, and deCODE shall be obligated to pay the royalty due
         and owing under this Agreement with respect thereto.

ARTICLE 11 - TERM AND TERMINATION

11.1     Term

         This AGREEMENT shall come into effect and full force on the EFFECTIVE
         DATE and, unless terminated earlier pursuant to the provisions of this
         AGREEMENT, shall expire on the later of
         (i)      the date all BAYER PATENTS expire, or
         (ii)     ten (10) years after the FIRST COMMERCIAL SALE in the first
                  country.

11.2     Termination and Contingencies.

11.2.1   Either PARTY may terminate this AGREEMENT at any time by giving written
         notice to the other PARTY in the event that:

         (i)      Any proceeding in bankruptcy or in reorganization (other than
                  internal reorganization) or for the appointment of a receiver
                  or trustee or any other proceedings under a law for the relief
                  of debtors shall be instituted by or against the other PARTY,
                  which proceedings are not dismissed within sixty (60) days and
                  prevent

<Page>

                                       24

                  the other PARTY from performing the material obligations
                  imposed on it by this AGREEMENT;

         (ii)     the other PARTY defaults in the performance of any material
                  obligations imposed on it by this AGREEMENT and such default
                  is not remedied in all material respects within ninety (90)
                  days of receipt of written demand from the notifying PARTY to
                  cure the default.

11.2.2   deCODE may terminate this AGREEMENT at any time before the FIRST
         COMMERCIAL SALE upon ninety (90) days prior written notice to BAYER,
         giving BAYER the relevant reasons for termination in writing. At the
         effective date of the termination, all rights, KNOW HOW and the LICENSE
         granted under the AGREEMENT to deCODE will expire.

11.2.3.  Notwithstanding the foregoing, deCODE may terminate this Agreement by a
         written notice no later than [**] after the Effective Date, if the
         following contingencies still exist at such time:
         i)       In preclinical studies [CONFIDENTIAL TREATMENT REQUESTED];
         ii)      In clinical trials (Phase I or later) clinically relevant
                  [CONFIDENTIAL TREATMENT REQUESTED].
         iii)     deCODE's due diligence on BAYER KNOW-HOW has not been
                  completed in a satisfactory manner, e.g., unexpected
                  materially adverse circumstances pertaining to the BAYER
                  KNOW-HOW have been discovered.

         Once the foregoing contingencies have been removed, deCODE's right to
         terminate the AGREEMENT under this Article will expire. deCODE shall
         exercise diligent efforts to have the contingencies removed as soon as
         possible following the EFFECTIVE DATE, provided that the obligations
         under Articles 2.2 and 2.3 hereof have been met.

<Page>

                                       25

         No payment under the AGREEMENT executed to BAYER until the date of
         termination will be refundable.

11.2.4   If this AGREEMENT is terminated, such expiration or termination shall
         neither release the other PARTY from any obligation to make payments
         accrued hereunder prior to the date of such expiration or termination
         and shall not release the PARTIES from the secrecy obligations as
         provided herein, or from the indemnity obligations.

         If the AGREEMENT is terminated by BAYER according to Article 11.2.1, or
         Article 14.2, or by deCODE according to Article 11.2.1 or Article
         11.2.2, deCODE shall, upon request of BAYER, immediately reassign its
         NDA approvals for PRODUCT in the TERRITORY to BAYER or to a party
         designated by BAYER. deCODE shall also provide BAYER with all
         information and results developed during the license term reasonably
         necessary for maintaining regulatory approvals for sale of COMPOUND
         which BAYER may use at its sole discretion. The royalty provision of
         Article 7.2.4 shall apply.

11.2.5   If this AGREEMENT expires pursuant to Article 11.1 or is terminated by
         either PARTY as provided in Article 11.2 or Article 14.2, all rights,
         access to and use of KNOW HOW and the LICENSE granted under the
         AGREEMENT to deCODE shall expire.

11.2.6   If this Agreement is terminated, and in the event that the ownership of
         the BAYER IND has been transferred to deCODE under Article 3.1.4 hereof
         at the time of such termination, deCODE will transfer ownership of the
         BAYER IND back to BAYER.

11.2.7   The expiration or termination of this AGREEMENT shall not affect the
         following Articles or Articles which shall remain in force unlimited or
         as defined in such Articles or Articles: Article 1; Article 5.2;
         Article 7.2.4, Article 7.8; Article 9; Articles 11.2.4-11.2.6; Article
         12; Article 14.5 and 14.6

<Page>

                                       26

ARTICLE 12 - LIABILITY

12.1     deCODE shall bear full liability for PRODUCT developed, manufactured,
         packaged, promoted, distributed and sold in the TERRITORY hereunder and
         for its other activities related thereto.

12.2     BAYER shall not be responsible for any damages, claims or losses that
         deCODE, its AFFILIATES, SUBLICENSEES or THIRD PARTIES may suffer by
         reason of licensed exploitation of the BAYER PATENTS and of the BAYER
         KNOW HOW or by manufacture, use and sale of PRODUCT or by reason of
         acts of commission or omission on the part of deCODE or its employees
         or agents with regard to the processing, use and sale of PRODUCT.

         deCODE shall hold harmless and fully indemnify BAYER, its AFFILIATES,
         and each of its and their respective employees, officers, directors and
         agents (each a "BAYER Indemnified PARTY") from and against all damages,
         claims or losses which may be made against BAYER by reason of deCODE's
         manufacture, use and sale of PRODUCT or by reasons of acts of
         commission or omission of deCODE's employees or agents with regard to
         processing, use or sale of PRODUCT.

12.3     Notwithstanding the foregoing, BAYER shall be responsible for damages
         incurred to THIRD PARTIES based on product liability if deCODE or the
         THIRD PARTY can prove that the damage results from

         -        the restricted use of certain batches of COMPOUND - as to be
                  identified by BAYER in Schedule B - which will only be
                  released for use outside of any clinical trials or any human
                  application; or
         -        the non-conformity of COMPOUND delivered by BAYER released for
                  use in clinical trials - as to be identified by BAYER in
                  Schedule B - with specifications as set forth in Schedule B,
                  provided that such

<Page>

                                       27

                  non-conformity could not be detected by deCODE through quality
                  control tests agreed upon between the PARTIES; or
         -        intentional or gross negligence of BAYER during the
                  development or manufacture of the delivered COMPOUND.

12.4     deCODE shall have no obligation under this AGREEMENT to hold harmless
         and fully indemnify any BAYER Indemnified PARTY from and against all
         damages, claims or losses which result from willful misconduct or
         negligent acts or omissions of BAYER, its AFFLILIATES, or any of its or
         their respective employees, officers, directors or agents related to
         the testing of COMPOUND.

ARTICLE 13 - REPRESENTATIONS AND WARRANTIES

13.1     deCODE represents and warrants that the execution and performance of
         this AGREEMENT is within the corporate power of deCODE and has been
         duly authorized by all necessary corporate action. BAYER represents and
         warrants that the execution, delivery and performance of this AGREEMENT
         is within the corporate power of BAYER and has been duly authorized by
         all necessary corporate action. This AGREEMENT constitutes a valid and
         binding AGREEMENT between BAYER and deCODE.

13.2     deCODE represents and warrants that there are no contractual
         prohibitions or impediments including any claims, judgments,
         settlements against or owed by deCODE preventing it from entering into
         or performing its obligations under this AGREEMENT. BAYER represents
         and warrants that there are no contractual prohibitions or impediments
         including any claims, judgments, settlements against or owed by BAYER
         preventing it from entering into or performing its obligations under
         this AGREEMENT.

<Page>

                                       28

13.3     deCODE and BAYER each undertakes to the other to strictly adhere to all
         applicable laws and regulations with respect to COMPOUND and PRODUCT.

13.4     BAYER does not represent or warrant that the BAYER PATENTS are or will
         be valid or that they will not infringe the rights of THIRD PARTIES or
         that the development, manufacture, use or sale of PRODUCT is not or
         will not be an infringement of the rights of THIRD PARTIES. At the
         EFFECTIVE DATE of this AGREEMENT, BAYER represents that to the best of
         its knowledge, BAYER does not have any information that BAYER PATENTS
         are not valid or that they will infringe the rights of THIRD PARTIES or
         that the development, manufacture, use or sale of PRODUCT is or will be
         an infringement of the rights of THIRD PARTIES. BAYER further
         represents that it is not aware of any (i) BAYER PATENTS or BAYER KNOW
         HOW that are required and/or useful within the FIELD (A) for
         manufacture, formulation, and handling COMPOUND, or (B) developing,
         registering, marketing and selling PRODUCT in the TERRITORY, which are
         not being licensed or otherwise provided to deCODE hereunder, or (ii)
         intellectual property rights of any THIRD PARTY that are required
         and/or useful within the FIELD for, or would prevent or otherwise limit
         or hinder deCODE's (A) manufacture, formulation, and handling COMPOUND,
         or (B) developing, registering, marketing and selling PRODUCT in the
         TERRITORY.

ARTICLE 14 - MISCELLANEOUS

14.1     Neither PARTY shall be responsible to the other for any failure or
         delay in performing any of its obligations under this AGREEMENT or for
         other non-performance hereof if such delay or non-performance is caused
         by an event of Force Majeure such as strike, stoppage of labor, lockout
         or other labor trouble, fire, flood, accident, act of God or of
         government or of the public enemy of a PARTY, regulations, or laws of
         any government; war, terrorist attack, civil commotion, epidemic,
         failure of public utilities or

<Page>

                                       29

         common carriers or by any cause unavoidable or beyond the reasonable
         control of a PARTY ("FORCE MAJEURE").

14.2     However, the PARTY affected by such FORCE MAJEURE shall use its
         reasonable efforts to avoid, remove or remedy such circumstances.
         Either PARTY temporarily excused from performance hereunder by such
         circumstances shall resume performance with utmost dispatch when such
         circumstances are removed or remedied. Either PARTY claiming such
         circumstances as an excuse for delay in performance shall give prompt
         notice thereof and of the period for which such inability is expected
         to continue. in writing to the other PARTY.

14.3     Neither PARTY shall be entitled to assign its rights and obligations
         hereunder in whole or in part to a THIRD PARTY without the express
         written consent of the other PARTY hereto which consent shall not
         unreasonably be withheld, provided, however, that either party may,
         without such consent, assign the AGREEMENT and its rights and
         obligations but only IN TOTO, in connection with the transfer or sale
         of all or substantially all of the assets of its business (or that
         portion thereof to which this Agreement relates), or in the event of a
         merger or consolidation or change of control or similar transaction.
         This AGREEMENT shall be binding upon, and inure to the benefit of, each
         PARTY, its AFFILIATES and permitted successors and assigns.

<Page>

                                       30

14.4     The invalidity or un-enforceability of an Article or any part of an
         Article of the AGREEMENT in any jurisdiction shall not cause the
         invalidity of the whole AGREEMENT as to such jurisdiction, and shall
         not affect the validity or enforceability of such Article or such part
         of an Article in any other jurisdiction. The PARTIES will replace any
         Article or part of an Article found invalid or unenforceable with an
         alternative which should as nearly as possible achieve the PARTIES
         original intent.

14.5     No amendment of this AGREEMENT shall be valid or binding upon the
         PARTIES hereto unless made in writing and duly executed on behalf of
         each PARTY hereto.

14.6     The PARTIES hereto agree that the validity of this AGREEMENT and their
         respective rights and obligations under it shall be governed by the
         laws of the State of Delaware.

14.7     The PARTIES agree that if any dispute or disagreement arises between
         them in respect to this AGREEMENT, they shall follow the following
         procedure in an attempt to resolve the dispute or disagreement
         amicably:

         a.   The PARTY claiming that such a dispute exists shall give notice in
              writing to the other PARTY of the nature of the dispute.

         b.   Within fourteen (14) business days of receipt of such notice, a
              nominee or nominees of deCODE and a nominee or nominees of BAYER
              shall jointly decide the steps to be taken. If they do not agree
              to a jointly accepted procedure, they shall meet at least once
              within additional thirty (30) business days, in person, and
              exchange written summaries reflecting, in reasonable detail, the
              nature and extent of the dispute, and at this meeting they shall
              use their reasonable endeavours to resolve the dispute.

         c.   If, within a further period of thirty (30) business days, the
              dispute has not been resolved, or if for any reason, the required
              meeting has not

<Page>

                                       31

              been held, the PARTIES agree that any dispute may be referred to
              arbitration according to Article 14.8.

14.8     All disputes between the PARTIES arising in connection with this
         AGREEMENT shall, failing a settlement according to Section 14.7, be
         referred to arbitration composed of a panel of three (3) persons, who
         shall have knowledge of the pharmaceutical business. In such an event,
         each PARTY shall appoint one (1) independent arbitrator, who together
         shall jointly appoint a third arbitrator, who shall act as chairman. If
         either PARTY fails to appoint an arbitrator within 30 days of request
         by the other PARTY to so appoint, or if the arbitrators cannot agree on
         a chairman, either PARTY or both PARTIES jointly, may submit a request
         to the President of the Chamber of Commerce in Zurich, Switzerland, to
         so appoint. The foregoing arbitration shall take place in Zurich. The
         rules of procedure of the arbitration shall be governed by the Laws of
         the Canton of Zurich, Switzerland. The language of the arbitration
         shall be the English language. Judgment of the arbitration panel shall
         be final and legally binding upon the PARTIES.

14.9     Any notice required to be given hereunder shall be considered properly
         given if sent by registered letter or telex or telefax, prepaid, to the
         applicable PARTY at the address set forth below:

         Any notice to deCODE shall be addressed to:

         deCODE Genetics, Ehf.
         Mark Gurney, PhD
         Vice-President, Drug Discovery
         Sturlugotu 8
         IS-101 Reykjavik
         Iceland
         main:  +354-570-1900

<Page>

                                       32

         GSM: [CONFIDENTIAL TREATMENT REQUESTED]
         fax:  +354-570-2902

         with a copy to:
         deCODE Genetics Ehf.
         Johann Hjartarson Esq.
         Sturlugotu 8
         IS-101 Reykjavik
         Iceland
         Phone: +354-570-1900

         Any notice to BAYER shall be addressed to:

         Bayer HealthCare AG
         Division Pharma - BPA ICL
         Gebaude Q 30
         D-51368 Leverkusen
         Germany
         Tel:     ++49-214-30-52119
         Fax:     ++49-214-30-64830

         with a copy to:
         Bayer HealthCare AG
         CAO - L&P PL
         Gebaude Q 18
         D-51368 Leverkusen
         Germany
         Tel:  ++49-214-30-66196
         Fax:  ++49-214-30-24186

<Page>

                                       33

         or to such other address for such PARTY as it shall have furnished
         theretofore in writing to the other PARTY. If sent by mail, the date of
         receipt shall be deemed to be one week from the date of mailing.

IN WITNESS WHEREOF the PARTIES have caused this AGREEMENT to be duly executed as
of the day and year first written above.

Leverkusen                                                Reykjavik,
Date:                                                     Date:
Bayer HealthCare AG                                       deCode genetics, Ehf.

<Table>
<S>                           <C>                            <C>
/s/  Dr. D. Brocks            /s/ Dr. W. van den Kerckhoff   /s/ Dr. Kari Stefansson
Dr. D. Brocks                 Dr. W. van den Kerckhoff       Dr. Kari Stefansson
PH-Head of Int. Cooperation   Patents and Licensing          President & CEO
& Licensing Europe
</Table>

<Page>

                                       34

SCHEDULE A:       BAYER PATENTS

                  COMPOUND BAY X1005 (EP-B-344519 = LEA 26 119)

<Table>
<Caption>
     COUNTRY         Filing Date                PATENT-NO.           EXPIRATION DATE
------------------------------------------------------------------------------------
       <S>                <C>                    <C>                    <C>
       DK                 30.05.1989             169544                 30.05.2009

       NO                 16.05.1989             174889                 16.05.2009

       FI                 29.05.1989              91635                 29.05.2009

       HU                 30.05.1989             207719                 30.05.2009

       HU                 31.05.1995             211570                 18.05.2009

       PT                 29.05.1989              90675                 29.05.2009

       IE                 12.06.1989              61922                 12.06.2009

       ZA                 30.05.1989             89-4093                30.05.2009

       IL                 29.05.1989              90435                 29.05.2009

       SG                 30.03.1995             9590127                18.05.2009

       PH                 31.05.1989             38723*                      -

       CN                 15.05.1989              31912                 15.05.2004

       HK                 16.03.1995             388-95                 18.05.2009

       KR                 30.05.1989             131202                 27.11.2012

       TW                 12.05.1989              44432                 31.01.2006

       JP                 29.05.1989             2693576                29.05.2006

       JP                 23.05.1997             3076003                29.05.2006

       US                 19.05.1989             4970215                19.05.2009

       CA                 29.05.1989             1333802                03.01.2012

       HN                 22.02.1995              3477                  22.02.2015
</Table>

<Page>

                                       35

<Table>
       <S>                <C>                     <C>                   <C>
       PA                 10.08.1995              76772                 18.05.2009
</Table>

<Page>

                                       36

<Table>
<Caption>
     COUNTRY         FILING DATE                PATENT-NO.           EXPIRATION DATE
------------------------------------------------------------------------------------
       <S>                <C>                    <C>                    <C>
       DO                 03.03.1995              5182                  16.11.2010

       AR                 15.03.1995             331346*                 Cancelled

       AU                 29.05.1989             616269                 29.05.2009

       NZ                 26.05.1989             229310                 26.05.2009

       DE                 18.05.1989             EDE 58904042.1         18.05.2009

       SE                 18.05.1989             ESE 89108895.7         18.05.2009

       AT                 18.05.1989                EAT 0344519         18.05.2009

       GR                 18.05.1989                EGR 0344519         18.05.2009

       CH                 18.05.1989                ECH 0344519         18.05.2009

       IT                 18.05.1989                EIT 0344519         18.05.2009

       ES                 18.05.1989                EES 0344519         18.05.2009

       FR                 18.05.1989                EFR 0344519         18.05.2009

       BE                 18.05.1989                EBE 0344519         18.05.2009

       NL                 18.05.1989                ENL 0344519         31.05.2009

       GB                 18.05.1989                EGB 0344519         18.05.2009
</Table>

<Page>

                                       37

MANUFACTURING PROCESS (EP-B-509359 = LEA 28 305)

<Table>
<Caption>
                  COUNTRY     APPLICATION      APPLICATION       NUMBER OF        DATE OF
     NO.           CODE          NUMBER           DATE             ISSUE           ISSUE           TERM
----------------------------------------------------------------------------------------------------------
  <S>              <C>         <C>             <C>              <C>              <C>            <C>
  LEA 28305         JP         118492-92       1992-04-13         3224271        2001-08-24     2012-04-13

  LEA 28305         US           866707        1992-04-10         5306820        1994-04-26     2012-04-26

  LEA 28305        US 01         164674        1993-12-08         5473076        1995-12-05     2012-12-05

  LEA 28305        E AT        92105894.7      1992-04-06       EAT 0509359                     2012-04-06

  LEA 28305        E BE        92105894.7      1992-04-06       EBE 0509359                     2012-04-06

  LEA 28305        E CH        92105894.7      1992-04-06       ECH 0509359                     2012-04-06

  LEA 28305        E DE        92105894.7      1992-04-06        59205422.5                     2012-04-06

  LEA 28305        E DK        92105894.7      1992-04-06       EDK 0509359                     2012-04-06

  LEA 28305        E EP        92105894.7      1992-04-06        92105894.7      1996-02-28     2012-04-06

  LEA 28305        E ES        92105894.7      1992-04-06       EES 0509359                     2012-04-06

  LEA 28305        E FR        92105894.7      1992-04-06       EFR 0509359                     2012-04-06

  LEA 28305        E GB        92105894.7      1992-04-06       EGB 0509359                     2012-04-06

  LEA 28305        E GR        92105894.7      1992-04-06       EGR 0509359                     2012-04-06

  LEA 28305        E IT        92105894.7      1992-04-06       EIT 0509359                     2012-04-06

  LEA 28305        E LU        92105894.7      1992-04-06       ELU 0509359                     2012-04-06

  LEA 28305        E NL        92105894.7      1992-04-06       ENL 0509359                     2012-04-30

  LEA 28305        E SE        92105894.7      1992-04-06        92105894.7                     2012-04-06
</Table>

<Page>

                                       38

SCHEDULE B:

SPECIFICATION OF COMPOUND AND CERTIFICATE OF ANALYSIS

[CONFIDENTIAL TREATMENT REQUESTED]

<Page>

                                       39

SCHEDULE C:

DEVELOPMENT PLAN
[CONFIDENTIAL TREATMENT REQUESTED]

<Page>

                                       40

SCHEDULE D:

STUDY PLANS FOR EVALUATION OF [CONFIDENTIAL TREATMENT REQUESTED]

<Page>

                                       41

SCHEDULE E:

BAYER BAY X1005 REGULATORY FILINGS

              -   IND  Reference No: # 37 130

              -   CTX Reference No: # 0010/0197/A

              -   German Clinical Trial Application No: # 6373 40<Page>

                                                                   Exhibit 10.33

[NOTE: CERTAIN PORTIONS OF THIS DOCUMENT HAVE BEEN MARKED TO INDICATE THAT
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CONFIDENTIAL INFORMATION CONTAINED
IN THIS DOCUMENT. THE CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.]

                  LICENSE AND RESEARCH COLLABORATION AGREEMENT

                                     BETWEEN

                                MERCK & CO., INC.

                                       AND

                              DECODE GENETICS, EHF.

<Page>

                  LICENSE AND RESEARCH COLLABORATION AGREEMENT

         THIS RESEARCH COLLABORATION AND LICENSE AGREEMENT (this "Agreement"),
which shall be effective as of February 25, 2004 (the "Effective Date"), is
entered into by and between deCODE genetics, Ehf., a corporation organized under
the laws of Iceland ("deCODE") and Merck & Co., Inc., a corporation organized
under the laws of the State of New Jersey, having an office located at One Merck
Drive, Whitehouse Station, New Jersey 08889 ("MERCK").

                             PRELIMINARY STATEMENTS

A.       deCODE has expertise in conducting research in the field of human
genetics and genomics and in the conduct of clinical trials.

B.       MERCK has certain expertise in drug development and in the design and
conduct of clinical trials to demonstrate the safety and efficacy of its
pharmaceutical products.

C.       deCODE and MERCK wish to collaborate on the design and conduct of
Information Rich Clinical Trials (terms with initial capitals as hereafter
defined) on selected MERCK compounds in specified Disease Areas in accordance
with the attached Work Plan.

D.       deCODE Parent (as hereinafter defined) and MERCK are simultaneously
entering into a separate Stock and Warrant Purchase Agreement whereby MERCK
shall purchase shares of stock of deCODE Parent pursuant to the terms and
conditions set forth in that agreement.

NOW, THEREFORE, in consideration of the foregoing Preliminary Statements and the
mutual agreements and covenants set forth herein, the Parties hereby agree as
follows:

1.       DEFINITIONS

         Unless specifically set forth to the contrary herein, the following
terms, whether used in the singular or plural, shall have the respective
meanings set forth below:

1.1      "AFFILIATE" shall mean as to deCODE or MERCK, as the case may be (i)
         any corporation or business entity of which fifty percent (50%) or more
         of the securities or other ownership interests representing the equity,
         the voting stock or general partnership interest are owned, controlled
         or held, directly or indirectly, by MERCK or deCODE; or (ii) any
         corporation or business entity which, directly or indirectly, owns,
         controls or holds fifty percent (50%) (or the maximum ownership
         interest permitted by law) or more of the securities or other ownership
         interests representing the equity, the voting stock or, if applicable,
         the general partnership interest, of MERCK or deCODE.

1.2      "ASSOCIATED INFORMATION" shall mean information about [CONFIDENTIAL
         TREATMENT REQUESTED] in an IRCT performed as part of the Research
         Program which [CONFIDENTIAL TREATMENT REQUESTED] in an Exclusive
         Disease Area or a Non-exclusive Disease Area where the [CONFIDENTIAL
         TREATMENT REQUESTED] is associated with the [CONFIDENTIAL TREATMENT
         REQUESTED] within the Disease Area being studied in that IRCT.

1.3      "BUDGET" shall mean the projected expenditures for the upcoming year
         set out in Schedule 2.6

                                        4
<Page>

         and more fully described in Section 2.6.

1.4      "CALENDAR QUARTER" shall mean the respective periods of three (3)
         consecutive calendar months ending on March 31, June 30, September 30
         and December 31.

1.5      "CALENDAR YEAR" shall mean each successive period of twelve (12) months
         commencing on January 1 and ending on December 31.

1.6      A "CHANGE IN CONTROL" shall mean the occurrence of any of the
         following:

         (a) An acquisition of any voting securities of deCODE Parent (the
         "Voting Securities") by any "Person" (as the term "person" is used for
         purposes of Section 13(d) or 14(d) of the Securities Exchange Act of
         1934, as amended (the "Exchange Act")), immediately after which such
         Person has "Beneficial Ownership" (within the meaning of Rule 13d-3
         promulgated under the Exchange Act) of more than fifty percent (50%) of
         (1) the then-outstanding shares of common stock of deCODE Parent (or
         any other securities into which such shares of common stock are changed
         or for which such shares of common stock are exchanged) (the "Shares")
         or (2) the combined voting power of deCODE Parent's then-outstanding
         Voting Securities;

         (b) The individuals who, as of Effective Date, are members of the board
         of directors of deCODE Parent (the "Incumbent Board"), following a
         Merger (as hereinafter defined), do not for any reason constitute at
         least a majority of the members of the board of directors of (x) the
         corporation resulting from such Merger (the "Surviving Corporation"),
         if fifty percent (50%) or more of the combined voting power of the
         then-outstanding voting securities of the Surviving Corporation is not
         Beneficially Owned, directly or indirectly, by another Person (a
         "Parent Corporation") or (y) if there is one or more than one Parent
         Corporation, the ultimate Parent Corporation; PROVIDED, HOWEVER, that,
         any individual becoming a director subsequent to the date hereof whose
         election, or nomination for election by such company's shareholders,
         was approved by a vote of at least a majority of the directors then
         comprising the Incumbent Board shall be considered as though such
         individual were a member of the Incumbent Board, but excluding, for
         this purpose, any such individual whose initial assumption of office
         occurs as a result of an actual or threatened election contest with
         respect to the election or removal of directors or other actual or
         threatened solicitation of proxies or consents by or on behalf of a
         Person other than the board of directors of deCODE Parent (a "Proxy
         Contest"), including by reason of any agreement intended to avoid or
         settle any Proxy Contest;

         (c) At least eighty (80%) percent of voting securities of deCODE are no
         longer owned directly or indirectly by deCODE Parent; or

         (d) The consummation of:

                 (i)   A merger, consolidation or reorganization (1) with or
         into deCODE Parent or a direct or indirect subsidiary of deCODE Parent
         or (2) in which securities of deCODE Parent are issued (both
         1.5(c)(i)(1) and (2) are defined as a "Merger"), unless such Merger is
         a "Non-Control Transaction." A "Non-Control Transaction" shall mean a
         Merger in which:

                              (A) the stockholders of deCODE Parent immediately
         before such Merger own directly or indirectly immediately following
         such Merger at least fifty percent (50%) of the combined voting power
         of the outstanding voting securities of (x) the Surviving Corporation,
         if there is no Parent Corporation or (y) if there is one or more than
         one Parent Corporation, the

                                        4
<Page>

         ultimate Parent Corporation;

                              (B) the individuals who were members of the
         Incumbent Board immediately prior to the execution of the agreement
         providing for such Merger constitute at least a majority of the members
         of the board of directors of (x) the Surviving Corporation, if there is
         no Parent Corporation, or (y) if there is one or more than one Parent
         Corporation, the ultimate Parent Corporation; and

                              (C) no Person other than (1) deCODE Parent, or
         (2) any Person who, immediately prior to the Merger had Beneficial
         Ownership of fifty percent (50%) or more of the then outstanding Shares
         or Voting Securities, has Beneficial Ownership, directly or indirectly,
         of fifty percent (50%) or more of the combined voting power of the
         outstanding voting securities or common stock of (x) the Surviving
         Corporation, if fifty percent (50%) or more of the combined voting
         power of the then outstanding voting securities of the Surviving
         Corporation is not Beneficially Owned, directly or indirectly by a
         Parent Corporation, or (y) if there is one or more than one Parent
         Corporation, the ultimate Parent Corporation; PROVIDED, HOWEVER, that
         any Person described in clause (2) of this subsection (C) may not,
         immediately following the Merger, Beneficially Own more than thirty
         percent (30%) of the combined voting power of the outstanding voting
         securities of the Surviving Corporation or the Parent Corporation, as
         applicable, for the Merger to constitute a Non-Control Transaction.

                              (ii) A complete liquidation or dissolution of
         deCODE Parent; or

                              (iii) The sale or other disposition of all or
         substantially all of the assets of deCODE Parent and its Subsidiaries
         taken as a whole to any Person (other than (x) a transfer under
         conditions that would constitute a Non-Control Transaction, with the
         disposition of assets being regarded as a Merger for this purpose or
         (y) the distribution to deCODE Parent's stockholders of any other
         assets).

         Notwithstanding the foregoing, a Change in Control shall not be deemed
         to occur solely because any Person (the "Subject Person") acquired
         Beneficial Ownership of more than the permitted amount of the then
         outstanding Shares or Voting Securities as a result of the acquisition
         of Shares or Voting Securities by deCODE Parent which, by reducing the
         number of Shares or Voting Securities then outstanding, increases the
         proportional number of shares Beneficially Owned by the Subject
         Persons; provided that if a Change in Control would occur (but for the
         operation of this sentence) as a result of the acquisition of Shares or
         Voting Securities by deCODE Parent and, after such share acquisition by
         deCODE Parent, the Subject Person becomes the Beneficial Owner of any
         additional Shares or Voting Securities and such Beneficial Ownership
         increases the percentage of the then outstanding Shares or Voting
         Securities Beneficially Owned by the Subject Person, then a Change in
         Control shall occur.

1.7      "COLLABORATION DATE" shall be February 25, 2004.

1.8      "COLLABORATION INFORMATION AND INVENTION" shall mean any discoveries,
         Improvements, processes, methods, protocols, formulas, data,
         inventions, know-how and trade secrets, patentable or otherwise, that
         arise from the Research Program.

1.9      "COLLABORATION PATENTS" shall mean any and all patents and patent
         applications in the Territory (which for the purposes of this Agreement
         shall be deemed to include certificates of invention

                                        4
<Page>

         and applications for certificates of invention) that a Party or its
         Affiliates owns, Controls or through license or otherwise acquires
         rights during the term of this Agreement which claim, cover or relate
         to Collaboration Information and Inventions or are divisions,
         continuations, continuations-in-part, reissues, renewals, extensions,
         supplementary protection certificates, utility, models and the like of
         any such patents and patent applications and foreign equivalents
         thereof.

1.10     "COMBINATION PRODUCT" shall mean a Product which includes one or more
         active ingredients other than IRCT Compound or Related IRCT Compound in
         combination with IRCT Compound or Related IRCT Compound. All references
         to Product in this Agreement shall be deemed to include Combination
         Product.

1.11     "COMPETITIVE PRODUCT" shall mean a product containing the IRCT Compound
         or Related IRCT Compound which has or attains on a Calendar Year basis
         a market share of [CONFIDENTIAL TREATMENT REQUESTED] or more in a
         country of sale as measured by prescriptions or other similar
         information in the country of sale.

1.12     "COMPETITOR" shall mean a company in the pharmaceutical business sector
         with reported annual gross revenues from the sale of pharmaceuticals in
         excess [CONFIDENTIAL TREATMENT REQUESTED] for each of its [CONFIDENTIAL
         TREATMENT REQUESTED].

1.13     "CONTROL", "CONTROLS" OR "CONTROLLED BY" shall mean either (a) being an
         Affiliate of either MERCK or deCODE; or (b) with respect to any item of
         or right under Collaboration Patents, Patents or Know-How, the
         possession of (whether by ownership or license, other than pursuant to
         this Agreement) or the ability of a Party to grant access to, or a
         license or sublicense of, such items or right as provided for herein
         without violating the terms of any agreement or other arrangement with
         any Third Party existing at the time such Party would be required
         hereunder to grant the other Party such access or license or
         sublicense.

1.14     "deCODE INFORMATION AND INVENTIONS" shall mean all Collaboration
         Information and Inventions developed or invented solely by employees of
         deCODE or other persons not employed by MERCK acting on behalf of
         deCODE.

1.15     "deCODE KNOW-HOW" shall mean all secret, substantial and identified
         information and materials, including, but not limited to, discoveries,
         Improvements, processes, formulas, data, inventions(including without
         limitation deCODE's Information and Inventions and deCODE's rights in
         Joint Information and Inventions), know-how and trade secrets,
         patentable or otherwise, which arise from the Research Program and
         during the term of this Agreement (i) are in deCODE's possession or
         control, (ii) are not generally known and (iii) are necessary or useful
         to MERCK in connection with the Research Program or the research,
         development, manufacture, marketing, use or sale of IRCT Compound,
         Related IRCT Compound, Tests or Product in the

                                        4
<Page>

         Territory.

1.16     "deCODE COLLABORATION PATENTS" shall mean Collaboration Patents that
         claim, cover or relate to deCODE Information and Inventions excluding
         deCODE Information and Inventions relating to deCODE Generalized
         Technology.

1.17     "deCODE COMPOUNDS" shall mean compounds[CONFIDENTIAL TREATMENT
         REQUESTED].

1.18     "deCODE GENERALIZED TECHNOLOGY" shall mean any Technical Information
         relating to generalized methods for conducting genomics research and
         characterizing the function of genes or any raw data useful in
         generalized genomics research tools which at any time is owned or
         controlled by deCODE or its Affiliates (provided deCODE or its
         Affiliates have the right to license or otherwise make available such
         Technical Information to MERCK).

1.19     "deCODE GENOMICS DATA" shall mean (a) [CONFIDENTIAL TREATMENT
         REQUESTED] as may be created, developed or acquired by deCODE from time
         to time during the term of this Agreement or as may be existing or have
         been created as of the Effective Date, and (b) deCODE's proprietary
         inventions, processes and other assets directly relating to the use,
         creation, maintenance, development, operation, access, analysis,
         reporting, storage, protection, and/or transmission of such proprietary
         databases, including proprietary methods, procedures and techniques,
         procedure manuals, personal and scientific data, computer technical
         expertise and software, in each case independently developed by or on
         behalf of deCODE and such software useful for the analysis of the
         information included in such databases.

1.20     "deCODE PARENT" shall mean deCODE genetics, Inc., a corporation
         organized and existing under the laws of the State of Delaware.

1.21     "deCODE PATENTS" shall mean Patents, that deCODE or its Affiliates
         Control prior to the Effective Date or during the term of this
         Agreement, including but not limited to those listed on Schedule 1.21,
         that are necessary or useful to MERCK in connection with the Research
         Program or the research, development, manufacture, marketing, use or
         sale of IRCT Compound, Tests or Product in the Territory including
         Patents claiming deCODE Genomics Data but excluding any part of Patents
         claiming deCODE Generalized Technology.

1.22     "deCODE PRIOR KNOW-HOW" shall mean all secret, substantial and
         identified information and materials, including, but not limited to,
         discoveries, Improvements, processes, formulas, data, inventions,
         know-how and trade secrets, patentable or otherwise, which existed
         prior to the Effective Date and during the term of this Agreement (i)
         are in deCODE's possession or control, (ii) are not generally known and
         (iii) are necessary or useful to MERCK in connection with the

                                        4
<Page>

         Research Program or the research, development, manufacture, marketing,
         use or sale of IRCT Compound, Tests or Product in the Territory
         including deCODE Genomics Data but excluding deCODE Generalized
         Technology and deCODE Know-How.

1.23     "DISEASE AREAS" shall mean Exclusive Disease Areas and Non-exclusive
         Disease Areas.

1.24     "EXCLUSIVE DISEASE AREAS" shall mean at least one of the following:
         [CONFIDENTIAL TREATMENT REQUESTED].

1.25     [CONFIDENTIAL TREATMENT REQUESTED]

1.26     [CONFIDENTIAL TREATMENT REQUESTED]

1.27     [CONFIDENTIAL TREATMENT REQUESTED]

1.28     "NON-EXCLUSIVE DISEASE AREAS" shall mean [CONFIDENTIAL TREATMENT
         REQUESTED].

1.29     [CONFIDENTIAL TREATMENT REQUESTED]

1.30     "ELECTED DISEASE" shall have the meaning set out in Section 3.1(d).

1.31     "EXCLUSIVE LICENSE FEE" shall have the meaning set out in Section
         3.1(d).

1.32     "EXECUTIVE COMMITTEE" shall mean the committee made up of one senior
         executive of each Party as more fully described in Section 2.5.1.

1.33     "FILING" of an NDA shall mean the acceptance by a Regulatory Authority
         of an NDA for filing.

1.34     "FIRST COMMERCIAL SALE" shall mean, with respect to any Product or
         Test, the first sale for end use or consumption of such Product or Test
         in a country after all required approvals, including Marketing
         Authorization, have been granted by the Regulatory Authority of such
         country.

                                        4
<Page>

1.35     "FULL TIME EQUIVALENT" or "FTE" shall mean the equivalent of a
         full-time scientist's work time over a twelve-month period (including
         normal vacations, sick days and holidays). The portion of an FTE year
         devoted by a scientist to the Research Program shall be determined by
         dividing the number of full days during any twelve-month period devoted
         by such employee to the Research Program by the total number of working
         days during such twelve-month period.

1.36     "IMPROVEMENT" shall mean any enhancement, whether or not patentable, in
         the manufacture, formulation, ingredients, preparation, presentation,
         means of delivery, dosage or packaging of IRCT Compound, Related IRCT
         Compound, Tests or Product.

1.37     "INFORMATION" shall mean any and all information and data, including
         without limitation all MERCK Know-How, deCODE Know-How, and all other
         scientific, pre-clinical, clinical, regulatory, manufacturing,
         marketing, financial and commercial information or data, whether
         communicated in writing or orally or by any other method, which is
         provided by one Party to the other Party in connection with this
         Agreement.

1.38     "INFORMATION RICH CLINICAL TRIAL OR IRCT" shall mean a clinical trial
         which includes the following, as specified in the protocol for such
         clinical trial: [CONFIDENTIAL TREATMENT REQUESTED]

1.39     "INVENTION" means any process, method, composition of matter, article
         of manufacture, discovery or finding that is conceived and reduced to
         practice.

1.40     "IRCT COMPOUND" shall mean a Selected Compound that has [CONFIDENTIAL
         TREATMENT REQUESTED] in accordance with the Agreement.

1.41     "JOINT INFORMATION AND INVENTIONS" shall mean all discoveries,
         Improvements, processes, methods, protocols, formulas, data,
         Inventions, know-how and trade secrets, patentable or otherwise,
         arising from the Research Program developed or invented jointly by
         employees of MERCK and deCODE or others acting on behalf of MERCK and
         deCODE.

1.42     "JOINT COLLABORATION PATENTS" shall mean Collaboration Patents that
         claim, cover or relate to Joint Information and Inventions.

1.43     "MARKETING AUTHORIZATION" shall mean any approval (including without
         limitation all applicable pricing and governmental reimbursement
         approvals) necessary to receive permission from the relevant Regulatory
         Authority to market and sell a Product or Test in any country.

1.44     "MERCK COMPOUND OPTION" shall have the meaning set out in Section
         3.1(e) (i).

1.45     "MERCK COMPOUND PATENT" shall mean any Patent that claims, covers or
         relates to an IRCT Compound, Related IRCT Compound, Test or Product
         Controlled by MERCK.

1.46     "MERCK EXERCISE NOTICE" shall have the meaning set out in Section
         3.1(e) (iii).

1.47     "MERCK INFORMATION AND INVENTIONS" shall mean all discoveries,
         Improvements, processes,

                                        4
<Page>

         methods, protocols, formulas, data, Inventions, know-how and trade
         secrets, patentable or otherwise, arising from the Research Program
         developed or invented solely by employees of MERCK or other persons not
         employed by deCODE acting on behalf of MERCK.

1.48     "MERCK KNOW-HOW" shall mean any information and materials, including
         but not limited to, discoveries, Improvements, processes, methods,
         protocols, formulas, data, inventions (including without limitation
         MERCK's Information and Inventions and MERCK's rights in Joint
         Information and Inventions), know-how and trade secrets, patentable or
         otherwise, which arise from the Research Program and during the term of
         this Agreement, (i) are in MERCK's possession or control, (ii) are not
         generally known and (iii) are in MERCK's opinion necessary to deCODE in
         the performance of its obligations under the Research Program.

1.49     "MERCK COLLABORATION PATENTS" shall mean Collaboration Patents that
         claim, cover or relate to MERCK Information and Inventions.

1.50     "MERCK PATENTS" shall mean Patents Controlled by MERCK prior to the
         Effective Date or during the term of this Agreement (provided MERCK has
         the right to license or otherwise make available such Patents to
         deCODE) and are necessary or useful to deCODE in connection with the
         Research Program.

1.51     "MERCK PRIOR KNOW-HOW" shall mean any information and materials,
         including but not limited to, discoveries, Improvements, processes,
         methods, protocols, formulas, data, inventions, know-how and trade
         secrets, patentable or otherwise, which existed prior to the Effective
         Date and during the term of this Agreement, (i) are in MERCK's
         possession or control, (ii) are not generally known and (iii) are in
         MERCK's opinion necessary to deCODE in the performance of its
         obligations under the Research Program excluding MERCK Know-How.

1.52     "MERCK SHARE" [CONFIDENTIAL TREATMENT REQUESTED].

1.53     "NET SALES" shall mean the gross invoice price of Product or Tests sold
         by MERCK or its Related Parties to the first Third Party after
         deducting, if not previously deducted, from the amount invoiced or
         received:

         (a)     trade and quantity discounts other than early pay cash
                 discounts;

         (b)     returns, rebates, chargebacks and other allowances;

         (c)     retroactive price reductions that are actually allowed or
         granted;

         (d)     sales commissions paid to Third Party distributors and/or
         selling agents;

         (e)     a fixed amount equal to [CONFIDENTIAL TREATMENT REQUESTED] of
         the amount invoiced to cover bad debt, sales or excise taxes, early
         payment cash discounts, transportation and insurance, custom duties,
         and other governmental charges; and

         (f)     the standard inventory cost of devices or delivery systems used
         for dispensing or administering Product or Tests, as applicable. With
         respect to sales of Combination Products, Net Sales shall be calculated
         on the basis of the gross invoice price of Product(s) containing the
         same strength of IRCT Compound or Related IRCT Compound sold without
         other active ingredients. In the event that Product is sold only as a
         Combination Product, Net Sales shall be calculated on the basis of the
         gross invoice price of the

                                        4
<Page>

         Combination Product multiplied by a fraction, the numerator of which
         shall be the inventory cost of IRCT Compound or Related IRCT Compound
         in the Product and the denominator of which shall be the inventory cost
         of all of the active ingredients in the Combination Product. Inventory
         cost shall be determined in accordance with MERCK's regular accounting
         methods, consistently applied. The deductions set forth in paragraphs
         (a) through (f) above will be applied in calculating Net Sales for a
         Combination Product. In the event that Product is sold only as a
         Combination Product and either Party reasonably believes that the
         calculation set forth in this Paragraph does not fairly reflect the
         value of the Product relative to the other active ingredients in the
         Combination Product, the Parties shall negotiate, in good faith, other
         means of calculating Net Sales with respect to Combination Products.

1.54     "PARTY OR PARTIES" shall mean either MERCK or deCODE or both as the
         context requires.

1.55     "PATENT RIGHTS" shall mean deCODE Collaboration Patents, and deCODE's
         interest in Joint Collaboration Patents.

1.56     "PATENTS" shall mean any and all patents and patent applications in the
         Territory (which for the purposes of this Agreement shall be deemed to
         include certificates of invention and applications for certificates of
         invention) that a Party owns, Controls or through license or otherwise
         acquires rights prior to the Effective Date or during the term of this
         Agreement which: (i) claim, cover or relate to a Selected Compound,
         Test and/or Product; or (ii) claim, cover or relate to Inventions; or
         (iii) are divisions, continuations, continuations-in-part, reissues,
         renewals, extensions, supplementary protection certificates, utility,
         models and the like of any such patents and patent applications and
         foreign equivalents thereof.

1.57     "PRODUCT(s)" shall mean any therapeutic preparation in final form
         containing (a) an IRCT Compound for sale by prescription,
         over-the-counter or any other method for any and all uses that arise
         from the [CONFIDENTIAL TREATMENT REQUESTED] in the Disease Area or (b)
         a Related IRCT Compound, including without limitation in the case of
         either 1.57(a) or (b) any Combination Product.

1.58     "RELATED PARTIES" shall mean a Party's Affiliates or sublicensees, but
         shall not mean a Party's distributors.

1.59     "REGULATORY AUTHORITY" shall mean any applicable government regulatory
         authority involved in granting approvals for the manufacturing,
         marketing, reimbursement and/or pricing of a Product or Test, as
         applicable, in the Territory, including, in the United States, the
         United States Food and Drug Administration and any successor
         governmental authority having substantially the same function.

1.60     "RELATED IRCT COMPOUND" shall mean a compound Controlled by MERCK that
         [CONFIDENTIAL TREATMENT REQUESTED].

1.61     "RESEARCH PROGRAM TERM" shall mean the duration of the Research Program
         and "Extended Research Program Term" shall mean any period of the
         Research Program as it may be extended by mutual agreement of the
         Parties, as described more fully in Section 2.10.

1.62     "RESEARCH PROGRAM" shall mean the research activities undertaken by the
         Parties hereto as set forth in Article 2 and Attachment 2.1.

1.63     "SELECTED COMPOUND" shall mean any compound proposed by MERCK and
         accepted by the

                                        4
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         Operating Committee to be evaluated in Information Rich Clinical
         Trials.

1.64     "OPERATING COMMITTEE" shall mean the joint research committee
         established to facilitate the Research Program as more fully described
         in Section 2.5.1.

1.65     "SUCCESSFUL CLINICAL RESULT" shall mean result(s) [CONFIDENTIAL
         TREATMENT REQUESTED].

1.66     "TECHNICAL INFORMATION" shall mean information, data or know-how
         (whether patentable or unpatentable), including without limitation,
         formulas, manufacturing methods, procedures, designs, compositions of
         matter, plans, applications, specifications, drawings, techniques,
         materials (including without limitation biological materials such as
         tissue samples, plasma samples, cell lines, RNA, DNA, DNA fragments,
         organisms, proteins, polypeptides, plasmids, vectors and the like),
         compounds, samples, inventions, discoveries, and the like, as well as
         improvements related thereto.

1.67     "TERRITORY" shall mean all of the countries in the world, and their
         territories and possessions.

1.68     "THERAPEUTIC FIELD" shall mean any and all application of technology to
         [CONFIDENTIAL TREATMENT REQUESTED].

1.69     "TESTS" shall mean pharmacogenomic tests aimed at predicting the
         response or non-response and side-effects to an IRCT Compound that are
         developed, discovered or identified through the Research Program.

1.70     "THIRD PARTY" shall mean an entity other than MERCK and its Affiliates,
         and deCODE and its Affiliates.

1.71     "VALID PATENT CLAIM" shall mean a claim of an issued and unexpired
         patent included within the MERCK Compound Patent which claims IRCT
         Compound, Related IRCT Compound, Tests or Product as a composition of
         matter, which has not been revoked or held unenforceable or invalid by
         a decision of a court or other governmental agency of competent
         jurisdiction, and which is not appealable or has not been appealed
         within the time allowed for appeal, and which has not been disclaimed,
         denied or admitted to be invalid or unenforceable through reissue,
         re-examination or disclaimer or otherwise.

1.72     "WORK PLAN" shall mean Schedule 2.1-X describing the tasks to be
         performed by each of the Parties in furtherance of the Research
         Program. It is anticipated that there will be separate work plans
         relating to each IRCT conducted by the Parties which shall be appended
         to the Agreement in sequential order.

2.       RESEARCH PROGRAM

2.1      GENERAL

         deCODE and MERCK shall engage in the Research Program upon the terms
         and conditions set forth in this Agreement. The activities to be
         undertaken in the course of each IRCT pursuant to the Research Program
         will be set forth in a Work Plan (Schedule 2.1-X) wherein X shall begin
         with 1 continue in succession. Prior to the initiation of any IRCT
         herein the Parties shall agree in writing signed by members of the
         Executive Committee or their designees on what is a Successful Clinical
         Result and the signed writing shall become part of the corresponding
         Work

                                        4
<Page>

         Plan for that IRCT. The Work Plan may be amended from time to time upon
         the mutual written agreement by authorized representatives of the
         Parties. All Work Plans including Schedule 2.1-0 attached hereto are
         part of the Agreement. Notwithstanding any provision of the Agreement
         to the contrary, neither Party shall be obligated to conduct any
         activities which it reasonably believes would be in violation of any
         statute, regulation, law, or terms of any ongoing deCODE project in a
         Non-exclusive Disease Area.

2.2      CONDUCT OF RESEARCH

         deCODE and MERCK each shall conduct the Research Program in good
         scientific manner, and in compliance in all material respects with all
         requirements of applicable laws, rules and regulations and all
         applicable good laboratory practices to attempt to achieve their
         objectives efficiently and expeditiously. deCODE and MERCK each shall
         proceed diligently with the work set out in the Work Plan by using
         their respective good faith efforts to allocate sufficient time,
         effort, equipment and facilities to the Research Program and to use
         personnel with sufficient skills and experience as are required to
         accomplish the Research Program in accordance with the terms of this
         Agreement and Work Plan.

         deCODE and MERCK shall be entitled to utilize the services of their
         Affiliates to perform their respective Research Program activities.
         Each Party shall also be entitled to utilized the services of Third
         Parties to perform their respective Research Program activities only
         upon the prior written consent of the other Party or as specifically
         set forth in Work Plan. Notwithstanding any such consent, both Parties
         shall remain at all times fully liable for its respective
         responsibilities under the Research Program.

2.3      INFORMATION RICH CLINICAL TRIALS

         Each IRCT shall be conducted in accordance with the Work Plan and a
         detailed protocol. A proposed protocol and a draft proposal for what a
         Successful Clinical Result will be, shall be prepared initially by the
         Operating Committee. These draft proposals shall be further reviewed
         internally by the appropriate committees within MERCK and deCODE. The
         draft proposals, with any changes or revisions made by MERCK or deCODE,
         shall then be considered and revised by the Operating Committee for
         submission to the Executive Committee. deCODE shall be obligated to
         provide support needed to conduct no more than five (5) IRCTs
         concurrently at any time during the Research Program. Each IRCT shall
         be conducted under the direction and control of the Operating Committee
         in accordance with the terms and conditions set forth in Schedule 2.3
         and a Study Protocol for that Selected Compound. In any given IRCT that
         is conducted under this Agreement the Parties may modify and/or
         supplement the terms and conditions set forth in Schedule 2.3 in
         accordance with Section 10.7 herein. All data and results pertaining to
         any Selected Compound may be used by MERCK in filings with Regulatory
         Authorities and all other rights to any intellectual property that are
         embodied by those data and results shall be governed by Article 3.

2.4      COMPOUND SELECTION

         MERCK shall nominate MERCK compounds during the Research Program for
         which Information Rich Clinical Trials shall be conducted by the
         Parties according to the Work Plan. deCODE shall be given the
         opportunity to review each proposed compound to confirm that deCODE's
         conduct of one or more IRCTs on such compound under this Agreement
         would not

                                        4
<Page>

         conflict with any other ongoing deCODE project(s). The Operating
         Committee shall select which MERCK nominated compounds will become
         Selected Compounds; PROVIDED, HOWEVER, that solely with respect to
         compounds in the Non-exclusive Disease Area, deCODE shall not be
         obligated to perform development efforts with respect to any such
         compounds if it reasonably believes that the performance of such
         efforts will conflict with any ongoing deCODE project(s).

2.5      GOVERNANCE OF THE COLLABORATION.

         The Parties hereby establish process to govern the conduct of the
         Research Program and each party's contribution to the Research Program
         as follows:

2.5.1    MANAGERIAL OVERSIGHT.

         There will be two levels of managerial oversight of the Research
         Program. There will be an Executive Committee and an Operating
         Committee. In addition each Party shall designate Project Leaders for
         the Research Program.

                 (a)   EXECUTIVE COMMITTEE

                 The Executive Committee shall consist of one senior executive
                 from each of MERCK and deCODE. The Executive Committee shall
                 have the ultimate authority for decisions regarding the
                 Research Program. The matters that require approval by the
                 Executive Committee shall include approval of financial
                 statements such as the Budget and approval of the Work Plan.

                       (i)    Any disputes where the Executive Committee cannot
                       reach a mutually acceptable decision within thirty (30)
                       days after the matter was referred to them shall be
                       decided by the President of MERCK Research Laboratories
                       and the final determination of the issue that shall be
                       binding on the Parties and the Research Program;
                       PROVIDED, HOWEVER, as set forth below in Section 2.5.1
                       (a)(ii) regarding implementation of such decisions and in
                       all cases that to the extent such disputes materially
                       affect the rights or obligations of the Parties under
                       this Agreement, MERCK shall consult with deCODE and the
                       Parties shall agree on a course of action to lawfully
                       avoid or minimize such effects upon the rights or
                       obligations of the Parties, to the extent practicable.

                       (ii)   Any disputes arising with respect to the manner in
                       which decisions of the Operating Committee, the Executive
                       Committee or the President of Merck Research Laboratories
                       will be implemented that will affect relations with
                       patients participating in the Research Program, research
                       sites, consultants, investigators or vendors all of which
                       are in Iceland, or any governmental authority in Iceland
                       ("Implementation Disputes"), shall be decided by the
                       Chief Executive Officer of deCODE (or his designee) and
                       the final determination of the issue that shall be
                       binding on the Parties and the Research Program, who
                       shall give good faith consideration to the comments of
                       MERCK's Executive Committee member (or their respective
                       designees) in resolving such matter; PROVIDED, HOWEVER,
                       that to the extent such disputes materially affect the
                       rights or obligations of the Parties under this
                       Agreement, deCODE shall consult with MERCK and the
                       Parties shall agree on a course of action to lawfully
                       avoid or minimize such effects upon the rights or
                       obligations of the Parties, to the extent practicable.

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<Page>

                 (b)   OPERATING COMMITTEE

                       The Operating Committee shall be based in Iceland and
                       composed of MERCK representatives and deCODE
                       representatives and shall exist for [**] after
                       termination or expiration of the Research Program Term.
                       The Operating Committee shall perform the following
                       functions (i) approve and, as the need arises, determine
                       the necessity to remove personnel working on the Research
                       Program, (ii) prepare the Budget, (iii) formulate and
                       adjust Work Plans, (iv) select Compounds; (v) oversee
                       progress of the Research Program and exchange of data
                       between the Parties; and (vi) appoint sub-committees of
                       equal representation to fulfill any of the enumerated
                       tasks set forth in this Section 2.5.1(b). Each Party
                       shall have 1 vote. Each Party shall appoint its
                       representatives to the Operating Committee from time to
                       time, and may substitute one or more of its
                       representatives, in its sole discretion, effective upon
                       notice to the other Party of such change. These
                       representatives shall have, individually or collectively,
                       appropriate technical credentials, experience and
                       knowledge, and ongoing familiarity with the Research
                       Program. Additional representatives or consultants may
                       from time to time, by mutual consent of the Parties, be
                       invited to attend Operating Committee meetings, in the
                       case of consultants subject to such consultant's written
                       agreement to comply with the requirements of Section 4.1.
                       Any member of the Operating Committee may designate a
                       substitute to attend and perform the functions of that
                       member at any meeting of the Operating Committee. A
                       chairperson and secretary of the Operating Committee
                       shall serve co-terminus one (1) year terms, commencing on
                       the Collaboration Date or an anniversary thereof, as the
                       case may be. deCODE shall have the right to name the
                       chairperson and MERCK shall have the right to name the
                       secretary of the Operating Committee. Decisions of the
                       Operating Committee shall be made unanimously by the
                       members. In the event that the Operating Committee cannot
                       or does not, after good faith efforts, reach agreement on
                       an issue, the resolution and/or course of conduct shall
                       be referred to the Executive Committee. Each Party shall
                       bear its own expenses related to the attendance of such
                       meetings by its representatives and invitees.

2.5.2    MEETINGS AND MINUTES.

         Meetings of the Operating Committee require the participation of at
         least one member of the Operating Committee from each Party. During the
         Research Program Term, the Operating Committee shall meet in person at
         least once during every Calendar Year. From time to time, a Party may
         give the other Party reasonable notice of its desire to hold a meeting
         of the Operating Committee. Unless otherwise agreed by the Parties,
         meetings of the Operating Committee shall be held in person and shall
         alternate between the offices of the Parties, or meet in such other
         place as agreed by the Parties. Instead of meeting in person, the
         members of the Operating Committee may, for purposes of holding a
         Operating Committee meeting, convene or be polled or consulted from
         time to time by means of telecommunications, video conferences,
         electronic mail or correspondence, as deemed necessary or appropriate
         by the Parties.

         With the sole exception of specific items of the meeting minutes to
         which the chairperson and the secretary cannot agree and which are
         escalated as provided below, definitive minutes of all Operating
         Committee meetings shall be finalized promptly after the meeting to
         which the minutes pertain, as follows:

         Promptly after each Operating Committee meeting, the secretary shall
         prepare and distribute to all members of the Operating Committee draft
         minutes of the meeting. Such minutes shall provide a description, in
         reasonable detail, of the discussions at the meeting and a list of any
         actions,

                                        4
<Page>

         decisions or determinations approved by the Operating Committee and a
         list of any issues to be resolved by the Executive Officers.

         The chairperson shall then promptly after receiving such draft minutes
         collect comments thereon from the members of his or her Party and
         provide them to the secretary.

         The chairperson and the secretary of the Operating Committee shall then
         discuss each other's comments and finalize the minutes. The secretary
         and chairperson shall each sign and date the final minutes. The
         signature of the chairperson and the secretary upon the final minutes
         shall indicate each Party's assent to the minutes.

         If at any time during the preparation and finalization of the Operating
         Committee meeting minutes, the secretary and the chairperson do not
         agree on any issue with respect to the minutes, such issue shall be
         resolved by the decision making process as provided in Section
         2.5.1(a). The decision resulting from the decision making process shall
         be recorded by the secretary in amended finalized minutes for said
         meeting.

2.5.3    PROJECT LEADERS.

         MERCK and deCODE each shall appoint a person (a "Project Leader") from
         the Operating Committee to coordinate its part of the Research Program.
         The Project Leaders shall be the primary contact between the Parties
         and the Operating Committee with respect to the Research Program. Each
         Party shall notify the other within thirty (30) days of the date of the
         Agreement of the appointment of its Project Leader and shall notify the
         other Party as soon as practicable upon changing this appointment.

2.6      ANNUAL BUDGET .

         All costs in personnel time, expenses, goods and Third Party services
         shall be estimated in advance for the subsequent Calendar Year
         according to the Budget to be set forth in Schedule 2.6. The Budget
         shall be prepared by the Project Leaders under the direction and
         control of the Operating Committee by September 30th of the year
         preceding the Calendar Year of the Budget.

2.7      RECORDS AND REPORTS

2.7.1    RECORDS.

         Each Party shall maintain records, in sufficient detail and in good
         scientific manner appropriate for patent and regulatory purposes, which
         shall fully and properly reflect all work done and results achieved in
         the performance of the Research Program by that Party.

2.7.2    COPIES AND INSPECTION OF RECORDS.

         (a) MERCK shall have the right, during normal business hours and upon
         reasonable notice, to inspect and copy all such records of deCODE
         referred to in Section 2.7.1. MERCK shall maintain such records and the
         information disclosed therein in confidence in accordance with Section
         4.1. MERCK shall have the right to arrange for its employees and/or
         consultants involved in the activities contemplated hereunder to visit
         the offices and laboratories of deCODE and any of its Third Party
         contractors as permitted under Section 2.2 during normal business hours
         and upon reasonable notice, and to discuss the Research Program work
         and its results in

                                        4
<Page>

         detail with the technical personnel and consultants of deCODE. Upon
         request, deCODE shall provide copies of the records described in
         Section 2.7.1 above.

         (b) At least once per Calendar Year during the term of the Agreement,
         MERCK shall provide deCODE with information about the status of any
         IRCT Compounds in development at MERCK including a review of any
         significant developmental milestones achieved or setbacks encountered
         since the previous year's review and such other information as may be
         reasonably requested by deCODE so as to enable deCODE to monitor or
         confirm MERCK's compliance with the provisions of Section 3.4 hereof.
         deCODE shall have the right, during normal business hours and upon
         reasonable notice, to inspect and copy all such records of MERCK
         referred to in Section 2.7.1 that are necessary to deCODE to perform
         its obligations under this Agreement. deCODE shall maintain such
         records and the information disclosed therein in confidence in
         accordance with Section 4.1.

2.8      COMPLIANCE

         deCODE shall conduct the Research in accordance with all applicable
         laws, rules and regulations, including, without limitation, all current
         governmental regulatory requirements concerning Good Laboratory
         Practices. In addition, if animals are used in research hereunder,
         deCODE will comply with the Animal Welfare Act or any other applicable
         local, state, national and international laws or regulations relating
         to the care and use of laboratory animals. MERCK encourages deCODE to
         use the highest standards, such as those set forth in the Guide for the
         Care and Use of Laboratory Animals (NRC, 1996), for the humane
         handling, care and treatment of such research animals. Any animals
         which are used in the course of the Research, or products derived from
         those animals, such as eggs or milk, will not be used for food
         purposes, nor will these animals be used for commercial breeding
         purposes. deCODE shall notify MERCK in writing of any deviations from
         applicable regulatory or legal requirements. deCODE hereby certifies
         that it will not and has not employed or otherwise used in any capacity
         the services of any person debarred under Section 21 USC 335a in
         performing any services hereunder.

2.9      RESEARCH PROGRAM TERM

         Except as otherwise provided herein, the term of the Research Program
         shall commence on the Collaboration Date and continue for a period of
         seven (7) years. Following the initial seven (7) year term, the
         Research Program will renew annually for successive one (1) year terms
         ("Extended Research Term") unless either Party sends a written notice
         of termination at any time to the other Party PROVIDED, HOWEVER, that
         MERCK may send such written notice of termination at any time beginning
         five (5) years after the Collaboration Date. Such notice of termination
         shall be sent at least [**] prior to the date of termination. In the
         event that deCODE exercises its right to terminate under this Section
         2.9, such termination shall not affect any ongoing IRCTs which shall be
         completed at MERCK's discretion, PROVIDED HOWEVER that deCODE shall not
         be obligated to begin any new IRCT which has been approved by the
         Operating Committee but not yet begun. From time-to-time, the Parties
         shall amend the Work Plan as applicable. In the event of a Change of
         Control pursuant to which a Competitor Controls deCODE, MERCK shall
         have the right to terminate the Research Program at any time on written
         notice to deCODE. In the event that the term of the Research Program
         expires or the Research Program is terminated during the pendency of an
         IRCT or in the event that the Parties elect to abandon or terminate any
         IRCT during the course of the Research Program, the Parties shall
         arrange for orderly completion or

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<Page>

         early termination of such IRCT over a reasonable period of at least 90
         days, including making provision for payment for all non-cancelable
         expenses associated therewith.

2.10     EXCLUSIVE EFFORTS

         (a) During the Research Program Term, deCODE shall work exclusively
         with MERCK in efforts to conduct IRCT [CONFIDENTIAL TREATMENT
         REQUESTED] and shall not otherwise facilitate or assist any Third Party
         to conduct IRCT [CONFIDENTIAL TREATMENT REQUESTED] by providing rights
         to, either through license or any agreement to forgo enforcement of,
         deCODE Patents or deCODE Prior Know-How. This Agreement does not
         prohibit deCODE from (i) conducting IRCT [CONFIDENTIAL TREATMENT
         REQUESTED]; or (ii) conducting clinical trials [CONFIDENTIAL TREATMENT
         REQUESTED]. In the event that MERCK and deCODE begin an IRCT with a
         Selected Compound in a Non-exclusive Disease Area, deCODE shall not
         commence any IRCT with [CONFIDENTIAL TREATMENT REQUESTED].

         (b) Beginning after the first anniversary of the Effective Date, if
         during any [**] period the Parties do not commence or continue an IRCT
         in any one of the Exclusive Disease Areas, and if during such two-year
         period the Operating Committee neither plans nor conducts at least five
         concurrent IRCT's during at least [**] of such [**] period, then such
         specific Disease Area shall thereafter become a Non-Exclusive Disease
         Area for all purposes under this Agreement. Notwithstanding the
         preceding sentence, the Parties may agree to create exceptions to, or
         the tolling of, the foregoing for special circumstances.

2.11     EXCHANGE OF INFORMATION

         During the Research Term, deCODE promptly shall disclose on an ongoing
         basis to MERCK in English and in writing all deCODE Know-How. MERCK
         shall promptly disclose to deCODE during the Research Program Term all
         MERCK Know-How.

2.12     USE OF HUMAN MATERIALS

         With respect to any human cell lines, tissue, human clinical isolates
         or similar human-derived materials that have been or are to be
         collected and/or used in the Research Program ("Human Materials"), each
         Party represents and warrants (i) that it has complied, or shall
         comply, with all applicable laws, guidelines and regulations relating
         to the collection and/or use of the Human Materials and (ii) that it
         has obtained, or shall obtain, all necessary approvals and appropriate
         informed consents, in writing, for the collection and/or use of such
         Human Materials. deCODE shall provide documentation of such approvals
         and consents upon MERCK's request. Each Party further represents and
         warrants that such Human Materials may be used as contemplated in this
         Agreement without any obligations to the individuals or entities
         ("Providers") who contributed the Human Materials, including, without
         limitation, any obligations of compensation to such Providers or any
         other Third Party for the intellectual property associated with, or
         commercial use of, the Human Materials for any purposes.

2.13     PHARMACOGENOMICS TESTS.

         (a) TESTS FOR USE IN CLINICAL TRIALS. MERCK shall have the sole and
         exclusive right to direct and control the development and
         commercialization of Tests for use with Selected Compounds. deCODE
         shall have the first right to perform the work needed to develop such
         Tests for use in the

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<Page>

         conduct of IRCT's under this Agreement as set forth below. MERCK shall
         identify and prioritize the Tests it wishes to have developed and Merck
         shall have the right to solicit bids from Third Parties including
         deadlines for the achievement of defined events in the development of
         such Tests ("Test Milestones"). Prior to accepting any specific bid
         from a Third Party, MERCK shall inform deCODE about the bid by
         providing deCODE with a written notice including sufficient information
         about the Test Milestones in the Third Party bid. deCODE shall have
         thirty days from MERCK's notice to agree to the Test Milestones set
         forth in the Third Party bid for a particular Test or MERCK may enter
         into an agreement for the development of that Test with the Third
         Party.

         (b) TESTS FOR USE WITH MARKETED COMPOUNDS. In the event that MERCK
         desires to have developed and marketed a Test for use with a Product,
         MERCK shall have the right to solicit bids including Test Milestones
         from Third Parties. If a Test has not been previously developed under
         Section 2.13(a) for the IRCT Compound in the Product by a Third Party,
         then prior to accepting any specific bid from a Third Party, MERCK
         shall inform deCODE about the bid by providing deCODE with a written
         notice including sufficient information about the Test Milestones in
         the Third Party bid. deCODE shall have thirty days from MERCK's notice
         to agree to the Test Milestones set forth in the Third Party bid for a
         particular Test or MERCK may enter into an agreement for the
         development of that Test with the Third Party.

         (c) REVERSION OF RIGHTS TO TEST DEVELOPMENT. In the event that deCODE
         exercises its rights under either Section 2.13 (a) or 2.13 (b) to
         develop a Test and deCODE at any time fails to achieve a Test
         Milestone, then the Parties shall meet within [**] to discuss the
         reasons for failure to achieve the Test Milestone and any proposals for
         revised Test Milestones provided, however, MERCK shall have the right
         in its sole discretion to continue on in the development of such Test
         either with deCODE, by itself or to enter into an agreement with a
         Third Party for such Test. deCODE shall cooperate with MERCK in
         providing reasonable assistance necessary to insure a rapid and
         efficient transfer of technology related to the Test to allow the
         continued development of the Test by MERCK or its contractor.

         (d) RETAINED RIGHTS. MERCK's rights to develop pharmacogenomic tests
         set forth in this Section 2.13 and Article 3 are limited to Tests and
         no license under Article 3 shall be construed to grant to MERCK or any
         sublicensee any rights under deCODE Patents, deCODE Generalized
         Technology, deCODE Collaboration Patents, deCODE Know-How, deCODE
         Genomics Data with respect to research and development of
         pharmacogenomic tests or diagnostics generally.

3.       LICENSE; EXCHANGE OF INFORMATION; DEVELOPMENT AND COMMERCIALIZATION

3.1      LICENSE GRANT

         (a)     COMMERCIALIZATION GRANTS. deCODE hereby grants to MERCK an
                 exclusive license in the Territory under deCODE Collaboration
                 Patents, Joint Collaboration Patents, and deCODE Know-How, with
                 a right to sublicense (i) to make, have made, use, offer to
                 sell, sell or import IRCT Compound and Product(s) and related
                 Tests and (ii) to practice any other invention claimed in the
                 foregoing patents solely with IRCT Compounds and Products or
                 use any licensed Know-How solely with IRCT Compounds and
                 Products and related Tests.

         (b)     COMPOUND DEVELOPMENT GRANTS.

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<Page>

                 (i)   deCODE hereby grants to MERCK an exclusive license in the
                       Territory under deCODE Collaboration Patents, Joint
                       Collaboration Patents and deCODE Know-How with a right to
                       sublicense for the development of compounds Controlled by
                       MERCK and related Tests in the Therapeutic Field for (1)
                       Disease Areas and (2) Associated Information.

                 (ii)  deCODE hereby grants to MERCK an non-exclusive license in
                       the Territory under deCODE Prior Know-How and deCODE
                       Patents with a right to sublicense for the development of
                       compounds Controlled by MERCK and related Tests in the
                       Therapeutic Field for (1) Disease Areas and (2)
                       Associated Information.

                 (iii) Subject to Section 3.1 (d), upon expiration or
                       termination of the Research Program under Section 2.9,
                       the licenses granted in this Section 3.1(b)(ii) under the
                       deCODE Collaboration Patents, Joint Collaboration
                       Patents, and deCODE Know-How, shall become non-exclusive.

         (c)     MUTUAL COVENANTS. Subject to Section 3.1(d), each Party
                 covenants that for the Research Program Term neither it nor its
                 Affiliates shall practice any invention covered by the deCODE
                 Collaboration Patents, the MERCK Collaboration Patents and the
                 Joint Collaboration Patents nor will it or its Affiliates use
                 deCODE Know-How or MERCK Know-How for any purposes other than
                 in furtherance of the Research Program. The covenants made in
                 this Section 3.1(c) are intended to include each Party's
                 promise not to use its Collaboration Patents or its Know-How
                 for purposes other than the Research Program and in the case of
                 MERCK additionally to include a right to develop and market
                 Products.

         (d)     MERCK OPTION - INTELLECTUAL PROPERTY.

                 At any time but no later then the expiration or termination of
                 the Research Program under Section 2.9, MERCK may (1) retain
                 exclusive rights granted in Section 3.1(b)(i) and (2) deCODE
                 will release MERCK from its covenant under Section 3.1 (c) by
                 payment of an exclusive license fee of [CONFIDENTIAL TREATMENT
                 REQUESTED] for which MERCK elects to retain exclusivity. MERCK
                 may exercise this option by providing notice and payment to
                 deCODE at any time prior to or concurrently with the expiration
                 or termination of the Research Program. Upon payment of the
                 Exclusive License Fee, deCODE hereby releases MERCK from the
                 covenant made in Section 3.1 (c) with respect to the Elected
                 Disease.

         (e)     MERCK OPTION - DECODE COMPOUNDS.

                 (i)   RIGHTS GRANTED. In the Non-exclusive Disease Areas deCODE
                       may research and develop deCODE Compounds. During the
                       Research Term, for each deCODE Compound in a
                       Non-exclusive Disease Area that deCODE Controls, deCODE
                       grants to MERCK an exclusive option to negotiate for an
                       exclusive license to that deCODE Compound in the
                       Territory ("MERCK Compound Option"), subject only to any
                       conflicting or superceding rights of Third Parties with
                       respect to that deCODE Compound that were granted prior
                       to the Effective Date or as a condition of deCODE
                       obtaining rights to such deCODE Compound. As to deCODE
                       Compounds in a Non-Exclusive Disease Area that are not
                       subject to conflicting or superceding rights of Third
                       Parties, deCODE agrees it will not engage in any
                       discussions with a Third Party for commercial rights of
                       any kind to

                                        4
<Page>

                       a deCODE Compound before first offering such rights to
                       MERCK as set forth in the succeeding provisions of this
                       Section 3 1(e).

                 (ii)  deCODE NOTICE. From time to time and prior to discussions
                       with any Third Party concerning the sale, licensing or
                       commercial relationship involving a deCODE Compound, at
                       deCODE's sole discretion it may provide MERCK with notice
                       that it intends to license rights to commercialize a
                       deCODE Compound("deCODE Notice"). The deCODE Notice shall
                       contain a commercially reasonable offer in writing
                       containing the financial terms under which deCODE is
                       willing to license the deCODE Compound to MERCK and will
                       include relevant information about the deCODE Compound
                       including but not limited to any chemical, biological and
                       clinical data. deCODE will provide MERCK an opportunity
                       to review any and all relevant information about the
                       deCODE Compound including but not limited to the
                       foregoing chemical, biological and clinical data.

                 (iii) CONDITIONS TO OPTION EXERCISE; OPTION TERM. The MERCK
                       Compound Option may be exercised at any time but no later
                       then the earlier of [**] after the deCODE Notice or the
                       end of the Term. MERCK may exercise the MERCK Compound
                       Option by sending written notice ("MERCK Exercise
                       Notice") to deCODE that MERCK wishes to engage in
                       negotiations for an exclusive license to the deCODE
                       Compound. MERCK shall have [**] to negotiate in good
                       faith principal business terms to be enumerated in a
                       non-binding term sheet and [**] thereafter ("Negotiation
                       Period") to negotiate in good faith and execute a
                       definitive agreement for an exclusive license to the
                       deCODE Compound in the Territory, which may be extended
                       by the Parties on mutual consent.

                 (iv)  OPTION LAPSE AND REVIVAL. In the event that the Parties
                       fail to reach agreement on the terms and conditions of an
                       exclusive license during the Negotiation Period, deCODE
                       shall have the right to negotiate with Third Parties for
                       rights to that deCODE Compound; PROVIDED, HOWEVER, that
                       if deCODE has not licensed rights to that deCODE Compound
                       within [**] after the end of the Negotiation Period, and
                       if the Term has not yet expired or been terminated,
                       deCODE grants to MERCK another MERCK Compound Option for
                       that deCODE Compound exercisable in accordance with
                       Sections 3.1(e) et seq.

         (f)     deCODE LICENSES.

                 (i)   During the Research Program, MERCK grants to deCODE a
                       non-exclusive license under MERCK Collaboration Patents,
                       MERCK Know-How, MERCK Prior Know-How and MERCK Patents
                       solely to perform its obligations under the Research
                       Program.

                 (ii)  In the event the Research Program expires or terminates
                       and (1) MERCK has not made at least one payment under
                       Section 3.1(d)(i) or (2) a Change of Control pursuant to
                       which a Competitor obtains Control of deCODE has not
                       occurred, MERCK grants to deCODE a non-exclusive,
                       royalty-free license to practice any and all inventions
                       covered by MERCK Collaboration Patents.

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<Page>

3.2      NON-EXCLUSIVE LICENSE GRANT

         In the event the making, having made, use, offer for sale, sale or
         import by MERCK, its Affiliates or permitted sublicensees of IRCT
         Compound(s), Test(s) or Product(s) would infringe during the term of
         this Agreement a claim of issued letters patent which deCODE owns or
         has the rights to license and which patents are not covered by the
         grant in Section 3.1, deCODE hereby grants to MERCK, to the extent
         deCODE is legally able to do so, a non-exclusive, sublicensable,
         royalty-free license in the Territory under such issued letters patent
         solely for MERCK to develop, make, have made, use, sell, offer for sale
         or import IRCT Compound(s), Test(s) and Product(s) in the Territory.

3.3      NO IMPLIED LICENSES.

         The Parties do not intend to grant rights under patents or know-how
         except as expressly set forth herein and the grant of rights herein
         does not imply a grant of rights to patents and know-how Controlled by
         a Party that may be necessary to practice the full scope of any right
         granted herein. Except as otherwise expressly qualified herein all
         exclusive licenses granted herein are exclusive even as to the grantor
         and no implied rights are retained.

3.4      DEVELOPMENT AND COMMERCIALIZATION.

         MERCK shall use reasonable efforts, consistent with the usual practice
         followed by MERCK in pursuing the commercialization and marketing of
         its other pharmaceutical products of a similar commercial value, at its
         own expense, to develop and commercialize a Product or Test on a
         commercially reasonable basis in such countries in the Territory where
         in MERCK's opinion it is commercially viable to do so.

3.5      EXCUSED PERFORMANCE.

         In addition to the provisions of Article 7 hereof, the obligation of
         MERCK with respect to any Product or Test under Section 3.4 are
         expressly conditioned upon the continuing absence of any adverse
         condition or event relating to the safety or efficacy of the Product or
         Test, and the obligation of MERCK to develop or market any such Product
         or Test shall be delayed or suspended so long as in MERCK's opinion any
         such condition or event exists.

3.6      RIGHT OF FIRST NEGOTIATION.

         In the event that MERCK determines that neither it nor its Affiliates
         will commercialize an IRCT Compound and in its sole discretion
         determines that it will license the commercial rights to a Third Party,
         it shall notify deCODE of such decision and shall negotiate exclusively
         with deCODE in good faith on the terms and conditions on which it is
         willing to license commercial rights to such IRCT Compound for a period
         of [**]. In the event that deCODE does not agree upon principal
         business terms to be enumerated in a non-binding term sheet within [**]
         or the Parties do not execute a definitive agreement on such terms and
         conditions within [**] thereafter, MERCK shall have the right to
         negotiate with Third Parties for the commercial rights to that IRCT
         Compound; PROVIDED, HOWEVER, that if MERCK has not licensed commercial
         rights to such IRCT Compound to a Third Party within [**] after the end
         of the [**] period and if the Term has

                                        4
<Page>

         not yet expired or been terminated, MERCK grants to deCODE another
         right of first negotiation exercisable in accordance with this Section
         3.6. In connection with the rights granted under this Section 3.6,
         MERCK will provide deCODE with reasonable opportunity to review any and
         all relevant information about the IRCT Compound including but not
         limited to chemical, biological and clinical data. deCODE's rights
         under this Section 3.6 shall be subject only to any conflicting or
         superceding rights of Third Parties with respect to a particular IRCT
         Compound that were granted prior to the compound's selection under
         Section 2.4.

4.       CONFIDENTIALITY AND PUBLICATION

4.1      NONDISCLOSURE OBLIGATION.

         All Information disclosed by one Party to the other Party hereunder
         shall be maintained in confidence by the receiving Party and shall not
         be disclosed to non-Party or used for any purpose except as set forth
         herein without the prior written consent of the disclosing Party,
         except to the extent that such Information:

         (a)     is known by receiving Party at the time of its receipt, and not
                 through a prior disclosure by the disclosing Party, as
                 documented by the receiving Party's business records;

         (b)     is properly in the public domain;

         (c)     is subsequently disclosed to the receiving Party by a Third
                 Party who may lawfully do so and is not under an obligation of
                 confidentiality to the disclosing Party;

         (d)     is developed by the receiving Party independently of
                 Information received from the disclosing Party, as documented
                 by the receiving Party's business records;

         (e)     is disclosed to governmental or other regulatory agencies in
                 order to obtain patents or to gain or maintain approval to
                 conduct clinical trials or to market Product or Tests, but such
                 disclosure may be only to the extent reasonably necessary to
                 obtain patents or authorizations.

         Any combination of features or disclosures shall not be deemed to fall
         within the foregoing exclusions merely because individual features are
         published or available to the general public or in the rightful
         possession of the receiving Party unless the combination itself and
         principle of operation are published or available to the general public
         or in the rightful possession of the receiving party.

4.1.2    Notwithstanding the obligations of confidentiality and prohibitions on
         use, it shall not be a breach of a Party's obligations under this
         Section 4.1 to disclose Proprietary Information:

         (a)     to Third Parties under confidentiality provisions at least as
         stringent as those in this Agreement, for consulting, manufacturing
         development, manufacturing, external testing, marketing trials and to
         Third Parties who are sublicensees or other development/marketing
         partners of the Parties with respect to any of the subject matter of
         this Agreement; or

         (b)     in compliance with applicable laws or regulations (including
         the disclosure requirements of the U.S. Securities and Exchange
         Commission, NASDAQ or any stock exchange on which securities issued by
         such Party or its Affiliates are traded) or order by a court or other
         regulatory

                                        4
<Page>

         body having competent jurisdiction; provided that if a Party is so
         required to disclose Information that is subject to the non-disclosure
         provisions of this Section 4.1 or 4.2, such Party shall promptly inform
         the other Party of the disclosure that is being sought in order to
         provide the other Party an opportunity to challenge or limit the
         disclosure obligations except where impracticable for necessary
         disclosures (for example, to physicians conducting studies or to health
         authorities). Information that is disclosed by judicial or
         administrative process shall remain otherwise subject to the
         confidentiality and non-use provisions of this Section 4.1 and Section
         4.2, and the Party disclosing Information pursuant to law or court
         order shall take all steps reasonably necessary, including without
         limitation obtaining an order of confidentiality, to ensure the
         continued confidential treatment of such Information.

4.2      deCODE KNOW-HOW.

         deCODE agrees to use its best efforts to keep all deCODE Know-How and
         deCODE Prior Know-How confidential except as may be agreed by the
         Parties under Section 4.3. deCODE agrees that to the extent deCODE
         Prior Know-how will be disclosed to Third Parties for use outside of
         the Disease Areas that such disclosure to a Third Party will be subject
         to obligations of non-disclosure similar to those in Section 4.1 above.

4.3      PUBLICATION.

         MERCK and deCODE each acknowledge the other Party's interest in
         publishing the results of its research in order to obtain recognition
         within the scientific community and to advance the state of scientific
         knowledge. Each Party also recognizes the mutual interest in obtaining
         valid patent protection and in protecting business interests and trade
         secret information. Consequently, except for disclosures permitted
         pursuant to Section 4.1, either Party, its employees or consultants
         wishing to make a publication shall deliver to the other Party a copy
         of the proposed written publication or an outline of an oral disclosure
         at least sixty (60) days prior to submission for publication or
         presentation. The reviewing Party shall have the right (a) to propose
         modifications to the publication or presentation for patent reasons,
         trade secret reasons or business reasons or (b) to request a reasonable
         delay in publication or presentation in order to protect patentable
         information. If the reviewing Party requests a delay, the publishing
         Party shall delay submission or presentation for a period of ninety
         (90) days to enable patent applications protecting each Party's rights
         in such information to be filed in accordance with Article 7 below.
         Upon expiration of such ninety (90) days, the publishing Party shall be
         free to proceed with the publication or presentation. If the reviewing
         Party requests modifications to the publication or presentation, the
         publishing Party shall edit such publication to prevent disclosure of
         trade secret or proprietary business information prior to submission of
         the publication or presentation.

4.4      PUBLICITY/USE OF NAMES.

         No disclosure of the existence of, or the terms of, this Agreement may
         be made by either Party, and no Party shall use the name, trademark,
         trade name or logo of the other Party or its employees in any
         publicity, news release or disclosure relating to this Agreement or its
         subject matter, without the prior express written permission of the
         other Party. Nothing in this Agreement shall prevent either Party from
         issuing statements that such Party determines to be necessary to comply
         with applicable law (including the disclosure requirements of the U.S.
         Securities and Exchange Commission, NASDAQ or any other stock exchange
         on which securities issued by such Party are traded); provided,
         HOWEVER, that, the disclosing Party shall provide the other Party with
         a copy of

                                        4
<Page>

         the proposed text of such statements sufficiently in advance of the
         scheduled release thereof to afford such other Party a reasonable
         opportunity to review and comment upon the proposed text and the
         disclosing Party shall take all reasonable steps to limit such
         disclosure solely to fulfill its legal obligations.

4.5      IMPROPER DISCLOSURES.

         In the event that either Party discloses Information other than in
         accordance with Sections 4.3 and 4.4, the non-breaching Party shall
         have the right to seek compensation from the breaching Party in
         addition to and not in place of any other non-monetary remedies
         available for such breach of Sections 4.3 and 4.4. Entitlement to
         compensation and the amount of the compensation shall be submitted to
         dispute resolution in accordance with Section 10.6.

5.       PAYMENTS; ROYALTIES AND REPORTS

5.1      RESEARCH PROGRAM FUNDING

         (a) PARTY CONTRIBUTIONS. As set forth herein each Party has an ongoing
         financial obligation to support the Research Program. Neither Party
         shall be obligated to provide a higher level of support than agreed
         upon in the Budget for any Calendar Year. In accordance with the Budget
         and with funding process set out in Schedule 5.1, MERCK shall be
         responsible for [**] of the operational expenses of the Research
         Program and deCODE shall be responsible for [**] of the operational
         expenses. These shared operational expenses shall be limited solely to
         [CONFIDENTIAL TREATMENT REQUESTED], as reflected in Schedule 5.1, and
         the Parties contemplate that deCODE shall provide approximately
         [CONFIDENTIAL TREATMENT REQUESTED] provided by MERCK. Without its
         consent, deCODE shall not be obligated to share responsibility for
         operational expenses that result from aggregate [CONFIDENTIAL TREATMENT
         REQUESTED]. Subject to the methodology set forth in Schedule 5.1, such
         other methodologies as the Operating Committee may expressly approve
         and in accordance with the Budget, operational expenses incurred by
         either Party shall be determined in accordance with that Party's
         regular accounting methods, consistently applied.

         (b) BUDGET PREPARATION. The estimated expenditures for that portion of
         the first Calendar Year beginning on the Effective Date and ending on
         December 31st shall be set forth in the Budget which will be attached
         hereto as Schedule 2.6 following its preparation by the Operating
         Committee and approval by the Executive Committee. By the initial
         September 15th following the Effective Date of the Agreement and for
         each subsequent September 15th, the Operating Committee shall prepare a
         Budget for the upcoming Calendar Year for approval by the Executive
         Committee.

         (c) RESEARCH PAYMENTS. MERCK shall pay to deCODE, in advance on a
         quarterly basis at the beginning of each Calendar Quarter its estimated
         MERCK Share for that Calendar Quarter. The initial payment shall be
         made within thirty days of approval of the initial Budget by the
         Executive Committee. Within sixty (60) days following the end of a
         Calendar Quarter, the Parties shall meet and determine actual
         expenditures in employee time and expenses properly attributable to the
         Research Program for that Calendar Quarter. The combined total of
         expenditures shall be the Research Program Expenditures for that
         Calendar Quarter. The MERCK Share shall be determined in accordance
         with Schedule 5.1 and the Parties shall reconcile the

                                        4
<Page>

         differences between contribution obligations and expenditures by
         payment of the appropriate amount of money from one Party to the other
         Party in accordance with Schedule 5.1.

         (d) ANCILLARY PAYMENTS BY MERCK. Certain expenditures directly
         associated with the conduct of the IRCT in accordance with Section 2.3
         shall be borne solely by MERCK and shall not be considered part of the
         Research Program funding subject to the defined contributions of the
         Parties. These expenditures shall include [**] and only those costs of
         a similar nature agreed to in writing by the parties.

         (e) PAYMENT FOR ABANDONED IRCT COMPOUNDS. If MERCK in its sole
         discretion for reasons other than safety or efficacy elects to abandon
         development of an IRCT Compound, and provided that (i) MERCK has
         elected not to offer commercialization rights to deCODE pursuant to
         Section 3.6, and (ii) there is or will be no Product in the same
         Disease Area as the abandoned IRCT Compound for which deCODE has
         received or may receive payments under either Section 5.3 or 5.4, THEN
         MERCK shall be obligated to pay deCODE [**] of its costs and expenses
         incurred to provide the FTEs dedicated to the development of that IRCT
         Compound under the Research Program PROVIDED, HOWEVER, that MERCK shall
         not be obligated to pay deCODE until the later of the end of the
         Research Program Term including any Extended Research Program Term or
         the date on which no other IRCT Compounds in the same Disease Area as
         the abandoned IRCT Compound are being developed by MERCK.

5.2      CONSIDERATION FOR LICENSE

         In partial consideration for the licenses granted herein under the
         Patent Rights and deCODE Know-How, upon the terms and conditions
         contained herein, MERCK shall pay to deCODE a total of [**] dollars as
         a non-refundable exclusivity license and technology access signature
         fee for all of the diseases within the Disease Area within thirty (30)
         days of the Effective Date. This payment is comprised of [**] dollars.

         If deCODE rejects the initial [**] MERCK nominated compounds from
         [CONFIDENTIAL TREATMENT REQUESTED] for an Information Rich Clinical
         Trial pursuant to Section 2.4, THEN at any time prior to deCODE's
         acceptance of a subsequent MERCK nominated compound in the
         [CONFIDENTIAL TREATMENT REQUESTED], MERCK may demand by written notice
         to deCODE the payment of [**] dollars. deCODE shall make such payment
         to MERCK within thirty (30) days of the notice. Effective when MERCK
         gives such notice, this Agreement shall be deemed terminated with
         respect to such Non-Exclusive Disease Areas, after which time neither
         MERCK nor deCODE shall have further rights or obligations with respect
         to the conduct of the Research Program in such Non-Exclusive Disease
         Area under Section 2, and all licenses, options and other rights
         granted to either Party under Section 3 with respect to such
         Non-Exclusive Disease Area shall terminate.

5.3      MILESTONE PAYMENTS

         Subject to the terms and conditions in this Agreement, MERCK shall pay
to deCODE the following milestone payments:

         (a)     MERCK will pay a milestone of [CONFIDENTIAL TREATMENT
                 REQUESTED].

         (b)     MERCK will pay a milestone of [CONFIDENTIAL TREATMENT
                 REQUESTED].

                                        4
<Page>

                                        4
<Page>

         MERCK shall notify deCODE in writing within thirty (30) days upon the
         achievement of the milestone for each Product or Test, and shall make
         the appropriate milestone payment within thirty (30) days of the
         achievement of such milestone. The milestone payment shall be payable
         only upon the [**] achievement of such milestone for any Test or
         Product containing a unique IRCT Compound and no amounts shall be due
         hereunder for [**] achievement of such milestone with other Tests or
         Products containing that IRCT Compound. No milestone payment shall be
         due under 5.3 (a) for any Product containing a Related IRCT Compound if
         a milestone under Section 5.3(a) has been paid for a Product containing
         an IRCT Compound that the Related IRCT Compound was derived from or
         that the Related IRCT Compound is [CONFIDENTIAL TREATMENT REQUESTED]
         unless the Product also contains an IRCT Compound that would otherwise
         qualify for the milestone under this Section 5.3. In the event that
         MERCK makes a payment under Section 5.3(a) for a Product containing a
         Related IRCT Compound, it shall have no further obligation to make
         milestone payments under Section 5.3(a) for (i) any other Product
         containing that Related IRCT Compound; (ii) the IRCT Compound that it
         is a [CONFIDENTIAL TREATMENT REQUESTED] of under Section 1.60(a); or
         (iii) any other compound that is a Related IRCT Compound because it is
         a [CONFIDENTIAL TREATMENT REQUESTED] of the IRCT Compound of (ii).

5.4      ROYALTIES

5.4.1    ROYALTIES PAYABLE BY MERCK.

         (a) Subject to the terms and conditions of this Agreement, MERCK shall
         pay to deCODE royalties on a country-by-country basis in an amount
         equal to:

         (i) MERCK will pay a royalty of [**] to deCODE on MERCK's Net Sales of
         Product.

         (ii)    In the event there is no Valid Patent Claim of a MERCK Compound
         Patent in a country, the royalty due for Net Sales in that country
         shall be [**] percent of those royalty rates set forth in Section 5.4.1
         (a)(i).

         (iii)   Royalties on each Product at the rate set forth above shall be
         effective as of the date of First Commercial Sale of Product in a
         country and shall continue until the later of (A) the expiration of the
         last Valid Patent Claim of a MERCK Compound Patent in that country or
         (B) until the tenth (10th) anniversary of the First Commercial Sale in
         such country, subject to the following conditions:

                 (1)   that only one royalty shall be due with respect to the
                 same unit of Product;

                 (2)   that no royalties shall be due upon the sale or other
                 transfer among MERCK or its Affiliates or sublicensees, but in
                 such cases the royalty shall be due and calculated upon MERCK's
                 or its Affiliate's or sublicensee's Net Sales to the first
                 independent Third Party; and

                 (3)   no royalties shall accrue on the disposition of Product
                 in reasonable quantities by MERCK or its Related Parties as
                 samples (promotion or otherwise) or as donations (for example,
                 to non-profit institutions or government agencies for a
                 non-commercial purpose).

         (b)     Subject to the terms and conditions of this Agreement, MERCK
                 shall pay to deCODE royalties on a Test-by-Test and a
                 country-by-country basis of [**] of MERCK's Net Sales of Tests.

                                        4
<Page>

5.4.2    CHANGE IN SALES PRACTICES.

         The Parties acknowledge that during the term of this Agreement, MERCK's
         sales practices for the marketing and distribution of Product or Tests
         may change to the extent to which the calculation of the payment for
         royalties on Net Sales may become impractical or even impossible. In
         such event the Parties agree to meet and discuss in good faith new ways
         of compensating deCODE to the extent currently contemplated under
         Section 5.4.1.

5.4.3    ROYALTIES FOR BULK COMPOUND.

         In those cases where MERCK sells bulk IRCT Compound or Related IRCT
         Compound rather than Product in packaged form to an independent Third
         Party, the royalty obligations of this Section 5.4 shall be applicable
         to the bulk IRCT Compound or Related IRCT Compound.

5.4.4    COMPETITIVE PRODUCT.

         In the event a Competitive Product is sold in a country, then the
         royalty term set out in Section 5.4.1.(a)(iii) for the corresponding
         Product shall be [**] from First Commercial Sale without regard to the
         existence of a Valid Patent Claim and royalties shall be reduced in
         accordance Section 5.4.1(a)(ii) .

5.5      REPORTS; PAYMENT OF ROYALTY

         During the term of the Agreement following the First Commercial Sale of
         a Product or Test, MERCK shall furnish to deCODE a quarterly written
         report for the Calendar Quarter showing the Net Sales of all Products
         or Tests subject to royalty payments sold by MERCK and its Related
         Parties in the Territory during the reporting period and the royalties
         payable under this Agreement. Reports shall be due on the sixtieth (60)
         day following the close of each Calendar Quarter. Royalties shown to
         have accrued by each royalty report shall be due and payable on the
         date such royally report is due. MERCK shall keep complete and accurate
         records in sufficient detail to enable the royalties payable hereunder
         to be determined.

5.6.     AUDITS

5.6.1    Upon the written request of deCODE and not more than once in each
         Calendar Year, MERCK shall permit an independent certified public
         accounting firm of nationally recognized standing selected by deCODE
         and reasonably acceptable to MERCK, at deCODE's expense, to have access
         during normal business hours to such of the records of MERCK as may be
         reasonably necessary to verify the accuracy of the royalty reports
         hereunder for any year ending not more than twenty-four (24) months
         prior to the date of such request. The accounting firm shall disclose
         to deCODE only whether the royalty reports are correct or incorrect and
         the specific details concerning any discrepancies. No other information
         shall be provided to deCODE.

5.6.2    If such accounting firm correctly identifies a discrepancy made during
         such period, the appropriate Party shall pay the other Party the amount
         of the discrepancy within thirty (30) days of the date deCODE delivers
         to MERCK such accounting firm's written report so correctly concluding,
         or as otherwise agreed upon by the Parties. The fees charged by such
         accounting firm shall be paid by deCODE, PROVIDED, HOWEVER, if the
         payments made or payable were at least

                                        4
<Page>

         [**] dollars below and less than [**] of the amount that should have
         been paid during the period in question, MERCK shall also reimburse
         deCODE for the reasonable costs of such audit.

5.6.3    MERCK shall include in each sublicense granted by it pursuant to this
         Agreement a provision requiring the sublicensee to make reports to
         MERCK, to keep and maintain records of sales made pursuant to such
         sublicense and to grant access to such records by deCODE's independent
         accountant to the same extent required of MERCK under this Agreement.
         Upon the expiration of twenty-four (24) months following the end of any
         year, the calculation of royalties payable with respect to such year
         shall be binding and conclusive upon deCODE, and MERCK and its
         sublicensees shall be released from any liability or accountability
         with respect to royalties for such year.

5.6.4    Upon the expiration of twenty-four (24) months following the end of any
         year, the calculation of royalties payable with respect to such year
         shall be binding and conclusive upon deCODE, and MERCK and its Related
         Parties shall be released from any liability or accountability with
         respect to royalties for such year.

5.6.5    deCODE shall treat all financial information subject to review under
         this Section 5.6 or under any sublicense agreement in accordance with
         the confidentiality and non-use provisions of this Agreement, and shall
         cause its accounting firm to enter into an acceptable confidentiality
         agreement with MERCK and/or its Related Parties obligating it to retain
         all such information in confidence pursuant to such confidentiality
         agreement.

5.7      PAYMENT EXCHANGE RATE

         All payments to be made by MERCK to deCODE under this Agreement shall
         be made in United States dollars and may be paid by check made to the
         order of deCODE or bank wire transfer in immediately available funds to
         such bank account in the United States designated in writing by deCODE
         from time to time. In the case of sales outside the United States, the
         rate of exchange to be used in computing the amount of currency
         equivalent in United States dollars due deCODE shall be made at the
         rate of exchange and on the periodic schedule used by MERCK for its own
         financial reporting purposes at such time.

5.8      INCOME TAX WITHHOLDING

         If laws, rules or regulations require withholding of income taxes or
         other taxes imposed upon payments set forth in this Article 5, MERCK
         shall make such withholding payments as required and subtract such
         withholding payments from the payments set forth in this Article 5.
         MERCK promptly shall notify deCODE of such withholding and shall submit
         appropriate proof of payment of the withholding taxes to deCODE within
         a reasonable period of time.

6.       REPRESENTATIONS AND WARRANTIES

6.1      REPRESENTATION AND WARRANTY

         (a)     deCODE represents and warrants to MERCK that as of the date of
                 this Agreement:

         (i)     it has the full right, power and authority to enter into this
                 Agreement, to perform the Research Program and to grant the
                 licenses granted under Article 3 hereof;

                                        4
<Page>

         (ii)    it has not previously assigned, transferred, conveyed or
                 otherwise encumbered its right, title and interest in Patent
                 Rights, deCODE Know-How or deCODE Prior Know-How;

         (iii)   to the best of deCODE's knowledge, it is the sole and exclusive
                 owner of the Patent Rights and deCODE Know-How(excluding those
                 rights included in the foregoing on basis that deCODE has
                 Control solely through license rights from a Third Party), all
                 of which are (and shall be, in the case of deCODE Information
                 and Invention) free and clear of any liens, charges and
                 encumbrances, and no other person, corporate or other private
                 entity, or governmental entity or subdivision thereof, has or
                 shall have any claim of ownership whatsoever with respect to
                 the Patent Rights and deCODE Know-How;

         (iv)    there are no claims, judgments or settlements against or owed
                 by deCODE or pending or threatened claims or litigation
                 relating to the Patent Rights, deCODE Know-How and deCODE Prior
                 Know-How(excluding those rights included in the foregoing on
                 basis that deCODE has Control solely through license rights
                 from a Third Party); and

         (v)     deCODE has disclosed to MERCK all reasonably relevant
                 information regarding the Patent Rights and deCODE Know-How
                 licensed under this Agreement, including without limitation the
                 existence of any patent opinions obtained by deCODE related
                 thereto.

         (b) MERCK represents and warrants to deCODE that as of the date of this
         Agreement:

         (i)     it has the full right, power and authority to enter into this
                 Agreement, to perform the Research Program and to grant the
                 licenses granted under Article 3 hereof;

         (ii)    it has not previously assigned, transferred, conveyed or
                 otherwise encumbered its right, title and interest in MERCK
                 Patents, MERCK Collaboration Patents, Joint Collaboration
                 Patents, MERCK Know-How or MERCK Prior Know-How;

         (iii)   to the best of MERCK's knowledge, it is the sole and exclusive
                 owner of MERCK Patents, MERCK Collaboration Patents, MERCK
                 Know-How or MERCK Prior Know-How(excluding those rights
                 included in the foregoing on basis that MERCK has Control
                 solely through license rights from a Third Party), all of which
                 are (and shall be, in the case of MERCK Information and
                 Invention) free and clear of any liens, charges and
                 encumbrances, and no other person, corporate or other private
                 entity, or governmental entity or subdivision thereof, has or
                 shall have any claim of ownership whatsoever with respect to
                 MERCK Patents, MERCK Collaboration Patents, Joint Collaboration
                 Patents, MERCK Know-How or MERCK Prior Know-How;

         (iv)    there are no claims, judgments or settlements against or owed
                 by MERCK or pending or threatened claims or litigation relating
                 to the MERCK Patents, MERCK Collaboration Patents, Joint
                 Collaboration Patents, MERCK Know-How or MERCK Prior
                 Know-How(excluding those rights included in the foregoing on
                 basis that MERCK has Control solely through license rights from
                 a Third Party).

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7.       PATENT PROVISIONS

7.1      OWNERSHIP, FILING, PROSECUTION AND MAINTENANCE OF PATENTS

7.1.1    deCODE shall retain all right, title and interest in and to deCODE
         Generalized Technology, deCODE Genomics Data, deCODE Know-How, deCODE
         Prior Know-How, deCODE Collaboration Patents and deCODE Patents,
         subject to the licenses granted to MERCK pursuant to Section 3.1.

7.1.2    MERCK shall retain all right, title and interest in and to the MERCK
         Know-How, MERCK Collaboration Patents and MERCK Patents, subject to the
         licenses granted to deCODE pursuant to Section 3.1.

7.1.3    Subject to the licenses granted hereunder:

         (i)     rights to deCODE Information and Inventions shall belong to
                 deCODE;

         (ii)    rights to MERCK Information and Inventions shall belong to
                 MERCK; and

         (iii)   rights to Joint Information and Inventions shall belong jointly
                 to deCODE and to MERCK.

         Except as expressly set forth in this Agreement, the Parties shall
         follow United States laws of inventorship, ownership, and patenting
         rights including a Party's ability to exploit joint inventions without
         accounting to each other.

7.1.4    deCODE agrees to file, prosecute and maintain in the Territory, upon
         appropriate consultation with MERCK, the Patent Rights licensed to
         MERCK under this Agreement; PROVIDED, HOWEVER, with respect to Joint
         Information and Inventions, MERCK shall have the first right to file
         patent applications for such Joint Information and Inventions. With
         respect to deCODE Information and Inventions, deCODE may elect not to
         file and if so MERCK shall have the right to file patent applications.
         In such event, deCODE shall execute such documents and perform such
         acts at deCODE's expense as may be reasonably necessary to effect an
         assignment of such Patent Rights to MERCK in a timely manner to allow
         MERCK to continue such prosecution or maintenance. In each case, the
         filing Party shall give the non-filing Party an opportunity to review
         the text of the application before filing, shall consult with the
         non-filing Party with respect thereto, and shall supply the non-filing
         Party with a copy of the application as filed, together with notice of
         its filing date and serial number. deCODE shall keep MERCK advised of
         the status of the actual and prospective patent filings and upon the
         request of MERCK, provide advance copies of any papers related to the
         filing, prosecution and maintenance of such patent filings. deCODE
         shall promptly give notice to MERCK of the grant, lapse, revocation,
         surrender, invalidation or abandonment of any Patent Rights licensed to
         MERCK for which deCODE is responsible for the filing, prosecution and
         maintenance. With respect to all filings hereunder, the filing Party
         shall be responsible for payment of all costs and expenses related to
         such filings, except with respect to filings related to Joint
         Collaboration Patents, the costs and expenses of which shall be borne
         equally by the Parties.

                                        4
<Page>

         In the event that a Party elects not to contribute to the costs and
         expenses incurred in connection with a filing related to a Joint
         Collaboration Patent in any country, such Party shall be deemed to have
         abandoned its rights with respect to such Joint Collaboration Patent in
         such country.

7.2      OPTION OF MERCK TO PROSECUTE AND MAINTAIN PATENTS

         deCODE shall give notice to MERCK of any desire to cease prosecution
         and/or maintenance of Patent Rights on a country by country basis in
         the Territory and, in such case, shall permit MERCK, at its sole
         discretion, to continue prosecution or maintenance of such Patent
         Rights at its own expense. If MERCK elects to continue prosecution or
         maintenance or to file based on deCODE's election not to file pursuant
         to Section 7.1 above, deCODE shall execute such documents and perform
         such acts at deCODE's expense as may be reasonably necessary to effect
         an assignment of such Patent Rights to MERCK in a timely manner to
         allow MERCK to continue such prosecution or maintenance.

7.3      INTERFERENCE, OPPOSITION, REEXAMINATION AND REISSUE

         (a)     deCODE shall, within ten (10) days of learning of such event,
         inform MERCK of any request for, or filing or declaration of, any
         interference, opposition, or reexamination relating to Patent Rights.
         MERCK and deCODE shall thereafter consult and cooperate fully to
         determine a course of action with respect to any such proceeding. MERCK
         shall have the right to review and approve any submission to be made in
         connection with such proceeding.

         (b)     deCODE shall not initiate any reexamination, interference or
         reissue proceeding relating to Patent Rights without the prior written
         consent to MERCK, which consent shall not be unreasonably withheld.

         (c)     In connection with any interference, opposition, reissue, or
         reexamination proceeding relating to Patent Rights, MERCK and deCODE
         will cooperate fully and will provide each other with any information
         or assistance that either may reasonably request. deCODE shall keep
         MERCK informed of developments in any such action or proceeding,
         including, to the extent permissible by law, consultation and approval
         of any settlement, the status of any settlement negotiations and the
         terms of any offer related thereto.

         (d)     deCODE shall bear the expense of any interference, opposition,
         reexamination, or reissue proceeding relating to Patent Rights, except
         with respect to proceedings related to Joint Collaboration Patents, the
         costs and expenses of which shall be borne equally by the Parties. In
         the event that a Party elects not to contribute to the costs and
         expenses incurred in connection with a proceeding in a country related
         to a Joint Collaboration Patent, such Party shall be deemed to have
         abandoned its rights with respect to such Joint Collaboration Patent in
         that country.

7.4      ENFORCEMENT AND DEFENSE

         (a)     deCODE shall give MERCK notice of either (i) any infringement
         of Patent Rights, or (ii) any misappropriation or misuse of deCODE
         Know-How, that may come to deCODE's attention. MERCK and deCODE shall
         thereafter consult and cooperate fully to determine a course of action,
         including but not limited to the commencement of legal action by either
         or both MERCK and deCODE, to terminate any infringement of Patent
         Rights or any misappropriation or misuse

                                        4
<Page>

         of deCODE Know-How. However, deCODE, upon notice to MERCK, shall have
         the first right to initiate and prosecute such legal action in the name
         of deCODE and MERCK, or to control the defense of any declaratory
         judgment action relating to Patent Rights or deCODE Know-How. deCODE
         shall promptly inform MERCK if it elects not to exercise such first
         right and MERCK shall thereafter have the right to either initiate and
         prosecute such action or to control the defense of such declaratory
         judgment action in the name of MERCK and, if necessary, deCODE. Each
         Party shall have the right to be represented by counsel of its own
         choice. The Party initiating a prosecution relating to Patent Rights
         shall bear the expense of such prosecution, except with respect to
         prosecutions related to Joint Collaboration Patents, the costs and
         expenses of which shall be borne equally by the Parties. In the event
         that a Party elects not to contribute to the costs and expenses
         incurred in connection with a prosecution related to a Joint
         Collaboration Patent in a country, such Party shall be deemed to have
         abandoned its rights with respect to such Joint Collaboration Patent in
         that country.

         (b)     In the event that deCODE elects not to initiate and prosecute
         an action as provided in paragraph (a), and MERCK elects to do so, the
         costs of any agreed-upon course of action to terminate infringement of
         Patent Rights or misappropriation or misuse of deCODE Know-How,
         including without limitation the costs of any legal action commenced or
         the defense of any declaratory judgment, shall be shared equally by
         deCODE and MERCK.

         (c)     For any action to terminate any infringement of Patent Rights
         or any misappropriation or misuse of deCODE Know-How, in the event that
         MERCK is unable to initiate or prosecute such action solely in its own
         name, deCODE will join such action voluntarily and will execute and
         cause its Affiliates to execute all documents necessary for MERCK to
         initiate litigation to prosecute and maintain such action. In
         connection with any action, MERCK and deCODE will cooperate fully and
         will provide each other with any information or assistance that either
         may reasonably request. Each Party shall keep the other informed of
         developments in any action or proceeding, including, to the extent
         permissible by law, the consultation and approval of any settlement
         negotiations and the terms of any offer related thereto.

         (d)     Any recovery obtained by either or both MERCK and deCODE in
         connection with or as a result of any action contemplated by this
         section, whether by settlement or otherwise, shall be shared in order
         as follows:

                 (i)   the Party which initiated and prosecuted the action shall
                       recoup all of its costs and expenses incurred in
                       connection with the action;

                 (ii)  the other Party shall then, to the extent possible,
                       recover its costs and expenses incurred in connection
                       with the action; and

                 (iii) the amount of any recovery remaining shall then be
                       allocated between the Parties on a PRO RATA basis taking
                       into consideration the relative economic losses suffered
                       by each Party. By way of example and not limitation,
                       MERCK may suffer lost profit from the loss of sales of
                       Product or Tests and deCODE may suffer lost royalty
                       income on the loss of sales.

         (e)     deCODE shall inform MERCK of any certification regarding any
         Patent Rights it has received pursuant to either 21 U.S.C. Sections
         355(b)(2)(A)(iv) or (j)(2)(A)(vii)(IV) or it successor provisions or
         any similar provisions in a country in the Territory other than the
         United States and shall provide MERCK with a copy of such certification
         within five (5) days of receipt. deCODE's and MERCK's rights with
         respect to the initiation and prosecution of any legal action as a
         result
                                        4
<Page>

         of such certification or any recovery obtained as a result of such
         legal action shall be as defined in paragraphs 7.4(a)-(d) hereof;
         PROVIDED, HOWEVER, deCODE shall exercise its first right to initiate
         and prosecute any action and shall inform MERCK of such decision within
         ten (10) days of receipt of the certification, after which time MERCK
         shall have the right to initiate and prosecute such action.

7.5      PATENT TERM RESTORATION

         The Parties hereto shall cooperate with each other in obtaining patent
         term restoration or supplemental protection certificates or their
         equivalents in any country in the Territory where applicable to Patent
         Rights. In the event that elections with respect to obtaining such
         patent term restoration are to be made, MERCK shall have the right to
         make the election and deCODE agrees to abide by such election.

8.       TERM AND TERMINATION

8.1      TERM AND EXPIRATION.

         This Agreement shall be effective as of the Effective Date and unless
         terminated earlier pursuant to Sections 8.2 or 8.3 below, this
         Agreement shall continue in effect until expiration of all payment
         obligations hereunder. Upon expiration of this Agreement due to the
         expiration of all payment obligations, MERCK's licenses pursuant to
         Section 3.1 and 3.2 shall become fully paid-up, perpetual licenses.

8.2      TERMINATION BY A PARTY.

         Notwithstanding anything contained herein to the contrary, after the
         Research Program has ended or been terminated and if no IRCT Compounds
         are being sold as Products and no IRCT Compounds are in development,
         MERCK shall have the right to terminate this Agreement at any time in
         its sole discretion by giving ninety (90) days' advance written notice
         to deCODE. Not later than thirty (30) days after the date of such
         termination, each Party shall return or cause to be returned to the
         other Party all Information in tangible form received from the other
         party and all copies thereof, except that each party may retain one
         copy in its confidential files for records purposes. In the event of
         termination under this Section 8.2: (i) each Party shall pay all
         amounts then due and owing as of the termination date; and (ii) except
         for the surviving provisions set forth in Section 8.4 hereof, the
         rights and obligations of the parties hereunder shall terminate as of
         the date of such termination; PROVIDED, HOWEVER, that MERCK retain all
         licenses granted under Section 3.1 in the scope that existed
         immediately prior to termination.

8.3      TERMINATION FOR CAUSE

8.3.1    CAUSE FOR TERMINATION.

         This Agreement may be terminated at any time during the term of this
         Agreement upon written notice by either Party if the other Party is in
         breach of its material obligations hereunder by causes and reasons
         within its control and has not cured such breach within ninety (90)
         days after notice requesting cure of the breach; PROVIDED, HOWEVER, in
         the event of a good faith dispute with

                                        4
<Page>

         respect to the existence of a material breach, the ninety (90) day cure
         period shall be tolled until such time as the dispute is resolved
         pursuant to Section 10.6 hereof.

8.3.2    EFFECT OF TERMINATION FOR CAUSE ON LICENSE.

         (a)     If MERCK terminates this Agreement under Section 8.3.1, MERCK's
         licenses pursuant to Sections 3.1 and 3.2 shall be subject only to
         MERCK's continuing obligations of compensation, reporting and
         confidentiality to deCODE under Sections 2.7.2(a), 4, 5.3 and 5.4 and
         otherwise may not be terminated nor circumscribed for any other reason.
         In addition, deCODE shall at MERCK's request promptly return or cause
         to be returned to MERCK all Products and Tests, IRCT Compounds, Related
         IRCT Compounds, Information in tangible form, and all substances or
         compositions delivered or provided by MERCK, as well as any other
         material provided by MERCK in any medium. If deCODE terminates this
         Agreement under Section 8.3.1, (1) if MERCK has not paid any Exclusive
         License Fees prior to termination then MERCK's licenses under Section
         3.1(b) and (d) become non-exclusive; (2) if MERCK pays an Exclusive
         License Fee at any time prior to the date of termination, then its
         license rights under Section 3.1 (b) and (d) to the corresponding
         Elected Disease become exclusive licenses; (3) MERCK's licenses under
         Section 3.1(a) survive any termination of the Agreement by deCODE and
         to the extent that any IRCT Compounds, Related IRCT Compounds, Tests or
         Products exist, subject to MERCK's continuing obligations of
         compensation, reporting and confidentiality to deCODE under Sections
         2.7.2, 4, 5.3 and 5.4.

         (b)     If this Agreement is rejected by or on behalf of deCODE under
         Section 365 of the United States Bankruptcy Code (the "Code"), all
         licenses and rights to licenses granted under or pursuant to this
         Agreement by deCODE to MERCK are, and shall otherwise be deemed to be,
         for purposes of Section 365(n) of the Code, licenses of rights to
         "intellectual property" as defined under Section 101(35A) of the Code.
         The Parties agree that MERCK, as a licensee of such rights under this
         Agreement, shall retain and may fully exercise all of its rights and
         elections under the Code, and that upon commencement of a bankruptcy
         proceeding by or against deCODE under the Code, MERCK shall be entitled
         to a complete duplicate of or complete access to (as MERCK deems
         appropriate), any such intellectual property and all embodiments of
         such intellectual property. Such intellectual property and all
         embodiments thereof shall be promptly delivered to MERCK (i) upon any
         such commencement of a bankruptcy proceeding upon written request
         therefore by MERCK, unless deCODE elects to continue to perform all of
         its obligations under this Agreement or (ii) if not delivered under (i)
         above, upon the rejection of this Agreement by or on behalf of deCODE
         upon written request therefore by MERCK. If the Agreement is rejected
         by or on behalf of deCODE under any provisions of bankruptcy or
         insolvency law of any other country, it is the Parties intent that the
         licenses of rights of intellectual property shall not be subject to
         termination and that MERCK shall be entitled to a complete duplicate of
         or complete access to (as MERCK deems appropriate), any such
         intellectual property and all embodiments of such intellectual property
         or to the maximum protections afforded to licensees under the
         applicable law.

         The foregoing provisions of Subsection 8.3.2(a) are without prejudice
         to any rights MERCK may have arising under the Code or other applicable
         law.

8.4      EFFECT OF EXPIRATION OR TERMINATION; SURVIVAL

         Expiration or termination of the Agreement shall not relieve the
         Parties of any obligation accruing prior to such expiration or
         termination. Any expiration or termination of this Agreement shall be

                                        4
<Page>

         without prejudice to the rights of either Party against the other
         accrued or accruing under this Agreement prior to expiration or
         termination, including without limitation the obligation to pay
         royalties for Product(s), Tests, Related IRCT Compounds or IRCT
         Compound sold prior to such expiration termination. In the event this
         Agreement expires or is terminated during the pendency of an IRCT, the
         Parties shall arrange for orderly completion or early termination of
         such IRCT, including making provision for payment for all
         non-cancelable expenses associated therewith. The provisions of Article
         4 shall survive the expiration or termination of the Agreement and
         shall continue in effect for ten (10) years. In addition, the
         provisions of Articles 1, 4, 5, 6 and 7, and Sections 2.7, 8.4 and 10.6
         shall survive any expiration or termination of this Agreement.

9.       INDEMNIFICATION; INSURANCE; LIABILITY

9.1      INDEMNIFICATION

9.1.1    INDEMNIFICATION BY MERCK.

         MERCK shall indemnify and hold harmless deCODE, its Affiliates, any
         present or future parent or subsidiary of them, and their respective
         officers, directors, employees, agents and Affiliates (collectively in
         this Section 9.1 referred to as "deCODE") from and against any and all
         losses, liabilities, damages including, but not limited to, reasonable
         counsel fees, actually incurred by deCODE in defending against any
         litigation or any claim whatsoever by a Third Party and any and all
         amounts reasonably paid in settlement of any claim or litigation, any
         settlement payments (which shall first be subject to MERCK's prior
         written consent, not to be unreasonably withheld) (collectively in this
         section referred to as "deCODE Losses"), PROVIDED such deCODE Losses
         arise solely out of (i) the promotion, marketing, distribution and
         sale, whether directly or through distributors, of the Products or
         Tests, or (ii) the negligence, recklessness or wrongful intentional
         acts or omissions of MERCK, its Affiliates or its sublicensees, if any,
         or their respective directors, officers, employees or agents, in
         connection with the performance by MERCK under this Agreement; and
         PROVIDED further, that this obligation by MERCK shall not apply in the
         event that such deCODE Losses are attributable in any manner to any
         intentional act or negligence, willful or otherwise, of deCODE.

9.1.2    INDEMNIFICATION BY deCODE.

         deCODE shall indemnify and hold harmless MERCK, its Affiliates, any
         present or future parent or subsidiary of them, and their respective
         officers, directors, employees, agents and Affiliates (collectively in
         this Section 9.1.2 referred to as "MERCK") from and against any and all
         losses, liabilities, damages including, but not limited to, reasonable
         counsel fees, actually incurred by MERCK in defending against any
         litigation or any claim whatsoever by a Third Party and any and all
         amounts reasonably paid in settlement of any claim or litigation, any
         settlement payments (which shall first be subject to deCODE' prior
         written consent, not to be unreasonably withheld) (collectively in this
         section referred to as "MERCK Losses"), PROVIDED such MERCK Losses
         arise solely out of (i) the promotion, marketing, distribution and
         sale, whether directly or through distributors, of the Products or
         Tests by deCODE or (ii) the negligence, recklessness or wrongful
         intentional acts or omissions of deCODE, its Affiliates or its
         sublicensees, if any, or their respective directors, officers,
         employees or agents, in connection with the performance by deCODE under
         this Agreement; and PROVIDED further, that this obligation by deCODE
         shall not apply in the event that such MERCK Losses are attributable in
         any manner to any intentional act or negligence, willful or otherwise,
         of MERCK.

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<Page>

9.1.3    NOTICE OF CLAIM OF INDEMNIFICATION - THIRD PARTY CLAIMS

         (a)     A Party (the "Indemnified Party") seeking indemnification under
         this Agreement for a claim made against it by a Third Party ("Third
         Party Claim") shall notify the other Party (the "Indemnifying Party")
         in writing of the Third Party Claim within thirty (30) days after
         receipt by the Indemnified Party of written notice of the Third Party
         Claim; however, failure to give such notification shall not affect the
         indemnification provided under this Agreement, except to the extent the
         Indemnifying Party shall actually in a material manner have been
         prejudiced by the failure. Thereafter, the Indemnified Party shall
         deliver to the Indemnifying Party, promptly after the Indemnified
         Party's receipt thereof, copies of all notices and documents (including
         court papers) received by the Indemnified Party relating to the Third
         Party Claim.

         (b)     The Indemnifying Party shall have the right, within thirty (30)
         days after being so notified, to assume the defense of such Third Party
         Claim with counsel reasonably satisfactory to the Indemnified Party. In
         any such proceeding the defense of which the Indemnifying Party shall
         have so assumed, the Indemnified Party shall have the right to
         participate therein and retain its own counsel (without otherwise
         affecting the rights of the Parties under Section 9.1) at its own
         expense unless (i) the Indemnified Party and the Indemnifying Party
         shall have mutually agreed to the retention of such counsel, (ii) the
         Indemnified Party shall have reasonably concluded that there may be one
         or more legal defenses available to it which are different from or
         additional to those available to the Indemnifying Party, or (iii) the
         named parties to any such proceeding (including the impleaded parties)
         include both the Indemnifying Party and the Indemnified Party, and
         representation of both Parties by the same counsel would be
         inappropriate in the opinion of the Indemnified Party's counsel due to
         actual or potential differing interests between them; in any such case,
         one firm of attorneys separate from the Indemnifying Party's counsel
         may be retained to represent the Indemnified Parties at the
         Indemnifying Party's expense. Any settlement of such a Third Party
         Claim, the defense of which has been assumed by the Indemnifying Party,
         shall not be entered into by the Indemnifying Party without prior
         written consent of the Indemnified Party, which consent shall not be
         unreasonably withheld.

         (c)     With respect to all Third Party Claims, the Indemnified Party
         shall cooperate in all reasonable respects with the Indemnifying Party
         in connection with any Third Party Claims and the defense or compromise
         thereof. Such cooperation shall include the retention and (upon the
         Indemnifying Party's request) the provision to the Indemnifying Party
         of records and information reasonably relevant to the Third Party
         Claim, making employees available on a mutually convenient basis to
         provide additional information, and explanation of any material
         provided under this Agreement. If the Indemnifying Party shall have
         assumed the defense of a Third Party Claim, the Indemnified Party shall
         not, without first waiving the indemnity as to such claim, admit any
         liability with respect to, or settle, compromise, or discharge, the
         Third Party Claim, without the Indemnifying Party's prior written
         consent; PROVIDED that admissions of facts which a Party may reasonably
         be required to make shall not be deemed to be admissions of liability.

9.1.4    COOPERATION.

         The Parties shall cooperate with each other with respect to resolving
         any claim or liability with respect to which one Party is obligated to
         indemnify the other Party under this Agreement, including, without
         limitation, by taking reasonable efforts to mitigate or resolve any
         such claim or liability.

9.2      INSURANCE.

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<Page>

         Each Party shall maintain adequate insurance against liability and
         other risks associated with its activities contemplated by this
         Agreement, including but not limited to its indemnification obligations
         herein, in such amounts and on such terms as are customary in the
         industry for the activities to be conducted by it under this Agreement.
         Each Party shall furnish to the other Party evidence of such insurance,
         upon request.

10.      MISCELLANEOUS

10.1     FORCE MAJEURE

         Neither Party shall be held liable to the other Party nor be deemed to
         have defaulted under or breached the Agreement for failure or delay in
         performing any obligation under the Agreement when such failure or
         delay is caused by or results from causes beyond the reasonable control
         of the affected Party including, but not limited to, embargoes, war,
         acts of war (whether war be declared or not), insurrections, riots,
         civil commotions, strikes, lockouts or other labor disturbances, fire,
         floods, or other acts of God, or acts, omissions or delays in acting by
         any governmental authority or the other Party. The affected Party shall
         notify the other Party of such force majeure circumstances as soon as
         reasonably practical, and shall promptly undertake all reasonable
         efforts necessary to cure such force majeure circumstances. The Party
         giving such notice shall thereupon be excused from such of its
         obligations under this Agreement as it is thereby disabled from
         performing for so long as it is so disabled and the thirty (30) days
         thereafter. To the extent possible, each Party shall use reasonable
         efforts to minimize the duration of any force majeure.

10.2     ASSIGNMENT/ CHANGE OF CONTROL

         (a) Neither Party shall be entitled to assign its rights or delegate
         its obligations hereunder without the express written consent of the
         other Party hereto, except that (i) MERCK may assign its rights and
         transfer its duties hereunder to an Affiliate or to any assignee of all
         or substantially all of its business (or that portion thereof to which
         this Agreement relates) or in the event of MERCK's merger,
         consolidation or involvement in a similar transaction and (ii) deCODE
         may assign its rights and transfer its duties hereunder to an Affiliate
         or to any assignee of all or substantially all of its business (or that
         portion thereof to which this Agreement relates) or in the event of
         deCODE's merger, consolidation or involvement in a similar transaction,
         PROVIDED HOWEVER, during the Research Program Term deCODE may not
         assign its rights and obligations under the Agreement without MERCK's
         written consent which shall not be unreasonably withheld. It shall be
         reasonable for MERCK to withhold consent of an assignment to a
         Competitor. No assignment and transfer shall be valid or effective
         unless done in accordance with this Section 9.2 and unless and until
         the assignee/transferee shall agree in writing to be bound by the
         provisions of this Agreement.

         (b) In the event that deCODE enters into an agreement resulting in a
         Change of Control pursuant to which a Competitor obtains Control of
         deCODE, then (1) MERCK shall have the right to terminate the Agreement
         under Section 8.3.1 and; (2) deCODE shall adopt procedures to be agreed
         upon in writing by MERCK to prevent the disclosure of deCODE Know-How,
         deCODE Information and Inventions, MERCK Information and Inventions,
         Joint Information and Inventions and MERCK Know-How (collectively,
         "Sensitive Information") beyond the deCODE personnel having access to
         and knowledge of Sensitive Information prior to the Change of

                                        4
<Page>

         Control and deCODE shall adopt procedures approved in writing by MERCK
         to control the dissemination of Sensitive Information disclosed after
         the Change of Control. The purposes of all such procedures shall be to
         strictly limit such disclosures to only those personnel having a need
         to know Sensitive Information in order for deCODE to perform its
         obligations.

10.3     SEVERABILITY

         If any one or more of the provisions contained in this Agreement is
         held invalid, illegal or unenforceable in any respect, the validity,
         legality and enforceability of the remaining provisions contained
         herein shall not in any way be affected or impaired thereby, unless the
         absence of the invalidated provision(s) adversely affects the
         substantive rights of the Parties. The Parties shall in such an
         instance use their best efforts to replace the invalid, illegal or
         unenforceable provision(s) with valid, legal and enforceable
         provision(s) which, insofar as practical, implement the purposes of
         this Agreement.

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<Page>

10.4     NOTICES

         All notices which are required or permitted hereunder shall be in
         writing and sufficient if delivered personally, sent by facsimile (and
         promptly confirmed by personal delivery, registered or certified mail
         or overnight courier), sent by nationally-recognized overnight courier
         or sent by registered or certified mail, postage prepaid, return
         receipt requested, addressed as follows:

         if to deCODE, to:     deCODE genetics, Ehf.
                               Sturlugata 8, IS-101
                               Reykjavik, Iceland
                               Attention: President
                               Facsimile No.: +354 570 1901

                  and:         Attention: Legal Department
                               Facsimile No.: +354 570 1981

         if to MERCK, to:      Merck & Co., Inc.
                               One Merck Drive
                               P.O. Box 100, WS3A-65
                               Whitehouse Station, NJ 08889-0100
                               Attention: Office of Secretary
                               Facsimile No.: (908) 735-1246

                    And        Merck & Co., Inc.
                               One Merck Drive
                               Attention: Chief Licensing Officer
                               P.O. Box 100, WS2A-30
                               Whitehouse Station, NJ 08889-0100
                               Facsimile: (908) 735-1214

         or to such other address as the Party to whom notice is to be given may
         have furnished to the other Party in writing in accordance herewith.
         Any such notice shall be deemed to have been given: (a) when delivered
         if personally delivered or sent by facsimile on a business day; (b) on
         the business day after dispatch if sent by nationally-recognized
         overnight courier; and/or (c) on the fifth business day following the
         date of mailing if sent by mail.

10.5     APPLICABLE LAW

         The Agreement shall be governed by and construed in accordance with the
         laws of the State of New Jersey and the patent laws of the United
         States without reference to any rules of conflict of laws or renvoi.
         The United Nations Convention on the Sale of Goods shall not apply.

10.6     DISPUTE RESOLUTION

         (a) The Parties shall negotiate in good faith and use reasonable
         efforts to settle any dispute, controversy or claim arising from or
         related to this Agreement or the breach thereof. If the Parties do not
         fully settle, and a Party wishes to pursue the matter, each such
         dispute, controversy

                                        4
<Page>

         or claim that is not an "Excluded Claim" shall be finally resolved by
         binding arbitration in accordance with the Commercial Arbitration Rules
         and Supplementary Procedures for Large Complex Disputes of the American
         Arbitration Association ("AAA"), and judgment on the arbitration award
         may be entered in any court having jurisdiction thereof.

         (b) The arbitration shall be conducted by a panel of three persons
         experienced in the pharmaceutical business: within 30 days after
         initiation of arbitration, each Party shall select one person to act as
         arbitrator and the two Party-selected arbitrators shall select a third
         arbitrator within 30 days of their appointment. If the arbitrators
         selected by the Parties are unable or fail to agree upon the third
         arbitrator, the third arbitrator shall be appointed by the AAA. The
         place of arbitration shall be New York, New York, and all proceedings
         and communications shall be in English.

         (c) Either Party may apply to the arbitrators for interim
         injunctive relief until the arbitration award is rendered or the
         controversy is otherwise resolved. Either Party also may, without
         waiving any remedy under this Agreement, seek from any court having
         jurisdiction any injunctive or provisional relief necessary to protect
         the rights or property of that Party pending the arbitration award. The
         arbitrators shall have no authority to award punitive or any other type
         of damages not measured by a Party's compensatory damages. Each Party
         shall bear its own costs and expenses and attorneys' fees and an equal
         share of the arbitrators' and any administrative fees of arbitration.

         (d) Except to the extent necessary to confirm an award or as may be
         required by law, neither a Party nor an arbitrator may disclose the
         existence, content, or results of an arbitration without the prior
         written consent of both Parties. In no event shall an arbitration be
         initiated after the date when commencement of a legal or equitable
         proceeding based on the dispute, controversy or claim would be barred
         by the applicable New York statute of limitations.

         (e) The parties agree that, in the event of a dispute over the nature
         or quality of performance under this Agreement, neither party may
         terminate the Agreement until final resolution of the dispute through
         arbitration or other judicial determination. The parties further agree
         that any payments made pursuant to this Agreement pending resolution of
         the dispute shall be refunded if an arbitrator or court determines that
         such payments are not due.

         (f) As used in this Section, the term "Excluded Claim" shall mean a
         dispute, controversy or claim that concerns (i) the validity or
         infringement of a patent, trademark or copyright; or (ii) any
         antitrust, anti-monopoly or competition law or regulation, whether or
         not statutory.

10.7     ENTIRE AGREEMENT; AMENDMENTS

         The Agreement contains the entire understanding of the Parties with
         respect to the Research Program and licenses granted hereunder. All
         express or implied agreements and understandings, either oral or
         written, with regard to the Research Program and the licenses granted
         hereunder are superseded by the terms of this Agreement. The Agreement
         may be amended, or any term hereof modified, only by a written
         instrument duly executed by authorized representatives of both Parties
         hereto.

                                        4
<Page>

10.8     HEADINGS

         The captions to the several Articles and Sections hereof are not a part
         of the Agreement, but are merely for convenience to assist in locating
         and reading the several Articles and Sections hereof.

10.9     INDEPENDENT CONTRACTORS

         It is expressly agreed that deCODE and MERCK shall be independent
         contractors and that the relationship between the two Parties shall not
         constitute a partnership, joint venture or agency. Neither deCODE nor
         MERCK shall have the authority to make any statements, representations
         or commitments of any kind, or to take any action, which shall be
         binding on the other Party, without the prior written consent of the
         other Party.

10.10    WAIVER

         A waiver (whether express or implied) by one of the Parties of any of
         the provisions of this Agreement or of any breach of or default by the
         other Party in performing any of those provisions shall not constitute
         a continuing waiver and that waiver shall not prevent the waiving Party
         from subsequently enforcing any of the provisions of this Agreement not
         waived or from acting on any subsequent breach of or default by the
         other Party under any of the provisions of this Agreement.

10.11    CUMULATIVE REMEDIES

         No remedy referred to in this Agreement is intended to be exclusive,
         but each shall be cumulative and in addition to any other remedy
         referred to in this Agreement or otherwise available under law.

10.12    WAIVER OF RULE OF CONSTRUCTION

         Each Party has had the opportunity to consult with counsel in
         connection with the review, drafting and negotiation of this Agreement.
         Accordingly, the rule of construction that any ambiguity in this
         Agreement shall be construed against the drafting Party shall not
         apply.

                                        *

                                        *

                                        *

                                        *

                                        *

                                        4
<Page>

10.13    COUNTERPARTS

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

         IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first set forth above.

MERCK & CO., INC.                             DECODE GENETICS, EHF.

BY: /s/ Raymond V. Gilmartin                  BY: /s/ Kari Stefansson
    ------------------------                      -------------------
    Raymond V. Gilmartin                          Kari Stefansson

TITLE: Chairman, President and Chief          TITLE:
Executive Officer

DATE:                                         DATE:
     --------------------                          -----------------

                                        4
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                                    SCHEDULES

                          SCHEDULE 1.21 DECODE PATENTS

[CONFIDENTIAL TREATMENT REQUESTED]

                                        4
<Page>

                        SCHEDULE 2.1-0 INITIAL WORK PLAN

[CONFIDENTIAL TREATMENT REQUESTED]

                                        4
<Page>

                                  Schedule 2.3
                       [CONFIDENTIAL TREATMENT REQUESTED]

                                        4
<Page>

APPENDIX 1.3.1.b: [CONFIDENTIAL TREATMENT REQUESTED]

                                        4
<Page>

APPENDIX 3.5 [CONFIDENTIAL TREATMENT REQUESTED]

                                        4
<Page>

SCHEDULE 2.6 BUDGET

                                        4
<Page>

SCHEDULE 5.1 Research Program Funding
[CONFIDENTIAL TREATMENT REQUESTED]

                                        4

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