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                                                                   EXHIBIT 10.14

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

                        RESEARCH COLLABORATION AGREEMENT

THIS RESEARCH COLLABORATION AGREEMENT ("AGREEMENT") is made effective as of
February 21, 2003 ("EFFECTIVE DATE") by and between ANADYS PHARMACEUTICALS,
INC., a Delaware corporation ("ANADYS"), with its principal place of business at
9050 Camino Santa Fe, San Diego, CA 92121, USA, and AMGEN INC., a Delaware
corporation ("AMGEN"), with its principal place of business at One Amgen Center
Drive, Thousand Oaks, CA, 91320 USA. Anadys and Amgen are sometimes referred to
in this Agreement individually as a "PARTY" and collectively as the "PARTIES".

                                    RECITALS

         A.       Anadys has certain proprietary technology known or referred to
as ATLAS(TM) (Any Target Ligand Affinity Screen), which can be used for
high-throughput screening for protein targets of both known or unknown function
to rapidly identify compounds that bind to protein targets.

         B.       Amgen desires to identify small molecule compounds active
against a specific target as candidates for pharmaceutical development.

         C.       The Parties desire to utilize ATLAS for the specific target
using (a) Amgen's small molecule compound library and (b) Anadys' small molecule
compound library to identify potential lead compounds for further research and
optimization to generate compounds for potential preclinical and clinical
development, manufacturing and commercialization by Amgen.

         D.       The Parties desire that Amgen should obtain ownership of or
exclusive rights to certain of the compounds active against the specific target
in exchange for certain fees, milestone payments and royalties payable to
Anadys.

         In consideration of the foregoing recitals and the covenants contained
herein, Anadys and Amgen hereby agree as follows:

                                    AGREEMENT

         1.       DEFINITIONS

                  (a)      "AFFILIATE" means, with respect to a Party, an entity
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such Party. For purposes of this
definition, "control" means the possession, direct or indirect, of the power to
cause the direction of the management and policies of a Person, whether through
ownership of fifty percent (50%) or more of the voting securities of such
Person, by contract or otherwise.

                  (b)      "AMGEN KNOW HOW" means (i) Information that Amgen
provides to Anadys that is necessary or useful for purposes of the Research
Program or for research, development, manufacturing and commercialization of
Collaboration Products, that Amgen or any of its Affiliates Controls on the
Effective Date or during the term of the Agreement, (ii)

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Amgen Materials; (iii) the Amgen Library Compounds; and in each case, any
replication or any part of any of the foregoing.

                  (c)      "AMGEN LIBRARY COMPOUNDS" means one or more of the
small molecule compounds represented in Amgen's compound library, which are
supplied to Anadys for screening as part of the Research Plan.

                  (d)      "AMGEN LIBRARY VALIDATED HIT" means (i) an Amgen
Library Compound(s) that is/are a Qualified Hit(s); and (ii) any Derivative(s)
of an Amgen Library Compound(s) that meets the inhibition and [...***...]
requirements of a Qualified Hit, in each casE, that meets the Validation
Criteria.

                  (e)      "AMGEN MATERIALS" means, other than Amgen Library
Compounds, any materials Controlled by Amgen that Amgen provides to Anadys,
including, without limitation biological materials or chemical compounds,
screens, animal models, cell lines, cells, nucleic acids, proteins (e.g., the
Target) and reagents, together with any analogs, derivatives, fragments,
progeny, sub-cellular constituents or expression products thereof, for use in
the conduct of the Research Program.

                  (f)      "AMGEN-SELECTED VALIDATED HIT" has the meaning
provided in Section 5(i). Each Amgen-Selected Validated Hit shall include
analogs, homologs, isomers, prodrugs, chemical formulations or bioisosteres
(whether derived in single or multiple steps) of a chemical compound(s) thereof
that are Anadys Library Compounds that interact with and regulate the activity
of the Target.

                  (g)      "ANADYS KNOW-HOW" means other than Research Results,
(i) Information that is necessary or useful for purposes of the Research Program
or for research, development, manufacturing and commercialization of
Collaboration Products, that Anadys or any of its Affiliates Controls on the
Effective Date or during the term of the Agreement, and (ii) the Anadys Library
Compounds; and in each case, any replication or any part of any of the
foregoing.

                  (h)      "ANADYS LIBRARY COMPOUNDS" means one or more of the
approximately [...***...] ([...***...]) small molecule compounds represenTed in
Anadys' compound library.

                  (i)      "ANADYS LIBRARY VALIDATED HIT" means (i) an Anadys
Library Compound(s) that is/are a Qualified Hit(s); and (ii) any Derivative(s)
of an Anadys Library Compound(s) that meets the inhibition and [...***...]
requirements of a Qualified Hit, in each case, that meets the Validation
Criteria.

                  (j)      "ASSAY TECHNOLOGY" means all inventions, discoveries,
works of authorship, trade secrets and other know-how or developments, including
observations, conclusions, hypotheses, identifications, data and other
information, and all Intellectual Property appurtenant thereto, that are made,
conceived, reduced to practice, authored, or otherwise generated or obtained
directly or indirectly by Anadys in whole or in part in the course of
performance of the Research Plan that are modifications or improvements of ATLAS
screening technology, including assay design, development, validation,
implementation, application, and

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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performance, that are generally useful for ATLAS screening assays without
respect to a particular target, compound, or set of compounds.

                  (k)      "ATLAS" means Any Target Ligand Affinity Screen,
Anadys' proprietary technology which can be used for high-throughput screening
for protein targets of both known or unknown function to identify compounds that
bind to protein targets.

                  (l)      "COLLABORATION PRODUCT" means a pharmaceutical
composition that contains a Lead Compound.

                  (m)      "COMPOUND" means a Primary Hit, Qualified Hit and/or
Validated Hit or any Derivative of the foregoing.

                  (n)      "CONFIDENTIAL INFORMATION" means, subject to the
limitations set forth in Section 6(b), (i) all proprietary or confidential
Information, disclosed by one Party to the other Party in the course of
performing under this Agreement; and (ii) all "Confidential Information" as
defined in and exchanged pursuant to the [...***...] by and between the Parties.

                  (o)      "CONTROL", "CONTROLS" and "CONTROLLED" mean, with
respect to a particular item of information or property right, that the
applicable Party owns or has a license to such item or right and has the ability
to grant to the other Party access to and a license or sublicense (as
applicable) under such item or rights as provided for herein without violating
the terms of any agreement or other arrangement with any Third Party existing as
of the Effective Date.

                  (p)      "COMMERCIALLY REASONABLE EFFORTS" means the level of
efforts and resources commonly used in the research-based pharmaceutical
industry for the development, manufacturing and commercialization of a product
of similar market potential at a similar stage in its product life as that of a
Royalty Bearing Collaboration Product, taking into account efficacy, the
competitiveness of alternative products and product candidates in development or
in the marketplace (excluding other products owned or controlled by Amgen), the
patent and other proprietary position of the product, the likelihood of
regulatory approval given the regulatory structure involved, the profitability
of the product including the royalties payable to licensors of patent rights,
alternative products and product candidates and other relevant factors.
Commercially Reasonable Efforts shall be determined on a market-by-market and
country-by-country basis of a particular Royalty Bearing Collaboration Product,
and it is anticipated that the level of effort would change over time,
reflecting changes in the status of the Royalty Bearing Collaboration Product
and the market and/or country involved.

                  (q)      "COMPENSATION" means any payment, to the extent
applicable, to Anadys pursuant to Section 5(e), 5(f), 5(g) or 5(i) of this
Agreement.

                  (r)      "DERIVATIVE" means an analog, homolog, isomer,
prodrug, chemical formulation or bioisostere (whether derived in single or
multiple steps) of a chemical compound(s) Controlled by Anadys or Amgen and made
under an analoging program or a chemical synthesis program by Anadys under the
Research Program or Amgen (or by a Third Party on behalf of Amgen). For the
avoidance of doubt, "Derivative" also means any compound which is a chemical
modification of another Derivative.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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

                  (t)      "FIRST COMMERCIAL SALE" means, with respect to a
particular Royalty Bearing Collaboration Product, the first sale for end-use or
consumption of such Royalty Bearing Collaboration Product in a country after the
governing health regulatory authority of such country has granted Regulatory
Approval. Sale to an Affiliate or Sublicensee will not constitute a First
Commercial Sale unless the Affiliate or Sublicensee is the last entity in the
distribution chain of the Royalty Bearing Collaboration Product.

                  (u)      "FTE" means the equivalent of the work of one
employee full-time for one (1) year (consisting of at least a total of
[...***...] weeks or [...***...] hours per year (excluding vacations and
holidays) of work during and directly in furtherance of the REsearch Program,
carried out by an Anadys employee or Third Party mutually agreed upon by the
JSC. Overtime shall not be counted toward the number of hours that are used to
calculate the FTE contribution. No one person shall be permitted to account for
more than one FTE. Scientific work to be performed by Anadys employees or
mutually agreeable Third Parties in furtherance of this Agreement may include,
but is not limited to, experimental laboratory work, recording and writing up
results, reviewing literature and references, holding scientific discussions and
directing the activities of laboratory personnel.

                  (v)      "IND FILING" means the filing of an Investigational
New Drug Application (as defined in 21 C.F.R. 312 or any successor regulation)
with the FDA or the equivalent application or filing filed with any equivalent
agency or governmental authority in the European Union necessary to commence
human clinical trials in such jurisdiction.

                  (w)      "INFORMATION" means all tangible and intangible
techniques, technology, practices, discoveries, works of authorship, trade
secrets, inventions (whether patentable or not), structures, formulations,
assays, methods, processes, formulas, knowledge, and other know-how or
developments (including observations, conclusions, hypotheses, identifications),
conclusions, skill, experience, data and results (including pharmacological,
toxicological and clinical test data and results and analytical and quality
control data and results), drawings, diagrams, descriptions, software and
algorithms.

                  (x)      "INTELLECTUAL PROPERTY" means all Patent Rights,
trade marks, service marks, registered designs, applications for any of the
foregoing and the right to apply for any of the foregoing in any part of the
world, copyright, approvals, data exclusivity rights, database rights and rights
in databases, design right, inventions, Confidential Information, know-how,
trade secrets and any other similar right situated in any country in the world.

                  (y)      "JOINT STEERING COMMITTEE" or "JSC" means the
committee established and operating in accordance with Section 2(b).

                  (z)      "LEAD COMPOUND" means a Validated Hit and/or
Derivative(s) thereof that [...***...] that is designated by Amgen as a clinical
candidate pursuant to Section 3(b). For the avoidance of doubt, a Derivative of
a Validated Hit shall include such Derivative(s) made by

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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Anadys prior to, or subsequent to, Amgen's designation of such Validated Hit as
a Lead Compound.

                  (aa)     "NDA" means (i) a New Drug Application and all
amendments and supplements thereto filed with the FDA; or (ii) the equivalent
application, including, without limitation, a Marketing Authorization
Application filed with any equivalent agency or governmental authority in the
European Union (i.e., the EMEA)) requiring such filing, including all documents,
data and other information concerning a pharmaceutical product which are
necessary for gaining Regulatory Approval to market and sell such pharmaceutical
product.

                  (bb)     "NDA APPROVAL" means the approval by the FDA (or
equivalent agency or governmental authority in the European Union (i.e., the
EMEA)) of an NDA.

                  (cc)     "NDA SUBMISSION" means the submission of an NDA with
the FDA (or equivalent agency or governmental authority in the European Union
(i.e., the EMEA)) in the United States (or European Union).

                  (dd)     "NET SALES" means the gross billings, recognized in
accordance with the generally accepted accounting principles (GAAP) consistently
applied, for the sale to a Third Party of Royalty Bearing Collaboration Product
in finished product form made by Amgen, its Affiliates or Sublicensees, as
applicable, less the following deductions:

                           (i)      amounts repaid or credited by reason of
timely rejections, recalls, returns or wastage replacement (whether in cash or
trade);

                           (ii)     taxes, excises, duties or other governmental
charges (other than income taxes);

                           (iii)    bad debt and retroactive price reductions;

                           (iv)     shipping, transportation, packing and
delivery charges actually incurred, including shipping insurance; and

                           (v)      normal and customary trade, cash and
quantity discounts, free goods, rebates, charge backs, credits and allowances
granted to Third Parties, including mandatory rebates to governmental agencies.

Notwithstanding anything else in this Section 1(dd), amounts received by Amgen
or its Affiliates or Sublicensees for the sale of Royalty Bearing Collaboration
Products among Amgen and its Affiliates or Sublicensees for resale shall not be
included in the computation of Net Sales hereunder.

                  (ee)     "PATENT RIGHTS" means (a) United States patents,
reexaminations, reissues, additions, renewals, extensions and term restorations,
and foreign counterparts thereof, (b) pending applications for United States
patents, including, without limitation, provisional applications, continuations,
continuations-in-part, divisional and substitute applications, including without
limitations, inventors' certificates, and (c) foreign counterparts thereof.

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                  (ff)     "PERSON" means an individual, partnership, limited
liability company, joint venture, corporation, trust, estate, unincorporated
organization, or any other entity, or any government or any department or agency
thereof.

                  (gg)     "PHASE 1" means that portion of the Research Plan to
be conducted by Anadys pursuant to this Research Collaboration Agreement as set
forth in Section 2(c)(i).

                  (hh)     "PHASE 2" means that portion of the Research Plan to
be conducted by Anadys pursuant to this Research Collaboration Agreement as set
forth in Section 2(c)(ii).

                  (ii)     "PHASE 3" means additional research activities to
support lead optimization efforts. At Amgen's option, all or a portion of Phase
3 may be performed by Anadys pursuant this Agreement, as set forth in Section
2(c)(iv).

                  (jj)     "PHASE 3 INTEREST NOTICE" means a written notice
given by Amgen to Anadys pursuant to Section 2(c)(iv) during the term of the
Agreement which specifies (i) Amgen's election to proceed with Phase 3 and (ii)
whether Amgen elects to have Anadys perform all or a portion of Phase 3.

                  (kk)     "PRIMARY HITS" mean an Amgen Library Compound(s) or
Anadys Library Compound(s) that is screened by Anadys during the Research
Program using the Screening Assay, and that
[...***...] or such other criteria determined by the JSC.

                  (ll)     "PROGRAM COMPOUNDS" shall mean (i) Amgen Library
Compounds, Amgen-Selected Validated Hit(s), Lead Compound(s), and/or
Collaboration Product(s) and any Derivatives of the foregoing; and (ii)
Derivatives of Anadys Library Validated Hits that are not Amgen-Selected
Validated Hits.

                  (mm)     "QUALIFIED HITS" mean an Amgen Library Compound(s) or
Anadys Library Compound(s) that is screened by Anadys during the Research
Program using the Screening Assay, qualifies as a Primary Hit(s) and, further,
that [...***...] or such other criteria as designated by the JSC.

                  (nn)     "REGULATORY APPROVAL" means any and all approvals
(including pricing and reimbursement approvals), product and/or establishment
licenses, registrations or authorizations of any national, supra-national,
regional, state, or local regulatory agency, department, bureau commission,
council or other government entity that is necessary for the manufacture, use,
storage, import, export, transport and sale of a Collaboration Product in a
regulatory jurisdiction.

                  (oo)     REGULATORY FILINGS" means, collectively, INDs,
biologic license applications (BLAs), NDAs, establishment license applications
(ELAs) and drug master files (DMFs), applications for designation of a
Collaboration Product(s) such as an "Orphan Product(s)" under the Orphan Drug
Act, or any other similar filings (including any foreign equivalents), including
any related correspondence and discussions as may be required or requested by
the FDA or equivalent foreign governmental authority(ies), for the clinical
testing, manufacture or sale of a Collaboration Product.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  (pp)     "RESEARCH PLAN" means the work plan, as it may be
amended from time to time in accordance with Section 2(a), for Phase 1, Phase 2
(if applicable) and at Amgen's discretion Phase 3 of the Research Program. The
initial Research Plan is attached to this Agreement as Exhibit B.

                  (qq)     "RESEARCH PROGRAM" means the work conducted pursuant
to this Agreement and the Research Plan during Phase 1 and Phase 2 (if
applicable) and the work that may be conducted at Amgen's discretion during
Phase 3.

                  (rr)     "RESEARCH RESULTS" means, other than Assay
Technology, (i) all Information that is made, conceived, reduced to practice,
authored, or otherwise generated or obtained directly or indirectly by Anadys or
Amgen in whole or in part in the course of performance of this Agreement or of
the Research Program; and (ii) Program Compounds and all intellectual property
(including Patent Rights) appurtenant thereto.

                  (ss)     "RESEARCH TERM" means the term commencing on the
Effective Date and continuing until completion of Anadys' responsibilities under
the Research Plan unless earlier terminated or extended by Amgen.

                  (tt)     "ROYALTY TERM" shall mean, with respect to any
Royalty Bearing Collaboration Product in any country, the period of time
commencing on the First Commercial Sale of such Royalty Bearing Collaboration
Product in such country and ending upon the expiration of the last to expire of
the Anadys Patent Rights relating to such Royalty Bearing Collaboration Product
in such country.

                  (uu)     "ROYALTY BEARING COLLABORATION PRODUCT" means a
Collaboration Product containing a Lead Compound that is an Anadys Library
Validated Hit, and further, for which Amgen is obligated to pay Anadys a royalty
payment for the Royalty Term pursuant to Section 5(g) of this Agreement.

                  (vv)     "SCREENING ASSAY" means a screening assay employing
ATLAS that is suitable, as determined by the JSC, for use in screening Amgen
Library Compounds and Anadys Library Compounds against the Target in a
high-throughput screening format, that Anadys develops under the Research Plan
as described in Section 2(c)(i).

                  (ww)     "START OF PHASE III CLINICAL TRIALS" means the first
dosing of a patient in a trial, which trial shall be on sufficient numbers of
patients that, if the defined end-points are met, are designed (and agreed to by
the governing health regulatory authority of such country or jurisdiction in
which such trial is to be conducted) based upon existing data in the same
patient population as of the start of the trial, to definitively establish that
a pharmaceutical product is safe and efficacious for its intended use, and to
define warnings, precautions and adverse reactions that are associated with the
pharmaceutical product in the dosage range to be prescribed, and to provide
pivotal data supporting Regulatory Approval of such pharmaceutical product or
label expansion of such pharmaceutical product and that satisfy the requirements
of 21 C.F.R. 321.21(c) (or its successor regulation), or its foreign equivalent.

                  (xx)     "SUBLICENSEE" means any Affiliate or Third Party to
which Amgen grants any right to develop, make, have made, market, import,
export, distribute, use, offer for sale, sell

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or have sold Collaboration Products. Solely for purposes of Compensation payable
to Anadys under Section 5(g) of this Agreement, a Third Party who is granted
only the right to sell a Royalty Bearing Collaboration Product (such as a
wholesaler, distributor, contract sales force or a Person providing products
directly to patients in a home health care setting) or to use a Royalty Bearing
Collaboration Product (such as a customer receiving an implied license as a
consequence of purchase) shall not be considered a Sublicensee.

                  (yy)     "TARGET" means [...***...]. For the avoidance of
doubt, "Target" shall include, without limitation, [...***...] or [...***...] of
[...***...].

                  (zz)     "THIRD PARTY" means any person or entity other than
Amgen, Anadys, and their respective Affiliates.

                  (aaa)    "VALIDATED HIT" means an Anadys Library Validated Hit
or an Amgen Library Validated Hit.

                  (bbb)    "VALIDATION CRITERIA" means, as established by the
JSC, the validation criteria set forth in the Research Plan that qualify a
Qualified Hit as a Validated Hit.

         2.       RESEARCH PROGRAM.

                  (a)      RESEARCH PLAN AND GENERAL OBLIGATIONS. The initial
Research Plan, attached to this Agreement as Exhibit B, sets forth the specific
activities that Anadys and Amgen will undertake during Phase 1, Phase 2 (if
applicable) and at Amgen's discretion (and Anadys' agreement to perform Phase 3
work for Amgen) Phase 3 of the Research Program. The Research Plan may be
amended only with the approval of the JSC. Anadys will use diligent,
commercially reasonable efforts to carry out the responsibilities assigned to it
under the Research Plan according to the schedule set forth therein. Anadys
shall not subcontract any of its obligations under the Research Plan to any
Third Party without the prior written consent of Amgen. Any approved
subcontracting shall be performed pursuant to a written agreement containing
appropriate provisions as determined by the JSC, including, without limitation,
provisions of confidentiality, non-use and intellectual property at least as
restrictive as set forth herein.

                  (b)      JOINT STEERING COMMITTEE.

                           (i)      FORMATION. Within ten (10) business days of
the Effective Date, the Parties will establish a JSC comprised of three (3)
members from each Party, which members shall initially be the persons set forth
on Exhibit C. Amgen will designate one of its members to act as chairperson of
the JSC. A Party may designate substitute(s) for its JSC members to participate
if one or more of such Party's members cannot attend a meeting. A Party may
replace any of its JSC members by giving the other Party written notice stating
the name(s) of the member(s) to be replaced and the replacement, and Exhibit C
shall be updated accordingly. The chairperson will call meetings as scheduled in
Section 2(b)(iii) or as requested by a Party's members, prepare and circulate an
agenda in advance of each meeting, and prepare and issue minutes of each meeting
within thirty (30) days thereafter. Anadys, via a designated Anadys JSC member,
shall confirm the accuracy of such minutes in writing, within ten (10) days of
issuance of such minutes, or, if not confirmed within such ten (10) day period,
such minutes shall be deemed accurate.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                           (ii)     RESPONSIBILITIES. The JSC shall have overall
responsibility for managing, directing and overseeing the Research Program,
including, but not limited to (1) approving modifications to the Research Plan,
(2) monitoring and coordinating communication regarding the Parties' efforts
under the Research Plan, (3) establishing the Validation Criteria for Anadys
Library Compounds and Amgen Library Compounds screened by Anadys using the
Screening Assay, to qualify a Qualified Hit as a Validated Hit, (4) facilitating
receipt of and discussing information as to Amgen's designation of Lead
Compounds, (5) determining whether Phase 1 (or any other phase) of the Research
Program has been completed; (6) manage, review and evaluate the progress of the
Research Program and the ongoing research conducted under the Research Plan; (7)
allocate responsibilities for the various Research Program activities to be
conducted under the Research Plan; (8) establish criteria for and determine when
successful development of Screening Assay has been completed; (9) establish
criteria for and identify Primary Hits and Qualified Hits for Screening Assay;
(10) establish criteria for successful validation of therapeutic activity of
Validated Hits and identify potential Lead Compounds from Validated Hits; and
(11) facilitating the resolution of disputes that may arise with respect to the
Research Plan and its conduct. The JSC shall not have any power to amend, modify
or waive compliance with the terms of this Agreement.

                           (iii)    MEETINGS. During the Research Term, the JSC
will meet quarterly, or at any other time as reasonably requested by a Party.
The JSC will meet via teleconference or videoconference, or the Parties may meet
at Amgen's facilities in Thousand Oaks, California, Anadys' facilities in San
Diego, California, or such other location as the Parties may agree. With the
prior consent of the other Party's JSC members, a Party may include other of its
personnel or consultants in JSC meetings as nonvoting participants. Each Party
shall be responsible for all of its own expenses of participating in the JSC. To
be effective, meetings of the JSC must have the presence or participation of at
least one (1) member of each Party.

                           (iv)     DECISION-MAKING. The JSC will attempt in
good faith to make decisions by consensus with respect to any matters that
properly come before it. Each member of the JSC shall have one vote. In the
event that the JSC is unable to agree on a specific matter by unanimous vote,
the chair of the JSC shall exercise a deciding vote. Notwithstanding the
foregoing, in no event shall Anadys become obligated to perform additional work
outside the scope of the Research Plan that would cause Anadys to incur
additional costs beyond those provided in this Agreement that Amgen does not
approve for reimbursement to Anadys, without Anadys'approval.

                  (c)      CONDUCT OF RESEARCH PROGRAM.

                           (i)      PHASE 1. Amgen will, at its own expense,
supply to Anadys the quantities of protein of the Target set forth in the
Research Plan and the Amgen Library Compounds, as selected by Amgen. As
described in the Research Plan, Anadys will use its screen development
capabilities to develop one (1) screening assay for use with ATLAS for the
Target. Anadys shall validate the Screening Assay to the reasonable satisfaction
of the JSC.

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Anadys will provide Amgen with oral or written updates as to the progress of the
Screening Assay development, will consider in good faith any guidance or
comments that Amgen provides with respect to such development, and, for any
candidate Screening Assay, will provide Amgen with a written report on such
assay, including relevant testing and validation results, sufficient for Amgen
to evaluate such assay against the required parameters and specifications and
Anadys' description of the assay. The Parties anticipate that Phase 1 shall be
completed no later than [...***...] months from the Effective Date. Upon
completion of Phase 1, the JSC will determine in its sole discretion whether to
perform Phase 2.

                           (ii)     PHASE 2. If determined by the JSC, Anadys
will screen the Target against all of the Amgen Library Compounds ([...***...])
anD the Anadys Library Compounds as designated in the Research Plan for activity
in the Screening Assay to identify Primary Hits. Anadys will screen the Target
against Primary Hits selected by the JSC and perform such other work as set
forth in the Research Plan to identify Qualified Hits. In accordance with the
Validation Criteria, the JSC shall identify Validated Hits. Anadys will provide
Amgen with monthly written updates as to the progress of the screening and will
identify all Validated Hits not previously identified to Amgen, and their
relevant Screening Assay results. At the end of the screening using a Screening
Assay, Anadys will provide Amgen with a written report including comprehensive
results of the screening.

                           (iii)    DISCLOSURE OF STRUCTURES. The Parties
recognize that Amgen may want to consider through indirect means the structure
of some or all of the Compounds and Amgen Independent Compounds as set forth in
Section 4(iv)(C). In such event, Amgen shall identify to Anadys through the JSC
the compound designation of each Compound for which disclosure of structural
information is requested. In the case of Compounds that are Anadys Library
Compounds and/or Derivative(s) thereof, Anadys shall deliver to a mutually
agreed upon Third Party consultant structure information and all activity data
related to the Target for each such Compound that is, or is derived from, an
Anadys Library Compound. For Compounds that are Amgen Library Compounds and/or
Derivative(s) thereof, Anadys shall deliver to such Third Party consultant all
activity data for each such Compound that is, or is derived from an Amgen
Library Compound, and sufficient information to allow such Third Party
consultant to identify the structure of each such Compound. In the case of Amgen
Independent Compounds as set forth in Section 4(iv)(C), Amgen shall deliver to
such Third Party consultant structure information sufficient to allow such Third
Party consultant to determine which if any Compounds that are Anadys Library
Compounds are similar in structure to Amgen Independent Compounds. In the event
that Amgen elects to use a Third Party consultant for consideration of
structural information, Amgen shall ensure that the Third Party consultant is
obligated to maintain confidentiality of (i) any Anadys confidential information
disclosed by Anadys to the Third Party consultant, as to Amgen and any Third
Party; and (ii) any Amgen confidential information disclosed by Amgen to the
Third Party consultant, as to Anadys and any Third Party; in each case, under
terms that are at least as stringent as the obligations of confidentiality
undertaken by the Parties through this Agreement; provided, however, that such
Third Party consultant shall be permitted to inform Amgen as to the existence of
any structurally similar Compounds, and shall be permitted to identify such
Compound(s) that is/are, or is/are derived from, an Amgen Library Compound. The
Parties agree that (i) any Compound that is an Anadys Library Compound or
Derivative thereof that is identified by the Third Party consultant to be
structurally identical to any Compound that is an Amgen Library Compound or
Derivative

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       10
<PAGE>

thereof shall be deemed a Compound that is, or is derived from, an Amgen Library
Compound; (ii) any Compound that is an Anadys Library Compound or Derivative
thereof that is identified by the Third Party consultant to be structurally
similar to an Amgen Library Compound or Derivative thereof shall be deemed a
Compound that is, or is derived from, an Amgen Library Compound, unless such
Compound that is an Anadys Library Compound or Derivative thereof [...***...]
the Compound that is the Amgen Library Compound or Derivative thereof, in which
case such Compound shall be deemed a Compound that is, or is derived from, an
Anadys Library Compound; (iii) any Amgen Independent Compound that is identified
by the Third Party consultant to be structurally identical to any Anadys Library
Compound or Derivative thereof shall be deemed to not be a Compound; and (iv)
any Amgen Independent Compound that is identified by the Third Party consultant
to be structurally similar to any Anadys Library Compound or Derivative thereof
shall be deemed to not be a Compound, unless such Anadys Library Compound or
Derivative thereof [...***...] the Compound that is the Amgen Independent
Compound, in which case such Anadys Library Compound or Derivative thereof shall
be deemed a Compound that is, or is derived from, an Anadys Library Compound.

                           (iv)     PHASE 3. At any time during the term of this
Agreement, Amgen may, at its sole discretion, submit a Phase 3 Interest Notice,
which may include a request to have Anadys conduct additional work under the
Research Program. Subject to Section 3(a), Phase 3 work will involve, among
other things, medicinal chemistry to [...***...]. If Amgen elects to have Anadys
perform Phase 3 worK, and Anadys agrees to perform such Phase 3 work, the
Parties shall negotiate in good faith the terms of such Phase 3 work (except
that the research funding for Phase 3 shall be as set forth in Section 5(d) of
this Agreement). For the avoidance of doubt, nothing contained in this Agreement
shall be construed to obligate either Party to proceed with Phase 3.

                  (d)      MATERIALS AND EQUIPMENT; COSTS. Other than with
respect to Amgen Materials and Amgen Library Compounds provided by Amgen
pursuant to the Research Plan, Anadys shall be responsible for the procurement
and documentation of the quality of all materials, equipment and facilities used
for the Research Program. Anadys covenants that the materials, equipment and
facilities to be used by Anadys under this Agreement shall be of the same
quality as Anadys in its experience and best scientific judgment uses in its own
research of similar nature. Except for funding of the Research Program paid to
Anadys by Amgen pursuant to Section 5(b) (and to the extent applicable, Sections
5(c) and 5(d)), each Party will bear its own costs and expenses for its
activities under the Research Plan, including without limitation materials,
labor, equipment and overhead costs, and, in the case of Anadys, storing,
handling, transporting and disposing of chemical synthesis by-products generated
by Anadys during the performance of the Research Program.

                  (e)      RESEARCH REPORTS. Anadys will keep Amgen fully
informed as to all discoveries and technical developments (including, without
limitation, any inventions) made in the course of performing activities under
the Research Program. In addition, prior to each meeting of the JSC, Anadys and
Amgen each will prepare and distribute to all members of the JSC (no later than
ten (10) business days prior to each such meeting) a reasonably detailed written
summary report setting forth information regarding the Research Results and
progress of performance of the Research Program (since the last report). The
information contained in the report shall be accurate in the reporting Party's
best scientific judgment. At Amgen's request, at

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       11
<PAGE>

any time during the Research Term, Anadys shall provide written reports of any
studies performed by Anadys as part of the Research Program which Amgen may need
to support its regulatory submissions relating to Collaboration Products and
shall allow Amgen to use the data included in such reports to support such
submissions. Nothing herein will require either Party to disclose information
received from a Third Party that remains subject to bona fide confidentiality
obligations to such Third Party.

                  (f)      TECHNICAL ASSISTANCE. During the course of the
Research Program, each Party shall provide the other Party with reasonable
technical assistance relating to the use of such Party's technology, solely to
the extent permitted under the license(s) granted to the other Party in this
Agreement.

                  (g)      PERFORMANCE STANDARDS. Anadys shall use reasonable
best efforts, and shall commit the personnel, facilities and resources, to
screen and identify the Compounds and to perform its other obligations under the
Research Plan. Amgen will use reasonable best efforts to perform its obligations
under the Research Plan. Each Party shall conduct its activities under the
Research Program in good scientific manner and in compliance in all material
respects with applicable laws, rules and regulations and with applicable good
laboratory practices and good manufacturing practices. Each Party shall prepare
and maintain complete and accurate written records with respect to its
activities under the Research Plan consistent with industry standards including,
for purposes of patent and regulatory matters, prompt signing and corroboration
of laboratory notebooks and conception documents. Upon Amgen's written request
and within twenty (20) business days after such request, Anadys shall make the
source data (including laboratory notebook records) of the Research Results
available for inspection by an authorized representative of Amgen at any
reasonable time during Anadys' regular working hours, and copies of all or any
part of such data and all records (whether in tangible or electronic form) shall
be furnished to Amgen upon request.

                  (h)      ANADYS RESEARCHERS. Amgen and Anadys acknowledge the
importance of having personnel devoted full-time to work in the Research
Program. Accordingly, in order to maximize the effective conduct of the Research
Program, Anadys shall use reasonable best efforts to maximize the continuity of
Anadys researchers conducting the Research Program, particularly with respect to
any Phase 3 work that Amgen may, in its sole discretion, elect to have Anadys
perform (and Anadys agrees to perform for Amgen). Prior to beginning work on the
Research Program and/or being given access to Anadys Know-How, Amgen Know-How
and Research Results, each employee, consultant or agent of Anadys shall have
signed or shall be required to sign a non-disclosure and invention assignment
agreement pursuant to which each such person shall agree to comply with all of
the obligations of Anadys or Amgen, as appropriate, substantially including: (a)
promptly reporting any invention, discovery, process, software program or other
intellectual property right, as appropriate within Anadys Know-How, Amgen
Know-How and Research Results; (b) assigning to Anadys or Amgen, as appropriate,
all of his or her right, title and interest in and to any such invention,
discovery, process, software program or other Intellectual Property; (c)
cooperating in the preparation, filing, prosecution, maintenance and enforcement
of any patent rights; (d) performing all acts and signing, executing,
acknowledging and delivering any and all papers, documents and instruments
required for effecting the obligations and purposes of this Agreement and (e)
abiding by the obligations of confidentiality and non-use set forth in this
Agreement. It is understood and

                                       12
<PAGE>

agreed that any such non-disclosure and invention assignment agreement need not
be specific to this Agreement.

                  (i)      MATERIALS TRANSFER In order to facilitate the
Research Program, Amgen may provide to Anadys, Amgen Materials for use by Anadys
in furtherance of the Research Program. All such Amgen Materials and Amgen
Library Compounds delivered to Anadys shall remain the sole property of Amgen,
shall be used only in furtherance of the Research Program in accordance with
this Agreement and remain solely under the control of Anadys, shall not be used
or delivered to or for the benefit of any Third Party without the prior written
consent of Amgen, and shall not be used in research or testing involving human
subjects, except to the extent permitted by applicable law and permitted by the
licenses granted hereunder. The Amgen Materials supplied under this Section 2(i)
and Amgen Library Compounds must be used with prudence and appropriate caution
in any experimental work, because not all of their characteristics may be known.
Except as expressly set forth in this Agreement, THE AMGEN MATERIALS AND AMGEN
LIBRARY COMPOUNDS ARE PROVIDED "AS IS" AND WITHOUT ANY REPRESENTATION OR
WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY
OF MERCHANTABILITY OR OF FITNESS FOR ANY PARTICULAR PURPOSE OR ANY WARRANTY THAT
THE USE OF THE MATERIALS WILL NOT INFRINGE OR VIOLATE ANY PATENT OR OTHER
PROPRIETARY RIGHTS OF ANY THIRD PARTY.

         3.       AMGEN'S FURTHER RESEARCH, DEVELOPMENT AND COMMERCIALIZATION.

                  (a)      INVESTIGATION AND CHARACTERIZATION OF COMPOUNDS. Once
the JSC identifies Validated Hits, Amgen will be responsible for all further
evaluation, characterization and optimization of such Validated Hits and for the
generation and designation of Lead Compounds, subject to the possibility that
Anadys may perform certain such activities pursuant to Section 2(c)(iv).
Activities included within Amgen's responsibility may include, as determined in
Amgen's sole discretion, performing initial optimization and other chemical
modification of Validated Hits in order to generate additional compounds for
evaluation as potential Lead Compounds, characterizing Validated Hits or
potential Lead Compounds, and other research and investigation work with respect
to any such compound.

                  (b)      DESIGNATION OF LEAD COMPOUNDS. Amgen may, in its sole
discretion and acting in good faith, designate as a Lead Compound any Validated
Hit or any Derivative of a Validated Hit. In the event that Amgen designates as
a Lead Compound an Anadys Library Validated Hit that had not been previously
deemed an Amgen-Selected Validated Hit, such Anadys Library Validated Hit shall
become an Amgen-Selected Validated Hit and shall be subject to Compensation
under Section 5(i) of this Agreement. Once Amgen designates a Lead Compound, it
will promptly so notify Anadys in writing, and provide Anadys with a designation
for such Lead Compound for future reporting purposes. Amgen may conduct such
further research and optimization and other chemical modification activities
with respect to Lead Compounds, including revising its list of Lead Compounds,
at its sole discretion and in good faith. Amgen will provide Anadys with
quarterly written updates as to any revisions to the list of Lead Compounds.

                                       13
<PAGE>

                  (c)      RESPONSIBILITY. After conclusion of the Research
Term, Amgen shall have sole and full control, authority, discretion and right to
conduct (by itself or via a Third Party) and make all decisions regarding
continued research, activities and all development (e.g., pre-clinical
development, nomination of clinical candidates, clinical trial design),
regulatory activities (e.g., interaction with all governmental authorities and
preparation of any Regulatory Filings), manufacturing and commercialization
(e.g., determination of price, sales and distribution, packaging, labeling,
language to be included on the package insert, promotion, detailing and
selection of trademarks and Phase IV clinical trials) of the Target and Program
Compounds. At Amgen's request and expense, Anadys shall make its employees,
consultants and agents reasonably available upon reasonable notice during normal
business hours at its place of employment to consult with Amgen on issues
arising during or from the Research Program and in connection with any request
from any regulatory agency, including those relating to regulatory, scientific
and technical issues.

                  (d)      DILIGENCE.

                           (i)      After the conclusion of the Research
Program, Amgen will devote Commercially Reasonable Efforts to pursue research,
development and commercialization with respect to Collaboration Products that is
the subject of Compensation under Section 5(e) or 5(f) below. For the avoidance
of doubt, by way of example and not by way of a minimum obligation, if Amgen
pursues research, development and/or commercialization of one (1) Collaboration
Product, Amgen shall be deemed to have used Commercially Reasonable Efforts
under this Agreement.

                  (e)      CESSATION OF DEVELOPMENT AND COMMERCIALIZATION. If
Amgen makes a final determination in its sole discretion that it will cease all
activities under this Agreement to identify and designate Lead Compounds, all
research and preclinical development activities with respect to Collaboration
Products, and terminate all development and commercialization of Royalty Bearing
Collaboration Products, it will so notify Anadys in writing within [...***...]
days of such determination.

                  (f)      COMMUNICATIONS WITH ANADYS.

                           (i)      GENERAL REPORTS. After conclusion of the
Research Program, in the event that Amgen nominates a clinical candidate that
would be deemed a Collaboration Product, Amgen will submit to Anadys an annual
written report summarizing the status of the clinical and regulatory
development, marketing and commercialization activities with respect to any such
Collaboration Product to allow Anadys to monitor Amgen's compliance with Section
3(d). Such reports shall be deemed to be Confidential Information of Amgen.

                           (ii)     CLINICAL AND REGULATORY DEVELOPMENT. Amgen
shall own all right, title and interest in and to Regulatory Filings and
Regulatory Approvals relating to Program Compounds, and be responsible for all
communications with all regulatory agencies.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       14
<PAGE>

         4.       OWNERSHIP, LICENSES AND NEGATIVE COVENANTS.

                  (a)      INVENTORSHIP AND AUTHORSHIP. Inventorship of
discoveries or inventions, and authorship of works of authorship shall be
determined in accordance with the patent and copyright laws of the United States
of America, respectively.

                  (b)      OWNERSHIP. Ownership shall be determined in
accordance with this Section 4(b), notwithstanding affiliation with a Party of
inventors or authors or the determination of inventorship or authorship in
accordance with Section 4(a).

                           (i)      As between the Parties, subject to the
license granted to Anadys under Section 4(d), Amgen shall solely own all right,
title and interest in and to Amgen Know How, Research Results, and all
Intellectual Property appurtenant thereto (the "Amgen Intellectual Property"),
which shall vest in Amgen as the absolute owner thereof and Anadys will, and
hereby does, assign to Amgen all or part of the right, title and interest of
Anadys in and to the Research Results. For avoidance of doubt: (i) Amgen may
freely grant licenses or other rights, through multiple tiers of licensees and
Sublicensees, under the Amgen Intellectual Property, provided, however, that no
grant of such a license or sublicense shall be construed as relieving Amgen of
its obligations under this Agreement; (ii) Amgen shall have the unrestricted
right to use Research Results (whether during or after the Research Program
and/or the term of this Agreement) and to own all Intellectual Property,
including but not limited to any Information and compounds, resulting from such
use; and (iii) Amgen shall solely own all right, title and interest in and to
any compounds arising or resulting from the license granted by Anadys to Amgen
under Section 4(c).

                           (ii)     Subject to the license granted to Amgen
under Section 4(c), Anadys shall retain sole ownership of Anadys Know-How, and
all Intellectual Property appurtenant thereto. Subject to the license granted to
Amgen under Section 4(c), Anadys shall solely own all right, title and interest
in and to the Screening Assay and the Assay Technology.

                           (iii)    In the event Amgen decides to proceed with
Phase 3 and provides the requisite notice in accordance with Section 2(c)(iv),
Anadys shall transfer to Amgen any chemistry methodologies relating to any
Validated Hits selected for Phase 3. Anadys shall grant Amgen a non-exclusive,
royalty-free license in perpetuity including the right to sublicense under the
Anadys Know How and under Intellectual Property owned or licensed by Anadys to
use or have used for Amgen's benefit any such methodologies.

                           (iv)     ASSIGNMENT AND CONTROL OF INVENTIONS.

                           (A)      Anadys will provide reasonable assistance to
Amgen, at Amgen's expense, in obtaining and from time to time enforcing and
defending Amgen's rights as set forth in Section 4(b), to Research Results,
including without limitation and as applicable, the assignment to Amgen of all
or part of the right, title and interest of its employees or independent
contractors in and to such Research Results to perfect Amgen's right, title and
interest in and to the Research Results, and reasonably cooperating, at Amgen's
request, in filing, prosecuting, maintaining, defending and enforcing Amgen's
Patent Rights included within the Research Results. Each Party will solely own
all Patent Rights included in its solely owned Intellectual

                                       15
<PAGE>

Property and shall have the sole right, but not the obligation, at its expense,
to file, prosecute, maintain, and prosecute, defend and otherwise control other
administrative proceedings for such Patent Rights that it owns pursuant to
Section 4(b), and to initiate, prosecute and control any action with respect to
any infringement of such Patent Rights.

                           (B)      At Amgen's sole expense, Anadys agrees to
cooperate fully (and to cause any employee, consultant or agent who worked on
the Research Program to cooperate) in the preparation, filing, prosecution and
defense of any Patent Rights relating to Research Results under this Agreement.
Such cooperation includes, but is not limited to executing all papers and
instruments, or requiring its employees or agents to execute such papers and
instruments, so as to effectuate the ownership of inventions set forth in
Section 4(b) and Patent Rights claiming such inventions, and to enable Amgen to
apply for and to prosecute patent applications in any country; and promptly
informing Amgen of any matters coming to Anadys' attention that may affect the
preparation, filing, prosecution or defense of any such patent applications.

                           (C)      For the avoidance of doubt and
notwithstanding any other provision of this Agreement, if Amgen or its
Affiliate, through in-licensing from a Third Party or research efforts that are
independent of the Research Program and without the use or assistance of any
Confidential Information of Anadys or Research Results, has identified or
identifies a compound that has the biological activity to otherwise meet the
criteria of a Compound, such compound shall not be considered a Collaboration
Product and Amgen or its Affiliate(s) as applicable shall be free to develop and
commercialize such compound without obligation to Anadys (but, in any event,
provided that neither Amgen nor such Affiliate(s) utilizes any Confidential
Information of Anadys or Research Results in connection with such development
and commercialization efforts). In furtherance of the foregoing, Amgen may
identify to the Third Party consultant pursuant to Section 2(c)(iii), compounds
for which Amgen has identified without the use or assistance of any Confidential
Information of Anadys or Research Results ("Amgen Independent Compounds"). In
the event that any Amgen Independent Compound is deemed not to be a Compound
under Section 2(c)(iii), the Anadys Library Compounds associated with each such
Amgen Independent Compound shall not be included within the Research Results and
neither the Third Party consultant nor Anadys shall disclose to Amgen such
Anadys Library Compounds or any Confidential Information of Anadys related
thereto. For the avoidance of doubt and notwithstanding the foregoing sentence,
as to Anadys, any Information regarding Amgen Independent Compounds deemed not
to be Compounds under Section 2(c)(iii) by the Third Party consultant shall be
included within the Research Results.

                           (D)      Subject to Anadys' negative covenants in
Section 4(e) of this Agreement, Anadys shall not be precluded from having rights
to Information that it independently develops without the use of Amgen
Confidential Information, Amgen Know-How or Research Results.

                  (c)      LICENSE GRANT BY ANADYS. Anadys hereby grants to
Amgen a nonexclusive, worldwide, paid up license with the right to sublicense,
under Intellectual Property and Anadys Know-How Controlled by Anadys (except
ATLAS) solely for the purpose of (i) performance by Amgen of its
responsibilities under the Research Program; (ii) to research, develop, make,
have made, use, sell, offer for sale, have sold, import, export or otherwise
exploit or transfer physical possession of or title in Program Compounds; and
(iii) to research, develop,

                                       16
<PAGE>

make, have made or use any Compound that is an Anadys Library Compound. For the
avoidance of doubt, Compensation shall not be affected by the fact that the
license granted by Anadys to Amgen in this Section 4(c) is a paid up license.

                  (d)      LICENSE GRANT BY AMGEN. Amgen hereby grants to Anadys
a nonexclusive, worldwide, paid up license without the right to sublicense,
under the Amgen Know How solely for purpose of performance by Anadys of its
responsibilities under the Research Program.

                  (e)      NEGATIVE COVENANTS.

                           (i)      Anadys shall not use the quantities of
protein of the Target supplied by Amgen or the Amgen Library Compounds or the
Research Results for any purpose other than the conduct of the Research Plan in
accordance with this Agreement; provided, however, that Anadys may use the
statistic data of the number of hits obtained from Phase 2 activities for
internal research purposes and may disclose to Third Parties without reference
to the Research Results, the statistic of the number of hits obtained from the
Phase 2 activities and the fact that the Target is [...***...], without
disclosing any other Information, including, without limitation, the identity of
the Target, Amgen or the nature of the relationship with Amgen.

                           (ii)     For a period beginning on the Effective Date
and ending upon the later of (A) the date that is one (1) year after the
termination of the Research Term or (B) the date that Amgen provides notice to
Anadys pursuant to Section 3(e), Anadys shall not develop or use assays for, or
conduct compound screening utilizing ATLAS for, or knowingly permit or knowingly
enable any Third Party to conduct any such activities with respect to, the
Target on its own behalf or for any Third Party and shall not develop or
commercialize, on its own behalf or for any Third Party, any compound which
binds the Target.

                           (iii)    Anadys shall not knowingly assert or file
any Patent Rights related to or claiming Research Results made, conceived,
reduced to practice, authored, or otherwise generated or obtained: (i) by Anadys
in whole or in part in the course of performance of this Agreement or of the
Research Program; or (ii) by Amgen in whole or in part in the course of the
Research Program.

                  (f)      NO IMPLIED LICENSES. Except as expressly stated in
this Section 4, nothing in this Agreement shall be deemed to grant either Party
any license or other rights to practice any Intellectual Property of the other
Party or such other Party's Confidential Information, other information or other
rights except as expressly stated in this Section 4, including that nothing in
this Agreement is intended to, or shall, give Amgen any license or other right
to practice ATLAS.

         5.       COMPENSATION.

                  (a)      TECHNOLOGY ACCESS FEE. Within five (5) business days
following the Effective Date, Amgen will pay Anadys a one-time, non-refundable
technology access fee of [...***...] ($[...***...]).

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       17
<PAGE>

                  (b)      PHASE 1 RESEARCH FUNDING. Amgen shall pay to Anadys
[...***...] for performance of the Phase 1 activities, payable as followS:
[...***...] shall be remitted to Anadys prior to the commencement of Phase 1 and
[...***...] shall be remitted to Anadys upon completiOn of Phase 1 (as
determined by the JSC), with each of the foregoing payments being due within (5)
five business days after Amgen's receipt of an invoice from Anadys.

                  (c)      PHASE 2 RESEARCH FUNDING. If Anadys performs Phase 2
work, Amgen shall pay to Anadys [...***...] for performance of the PhasE 2
activities, payable as follows: [...***...] shall be remitted to Anadys prior to
the commencement of Phase 2 and [...***...] shall be remitted to Anadys upon
completion of Phase 2, with each of the foregoing payments being due within (5)
five business days after Amgen's receipt of an invoice from Anadys.

                  (d)      PHASE 3 RESEARCH FUNDING. If Phase 3 occurs pursuant
to Section 2(c)(iv) of this Agreement, Amgen will pay Anadys research funding
during Phase 3 based on the number of FTEs at Anadys designated pursuant to
Section 2(c)(iv). For each such FTE, Amgen will pay Anadys at a rate of
[...***...] Dollars ($[...***...]) per FTE per year. Amgen will pay such amounts
to Anadys on a calendar quartEr basis in advance, during Phase 3, pursuant to an
invoice from Anadys. Anadys shall deliver written reports (certified by an
officer of Anadys) to Amgen on a quarterly basis within thirty (30) days after
the end of such quarter setting forth the number of FTEs actually devoted by
Anadys to Phase 3 work and a summary of such FTE-funded activities with respect
to such Phase 3 work during such quarter. Anadys shall promptly refund any
overpayment of such FTE costs to Amgen, within thirty (30) days of receipt
thereof. If Anadys' commitment of FTEs to performance of the Phase 3 work
increases during a calendar quarter pursuant to written request by Amgen, Amgen
will pay Anadys research funding for such additional FTEs for the remainder of
the quarter at the same rate of [...***...] Dollars ($[...***...]) per FTE per
year pursuant to an invoice from Anadys. In no event should Amgen be obligated
to pay Anadys for FTEs beyond the number of FTEs approved by Amgen.

                  (e)      RESEARCH MILESTONE PAYMENT. Amgen shall pay Anadys a
one-time research milestone payment of [...***...] Dollars ($[...***...]) within
thirty (30) days after Amgen selects, by written notice to Anadys, the first
Validated Hit (regardless of whether such Validated Hit is an Amgen Library
Validated Hit or an Anadys Library Validated Hit) for Phase 3.

                  (f)      CLINICAL MILESTONE PAYMENTS. Amgen will pay to Anadys
the following one-time clinical development milestone payments as set forth in
this Section 5(f) ("Milestone Payment(s)") within thirty (30) days after the
first achievement of the corresponding milestone events ("Milestone Events") for
the first Collaboration Product.

<TABLE>
<CAPTION>
MILESTONE EVENT                       MILESTONE PAYMENT AMOUNT
---------------                       ------------------------
<S>                                   <C>
[...***...]                                 $[...***...]

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

[...***...]                                 $[...***...]
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       18
<PAGE>

<TABLE>
<S>                                         <C>
[...***...]                                 $[...***...]
                                            ------------

   TOTAL                                    $[...***...]
</TABLE>

         For avoidance of doubt, each of the above Milestone Payments under
Section 5(f) shall be payable only with respect to and upon the first
Collaboration Product to first achieve each corresponding Milestone Event
regardless of the number of times such Collaboration Product or other
Collaboration Product(s) subsequently achieves each such Milestone Event.

                  (g)      ROYALTIES. During each applicable Royalty Term in a
country, Amgen will pay Anadys a royalty payment equal to [...***...] percent
([...***...]%) of Net Sales for each Royalty Bearing Collaboration Product sold
by Amgen, its Affiliates or Sublicensees, in sUch country.

                  (h)      CUMULATIVE ROYALTIES. The obligation under Section
5(g) to pay royalties on the Net Sales of a Royalty Bearing Collaboration
Product shall be imposed only once with respect to the same unit of said Royalty
Bearing Collaboration Product regardless of the number of claims within Anadys'
Patent Rights relating to such Royalty Bearing Collaboration Product in such
country.

                  (i)      COMPENSATION FOR AMGEN-SELECTED VALIDATED HITS. In
the event that any Validated Hit selected by Amgen is an Anadys Library
Validated Hit, Amgen shall have the option, in its sole discretion, to select
such Anadys Library Validated Hit as a Program Compound by providing written
notice to Anadys ("Amgen-Selected Validated Hit"). Amgen shall pay Anadys
$[...***...] for each such Amgen-SelecTed Validated Hit within thirty (30) days
of the foregoing written notice or written notice under Section 3(b) above.

                  (j)      PAID-UP LICENSE. Upon the expiration of Amgen's
obligation under Section 5(g) to pay royalties on Net Sales of a Royalty Bearing
Collaboration Product in a country, Amgen shall have a fully paid-up,
non-exclusive license, with the right to sublicense, under Anadys Know-How and
Patent Rights to research, develop, make, have made, use, sell, offer for sale,
have sold, import, export or otherwise exploit, or transfer physical possession
of or title in such Royalty Bearing Collaboration Product for any use in that
country.

                  (k)      NO OTHER COMPENSATION. Other than as explicitly set
forth (and as applicable) in this Section 5 or pursuant to Section 9 of this
Agreement, Amgen shall not be obligated to pay any additional fees, milestone
payments, royalties or any additional payments to Anadys under this Agreement.

                  (l)      PAYMENT; REPORT. All royalty amounts payable to
Anadys under this Agreement shall be paid in U.S. dollars within [...***...]
([...***...]) days of the end of the calendar quarter in which the Net Sales
giving rise to such royalty were made or as otherwise specifically provided
herein. Each payment of royalty payments shall be accompanied by a statement of
the amount of aggregate worldwide gross sales, and, on a country by country
basis, the amount of gross sales, a calculation of Net Sales showing deductions
provided for in Section 1(dd) (in each case during such quarter and on a
cumulative basis for the current year) and the amount of royalty payments due on
such sales.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       19
<PAGE>

                  (m)      EXCHANGE RATE; MANNER AND PLACE OF PAYMENT.

                           (i)      For purposes of computing such payments, the
Net Sales in countries other than the United States shall be converted into U.S.
Dollars as computed using the average rate of exchange for buying funds as
reported in Bloomberg Professional, a service of Bloomberg L.P for the calendar
quarter in which such Net Sales were made, or in the event Bloomberg
Professional is not available then the Wall Street Journal for the currency of
the country in which the sale is made.

                           (ii)     In any country where conversion of the local
currency is blocked and such currency cannot be removed from the country, Amgen
will pay Anadys in local currency by deposit in a local bank account designated
by Anadys.

                           (iii)    Any payments other than those specified in
Section 5(m)(ii) shall be payable to Anadys by wire transfer at such bank in the
United States as Anadys shall specify from time to time.

                  (n)      TAXES. All taxes levied on account of royalties
payable to Anadys hereunder shall be paid by Anadys. In the event laws or
regulations require withholding of taxes from any payment of royalties, the
taxes will be deducted from the royalty payment by Amgen and will be paid by
Amgen to the proper taxing authority. Amgen will furnish Anadys with the
original copies of all official receipts for such taxes. In the event of any
such withholding, the Parties agree to confer regarding other measures to
minimize such withholding.

                  (o)      RECORDS AND AUDIT. Amgen will keep complete and
accurate records pertaining to the sale or other disposition of the Royalty
Bearing Collaboration Products in sufficient detail to permit Anadys to confirm
the accuracy of all payments due hereunder. Anadys shall have the right to cause
an independent, certified public accountant to audit such records to confirm
Amgen's Net Sales, royalty payments and other payments for the preceding year.
Prior to audit implementation, Anadys shall submit an audit plan, including
audit scope, to Amgen for Amgen's approval, which shall not be unreasonably
withheld. Such audit rights may be exercised no more often than once a year,
within four (4) years after the calendar quarter to which such records relate,
upon reasonable notice to Amgen and during normal business hours for the sole
purpose of, and only to the extent necessary, to verify the completeness and
accuracy of the records and payments made under this Agreement; provided,
however, that the books and records for any particular calendar year shall only
be subject to one audit. The independent, certified public accountant shall keep
confidential any information obtained during such inspection and shall report to
Anadys only the amounts of Net Sales and royalties due and payable, but may
include, in the event the accountant shall be unable to verify the correctness
of any or all of such payment, the unverifiable amount of such payment and
information relating to why any or all of such payment is unverifiable. Amgen
shall receive a copy of each such report concurrently with receipt by Anadys. In
the event that such payment is unverifiable, Amgen and Anadys shall use good
faith efforts to arrive at an equitable solution. Anadys will bear the full cost
of such audit unless such audit discloses an underpayment of more than
[...***...] percent ([...***...]%) from the amount of total payments due. In
such case, Amgen Will pay, in addition to the amount of any underpayment, the
reasonable cost of Anadys' certified public accountant for the audit. In the
event of an overpayment by Amgen, the amount overpaid shall be credited

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       20
<PAGE>

against future royalties owed to Anadys by Amgen. The terms of this Section 5(o)
shall survive any termination or expiration or termination of this Agreement for
a period of [...***...] ([...***...]) years. Upon the expiration of such
[...***...] ([...***...]) year period, the calculation of any such amounts
payable with respect to such particular year shall be binding and conclusive
upon Anadys, and Amgen shall be released from any liability or accountability
with respect to such amounts for such year.

         6.       CONFIDENTIAL INFORMATION.

                  (a)      During the term of this Agreement, and for a period
of [...***...] ([...***...]) years thereafter, each Party will maintain aLl
Confidential Information of the other Party received by it under this Agreement
in trust and confidence and, without the express prior written permission of the
other Party, shall not disclose any such Confidential Information of the other
Party to any Third Party or use any such Confidential Information of the other
Party for any purposes or to an extent other than as necessary or permitted for
performance under this Agreement. Neither Party shall use Confidential
Information of the other Party for any purpose or in any manner that would
constitute a violation of any laws or regulations, including without limitation
the export control laws of the United States. Neither Party shall disclose
Confidential Information of the other Party to any employee, agent, consultant,
Affiliate, or Sublicensee who does not have a need for such information. To the
extent that a Party is authorized under this Agreement to disclose Confidential
Information of the other Party, it will disclose only to its employees,
directors, officers, agents, consultants, Affiliates, Sublicensees or clinical
investigators to whom disclosure is permitted to be made who are subject to
binding obligations to hold in confidence and not make use of such Confidential
Information of the other Party for any purpose other than those permitted by
this Agreement, that are at least as restrictive as those of this Section 6.
Each Party will use at least the same standard of care as it uses to protect its
own Confidential Information of a similar nature to ensure that such employees,
agents, consultants and clinical investigators do not disclose or make any
unauthorized use of Confidential Information of the other Party, but no less
than reasonable care. Each Party will notify the other Party promptly upon
discovery of any unauthorized use or disclosure of the Confidential Information
of the other Party in violation of the foregoing.

                  (b)      EXCEPTIONS. The restrictions on disclosure and use of
Confidential Information set forth in Section 6(a) shall not apply to
Confidential Information that the receiving Party can demonstrate by competent
written evidence:

                           (i)      is now, or hereafter becomes, through no act
or failure to act on the part of the receiving Party, its employees or
contractors in breach hereof, generally known or available;

                           (ii)     is known by the receiving Party at the time
of receiving such information, as evidenced by its contemporaneous written
records;

                           (iii)    is hereafter furnished to the receiving
Party by a Third Party, as a matter of right and without restriction on
disclosure; or

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       21
<PAGE>

                           (iv)     is independently developed by the receiving
Party without reference to such Confidential Information, as shown by
independent, contemporaneous, written records.

                  (c)      AUTHORIZED DISCLOSURE. Notwithstanding any other
provision of this Agreement, each Party may disclose Confidential Information if
such disclosure:

                           (i)      is in response to a valid order of a court
or other governmental body of the United States or a foreign country, or any
political subdivision thereof; provided, however, that the receiving Party shall
first have given notice to the other Party hereto;

                           (ii)     is otherwise required by governmental law,
rule or regulation, including without limitation rules or regulations of the
U.S. Securities and Exchange Commission, or by rules of the National Association
of Securities Dealers;

                           (iii)    is otherwise necessary to prosecute or
defend litigation, comply with applicable governmental regulations, make
governmental patent or regulatory filings, or otherwise enforce obligations
under this Agreement, but only to the extent that any such disclosure is
necessary for such enforcement;

                           (iv)     (with respect to Amgen as the disclosing
Party) is to other Third Parties in connection with due diligence or similar
investigations by such Third Parties, in each case who agree to be bound by
similar terms of confidentiality and non-use at least equivalent in scope to
those set forth in this Section 6; or

                           (v)      (with respect to Anadys as the disclosing
Party), is to other Third Parties in connection with financing-related due
diligence or similar investigations by such Third Parties, in each case who
agree to be bound by similar terms of confidentiality and non-use at least
equivalent in scope to those set forth in this Section 6; provided that Anadys
shall only disclose to such Third Parties the following: (i) this Agreement;
(ii) information permitted to be disclosed to Third Parties under Section
4(e)(i)) of this Agreement; and (iii) Amgen's reports under Section 3(f)(i) of
this Agreement;

provided, however, that the Party required or intending to disclose the other
Party's Confidential Information under Section 6(c)(i), (ii) or (iii) shall
first have given prompt notice to such Party to enable it to seek any available
exemptions from or limitations on such disclosure requirement and shall
reasonably cooperate in such efforts by the other Party.

                  (d)      PUBLICITY. Neither Party shall make any disclosure or
public announcement of this Agreement or its terms, or the relationship between
the Parties, without the other Party's prior written consent, unless, in the
reasonable opinion of such Party's counsel, a public disclosure shall be
required by law, regulation or court order, including without limitation in a
public filing by the United States Securities and Exchange Commission, the
disclosing Party shall provide copies of the disclosure reasonably in advance
(but in no event less than fifteen (15) business days) of such filing or other
disclosure for the nondisclosing Party's prior review and comment; the
nondisclosing Party shall provide its comments, if any, on such announcement as
soon as practicable.

                                       22
<PAGE>

                  (e)      USE OF NAMES, LOGOS OR SYMBOLS. Subject to Section
6(d), no Party hereto shall use the name, trademarks, logos, physical likeness,
employee names or owner symbol of any other Party for any purpose, including,
without limitation, private or public securities placements, without the prior
written consent of the affected Party. Nothing contained in this Agreement shall
be construed as granting either Party any rights or license to use any of the
other Party's trademarks or trade names or the names of any employees thereof,
without separate, express written permission of the owner of such trademark or
trade name or name.

                  (f)      PUBLICATIONS. Amgen shall have the sole right, either
directly or indirectly, to publish scientific results and other related
information or work that was generated or conducted during and in furtherance of
this Agreement. Before any such paper including oral presentation materials,
abstracts and the like, is submitted for publication, Amgen will deliver a
complete copy to Anadys at least thirty (30) business days prior to submitting
the paper to a publisher. Anadys will have the right to review any such paper
and give its comments to Amgen within thirty (30) business days of the delivery
of such paper to Anadys. It is understood and agreed that failure by Anadys to
notify Amgen within such thirty (30) business day period shall be deemed consent
by Anadys to such publication. Amgen will comply with Anadys' request to delete
references to Anadys' Confidential Information in any such paper. Any such paper
will include recognition of the contributions of Anadys according to standard
practice for assigning scientific credit, either through authorship or
acknowledgment, as may be appropriate.

         7.       REPRESENTATIONS AND WARRANTIES.

                  (a)      REPRESENTATIONS, WARRANTIES AND COVENANTS OF ANADYS

                           (i)      GRANT OF RIGHTS. As of the Effective Date,
Anadys has sufficient legal and/or beneficial title and ownership under its
Intellectual Property as is necessary to fulfill its obligations under this
Agreement and to grant the licenses to Amgen pursuant to this Agreement. As of
the Effective Date, Anadys has not granted, and shall not during the term of
this Agreement grant, any right, license, consent or privilege to any Third
Party or otherwise undertake any action, either directly or indirectly, which
would conflict with the rights granted to Amgen or interfere with any
obligations of Anadys set forth in this Agreement. As of the Effective Date,
Anadys has not entered into any arrangement, understanding, or agreement with a
Third Party regarding the Target (including, but not limited to, development of
any screening assay to the Target using ATLAS).

                           (ii)     ABSENCE OF LITIGATION, INFRINGEMENT OR
MISAPPROPRIATION. As of the Effective Date, there is no pending or threatened
litigation and Anadys has not received any communication relating thereto which
alleges that Anadys' activities with the Assay Technology using ATLAS or under
this Agreement would infringe or misappropriate any Intellectual Property of any
Third Party. There is no material unauthorized use, infringement or
misappropriation of any of its Intellectual Property that are the subject of the
licenses granted to Amgen hereunder.

                           (iii)    PERFORMANCE. Anadys shall perform all work
under this Agreement in a professional manner and in accordance with applicable
current good laboratory practices and good clinical practices. Anadys shall use
diligent, commercially reasonable efforts

                                       23
<PAGE>

to perform the research and experimentation necessary or useful to accomplish
the goals and objectives set forth in the Research Plan.

                           (iv)     FULL DISCLOSURE. As of the Effective Date,
Anadys has provided Amgen with all information that Amgen has requested for
deciding the merits of entering into this Agreement and all information
reasonably useful or necessary to enable Amgen to make an informed decision
regarding entering into this Agreement, and all such provided information is
true and not misleading.

                           (v)      DETERMINATION OF COMPOUND STRUCTURE. Anadys
covenants that it will not: (i) disclose to Amgen the [...***...] of any Amgen
Library Compound or the structure of any Anadys Library Compound identified as a
Compound unless and until expressly requested by Amgen in writing; or (ii)
determine the structure of any Amgen Library Compound screened by Anadys
pursuant to this Agreement.

                  (b)      MUTUAL REPRESENTATIONS AND WARRANTIES. Each Party
hereby represents and warrants to the other Party as follows:

                           (i)      CORPORATE EXISTENCE AND POWER. It is a
corporation duly organized, validly existing and in good standing under the laws
of the state in which it is incorporated, and has full corporate power and
authority and the legal right to own and operate its property and assets and to
carry on its business as it is now being conducted and as contemplated in this
Agreement, including, without limitation, the right to grant the licenses
granted hereunder.

                           (ii)     AUTHORITY AND BINDING AGREEMENT. As of the
Effective Date, (a) it has the corporate power and authority and the legal right
to enter into this Agreement and perform its obligations hereunder; (b) it has
taken all necessary corporate action on its part required to authorize the
execution and delivery of the Agreement and the performance of its obligations
hereunder; and (c) the Agreement has been duly executed and delivered on behalf
of such Party, and constitutes a legal, valid and binding obligation of such
Party and is enforceable against it in accordance with its terms.

                           (iii)    NO CONFLICT. It has not entered, and will
not enter, into any agreement with any Third Party which is in conflict with the
rights granted to the other Party under this Agreement, and has not taken and
will not take any action that would in any way prevent it from granting the
rights granted to the other Party under this Agreement, or that would otherwise
materially conflict with or adversely affect the rights granted to the other
Party under this Agreement.

                  (c)      NO OTHER REPRESENTATIONS OR WARRANTIES. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATION OR
WARRANTY TO THE OTHER PARTY OF ANY KIND, EXPRESS, IMPLIED, OR STATUTORY,
INCLUDING WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT OR NON-MISAPPROPRIATION OF THIRD PARTY
INTELLECTUAL PROPERTY RIGHTS, TITLE, CUSTOM OR TRADE.

         8.       TERM AND TERMINATION

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       24
<PAGE>

                  (a)      TERM. This Agreement shall commence on the Effective
Date and, unless terminated earlier pursuant to Sections 8(b)(ii) or 8(c), shall
be in full force and effect until the expiration of the last to expire Royalty
Term.

                  (b)      ELECTIVE TERMINATION.

                           (i)      Elective Termination of Research Program.
Amgen shall have the right to elect, at any time, to terminate the Research
Program upon [...***...] ([...***...]) days' notice to Anadys.

                           (ii)     Elective Termination of Agreement. Amgen
shall have the right to elect, at any time, to terminate the Agreement upon
[...***...] ([...***...]) days' notice to Anadys.

                  (c)      TERMINATION FOR CAUSE

                           (i)      In the event any material representation or
warranty made hereunder by a Party shall have been untrue in any material
respect ("Representation Default"), or upon or after the material breach of any
material provision of this Agreement by a Party ("Performance Default"), the
Party not in default ("Non-Defaulting Party") shall have the right to give the
other Party ("Defaulting Party") written notice thereof ("Notice of Default"),
which notice must state the nature of the Representation Default or Performance
Default in reasonable detail and must request the Defaulting Party cure such
Representation Default or Performance Default within [...***...] ([...***...])
days, with all rights and obligations remaining in full force and effect during
such [...***...] ([...***...]) day period. If the Defaulting Party shall dispute
the existence, extent or nature of any default set forth in a Notice of Default,
the parties shall use good faith efforts to resolve the dispute in accordance
with the procedures set forth in Section 10(a).

                           (ii)     In the event of a Representation Default by
Anadys that shall not have been cured within the period set forth above after
receipt of a Notice of Default, Amgen (in addition to any other remedies which
may be available at law or equity) may terminate this Agreement in its entirety
and be entitled to a refund of all monies paid to Anadys.

                           (iii)    In the event of a Performance Default by
Anadys that shall not have been cured within the period set forth above after
receipt of a Notice of Default, Amgen (in addition to any other remedies which
may be available at law or equity), at its option, may (i) terminate the
Agreement, or (ii) if Amgen decides not to terminate the Agreement, Amgen shall
have the right to offset any costs it has incurred as a direct result of curing
such breach against the amounts then or in the future payable to Anadys for the
performance of such obligations provided that Amgen has taken commercially
reasonable efforts to mitigate such costs.

                           (iv)     In the event of a Performance Default by
Amgen regarding Amgen's obligation to pay Anadys any applicable fees, funding,
milestone payments or royalties pursuant to Sections 5(a), 5(b), 5(c), 5(d),
5(e), 5(f), 5(g) or 5(i) of this Agreement, that shall not have been cured
within the period set forth above after receipt of a Notice of Default, Anadys,
at its option, may terminate this Agreement. In the event of a Performance
Default by Amgen other than regarding Amgen's obligation to pay Anadys any
applicable fees, funding, milestone

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       25
<PAGE>

payments or royalties pursuant to Sections 5(a), 5(b), 5(c), 5(d), 5(e), 5(f),
5(g) or 5(i) of this Agreement, Anadys shall only be entitled to seek legal
remedies but shall not be entitled to seek termination of this Agreement, and
all of Amgen's rights and obligations under this Agreement shall remain in full
force and effect.

                  (d)      EFFECTS OF TERMINATION. If Amgen terminates the
Research Program pursuant to Section 8(b)(i), this Agreement shall remain in
full force and effect but for the conduct of the Research Plan and Research
Program. If a Party terminates this Agreement under Sections 8(b)(ii) or 8(c),
all terms and provisions not stated expressly in Section 8(f) to survive, shall
terminate as of the effective date of termination.

                           (i)      Upon expiration or termination of this
Agreement, each Party shall cease to use Confidential Information of the other
Party and shall destroy all Confidential Information of the other Party and
shall certify in writing to such other Party the completion thereof. Each Party
shall be entitled to retain one (1) archival copy of the other Party's
Confidential Information for the sole purpose of determining its obligations
hereunder.

                           (ii)     Upon termination of this Agreement, Anadys
will cease to use any Amgen Know How and Research Results and will, at Amgen's
sole discretion, instruction and expense, either return to Amgen or destroy any
such remaining materials and information relating thereto provided by Amgen.
Anadys shall also cease to use the Screening Assay and shall destroy the
Screening Assay and any Information associated therewith; provided, however,
that Anadys shall be free to use the Information in accordance with the
restrictions set forth in Section 6 and will not be required to destroy the
statistic of the number of hits obtained from Phase 2 activities to the extent
its use is permitted under Section 4(e)(i).

                  (e)      TRANSITION. During any sixty (60) day period after
termination of the Agreement, each Party shall assist (and be responsible for
its own expenses) in the transition of affairs in a timely, reasonable and
businesslike manner. In the event that Amgen nominates a clinical candidate that
would be deemed a Collaboration Product, Amgen will submit to Anadys an annual
written report summarizing the status of the clinical and regulatory
development, marketing and commercialization activities with respect to any such
Collaboration Product. Such reports shall be deemed to be Confidential
Information of Amgen.

                  (f)      ACCRUED RIGHTS AND OBLIGATIONS; SURVIVAL. Termination
of this Agreement by a Party pursuant to Section 8(c) shall not be a Party's
sole remedy for a material breach of this Agreement but shall be in addition to
any other rights or remedies of a Party under this Agreement. Termination or
expiration of this Agreement shall not affect any accrued rights or surviving
obligations of the Parties. The provisions of the following sections shall
survive the expiration or termination of this Agreement for any reason
whatsoever, except as expressly set forth in such sections:

                  Section 4(e) (Negative Covenants)

                  Section 5(e) (Research Milestone Payment)

                  Section 5(f) (Clinical Milestone Payment)

                  Section 5(g) (Royalties)

                                       26
<PAGE>

                  Section 5(h) (Cumulative Royalties)

                  Section 5(j) (Paid up License)

                  Section 5(k) (No Other Compensation)

                  Section 5(l) (Payment; Report)

                  Section 5(m) (Exchange Rate; Manner and Place of Payment)

                  Section 5(n) (Taxes)

                  Section 5(o) (Records and Audit)

                  Section 4(b) (Ownership)

                  Section 6 (Confidential Information)

                  Section 8(d) (Effects of Termination)

                  Section 8(e) (Transition)

                  Section 8(f) (Accrued Rights and Obligations; Survival)

                  Section 9 (Indemnification)

                  Section 10 (General Provisions)

         9.       INDEMNIFICATION, INSURANCE, LIMITATIONS OF LIABILITY.

                  (a)      INDEMNIFICATION BY AMGEN. Amgen will indemnify, hold
harmless and defend Anadys, its Affiliates, and their respective employees and
agents against any and all losses, damages, liabilities, judgments, fines,
amounts paid in settlement, expenses and costs of defense (including without
limitation reasonable attorneys' fees and witness fees) ("LOSSES") resulting
from any claim, demand, suit, action or proceeding brought or initiated by a
Third Party ("THIRD PARTY CLAIM") against them to the extent that such Third
Party Claim arises out of (i) the research, development, manufacture, use, sale
or other commercialization of Collaboration Products by Amgen, its Affiliates,
or Sublicensees; (ii) a Representation Default or Performance Default by Amgen;
or (iii) the negligence or willful misconduct of Amgen, its Affiliates, or their
respective employees or agents in the course of performance under this
Agreement; provided, however, that such indemnity shall not apply, in each case,
to the extent such Losses result from the gross negligence or willful misconduct
of Anadys or from a Representation Default or Performance Default by Anadys.

                  (b)      INDEMNIFICATION BY ANADYS. Anadys will indemnify,
hold harmless and defend Amgen, its Affiliates and their respective employees
and agents against any and all Losses resulting from any Third Party Claim
against them to the extent that such Third Party Claim arises out of (i) the
conduct of the Research Plan, Research Program or the use, handling, storage or
other disposition of any product or material used for purposes of the Research
Plan by Anadys or its Affiliates; (ii) a Representation Default or Performance
Default by Anadys; (iii) the practice by Amgen of any license granted hereunder;
or (iv) the negligence or willful misconduct of Anadys, its Affiliates, or their
respective employees or agents in the course of performance under this
Agreement; provided, however, that such indemnity shall not apply, in each case,
to the extent such Losses result from the gross negligence or willful misconduct
of Amgen or from a Representation Default or Performance Default of Amgen.

                                       27
<PAGE>

                  (c)      MECHANICS. In the event a Party entitled to
indemnification under Section 9(a) or 9(b) (the "Indemnified Party") seeks
indemnification thereunder, it will inform the Party obligated to provide
indemnification under Section 9(a) or 9(b) (the "Indemnifying Party") of a Third
Party Claim as soon as reasonably practicable after it receives notice of the
claim, it will permit the Indemnifying Party to assume direction and control of
the defense of the Third Party Claim (including the right to settle the claim
solely for monetary consideration), and will cooperate as requested (at the
expense of the Indemnifying Party) in the defense of the Third Party Claim;
provided, however, that the Indemnified Party shall have the right to retain its
own counsel, with the fees and expenses to be paid by the Indemnified Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other Party represented by such
counsel in such proceedings. The indemnity obligation in this Section 9 shall
not apply to amounts paid in settlement of any loss, liability, damage, expense,
claim, demand, action or other proceeding by the Indemnified Party if such
settlement shall be effected without the consent of the Indemnifying Party. The
failure by the Indemnified Party to deliver notice to the Indemnifying Party
within a reasonable time after commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such Indemnifying Party of
any liability to the Indemnified Party under this Section 9(c), but the omission
to deliver notice to the Indemnifying Party will not relieve the Indemnifying
Party of any liability that it may have to the Indemnified Party other than
under this Section 9(c). The Indemnified Party under Section 9(a) or 9(b) and
its employees and agents shall cooperate reasonably with the Indemnifying Party
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification.

                  (d)      INSURANCE. Each Party, at its own expense, will
maintain product liability insurance (or self-insure) in an amount consistent
with industry standards during the term of this Agreement and will name the
other Party as an additional insured with respect to such insurance. Each Party
will provide the other Party with a certificate of insurance (or evidence of
self-insurance) evidencing such coverage. Such insurance shall not be construed
to create a limit of the insuring Party's liability with respect to its
indemnification obligations under this Section 9.

                  (e)      LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE
LIABLE TO THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO LOST PROFITS, WHETHER IN CONTRACT, TORT OR
OTHERWISE, ARISING FROM OR RELATING TO ANY BREACH OF OR ACTIVITIES UNDER THIS
AGREEMENT, REGARDLESS OF ANY NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. Nothing
in this Section 9(e) is intended to limit or restrict the indemnification rights
or obligations of any party under this Agreement.

         10.      GENERAL PROVISIONS.

                  (a)      DISPUTE RESOLUTION. The Parties recognize that
disputes may from time to time arise between the Parties during the term of this
Agreement. It is the objective of the Parties to establish procedures to
facilitate the resolution of disputes arising under this Agreement in an
expedient manner by mutual cooperation and without resort to litigation. To
accomplish this objective, the Parties agree to follow the procedures set forth
in this Section 10(a) to resolve any dispute arising under this Agreement. In
the event of such a dispute between the Parties, either Party, by written notice
to the other Party, have such dispute referred

                                       28
<PAGE>

to a senior executive officer of each Party, for attempted resolution by good
faith negotiations within thirty (30) days after such notice is received. If the
designated executive officers are not able to resolve such dispute, either Party
may at any time after such thirty (30) day period pursue any legal or equitable
remedy available to it.

                  (b)      JURISDICTION AND VENUE. In connection with any
dispute arising hereunder or in connection with the subject matter hereof that
is not settled in accordance with Section 10(a), each of the Parties hereby
consents to the exclusive jurisdiction and venue of the U.S. federal courts
located within the state of California and of the California state courts. Each
Party hereby irrevocably waives any right that it may have to assert that any
such court lacks jurisdiction or that such forum is not convenient.

                  (c)      GOVERNING LAW; LANGUAGE. This Agreement shall be
governed and construed in accordance with the laws of the State of California,
except for its choice of law rules. The official text of this Agreement and any
exhibits referenced herein, or any notice given or accounts or statements
required by this Agreement shall be in English. In the event of any dispute
concerning the construction or meaning of this Agreement, reference shall be
made only to this Agreement as written in English and not to any other
translation into any other language.

                  (d)      NOTICE. All notices hereunder shall be in writing and
shall be delivered personally, sent for next day delivery by internationally
recognized courier service or transmitted by facsimile (transmission confirmed),
with confirmation by next day delivery by an internationally recognized courier
service, to the following addresses and facsimiles of the respective Parties or
such other address or facsimile as is notified pursuant to this Section 10(d):

Amgen:                Amgen Inc.
                      One Amgen Center Drive
                      Thousand Oaks, CA 91320-1799
                      Attention: Vice President, Licensing
                      Fax No.: (805) 499-6058

with a copy to:       Amgen Inc.
                      One Amgen Center Drive
                      Thousand Oaks, CA 91320-1799
                      Attention: Senior Vice President, General Counsel
                      Fax No.: (805) 447-8011

Anadys:               Anadys Pharmaceuticals, Inc.
                      9050 Camino Santa Fe
                      San Diego, CA 92121
                      Attention: Michael Kamdar, Vice President,
                      Corporate Development & Strategy
                      Fax: [...***...]

with a copy to:       Anadys Pharmaceuticals, Inc.
                      9050 Camino Santa Fe

                                           ***CONFIDENTIAL TREATMENT REQUESTED

                                       29
<PAGE>

                      San Diego, CA 92121
                      Attention: Elizabeth Reed, Senior Director, Legal Affairs
                      Fax: [...***...]

                  (e)      WAIVER. The failure on the part of a Party to
exercise or enforce any rights conferred upon it hereunder shall not be deemed
to be a waiver of any such rights nor operate to bar the exercise or enforcement
thereof at any time or times hereafter.

                  (f)      ASSIGNMENT. Except as expressly provided hereunder,
neither this Agreement nor any rights or obligations hereunder may be assigned
or otherwise transferred by either Party without the prior express written
consent of the other Party, which shall not be unreasonably withheld; provided,
however, that Amgen may assign this Agreement and its rights and obligations
hereunder without Anadys' consent to any Affiliate, and either Party, may assign
this Agreement and its rights and obligations hereunder without the other
Party's consent in connection with the transfer or sale of all or substantially
all of the business of such Party to which this agreement relates to a Third
Party, whether by merger, sale of stock, sale of assets or otherwise. The rights
and obligations of the Parties under this agreement will be binding upon and
inure to the benefit of the successors and permitted assigns of the Parties. Any
purported assignment not in compliance with this Section 10(f) will be void.

                  (g)      PERFORMANCE BY AFFILIATES. A Party's obligations
under this Agreement may be performed by its Affiliates. Obligations of the
Party for which one of its Affiliates is performing hereunder shall be deemed to
extend to such performing Affiliate. Each Party guarantees performance of this
Agreement by its Affiliates. Wherever in this Agreement the Parties delegate
responsibility to Affiliates or local operating entities, the Parties agree that
such entities shall not make decisions inconsistent with this Agreement, amend
the terms of this Agreement or act contrary to its terms in any way.

                  (h)      BANKRUPTCY. All rights and licenses granted under or
pursuant to this Agreement by Anadys to Amgen are, and shall be deemed to be,
for purposes of Section 365(n) of the Bankruptcy Code and any similar law or
regulation in any other country, licenses of rights to "intellectual property"
as defined under Section 101(35A) of the Bankruptcy Code. The Parties agree that
all Intellectual Property licensed hereunder by Anadys to Amgen are part of the
"intellectual property" as defined under Section 101(35A) of the Bankruptcy Code
subject to the protections afforded the non-bankrupt Party under Section 365(n)
of the Bankruptcy Code, and any similar law or regulation in any other country.
The Parties further agree that, in the event of the commencement of a bankruptcy
proceeding by or against Anadys under the U.S. Bankruptcy Code, Amgen shall be
entitled to a complete duplicate of (or complete access to, as appropriate) any
such intellectual property and all embodiments of such intellectual property,
and same, if not already in its possession, shall be promptly delivered to it
(i) upon any such commencement of a bankruptcy proceeding, upon its written
request therefor, unless Anadys elects to continue to perform all of its
obligations under this Agreement, or (ii) if not delivered under (i) above,
following the rejection of this Agreement by or on behalf of Anadys upon written
request therefor by Amgen.

                  (i)      SEVERABILITY. The provisions of this Agreement are
severable. If any item or provision of this Agreement shall to any extent be
invalid or unenforceable, the remainder of

                                          ***CONFIDENTIAL TREATMENT REQUESTED

                                       30
<PAGE>

this Agreement shall not be affected thereby, and each term and provision of
this Agreement shall be valid and shall be enforced to the fullest extent
permitted by law.

                  (j)      FORCE MAJEURE. Neither Party shall be liable for any
delay or failure of performance to the extent such delay or failure is caused by
circumstances beyond its reasonable control and that by exercise of due
diligence it is unable to prevent, provided that the Party claiming excuse uses
and continues to use commercially reasonable efforts to overcome the same.

                  (k)      ENTIRE AGREEMENT; MODIFICATION. This Agreement,
including any exhibits expressly named and referenced herein, and the
[...***...] constitute the entire agreement and understanding of the Parties and
supersedes any prior agreements or understandings relating to the subject matter
hereof. Any modification of this Agreement shall be effective only to the extent
it is reduced to writing and signed by a duly authorized representative of each
Party hereto. No trade customs, courses of dealing or courses of performance by
the Parties will be relevant to modify, supplement or explain any term(s) used
in this Agreement. This Agreement may not be modified or supplemented by any
purchase order, change order, acknowledgment, order acceptance, standard terms
of sale, invoice or the like.

                  (l)      RELATIONSHIP BETWEEN PARTIES. The Parties'
relationship, as established by this Agreement, shall be solely that of
independent contractors. This Agreement does not create or imply the creation of
a partnership, agency, distributorship, employee-employer, joint venture or
similar business relationship between Amgen and Anadys. Neither Party shall have
any authority (actual or apparent) to bind the other, nor to assume or create
any obligation, representation, warranty or guarantee, express or implied, on
behalf of the other Party for any purpose whatsoever. Each Party shall use its
own discretion and shall have complete and authoritative control over its
employees, Affiliates and sublicensees and the details of performing its
obligations under this Agreement.

                  (m)      EXHIBITS. All Exhibits referenced in and attached
hereto are incorporated in this Agreement by reference. In case of any
discrepancies between language incorporated from the Exhibits and the terms of
the Sections, the terms of the Sections shall prevail; provided, however, where
Sections of this Agreement make explicit reference to a substantive matter
contained in an Exhibit, the substantive matter contained in such Exhibit shall
prevail.

                  (n)      COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be an original and all of which shall
constitute together the same document.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       31
<PAGE>

The persons executing this Agreement represent and warrant that they have the
full power and authority to cause their respective entities to enter into this
Agreement.

         IN WITNESS WHEREOF the Parties have executed this Agreement as of the
Effective Date by their duly authorized representatives.

ANADYS PHARMACEUTICALS, INC.                 AMGEN INC.

By:                                          By:
   ---------------------------------            --------------------------------
Name: Michael Kamdar                         Name: Paul Reider

Title: Vice President, Corporate             Title: Vice President, Chemical
       Development and Strategy              Research

                                       32
<PAGE>

                                    EXHIBIT A

                                   [...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       1
<PAGE>

                                    EXHIBIT B

                                  RESEARCH PLAN

                                   [...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       2
<PAGE>

                                    EXHIBIT C

                                   JSC MEMBERS

ANADYS MEMBERS:   [...***...]

AMGEN MEMBERS:    [...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                       3<PAGE>
                                                                   EXHIBIT 10.15

                                                                 CERYLID PTY LTD
                                                            (ABN 92 061 632 684)

                                                                             and

                                                      ANADYS PHARMACEUTICALS INC

                                                             SCREENING AGREEMENT

                                                            Arnold Bloch Leibler
                                                            Ref: SGS:01- 1105573
<PAGE>

                                TABLE OF CONTENTS

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

<PAGE>

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

                               SCREENING AGREEMENT

DATE

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

PARTIES

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

BACKGROUND

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

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

AGREEMENT

1        DEFINITIONS AND INTERPRETATION

         1.1      DEFINITIONS

                  In this Agreement:

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

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

                  "AGREEMENT" means this agreement;

                  "ANADYS" means Anadys Pharmaceuticals, Inc.;

                  "ANADYS INVENTIONS" means all:

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

                  (b)      Targets and Screens,

<PAGE>

                                        2

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

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

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

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

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

                  "CERYLID" means Cerylid Pty Limited;

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

                  "CERYLID INVENTIONS" means all:

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

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

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

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

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

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

<PAGE>

                                       3

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

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

                  (a)      how or when it arises;

                  (b)      whether it is actual or contingent;

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

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

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

                  "COMMENCEMENT DATE" means the date of this Agreement;

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

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

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

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

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

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                       4

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

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

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

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

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

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

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

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

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

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

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

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

                  (a)      an Insolvency Event occurs; or

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

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

                           (ii)     is not capable of remedy;

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                       5

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

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

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

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

                  "GOVERNMENTAL AGENCY" means:

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

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

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

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

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

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

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

                  (b)      then under active development by Cerylid or any of
                           its Related Bodies Corporate;
<PAGE>

                                        6

                  "INFORMATION" means the terms of this Agreement and all
                  information in any way relating to a Party or the business of
                  that Party including without limitation:

                  (a)      marketing and technical information;

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

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

                  (d)      all financial information relating to that Party,

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

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

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

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

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

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

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

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

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

<PAGE>
                                       7

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE>
                                       8

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

                  "PARTY" means a party to this Agreement;

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

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

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

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

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

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

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

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

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

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

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

<PAGE>
                                       9

                  "SCREENING ACTIVITIES" means undertaking:

                  (a)      Screens pursuant to Clause 5;

                  (b)      Dereplication pursuant to Clause 7.1;

                  (c)      Characterisation pursuant to Clause 7.2; and

                  (d)      LC/MS Analysis;

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

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

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

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

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

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

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

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

<PAGE>
                                       10

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

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

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

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

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

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

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

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

                  (b)      strike, lockout or other labour difficulty;

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

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

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

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

                  "WELL" means a well from any of the:

                  (a)      Sample Extracts;

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
                                       11

                  (b)      fractions arising from the SPE Fractionation;

                  (c)      fractions arising from the HPLC Fractionation; or

                  (d)      Assay plates from a Screen.

         1.2      INTERPRETATION

                  In this Agreement, unless the context requires otherwise:

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

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

                  1.2.3    words denoting individuals include corporations and
                           vice versa;

                  1.2.4    words denoting gender include all genders;

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

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

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

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

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

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

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

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                                       12

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

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

         1.3      HEADINGS

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

2        FEES

         2.1      ACCESS FEE

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

                  2.1.1    Cerylid's library of Extracts; and

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

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

         2.2      PROJECT-RELATED FEES

                  Anadys will pay to Cerylid:

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

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

         2.3      INTEREST

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

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                                       13

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

                  2.3.2    at the Default Rate.

3        SUPPLY OF SAMPLE EXTRACTS

         3.1      SUPPLY

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

         3.2      FREIGHT AND INSURANCE

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

4        USE OF SAMPLE EXTRACTS

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

         4.2      Anadys may not:

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

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

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

5        SCREENS / TARGETS

         5.1      NOTIFICATION OF SCREENS / TARGETS

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

         5.2      CERYLID APPROVAL

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

         5.3      CIRCUMSTANCES OF REJECTION

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

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                                       14

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

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

         5.4      EXCLUSIVITY

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

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

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

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

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

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

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

6        SCREENING

         Anadys will:

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

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       15

7        DEREPLICATION AND CHARACTERISATION

         7.1      DEREPLICATION

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

                  7.1.2    Dereplication will occur in a 2 stage process
                           involving:

                           7.1.2.1  SPE Fractionation; and

                           7.1.2.2  HPLC Fractionation.

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

         7.2      CHARACTERISATION

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

<PAGE>
                                       16

8        TERM

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

9        REPORTING

                  Cerylid:

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

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

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

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

10       IDENTIFIED COMPOUNDS

         10.1     NOTIFICATION BY CERYLID

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

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

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

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

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                                       17

         10.2     ASSESSMENT PERIOD

                  Anadys may during the Assessment Period:

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

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

11       EVALUATION COMPOUNDS

         11.1     RIGHTS OF CUSTOMER

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

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

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

         11.2     SUPPLY OF EVALUATION COMPOUNDS

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                                       18

12       LICENCE OF SELECTED COMPOUNDS

         With respect to any Evaluation Compound, upon Anadys:

         12.1     giving Cerylid a Selected Compound Notice; and

         12.2     paying Cerylid the Licence Fee,

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

13       INVENTIONS

         13.1     OWNERSHIP OF INVENTIONS

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

                  13.1.2   Cerylid will own all Cerylid Inventions.

                  13.1.3   Anadys will own all Anadys Inventions.

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

         13.2     PATENT PROSECUTION AND MAINTENANCE

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

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

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

<PAGE>
                                       19

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

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

         13.3     COOPERATION OF THE PARTIES

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

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

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

         13.4     INFRINGEMENT BY THIRD PARTIES

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

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

<PAGE>
                                       20

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

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

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

                           13.4.4.1 60 days following the notice of alleged
                                    infringement; or

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

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

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

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

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

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

<PAGE>
                                       21

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

         13.5     INFRINGEMENT OF THIRD PARTY RIGHTS

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

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

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

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

14       PRIOR RIGHTS

         14.1     PRIOR THIRD PARTY RIGHTS

                  Anadys acknowledges and agrees that:

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

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

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

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

<PAGE>
                                       22

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

         14.2     CERYLID NOT TO GRANT OTHER RIGHTS

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

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

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

15       MANAGEMENT COMMITTEE AND REPORTING

         15.1     ESTABLISHMENT OF MANAGEMENT COMMITTEE

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

         15.2     PURPOSE OF THE MANAGEMENT COMMITTEE

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

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

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

<PAGE>
                                       23

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

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

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

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

         15.3     ANADYS' AUTHORITY

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

16       TERMINATION

         16.1     TERMINATION BY NOTICE

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

         16.2     CONSEQUENCES OF TERMINATION

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

<PAGE>
                                       24

         16.3     SURVIVAL

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

17       DISPUTE RESOLUTION

         17.1     COMPULSORY ALTERNATIVE DISPUTE RESOLUTION

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

         17.2     PRIMARY DISPUTE RESOLUTION PROCEDURE

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

         17.3     SECONDARY DISPUTE RESOLUTION PROCEDURE

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

<PAGE>
                                       25

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

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

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

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

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

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

         17.4     RIGHT TO LITIGATE

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

         17.5     URGENT RELIEF

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

18       CONFIDENTIAL INFORMATION

         18.1     OBLIGATION TO MAINTAIN CONFIDENTIALITY

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

         18.2     PERMITTED DISCLOSURE

<PAGE>
                                       26

                  A Party may disclose Confidential Information of the other
                  Party:

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

                  18.2.2   pursuant to any court order;

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

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

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

                  18.2.6   to another Party.

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

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

         18.3     NOTICE; PROTECTIVE ORDER

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

         18.4     INJUNCTIVE RELIEF

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

<PAGE>
                                       27

19       PUBLICITY

         19.1     ANNOUNCEMENTS

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

         19.2     ANNOUNCEMENTS TO STOCK EXCHANGE

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

20       REPRESENTATIONS AND WARRANTIES

         20.1     REPRESENTATIONS OF BOTH PARTIES

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

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

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

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

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

         20.2     STATUS OF REPRESENTATIONS

                  All representations and warranties in this Agreement:

                  20.2.1   survive the execution and delivery of this Agreement;

<PAGE>
                                       28

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

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

21       LIMITATION OF LIABILITY

         21.1     EXCLUSION OF TERMS AND WARRANTIES

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

         21.2     REQUIRED STATUTORY WARRANTIES

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

         21.3     LIMITATION OF LIABILITY

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

                  21.3.1   if the breach relates to goods:

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

                           21.3.1.2 the repair of such goods;

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

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

                  21.3.2   if the breach relates to services:

                           21.3.2.1 the supplying of the services again; or

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

<PAGE>
                                       29

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

22       INDEMNITY

         22.1     CERYLID'S INDEMNITY

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

                  22.1.1   a breach of this Agreement by Anadys; or

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

         22.2     ANADYS' INDEMNITY

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

                  22.2.1   a breach of this Agreement by Cerylid; or

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

         22.3     STATUS OF INDEMNITY

                  Each indemnity in this Agreement:

                  22.3.1   is a continuing obligation;

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

                  22.3.3   survives termination of this Agreement.

23       UNCONTROLLABLE EVENTS

         23.1     UNCONTROLLABLE EVENT

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

                  23.1.1   specify the obligations it cannot perform;

<PAGE>
                                       30

                  23.1.2   reasonably describe the Uncontrollable Event;

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

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

         23.2     SUSPENSION OF OBLIGATIONS

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

         23.3     OBLIGATIONS OF PARTIES

                  Each Party must:

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

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

         23.4     LIMIT OF OBLIGATIONS

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

         23.5     EXTENDED EXISTENCE OF UNCONTROLLABLE EVENT

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

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

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

<PAGE>
                                       31

         23.6     EXTENSION

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

         23.7     PAYMENT OF MONEY

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

24       NOTICES

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

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

                  in the case of Cerylid:

                  Address:        576 Swan Street
                                  Richmond Victoria 3121
                                  Australia

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

                  E-mail          businessdevelopment@cerylid.com.au

                  Attention:      Vice President, Business Development

                  in the case of Anadys:

                  in accordance with Item 14 of Schedule 1.

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

         24.3     deemed to have been given and served:

                  24.3.1   where delivered by hand, at the time delivery;

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

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
                                       32

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

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

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

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

25       GENERAL PROVISIONS

         25.1     INVALID OR UNENFORCEABLE PROVISIONS

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

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

                  25.1.2   it does not affect the validity or enforceability of:

                           25.1.2.1 that provision in another jurisdiction; or

                           25.1.2.2 the remaining provisions;

         25.2     REPLACEMENT OF INVALID PROVISION

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

         25.3     WAIVER

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

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

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

<PAGE>
                                       33

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

         25.4     ENTIRE AGREEMENT

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

         25.5     COUNTERPARTS

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

         25.6     AMENDMENTS

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

         25.7     SUCCESSORS AND ASSIGNS

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

         25.8     ASSIGNMENT

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

         25.9     ATTORNEYS

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

         25.10    FURTHER ASSURANCES

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

<PAGE>
                                       34

         26       GOVERNING LAW AND JURISDICTION

                  26.1     GOVERNING LAW

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

                  26.2     JURISDICTION

                           The Parties irrevocably and unconditionally:

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

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

                  26.3     SERVICE OF PROCESS

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

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

                           26.3.2   in any other way permitted by law.

<PAGE>
                                       35

EXECUTED AS AN AGREEMENT

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

__________________________________________Signature

__________________________________________Name (Print)

__________________________________________Position

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

__________________________________________Signature

__________________________________________Name (Print)

__________________________________________Position

<PAGE>

                                   SCHEDULE 1

ITEM 1

Date:

ITEM 2

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

                   2.     Anadys Pharmaceuticals Inc. ("Anadys")

ITEM 3

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

ITEM 4

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

ITEM 5

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

ITEM 6

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

ITEM 7

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

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED
<PAGE>

ITEM 8

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

ITEM 9

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

ITEM 10

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

ITEM 11

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

ITEM 12

Number of Management
  Committee Representatives: 6

ITEM 13

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

ITEM 14

Notices:                  ANADYS

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

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

                          E-mail:      mkamdar@anadyspharma.com

                          Attention:   Michael J Kamdar

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

                                   SCHEDULE 2

Research Plan

           SCREENING COLLABORATION BETWEEN CERYLID PTY LTD AND ANADYS
                              PHARMACEUTICALS, INC

                                  6 JUNE, 2002

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

     1.  Provision of Sample Extracts (Cerylid)

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

     2.  Primary Screening (Anadys)

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

     3.  REPORT OF DATA (ANADYS)

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>

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

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

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

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

     5.  SHIPMENT OF FRACTIONS (CERYLID)

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

     6.  ASSAY DEVELOPMENT (ANADYS)

     -   Anadys will assay the fractions to localise bioactivities

     7.  REPORT OF DATA (ANADYS)

     -   Anadys will report Anadys Screening Data to Cerylid

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

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

     9.  SHIPMENT OF FRACTIONS (CERYLID)

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

     10. SECONDARY ASSAY DEVELOPMENT (ANADYS)

<PAGE>

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

     11. ASSAY DEVELOPMENT (ANADYS)

     -   Anadys will assay the fractions to localise bioactivities

     12. LC/MS ANALYSIS (ANADYS)

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

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

     13. PURIFY AND STRUCTURE DETERMINATION (CERYLID)

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

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

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

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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