Document:

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                                                                    EXHIBIT 10.1

                      DEVELOPMENT AND MARKETING AGREEMENT

     THIS AGREEMENT is entered into as of the 8th day of August, 2000 (the
"Execution Date"), by and among Biogen, Inc., a Massachusetts corporation with
its principal place of business at 14 Cambridge Center, Cambridge, Massachusetts
02142 ("Biogen"), Targeted Genetics Corporation, a Washington corporation with
its principal place of business at 1100 Olive Way, Suite 100, Seattle,
Washington 98101 ("Targeted"), and Genovo, Inc., a Delaware corporation with its
principal place of business at 512 Elmwood Avenue, Sharon Hill, Pennsylvania
19079 ("Genovo").

                                    RECITALS

     A.   Targeted and Genovo have agreed that Genovo will be acquired by
Targeted, such that Genovo will become a wholly-owned subsidiary of Targeted
(the "Acquisition").

     B.   This Agreement is a condition precedent to Targeted's obligation to
consummate the Acquisition and, except as provided in Article 2, shall become
effective on the Closing Date of the Acquisition (the "Effective Date").

     C.   Upon consummation of the Acquisition, Biogen and Targeted desire to
establish a new cooperative development program intended to discover, develop,
and certify for use in humans one or more new pharmaceutical products of the
types, and for the purposes, described herein.

     NOW, THEREFORE, the parties hereby agree as follows:

     Article 1.  Definitions and Use of Terminology.

     The following terms used herein shall have the following stated or
referenced meanings:

     1.1  "AAV Interferon-beta Product" means a Product incorporating the Beta
           ---------------------------
Interferon Gene and any AAV Vector as the delivery platform.

     1.2  "AAV Vector" means an adeno-associated viral vector useful or
           ----------
potentially useful for the delivery of Genes to human cells.

     1.3  "Additional Development Project" means a Development Project approved
           ------------------------------
pursuant to Article 3 hereof, other than the Ad Interferon-beta Project.

     1.4  "Ad Interferon-beta Product" means the Product incorporating the Beta
           --------------------------
Interferon Gene and an Ad Vector that is the subject of the Ad Interferon-beta
Project.

[*] Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omitted portions of this exhibit has been filed separately with the SEC.

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     1.5    "Ad Interferon-beta Project" means the Development Project described
             --------------------------
in Section 3.1.

     1.6    "Ad Vector" means an adenoviral vector useful or potentially useful
             ---------
for the delivery of Genes to human cells.

     1.7    "Affiliate" of an entity means and includes the entities that,
             ---------
directly or indirectly, own or control more than 50% of the voting interests (or
equivalent control) of such entity ("Parent"), or more than 50% of the voting
interests (or equivalent control) of which is, directly or indirectly, owned or
controlled by such entity or its Parent.  For purposes of this definition and
this Agreement:

     (i)    no entity shall remain an "Affiliate" unless it continues to meet
            the foregoing criteria;

     (ii)   Emerald Gene Systems, Ltd. ("Emerald Gene Systems") shall not be
                                         --------------------
            considered an Affiliate of Targeted for purposes of this Agreement,
            unless at some future point Targeted acquires the interest of Elan
            Corporation, PLC in Emerald Gene Systems; and

     (iii)  Biogen and Targeted shall in no event be considered Affiliates of
            each other for purposes of this Agreement.

     1.8    "Approved Product" means, with respect to any nation, a Clinical
             ----------------
Product that has received final Regulatory Approval in such nation.

     1.9    "BLA" means a Biologics License Application, or comparable
             ---
application in any nation.

     1.10   "Beta Interferon Field" means the treatment or prevention in humans
             ---------------------
of one or more diseases through the use or application of one or more gene
therapy vectors to deliver Genes described in Exhibit A; such Genes being
                                              ---------
defined herein as the "Beta Interferon Genes."
                       ---------------------

     1.11   "Biogen Patents" means as the term relates to a particular
             --------------
Development Project those United States and foreign patents and patent
applications that are at any time during the applicable Development Period owned
or Controlled by Biogen or any of its Affiliates, to the extent the same cover
any aspect of the Biogen Technology or the practice or use thereof applicable to
Targeted's Development Tasks under such Development Project.

     1.12   "Biogen Technology" means any and all technology, know-how and
             -----------------
rights owned or Controlled by Biogen or any of its Affiliates during the
Development Period with respect to a specific Development Project contemplated
under this Agreement to the extent the same directly relate to, are desirable
for, or are necessary or useful for, the production, storage and/or marketing of
one or more Products and are used or contemplated to be used in

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connection with Targeted's Development Tasks as specified in the Project Plan
and Budget applicable to such Development Project.

     1.13  "BMF" means either (i) a Biologics Master File or equivalent filing
            ---
maintained with a Regulatory Authority, or (ii)  a BLA for a Commercial Vector
containing all required commercial manufacturing information applicable to such
Commercial Vector, where a Biologics Master File would not under the applicable
rules of a Regulatory Authority be appropriate with respect to such Commercial
Vector.

     1.14  "Cancer Field" means the treatment or prevention in humans of one or
            ------------
more cancers through the use or application of AAV Vectors or Ad Vectors to
deliver [*]

     1.15  "Candidate Product" means any Product described in Section 1.65(i)
            -----------------
that is the subject of an approved Development Project hereunder, prior to the
Clinical Development Date for such Product.  While there may be multiple
Candidate Products involved in a single Development Project, and there may be
variation among them as to some aspects of the Product Genes to be incorporated
therein (including, by way of illustration, as to the specific promoters or
enhancers to be incorporated or as to choices to be made among homologous
sequences), all Candidate Products in the same Development Project shall use the
same Research Vector and shall have Product Genes that, as a whole, are
anticipated to encode for the same protein or that are otherwise agreed by the
parties to be similarly configured as to anticipated effects in humans.

     1.16  "Closing Date" means the date of the final closing of the
            ------------
Acquisition.

     1.17  "Certification and Testing Activities" means the supervision and/or
            ------------------------------------
conduct of human clinical trials, including all supporting activities related
thereto, and the preparation and submission of applications for permission to
conduct such trials, such as an IND, and for Regulatory Approval with respect to
a Clinical Product, as more fully described in Article 4 and in the applicable
Project Plan and Budget.

     1.18  "Clinical Development Date" for a Product means the date such Product
            -------------------------
is designated as a Clinical Product by Biogen.

     1.19  "Clinical Product" means any Product described in Section 1.65(i)
            ----------------
that has theretofore been designated by Biogen as having been sufficiently
developed under a Development Project such that the next steps in pursuing the
Development Project therefor are or were the preparation and filing of an IND.

     1.20  "Clinical Vectors" means any Supplied Vector or Manufactured Vector
            ----------------
(other than Commercial Vectors) intended for use in a Clinical Product.

[*] Confidential Treatment Requested

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     1.21  "Commercial Supply Agreement" means the agreement to be entered by
            ---------------------------
the parties pursuant to Section 9.7 with respect to the detailed terms for the
manufacture and supply by Targeted of Commercial Vectors that are AAV Vectors.

     1.22  "Commercial Vectors" means any Supplied Vector or Manufactured Vector
            ------------------
intended for use in an Approved Product.

     1.23  "Combination Product" means a product which includes one or more
            -------------------
active ingredients or active components other than Product in combination with
Product.

     1.24  "Committee Action" means an official act, decision, or ruling of the
            ----------------
Joint Steering Committee, which shall require in each case that at least one of
the following applies:

     (i)   all members of the Joint Steering Committee present and acting (but
           in any event a minimum of four such members) have consented thereto,
           where such consent is given either in writing (signed either
           collectively or in multiple identical counterparts, the signers being
           considered "present and acting" for this purpose) or by vote at a
           duly convened meeting of the Joint Steering Committee and
           subsequently entered into the minutes of such meeting; or

     (ii)  at least two members of the Joint Steering Committee have consented
           thereto (in the manner described above), and have further put the
           matter before the parties' CEOs as described in Section 16.1, and the
           act, decision, or ruling has received the written approval of the
           CEOs of Biogen and Targeted, or:

           (A)  where the matter involves only Targeted Development Tasks (other
                than with respect to the Initial Ad Interferon-beta Project Plan
                and Budget), the act, decision, or ruling has received the
                written approval of the CEO of Targeted;

           (B)  where the matter involves only Biogen Development Tasks, the
                act, decision, or ruling has received the written approval of
                the CEO of Biogen; or

           (C)  subject to Biogen's obligations under Article 5 and Section
                7.1(i), where the matter involves an increase in the upper limit
                of any budget related to a Development Project (above the
                amounts permissible under Section 5.3), the act decision, or
                ruling has received the written approval of the CEO of Biogen;

           or, where none of the foregoing is applicable (including any
           determination by Committee Action referred to in Section 1.62,
           Section 4.1(iv)(C), Section 6.4, Section 7.6(iii), or Section 8.4),
           the matter is placed into mediation under

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            Section 16.2 and the act, decision, or ruling has received the
            written approval of the CEOs of Biogen and Targeted; or

     (iii)  arbitration pursuant to Section 16.3 results in the adoption of the
            act, decision, or ruling as constituting Committee Action.

A Committee Action may include the rescinding or amendment of any prior
Committee Action.

     1.25   "Confidential Technology" means all technology, data, materials,
             -----------------------
information and the like that is, at the relevant time hereunder, protected or
required to be protected as confidential information pursuant to Article 14.

     1.26   "Contractor" means:
             ----------

     (i)    a Third Party to which a party subcontracts any portion of its
            Development Tasks or its manufacturing activities with respect to a
            Supplied Vector or Manufactured Vector under or related to this
            Agreement and which is approved for such purpose, to the extent that
            approval is required under this Agreement, by the other party to
            this Agreement in writing pursuant to Section 17.3 prior to the
            granting of the applicable subcontract; or

     (ii)   an Affiliate of a party to which such party subcontracts all or any
            portion of its Development Tasks or its manufacturing activities
            with respect to a Supplied Vector or Manufactured Vector under or
            related to this Agreement.

     1.27   "Contractor Designation" means an invocation by Biogen of its right
             ----------------------
described in Section 10.4 or in Section 10.7 to designate a Designated
Contractor to manufacture certain Supplied Vectors.

     1.28   "Control" means the ability to grant a license or sublicense as
             -------
provided for herein without violating the terms of any agreement or other
arrangement with a Third Party.

     1.29   "Covered Infringement" is defined in Section 15.1
             --------------------

     1.30   "Current Good Manufacturing Practices" or "cGMP" means the
             ------------------------------------      ----
regulations set forth in 21 C.F.R. Parts 210-211 and 21 C.F.R. Subchapter F
(Biologics) and the requirements thereunder imposed by the FDA, and the
equivalent regulations and requirements in jurisdictions outside the United
States.

     1.31   "Designated Contractor" means a Contractor designated by Biogen
             ---------------------
pursuant to a Contractor Designation under Article 10.

     1.32   "Development Period" means, with respect to each Development
             ------------------
Project, the period specified in the Project Plan and Budget during which such
Development Project will

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be conducted pursuant to this Agreement, or such longer or shorter time as may
be approved by Committee Action, but not in any case after the termination of
the Development Project or of either party's participation therein as provided
herein.

     1.33  "Development Project" means a project directed at the development and
            -------------------
Certification and Testing Activities designed to achieve an Approved Product and
that is the subject of a Project Plan and Budget approved as described in
Sections 3.1, 3.3, and 3.5, as applicable.  While each Development Project will
be directed at developing, at the end of such Development Project, one Approved
Product (whether or not such Approved Product is intended for use in patients in
combination with any other Products or products), it is understood that a number
of Candidate Products may be involved in a particular Development Project, and
that there may in succession be more than one Clinical Product in a Development
Project, if a previous Clinical Product in that Development Project is abandoned
in favor of another.

     1.34  "Development Tasks" means those steps, phases, activities, and
            -----------------
responsibilities of each party and its Contractors that will be part of each
Development Project, as more fully described in the applicable Project Plan and
Budget.  Subject to Section 4.3, the Development Tasks will include, but not be
limited to the following:

     (i)   The "Biogen Development Tasks," which are defined as follows:
                -------------------------

           (A)  preclinical biology and animal studies;

           (B)  final formulation development, design and optimization;

           (C)  human clinical trials;

           (D)  preparation and submission of all regulatory filings other than
                BMFs [*]; and

           (E)  activities related to the Initial Ad Interferon-beta Project
                Plan and Budget.

     (ii)  The "Targeted Development Tasks," which are defined as follows:
                ---------------------------

           (A)  vector design and optimization;

           (B)  manufacturing process development, optimization, scale-up and
                validation;

           (C)  assay development, qualification, and validation;

           (D)  manufacture of Research Vectors and Clinical Vectors; and

[*] Confidential Treatment Requested

                                      -6-
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           (E)  creation and management of BMFs, and filing of BMFs for
                regulatory purposes.

     1.35  "Distributor" means a Third Party who purchases Product from Biogen
            -----------
for resale, and who does not require, and is not granted, any license or
sublicense under any Targeted Patents, Targeted Technology, Biogen Patents,
Biogen Technology, Joint Patents, or Joint Technology other than a sublicense to
allow the Distributor to perform final packaging of Product or to enable a
regulatory filing or to allow the Distributor to conduct a confirmatory clinical
trial of Product to support a regulatory filing in such Distributor's territory.

     1.36  "Emerald Gene Systems Agreements" means the Subscription, Joint
            -------------------------------
Development and Operating Agreement dated July 21, 1999 among Elan Corporation,
PLC, Elan International Services, Ltd., Targeted, and Targeted Genetics Newco.,
Ltd., and the License Agreement dated July 21, 1999 between Targeted and
Targeted Genetics Newco., Ltd.

     1.37  "EMEA" means the European Medicines Evaluation Agency, or any
            ----
successor thereto, which coordinates the scientific review of human
pharmaceutical products under the centralized licensing procedure in the
European Union.

     1.38  "End Use" means the retail sale, distribution or administration of a
            -------
Product by a pharmacy or other pharmaceutical dispensary or health practitioner
to a patient.  "End User" means such pharmacy, dispensary or practitioner.
                --------

     1.39  "Excluded Fields" means the following:
            ---------------

     (i)   subject to Section 3.10, the Excluded Fields include all services,
           products and other activities or endeavors to which Emerald Gene
           Systems has exclusive rights or options under the Emerald Gene
           Systems Agreements, or in any area in which Targeted has committed
           not to compete with Emerald Gene Systems under the Emerald Gene
           Systems Agreements, and research related thereto (the "Emerald Gene
                                                                  ------------
           Systems Excluded Fields"), all as described in Exhibit B;
           -----------------------                        ---------

     (ii)  as of the Execution Date the Excluded Fields also include those other
           diseases, therapeutic fields, services, products and activities or
           endeavors described in Exhibit B, and research related thereto;
                                  ---------
           provided, however, that any such Excluded Field that is so listed
           because it is the subject of active negotiations or collaboration
           activities, or of a Targeted internal project, which negotiations,
           activities and projects (as applicable), as well as any other
           negotiations, activities and projects with respect thereto, are
           subsequently entirely abandoned by Targeted, shall no longer be an
           Excluded Field under this clause (ii);

                                      -7-
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     (iii)  following the Execution Date and prior to a respective Proposal
            Submission Date, the list of Excluded Fields may be supplemented by
            Targeted through the commencement by Targeted or its Affiliates,
            outside the Cancer Field and Beta Interferon Field, of:

            (A)  any significant project, or active negotiations for any
                 significant project, involving the material participation of
                 Targeted or an Affiliate of Targeted in a Third Party
                 collaboration; or

            (B)  any significant internally-funded project at Targeted or any of
                 its Affiliates, where there is evidence of material on-going
                 work,

            in which event the Excluded Fields shall then and thereafter include
            any diseases or therapeutic fields, services, products and other
            activities or endeavors that are the subject of such collaborations,
            negotiations or internal projects, and research related thereto, to
            the extent that a Development Project (or its related Product)
            involving any thereof would conflict with the terms of such
            collaboration or with the goals of such internal project; provided,
            however, that if all negotiations, activities and projects of
            Targeted with respect to any such Excluded Field are subsequently
            entirely abandoned by Targeted, such field shall no longer be an
            Excluded Field under this clause (iii);

     (iv)   Notwithstanding anything in clauses (i), (ii) or (iii) to the
            contrary, the Excluded Fields as of a particular Proposal Submission
            Date, shall be the Excluded Fields determined as of that time under
            clauses (i), (ii) and (iii) of this Section, and, as to the Product
            that is the subject of the Development Project, if any, initiated
            under the applicable Proposal, shall be called the "Product-Specific
                                                                ----------------
            Excluded Fields" and shall remain the Excluded Fields applicable to
            ---------------
            that Product thereafter, notwithstanding any further application of
            clauses (i) or (iii) of this Section as to other Products, provided
            that the list of Product specific Excluded Fields shall be narrowed
            in the event of termination of the Emerald Gene Systems Agreement,
            or termination of the active negotiations or collaboration
            activities, or termination of a Targeted internal project as
            specified under clause (iii); and

     (v)    Notwithstanding anything in clauses (i), (ii) or (iii) to the
            contrary, the Excluded Fields described in clauses (i) and (ii)
            shall be the sole "Product-Specific Excluded Fields" applicable to
                               --------------------------------
            the Ad Interferon-beta Product, and shall remain the sole Excluded
            Fields applicable to that Product, notwithstanding any application
            of clause (iii) of this Section as to other Products, provided the
            Excluded Fields under clause (i) shall no longer be Excluded Fields
            with respect to the Ad Interferon-beta Product in the event of
            termination of the Emerald Gene Systems Agreements.

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     (vi)   Notwithstanding the foregoing, in no event shall the Beta Interferon
            Field be an Excluded Field with respect to the Ad Interferon-beta
            Product.

     1.40   "Exclusivity Period" means, with respect to each Product:
             ------------------

     (i)    with respect to any member nation of the European Union (and any
            other nation in the Territory in which applicable law would restrict
            the permissible duration of a period of exclusivity to the life of
            applicable patents), the Exclusivity Period is the period during the
            Product-Specific Term for such Product in such nation, ending on the
            date on which there are no longer any Targeted Patents or Joint
            Patents in that nation applicable to the Product or, if later, the
            date on which all of Targeted's Confidential Technology provided to
            Biogen hereunder has been disclosed without restriction to the
            public, provided that, in the case in which, there are no longer any
            such Targeted Patents and there are no Joint Patents in that nation
            applicable to the Product, the Exclusivity Period will not last
            longer in any such nation in the European Union than ten years from
            the first Regulatory Approval for such Product in any nation in the
            European Union; and

     (ii)   with respect to any other nation, the Exclusivity Period is
            coterminous with the applicable Product-Specific Term.

     1.41   "Expanded Ad Interferon-beta Project Plan and Budget" means an
             ---------------------------------------------------
expanded Project Plan and Budget that may be approved for additional Development
Tasks to be conducted by Targeted for the Ad Interferon-beta Project, as
described in Section 3.1.

     1.42   "FDA" means the United States Food and Drug Administration, or any
             ---
successor thereto, having the administrative authority to regulate the marketing
of human pharmaceutical products or biological therapeutic products, delivery
systems and devices in the United States.

     1.43   "FTE" means the equivalent of a full year of effort on a full time
             ---
basis of an employee possessing skills and experience necessary to carry out
applicable tasks and responsibilities under the Project Plans and Budgets.

     1.44   "FTE Rate" means the amount to be invoiced by Targeted to Biogen per
             --------
FTE which rate shall initially be as specified in Exhibit C and shall include
                                                  ---------
the costs and expenses specified in Exhibit C.  Targeted shall adjust the FTE
                                    ---------
Rate commencing with January 1 of each year to reflect any year-to-year increase
or decrease in Targeted's actual costs and expenses as specified in Exhibit C,
                                                                    ---------
provided that Targeted provides information substantiating any such increase or
decrease to Biogen's reasonable satisfaction.

     1.45   "Fully Burdened Manufacturing Cost" means, [*]
             ---------------------------------

[*] Confidential Treatment Requested

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     1.46  "GAAP" means United States generally accepted accounting principles,
            ----
consistently applied.

     1.47  "Gene" means any nucleotide sequence that is capable of encoding a
            ----
protein or a protein fragment.

     1.48  "Gene Controlled by Targeted" means a Gene that is proprietary to
            ---------------------------
Targeted or a Third Party and as to which Targeted has (directly or by effective
or conditional grant) the ability to grant a license or sublicense without
violating the terms of any agreement with such Third Party.

     1.49  "IND" means an Investigational New Drug Application filed with the
            ---
FDA or an equivalent foreign filing.

     1.50  "Initial Ad Interferon-beta Project Plan and Budget" means the
            --------------------------------------------------
initial Project Plan and Budget for the Ad Interferon-beta Project described in
Section 3.1.

     1.51  "Initial Project Funding" is defined in Section 5.1.
            -----------------------

     1.52  "Initiation" of a clinical trial, and "Initiated" as to a clinical
            ----------                            ---------
trial, means the opening of the trial for enrollment of patients.

     1.53  "Joint Patents" means any United States patents and foreign
            -------------
equivalents, United States and foreign patent applications, and all divisions,
continuations, continuations-in-part, reissues, or extensions thereof, any
periods of marketing exclusivity relating thereto, and any letters patent that
issue thereon, to the extent the same claim any Joint Technology.

     1.54  "Joint Steering Committee" means a committee of six members, three of
            ------------------------
whom will be designated in writing by each of Targeted and Biogen.  The parties'
respective representatives on the initial Joint Steering Committee shall be
designated by Targeted and

                                      -10-
<PAGE>

by Biogen within thirty (30) days following the Effective Date. If at any time a
vacancy occurs (whether due to death, disability, resignation, removal by a
party of its designee by written notice to the other party, or otherwise), the
vacancy will be filled as soon as is reasonably practicable by designation by
the party that originally designated the prior incumbent. In the meantime, the
Joint Steering Committee shall continue to function with its remaining members,
provided that any Committee Action described in 1.24(i) will continue to require
the consent of at least four members.

     1.55  "Joint Technology" means any and all inventions, improvements,
            ----------------
modifications, alterations, or enhancements that are made jointly by one or more
employees of Biogen or any of its Affiliates, on the one hand, and one or more
employees of Targeted or any of its Affiliates, on the other hand, during and in
the course of the parties' cooperative development activities under or in
support of this Agreement, together with all United States and foreign
intellectual property and other rights and interests of the parties and their
respective Affiliates thereto and therein, including patent rights, trade
secrets, copyright, periods of market exclusivity, and other related rights or
interests, to the extent the same remain protected by any such rights and
interests from being used freely by others.

     1.56  "Major Markets" means each of:  (i) The United States of America;
            -------------
(ii) the European Union; and (iii) Japan.

     1.57  "Manufactured Vector" means Ad Vectors made by or for Biogen pursuant
            -------------------
to its license under Section 8.4(iii) and AAV Vectors made by or for Biogen
pursuant to the Manufacturing License.

     1.58  "Manufacturing License" is defined in Article 10.
            ---------------------

     1.59  "Minimum Annual Project Funding" is defined in Section 5.4.
            ------------------------------

     1.60  "Minimum Quarterly Funding" is defined in Section 5.5.
            -------------------------

     1.61  "Modified Product" means a Product based on another Product, where
            ----------------
there has been a change in the molecular sequence of such other Product, whether
of the Gene, any promoter, the vector, or otherwise, where such change is not so
significant as to create a different Product, as determined by Committee Action
consistent with this Section.  By way of illustration, but not limitation as to
other situations:

     (i)   the use of [*] (where the initial Product incorporated an AAV Vector)
           would lead to a Modified Product and not a different Product;

     (ii)  the use of any AAV Vector where the initial Product incorporated an
           Ad Vector (and vice versa) would lead to a different Product and not
           a Modified Product;

[*] Confidential Treatment Requested

                                      -11-
<PAGE>

     (iii)  a change in the sequence of a Gene which nevertheless retains a
            homologous sequence to the initial Gene sequence, expressing
            essentially the same protein or its homologue, would lead to a
            Modified Product and not a different Product;

     (iv)   a change in the Gene that is not covered by clause (iii) above would
            lead to a different Product and not a Modified Product; and

     (v)    a change in the vector construct (e.g., changes to promoter(s) or
            other components, or the substitution of promoters or other
            components), while retaining the same Gene (or its homologue as
            described in clause (iii) above), would lead to a Modified Product
            and not a different Product.

     1.62   "Net Sales" means the invoiced or otherwise recognized sales of any
             ---------
Product by Biogen, its Affiliates or their Sublicensees to a non-Affiliated
Distributor or to an End User, whether the consideration is or is to be in cash,
payment in kind, barter, or another form, less the following items as applicable
to such Product, to the extent included in the amount invoiced or otherwise
recognized:

     (i)    ordinary and customary credits or allowances granted upon returns,
            rejections or recalls;

     (ii)   shipping and insurance costs;

     (iii)  ordinary and customary quantity and other trade discounts, rebates,
            credits or allowances, including allowances for uncollectible
            amounts;

     (iv)   customs duties, taxes and surcharges and other governmental charges
            incurred in connection with exportation or importation; and

     (v)    government mandated rebates and retroactive price reductions,

all in accordance with GAAP.  The transfer of any Product between Biogen, its
Affiliates or their Sublicensees and another entity in such group, other than to
a non-Affiliated Distributor or to an End User, shall not be considered a sale.
In such cases, "Net Sales" hereunder shall be determined using the invoiced or
otherwise recognized sales price by the transferee party, Affiliate, Sublicensee
to the non-Affiliated Distributor or the End-User, less the deductions allowed
under this Section.

In the event that consideration in addition to or in lieu of money is received
for the sale of Product in an arms-length transaction, the fair market value of
such consideration shall be included in the determination of Net Sales for such
sale.  Such fair market value shall be determined by Biogen in good faith.  To
the extent that Product is sold in other than an arms-length transaction, Net
Sales for such sale shall be the average Net Sales of such Product sold in an
arms-length transaction during the applicable royalty reporting period in the
country in

                                      -12-
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which the non-arms-length transaction occurred. If there are no arms-length
transactions available as reference under the preceding sentence, then the
parties shall negotiate in good faith a commercially reasonable mechanism for
calculating Net Sales on the non-arms-length transaction.

For purposes of this Agreement, "sale" means any transfer or other distribution
or disposition, but shall not include transfers or other distributions or
dispositions of Product, at no charge, for preclinical, clinical or regulatory
purposes or in connection with patient assistance programs or other charitable
purposes or to physicians or hospitals for promotional purposes.  Product shall
be considered "sold" when billed or invoiced.

In the event that Product is sold in the form of a Combination Product, Net
Sales for the Combination Product shall be determined by multiplying actual Net
Sales of the Combination Product (determined by reference to the definition of
Net Sales set forth above) during the royalty payment period by the fraction
A/A+B where A is the average sale price of Product when sold separated in
finished form and B is the average sales price of the other active ingredients
and components when sold separately in finished form, in each case during the
applicable royalty reporting period in the country in which the sale of the
Combination Product was made, or if sales of both the Product and the other
active ingredients and components did not occur in such period, then in the most
recent royalty reporting period in which sales of both occurred.  Where the
Product is sold separately in finished form but the other ingredients and
components are not, Net Sales for the Combination Product shall be determined by
multiplying actual Net Sales of the Combination Product (determined by reference
to the definition of Net Sales set forth above) during the royalty payment
period by the ratio of the average per-unit sale price of Product when sold
separated in finished form to the average per-unit Net Sales of the Combination
Product, in each case during the applicable royalty reporting period in the
country in which the sale of the Combination Product was made.  Where the other
ingredients and components are sold separately in finished form but the Product
is not, Net Sales for the Combination Product shall be determined by multiplying
actual Net Sales of the Combination Product (determined by reference to the
definition of Net Sales set forth above) during the royalty payment period by
the difference obtained by subtracting from 1 the ratio of the average per-unit
sale price of the other ingredients and components when sold separated in
finished form to the average per-unit Net Sales of the Combination Product, in
each case during the applicable royalty reporting period in the country in which
the sale of the Combination Product was made.  In the event that such average
sales price cannot be determined for either of the Product or for all other
active ingredients and components included in the Combination Product, Net Sales
for purposes of determining payments under this Agreement shall be calculated by
multiplying the Net Sales of the Combination Product by the fraction C/C+D where
C is the standard fully-absorbed cost of the Product portion of the combination
and D is the sum of the standard fully-absorbed costs of all other active
ingredients and components included in the Product, in each case as determined
in accordance with GAAP; provided, however that the parties agree that such
approach is valid in light of the particular circumstances, which agreement
shall not be unreasonably withheld or delayed.

                                      -13-
<PAGE>

Where a Targeted Adjunct Therapy is packaged together with a Product described
in Section 1.65(i), or where it is labeled and promoted solely for use in
conjunction with such a Product, all of the Net Sales of such Combination
Product or Targeted Adjunct Therapy will be Net Sales for the purposes of this
Agreement, and the "Attributable Portion" as to such Targeted Adjunct Therapy
(or as to the Targeted Adjunct Therapy portion of such Combination Product) in
this instance would be 100%. Where a Targeted Adjunct Therapy is not packaged
together with a Product described in Section 1.65(i) but is labeled or promoted
for use in conjunction with such Product in addition to other uses, then the Net
Sales thereof for purposes of this Agreement shall be equal to that portion of
the Net Sales of such Targeted Adjunct Therapy (determined by reference to the
definition of Net Sales set forth above) that is reasonably attributable to use
of such Targeted Adjunct Therapy in conjunction with a Product described in
Section 1.65(i) (the "Attributable Portion"). The Attributable Portion for each
Targeted Adjunct Therapy shall be determined periodically by Committee Action,
in light of any available and reasonably reliable data [*].

     1.63  "Option" is defined in Section 3.2.
            ------

     1.64  "Option Period" means the three-year period starting at the Effective
            -------------
Date.

     1.65  "Product" means (i) any human gene therapy product that is or was the
            -------
subject of a Development Project and incorporates a Targeted Vector; or (ii) a
Targeted Adjunct Therapy that is covered by a license granted to Biogen
hereunder.

     1.66  "Product Gene" means the Gene or Genes agreed by Biogen and Targeted
            ------------
under Section 3.3 (provided that if the parties cannot agree, the Product Gene
shall be determined by Biogen, subject to Section 3.3(ii) and 3.5) to be
included in a Product.

     1.67  "Product-Specific Term" means, subject to Section 7.4, with respect
            ---------------------
to each Product, the period beginning, for the Ad Interferon-beta Product on the
Effective Date, and for other Products on the date such Product becomes a
Candidate Product (but not prior to the Effective Date) and ending on the last
to occur of:

     (i)   the final rejection, abandonment, expiration, termination or
           invalidation of the last Valid Claim of any Targeted Patent or Joint
           Patent covering the manufacture, use, sale or import of such Product,
           on a nation-by-nation basis in the Territory, with respect to the
           Product-Specific Term in such nation; and

     (ii)  the expiration of ten (10) years following the first Regulatory
           Approval of such Product in any nation, with respect to the Product-
           Specific Term in all nations in the Territory.

     1.68  "Proforma Price" is defined in Section 11.2.
            --------------

[*] Confidential Treatment Requested

                                      -14-
<PAGE>

     1.69  "Project Contacts" means the persons appointed by each party to serve
            ----------------
as contact persons between the parties from time to time in relation to this
Agreement (in addition to those representatives of the parties on the Joint
Steering Committee, who may or may not also contemporaneously be Project
Contacts).  The initial Project Contacts shall be designated by each party
within thirty (30) days following the Effective Date.  Each party shall promptly
notify the other party of any substitution of other personnel as its Project
Contacts.  Each party may select and supervise its other project staff as
needed.

     1.70  "Project Funding" means the Initial Project Funding together with the
            ---------------
cash payments to be made by Biogen to Targeted hereunder pursuant to Sections
5.4 and 5.5.

     1.71  "Project Plan and Budget" means, with respect to each Development
            -----------------------
Project, the detailed written descriptions of:

     (i)   the parties' and their Contractors' respective Development Tasks;

     (ii)  the Targeted Technology and Targeted Patents that are likely to be
           applicable to such Development Project or the Product involved
           therein, together with a designation (by type and source) of any
           thereof that are anticipated to be Applied Targeted Technology,
           Exhausted Targeted Patents, Exempted Targeted Patents, or Targeted
           Adjunct Therapies;

     (iii) a listing of any Targeted Licensors of any of Targeted Technology and
           Targeted Patents covered by clause (ii), together with a description
           of any then-known Targeted Licensor Provisions, including a
           description of any then-intended use in such Development Project or
           in the manufacture of the proposed Product of the C12 cell line
           referred to in that certain Exclusive Sublicense Agreement between
           Targeted and Alkermes, Inc. dated June 9, 1999;

     (iv)  the parties' respective responsibilities to attempt to obtain any
           Third Party licenses or rights that may be required;

     (v)   the budget for such Development Project,

all of which shall be adopted and approved by Biogen and Targeted pursuant to
Sections 3.1, 3.3, and 3.5.  The Project Plan and Budget for each approved
Development Project will be subject to amendment and refinement where [*] or
where the use of one or more Targeted Adjunct Therapies not previously
designated in the Project Plan and Budget becomes necessary for the effective
use of such Product.

[*] Confidential Treatment Requested

                                      -15-
<PAGE>

     1.72  "Project Quarter" means a calendar quarter, i.e., a three-month
            ---------------
period starting on any January 1, April 1, July 1 or October 1 in each year;
provided, however, that the first Project Quarter shall start on the Effective
Date and run through the first March 31, June 30, September 30 or December 31
thereafter.

     1.73  "Project Year" means a period of four successive Project Quarters
            ------------
starting either at the Effective Date or at the end of a prior Project Year, as
the case may be; provided however, that if the first Project Quarter is less
than forty-five (45) days long, then the first Project Year shall mean the
period of the first five successive Project Quarters.

     1.74  "Proposal" is defined in Section 3.2.
            --------

     1.75  "Proposal Submission Date" is defined in Section 3.3.
            ------------------------

     1.76  "Proprietary Manufacturing Technology" means any technology,
            ------------------------------------
information, know-how, or materials that are maintained in confidence by
Targeted or any of its Affiliates or its or their Contractors that relate to the
manufacturing of any viral based vectors.

     1.77  "Quarterly Budgeted Funding"  is defined in Section 5.5.
            --------------------------

     1.78  "Reasonable Commercial Efforts" means the exertion on a substantially
            -----------------------------
continuous basis of efforts as would normally be devoted to the applicable task
under similar circumstances by commercial parties with similar resources to
those of the applicable party, where such parties are motivated to the extent
appropriate to the circumstances to accomplish such task.  Reasonable Commercial
Efforts will not mean that a party commits that it will actually accomplish the
applicable task, nor that it will devote thereto efforts or resources beyond
those that a prudent commercial enterprise would devote, even though remaining
motivated to do so as described above.  With respect to Biogen's obligations
pursuant to Section 7.1 to commercialize Products following Regulatory Approval,
"Reasonable Commercial Efforts" shall mean those efforts consistent with the
efforts that would be exerted by Biogen in pursuing the development and
commercialization of its other products with similar market potential under like
circumstances.

     1.79  "Regulatory Approval" means, with respect to each Clinical Product
            -------------------
and as to each nation in the Territory, the approval by the Regulatory Authority
in such nation of such Product for commercial sale for administration in humans,
pursuant to a BLA in the United States or similar application in other nations,
including, where applicable, any government required pricing approvals.

     1.80  "Regulatory Authority" means the competent authority for each nation
            --------------------
of the Territory or for any relevant grouping of nations legally responsible for
authorizing the sale or supply of drug products in that nation or group.

     1.81  "Research Vectors" means any Supplied Vector or Manufactured Vector
            ----------------
intended for use in a Candidate Product.

                                      -16-
<PAGE>

     1.82  "Royalties" or "Sales Royalties" means the royalties to be paid on
            ---------      ---------------
Net Sales in the circumstances described in Section 7.5.

     1.83  "Specifications" means such standards and analytical measurements of
            --------------
Supplied Vectors or Manufactured Vectors established by Committee Action from
time to time with respect to particular Products, consistent with standards and
analytical measurements applied by Targeted to similar products.

     1.84  "Sublicensee" means a Third Party expressly licensed by Biogen to
            -----------
exploit a Product, but not including Distributors.

     1.85  "Subsequent Milestone Event" is defined in Section 6.3.
            --------------------------

     1.86  "Supplied Vectors" means any Targeted Vector and its incorporated
            ----------------
Product Gene that is designated under an approved Project Plan and Budget for
use in a Candidate Product or that is incorporated in the course of a
Development Project into, or as a component of, a Clinical Product, or that is
incorporated into, or is a component of, an Approved Product and which, in each
case, is going to be supplied by Targeted pursuant to Article 9.

     1.87  "Targeted Adjunct Therapy" means a product or treatment to be
            ------------------------
administered or used in conjunction with the use of a Product described in
Section 1.65(i), whether simultaneously or as part of a course of treatment, and
the manufacture, use, sale or import of which would directly or indirectly
infringe one or more Valid Claims of the Targeted Patents or the development,
manufacture, use or sale of which would utilize or has utilized any Targeted
Technology.

     1.88  "Targeted Competitor" means any entity not an Affiliate of Targeted,
            -------------------
which at the relevant time has, or has announced (or whose Affiliate has, or has
announced), a significant program for the discovery or development of any
technology intended broadly for in vivo delivery of Genes.  The parties agree
that the current Targeted Competitors consist of the entities listed in Exhibit
                                                                        -------
D.  The parties further agree during the term of this Agreement to amend Exhibit
-                                                                        -------
D to reasonably reflect the addition or removal of entities as Targeted
-
Competitors.  Notwithstanding the foregoing, in no event shall an Affiliate of
Biogen be considered a Targeted Competitor, unless such Affiliate is one of the
"AAV Competitors" so specified in Exhibit D, or a successor thereto.

     1.89  "Targeted Licensors" means those entities that have licensed or that
            ------------------
may hereafter license to Targeted or Genovo one or more aspects of the Targeted
Technology or the Targeted Patents.

     1.90  "Targeted Licensor Provisions" means any restrictions, limitations or
            ----------------------------
particular contractual provisions applicable to any potential sublicensing by
Targeted of any Targeted Technology, as defined in Section 1.92, or Targeted
Patents, as defined in Section 1.91.

                                      -17-
<PAGE>

     1.91  "Targeted Patents" means:
            ----------------

     (i)   those United States and foreign patents and patent applications owned
           or Controlled by Targeted or any of its Affiliates or Genovo on the
           Execution Date or at any time during the term of this Agreement, and
           all foreign counterparts, divisions, continuations, continuations-in-
           part, reissues, or extensions thereof and patents issuing therefrom,
           any periods of marketing exclusivity and supplemental protection
           relating thereto, with claims covering the manufacture, use, import,
           export or sale of the Ad Interferon-beta Product or Targeted Adjunct
           Therapies related thereto (the "Ad Interferon-beta Product Targeted
                                           -----------------------------------
           Patents").  The initial Ad Interferon-beta Product Targeted patents
           -------
           are described in Exhibit  E;
                            ----------

     (ii)  any patents and patent applications owned or Controlled by Targeted
           or any of its Affiliates or Genovo on the Execution Date or at any
           time during the term of this Agreement, to the extent the same would
           cover any aspect of Targeted's development, manufacture, use or sale
           of the Products or the Supplied Vectors hereunder and the coverage of
           which would be exhausted by such sale of Supplied Vectors by Targeted
           to Biogen hereunder (the "Exhausted Targeted Patents");

     (iii) any patents and patent applications owned or Controlled by Targeted
           or any of its Affiliates or Genovo on the Execution Date or at any
           time during the term of this Agreement, to the extent used in
           circumstances in which Biogen would be eligible for the exemption
           under 35 USC (S)271(e) (the "Exempted Targeted Patents");

     (iv)  any other patents and patent applications owned or Controlled by
           Targeted or any of its Affiliates or Genovo on the Execution Date or
           at any time during the term of this Agreement, to the extent the same
           would, in the absence of a license granted hereunder by Targeted or
           its Affiliates or Genovo, be infringed by Biogen's or Biogen's
           Affiliates' or Sublicensees', Distributors' or customers' development
           packaging, production, use, sale, offer for sale, or import of a
           Product as contemplated under this Agreement; and

     (v)   Targeted's and Genovo's interest in any Joint Patents,

and in each case any foreign counterparts, divisions, continuations-in-part,
reissues or extensions thereof and patents issuing therefrom, any periods of
marketing exclusivity and supplemental protection relating thereto arising at
any time; provided, however, that subject to Section 3.10, the foregoing
definition shall not be deemed to expand the licenses granted to Biogen under
this Agreement to include rights within the Emerald Gene Systems Excluded
Fields.

                                      -18-
<PAGE>

     1.92  "Targeted Technology" means any and all:
            -------------------

     (i)   technology, data, information, processes, materials, know-how and
           rights owned or Controlled by Targeted or any of its Affiliates or
           Genovo at any time during the term of this Agreement, that are used
           or contemplated to be used in connection with Targeted's, Genovo's,
           or their Affiliates' or Contractors' activities contemplated under
           this Agreement, or under previous development projects conducted by
           Genovo pursuant to one or more agreements with Biogen, in connection
           with the development, manufacture or supply of the Products, the
           Supplied Vectors or the Manufactured Vectors hereunder, and which
           need not be disclosed or provided to Biogen in connection with the
           conduct by Biogen or its Affiliates or Sublicensees of any of
           Biogen's Development Tasks or with any Certification and Testing
           Activities for a Product hereunder, to the extent the same directly
           relate to, are desirable for, or are necessary or useful for, the
           development, production, storage and/or marketing of such Product
           (the "Applied Targeted Technology");

     (ii)  other than the Applied Targeted Technology described in subsection
           1.92(i), or the Ad Interferon-beta Product Technology described in
           subsection 1.92(iii), technology, data, information, processes,
           materials, know-how and rights owned or Controlled by Targeted or any
           of its Affiliates or Genovo on the Execution Date or at any time
           during the term of this Agreement, that have been disclosed or
           provided to Biogen by Genovo in connection with previous development
           projects conducted by Genovo pursuant to one or more agreements with
           Biogen or that must be or is disclosed or provided to Biogen in
           connection with the conduct by Biogen or its Affiliates or
           Sublicensees of any Biogen Development Task or in connection with any
           Certification and Testing Activities for a Product hereunder, to the
           extent the same directly relate to, are desirable for, or are
           necessary or useful for, the development, production, storage and/or
           marketing of such Product;

     (iii) technology, data, information, processes, materials, know-how and
           rights owned or Controlled by Targeted or any of its Affiliates or
           Genovo on the Execution Date or at any time during the term of this
           Agreement, that have been used by Genovo in connection with previous
           development projects related to the Ad Interferon-beta Product
           pursuant to one or more agreements with Biogen or that are used or
           contemplated to be used by Biogen or Targeted or Genovo or any of
           their Affiliates or Contractors in connection with the Ad Interferon-
           beta Project, to the extent the same directly relate to, are
           desirable for, or are necessary or useful for, the development,
           production, storage and/or marketing of such Product (the "Ad
                                                                      --
           Interferon-beta Product Technology"); and
           ----------------------------------

     (iv)  Targeted's and Genovo's interest in any Joint Technology,

                                      -19-
<PAGE>

together with all United States and foreign intellectual property and other
rights and interests of Targeted or any of its Affiliates or Genovo thereto and
therein, including patent rights, trade secrets, copyright, periods of market
exclusivity, and other related rights or interests, to the extent owned or
controlled by, or licensed (with the right to sublicense) to Targeted or any of
its Affiliates or Genovo; provided, however, that subject to Section 3.10, the
foregoing definition shall not be deemed to expand the licenses granted to
Biogen under this Agreement to include rights within the scope of the Emerald
Gene Systems Excluded Fields.

     1.93  "Targeted Trademarks" means names, symbols and or characters that are
            -------------------
owned by Targeted and that have been designated for use under Section 8.9 in
conjunction with the Targeted Vector in Biogen's packaging and promotion of an
Approved Product hereunder.

     1.94  "Targeted Vectors" means any AAV Vector or Ad Vector whose
            ----------------
manufacture, use, sale or import would directly or indirectly infringe one or
more Valid Claims of the Targeted Patents (treating, for this purpose, such
patents as being owned entirely by a person or entity who is not the one that
is, without a license, so manufacturing, using, selling or importing such vector
and treating all then-pending patent applications as having been issued as
patents), or in the development, manufacture, use or sale of which any Targeted
Technology would be utilized or has been utilized.

     1.95  "Targeted's Actual Development Costs" is defined in Section 5.3.
            -----------------------------------

     1.96  "Territory" shall initially mean all nations of the world, but may be
            ---------
reduced as to particular nations and particular Products as provided herein.

     1.97  "Third Party" means any person or entity other than Targeted, Biogen,
            -----------
or any of their respective Affiliates.

     1.98  "Transfer Price" means, for a particular quantity of bulk Commercial
            --------------
Vectors that are Supplied Vectors, the sum of:

     (i)   [*] plus

     (ii)  [*].

[*] Confidential Treatment Requested

                                      -20-
<PAGE>

     1.99  "Valid Claim" means a claim in a pending patent application (provided
            -----------
that such application shall not remain pending for more than seven years from
filing) or a claim of an issued and unexpired patent, included within the
Targeted Patents or the Joint Patents, which has not been held permanently
abandoned, revoked, rendered unenforceable or invalidated by the applicant or by
a decision of a court or other governmental agency of competent jurisdiction, in
a decision unappealable or unappealed within the time allowed for appeal, and
which has not been admitted to be invalid or unenforceable through reissue or
disclaimer or otherwise.

     1.100 Where words and phrases are used herein in the singular, such usage
is intended to include the plural forms where appropriate to the context, and
vice versa. The words "including" and "includes" are used in their non-limiting
sense and have the same meaning as "including without limitation" and "including
but not limited to". References to Articles, Sections, and clauses are to the
same with all their subparts as they appear in this Agreement. "Herein" means
anywhere in this Agreement. "Hereunder" and "hereto" means under or pursuant to
any provision of this Agreement.

     Article 2.  Conditions to Effectiveness

     2.1   This Agreement, with the exception of Sections 3.8, 3.9(i), 3.10(i),
and Article 14 hereof, shall become effective on the Effective Date. Sections
3.8, 3.9(i), 3.10(i), and Article 14 hereof are effective from the Execution
Date. If the Effective Date has not

[*] Confidential Treatment Requested

                                      -21-
<PAGE>

occurred on or before October 31, 2000, then this Agreement shall be immediately
terminable upon written notice from any party to the other parties.

     2.2   No grant of any exclusive license under this Agreement shall become
effective unless and until the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") has expired or
been terminated, if the parties determine that the transactions contemplated by
this Agreement, including the grant of one or more such licenses, will require a
governmental filing to be made under the HSR Act.  If the parties are unable to
agree on whether a filing is required by the transactions contemplated by this
Agreement then the party that would be deemed to be the "Acquiring Party" (as
defined under the HSR Act) in such transaction shall determine whether such a
filing is required.  If it is determined that any such filing is required, each
of the parties shall exert its Reasonable Commercial Efforts to complete the
same in a timely fashion and the party deemed to be the Acquiring Party in such
transaction shall bear or reimburse the other party for all filing fees with
respect to such filing.

     Article 3.  Approval and Conduct of Development Projects.

     3.1   As of the Effective Date, the current approved Development Project is
the Ad Interferon-beta Project, which involves the development of an Ad
Interferon-beta Product within the Cancer Field.

     (i)   The Initial Ad Interferon-beta Project Plan and Budget shall be
           approved by Biogen subject to subsections 3.1(ii) and 3.1(iii) prior
           to the inception of any Development Tasks to be conducted by Targeted
           or Genovo thereunder following the Effective Date.

     (ii)  The Initial Ad Interferon-beta Project Plan and Budget will include a
           budget whereby up to $[*] of the Project Funding may be applied
           toward the costs and expenses related to work performed by Targeted
           or Genovo personnel relating to the Ad Interferon-beta Product within
           the Cancer Field over the term of the Option Period. The Targeted
           Development Tasks in the Initial Ad Interferon-beta Project Plan and
           Budget shall be subject to approval by Targeted, which shall not be
           unreasonably withheld or delayed. No work by Targeted or Genovo on
           the Ad Interferon-beta Project will be required beyond such $[*]
           budgeted amount, unless it is to be done pursuant to an Extended Ad
           Interferon-beta Project Plan and Budget that is approved under clause
           (iv) below.

     (iii) The Initial Ad Interferon-beta Project Plan and Budget will provide
           that no material Targeted Technology or Targeted Patents, other than
           any of the same which were Controlled by Genovo prior to the
           Effective Date, are expected to be applicable to or used in the work
           to be conducted by any party pursuant to such Initial Ad Interferon-
           beta Project Plan and Budget, provided, however that nothing herein
           shall negate Biogen's license under Section 8.4(iii).

[*] Confidential Treatment Requested
                                      -22-
<PAGE>

     (iv)  If Biogen elects to pursue further Development Tasks beyond those
           conducted within the scope of the Initial Ad Interferon-beta Project
           Plan and Budget, either as to a level of work beyond the $[*] budget
           under the Initial Ad Interferon-beta Project Plan and Budget or
           involving any material Targeted Technology or Targeted Patents
           relating to process development and extending beyond those described
           in clause (iii) above, Biogen shall so notify Targeted in writing
           during the Option Period, along with a proposed form of Expanded Ad
           Interferon-beta Project Plan and Budget with respect thereto. The
           final Expanded Ad Interferon-beta Project Plan and Budget, if any,
           will be subject to approval by Biogen and Targeted.

     3.2   In addition to the Ad Interferon-beta Project described above in
Section 3.1, during the Option Period, Biogen shall have the right, at its
option (the "Option"), to initiate three (3) Additional Development Projects.
Notwithstanding the foregoing, if one of the Additional Development Projects is
for an AAV Interferon-beta Product, then Biogen's Option shall cover a maximum
of four (4) Additional Development Projects, instead of three.  Biogen shall
have the right to submit up to a maximum of six (6) proposals (each a
"Proposal") for Additional Development Projects, excluding proposals which are
rejected by Targeted pursuant to Section 3.3(ii).

     3.3   The process for exercise of an Option by Biogen with respect to an
Additional Development Project shall consist of the following steps:

     (i)   Biogen shall notify Targeted in writing of its intention and submit a
           Proposal for Targeted's review to include the following:

           (A)  a description of the proposed Candidate Products, including the
                Product Genes and any Targeted Adjunct Therapies anticipated to
                be involved;

           (B)  the human diseases or conditions initially anticipated to be
                targeted for treatment or prevention by such Product;

           (C)  a description of the Targeted Vector anticipated to be involved,
                it being agreed that each Product will use either one AAV Vector
                or one Ad Vector, but not both;

           (D)  a preliminary statement of the rights and intellectual
                properties of or controlled by the respective parties or their
                Affiliates or of or by Third Parties (if any Third Party rights
                or properties are applicable) then known to the parties to be
                applicable or likely to be applicable to or required for the
                proposed Product or its development, testing, manufacture, use,
                certification, or marketing; and

[*] Confidential Treatment Requested

                                      -23-
<PAGE>

           (E)  such other matters or aspects of such Development Project as the
                parties may in their discretion agree to include in a proposal.

     (ii)  Targeted shall have up to thirty (30) days to review a Proposal and
           to notify Biogen whether or not such Proposal is accepted. Targeted's
           acceptance of a Proposal shall be without prejudice to its rights
           under Section 3.3(iii). Targeted will not unreasonably withhold or
           delay its acceptance of any Proposal that is made by Biogen pursuant
           to this Section 3.3, and that otherwise is in conformity with this
           Agreement. Notwithstanding the foregoing, Targeted shall not be
           required to accept a Proposal where:

           (A)  Biogen does not establish to Targeted's reasonable satisfaction,
                consistent with prevailing industry standards, that use of the
                anticipated Product Genes will not be blocked by rights held by
                any Third Party or by Targeted or any of Targeted's Affiliates,
                it being agreed that Targeted shall not be obligated under this
                Agreement to use or to permit the use in a Development Project
                of any Gene covered by any such rights of Targeted or its
                Affiliates; or

          (B)   the Product or the Development Project, as proposed by Biogen,
                would in whole or in part be within any of the Excluded Fields
                determined on the date such Proposal was submitted to Targeted
                (the "Proposal Submission Date").

     (iii) Once a Proposal is accepted by Targeted, the parties will work
           together to develop a Project Plan and Budget for the proposed
           Development Project. All Project Plans and Budgets (other than the
           Initial Ad Interferon-beta Project Plan and Budget, to be adopted as
           provided in Section 3.1(i)) shall require the specific approval of
           both Biogen and Targeted, upon which approval an Additional
           Development Project will be initiated and Biogen will be deemed to
           have exercised one of its Options. Biogen will not be deemed to have
           exercised an Option with respect to any proposed Additional
           Development Project until the Joint Steering Committee has agreed by
           Committee Action to initiate such Additional Development Project. If
           such Committee Action has not been obtained within 180 days after the
           Proposal Submission Date, either Targeted or Biogen may at any time
           thereafter declare by notice to the other that the proposed
           Development Project will not become an Additional Development Project
           hereunder, in which event Biogen will be treated as having used one
           of its Proposals hereunder, but not as having exercised one of its
           Options.

     3.4   Targeted shall have no obligation to notify Biogen of additions to
the Excluded Fields following the date hereof unless and until one or more of
the following applies:

                                      -24-
<PAGE>

     (i)   Biogen in good faith submits a Proposal that covers an Excluded
           Field;

     (ii)  Biogen intends in good faith to submit a Proposal, and it so
           certifies to Targeted, along with a request that Targeted inform
           Biogen if the same, as then described by Biogen, would cover an
           Excluded Field; or

     (iii) Biogen then intends in good faith to institute an internal or
           collaborative project outside the scope of this Agreement, and it so
           certifies to Targeted on a confidential basis during the Option
           Period, along with a request that Targeted inform Biogen if the same,
           as then described by Biogen, would involve an Excluded Field;

in any of which events Targeted shall inform Biogen on a confidential basis of
those Excluded Fields, if any, that would be involved in any of such Proposals,
prospective Proposals, or Biogen projects.

     3.5   The specific research and development activities to be performed by
each party in connection with a Development Project and the applicable timelines
and budgets shall be defined for each Project Year in the approved Project Plan
and Budget. The Project Plan and Budget for each approved Development Project
will be subject to amendment and refinement by Biogen in light of results
achieved, difficulties encountered, and other events and experience since the
initial adoption or most recent amendment of such Project Plan and Budget;
provided, however, that:

     (i)   any amendment or refinement that would result in a material change in
           the Targeted Development Tasks or the budgeted costs therefor will
           not be made without Committee Action; and

     (ii)  no amendment or refinement shall be made that would in any way limit
           or reduce Biogen's obligations under Section 7.1.

     3.6   Targeted shall have primary responsibility during each Development
Period for the Targeted Development Tasks, and Biogen shall have primary
responsibility for the Biogen Development Tasks. During each applicable
Development Period, each of Targeted and Biogen will exert its respective
Reasonable Commercial Efforts:

     (i)   to perform the respective Development Tasks allotted to it in the
           applicable Project Plan and Budget;

     (ii)  to do so in accordance with the applicable Project Plan and Budget;
           and

     (iii) to assist and to cooperate as requested with the other party's
           Reasonable Commercial Efforts to do the same as to its own
           Development Tasks under such Project Plan and Budget.

                                      -25-
<PAGE>

Each party in performing its respective Development Tasks shall comply with all
applicable laws, regulations, and professional standards.

     3.7  Each party will with respect to each Development Project provide to
the other party all necessary or useful information in or coming into its
possession or reasonably available to it to support the achievement of each
party's Development Tasks thereunder.  Each party's Project Contact will provide
written reports to the other party's Project Contact at least quarterly (and
more often upon reasonable request of the other party) throughout the applicable
Development Period with respect to each Development Project, stating in
reasonable detail all efforts made and in process, and all significant progress
achieved and difficulties encountered in the reporting party's portion of the
development effort since the last such report.  Each Project Contact will also
be available throughout each Development Period to answer any reasonable
questions from the other party's Project Contact, as appropriate.  However,
notwithstanding the foregoing or anything else to the contrary contained in this
Agreement:

     (i)  nothing shall require any party to disclose information for which such
          party has an obligation of confidentiality to a third party, but each
          party will exert its Reasonable Commercial Efforts to bring to the
          attention of the Joint Steering Committee any such third party
          restrictions as may be relevant to its role hereunder; and

     (ii) in no event (other than as provided in Section 4.1(iv) or in Article
          10), will Biogen be entitled to receive, or to gain access to, any
          Proprietary Manufacturing Technology.  Biogen shall be entitled,
          solely in connection with its regulatory filings, to reference the
          BMFs maintained by Targeted or its Affiliates with the relevant
          Regulatory Authorities, to the extent they contain Proprietary
          Manufacturing Technology.

     3.8  Subject to termination pursuant to Section 2.1, Biogen agrees that
from the Execution Date through the period ending twelve months from the earlier
of (i) the end of the Option Period or (ii) termination of this Agreement, it
shall not enter into a collaboration with any Third Party (other than with
academic investigators, or, to the extent any of the same are entered in
furtherance of a Development Project hereunder, with contract service providers,
Sublicensees or Distributors), for the conduct of research or development
directed toward the treatment or prevention of any disease or conditions in
humans using any AAV Vector or Ad Vector, other than in one or more of the
Excluded Fields.

     3.9

     (i)  Subject to termination pursuant to Section 2.1, Targeted agrees that
          from the Execution Date through the date Biogen (either alone or with
          a Third Party) is no longer developing or commercializing the Ad
          Interferon-beta Product pursuant to Section 7.1, Targeted shall not,
          except in furtherance of a Development Project hereunder or pursuant
          to an appointment under Section

                                      -26-
<PAGE>

           7.4, directly or indirectly, on its own or with an Affiliate or Third
           Party, conduct research or development directed toward the treatment
           or prevention of any disease or conditions in the Cancer Field or the
           Beta Interferon Field in the Territory, and shall not license or
           sublicense others to use or practice any Targeted Patents or Targeted
           Technology in the Cancer Field or Beta Interferon Field in the
           Territory, other than in the Emerald Gene Systems Excluded Fields or
           as provided in Section 3.10.

     (ii)  Targeted, its Affiliates and Genovo agree that they shall not, during
           the Exclusivity Period applicable to any Product, except in
           furtherance of a Development Project hereunder or pursuant to an
           appointment under Section 7.4, use or practice, or license or
           sublicense others to use or practice, any Targeted Patent or Targeted
           Technology to develop, manufacture, use, sell, offer for sale, or
           import, a product containing the same Gene as such Product in the
           Territory, other than in one or more of the Product-Specific Excluded
           Fields applicable to such Product.

     3.10  Targeted agrees that:

     (i)   it shall not following the Execution Date (but subject to termination
           pursuant to Section 2.1 hereof) through the period ending twelve (12)
           months from the earlier of (A) the end of the Option Period or (B)
           termination of this Agreement, approve the use in the Territory by or
           for Emerald Gene Systems of any Gene Controlled by Targeted for a
           project or product in the Cancer Field or Beta Interferon Field,
           except as otherwise provided in this Section 3.10;

     (ii)  if Biogen submits a Proposal hereunder involving a Product within the
           Emerald Gene Systems Excluded Fields, which Product would contain a
           Gene Controlled by Targeted, Targeted shall, to the extent provided
           under the Emerald Gene Systems Agreements, attempt through reasonable
           efforts to secure the agreement of Emerald Gene Systems to enter with
           Targeted, for the benefit of Targeted and Biogen consistent with
           their interests under this Agreement, into a development or marketing
           agreement with respect to such proposed Product, and, if such an
           agreement is not obtained from Emerald Gene Systems, to reduce the
           scope of the Emerald Gene Systems Excluded Fields with respect solely
           to such Product solely if and to the extent that such Product and the
           proposed Development Project related thereto would not involve the
           use or exploitation of any of the technologies or properties of
           Emerald Gene Systems or that Targeted has agreed to license
           exclusively to Emerald Gene Systems; and

     (iii) [*];

[*] Confidential Treatment Requested
                                      -27-
<PAGE>

it being understood, however, that Targeted has no right or authority to require
Emerald Gene Systems to agree to any of the foregoing agreements.

Article 4. Certification and Testing Activities; Other Regulatory Matters.

     4.1   Biogen and Targeted shall be responsible for preparing, filing, and
maintaining, and shall own, the regulatory filings relating to the Products as
set forth below:

     (i)   Targeted shall be responsible at its cost for preparing appropriate
           BMFs containing the Proprietary Manufacturing Technology with respect
           to Supplied Vectors or Manufactured Vectors in form and substance
           sufficient to permit Biogen to reference the same in satisfaction of
           the requirements of Regulatory Authorities with which Biogen files
           one or more INDs, BLAs or other applications for Regulatory Approval
           with respect to Clinical Products containing AAV Vectors to be
           marketed by Biogen pursuant to the licenses hereunder. Targeted shall
           submit, or cause to be submitted, such BMFs to such Regulatory
           Authorities and shall maintain them or cause them to be maintained
           therewith, provided that Biogen gives Targeted at least ninety (90)
           days prior written notice of Biogen's need to make such a reference
           in connection with an IND, BLA or other application for Regulatory
           Approval from such Regulatory Authority. Targeted shall provide
           reasonable advance notice to Biogen if Targeted makes any changes to
           BMFs that are applicable to such Products. [*]

[*] Confidential Treatment Requested

                                      -28-
<PAGE>

     (ii)  Biogen, its Sublicensees and/or Distributors, either directly or
           through their respective designees, shall be responsible for and have
           all decision-making authority for the preparation of and for
           maintaining all regulatory dossiers covering the Products (including
           but not limited to all INDs, BLAs other than those BLAs referred to
           in Section 1.13(ii), and other applications for Regulatory Approval)
           and Biogen, its Sublicensees and/or Distributors and their designees
           shall be the owner of all such filings related thereto.

     (iii) Subject to Section 3.7, Targeted shall, at Biogen's option and
           request, prepare those sections of the regulatory filings covering
           Products related to Targeted's Development Tasks and manufacturing
           activities, and shall otherwise cooperate, as reasonably requested by
           Biogen, in the preparation and maintenance of such regulatory
           filings. In addition, at Biogen's request, Targeted shall make
           appropriate personnel available for meetings with the FDA and EMEA or
           other Regulatory Authority [*]. Any and all such responsibilities
           assigned to Targeted shall be reflected in the respective Project
           Plans and Budgets, and Targeted's related costs and expenses shall be
           paid by Biogen in accordance with Article 5.

     (iv)  [*]

[*] Confidential Treatment Requested

                                      -29-
<PAGE>

     (v)   [*]

     (vi)  If a Project Plan and Budget calls for any Ad Vectors to be Supplied
           Vectors hereunder, such Project Plan and Budget shall specify the
           parties' respective responsibilities with respect to the filing of
           BMFs (if any) and other regulatory filings.

     (vii) Biogen and Targeted shall keep each other informed, on a regular
           basis, of material developments with respect to regulatory filings
           related to Products.

     4.2   Biogen and Targeted shall promptly notify the other of any fact,
circumstance, condition or knowledge dealing with any Supplied Vectors,
Manufactured Vectors or

[*] Confidential Treatment Requested

                                      -30-
<PAGE>

Products of which the party becomes aware that bears upon the safety or efficacy
of the Supplied Vectors, Manufactured Vectors or the Products.

     (i)   In particular and without limiting the generality of the foregoing,
           each party shall within three (3) business days notify, and shall
           cause its Affiliates, Contractors, and Sublicensees to notify the
           other party hereto upon receipt of any information concerning any
           serious or unexpected side effect, injury, toxicity, or allergenic or
           other sensitivity reaction or other adverse events or experience:

           (A) relating in any way to the Supplied Vectors, Manufactured Vectors
               or the Products or their application, testing, storage, use or
               sale; or

           (B) relating in any way to or occurring in or in connection with any
               Certification and Testing Activities conducted or to be conducted
               under this Agreement, whether or not then established to be
               covered by clause (A) above,

           including all available information with respect thereto. The parties
           agree to develop a standard operating procedure for the reporting of
           such events or experiences.

     (ii)  Each party shall promptly notify the other of any inspection or audit
           relating to Supplied Vectors, Manufactured Vectors or Products by any
           Regulatory Authority in the Territory. If a representative of the
           governmental authority takes samples in connection with such audit or
           inspection, the parties shall immediately provide each other, as
           appropriate, samples from the same batch. The party in receipt of
           such notice will provide the other party within 72 hours, with copies
           of all relevant documents, including FDA Forms 482 and 483 (as
           applicable), warning letters and other correspondence and
           notifications as such other party may reasonably request.

     (iii) Each party shall promptly notify the other of any recall notice or
           request made by any governmental authority, and of any knowledge
           obtained by such party that any such notice or request is under
           investigation or consideration by any governmental authority.

     (iv)  Targeted and Biogen agree to cooperate with each other during any
           inspection, investigation, recall, or other inquiry by the FDA or
           other Regulatory Authority, including providing information and/or
           documentation, as requested by the FDA, or other Regulatory
           Authority. To the extent permissible and to the extent related to
           Supplied Vectors or Manufactured Vectors, Targeted and Biogen also
           agree to discuss any responses to observations or notifications
           received and to give the other party an opportunity to comment on any
           proposed response before it is made. In the

                                      -31-
<PAGE>

          event of disagreement concerning the content or form of such response,
          Biogen shall be responsible for deciding the appropriate form and
          content of any response with respect to any of its cited activities
          and Targeted shall be responsible for deciding the appropriate form
          and content of any response with respect to any of its cited
          activities. Each party shall inform the other of all comments and
          conclusions received from the governmental authority.

     4.3  Biogen shall be responsible for conducting, directly and/or through
its Contractors, any and all clinical trials.  At Biogen's option and request,
Targeted shall have responsibility for conducting, directly and/or through its
Contractors, any and all Phase I clinical trials which Biogen requests it to
perform, and to file an IND with the FDA seeking approval to conduct such Phase
I clinical trials, in which case such responsibilities shall be considered part
of the Targeted Development Tasks and shall be reflected in the respective
Project Plans and Budgets and Targeted's related costs and expenses shall be
paid by Biogen in accordance with Article 5.

     Article 5. Project Funding; Other Payments; Funding Agreement.

     5.1  In consideration of the rights granted to Biogen under this Agreement,
Biogen shall pay Targeted on the Effective Date eight million dollars
($8,000,000) (of which [*] dollars ($[*]) is the "Initial Project Funding" and,
together with the Minimum Annual Project Funding, shall be applied towards the
payment of Targeted's Actual Development Costs, as described in Section 5.5).

     5.2  As additional consideration, Biogen shall make available to Targeted
certain equity investments and loans pursuant to a Funding Agreement between
Biogen and Targeted of even date herewith.

     5.3  Biogen shall bear all of its and its Contractors' costs and expenses
of conducting and fulfilling all of Biogen's responsibilities under any and all
approved Project Plans and Budgets.  Subject to the limitation contained in the
last sentence of this Section, Biogen shall bear all of Targeted's and its
Affiliates' and their Contractors' fully burdened costs and expenses of
conducting and fulfilling all of Targeted's responsibilities associated with or
preparatory for any and all approved Project Plans and Budgets ("Targeted's
Actual Development Costs") calculated, with respect to fully-burdened labor
costs, using the FTE Rate and provided that Targeted shall only include in
Targeted's Actual Development Costs charges for the FTE time of FTE's directly
working on a Development Project.  Targeted's Actual Development Costs shall not
include the costs and expenses of supplying Clinical Vectors or Commercial
Vectors, which shall be supplied to Biogen pursuant to the provisions contained
in Articles 9 and 11 of this Agreement.  For avoidance of doubt, Targeted's
Actual Development Costs shall, subject to the limitation contained in the last
sentence of this Section, include costs and expenses related to the following
items and shall be calculated in accordance with Exhibit C unless otherwise
                                                 ---------
indicated:

[*] Confidential Treatment Requested

                                      -32-
<PAGE>

     (i)   preparing Project Plans and Budgets pursuant to Section 3.3(iii)
           regardless of whether such Project Plans and Budgets are approved;

     (ii)  assistance with preparation and maintenance of regulatory filings
           pursuant to Section 4.1(iii);

     (iii) conducting Phase I clinical trials and filing INDs pursuant to
           Section 4.3;

     (iv)  supply of Research Vectors pursuant to Section 9.3;

     (v)   supply of Clinical Vectors to be used by Targeted or its Contractors
           pursuant to Section 9.4, such costs and expenses to be equal to [*];
           and

     (vi)  conducting and fulfilling all other responsibilities assigned to
           Targeted, its Affiliates, or its Contractors under any and all
           approved Project Plans and Budgets.

Notwithstanding the foregoing, if Targeted's Actual Development Costs for any
Project Year (exclusive of any amounts included therein related to the
preparation of Project Plans and Budgets) exceed [*] percent ([*]%) of
Targeted's total budgeted costs included in the approved Project Plans and
Budgets for such Project Year, Biogen shall not be obligated to pay the excess
without its specific approval and Targeted shall be responsible for any such
excess costs not approved by Biogen.

     5.4   During each of the first three Project Years, Biogen shall pay to
Targeted a minimum of [*] dollars ($[*]) (the "Minimum Annual Project Funding"),
whether or not any Development Projects are in effect hereunder. Such Minimum
Annual Project Funding shall be applied toward any amounts owed by Biogen to
Targeted under Section 5.3, if any, and shall be payable as specified in Section
5.5. After the first three Project Years Biogen shall have no further minimum
annual project funding obligation and in no event shall Biogen be obligated to
allocate Development Tasks to Targeted.

     5.5   On or before the first day of each Project Quarter during the first
three Project Years, Biogen shall pay to Targeted, the greater of:

     (i)   one-fourth of the Minimum Annual Project Funding for the then-current
           Project Year as described in Section 5.4 (the "Minimum Quarterly
           Funding"); provided, however, that if there are five Project Quarters
           in the first Project Year, then one-fifth of the Minimum Annual
           Project Funding for that Project Year will be paid on or before the
           first day of each Project Quarter in that Project Year; and

[*] Confidential Treatment Requested

                                      -33-
<PAGE>

     (ii) the aggregate amount budgeted for Targeted's fully burdened costs and
          expenses for that Project Quarter with respect to the then-approved
          Development Projects, as provided in the applicable Project Plans and
          Budgets (the "Quarterly Budgeted Funding");

provided, however, that for any such Project Quarter in which the Quarterly
Budgeted Funding exceeds the Minimum Quarterly Funding, Biogen may set-off
against the amount of such excess:

          (A)  the amount, if any, by which payments of Minimum Quarterly
               Funding for any previous Project Quarter exceeded the Quarterly
               Budgeted Funding applicable to that previous Project Quarter,
               until all such excess payments in previous Project Quarters have
               been so set-off; and

          (B)  the amount of the Initial Project Funding that has not previously
               been so set-off.

Any such excess payments that have not been so set-off prior to the end of the
third Project Year shall be deemed fully earned by Targeted and shall not be
subject to further set-off or credit.

     5.6  On or before the first day of each Project Quarter following the end
of the first three Project Years, Biogen shall pay to Targeted the Quarterly
Budgeted Funding with respect to such Project Quarter if any, without any set-
off or other credit with respect to any Initial Project Funding or Minimum
Annual Project Funding payments made during the first three Project Years.

     5.7  Targeted shall provide to Biogen summary quarterly reports no less
than forty-five (45) days after the end of each Project Quarter documenting, on
a basis consistent with Targeted's internal, generally-applicable cost
accounting methods, Targeted's Actual Development Costs for such Project
Quarter.

     (i)  If Targeted's Actual Development Costs are less than the Quarterly
          Budgeted Funding for a Project Quarter, Biogen shall be entitled to
          apply the overpayment toward the next payment due from Biogen pursuant
          to Section 5.5 of this Agreement (including the Minimum Quarterly
          Funding, but in this case only to the extent that Targeted's Actual
          Development Costs in such Project Quarter referred to in this Section
          5.7(i) was greater than the Minimum Quarterly Funding for such Project
          Quarter); provided, however, that if the amount of such overpayment
          exceeds the amount of the next payment due from Biogen, Targeted shall
          promptly pay Biogen such excess amount.

     (ii) If Targeted's Actual Development Costs are greater than the Quarterly
          Budgeted Funding for a Project Quarter, the excess amount shall be
          paid by Biogen together with the next payment due pursuant to Section
          5.5 or Section

                                      -34-
<PAGE>

          5.6 of this Agreement, or as to the last Project Quarter, within sixty
          days following the end of such Project Quarter; provided, however,
          that Biogen shall not be required to pay such excess amount to the
          extent that it would pay more than [*] of Targeted's total budgeted
          costs included in the approved Project Plans and Budgets for the
          respective Project Year.

     Article 6. Milestones.

     6.1  Biogen shall pay the following amounts to Targeted upon the first
achievement of each of the applicable milestones for each Product (other than
Targeted Adjunct Therapies and the Ad Interferon-beta Product or any Modified
Product based thereon) reaching such milestone, subject to Section 6.3:

<TABLE>
<CAPTION>
     -----------------------------------------------------------------------------------------
                                Milestone                                           Payment
                                ---------                                           -------
     -----------------------------------------------------------------------------------------
     <S>                                                                          <C>
      A.   Filing of IND                                                          $       [*]
     -----------------------------------------------------------------------------------------
      B.   Initiation of a Phase II clinical trial for such Product               $       [*]
     -----------------------------------------------------------------------------------------
      C1.  Initiation of a Phase III clinical trial for a Product                 $       [*]
           for which a milestone fee was paid at the Initiation of
           Phase II clinical trial
     -----------------------------------------------------------------------------------------
      C2.  Initiation of a Phase III clinical trial for a Product                 $       [*]
           for which no separate Phase II clinical trial was initiated
     -----------------------------------------------------------------------------------------
      D.   Filing of BLA                                                          $       [*]
     -----------------------------------------------------------------------------------------
      E.   Regulatory Approval in any nation                                      $       [*]
     -----------------------------------------------------------------------------------------
</TABLE>

     6.2  If an Expanded Ad Interferon-beta Plan and Budget has previously been
approved pursuant to Section 3.1, then Biogen shall pay the following amounts to
Targeted upon the first achievement of each of the applicable milestones for the
Ad Interferon-beta Product reaching such milestone, subject to Section 6.3:

[*] Confidential Treatment Requested

                                      -35-
<PAGE>

<TABLE>
<CAPTION>
     ----------------------------------------------------------------------------------
                                Milestone                                      Payment
                                ---------                                      -------
     ----------------------------------------------------------------------------------
     <S>                                                                     <C>
      A.  Filing of IND                                                      $      [*]
     ----------------------------------------------------------------------------------
      B.  Initiation of a Phase II clinical trial                            $      [*]
     ----------------------------------------------------------------------------------
      C1. Initiation of a Phase III clinical trial for which a               $      [*]
          milestone fee was paid at the Initiation of Phase II
          clinical trial
     ----------------------------------------------------------------------------------
      C2. Initiation of a Phase III clinical trial for which no              $      [*]
          separate Phase II clinical trial was initiated
     ----------------------------------------------------------------------------------
      D.  Filing of BLA                                                      $      [*]
     ----------------------------------------------------------------------------------
      E.  Regulatory Approval in any nation                                  $      [*]
     ----------------------------------------------------------------------------------
</TABLE>

     6.3  Where the milestones described in items B, C1 or C2 of the table set
forth in Section 6.1 or in Section 6.2, as applicable, are achieved more than
once (each called a "Subsequent Milestone Event") because such milestone is
achieved for a Modified Product based on a Product which (or another Modified
Product of which) has previously achieved such milestone, then the applicable
milestone payment amounts for each such item for each such Subsequent Milestone
Event shall be [*]. The milestones contained in items A, D and E of such table
shall [*] with respect to a Product and any Modified Product(s) based thereon.

     6.4  Where Targeted Adjunct Therapies that are not Controlled by Targeted
or any of its Affiliates or Genovo on the Execution Date are licensed hereunder,
Biogen shall [*] promptly upon inclusion of the particular Targeted Adjunct
Therapy in the applicable Project Plan and Budget.

     6.5  Biogen shall report to Targeted the occurrence of any event triggering
a milestone payment according to this Article 6 within thirty (30) days
following such occurrence, and shall pay the applicable milestone payment to
Targeted concurrently with such report and otherwise in conformity with Article
11.

     Article 7. Product Marketing and Sales Royalties.

     7.1  Biogen shall be responsible for all sales, marketing and related
commercial activities for all Approved Products.  Notwithstanding anything to
the contrary herein (including the last sentence of Section 5.4), Biogen shall
use Reasonable Commercial Efforts, throughout the Product-Specific Term:

     (i)  to develop all Candidate Products and all Clinical Products in order
          to achieve the applicable Approved Product; and

     (ii) to package, distribute, market, promote and sell all Approved Products
          in each of the three Major Markets.

[*] Confidential Treatment Requested

                                      -36-
<PAGE>

     7.2  In determining whether Biogen is complying with its obligations to use
Reasonable Commercial Efforts, the parties will take into account any material
adverse condition or event related to safety, bioavailability, or efficacy of
the Product, any impediments caused by formulation, manufacturing or other
technical issues related to the Product, any material adverse patent issues
related to the Product, and Targeted's performance of its related
responsibilities.

     7.3  If Targeted at any time believes that Biogen's efforts do not
constitute Reasonable Commercial Efforts as required under Section 7.1, Targeted
shall, prior to taking any other action hereunder with respect thereto, so
notify Biogen, along with a detailed statement of the minimum efforts which, in
Targeted's view, should be taken in order that such standard would be met.  In
such event, Biogen and Targeted shall meet over the ninety (90) days following
such notice and statement from Targeted, to attempt to agree upon efforts to be
pursued by Biogen or its Sublicensees and Distributors during the six months
ensuing from the date of such agreed statement.  Such efforts need not be
entirely undertaken directly by Biogen, but may include the grant by Biogen of
one or more sublicenses of its rights to exploit the Product, and/or the
appointment by Biogen of one or more Distributors for such Product in such Major
Market.  If Targeted and Biogen are unable to agree upon such a statement of
efforts within such 90-day period, they will promptly resolve their differences
through a process of dispute resolution under Article 16.  Once the level of
effort is agreed upon or determined by arbitration, if Targeted believes that
Biogen has materially failed to comply therewith and has failed to exert other
efforts which would constitute Reasonable Commercial Efforts during the period,
Targeted may, by notice to Biogen given within sixty (60) days following the end
of the period covered thereby, declare by notice to Biogen that Biogen has
failed to exert Reasonable Commercial Efforts.  If Biogen disagrees with such
determination, the parties shall resort to the dispute resolution mechanism set
forth in Article 16.

     7.4

     (i)  If it is determined pursuant to Section 7.3 that Biogen has failed to
          comply with its obligations described in Section 7.1(i), or if a
          Development Project is terminated by Biogen pursuant to Section 12.2
          or pursuant to Section 12.3 due to a material breach by Biogen or
          pursuant to Section 12.4 as a result of a Biogen bankruptcy or
          insolvency, Targeted may elect to require that Biogen, [*].

[* Confidential Treatment Requested

                                      -37-
<PAGE>

     (ii)  If it is determined pursuant to Section 7.3 that Biogen has failed to
           comply in any Major Market with its obligations described in Section
           7.1(ii) with respect to an Approved Product, then, in any such case,
           Targeted may, at its option, elect to [*].

     7.5   Biogen shall pay Targeted Sales Royalties in the following
circumstances, on:

     (i)   Net Sales of all Ad Interferon-beta Products and any Modified
           Products based thereon;

     (ii)  Net Sales of any other Product described in Section 1.65(i) which is,
           or the Manufactured Vectors for which are, manufactured by or for
           Biogen pursuant to the Manufacturing License; and

     (iii) Net Sales of any Targeted Adjunct Therapy that is licensed to Biogen
           hereunder for use with Ad Interferon-beta Products, with a Product
           containing Supplied Vectors, or with a Product described in clause
           (ii) of this section.

     7.6   The Sales Royalty rates applicable to any Product on which Sales
Royalties are to be paid under Section 7.5 whose manufacture, use, sale or
import would, without the license or sublicense to be granted under Section 8.4
or under Article 10, infringe one or more Valid Claims of the Targeted Patents
or Joint Patents (treating, for this purpose, all Joint Patents as if owned
entirely by Targeted, and all then-pending patent applications (other than
applications covering only Targeted Technology developed entirely after the
Execution Date) as having been issued as patents):

     (i)   shall, subject to Section 7.8, be equal to the rates determined under
           the table set forth in subclause (B) of Section 7.6(ii) below with
           respect to Net Sales of Ad Interferon-beta Product (or any Modified
           Product based thereon);

     (ii)  with respect to Net Sales of other Products for which a royalty is
           owed under Section 7.5(ii), shall, subject to Section 7.8, be equal
           to the greater of:

           (A) [*]; or

[*] Confidential Treatment Requested

                                     -38-
<PAGE>

          (B) Royalties determined under the following table:

<TABLE>
<CAPTION>
              -----------------------------------------------------------------------------
               For the portion of Net Sales in a                 The Sales Royalty rate for
               ---------------------------------                 --------------------------
                        calendar year:                            such Net Sales will be:
                        --------------                            -----------------------
              -----------------------------------------------------------------------------
              <S>                                                <C>
              -----------------------------------------------------------------------------
              Less than $[*]                                              [*]%
              -----------------------------------------------------------------------------

              -----------------------------------------------------------------------------
              Equal to or greater than $[*]                               [*]%
              -----------------------------------------------------------------------------
</TABLE>

              For purposes of determining whether the Net Sales of such a
              Product have exceeded $[*] in any calendar year under this
              subclause (B) of Section 7.6(ii), the Net Sales of such Product
              shall be aggregated with:

              (1)  the Net Sales of any Modified Product based thereon that is
                   also among the Products referred to in Section 7.5; and

              (2)  any Net Sales of such Product and any Modified Product based
                   thereon during such year, which Net Sales are not referred to
                   in Section 7.5 (e.g., where the Product contains Supplied
                   Vectors manufactured and supplied by Targeted or its
                   Contractors under Article 9 for which a Transfer Price is
                   paid);

    (iii) with respect to Net Sales of any Targeted Adjunct Therapy [*] shall be
          equal to; or

    (iv)  with respect to Net Sales of Targeted Adjunct Therapies that are not
          covered by clause (iii) above, shall be equal to [*] promptly upon
          inclusion of the particular Targeted Adjunct Therapy in the applicable
          Project Plan and Budget.

[*] Confidential Treatment Requested

                                     -39-
<PAGE>

     7.7   The Sales Royalty rates applicable to any Product on which Sales
Royalties are to be paid under Section 7.5 whose manufacture, use, sale or
import would not infringe one or more Valid Claims of the Targeted Patents or
Joint Patents (treating, for this purpose, all Joint Patents as if owned
entirely by Targeted and all then-pending patent applications (other than
applications covering only Targeted Technology developed entirely after the
Execution Date) as having been issued as patents), even without the license or
sublicense to be granted under Section 8.4 or Article 10:

     (i)   with respect to Net Sales of Targeted Adjunct Therapies [*] shall be
           equal to [*];

     (ii)  with respect to Net Sales of Targeted Adjunct Therapies [*] shall be
           equal to [*];

     (iii) otherwise shall, subject to Section 7.8, be equal to the greater of:

           (A) [*] percent ([*]%) of the royalty rates stated in the
               table in subclause (B) of Section 7.6(ii), or

           (B) the aggregate of any and all royalties payable by Targeted or
               Genovo either:

               (1)  [*], or

               (2)  [*] (but not, under this clause (B), over [*] percent ([*]%)
                    of the Net Sales of any such Product, and provided that
                    Biogen has, in the Project Plan and Budget or otherwise,
                    [*]),

               with respect to any such Products, plus [*] percent ([*]%) of the
               Net Sales of any such Product.

If some of the Net Sales of a Product would be covered by this Section 7.7 and
other Net Sales of that Product would be covered by Section 7.6, all such Net
Sales shall be aggregated for purposes of determining whether the total Net
Sales of such Product have exceeded $[*] in any calendar year.

[*] Confidential Treatment Requested
                                      -40-
<PAGE>

     7.8  Notwithstanding the foregoing, if it is necessary for Biogen or any of
its Affiliates or Sublicensees to make payments to Third Parties, other than
with respect to Genes or adjunct technologies, in order to make, have made, use,
sell or import Products, then the Sales Royalties payments due to Targeted from
Biogen pursuant to Section 7.6 shall be reduced by [*] percent ([*]%) of the
amount of such payments paid to such Third Parties; provided, however, that in
no event shall any such royalty payments due to Targeted from Biogen pursuant to
Section 7.6 (where Section 7.7 is not applicable) be thereby reduced by more
than [*] percent ([*]%) in any reporting period, or (where Section 7.7 is
applicable) be reduced to be less than the Royalty rates determined under
Section 7.7, without regard to this Section 7.8.

     7.9  If, in the circumstances described in Section 7.5, Biogen grants a
sublicense under the license granted to it pursuant to Section 8.4 or under the
Manufacturing License to a Sublicensee to make, use or sell the Product, such
sublicenses shall require the Sublicensee to account for and report its Net
Sales of the Product on the same basis as if such sales were Net Sales of the
Product by Biogen, and Biogen shall pay royalties on such sales of such Product
as if the Net Sales of the Sublicensees were Net Sales of Biogen.

     Article 8. Ownership and Licenses.

     8.1  Except as otherwise explicitly licensed or transferred as provided
herein, each of Targeted and Biogen will, as between it and the other, retain
ownership of any and all inventions, copyrights, trade secrets, patent rights
and other technology and rights to the extent made solely by its personnel or
Contractors, and such parties will jointly own any and all Joint Technology and
Joint Patents.  Inventorship for these purposes will be determined under the
prevailing U.S. rules and interpretations.  No party makes any grant of rights
by implication.

     8.2  Except as otherwise provided herein, each party shall be responsible,
as it shall determine, for the filing and prosecution of any and all patent
applications with respect, in whole or in part, to its own intellectual property
and for the maintenance of any available patent protection with respect thereto.
Notwithstanding the foregoing, Targeted agrees to consult with Biogen and to
keep Biogen informed of Targeted's decisions regarding the scope and content of
Targeted Patents, or applications therefor, that are developed by Targeted
directly in the course of a Development Project and Targeted shall provide
Biogen with the opportunity to review and provide input with respect thereto.
Targeted shall keep Biogen advised as to all material developments with respect
to such applications for such Targeted Patents and shall promptly supply Biogen
with copies of all applications and papers received and filed in connection with
the prosecution thereof in sufficient time in advance of filing for Biogen to
comment thereon, and shall consider in good faith Biogen's comments.  Subject to
Committee Action to the contrary, Joint Technology and Joint Patents and any
such patent application and foreign counterparts with respect thereto, shall be
prepared, filed and prosecuted jointly in the names of Biogen and Targeted by
counsel who shall be mutually acceptable to both Biogen and Targeted and who
shall represent all parties.  Biogen and Targeted shall cooperate with each
other to assure that such applications for Joint Patents will cover, to the best
of their knowledge, all items of commercial interest and importance to all
parties, including selection of designated countries or regions for foreign
filing.  Biogen and

[*] Confidential Treatment Requested

                                      -41-
<PAGE>

Targeted shall both be responsible for making decisions regarding scope and
content of such jointly owned applications to be filed and prosecution thereof,
and each of them shall be obligated to provide the other with opportunity to
review and provide input with respect thereto. Each party shall keep the other
advised as to all material developments with respect to such applications for
Joint Patents and shall promptly supply to each other copies of all papers
received and filed in connection with the prosecution thereof in sufficient time
in advance of filing for the other party to comment thereon, and shall consider
in good faith the other party's comments. The parties agree to cooperate fully
with each other and provide to each other all information and data and sign any
documents reasonably necessary and requested for the purpose of preparing,
filing and prosecuting patent applications covering Joint Technology. No party
commits that any patent protection will be available or continuous hereunder.
Each party shall be responsible for its own costs relating to the filing and
prosecuting of patent applications and maintenance of any available patent
protection with respect to its own intellectual property. Any such costs
relating to Joint Technology shall be shared equally by Biogen and Targeted,
provided in the event that if either Biogen or Targeted elects not to
financially support a patent or application that is part of the Joint Patents,
the other such party may file, prosecute and/or maintain such patent or patent
application at its own expense, and the other such party shall have no further
right or interest in or under such patent or patent application, or any patent
that may issue therefrom under this Agreement; provided, however, that where
Biogen so elects not to financially support such patent or application, the same
shall be deemed to be a Targeted Patent, irrespective of any participation by
Biogen personnel in the making of the inventions disclosed therein, and Biogen
will execute and deliver any and all conveyances, transfers and assignments of
its rights therein as are reasonably requested by Targeted, subject to Biogen's
rights thereto as set forth in Articles 8 and 10 hereof for Targeted Patents
other than those referred to in Section 1.91(v), except that Targeted will not
be required to consult with Biogen or to keep Biogen informed of Targeted's
decisions regarding the scope and content of such patent or patent application,
nor to provide copies or keep Biogen advised as to developments with respect to
any such application. Patent costs and expenses of the parties will not be
considered part of any Project Plan and Budget, but will be paid separately and
not from the Project Funding.

     8.3

     (i)  Biogen hereby grants to Targeted a nonexclusive, worldwide license,
          with right to sublicense to Contractors permitted under this
          Agreement, to use and to exercise the Biogen Technology and the Biogen
          Patents solely as necessary for performance of Targeted's Development
          Tasks during and in the course of any approved Development Project.
          Any sublicense granted under this Section with respect to a Product
          shall be subject to any limitations applicable to Biogen's
          intellectual property rights with respect thereto.

                                      -42-
<PAGE>

          It is expressly understood by the parties hereto that Biogen is
          conveying the Beta Interferon Gene to Targeted to be used in the Ad
          Interferon-beta Project by way of bailment and not by way of license.
          Targeted shall be permitted to possess and use the Beta Interferon
          Gene solely in connection with its obligations to perform the Ad
          Interferon-beta Project and/or the AAV Interferon-beta Product
          Development Project, if any, approved hereunder, but Targeted cannot
          modify the Beta Interferon Gene without the express written approval
          of Biogen.  It is expressly acknowledged and agreed by Targeted that
          at all times title and ownership of the Beta-Interferon Gene shall
          remain in Biogen and that Targeted shall have no right or license to
          utilize the Beta Interferon Gene nor to transfer the same to any Third
          Party.  At Biogen's sole election, Biogen may terminate the bailment
          and Targeted shall be obligated to promptly return any and all
          quantities of the Beta Interferon Gene in its possession.  The terms
          of this section shall pertain mutatis mutandis to any additional genes
          transferred to Targeted pursuant to a Development Project implemented
          pursuant to this Agreement.

     (ii) Targeted hereby grants to Biogen a nonexclusive, worldwide license,
          with right to sublicense to Contractors permitted under this
          Agreement, to use and to exercise the Targeted Technology (other than
          the Applied Targeted Technology, as designated in the applicable
          Project Plan and Budget) and under any Targeted Patents (other than
          the Exhausted Targeted Patents and the Exempted Targeted Patents, as
          designated in the applicable Project Plan and Budget) which would, but
          for this license grant, be infringed by Biogen's performance of its
          Development Tasks solely as necessary for performance of Biogen's
          Development Tasks during and in the course of any approved Development
          Project.

     8.4

     (i)  In addition to the other rights granted under this Agreement, Targeted
          hereby grants to Biogen an option to acquire a license (which option
          and license shall be as described in Section 8.4(ii) and shall be
          exclusive to the extent there described), with the right to grant
          sublicenses, as set forth in Sections 8.5 and 8.6, to Targeted
          Technology (that is not otherwise designated as Applied Targeted
          Technology in the applicable Project Plan and Budget, subject to any
          corrections described in Section 1.71) and under any and all Targeted
          Patents (that are not designated as Exhausted Targeted Patents or as
          Exempted Targeted Patents in the applicable Project Plan and Budget,
          subject to any corrections described in Section 1.71).  The option to
          acquire a license as set forth in this Section 8.4(i) as it relates to
          Targeted Patents shall apply to those Targeted Patents, now or
          hereafter Controlled by Targeted during the term of this Agreement,
          for which a Valid Claim would, but for such a license, and despite 35
          USC (S)271(e) and the supply of the Supplied Vectors by Targeted to

                                      -43-
<PAGE>

           Biogen, if applicable, be infringed by the development, manufacture,
           importation, exportation, use, offer to sell or sale of Products by
           Biogen, Biogen's Affiliates or Sublicensees, Distributors or
           customers. The exclusive nature of the option (to the extent provided
           in Section 8.4(ii)) shall commence with respect to each Product upon
           acceptance of the related Proposal by Targeted under Section 3.3(ii),
           but the option under this Section 8.4 will terminate if either party
           declares pursuant to Section 3.3(iii) that no Additional Development
           Project will be initiated for such Product or if the applicable
           Additional Development Project is terminated pursuant to Article 12.
           Otherwise, the option granted under this Section 8.4, to the extent
           not exercised, shall continue in effect until termination by Biogen
           of its development and commercialization efforts with respect to such
           Product. Biogen may exercise such option as to any such Targeted
           Technology or Targeted Patents at any time by written notification to
           the Joint Steering Committee. Upon receipt of notification from
           Biogen, the Joint Steering Committee shall identify the patents and
           patent applications constituting the Targeted Patents and Targeted
           Technology under which Biogen is to be licensed under this subsection
           for the applicable Product. The option hereunder shall continue in
           effect for any Targeted Technology and Targeted Patents not so
           identified.

     (ii)  The following shall be applicable with respect to Targeted Technology
           and any Targeted Patents, as to which Biogen exercises its option to
           acquire a license under Section 8.4(i):

           Targeted shall, subject to Sections 8.5 and 8.6, be deemed to have
           granted to Biogen a license during the applicable Product-Specific
           Term, with the right to sublicense, to such Targeted Technology and
           under such Targeted Patents to research, develop, manufacture, have
           manufactured, use, import, export, offer to sell or sell Products in
           the Territory other than in the applicable Product-Specific Excluded
           Fields; provided, however, that with respect to Products using AAV
           Vectors, Biogen will have no right or license to manufacture any
           Supplied Vector or Manufactured Vector to be incorporated into such
           Product unless and until it obtains a Manufacturing License under
           Article 10 to do so. Subject to any rights retained by Targeted
           Licensors, such license under this Section 8.4, and Biogen's option
           under this Section 8.4 to obtain any such license, shall be exclusive
           with respect to a Product described in Section 1.65(i) in a nation
           during the Exclusivity Period applicable to such nation for such
           Product, shall be as otherwise licensed with respect to a Product
           described in Section 1.65(ii), and shall otherwise be nonexclusive.

     (iii) Without limiting the rights set forth elsewhere in this Agreement,
           the following shall be applicable to the Ad Interferon-beta Product:

                                      -44-
<PAGE>

          Targeted hereby grants to Biogen an exclusive, worldwide license under
          the Ad Interferon-beta Product Targeted Patents and the Ad Interferon-
          beta Product Technology to develop, research, make, have made, use,
          have used, sell, offer for sale, import and have sold the Ad
          Interferon-beta Product in the Cancer Field and the Beta Interferon
          Field.

     (iv) Following the end of the Product-Specific Term applicable to a license
          granted under this Section 8.4, such license shall survive, on a
          perpetual, royalty-free, transferable, sublicenseable, and non-
          exclusive basis.

     8.5  All sublicenses to be granted by Targeted to Biogen under Section 8.4
(and any sublicenses thereof by Biogen) shall, with respect to those aspects of
the Targeted Technology and the Targeted Patents that have been licensed to
Targeted by the Targeted Licensors, be subject to and governed by any applicable
Targeted Licensor Provisions.

     8.6

     (i)  Subject to any applicable Targeted Licensor Provisions, Biogen shall
          have the right to grant sublicenses under any licenses granted to it
          under Section 8.4, without the prior written consent of Targeted
          unless:

          (A)  such sublicense is granted (with or without contingencies) prior
               to the completion of Phase II trials for the applicable Product
               or Modified Product based thereon; and

          (B)  such Sublicensee is a Targeted Competitor,

          in which cases such sublicense shall require the consent of Targeted,
          which consent shall not be unreasonably withheld or delayed.

     (ii) Any such sublicense:

          (A)  shall provide that it is subject to and shall be governed by this
               Agreement and that the Sublicensee shall conform to all of
               Biogen's obligations under Sections 8.5, 8.6, 8.8, 8.9, and 10.7,
               and Articles 7, 11, 13, 14, 15, and 17 hereof; and

          (B)  shall be disclosed to Targeted in its entirety, subject to
               Targeted's obligations under Article 14 to the extent applicable
               thereto.

     8.7  In recognition of the parties' cooperative efforts with respect to the
Joint Technology, but without the express or implied grant of any license to any
underlying or enabling rights or technology (except as otherwise provided
herein), it is agreed that each party and its Affiliates shall have the
nonexclusive, worldwide right and license, with right to sublicense, under the
Joint Technology and Joint Patents (subject, as to issued Joint Patents,

                                      -45-
<PAGE>

to Section 8.2, if a party elects not to bear its share of the expenses of the
prosecution or maintenance thereof), to research, develop, make, have made, use,
sell, offer for sale, and import any products or services, subject to the
parties' agreements under Sections 3.8, 3.9, and 3.10 and subject to any
exclusive rights granted to Biogen under Section 8.4 or under the Manufacturing
License, if invoked, with respect to Products. The non-exclusive license granted
under this Section 8.7 will be royalty-free except as is otherwise provided
herein. Each party will promptly notify the other of all Joint Technology and
provide such other party with access to all of the same.

     8.8   Biogen agrees to mark with notices of patent, and to have so marked
by its Affiliates and Sublicensees, every marketed Product, in accordance with
the laws of the United States or other applicable nations relating to the
marking of patented articles.

     8.9   Biogen shall be free to market Products under trademarks Controlled
by Biogen and Targeted shall have no right to use such trademarks for any
purpose whatsoever. To the extent Biogen is required by law to use a Targeted
Trademark or to the extent the parties agree that Biogen can use one of Targeted
Trademarks, Biogen agrees to the following terms and conditions with respect to
such use:

     (i)   Biogen acknowledges that all Targeted Trademarks and all rights
           therein or registrations thereof, worldwide, shall belong exclusively
           to Targeted, subject to the license granted to Biogen to use the
           Targeted trademark with respect to Product. Biogen shall make no use
           of any of the Targeted Trademarks except to identify and promote the
           Approved Product as contemplated hereunder for sale in the Territory.
           Biogen shall not continue using the Targeted Trademarks after
           termination or expiration of this Agreement;

     (ii)  Biogen shall cooperate with Targeted to protect the interest of
           Targeted in the Targeted Trademarks, and shall neither attempt to
           register nor authorize others to register any Targeted Trademarks
           without the prior written consent of Targeted in each instance, which
           consent shall not be unreasonably withheld. Biogen shall promptly
           inform Targeted of any actual or apparent infringement of any
           Targeted Trademarks which may come to Biogen's attention during the
           term hereof;

     (iii) Biogen shall use all appropriate notices of trademark status of the
           Targeted Trademarks, including the "(TM)" designation (or the "(R)"
           symbol for registered marks), in all labeling and promotional
           materials and shall otherwise conform with all policies and notices
           of Targeted's rights in the marks and for the protection of the
           Targeted Trademarks, including the inclusion of an appropriate
           footnote acknowledging the use of the Targeted Trademarks under
           license. Biogen will impose a spatial separation between any Targeted
           Trademarks and any other names or marks of Biogen or any others, and
           will not otherwise use any of Targeted's names, marks or symbols in
           any manner

                                      -46-
<PAGE>

          that could, whether immediately or over time, create any substantial
          association between them and the business of Biogen other than with
          Product; and

     (iv) Samples of the Approved Product and any advertising, promotional
          materials or packaging related thereto that bear the Targeted
          Trademarks shall be provided by Biogen to Targeted at least thirty
          days prior to the first use or sale thereof, and at other times upon
          the request of Targeted.  Biogen shall not put any of such items into
          initial use without first obtaining the written approval of Targeted,
          which approval shall not be unreasonably withheld or delayed.  If a
          Targeted Trademark is being used in connection with Approved Product,
          Targeted shall at all times have the right to check the quality of the
          Approved Product manufactured or offered by Biogen, from time to time
          during the term of this Agreement.  If at any time or times Targeted
          thinks that the quality of the Approved Product manufactured or
          offered by Biogen, or the packaging or promotional materials therefor,
          is not suitable for using the Targeted Trademarks or any of them,
          Targeted, at its option, shall have the right to suspend or prohibit
          the use of such Targeted Trademarks, provided that Targeted has given
          Biogen a written notice thereof and a period of one hundred twenty
          (120) days to bring them up to Targeted's standards.

     Article 9. Manufacturing and Supply of Vectors.

     9.1  This Article 9 shall apply only to Supplied Vectors that are AAV
Vectors; the manufacture and supply of Ad Vectors shall be governed by the terms
of the Project Plan and Budget applicable to the particular Product.

     9.2  Subject to the restrictions stated in Section 9.9, Article 10 and
elsewhere herein, during the applicable Product-Specific Term, Targeted and/or
its Contractors shall manufacture, and Targeted shall, in the form of Research
Vectors, Clinical Vectors and Commercial Vectors, provide to Biogen, all of
Biogen's, Biogen's Affiliates', Sublicensees' and Distributors' requirements for
AAV Vectors formulated with any of the Product Genes, and Biogen shall obtain
all of such requirements from Targeted, in accordance with this Article 9.  All
Supplied Vectors will conform to the applicable Specifications, will be
manufactured in accordance with cGMP, and will be shipped in bulk form, FOB
Targeted's manufacturing facility.  Biogen shall bear all transportation,
insurance, taxes, duties, and other costs and risks of loss, spoilage and damage
associated with the shipping and delivery of Supplied Vectors to Biogen or its
Affiliates or Sublicensees.

     9.3  Targeted will supply Research Vectors to Biogen for use in each
approved Development Project, on the schedule and in such quantities and of such
type as set forth in the applicable Project Plan and Budget.  Targeted's fully
burdened costs and expenses (calculated in accordance with Section 5.3) related
to the supply of Research Vectors to

                                      -47-
<PAGE>

Biogen or used by Targeted or its Contractors in a Development Project will be
included in the Project Plan and Budget and will be paid by Biogen in accordance
with Article 5.

     9.4  Targeted will supply Clinical Vectors to be used by Targeted or its
Contractors in the course of Certification and Testing Activities to be
conducted by or for Targeted under Section 4.3, pursuant to a Project Plan and
Budget. [*] will be included in the Project Plan and Budget and will be paid by
Biogen in accordance with Article 5.

     9.5  Targeted will supply to Biogen all of Biogen's requirements for
Clinical Vectors for use in the course of Certification and Testing Activities
to be conducted by Biogen under Article 4, pursuant to a Project Plan and
Budget. Such Clinical Vectors will be supplied at a price equal to [*], plus any
shipping and insurance costs incurred in shipping such Clinical Vectors pursuant
to Biogen's instructions.

     9.6  Specific procedures, standards, quantities and schedules for delivery
of Research Vectors and Clinical Vectors will be determined under each
applicable Project Plan and Budget.  Targeted shall notify Biogen orally as soon
as reasonably possible, but in any event within two (2) business days of the
occurrence of any manufacturing deviation known to Targeted in the manufacture
of such Supplied Vectors (excluding for purposes hereof Research Vectors) that
could reasonably be expected to impact safety, identity, quality or purity of
Product.  Subject to the protections and limitations stated in Sections 9.10(i)
and 9.10(ii), Targeted shall provide Biogen with test results, certificates of
analysis, batch records (including completed deviation reports for all
deviations, including deviations from master batch records and standard
operating procedures, which, with respect to Clinical Vectors for use in Phase
III trials will be provided within three business days of occurrence) and other
production information and records as Biogen shall from time to time reasonably
request in connection with its quality assurance/quality control operation,
within thirty (30) days of completing manufacturing and testing operations with
respect to each batch of Supplied Vectors.

     9.7  Prior to the commencement of Phase III clinical trials or an
equivalent pivotal study with respect to a Product, Biogen and Targeted shall
negotiate and enter into a commercially reasonable Commercial Supply Agreement
containing the applicable terms contained in this Agreement (including as to
Transfer Price and as to warranties and remedy limitations and as to the
applicable provisions of Article 10) and such other terms as the parties may
mutually agree as to the specific procedures, standards and schedules for
forecasting, ordering, and delivery lead times for Commercial Vectors; as to
Specifications; as to quality control testing and record keeping and reporting;
as to facilities access, contingency plans, auditing, recalls, indemnification
and minimum yield; and as to other details of the manufacture and supply by
Targeted of Commercial Vectors.

[*] Confidential Treatment Requested
                                      -48-
<PAGE>

     9.8   Except as provided in Article 10, Targeted will sell to Biogen, and
Biogen shall purchase from Targeted, all of Biogen's requirements for Commercial
Vectors (AAV Vectors only) for use in the Approved Products.  Such Commercial
Vectors supplied by Targeted will be sold at a price equal to the applicable
Transfer Price computed and payable in accordance with Section 11.2, plus any
shipping and insurance costs incurred in shipping such Commercial Vectors
pursuant to Biogen's instructions.

     9.9   No Supplied Vectors provided by Targeted to Biogen shall be supplied
or sent by Biogen to any Third Party without the consent of Targeted, except
that:

     (i)   Biogen may transfer Research Vectors and Clinical Vectors to
           Contractors who are performing research or services in the course of
           a Development Project, for use in such research or services; provided
           that Biogen provides notice to Targeted of such transfer and, prior
           to such transfer, enters into a written agreement under which such
           Contractor agrees (A) not to further transfer the Supplied Vectors to
           any third party; (B) not to use the Supplied Vectors for any other
           purpose; and (C) to a confidentiality obligation substantially
           similar to the obligations of Article 14 hereof;

     (ii)  Notwithstanding anything in this Agreement to the contrary, Biogen
           may, pursuant to a Project Plan and Budget, transfer to Third Parties
           Supplied Vectors incorporated into Candidate Products or Clinical
           Products; and

     (iii) Biogen may, consistent with its other agreements and obligations
           hereunder, package and sell Products that contain Commercial Vectors
           to Affiliates and Third Parties, including Sublicensees, Distributors
           and End Users, for use and sale in the Territory.

     9.10  Biogen shall have the right to conduct quality assurance inspections,
audits and investigations of Targeted's facilities, equipment, record-keeping
procedures and records relating to the manufacture of Research Vectors, Clinical
Vectors and Commercial Vectors no more often than once a year (or more often if
there are particular emergent quality assurance concerns) upon reasonable prior
notice.  In the event an issue related to cGMP compliance (if applicable) or
that otherwise could reasonably be expected to impact safety, identity, quality
or purity of Product is identified by Biogen in any inspection or audit,
Targeted shall use Reasonable Commercial Efforts to address the issue to
Biogen's reasonable satisfaction.  Targeted shall provide prompt notice to
Biogen of any inspections or investigations by the FDA or other regulatory
authority directed toward Research Vectors, Clinical Vectors and Commercial
Vectors or facilities used in the manufacture of Research Vectors, Clinical
Vectors and Commercial Vectors, and shall provide Biogen with copies of all
correspondence and reports related to such inspection or investigation as they
become available.  Biogen's rights hereunder shall extend to facilities,
equipment, record-keeping procedures and records of Contractors used by Targeted
with respect to the manufacture of Research Vectors, Clinical Vectors and
Commercial Vectors and Targeted shall ensure that

                                      -49-
<PAGE>

its agreements with such Contractors are consistent with this Agreement. Biogen
shall have the right to have its personnel observe during the manufacture and
testing of Clinical Vectors and Commercial Vectors.

[*]

     9.11 In the event Biogen desires to have Targeted implement commercially
reasonable manufacturing or related quality control or quality assurance
standards that are more stringent than those required by cGMP, Biogen and
Targeted shall meet to discuss the costs of such implementation, and if Biogen
then desires Targeted to proceed, Biogen shall pay Targeted on a current basis
for the costs of expenditures necessary for such implementation.

     9.12 If Biogen considers any shipment of Research Vectors does not conform
to the applicable Project Plan and Budget, or that any shipment of Clinical
Vectors or Commercial Vectors not to conform to the applicable Specifications or
has not been manufactured in accordance with cGMP, Biogen shall notify Targeted
within ninety (90) days following delivery and provide Targeted with the
relevant analysis.  If Targeted does not agree that such Supplied Vectors do not
so conform or have not been manufactured in accordance with cGMP (where
applicable), it shall so notify Biogen within thirty (30) days following receipt
of such notice and analysis from Biogen.  In that event, the parties shall
submit samples of the applicable production lot of the Supplied Vector to an
independent testing laboratory or, as applicable, shall submit the relevant
batch records to a Third Party consultant in each case approved for this purpose
by each of Targeted and Biogen, which approval shall not be unreasonably
withheld or delayed.  The determination of such independent laboratory or Third
Party consultant shall be binding on the parties hereto for purposes of this
Section.  Except as set forth in Section 13.4, TARGETED'S SOLE OBLIGATION AND
BIOGEN'S EXCLUSIVE REMEDY FOR ANY SUCH NONCONFORMITY SHALL BE AS FOLLOWS:

     (i)  Targeted shall at its own expense accept return of any shipment
          properly not accepted, or else reimburse Biogen for the cost of
          disposal or destruction;

[*] Confidential Treatment Requested
                                      -50-
<PAGE>

     (ii)   Targeted shall use its Reasonable Commercial Efforts to replace the
            non-conforming shipment with conforming Supplied Vectors, within a
            reasonable period of time, or if applicable within a timeframe to be
            agreed upon by the parties in the Commercial Supply Agreement and at
            no additional cost to Biogen or, at Biogen's election, shall
            reimburse Biogen for amounts paid by Biogen with respect to such
            non-conforming shipment; and

     (iii)  Article 10 shall apply if, in any circumstances set out in that
            Article, Targeted shall be unable to supply replacement conforming
            Supplied Vectors.

     Article 10.  Contractor Designations and Manufacturing License.

     10.1   If for any reason other than a failure of Biogen to fulfill its
responsibilities under this Agreement, Targeted fails to supply Biogen in a
timely fashion with Biogen's requirements for Clinical Vectors (for use in Phase
III trials) and Commercial Vectors in accordance with Article 9 and Targeted
fails to cure such failure (whether directly or through a Contractor) within
ninety days after notice from Biogen specifying such failure, Biogen may,
following such ninety-day period, notify Targeted that Biogen is invoking its
rights described in Section 10.4 due to such failure.

     10.2   If the aggregate annual Net Sales of any Approved Product
incorporating a Commercial Vector that is an AAV Vector exceed [*] dollars
($[*]) during any calendar year, and Biogen establishes to Targeted's reasonable
satisfaction that such rate of sales is likely to continue or to increase over
the course of at least the following [*] years, and Targeted does not commit,
within ninety (90) days following the request of Biogen (if Targeted has not
already done so), to build or to acquire a second manufacturing facility
appropriate for the manufacture of such Commercial Vector (whether directly or
by establishing a Targeted Contractor with such a facility) or in the event that
Targeted commits but does exert Reasonable Commercial Efforts to build or
acquire a second manufacturing facility, Biogen may, following such ninety-day
period, notify Targeted that Biogen is invoking its rights described in Section
10.4 due to such failure.

     10.3   If, at any time following the date that a Product that incorporates
an AAV Vector completes Phase II clinical trials in any nation:

     (i)    Targeted or its Contractor does not maintain on a substantially
            continuous basis at least one manufacturing facility as a cGMP
            facility appropriate for the manufacture of Clinical Vectors (for
            use in Phase III trials) and Commercial Vectors for such Product, in
            the quantities forecasted for at least the succeeding four quarters,
            and Targeted does not cure such failure within ninety (90) days
            following the request of Biogen to do so, except in circumstances in
            which such failure is due to the unavailability of Targeted's or its
            Contractors' facilities for any reason beyond Targeted's reasonable
            control and Targeted establishes to Biogen's reasonable satisfaction
            that such facilities are likely to be restored to availability and
            producing such Clinical

[*] Confidential Treatment Requested
                                      -51-
<PAGE>

           Vectors or Commercial Vectors materially sooner than the invocation
           by Biogen of its rights described in Section 10.4 would be likely to
           lead to the production of such Clinical Vectors or Commercial Vectors
           for or by Biogen; or

     (ii)  Targeted has received notices from Biogen or any Regulatory Authority
           that Targeted's manufacturing facility or processes for any Clinical
           Vectors (for use in Phase III trials) or Commercial Vectors are out
           of compliance with cGMP in ways that will need to be corrected, and
           Biogen establishes that Targeted is not exerting its Reasonable
           Commercial Efforts to make such corrections, and Targeted does not
           cure such failure to exert such Reasonable Commercial Efforts within
           sixty (60) days thereafter;

then Biogen may notify Targeted that Biogen is invoking its rights described in
Section 10.4 due to such failure, if it gives such notice within sixty (60) days
following any instance of such a failure.

     10.4  If Biogen properly invokes its rights under this Section, pursuant to
Sections 10.1, 10.2 or 10.3, at Biogen's election, to be exercised concurrently
with its notice to Targeted of such invocation under any such Sections:

     (i)   Biogen may require that Targeted have a Contractor mutually agreed
           upon by Biogen and Targeted (which agreement shall not be
           unreasonably withheld or delayed by either party unless the
           Designated Contractor is a Targeted Competitor) manufacture such
           Clinical Vectors and/or Commercial Vectors for Targeted, to be
           supplied by Targeted to Biogen under Article 9 hereof; or

     (ii)  Biogen may require that Targeted grant the license described in
           Section 10.6 (the "Manufacturing License") to Biogen with respect to
           such Clinical Vectors and Commercial Vectors.

     10.5  Biogen's rights under Section 10.4 shall be Biogen's sole and
exclusive remedy for any failure by Targeted to supply any Clinical Vectors or
Commercial Vector under this Agreement, or to do so in a timely fashion other
than reimbursement for amounts paid with respect to such Supplied Vectors.

     10.6  The Manufacturing License, if properly invoked pursuant to this
Article 10, will, subject to any applicable Targeted Licensor Provisions, and
subject to Biogen's Royalty obligations under Article 7, provide to Biogen:

     (i)   a transferable, limited license or sublicense as the case may be
           under the Targeted Technology and the Targeted Patents to manufacture
           such Clinical Vectors and Commercial Vectors to the extent necessary
           to enable Biogen to manufacture quantities of the Clinical Vectors
           and Commercial Vectors that otherwise would have been supplied by
           Targeted to Biogen under this

                                      -52-
<PAGE>

           Agreement, solely for use and application by Biogen for the uses and
           applications in the Territory that would be permitted under this
           Agreement with respect to such Clinical Vectors and Commercial
           Vectors purchased from Targeted. Such Manufacturing License will be
           exclusive to Biogen with respect to such manufacture of the Clinical
           Vectors and Commercial Vectors involved in a nation during the
           Exclusivity Period applicable to such nation for the applicable
           Product, and shall otherwise be nonexclusive [*] and

     (ii)  a license under Section 8.4, with right to grant sublicenses as
           permitted under Sections 8.5 and 8.6, under the Targeted Technology
           and the Targeted Patents to research, develop, manufacture, have
           manufactured, use, import, export, offer to sell or sell Products in
           the Territory.

Biogen shall have no right to sublicense any of its rights under clause (i)
above without Targeted's prior written consent (which consent shall not be
unreasonably withheld or delayed unless the Sublicensee is a Targeted
Competitor).  Any such sublicense shall be governed by the provisions of Section
8.6(ii).

     10.7  If for any reason other than a failure of Biogen to fulfill its
responsibilities under this Agreement, Targeted fails to supply Biogen in a
timely fashion with Biogen's requirements for Clinical Vectors for use in Phase
I or Phase II trials and Targeted fails to cure such failure (whether directly
or through a Contractor) within ninety days after notice from Biogen specifying
such failure, Biogen may, following such ninety-day period, notify Targeted that
Targeted must engage a Contractor mutually agreed upon by Biogen and Targeted
(which agreement shall not be unreasonably withheld or delayed by either party,
unless the Designated Contractor is a Targeted Competitor) to manufacture such
Clinical Vectors for Targeted, to be supplied by Targeted to Biogen under
Article 9 hereof.  Unless Targeted otherwise agrees at its option, no such
engagement of a Designated Contractor under this Section 10.7 will apply to the
manufacture or supply of any Supplied Vectors other than Clinical Vectors for
use in Phase I or Phase II trials.

     10.8  If Biogen properly invokes the Contractor Designation or the
Manufacturing License under this Article 10, Targeted agrees [*].

[*] Confidential Treatment Requested
                                      -53-
<PAGE>

The parties acknowledge that this is not a "turn-key" arrangement and Targeted
will only be required to make reasonably available to such Designated Contractor
or Biogen the best standard of such knowledge and information then available to
Targeted and directly used in its manufacture of the Clinical Vectors or
Commercial Vectors. If any professional licenses, facilities licenses or
approvals, or other permits are required for any of the consulting to be
provided by Targeted, Biogen will inform Targeted and Biogen will bear the costs
of the same. Targeted will not be responsible for any failure of such Designated
Contractor or Biogen to understand or implement any knowledge or information
communicated by Targeted or for any information or materials supplied to Biogen
by any person other than Targeted.

     Article 11.  Terms of Payment; Audits.

     11.1  Biogen shall provide to Targeted, within forty-five (45) days
following the end of each calendar quarter, a written report of all Net Sales in
such calendar quarter, including a calculation of the Royalties payable
hereunder, if any.  All Royalties hereunder shall be due quarterly at the date
each such report is due to Targeted.

     11.2  The [*] and the Transfer Price for Supplied Vectors shall be computed
for each type of Supplied Vector semi-annually as set forth herein, using
methodology consistent from year to year and consistent with the allocation of
costs otherwise used in the preparation of Targeted's audited financial
statements. The following provisions shall also apply:

     (i)   Where Targeted will acquire Supplied Vectors from Third Party
           contract manufacturers, and any such Third Party requires that
           Targeted pre-pay all or a portion of the price of such Supplied
           Vectors to be charged by the Third Party, that Targeted make payment
           upon delivery, and/or that Targeted otherwise make payments to or for
           the Third Party prior to the time when payment would otherwise become
           due hereunder from Biogen for such Supplied Vectors, Biogen shall, as
           reasonably requested by Targeted in such situations, pre-pay to
           Targeted all or a portion of the price for such Supplied Vectors as
           otherwise determined under this Agreement, in order to facilitate the
           institution or maintenance of such arrangements with such Third Party
           contract manufacturers. All such pre-payments by Biogen shall be
           credited to

[*] Confidential Treatment Requested

                                      -54-
<PAGE>

           subsequent payments of the price for the applicable Supplied Vectors
           as they otherwise become due hereunder; provided, however, that where
           any such payments made by Targeted to the Third Party are to be
           amortized over a series of deliveries or over time, similar
           arrangements will be made hereunder as to the timing of such credits
           to Biogen.

     (ii)  Subject to clause (i) above and Section 9.12, Targeted shall invoice
           Biogen for Clinical Vectors and Commercial Vectors upon shipment.
           Invoices shall be due and payable within thirty (30) days after the
           mailing date.

     (iii) The parties recognize that Targeted's actual [*] and Targeted's
           actual Transfer Prices may not be subject to precise calculation in
           advance. Therefore, they agree that Targeted shall invoice Biogen,
           and Biogen shall pay, for the Clinical Vectors and Commercial Vectors
           at the Proforma Price applicable at the time of invoice for such
           Supplied Vectors, plus any shipping and insurance costs incurred in
           shipping such Supplied Vectors pursuant to Biogen's instructions. As
           used herein:

           (A)  the "Proforma Price" for Clinical Vectors shall be equal to a
                proforma estimate of [*] as shall be agreed to by the parties
                prior to the commencement of the supply of such Clinical Vectors
                under Article 9 and again within thirty (30) days prior to each
                June 30th and December 31st, with respect to the periods
                starting on the following July 1 and January 1, respectively;

           (B)  the "Proforma Price" for Commercial Vectors shall be equal to a
                proforma estimate of the applicable per-unit Transfer Price for
                such Commercial Vectors as shall be agreed to by the parties
                prior to the commencement of the supply of such Commercial
                Vectors under Article 9, and again within thirty (30) days prior
                to each June 30/th/ and December 31/st/, with respect to the
                periods starting on the following July 1 and January 1,
                respectively,

           it being agreed that neither party shall unreasonably withhold or
           delay its agreement to any such estimate reasonably proposed by the
           other party.

     (iv)  Within sixty (60) days after each June 30/th/ and December 31/st/,
           Targeted will prepare and deliver to Biogen a schedule which shows
           the actual Fully Burdened Manufacturing Cost for each Clinical
           Vector, the quantity of each such vector provided to Biogen for the
           prior six-month period ending on June 30/th/ or December 31/st/, as
           well as the difference, if any, between the total invoice price paid
           by Biogen as Proforma Prices during such period and the actual [*]
           for such quantity. Similarly, within sixty (60) days after each June
           30/th/ and December 31/st/,

[*] Confidential Treatment Requested

                                      -55-
<PAGE>

           Targeted will prepare and deliver to Biogen a schedule which shows
           the actual Transfer Price for all Commercial Vectors, the quantity of
           each such vector provided to Biogen for the prior six-month period
           ending on June 30/th/ or December 31/st/, as well as the difference,
           if any, between the total invoice price paid by Biogen as Proforma
           Prices during such period and the actual Transfer Price for such
           quantity. If any such schedule shows that a refund is due to Biogen
           for the prior period, then the schedule shall be accompanied by such
           refund; if such schedule shows that an additional payment is owed to
           Targeted hereunder, then Biogen shall pay such additional amount
           within sixty (60) days following receipt of the schedule.

     11.3  Biogen shall keep and shall cause its Affiliates and its and their
Sublicensees to keep complete, true and accurate records for the purpose of
showing the derivation of all Sales Royalties, Net Sales, milestone payments and
Transfer Prices payable to Targeted under this Agreement.  All such records
shall be retained for a period of at least three years following the end of the
calendar year to which they relate.  Upon the written request of Targeted,
Biogen shall permit, and shall cause its Affiliates, Sublicensees to permit, an
independent public accounting firm selected by Targeted and acceptable to
Biogen, which acceptance shall not be unreasonably withheld or delayed, to have
access during normal business hours to such records of Biogen or such Affiliate
or Sublicensee, respectively, as may be reasonably necessary to verify the
accuracy of Biogen's reports of such of all Sales Royalties and milestone
payments, but such access need not be provided more frequently than once per
year, nor more than one time with respect to any particular period under review,
nor after the expiration of three years after the end of the period to which the
records relate.  Any such audit shall be at the expense of Targeted, unless the
audit reveals that, with respect to the period under audit, less than 95% of any
of the Sales Royalties, the sales-based value component of any Transfer Prices,
or milestone payments due to Targeted hereunder have been paid, in which event
Biogen shall pay or reimburse Targeted for the reasonable expenses of such
audit, in addition to Targeted's other remedies for such underpayment.  Targeted
agrees that unless covered by one or more exceptions described in Sections
14.1(i) - 14.1(vi), all information subject to review under this Section 11.3 is
confidential and that it shall cause its accounting firm to retain all such
information subject to the confidentiality restrictions of Article 14 hereof,
provided that the accounting firm may disclose such information to Targeted for
the purpose contemplated by this Section.

     11.4  Targeted shall keep and shall cause its Affiliates and its and their
Sublicensees to keep complete, true and accurate records for the purpose of
showing the calculation of Targeted's Actual Development Costs and Targeted's
Fully Burdened Manufacturing Costs and Transfer Prices under this Agreement. All
such records shall be retained for a period of at least three years following
the end of the calendar year to which they relate. Upon the written request of
Biogen, Targeted shall permit an independent public accounting firm selected by
Biogen and acceptable to Targeted, which acceptance shall not be unreasonably
withheld or delayed, to have access during normal business hours to such records
of Targeted as may be reasonably necessary to verify the accuracy of such
calculations, but such access

                                      -56-
<PAGE>

need not be provided more frequently than once per year, nor more than one time
with respect to any particular period under review, nor after the expiration of
three years after the end of the period to which the records relate. Any such
audit shall be at the expense of Biogen, unless the audit reveals that, with
respect to the period under audit, adjustments in favor of Biogen for the period
are five percent (5%) or more of the aggregate amount paid or payable by Biogen
to Targeted, in which event Targeted shall pay or reimburse Biogen for the
reasonable expenses of such audit, in addition to Biogen's other remedies for
such overpayment. Biogen agrees that unless covered by one or more exceptions
described in Sections 14.1(i) - 14.1(vi), all information subject to review
under this Section 11.4 is confidential and that it shall cause its accounting
firm to retain all such information subject to the confidentiality restrictions
of Article 14 hereof, provided that the accounting firm may disclose such
information to Biogen for the purpose contemplated by this Section.

     11.5  All monies due to Targeted hereunder shall be paid in United States
Dollars to Targeted in Seattle, WA, USA.  The rate of exchange to be used shall
be the average commercial rate of exchange applicable at the end of the quarter
as to which the payment is made for the conversion of local currency to United
States Dollars as published by The Wall Street Journal (or if it ceases to be
published, a comparable publication to be agreed upon by the parties) or, for
those countries for which such average exchange rate is not published by The
Wall Street Journal, the exchange rate fixed on the fifth day prior to the date
of payment as promulgated by the appropriate United States governmental agency
as mutually agreed upon by the parties.

     11.6  All amounts payable under this Agreement will bear interest at the
rate of 1 1/2% per month or the maximum legal rate, whichever is less, from the
date due through the date of payment.  Targeted reserves the right to alter the
payment procedures set forth in this Agreement if Biogen has previously failed
to conform to the payment provisions hereof or if and for so long as Targeted is
reasonably concerned about Biogen's financial condition.  Such alterations in
payment terms may include either a requirement of an irrevocable, confirmed
letter of credit or a requirement of cash prior to delivery.

     Article 12.  Term and Termination; Survival.

     12.1  The term of this Agreement shall begin on the Execution Date and,
subject to Article 2, Sections 12.3, 12.4 and 12.5, shall, unless earlier
terminated as provided herein, continue until the last to occur of: (i) the end
of the Option Period (or in the event Biogen has as of the end of the Option
Period submitted a Proposal which has not yet been rejected, the date such
Proposal is either rejected or the date specified in subsection (ii)); (ii) the
termination or completion, as certified by Committee Action, of the last
Development Project to remain in effect hereunder; or (iii) the end of the last
Product-Specific Term to expire or be terminated.

     12.2  An Additional Development Project may be terminated following the
first anniversary of the initiation thereof under Section 3.3(ii) and before
completion thereof, if it

                                      -57-
<PAGE>

is determined by Biogen that due to unfavorable or inconclusive results to that
time, no further efforts are likely to lead to the successful development of the
relevant Product. An Additional Development Project may be terminated by Biogen
prior to such first anniversary if substantial technical impediments or blocking
third party patent rights are newly discovered following the initiation of such
Additional Development Project, which have a material adverse affect on such
Additional Development Project. The Ad Interferon-beta Project may be terminated
by Biogen at any time at Biogen's discretion. The Product-Specific Term for the
applicable Product shall terminate when any Development Project is terminated
under this section.

     12.3  If either party materially breaches any of the terms, conditions or
agreements contained in this Agreement to be kept, observed or performed by it,
then the other party may terminate this Agreement, at its option and without
prejudice to any of its other legal or equitable rights or remedies, by giving
the party who committed the breach:

     (i)   in the case of breach of obligations other than the payment of money,
           90 days' notice in writing, unless the notified party within such 90-
           day period shall have cured the breach, and

     (ii)  in the case of breach of an obligation for the payment of money, 30
           days' notice in writing, unless the notified party within such 30-day
           period shall have cured the breach, including any required payment of
           interest on previously unpaid amounts as set forth herein; provided,
           however, that if there is a good faith dispute as to the amount
           purported to be due and payable, such 30-day period will not start to
           run until such dispute has been resolved, provided that, within
           thirty (30) days after such notice of breach both of the following
           shall have occurred:

           (A)  either of the parties has initiated the escalation procedures of
                Article 16 in order to resolve such dispute, and

           (B)  the payor shall pay any amount not in dispute.

If the defaulting party is Biogen, a termination under this section, without
prejudice to other remedies available to Targeted, shall remove all nations from
the Territory.

     12.4

     (i)   This Agreement will automatically terminate if Biogen files for
           protection under federal or state bankruptcy laws, becomes insolvent,
           makes an assignment for the benefit of creditors, appoints or suffers
           appointment of a receiver or trustee over its property, files a
           petition under any bankruptcy or insolvency act or has such petition
           filed against it. A termination under this subsection shall remove
           all nations from the Territory.

                                      -58-
<PAGE>

     (ii)  This Agreement will automatically terminate if Targeted files for
           protection under federal or state bankruptcy laws, becomes insolvent,
           makes an assignment for the benefit of creditors, appoints or suffers
           appointment of a receiver or trustee over its property, files a
           petition under any bankruptcy or insolvency act or has such petition
           filed against it.

     12.5  Biogen may, upon written notice to Targeted, terminate the Option
Period at any time following the first anniversary of the Execution Date,
provided, however, Biogen's obligations to pay the Minimum Annual Project
Funding under Section 5.4 shall continue.

     12.6  In the event that this Agreement expires pursuant to Section 12.1,
Biogen's obligations regarding payment of Project Funding, Royalties, milestone
fees, and the price of Supplied Vectors, if any, accrued as of the date of
expiration or that would thereafter come due under Sections 5.1 or 5.4, and the
provisions of Sections 7.4, 8.1, 8.4(iv), 8.7, 11.3 - 11.6 and of Articles 13,
14, 16 and 17 shall survive such expiration.  In the event this Agreement is
terminated (i) pursuant to Section 12.3 due to a material breach by Biogen or
(ii) pursuant to Section 12.4 as a result of a Biogen bankruptcy or insolvency,
Biogen's obligations regarding payment of Project Funding under Article 5,
Royalties, milestone fees, and the price of Supplied Vectors, if any, accrued as
of the date of termination or that would thereafter come due under Sections 5.1
or 5.4, and Targeted's rights under Section 8.7, and the provisions of Sections
7.4, 8.1, 11.3 - 11.6 and of Articles 13, 14, 16 and 17, shall survive any such
termination of this Agreement, and all other payment obligations and all other
terms of this Agreement, including the licenses and rights to obtain licenses
under Articles 8 or 10 and the supply agreements under Article 9, shall
terminate.  In the event that this Agreement is terminated (i) pursuant to
Section 12.3 due to a material breach by Targeted or (ii) pursuant to Section
12.4 as a result of a Targeted bankruptcy or insolvency, Biogen's obligations
regarding payment of Project Funding, if any, shall terminate, and the
provisions of Articles 6 through 17, including Biogen's licenses and rights to
obtain licenses thereunder, shall survive such termination.  Nothing contained
in this Section 12.6 shall relieve any party from liability for any breach of
this Agreement occurring before termination or expiration of this Agreement.

     12.7  In the event this Agreement is terminated by any party pursuant to
Section 2.1, then this Agreement, including Sections 3.8, 3.9(i), 3.10(i), 14.2
and 14.3 (but not including Section 14.1, which shall survive the termination of
this Agreement) shall be null and void.

     Article 13.  Representations, Warranties, Covenants, Indemnities, and
Insurance.

     13.1  Each party represents and warrants to the other that it is duly
organized and validly existing under the laws of the state of its organization,
that it has the requisite corporate authority to execute and deliver this
Agreement and to perform its obligations hereunder, and that the execution and
performance of its obligations hereunder are not and will not be in violation of
or in conflict with any obligation it may have to any third party;

                                      -59-
<PAGE>

provided, however, that Biogen acknowledges that certain of the licenses
hereunder may be subject to rights of the United States government under 35 USC
(S)200 et seq.

     13.2  Each party represents and warrants to the other that it has obtained,
and will at all times during the term of this Agreement hold and comply with,
all licenses, permits and authorizations necessary to perform this Agreement and
to test, manufacture, market, export, and import the Products, Supplied Vectors
and Manufactured Vectors to be so tested, manufactured, marketed, exported or
imported by it as provided herein, as now or hereafter required under any
applicable statutes, laws, ordinances, rules and regulations of the United
States and any applicable foreign, state, and local governments and governmental
entities.

     13.3  EXCEPT AS SET FORTH IN ARTICLE 9 WITH RESPECT TO SUPPLIED VECTORS,
THE FOREGOING WARRANTIES ARE IN LIEU OF, AND THE PARTIES EACH DISCLAIM, ALL
OTHER WARRANTIES, EXPRESS, IMPLIED OR ARISING BY LAW, INCLUDING ANY IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NON-
INFRINGEMENT.  NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION
OR WARRANTY (i) BY TARGETED AS TO THE PATENTABILITY, VALIDITY, OR SCOPE OF ANY
TARGETED PATENTS, TARGETED TECHNOLOGY, OR JOINT TECHNOLOGY, NOR AS TO THE
UTILITY, EFFICACY, NONTOXICITY, SAFETY OR APPROPRIATENESS OF SUPPLIED VECTORS,
MANUFACTURED VECTORS OR THE PRODUCT; OR (ii) BY BIOGEN AS TO THE PATENTABILITY,
VALIDITY, OR SCOPE OF ANY BIOGEN PATENTS, BIOGEN TECHNOLOGY, OR JOINT
TECHNOLOGY, NOR AS TO THE UTILITY, EFFICACY, NONTOXICITY, SAFETY OR
APPROPRIATENESS OF ANY PRODUCTS MADE THEREFROM.

     13.4  Targeted shall indemnify, defend and hold Biogen harmless from any
and all claims by Third Parties to the extent arising from, in connection with,
based upon, by reason of, or relating in any way to:

     (i)   any claim, action or damages arising out of any alleged infringement
           by reason of the manufacture, use or sale by Biogen of Clinical
           Products or Approved Products to the extent such infringement:

           (A)  would apply as well to the manufacture, sale or use of the
                Supplied Vectors or Manufactured Vectors contained therein, if
                manufactured, sold or used alone; or

           (B)  arises from [*];

           provided, however, that to the extent such infringement or alleged
           infringement is due to the Project Gene incorporated in such Supplied
           Vector

[*] Confidential Treatment Requested

                                      -60-
<PAGE>

           or Manufactured Vector, the same shall be covered by Biogen's
           indemnity to Targeted under Section 13.5(i) and not by this Section
           13.4(i);

     (ii)  any failure of the Supplied Vectors manufactured by Targeted or its
           Contractor (but not Manufactured Vectors), as and when delivered to
           Biogen hereunder for use in the Product(s), to conform to the
           Specifications or to have been manufactured in accordance with cGMP;

     (iii) any failure of Targeted or its Affiliates or Contractors to comply
           with its or their material obligations under Section 4.2; or

     (iv)  the negligence or intentional misconduct of Targeted, its Affiliates
           and/or their Contractors or any of their respective employees.

     13.5  Biogen shall indemnify, defend and hold Targeted harmless from any
and all claims by Third Parties to the extent arising from, in connection with,
based upon, by reason of, or relating in any way to:

     (i)   any claim, action or damages arising out of any alleged infringement
           by reason of the manufacture, use or sale of the Products except for
           those covered by Targeted's indemnity to Biogen under Section
           13.4(i);

     (ii)  the formulation, development, supply, production, manufacture, sale,
           delivery, distribution or use of the Products by Biogen, its
           Affiliates, Contractors or Sublicensees, except for those covered by
           Targeted's indemnity to Biogen under Section 13.4(i), (ii), (iii) or
           (iv);

     (iii) any failure of Biogen or its Affiliates, Contractors or Sublicensees
           to comply with its or their material obligations under Section 4.2;
           or

     (iv)  the negligence or intentional misconduct of Biogen, its Affiliates
           and/or their Contractors, or any of their respective employees.

     13.6  Notwithstanding anything to the contrary set forth elsewhere herein,
neither Biogen nor Targeted shall be obligated to indemnify the other party for
claims or liabilities to the extent arising from such other party's, or such
other party's Affiliates', Contractors', Sublicensees' or assigns', negligence,
intentional misconduct, or breach of any duties, obligations, warranties or
representations set forth herein.

     13.7  Whenever indemnification is provided for a party under this
Agreement, such right of indemnification shall extend also to the indemnified
party's Affiliates, officers, directors, shareholders, successors, assigns,
agents, employees, and insurers to the extent the same become subject to such
claim in such capacity.  The party seeking indemnification shall provide the
indemnifying party with written notice of any claim or action within ten (10)
days of its receipt thereof, and shall afford the indemnifying party the right
to control the defense

                                      -61-
<PAGE>

and settlement of such claim or action. Notwithstanding the foregoing, failure
to provide notice within such ten (10) day period shall not negate the
obligations of an indemnifying party unless such failure prejudices the defense
of any such claim. The party seeking indemnification shall provide reasonable
assistance to the indemnifying party in the defense of such claim or action. If
the defendants in any such action include both Biogen and Targeted, and either
party concludes that there may be legal defenses available to it which are
different from, additional to, or inconsistent with, those available to the
other, that party shall have the right to select separate counsel to participate
in the defense of such action on its behalf, and such party shall bear the cost
and expense of such separate defense, unless and to the extent the parties
otherwise agree, or it is determined through arbitration hereunder that such
costs and expense are or were required to be indemnified by the other party
hereunder and are or were required to be incurred separately due to such
different, additional, or inconsistent defenses. Should the indemnifying party
determine not to defend such claim or action, the other party shall have the
right to maintain the defense of such claim or action and the indemnifying party
agrees to provide reasonable assistance to it in the defense of such claim or
action and to bear the reasonable cost and expense of such defense (including
attorneys' and experts' fees and expenses). Neither party shall settle any such
claim or action in a way that prejudices or adversely impacts the other party to
this Agreement without the prior approval of such other party (which approval
shall not be unreasonably withheld or delayed).

     13.8  Each of Targeted and Biogen:

     (i)   from and after the first Clinical Development Date, shall obtain and
           keep in force, with insurers reasonably acceptable to the other party
           hereto, insurance covering products liability in amounts of not less
           than [*] U.S. dollars (US $[*]); and

     (ii)  from the first Regulatory Approval for a Product until three years
           after the end of the last Product-Specific Term to expire or to be
           terminated, shall obtain and keep in force such insurance covering
           products liability in amounts of not less than [*] U.S. dollars (US
           $[*]).

Each party shall provide written proof of the existence of such insurance to the
other party upon request.

     13.9  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT,
EXCEPT AS SET FORTH IN THE INDEMNITIES STATED IN SECTIONS 13.4 - 13.7, NO PARTY
SHALL UNDER ANY CIRCUMSTANCES BE LIABLE FOR ANY THIRD PARTY CLAIMS OR FOR ANY
INCIDENTAL, CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES, INCLUDING ANY LOST
PROFITS OR SAVINGS, ARISING FROM ANY BREACH OF WARRANTY OR THE PERFORMANCE OR
BREACH OF ANY OTHER PROVISION OF THIS AGREEMENT (OTHER THAN BREACHES OF ARTICLE
14) OR THE USE OR INABILITY TO USE

[*] Confidential Treatment Requested

                                      -62-
<PAGE>

THE PRODUCT, THE SUPPLIED VECTORS OR MANUFACTURED VECTORS OR EITHER PARTY'S
PATENTS OR TECHNOLOGY OR JOINT PATENTS OR TECHNOLOGY, OR ANY CLAIMS ARISING IN
TORT, PERSONAL INJURY, OR PRODUCT LIABILITY, EVEN IF SUCH PARTY HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.

     13.10 Targeted and Genovo each represent and warrant to Biogen that they
shall not amend the U. Penn Agreements without Biogen's consent, which consent
shall not be unreasonably withheld or delayed.

     13.11 Targeted hereby represents and warrants to Biogen as set forth below:

     (i)   To the best of Targeted's knowledge, it has sufficient legal and/or
           beneficial title under its intellectual property rights necessary for
           the purposes contemplated under this Agreement and to grant the
           licenses contained in this Agreement.

     (ii)  To the best of Targeted's knowledge, it is not aware of any material
           communications alleging that it has violated or, by conducting its
           business or the Targeted Development Tasks as currently proposed
           under this Agreement, it would violate any of the intellectual
           property rights of any Third Party.

     (iii) All of Targeted's relevant employees have executed agreements
           requiring assignment to Targeted of all inventions made during the
           course of and as a result of their association with Targeted and
           obliging the individual to maintain as confidential the confidential
           information of Targeted.

     (iv)  Targeted has not entered into any agreement with any Third Party
           which is in conflict with the rights granted to Biogen under this
           Agreement.

     (v)   Following the initiation of a Development Project, Targeted shall not
           take any action that would in any way prevent it from granting the
           rights granted to Biogen under this Agreement with respect thereto.

     13.12 Targeted and Biogen each hereby represent and warrant to the other
that such party is not aware of any data or information given to the other party
which is untrue or inaccurate or of any other data or information which is
necessary to make the data and information provided to the other party complete
and not misleading.

     Article 14.  Confidentiality and Non-Solicitation.

     14.1  In the course of performance under this Agreement or during the
discussions leading thereto, a party may disclose, or may have disclosed, to the
other confidential information belonging to such party in writing, orally or by
demonstration or sample. All such confidential information of a party shall be
maintained in confidence by the other and

                                      -63-
<PAGE>

will not be used by the other party for any purpose except as authorized
hereunder. Each party shall exercise, and shall cause its Affiliates,
Contractors, and Sublicensees to exercise, a reasonable degree of care, and at
least the same degree of care as it uses to protect its own confidential
information of similar nature, to preserve the confidentiality of such
information of the other party. Each party shall only use such information for
purpose of this Agreement and shall safeguard such information against
disclosure to Third Parties not authorized hereunder, including employees and
persons working or consulting for such party that do not have an established,
current need to know such information for purposes authorized under this
Agreement. This obligation of confidentiality does not apply to information and
material:

     (i)   that were properly in the possession of the receiving party, without
           any restriction on use or disclosure, prior to receipt from the other
           party;

     (ii)  that are at the time of disclosure hereunder in the public domain by
           public use, publication, or general knowledge;

     (iii) that become general or public knowledge through no fault of the
           receiving party or its Affiliates, Contractors, or Sublicensees
           following disclosure hereunder;

     (iv)  that are properly obtained by the receiving party from a Third Party
           not under a confidentiality obligation to the disclosing party
           hereto;

     (v)   that are documented to have been independently developed by or on
           behalf of the receiving party without the assistance of the
           confidential information of the other party;

     (vi)  to the extent the same are required to be disclosed by order of any
           court or governmental authority; provided, however, that the
           receiving party shall use its Reasonable Commercial Efforts to give
           the disclosing party prior notice of any such disclosure so as to
           afford the disclosing party a reasonable opportunity to seek, at the
           expense of the disclosing party, such protective orders or other
           relief as may be available in the circumstances; or

     (vii) to the extent that at least ten (10) years have elapsed since such
           information or materials (other than Proprietary Manufacturing
           Technology, to which this clause (vii) will not be applicable) were
           initially disclosed or provided to the receiving party by the
           disclosing party.

     Notwithstanding anything to the contrary, any results of Phase I clinical
trials performed by Targeted under Section 4.3 shall be the confidential
information of Biogen.

     14.2  No party shall make any public announcement or other publication
regarding the existence or terms of this Agreement without the prior consent of
the other parties, which

                                      -64-
<PAGE>

consent will not be unreasonably withheld or delayed. Targeted shall not make
any public announcement or other publication regarding work on any Development
Project hereunder or the results thereof without the prior written consent of
Biogen which will not be unreasonably withheld or delayed; provided that the
foregoing shall not prohibit any disclosure which, in the opinion of Targeted's
counsel, is required by any applicable law or by any competent governmental
authority.

     14.3  Each of Targeted (inclusive of Genovo, for the purposes of this
section) and Biogen agrees that from the Execution Date through the expiration
of twelve (12) months after the Effective Date, it will not directly or
indirectly solicit or encourage any employee of the other to leave or terminate
such employment for any reason, including becoming employed or otherwise engaged
in any capacity by such party (or any person or entity associated with such
party, whether or not an Affiliate), nor will it assist others in doing so.

     Article 15.  Third Party Infringement.

     15.1  Targeted shall promptly inform Biogen of any suspected infringement
of any of the Targeted Technology, the Targeted Patents, the Joint Technology or
the Joint Patents by a Third Party, to the extent such infringement or
misappropriation involves the manufacture, use or sale of a Product or a
substitutable or directly competitive product in the Territory during an
applicable Exclusivity Period ("Covered Infringement").  Biogen shall promptly
inform Targeted of any suspected infringement of any of the Targeted Technology,
the Targeted Patents, the Joint Technology or the Joint Patents of which Biogen
is aware, whether or not the same involves a Covered Infringement.

     15.2  If the suspected infringement or misappropriation does not involve a
Covered Infringement, Targeted may take, or refrain from taking, any action it
chooses, with or without notice to Biogen, and Biogen shall have no right to
take any action with respect to such suspected infringement or misappropriation,
nor to any recoveries with respect thereto. If the suspected infringement or
misappropriation involves a Covered Infringement, Targeted shall, within ninety
(90) days of the first notice referred to in Section 15.1, inform Biogen whether
or not Targeted intends to institute suit against such Third Party with respect
to a Covered Infringement.  Biogen will not take any steps toward instituting
suit against any Third Party involving a Covered Infringement until Targeted has
informed Biogen of its intention pursuant to the previous sentence.

     15.3  If Targeted notifies Biogen that it intends to institute suit against
a Third Party with respect to a Covered Infringement, and Biogen does not agree
to join in such suit as provided in Section 15.4, Targeted may bring such suit
on its own and shall in such event bear all costs of, and shall exercise all
control over, such suit.  Targeted may, at its expense, bring such action in the
name of Biogen and/or cause Biogen to be joined in the suit as a plaintiff.
Recoveries, if any, whether by judgment, award, decree or settlement, shall
belong solely to Targeted.

                                      -65-
<PAGE>

     15.4  If Targeted notifies Biogen that it desires to institute suit against
such Third Party with respect to a Covered Infringement, and Biogen notifies
Targeted within 30 days after receipt of such notice that Biogen desires to
institute suit jointly, the suit shall be brought jointly in the names of Biogen
and Targeted and all costs thereof shall be borne equally to the extent
applicable to the Covered Infringement.  Recoveries, if any, whether by
judgment, award, decree or settlement, shall (to the extent attributable to the
Covered Infringement), after the reimbursement of each of Targeted and Biogen
for its share of the joint costs in such action, be shared equally between
Targeted and Biogen.

     15.5  If Targeted notifies Biogen that it does not intend to institute suit
against such Third Party with respect to a Covered Infringement, Biogen may
institute such suit on its own.  Biogen shall bear all costs of, and shall
exercise all control over, such suit.  Recoveries, if any, whether by judgment,
award, decree or settlement, shall belong solely to Biogen; provided however
that, after reimbursement of Biogen for its costs in such action, Targeted shall
be paid an amount equal to the Sales Royalty determined by treating the net
recovery (after expenses), as if they had been Net Sales of a Sublicensee of
Biogen as contemplated herein.

     15.6  Should either Targeted or Biogen commence a suit under the provisions
of this Article 15 and thereafter elect to abandon the same, it shall give
timely notice to the other party, who may, if it so desires, be joined as a
plaintiff in the suit (or continue as such if it is already one) and continue
prosecution of such suit, provided, however, that the sharing of expenses and
any recoveries of such suit shall be as may be determined for that situation by
Committee Action.

     Article 16.  Escalation Procedures.

     16.1  The parties intend that, to the maximum extent practicable, they
shall reach decisions hereunder cooperatively through the deliberations of the
Joint Steering Committee and by consent of its members as described in Section
1.24(i).  In cases in which that does not occur, either party may as described
in Section 1.24(ii) institute the procedure described in this Section.  In such
circumstances, the proposed Committee Action will be provided in writing to each
party's Chief Executive Officer.  Such CEOs shall discuss the proposed Committee
Action, and shall meet with respect thereto if either of them believes a meeting
or meetings to be useful.  If the CEOs do not resolve the matter by either
approving the proposed Committee Action (whether or not in a revised form) or
agreeing to reject it (in either case by their mutual or unilateral action, as
applicable under the standards stated in Section 1.24(ii)), within thirty (30)
days (or such lesser or longer period as they may agree is a useful period for
their discussions), then either of them may institute a formal mediation of such
matter pursuant to Section 16.2.

     16.2  Any dispute or difference, between the parties arising out of or in
connection with this Agreement, including a disagreement over a proposed
Committee Action, that cannot be resolved by the consent of the parties' CEOs
shall be referred to mediation before

                                      -66-
<PAGE>

any party resorts to arbitration, litigation, or other dispute resolution
procedure. Unless the parties agree otherwise, the mediation will be conducted
in accordance with The CPR Mediation Procedure for Business Disputes (Revised
1998) of the CPR Institute for Dispute Resolution by a mediator who has had both
training and experience as a mediator of biotechnology industry licensing and
other general commercial matters. If the parties cannot agree on a mediator,
then the mediator will be selected by the President of the CPR Institute for
Dispute Resolution in accordance with the criteria set forth in the preceding
sentence. Within thirty days after the selection of the mediator, the parties
and their respective attorneys will meet with the mediator for one mediation
session of at least four hours. If the dispute cannot be settled during such
mediation session or during any mutually agreed continuation of such session,
any party to this Agreement may give to the mediator and the other party to this
Agreement written notice declaring the mediation process at an end, and such
dispute (other than as to a question relating to patent validity or as to a
matter left to the discretion of a party hereunder) will be resolved by
arbitration pursuant to Section 16.3. All discussions pursuant to this section
will be confidential and will be treated as compromise and settlement
discussions. Nothing said or disclosed, and no document produced, in the course
of such discussions which is not independently discoverable may be offered or
received as evidence or used for impeachment or for any other purpose in any
arbitration or litigation. The costs of any mediation pursuant to this section
will be shared equally by the parties to this Agreement. The use of mediation
will not be construed under the doctrines of laches, waiver or estoppel to
affect adversely the rights of either party, and in particular either party may
seek a preliminary injunction or other interim judicial relief at any time if in
its judgment such action is necessary to avoid irreparable damage.

     16.3  Any dispute or difference (other than as to a question relating to
patent validity or patent infringement or as to a matter left to the discretion
of a party hereunder), between the parties arising out of or in connection with
this Agreement that is not settled by mutual consent, or by one of the parties'
CEOs where such a resolution is applicable under the standards stated in Section
1.24(ii), or through such mediation, shall be finally adjudicated by binding
arbitration in accordance with the rules of the American Arbitration Association
to be conducted in Chicago before a panel of three arbitrators, one of whom
shall be selected by Biogen, one by Targeted and the third by the two previously
selected arbitrators.  Each of the parties agrees that the decisions of the
arbitrators shall be final and binding upon it and shall be enforceable in any
court having jurisdiction.  The parties' and the arbitrators' costs of any
arbitration shall be shared equally by Targeted and Biogen unless the
arbitration panel determines that a party has incurred unreasonable expenses due
to vexatious or bad faith positions taken by the other party, in which event the
arbitration panel may make an award of all or any portion of such expenses so
incurred.  Notwithstanding the foregoing, either party may seek a preliminary
injunction or other interim judicial relief at any time if in its judgment such
action is necessary to avoid irreparable damage.  Patent infringement and patent
validity issues will be referred to federal court.

                                      -67-
<PAGE>

     Article 17.  Miscellaneous.

     17.1  This Agreement incorporates the Exhibits referenced herein.  This
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, between the parties hereto with
respect to the subject matter hereof, other than the [*]. This Agreement has
been submitted to the scrutiny of, and has been negotiated by, all parties
hereto and their counsel, and shall be given a fair and reasonable
interpretation in accordance with its terms, without consideration or weight
being given to any such term's having been drafted by any party or its counsel.

     17.2  This Agreement shall bind and benefit the parties hereto and their
respective successors and permitted assigns; provided, however, that except as
part of the transfer:

     (i)   by Targeted of all or substantially all of its assets to a single
           buyer or pursuant to a merger or other corporate reorganization; or

     (ii)  by Biogen of all or substantially all of its assets to a single buyer
           or pursuant to a merger or other corporate reorganization in either
           case not involving any Targeted Competitor,

neither party shall assign or delegate any of its rights or obligations
hereunder at any time without the prior written consent of the other party
hereto, which consent shall not be unreasonably withheld or delayed, except
where a proposed transferee from Biogen is a Targeted Competitor.

     17.3  Subject to the provisions of Article 14, Biogen may subcontract
portions of the Development Tasks to be performed by it to its Affiliates and to
other Contractors, provided that such Affiliate or Contractor is not a Targeted
Competitor.  Targeted may not subcontract any portion of its Development Tasks,
without the written consent of Biogen, which consent shall not be unreasonably
withheld or delayed.

     17.4  All notices, requests or other communication provided for or
permitted hereunder shall be given in writing and shall be hand delivered or
sent by facsimile, reputable courier or by registered or certified mail, postage
prepaid, return receipt requested, to the address set forth on the signature
page of this Agreement, or to such other address as either party may inform the
other of in writing.  Notices will be deemed delivered on the earliest of
transmission by facsimile, actual receipt or three days after mailing as set
forth herein.

     17.5  Any terms of this Agreement may be amended or modified only in a
writing signed by all parties.  No waiver of any right or remedy hereunder shall
be effective unless in a writing signed by the party to be bound, nor shall any
wavier in one instance constitute a waiver of the same or any other right or
remedy in any other instance.

     17.6  The parties intend that this Agreement will be construed and enforced
to be consistent with all applicable laws, and they do not intend to violate
hereby any public policy

[*] Confidential Treatment Requested

                                      -68-
<PAGE>

or statutory or common law. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, such provision shall be enforced to the
maximum extent permitted by law and the parties' fundamental intentions
hereunder, and the remaining provisions shall not be affected or impaired.

     17.7  Nothing herein contained shall constitute this a joint venture
agreement or constitute either party as the partner, principal or agent of the
other, this being an Agreement between independent contracting entities. No
party shall have the authority to bind the others in any respect whatsoever.

     17.8  In the event that either party hereto is prevented from carrying out
its obligations under this Agreement by events beyond its reasonable control,
including acts or omissions of the other party, acts of God or government,
natural disasters or storms, fire, political strife, labor disputes, failure or
delay of transportation, default by suppliers or unavailability of raw
materials, then such party's performance of its obligations hereunder shall be
excused during the period of such event and for a reasonable period of recovery
thereafter, and the time for performance of such obligations shall be
automatically extended for a period of time equal to the duration of such event
or events; provided, however, that the other party may, at its election,
terminate this Agreement upon 120 days' prior notice to the party affected by
such events, unless such events cease to prevent such affected party's
performance hereunder during such 120-day period.

     17.9  This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of Delaware without regard to its conflict of laws
rules to the contrary.

     17.10 This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute a
single instrument.

                                 *************

                                      -69-
<PAGE>

     IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Agreement as of the date hereof, but subject to Article 2 above.

TARGETED GENETICS CORPORATION

By:  /s/ H. Stewart Parker
     ---------------------

Name:  H. Stewart Parker

Title:  President & CEO

Date Signed:  August 8, 2000

Address for Notices:     Targeted Genetics Corporation
                         1100 Olive Way, Suite 100
                         Seattle, Washington 98101
                         Attn: Chief Executive Officer
                         FAX:  206-623-7064

GENOVO, INC.

By: /s/ Eric Aguiar
    -----------------------------

Name:  Eric Aguiar

Title:  CEO

Date Signed:  8/8/00

Address for Notices:

Prior to or on the Effective Date:
                         Genovo, Inc.
                         512 Elmwood Avenue
                         Sharon Hill, Pennsylvania 19079
                         Attn: Chief Executive Officer
                         FAX:  __________________

                                      -70-
<PAGE>

Following the Effective Date: c/o Targeted Genetics Corporation
                              1100 Olive Way, Suite 100
                              Seattle, Washington 98101
                              Attn: Chief Executive Officer
                              FAX: 206-623-7064

BIOGEN, INC.

By: /s/ James C. Mullen
    ----------------------------------

Name:  James C. Mullen

Title:  President

Date Signed:   August 8, 2000

Address for Notices:     Biogen, Inc.
                         14 Cambridge Center
                         Cambridge, Massachusetts 02142
                         Attn: Vice President, General Counsel
                         FAX:  (617) 679-2838

                                      -71-
<PAGE>

                               LIST OF EXHIBITS

EXHIBIT A      Beta Interferon Gene

EXHIBIT B      Certain Excluded Fields

EXHIBIT C      Targeted's Actual Development Costs

EXHIBIT D      Targeted Competitors

EXHIBIT E      Ad Interferon-beta Product Targeted Patents

                                      -72-
<PAGE>

                                   EXHIBIT A

                             Beta Interferon Gene
                             --------------------

     [*]

[*] Confidential Treatment Requested

                                      -73-
<PAGE>

                                   EXHIBIT B

                            Certain Excluded Fields
                            -----------------------

1.   Cystic fibrosis transmembrane regulator proteins and any Gene encoding such
     a protein or a fragment thereof, and any viral vector designed or optimized
     for the delivery thereof

2.   Adenovirus E1-A Gene, and any viral vector designed or optimized for the
     delivery thereof

3.   Factor VIII and any Gene encoding Factor VIII or a fragment thereof, and
     any viral vector designed or optimized for the delivery thereof

4.   [*]

5.   TNF receptor: Fc, and any Gene encoding such a receptor or a fragment
     thereof, and any viral vector designed or optimized for the delivery
     thereof

6.   Known or suspected HIV antigens and any Gene encoding such an antigen or a
     fragment thereof, and any viral vector designed or optimized for the
     delivery thereof

7.   Prevention, treatment and/or diagnosis of lysosomal storage disorders using
     viral based vectors. Lysosomal storage disorders include, without
     limitation, [*].

8.   Genes associated with [*]

[*] Confidential Treatment Requested

                                      -74-
<PAGE>

9.   Emerald Gene Systems Excluded Fields:

Without prejudice to any additions that may be made to the Emerald Gene Systems
Excluded Fields following the Execution Date, as of the Execution Date, the
Emerald Gene Systems Excluded Fields include all services, products and other
activities or endeavors within the scope of the technologies, activities, and
projects described below:

          .    marketing, selling, developing, or assisting in the development
               for the use, manufacture, distribution or sale of EGS Products in
               the EGS Field,

          .    developing, or assisting in the development of, a Platform for
               the delivery of EGS Products in the EGS Field,

          .    marketing, selling, developing, or assisting in the development
               for the use, manufacture or distribution of products having the
               same Gene under research or being commercialized by Emerald Gene
               Systems as an EGS Product which are competitive (i.e., directed
               to the same indication) with such EGS Product,

where "Gene" has the meaning defined for it in this Agreement between Targeted
and Biogen, and the following other terms have the following meanings:

          "EGS Product" shall mean a Gene formulated for administration to
          mammals, including humans, by use of a Platform;

          "EGS Field" shall mean the research, development and commercialization
          of a Platform for delivery of Genes to mammals. For avoidance of
          doubt, the EGS Field shall exclude (i) cell therapy, (ii) ex vivo gene
          therapy, (iii) delivery of certain antisense oligonucleotides or their
          analogs, and (iv) transcutaneous and/or transdermal delivery (i.e.,
          pertaining to delivery, onto, into and through the skin);

          "Platform" shall mean the combined utilization of Drug Delivery
          Technologies and Gene Delivery Technologies for delivery of Genes by
          any route of administration;

          "Drug Delivery Technologies" shall mean formulation and/or excipient
          systems and technologies for delivery of a therapeutic agent to a
          mammal, allowing such agent, without limitation on other features that
          may be sought in addition to or instead of the following, to be
          administered on an optimized schedule, and/or to be administered with
          reduced side effects, and/or to be administered with enhanced
          efficacy, and/or to be administered with better patient compliance,
          and/or to be administered in reduced dosages. Drug Delivery
          Technologies shall also include Elan device delivery technologies
          including the MEDIPAD(R) Drug Delivery System and devices utilizing
          autoinjector technology. Notwithstanding the foregoing, Drug Delivery
          Technologies shall not include Base Technologies or Gene Delivery
          Technologies;

                                      -75-
<PAGE>

          "Gene Delivery Technologies" shall mean [*];

          "Base Technologies" shall mean technologies, techniques and
          formulations for the administration of an active agent to a mammal:
          (i) in formulations of the active agent with one or more substantially
          inert ingredients, including, without limitation, tonicity modifiers
          and bulking agents; or (ii) with or through devices or mechanical
          targeting systems or mechanical delivery systems (other than Elan's
          MEDIPAD(R) Drug Delivery System or devices utilizing autoinjector
          technology).

[*]

[*] Confidential Treatment Requested

                                      -76-
<PAGE>

                                   Exhibit C

                      Targeted's Actual Development Costs

Targeted's Actual Development Costs with respect to a project are comprised of
three separate cost components:  Fully-Burdened Labor Cost, Direct Project
Costs, and Internal Service Costs.  The basis for determination of these
components is described below.

     Fully-Burdened Labor Cost is calculated by extending the number of FTEs
     -------------------------
charged to a particular project by the FTE Rate.  The FTE Rate results from
Targeted's cost accounting system, which generally pools and allocates costs in
the following manner.

 .  Direct labor is pooled for each of several functional groups (research and
   ------------
   development, manufacturing, and clinical/regulatory/quality assurance), and
   is allocated to projects based on employee timecards. Direct labor charges
   include salaries and related payroll taxes.

 .  Each functional group has an indirect cost pool associated with it. These
   costs include the following and are allocated to projects based on direct
   labor:

     .    Employee benefits include medical, dental and insurance benefits,
          -----------------
          bonuses, 401(k) expenses, transit and parking, company-wide training
          and employee assistance.

     .    Indirect lab supplies are general use supplies that are low dollar
          ---------------------
          amount or not applicable to individual projects.

     .    Department operations costs include temporary help, office supplies,
          ---------------------------
          miscellaneous purchases, non-project travel, seminars and recruiting.

     .    R&D management costs include scientific management, project management
          --------------------
          and information systems support.

     .    Occupancy costs include rent, utilities, facility and equipment
          ---------------
          maintenance, repair and calibration, glass wash operations, media
          preparation, facility management and property taxes.

     .    Equipment costs include depreciation and amortization costs of owned
          ---------------
          and leased scientific equipment and office furniture.

 .    General and administrative costs, which include finance, accounting, human
     resources, executive and legal support, are allocated across all functional
     groups based upon direct labor.

                                      -77-
<PAGE>

 .    FTE Rates budgeted for calendar year 2000 are as follows:

     .    Research and development:  $[*]

     .    Clinical/regulatory/quality assurance:  $[*]

          Direct Project Costs include: outside services, supplies and travel
          --------------------
costs, all of which are project-specific in nature.

          Internal Services include: animal facility costs, which are charged to
          -----------------
projects based on capacity utilization, and research vector manufacturing, which
is charged to projects based on quantities of product used.

[*] Confidential Treatment Requested

                                      -78-
<PAGE>

                                   EXHIBIT D

                             Targeted Competitors
                             --------------------

                         Amgen
                         Avigen
                         Canji/Schering Plough
                         Cell Genesys
                         Chiron/Viagene
                         Cobra Therapeutics
                         Collateral Therapeutics
                         GenCell/Aventis
                         GenVec
                         Genstar
                         Genzyme
                         Genzyme Molecular Oncology
                         Inex
                         Introgen
                         IntroGene
                         MediGene
                         Oxford BioMedica
                         Selective Genetics
                         Systemix/Genetic Therapy/Novartis
                         Transkaryotic Therapies
                         Transgene
                         Valentis
                         Vical

                         The AAV Competitors are:

                         Avigen
                         Cell Genesys

                                      -79-
<PAGE>

                                   EXHIBIT E

                  Ad Interferon-beta Product Targeted Patents
                  -------------------------------------------

     See Notes at end of Exhibit

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
GENOVO SUBJECT MATTER                            ISSUED                   PENDING
----------------------------------------------------------------------------------------
<S>                                    <C>                          <C>
Adenovirus Vectors for Gene Therapy

         GNVPN.006/(1)/                         5,585,362
                                              Dec. 17, 1996

                                           E2 mutation and E1
                                                deletion

         GNVPN.008/(2)/                         6,001,557
                                              Dec. 14, 1999
                                         A polycation conjugate
                                          comprising a crippled
                                       adenovirus helper virus and
                                          a recombinant shuttle
                                                 vector

----------------------------------------------------------------------------------------

          GNVPN.010/(2)//(3)/

     Method of Reducing an Immune               5,872,154
      Response to a Recombinant               Feb. 16, 1999
            Adenovirus

----------------------------------------------------------------------------------------

             GNVPN.013/(2)/                                         08/549,489, pending

    Novel Adenovirus Gene Therapy                                   E1 and E4 deletions
         Vehicle and Cell Line

----------------------------------------------------------------------------------------
</TABLE>

                                      -80-
<PAGE>

EXHIBIT E, continued

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
<S>                                                                  <C>
          GNVPN.023/(2)//(3)/                                        08/889,930 allowed

  Method for Tolerizing a Mammalian
  Patient to Administration of Gene
           Therapy Vectors

----------------------------------------------------------------------------------------

         GNVPN.035/(2)/

    Methods for Production of                                        60/137,105 pending
 Recombinant Virus Which Require
         Helper Viruses

----------------------------------------------------------------------------------------

          GNVPN.037/(2)/

               [*]                                                   [*]        pending

----------------------------------------------------------------------------------------

         GNVPN.040/(2)/

               [*]                                                   [*]        pending

----------------------------------------------------------------------------------------

           GNVPN.041                                                 [*]        pending

               [*]                                                   [*]        pending

----------------------------------------------------------------------------------------
</TABLE>

NOTES:
/(1)/  Subject to Targeted Licensor Provisions set forth in Exhibit E1

/(2)/  Subject to Targeted Licensor Provisions set forth in Exhibit E2

/(3)/  A Targeted Adjunct Therapy

[*] Confidential Treatment Requested

                                      -81-
<PAGE>

                                  Exhibit E1
                                  ----------

                    University of Michigan Sublicense Terms

     The following Targeted Licensor Provisions shall govern the Development and
Marketing Agreement (the "Agreement") in accordance with Section 8.5 of the
Agreement with respect to the Targeted Patent indicated in Exhibit E as being
governed by this Exhibit E1 and any Targeted Technology licensed to Targeted or
Genovo under that certain University of  Michigan ("Michigan") License
Agreement, Michigan File 819, effective as of August 1, 1994 (the "Michigan
License Agreement") a copy of which has been provided to Biogen, as well as any
sublicense entered into by Biogen under any such Targeted Patent or Targeted
Technology (such Targeted Patent and Targeted Technology are referred to herein
as the "Michigan Technology"):

     1.  In addition to the requirements set forth in Articles 7 and 11 of the
Agreement, all reports required to be delivered by Biogen in accordance with
such article shall be consistent with Section 5.1 of the Michigan License
Agreement.

     2.  In reports delivered to Targeted or Genovo under the Agreement, Biogen
shall consistently employ the system of nomenclature and type designation for
Products as agreed in writing between Biogen and Genovo, and Biogen agrees to
inform Michigan or its auditors, when requested, as to the details concerning
such nomenclature system as well as to the additions thereto changes therein.

     3.  Biogen shall keep its books and records open for inspection upon
reasonable notice during business hours by an independent certified accountant
selected by Michigan and reasonably approved by Genovo in accordance with
Section 5.3 of the Michigan License Agreement.

     4.  All Products manufactured by or for Biogen within the scope of the
Michigan Technology shall be substantially manufactured in the United States (a)
if such Product is to be sold in the United States or (b) if required by any
regulation of, or Michigan or the Howard Hughes Medical Institute contract with,
the United States Government.

     5.  Within ten (10) days of the first commercial sale of a Product
incorporating or using Michigan Technology, Biogen shall report by written
letter to Genovo the date and general terms of that sale.

     6.  Notwithstanding anything in the Agreement to the contrary, the license
under Section 8.4(iii) of the Agreement shall terminate as to the Michigan
Technology upon the termination of the Michigan License Agreement; provided
however, Biogen may elect to

                                      -82-
<PAGE>

continue such license under the Agreement by delivering written notice to
Michigan within 60 days of Biogen's receipt of notice of the termination of the
Michigan License Agreement, which notice shall contain an agreement by Biogen to
assume in respect to Michigan all of the obligations (including obligations for
payment) contained in the Agreement with respect to such license to the Michigan
Technology.

     7.  Biogen hereby acknowledges and agrees that the Agreement is subject to
the following disclaimers of warranty and limitation of liability of Michigan:

         (a)   Michigan, including its fellows, officers, employees and agents,
makes no representations or warranties that any Licensed Patent (as defined in
the Michigan License Agreement) is or will be held valid, or that the
manufacture, use, sale or other distribution of any Products (as defined in the
Michigan License Agreement) will not infringe upon any patent or other rights
not vested in Michigan.

         (b)   MICHIGAN, INCLUDING ITS FELLOWS, OFFICERS, EMPLOYEES AND AGENTS,
MAKES NO REPRESENTATIONS, EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, AND ASSUMES NO RESPONSIBILITIES WHATEVER
WITH RESPECT TO DESIGN, DEVELOPMENT, MANUFACTURE, USE, SALE OR OTHER DISPOSITION
BY GENOVO, AFFILIATES OR SUBLICENSEES OF PRODUCTS.

         (c)   AS AMONG MICHIGAN, TARGETED, GENOVO, TARGETED'S AND GENOVO'S
AFFILIATES AND SUBLICENSEES, THE ENTIRE RISK AS TO PERFORMANCE OF PRODUCTS IS
ASSUMED BY TARGETED AND GENOVO AND THEIR AFFILIATES AND SUBLICENSEES. In no
event shall Michigan, including its fellows, officers, employees and agents, be
responsible or liable for any direct, indirect, special, incidental, or
consequential damages or lost profits to Targeted, Genovo, or their affiliates,
sublicensees or any other individual or entity regardless of legal theory. The
above limitations on liability apply even though Michigan, its fellows,
officers, employees or agents may have been advised of the possibility of such
damage. (This paragraph is not intended to release Michigan from liability
resulting from a breach of the Michigan License Agreement.)

     8.  Biogen shall not make any statement, representation or warranty or
accept any liability or responsibility whatsoever to any person or entity which
is inconsistent with any disclaimer or limitation included in paragraph 7 of
this Exhibit E1.

     9.  Biogen shall defend, indemnify and hold harmless Michigan, its fellows,
officers, employees and agents, for and against any and all claims, demands,
damages, losses and expenses of any nature (including reasonable attorneys' fees
and other litigation expenses), resulting from, but not limited to, death,
personal injury, illness, property damage, economic loss or products liability
arising from or in connection with, any of the following:  (1) Any manufacture,
use, sale or other disposition by Biogen of Products; (2) The direct or

                                      -83-
<PAGE>

indirect use by any person of Products made, used, sold or otherwise distributed
by Biogen; (3) The use by Biogen of any invention related to the Technology or
the Licensed Patents (as such terms are defined in the Michigan License
Agreement).

     10.  Prior to any distribution (including any distribution for clinical
trials) of a Product by Biogen, Biogen shall purchase and maintain in effect a
policy of product liability insurance in accordance with the requirements of and
otherwise comply with Section 13.3 of the Michigan License Agreement.

     11.  Biogen shall use its best efforts to comply with all provisions of any
applicable laws, regulation, rules and orders relating to the license granted
under the Agreement and to the testing, production, transportation, export,
packaging, labeling, sale or use of Products or otherwise applicable to Biogen's
activities under the Agreement. Biogen shall use its best efforts to obtain such
written assurances regarding export and reexport of technical data (including
Products made by use of technical data) as may be required by the Office of
Export Administration Regulations.

     12.  Biogen shall refrain from using the name of Michigan in publicity or
advertising without the prior written approval of Michigan (such approval may be
sought for the continued or repeated use of particular items of publicity or
advertising).  Reports in scientific literature and presentation of joint
research and development work are not considered publicity.  Biogen shall copy
Targeted and Genovo on all documents and materials submitted to Michigan for
approval.

     13.  Biogen shall mark Products with the appropriate patent notice as
approved by Michigan (when appropriate), such approval not to be unreasonably
withheld.

     14.  Upon the assignment of the Agreement to Michigan pursuant to Section
15 below, Biogen shall pay its own taxes due, if any, in the manner set forth in
Section 6.5 of the Michigan License Agreement.

     15.  Targeted and Genovo shall have the right to assign their rights under
the Agreement to Michigan in respect of Michigan Technology licensed under the
Agreement, and, upon the termination of the Michigan License Agreement or
Targeted's and Genovo's ceasing to exist as business entities, Targeted's and
Genovo's rights under the Agreement with respect to Michigan Technology licensed
to Genovo under the terminated Michigan License Agreement shall, upon the
election of Michigan, be automatically assigned to Michigan.

     16.  Biogen acknowledges Michigan's ownership interest in the Michigan
Technology.

                                      -84-
<PAGE>

                                  Exhibit E2
                                  ----------

                  University of Pennsylvania Sublicense Terms

     In addition to the terms set forth in the foregoing Development and
Marketing Agreement (the "Agreement"), the following Targeted Licensor
Provisions shall govern the Agreement in accordance with Section 8.5 of the
Agreement with respect to the Targeted Patents indicated in Exhibit E as being
governed by this Exhibit E2 and any related Targeted Technology (such Targeted
Patent and Targeted Technology are referred to herein as the "Penn Technology")
licensed to Targeted or Genovo under the U. Penn License Agreements:

     1.  Notwithstanding anything to the contrary set forth in the Agreement,
all sublicensees of Biogen shall be prohibited from granting further sublicenses
without the written consent of the University of Pennsylvania ("Penn"), which
consent shall not be unreasonably withheld.  In addition, any sublicense by
Biogen of any Penn Technology for the development, manufacture, use, marketing,
import and sales of Products shall be subject to the terms and conditions of the
license granted to Genovo under the U. Penn License Agreements.

     2.  If Targeted and Genovo become subject to a Bankruptcy Event (as defined
in the U. Penn License Agreements), all payments then or thereafter due and
owing to Targeted or Genovo from Biogen under the Agreement shall, upon notice
from Penn to Biogen, become directly payable to Penn for the account of Targeted
or Genovo.

     3.  Biogen shall notify Targeted and Genovo within twenty (20) days of the
first commercial sale of any Products under its sublicense to any Penn
Technology.

     4.  Biogen shall not use Penn's name, any adaptation thereof, any Penn
logotype, trademark, service mark or slogan or the name, mark or logotype of any
Penn representative or organization in any way, in each case without the prior
written consent of Penn.  Biogen shall copy Genovo on all documents and
materials submitted to Penn for approval.

     5.  Biogen shall comply with all United States and foreign laws with
respect to patent marking of Products made, used or sold under its sublicense to
Penn Technology.

     6.  If Targeted or Genovo becomes subject to a Bankruptcy Event (as defined
in the U. Penn License Agreements), to the extent allowed by law, Biogen shall
become a direct licensee of Penn to the extent of any sublicense existing
between Biogen and Targeted or Genovo immediately preceding the Bankruptcy
Event, without further action by Targeted, Genovo, Penn or Biogen.

                                      -85-<PAGE>

                                                                    EXHIBIT 10.2

                               FUNDING AGREEMENT

     This FUNDING AGREEMENT (this "Agreement") is made as of August 8, 2000, by
                                   ---------
and between Targeted Genetics Corporation, a Washington corporation

("Targeted"), and Biogen, Inc., a Massachusetts corporation ("Biogen").
  --------                                                    ------

                                   RECITALS

     In connection with the execution, as of the date of this Agreement, of (i)
an Agreement and Plan of Merger (the "Merger Agreement"), among Targeted, TGC
                                      ----------------
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Targeted ("Merger Sub"), Genovo, Inc., a Delaware corporation ("Genovo"), and
           ----------                                           ------
Biogen (as a principal stockholder of Genovo), (ii) a Development and Marketing
Agreement between Targeted and Biogen and (iii) a Return of Rights Agreement
among Genovo, Targeted and Biogen (collectively, the "Biogen Transaction
                                                      ------------------
Agreements"):
----------

     A.  Targeted has requested that Biogen extend to Targeted a term loan in
the amount of $10,000,000 and Biogen is willing to extend such credit facility
to Targeted on the terms and conditions set forth in this Agreement; and

     B.  Biogen desires to purchase from Targeted, and Targeted desires to sell
to Biogen, shares of Targeted's Common Stock, on the terms and subject to the
conditions set forth in this Agreement.

                                   AGREEMENT

     In consideration of the mutual covenants and conditions set forth in this
Agreement, the parties to this Agreement agree as follows:

                                  ARTICLE ONE
                                  DEFINITIONS

     As used in this Agreement and not otherwise defined, the following terms
have the meanings set forth below.

     "Common Stock" means the common stock of Targeted, par value $.01 per
      ------------
share.

     "Governmental Approval" means any authorization, consent, approval,
      ---------------------
certificate of compliance, license, permit, or exemption from, contract with,
registration or filing with, or report or notice to, any Governmental Entity
required or permitted by applicable law.

     "Governmental Entity" means any court, administrative agency or commission
      -------------------
or other governmental authority or instrumentality.

     "Loan," which is defined in Section 2.1.1 of this Agreement, includes all
      ----
renewals and amendments of the Loan.

[*] Portions of this exhibit have been omitted pursuant to a request for
    confidential treatment filed with the Securities and Exchange Commission.
    The omitted portions of this exhibit have been filed separately with the
    SEC.
<PAGE>

     "Loan Documents" means the Note, together with all other agreements,
      --------------
instruments and documents arising out of or relating to Article 2 of this
Agreement or the Loan, and includes all renewals, replacements and amendments of
such agreements, instruments and documents.

     "Material Adverse Effect" means a material adverse effect on the financial
      -----------------------
condition, results of operations, business or properties of the entity in
question.

     "Maturity Date" means the date of maturity of the Note, on which date all
      -------------
outstanding principal and interest on the Note are due and payable.  The
Maturity Date shall be the five-year anniversary date of the first Advance under
this Agreement; provided, however, that the Maturity Date shall not be later
than six years from the date of this Agreement.  If the Maturity Date would fall
on a day that is not a business day, then the Maturity Date shall be extended to
the next succeeding business day.

                                  ARTICLE TWO
                                   THE LOAN

2.1 Terms of the Loan
    -----------------

       Subject to the terms and conditions and on the terms set forth in this
Article 2, and in reliance on the representations, warranties and covenants of
Targeted made in or pursuant to this Agreement, Biogen agrees to extend the
following loan to Targeted:

       2.1.1  Loan Commitment

       Biogen shall lend to Targeted (the "Loan") an amount not to exceed
                                           ----
$10,000,000 (the "Loan Proceeds").  Such Loan Proceeds may be disbursed to
                  -------------
Targeted in one or more Advances (as defined in Section 2.1.3 of this Article
2).

       2.1.2  Promissory Note

       The Loan, and all Advances under the Loan, shall be evidenced by a single
promissory note substantially in the form attached to this Agreement as Exhibit
                                                                        -------
A (including all renewals, replacements and amendments of such promissory note,
-
the "Note").  The principal amount of the Note due and payable on the Maturity
     ----
Date shall be the aggregate principal amount of all Advances under the Note
outstanding on the Maturity Date.

       2.1.3  Advance of Proceeds

       (a) At any time and from time to time, Targeted may request in writing
(an "Advance Request") that all or a portion of the Loan Proceeds (each amount
     ---------------
of Loan Proceeds distributed pursuant to an Advance Request, an "Advance") be
                                                                 -------
disbursed to Targeted. Each such Advance Request shall specify the amount of
Loan Proceeds to be disbursed and the proposed date of disbursement (which date
shall not be less than 15 business days from the date such Advance Request is
made). Each Advance Request shall be subject to the following restrictions:

                                      -2-
<PAGE>

            (i)   the minimum amount of each Advance Request shall be $1,000,000
(unless an amount less than $1,000,000 remains available for disbursement under
the Loan, in which case such lesser amount may be requested);

            (ii)  Targeted shall make no more than five (5) Advance Requests
during the term of the Note; and

            (iii) there shall be no Event of Default (as defined in Section
2.5.1 of this Article 2) under the Note on the date of the Advance Request,
except to the extent that any Event of Default has been waived by Biogen.

     (b) Upon the satisfaction of the conditions described in Section 2.2 of
this Article 2, Biogen shall cause the Loan Proceeds specified in the Advance
Request to be advanced to Targeted by wire transfer of funds to the account
specified in writing by Targeted, on the later of (i) the date of disbursement
proposed by Targeted in the Advance Request and (ii) the date on which the
conditions described in Section 2.2 are satisfied with respect to such Advance
Request.

     2.1.4  Interest Rate

     (a) The Loan shall bear interest on the principal amount of the Note
remaining unpaid from time to time, at the rate equal to [*] per annum.

     (b) Upon the occurrence and during the continuance of any Event of Default,
Biogen may, at its option, charge interest on the principal balance of the Loan
and accrued interest at a rate of up to [*]% per annum in excess of the rate set
forth in subsection (a), from the date of the occurrence of the Event of Default
until the Event of Default is cured or waived by Biogen or, absent cure or
waiver, the Loan and such other amounts are repaid in full.

     (c) All computations of interest shall be based on a 365-day year for the
actual number of days elapsed.

     (d) Notwithstanding any provision contained in this Article 2 or in the
Note, the total liability of Targeted for payment of interest pursuant to this
Article 2 shall not exceed the maximum amount of interest permitted by
applicable law to be charged, collected or received from Targeted. If any
payments by Targeted include interest in excess of that maximum amount, Biogen
shall apply the excess interest payment to reduce the accrued and unpaid
interest on and principal balance of the Loan, and any excess interest payment
remaining after all outstanding principal and accrued interest has been paid
shall be returned to Targeted.

     2.1.5  Repayment

     Accrued and unpaid interest on the Loan shall be paid annually on the
anniversary date of the first Advance or, if earlier, on the Maturity Date.  All
outstanding principal shall be due and payable in full in cash on the Maturity
Date.

     2.1.6  Prepayments

[*] Confidential Treatment Requested

                                      -3-
<PAGE>

       Targeted may prepay all or any portion of the Loan at any time without
premium or penalty.  All prepayments shall be applied first to any accrued and
unpaid interest on the Loan and then to the outstanding principal balance of the
Loan.

2.2 Conditions Precedent to Funding the Loan
    ----------------------------------------

       Biogen shall not be required to disburse Loan Proceeds pursuant to any
Advance Request unless and until the following conditions have been fulfilled:

       (a) Targeted shall have executed and delivered to Biogen this Agreement,
the Loan Documents and the Biogen Transaction Agreements;

       (b) No Event of Default shall exist under this Agreement, the Loan
Documents or any Biogen Transaction Agreement;

       (c) All representations and warranties of Targeted contained in this
Agreement, the Loan Documents and the Biogen Transaction Agreements (as
modified, if necessary, as of the date of such Advance Request) shall be true
and correct in all material respects; and

       (d) The merger between Genovo and Merger Sub, pursuant to the terms of
the Merger Agreement (the "Merger"), shall have been consummated and each of the
                           ------
Development and Marketing Agreement and the Return of Rights Agreement shall
have become effective concurrently with the effectiveness of this Agreement and
the Merger Agreement.

2.3 Affirmative Covenants of Targeted
    ---------------------------------

       Targeted covenants and agrees that, so long as this Agreement is in
effect and until the principal balance under and all accrued interest on the
Loan are paid or satisfied in full, Targeted shall:

       2.3.1 Maintenance of Records; Financial Data; Reporting Requirements

       (a) Keep at all times books of account and other records in which
materially complete and correct entries will be made of all material dealings or
transactions of Targeted;

       (b) Keep its books of account in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied; and
                        ----

       (c) Furnish to Biogen as soon as practicable, and in any event within ten
days after filing, a copy of all periodic and special reports and forms filed by
Targeted with the Securities and Exchange Commission ("SEC").
                                                       ---

       2.3.2 Inspection

       Subject to reasonable notice to Targeted and at reasonable times, allow
any representative of Biogen to examine the books of account and other records
and files of Targeted relevant to the

                                      -4-
<PAGE>

Loan, and to discuss the affairs, business, finances and accounts of Targeted
with its senior officers.

       2.3.3  Exchange of Note

       Upon receipt of a written notice of loss, theft, destruction, or
mutilation of the Note, and upon surrendering such Note for cancellation if
mutilated, execute and deliver a new Note of like tenor in lieu of such lost,
stolen, destroyed or mutilated Note, provided that Biogen agrees to indemnify
and hold Targeted harmless from all claims, losses, and damages (including
reasonable attorneys' fees) incurred by Targeted as a result of loss, theft or
destruction of the Note.

       2.3.4  Further Assurances

       Promptly upon request by Biogen, duly execute and deliver to Biogen such
further instruments, agreements and documents and do or cause to be done such
further acts as may be reasonably necessary to carry out the provisions and
purpose of this Article 2 and the Loan Documents.

2.4 Negative Covenants of Targeted
    ------------------------------

       Targeted covenants and agrees that, so long as this Agreement is in
effect and until the principal balance and accrued interest on the Loan are paid
or satisfied in full, Targeted shall not, without the prior written consent of
Biogen (which consent shall not be unreasonably withheld or delayed):

       (a) Declare or pay any cash distributions or dividends or return any
capital to any of Targeted's shareholders; or

       (b) Wind up, liquidate or dissolve Targeted's business, enter into any
transaction to dispose of all or substantially all of Targeted's assets or agree
to do any of the foregoing.

2.5 Events of Default; Remedies
    ---------------------------

       2.5.1  Events of Default

       "Event of Default," wherever used in this Agreement, means any one of the
        ----------------
following events, whether voluntary, involuntary or pursuant to or affected by
operation of applicable law:

       (a) Targeted fails to pay the principal or interest due and payable on
the Note within 10 business days of the due date provided in Section 2.1.5 of
this Agreement for the payment of such principal or interest, and after written
notice to Targeted from Biogen of such failure to pay;

       (b) Targeted breaches any representation or warranty of Targeted in this
Agreement, or any representation or warranty of Targeted becomes untrue, in
either case which breach or misrepresentation is not or cannot be cured within
30 days of receipt by Targeted of written notice of such breach or
misrepresentation (or, so long as Targeted is diligently pursuing a cure,

                                      -5-
<PAGE>

such longer period of time as is reasonably necessary to cure such breach, not
to exceed an additional 30 days); or

       (c) Targeted fails to observe or perform any other term, covenant or
agreement to be performed or observed pursuant to the provisions of the Loan
Documents or any Biogen Transaction Agreement, and such default is not or cannot
be cured within 30 days of written notice to Targeted of such default (or, so
long as Targeted is diligently pursuing a cure, such longer period of time as is
reasonably necessary to cure such default, not to exceed an additional 30 days).

       2.5.2  Acceleration

       Upon the occurrence of any Event of Default, or at any time thereafter if
any Event of Default is then continuing, Biogen may, by written notice to
Targeted, declare the entire unpaid principal balance or any portion of the
principal balance of the Note and interest accrued on the Note to be immediately
due and payable by Targeted, and such principal and interest shall become
immediately due and payable, without presentation, demand, protest, notice of
protest or other notice of dishonor of any kind, all of which are expressly
waived by Targeted.

                                 ARTICLE THREE
                     PUT OPTION FOR TARGETED COMMON STOCK

       Subject to the terms and conditions and on the terms set forth in this
Section 3, and in reliance upon the representations, warranties, and covenants
of Biogen and Targeted contained in or made pursuant to this Agreement, Biogen
agrees to purchase from Targeted, and Targeted agrees to sell to Biogen,
Targeted Common Stock:

3.1 Commitment for Future Purchase
    ------------------------------

       In accordance with the provisions of this Article 3, Targeted may elect
to sell and issue to Biogen, and Biogen shall purchase from Targeted, a number
of shares of unregistered Common Stock (the "Shares") having an aggregate fair
                                             ------
market value of up to $10,000,000.

3.2 Put Option; Purchase and Sale
    -----------------------------

       3.2.1  Put Request

       (a) Subject to Section 3.2.2 of this Agreement, at any time and from time
to time before the third anniversary of the date of this Agreement, at the
election of Targeted in its sole discretion (the "Put Option") and upon its
                                                  ----------
written request (the "Put Request"), Biogen shall subscribe for and purchase (a
                      -----------
"Share Purchase") a number of shares of Common Stock having an aggregate fair
 --------------
market value less than or equal to the Remaining Value (as defined in subsection
(b) of this Section 3.2.1) at the time of such Put Request, at the price and on
the terms and conditions set forth in this Article 3. The Put Request shall
specify (i) the Tranche Purchase Amount (as defined in subsection (b)) of such
Share Purchase, (ii) the Remaining Value at the time of the Put Request and
immediately after such Share Purchase, and (iii) the date of closing

                                      -6-
<PAGE>

for such Share Purchase (the "Closing"), which date shall be 15 business days
                              -------
from the date the Put Request is made.

      (b) For purposes of this Article 3, the "Remaining Value" at the time of a
                                              ---------------
Put Request shall equal the difference of (i) $10,000,000 minus (ii) the sum of
the Tranche Purchase Amounts (as defined below) of all Share Purchases (if any)
made before the date of such Put Request. The "Tranche Purchase Amount" for any
                                               -----------------------
Share Purchase shall mean the aggregate value of the Shares purchased in such
Share Purchase, based on the Price Per Share, as determined at the time of such
Share Purchase pursuant to subsection (c) of this Section 3.2.1.

      (c) The price per Share for any individual Share Purchase (the "Price Per
                                                                      ---------
Share") shall equal the average of the daily closing prices of a share of
-----
Targeted Common Stock, as quoted on the Nasdaq National Market, for the period
of [*] directing such Share Purchase. Notwithstanding the foregoing, if at any
time during the 30 calendar days following the date of a Put Request Targeted
publicly discloses material adverse information and the closing price of a share
of Common Stock on the trading day immediately following such disclosure is less
than 90% of the closing price of a share of Common Stock on the trading day
immediately preceding such disclosure, then (i) the Price Per Share of the Share
Purchase for which Targeted made such Put Request shall be adjusted to equal the
average of the daily closing prices of a share of Common Stock for the five
trading days immediately following the disclosure of the material adverse
information and (ii) if such adjustment results in a lower Price Per Share,
Targeted shall issue to Biogen that number of additional Shares equal to the
quotient obtained by dividing (A) the difference obtained by subtracting (1) a
Tranche Purchase Amount based on such reduced Price Per Share from (2) the
original Tranche Purchase Amount for such Share Purchase, by (B) the lower Price
Per Share.

      3.2.2 Restrictions on Put Option

      The Put Option shall be subject to the following restrictions:

      (a) Targeted shall make no more than five Put Requests pursuant to this
Section 3.2;

      (b) the Tranche Purchase Amount for each individual Share Purchase shall
be at least $2,000,000 (unless the Remaining Value at the time of the Put
Request for such Share Purchase is less than $2,000,000, in which case Targeted
may exercise the Put Option for such lesser amount); and

      (c) Targeted shall not make any Put Request (and Biogen shall not be
required to make the corresponding Share Purchase) that, if effected, would
cause the number of shares of Targeted Common Stock owned by Biogen immediately
after such Share Purchase to exceed 19.9% of the outstanding shares of Common
Stock.

3.3 Purchase; Delivery
    ------------------

      3.3.1 Share Purchase Agreement

[*] Confidential Treatment Requested

                                      -7-
<PAGE>

       The purchase and sale of the Shares in each Share Purchase shall be made
pursuant to a share purchase agreement (the "Share Purchase Agreement"), the
                                             ------------------------
terms and conditions of which shall be substantially similar to the terms and
conditions set forth in this Article 3.

       3.3.2 Delivery

       At the Closing of each Share Purchase, subject to the terms and
conditions of this Agreement and the Share Purchase Agreement, Targeted shall
deliver to Biogen a certificate representing the Shares to be purchased by
Biogen at such Closing, dated the date of such Closing and duly registered in
the name of Biogen, against payment of the Tranche Purchase Amount by wire
transfer of funds to the account specified by Targeted in writing.

3.4 Conditions of Biogen's Obligations at Closing
    ---------------------------------------------

       The obligations of Biogen under this Article 3 with respect to a Share
Purchase are subject to the fulfillment, on or before the date of the Closing
for such Share Purchase, of each of the following conditions, unless waived in
writing by Biogen:

       3.4.1 Representations and Warranties

       The representations and warranties of Targeted contained in Article 4 of
this Agreement, with such modifications to Sections 4.2 (Capitalization) and
4.5(a) (SEC Reports) as may be required at the time of such Share Purchase,
shall be true on and as of the date of such Closing.  Targeted shall have taken
all actions on its part to be taken to permit the representations and warranties
of Biogen contained in Article 5 of this Agreement to be true on the date of
such Closing.

       3.4.2 Performance

       Targeted shall have performed and complied with all agreements,
obligations and conditions contained in this Article 3 that are required to be
performed or complied with by it on or before the date of such Closing.

       3.4.3 Exemption

       The offer and sale of the Shares to Biogen in such Share Purchase shall
be exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act").
 --------------

       3.4.4 Compliance Certificate

       The chief executive officer or the chief financial officer of Targeted
shall have delivered to Biogen a certificate stating that the conditions
specified in Sections 3.4.1 and 3.4.2 of this Article 3 have been fulfilled.

       3.4.5 Proceedings and Documents

                                      -8-
<PAGE>

       All corporate and other proceedings in connection with and all documents
incident to such Share Purchase shall be reasonably satisfactory to Biogen and
Biogen's counsel, and the Share Purchase Agreement shall have been duly executed
and delivered by Targeted.

       3.4.6 Opinion of Company Counsel

       Biogen shall have received an opinion from Orrick, Herrington & Sutcliffe
LLP, counsel for Targeted, dated as of the date of such Closing, in form and
substance reasonably satisfactory to Biogen.

       3.4.7 No Injunctions or Restraints

       There shall be no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the offer, sale and purchase of the
Shares in such Share Purchase.

       3.4.8 Biogen Transaction Agreements

       The Merger shall have been consummated and each of the Development and
Marketing Agreement and the Return of Rights Agreement shall have become
effective concurrently with the effectiveness of this Agreement and the Merger
Agreement.

3.5 Conditions of Targeted's Obligations at Closing
    -----------------------------------------------

       The obligations of Targeted under this Article 3 with respect to a Share
Purchase are subject to the fulfillment, on or before the date of the Closing
for such Share Purchase, of each of the following conditions, unless waived in
writing by Targeted:

       3.5.1 Representations and Warranties

       The representations and warranties of Biogen contained in Article 5 of
this Agreement shall be true on and as of the date of such Closing.

       3.5.2 Performance

       Biogen shall have performed and complied with all agreements, obligations
and conditions contained in this Article 3 that are required to be performed or
complied with by it on or before the date of such Closing.

       3.5.3 Exemption

       The offer and sale of the Shares to Biogen in such Share Purchase shall
be exempt from registration under the Securities Act.

       3.5.4 No Injunctions or Restraints

                                      -9-
<PAGE>

       There shall be no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the offer, sale and purchase of the
Shares in such Share Purchase.

3.6 Covenants of Targeted
    ---------------------

       3.6.1 Rule 144 Reporting

       Targeted shall use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144 under the
Securities Act, such that the condition specified in Rule 144(c) is met.

       3.6.2 Registration Rights

       (a) Demand Registration.
           -------------------

             (i)  On one occasion after the date of the Closing of Biogen's
first Share Purchase under this Article 3 but before the second anniversary of
the closing date of the Merger, Biogen may request that all of the Shares owned
by Biogen as of such date be registered under the Securities Act on a
Registration Statement on Form S-3 (or a successor form) (the "Resale S-3").
                                                               ----------
Upon the receipt of such request Targeted shall use its Reasonable Commercial
Efforts (as defined below) to effect the Resale S-3 as soon as practicable, at
Targeted's expense, and to cause the Resale S-3 to remain effective until the
earlier of 180 days from the effective date of the Resale S-3 and the date on
which all the Shares covered by the Resale S-3 have been sold; provided,
however, that Targeted shall not be required to effect the Resale S-3 if (A) if
Form S-3 is not available for such registration; (B) the Shares to be included
in the Resale S-3 would have an aggregate price to the public of less than
$1,000,000; (C) Targeted shall furnish to Biogen a certificate signed by the
president of Targeted stating that (1) Targeted is engaged or has bona fide
plans to engage in a registered public offering or is engaged in any other
activity that, in the good faith judgment of Targeted's board of directors,
would be adversely affected by the requested registration or (2) the requested
registration would involve initial or continuing disclosure obligations that are
not in the best interests of Targeted's shareholders at such time, in which
event Targeted shall have the right to defer the filing of the Resale S-3 for a
period of not more than 90 days after receipt of the request; or (D) Targeted
has already effected a registration statement on Form S-3 or Form S-1 within the
180-day period preceding the date of such request. As used in this Agreement,
"Reasonable Commercial Efforts" shall be determined under the law of the state
 -----------------------------
of Delaware, and shall mean such good faith efforts as are consistent with
efforts made by businesses of similar size and resources in a similar
circumstance and context to achieve the particular result in a timely manner,
but shall not require a party to take actions that would be commercially
unreasonable to such party in that circumstance.

             (ii) In the event Targeted effects the Resale S-3 pursuant to this
Section 3.6.2(a), Targeted shall indemnify and hold harmless Biogen, each
underwriter of such Shares, if any, and each other person, if any, who controls
Biogen or such underwriter within the meaning of the Securities Act or the
Exchange Act against any losses, claims, damages or liabilities, joint or
several, to which Biogen or such underwriter or controlling person may become
subject under

                                      -10-
<PAGE>

the Securities Act, the Exchange Act, state securities or blue sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based on any untrue statement or alleged
untrue statement of a material fact contained in the Resale S-3, any preliminary
prospectus or final prospectus contained in the Resale S-3 (the "Prospectus"),
                                                                 ----------
or arise out of or are based on the omission or alleged omission to state a
material fact required to be stated in the Resale S-3 or necessary to make the
statements in the Resale S-3 not misleading; and Targeted will reimburse Biogen
or such underwriter or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that Targeted will not be liable in any such case to the extent that any such
loss, claim, damages or liability arises out of or is based on an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Resale S-3, the Prospectus or any amendment or supplement of the Resale S-3
or the Prospectus in reliance on and in conformity with written information
furnished to Targeted by or on behalf of Biogen expressly for use in the Resale
S-3 or the Prospectus or any untrue statement in such prospectus or omission of
a material fact required to make a statement not misleading in the Prospectus
that is corrected in any subsequent Prospectus that was delivered to Biogen
before the pertinent sale or sales by Biogen.

     (b)   Inclusion in Affiliate Registration.
           -----------------------------------

     After the second anniversary of the closing date of the Merger and
continuing so long as Biogen is deemed to be an "affiliate" of Targeted, as that
term is defined under the Securities Act, Biogen shall be entitled to include
the Shares in any Demand Registration Statement effected by Targeted pursuant to
the provisions of Section 5.19 of the Merger Agreement, subject to the terms and
conditions of such Section 5.19.

     3.6.3 Company Registration

     If at any time or from time to time Targeted shall determine to register
any of its securities for its own account, other than (a) a registration
relating solely to employee benefit plans or (b) a registration relating solely
to a Rule 145 transaction, Targeted will promptly give Biogen written notice of
such registration and include in such registration all Shares held by Biogen as
of the date of such written notice; provided, however, that such Shares cannot
for whatever reason be sold by Biogen under Rule 144 and provided further that
Biogen shall make a written request for registration of such Shares within 20
days after receipt of such written notice from Targeted.  Notwithstanding the
foregoing, if the managing underwriter determines that marketing factors require
a limitation of the number of shares to be underwritten, the managing
underwriter may limit or exclude some or all of the Shares to be included in
such registration, such limitation or exclusion to be made pro rata with the
shares of all other shareholders also being registered at such time, on the
basis of the number of shares being registered.

     3.6.4 Information

     Targeted shall furnish to Biogen a copy of each document filed by Targeted
with the SEC, and each amendment to Targeted's articles of incorporation and
bylaws adopted, after the date of this Agreement.  The covenants set forth in
this Section 3.6.4 shall terminate and be of no further force or effect if
Biogen ceases to own at least 5% of Targeted's outstanding capital stock.

                                      -11-
<PAGE>

       3.6.5 Indemnification

       Targeted shall indemnify Biogen for losses and expenses resulting from
any breach by Targeted of a covenant, representation or warranty under this
Article 3; provided, however, that under no circumstances shall Biogen be
entitled to any indemnification in excess of the amount paid by Biogen for the
Shares owned by Biogen as of the date of such claim for indemnification.

3.7 Covenants of Biogen
    -------------------

       3.7.1 Market Manipulation

       Beginning upon the date of each Put Request and ending upon the date of
Closing of the related Share Purchase:

       (a) neither Biogen nor any of its affiliates shall sell, transfer the
economic risk of ownership in, make any short sale, pledge or otherwise dispose
of any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any other rights to purchase or acquire Common Stock;

       (b) neither Biogen nor any of its affiliates shall enter into any
contract, undertaking, agreement or arrangement (whether written or oral) with
any third party pursuant to which any of Biogen, its affiliates or such third
party will take, or cause to be taken, any of the actions set forth in
subsection (a).

                                 ARTICLE FOUR
                  REPRESENTATIONS AND WARRANTIES OF TARGETED

       Targeted represents and warrants to Biogen, as of the date of this
Agreement, as follows:

4.1 Organization, Standing and Power
    --------------------------------

       Targeted is a corporation duly organized and validly existing under the
laws of the state of Washington.  Targeted has the corporate power and authority
to own, lease and operate its properties and carry on its business as now being
conducted.  Targeted is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Targeted.  Targeted has
previously provided to Biogen with complete and correct copies of its articles
of incorporation and bylaws as in effect on the date of this Agreement.

4.2 Capital Structure
    -----------------

       (a) (i) The authorized capital stock of Targeted consists of 80,000,000
shares of Common Stock and 6,000,000 shares of preferred stock, par value $0.01
per share. As of July 25, 2000, the issued and outstanding capital stock of
Targeted consisted of 36,446,578 shares of Common Stock and the shares of Series
B convertible exchangeable preferred stock described in subsection (ii) below.

                                      -12-
<PAGE>

            (ii)  Shares of Series B convertible exchangeable preferred stock of
Targeted held by Elan International Services, Ltd. ("Elan") were convertible
                                                     ----
into 3,732,106 shares of Common Stock as of December 31, 1999. If Elan were to
elect to convert these shares of preferred stock on July 21, 2005 (the
expiration of the conversion option), these shares of preferred stock would
convert into 5,740,548 shares of Common Stock. Alternatively, Elan has the
option to exchange this preferred stock and any accumulated dividends for a
30.1% interest in Emerald Gene Systems, Ltd., the subsidiary of which Targeted
owns 80.1%.

            (iii) As of July 25, 2000, Targeted has reserved 3,419,544 shares of
Common Stock for issuance upon the exercise of stock options granted or
available for grant under Targeted's Restated 1992 Stock Option Plan and 1999
Stock Option Plan (collectively, the "Targeted Stock Option Plan"), of which
                                      --------------------------
options to purchase 2,730,241 shares have been issued and are outstanding and
options to purchase 689,303 shares are available for grant. Targeted has
reserved 6,398,175 shares of Common Stock for issuance upon the exercise of
outstanding warrants to purchase Common Stock.

            (iv)  As of the date of this Agreement, there are no other
outstanding shares of capital stock or voting securities of Targeted other than
shares of Common Stock issued after July 25, 2000 (i) upon the exercise of
options issued under the Targeted Stock Option Plan or upon the exercise of
warrants described above and (ii) to Elan pursuant to the Securities Purchase
Agreement dated as of July 21, 1999 and amended August 8, 2000, between Targeted
and Elan (the "Elan Stock Purchase Agreement").
               -----------------------------

     (b) The shares of issued and outstanding capital stock of Targeted have
been duly authorized and validly issued, are fully paid and nonassessable, are
free and clear of any security interests, liens or encumbrances other than any
liens or encumbrances created by or imposed upon the holders of such shares and
such shares have not been issued in violation of and, except the preemptive
right granted by Targeted to Elan in the Securities Purchase Agreement dated as
of July 21, 1999 (which allows Elan to participate in any future equity
financing of Targeted on the same terms and conditions as the investors in such
financing, such that Elan maintains its pro rata interest in Targeted), are not
otherwise subject to any preemptive or other similar rights or rights of first
refusal created by statute, the articles or certificate of incorporation or
bylaws of Targeted or any agreement to which Targeted is a party or by which it
is bound.

     (c) Except (i) as contemplated by this Agreement and the Merger Agreement,
(ii) as provided in the Rights Agreement dated as of October 17, 1996, between
Targeted and ChaseMellon Shareholder Services, LLC, as rights agent (the "Rights
                                                                          ------
Agreement"), and (iii) as provided in the Elan Stock Purchase Agreement, there
---------
are no other options, warrants, calls, rights, commitments, arrangements or
agreements of any character to which Targeted is a party or by which Targeted is
bound obligating Targeted to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of Targeted or obligating Targeted to grant, extend or enter into
any such option, warrant, call, right, commitment, arrangement or agreement.

     (d) There are no voting trusts or other agreements or understandings to
which Targeted is a party with respect to the voting of the capital stock of
Targeted.

                                      -13-
<PAGE>

4.3 Authority
    ---------

       Targeted has all requisite power and authority to execute, deliver and
perform its obligations under this Agreement, the Loan Documents and the Share
Purchase Agreement (collectively, the "Funding Agreements").  The execution and
                                       ------------------
delivery of the Funding Agreements and the consummation of the transactions and
contemplated by the Funding Agreements (including the issuance of Common Stock
pursuant to Article 3 of this Agreement) have been duly authorized by all
necessary corporate action on the part of Targeted.  Each of this Agreement and
the Loan Documents has been, and each Share Purchase Agreement will be, duly
executed and delivered by Targeted, and each of this Agreement and the Loan
Documents constitutes, and each Share Purchase Agreement will constitute, a
valid and legally binding obligation of Targeted, enforceable in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding at equity or at law).

4.4 No Conflict; Required Filings and Consents
    ------------------------------------------

       (a) The execution, delivery and performance of the Funding Agreements by
Targeted do not, and the consummation by Targeted of the transactions
contemplated by the Funding Agreements will not, conflict with or result in any
material violation of or default under (with or without notice or lapse of time,
or both), and do not and will not give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under, (i)
any provision of Targeted's articles of incorporation or bylaws, each as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Targeted or its properties or assets, except in the case of clause (ii) as would
not, individually or in the aggregate, have a Material Adverse Effect on
Targeted.

       (b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any person or entity or
Governmental Entity is required by or with respect to Targeted in connection
with the consummation of the transactions contemplated by the Funding
Agreements, except (i) the filing of appropriate Merger documents as required by
the Delaware General Corporation Law, (ii) the filing of a Form 8-K with the
Securities and Exchange Commission and the National Association of Securities
Dealers, (iii) any filings as may be required under applicable state securities
laws, (iv) the filing with the Nasdaq National Market of a Notification for
Listing of Additional Shares with respect to the shares of Common Stock to be
issued pursuant to Article 3 of this Agreement, (v) such other consents,
approvals, orders, authorizations, registrations, qualifications, designations,
declarations or filings that are required in connection with the Merger or that,
if not obtained or made, would not have a Material Adverse Effect on Targeted or
Biogen, and (vi) filings and notices not required to be made or given until
after the date of this Agreement.

4.5 SEC Reports; Financial Statements
    ---------------------------------

                                      -14-
<PAGE>

       (a) Targeted has filed with the SEC all reports, forms, registration
statements, definitive proxy statements and documents required to be filed with
the SEC since December 31, 1999, and has furnished to Biogen true and complete
copies, in the form filed with the SEC, of (i) its Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, (ii) the proxy statement relating
to its 2000 annual meeting of shareholders, (iii) its annual report to
shareholders for the fiscal year ended December 31, 1999 and (iv) its Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000 (collectively, the
"Targeted SEC Documents"). As of their respective filing dates, the Targeted SEC
 ----------------------
Documents (including all financial statements, exhibits and schedules to and
documents incorporated by reference in the Targeted SEC Documents) (i) complied
in all material respects with the requirements of the Exchange Act and the
Securities Act, and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated or necessary to make the
statements made in the Targeted SEC Documents, in light of the circumstances in
which they were made, not misleading, except to the extent corrected by a
subsequently filed Targeted SEC Document.

       (b) The financial statements of Targeted, including the notes to the
financial statements, included or incorporated by reference in the Targeted SEC
Documents (the "Targeted Financial Statements") were complete and correct in all
                -----------------------------
material respects as of their respective filing dates, complied as to form in
all material respects with applicable accounting requirements and with the
applicable published rules and regulations of the SEC as of their respective
dates, and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the related notes or, in the case of unaudited
statements, included in Quarterly Reports on Forms 10-Q). The Targeted Financial
Statements fairly present the consolidated financial condition and operating
results of Targeted and its subsidiaries at the dates and during the periods
indicated in the Targeted Financial Statements (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). There has been
no change in Targeted accounting policies except in response to SEC Staff
Accounting Bulletin No. 101 and as described in the Targeted SEC Documents.

4.6 Absence of Undisclosed Liabilities
    ----------------------------------

       Targeted has no material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) other than (a) those recorded or
otherwise disclosed in the Targeted Financial Statements, (b) those incurred in
the ordinary course of business and not required to be set forth in the Targeted
Financial Statements under GAAP, in all material respects, (c) those incurred in
the ordinary course of business since the date of the most recent Targeted
Financial Statements filed as part of the Targeted SEC Documents and consistent
with past practice and (d) those incurred in connection with the execution of
the Biogen Transaction Agreements or incurred in connection with the
transactions contemplated in such agreements.

4.7 Absence of Certain Changes
    --------------------------

       Except as set forth in Schedule 3.7 of the Targeted Disclosure Memorandum
attached as Exhibit F to the Merger Agreement (the "Targeted Disclosure
                                                    -------------------
Memorandum"), since December 31, 1999, Targeted has, in all material respects,
----------
conducted its business in the ordinary and usual course consistent with past
practice and there has not occurred:

                                      -15-
<PAGE>

       (a) material amendments or changes to Targeted's articles of
incorporation or bylaws;

       (b) declaration, setting aside, or payment of a dividend or other
distribution in respect to the capital stock of Targeted, or any direct or
indirect redemption, purchase or other acquisition by Targeted of any of its
capital stock;

       (c) issuance or sale by Targeted of any of its shares of capital stock,
or securities exchangeable, convertible or exercisable for its capital stock, or
of any other of its securities;

       (d) agreement by Targeted, or any officer or employee of Targeted on
behalf of Targeted, to do any of the things described in the preceding clauses
(a) through (c), other than in connection with the transactions contemplated by
this Agreement, the Merger Agreement and the Biogen Transaction Agreements.

4.8 Valid Issuance of Stock
    -----------------------

       The Shares, when issued, sold and delivered in accordance with the terms
of Article 3 of this Agreement for the consideration expressed in Article 3,
will be duly and validly issued, fully paid and nonassessable and free of any
liens or encumbrances other than those, if any, created by Biogen, and will be
issued in compliance with all applicable state and federal securities laws.

4.9 Litigation
    ----------

       There is no private or governmental action, suit, proceeding, claim,
arbitration or investigation pending before or, to the knowledge of Targeted or
any of its subsidiaries, threatened by, any Governmental Entity against Targeted
or any of its subsidiaries or any of their respective properties or any of their
respective officers or directors (in their capacities as such) that, if
determined in a manner adverse to Targeted or its subsidiaries would,
individually or in the aggregate, have a Material Adverse Effect on Targeted.
There is no judgment, decree or order against Targeted or any of its
subsidiaries or, to the knowledge of Targeted or any of its subsidiaries, any of
their respective directors or officers (in their capacities as such) that seeks
to prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or has, individually or in the aggregate, a
Material Adverse Effect on Targeted.

4.10 Intellectual Property
     ---------------------

       To Targeted's knowledge, Targeted owns, or licenses or otherwise
possesses legally enforceable rights to use all Intellectual Property that is
used in the business of Targeted as currently conducted by Targeted, except to
the extent that the failure to have such rights would not have, individually or
in the aggregate, a Material Adverse Effect on Targeted. To Targeted's knowledge
and except as set forth in Schedule 3.13 of the Targeted Disclosure Memorandum,
Targeted is the sole and exclusive owner or exclusive or nonexclusive licensee
of, with all right, title and interest in and to (free and clear of any liens),
such Intellectual Property, and has legally enforceable rights (and is not
contractually obligated to pay any compensation to any Person in respect of such
rights) to the use of such Intellectual Property or the material covered by such
Intellectual Property in connection with the services or products in respect of
which such Intellectual Property is being used.

                                      -16-
<PAGE>

                                 ARTICLE FIVE
                   REPRESENTATIONS AND WARRANTIES OF BIOGEN

       Biogen represents and warrants to Targeted, as of the date of this
Agreement, as follows:

5.1 Authority
    ---------

       Biogen has all requisite power and authority to execute, deliver and
perform its obligations under the Funding Agreements.  The execution and
delivery of the Funding Agreements and the consummation of the transactions
contemplated by the Funding Agreements have been duly authorized by all
necessary corporate action on the part of Biogen.  Each of this Agreement and
the Loan Documents has been, and each Share Purchase Agreement will be, duly
executed and delivered by Biogen, and each of this Agreement and the Loan
Documents constitutes, and each Share Purchase Agreement will constitute, a
valid and legally binding obligation of Biogen, enforceable in accordance with
its terms (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, including concepts of materiality, reasonableness, good faith and fair
dealing, regardless of whether in a proceeding at equity or at law).

5.2 No Conflict; Required Filings and Consents
    ------------------------------------------

       (a) The execution, delivery and performance of the Funding Agreements by
Biogen do not, and the consummation by Biogen of the transactions contemplated
by the Funding Agreements will not, conflict with or result in any material
violation of or default under (with or without notice or lapse of time, or
both), and do not and will not give rise to a right of termination, cancellation
or acceleration of any obligation or loss of a benefit under, (i) any provision
of Biogen's articles of incorporation or bylaws, each as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Biogen or its properties or assets,
except in the case of clause (ii) as would not, individually or in the
aggregate, have a Material Adverse Effect on Biogen.

       (b) No consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any person or entity or
Governmental Entity is required by or with respect to Biogen in connection with
the consummation of the transactions contemplated by the Funding Agreements,
except (i) such consents, approvals, orders, authorizations, registrations,
qualifications, designations, declarations or filings that, if not obtained or
made, would not have a Material Adverse Effect on Targeted or Biogen and (ii)
filings and notices not required to be made or given until after the date of
this Agreement.

5.3 Exemption from Registration
    ---------------------------

       Biogen has been advised that none of the Shares to be purchased by Biogen
under Article 3 of this Agreement have been, or as of the date of issuance, will
be, registered under the Securities Act and the rules and regulations of the SEC
promulgated under the Securities Act or

                                      -17-
<PAGE>

applicable state securities laws, but will be offered and sold pursuant to
exemptions from such laws, and that Targeted's reliance upon such exemptions is
predicated in part on Biogen's representations contained in this Article 5.
Biogen is an "accredited investor," as that term is defined under the Securities
Act.

5.4 Purchase Entirely for Own Account
    ---------------------------------

       Biogen will acquire the Shares for investment for its own account, not as
a nominee or agent, and not with a view to the distribution of any part of the
Shares, and Biogen does not have any present intention of selling, granting any
participation in, or otherwise distributing any of the Shares in a manner
contrary to the Securities Act or any applicable state securities law. Biogen
does not have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant participations to any person with respect to
any of the Shares.

5.5 Access to Information
    ---------------------

       Biogen has been furnished such information as it has requested to
evaluate an investment in the Shares. Biogen has been given the opportunity to
ask questions of and receive answers from representatives of Targeted concerning
the terms and conditions of the offering of the Shares and to obtain any
additional information, to the extent reasonably available.

5.6 Restricted Securities
    ---------------------

       Biogen understands that the Shares will be characterized under the
Securities Act as "restricted securities" and that the Shares cannot be sold or
transferred unless subsequently registered under the Securities Act or an
exemption from such registration is available.  Biogen represents that it is
familiar with Rule 144 under the Securities Act, as presently in effect, and
understands the resale limitations imposed by Rule 144 and by the Securities
Act.

5.7 Legends
    -------

       Biogen understands that the certificates evidencing the Shares may bear
legends in substantially the following form:

          The securities evidenced by this certificate have not been registered
          under the Securities Act of 1933, as amended, or applicable state
          securities law (collectively, "the Acts"), and no interest in these
          securities may be sold, distributed, assigned, offered, pledged or
          otherwise transferred unless (i) there is an effective registration
          statement under the Acts covering any such transaction involving these
          securities, (ii) the Company receives an opinion of legal counsel for
          the holder of these securities reasonably satisfactory to the Company
          stating that such transaction is exempt from registration or (iii) the
          Company otherwise satisfies itself that such transaction is exempt
          from registration.

                                      -18-
<PAGE>

As soon as practicable after the registration of Shares in accordance with this
Agreement, Targeted shall, upon receipt of appropriate supporting documentation
as may be reasonably requested by Targeted, authorize the removal of the
restrictive legend from the stock certificate(s) representing such registered
Shares.

5.8 Notices
    -------

       All notices required or permitted to be given under the Funding
Agreements shall be governed by the terms of Section 9.2 of the Merger
Agreement.

5.9 Payment of Expenses
    -------------------

     (a) Subject to the provisions of subsection (b) of this Section 6.2, each
party shall pay its own expenses incident to the negotiation, preparation and
execution of the Funding Agreements (including attorneys' fees and costs).

     (b) If there shall occur any Event of Default under the Note, Biogen shall
be entitled to recover any costs and expenses incurred by Biogen in connection
with the preservation of rights under, and enforcement of, the Loan Documents,
whether or not any lawsuit is commenced (including, without limitation,
reasonable attorneys' fees and costs).

5.10 Amendment and Waiver; Remedies Cumulative
     -----------------------------------------

     (a) Any term or provision of any of the Funding Agreements may be amended
or waived only with the written consent of the parties or their respective
successors and assigns.

     (b) No single or partial exercise of any right, power or privilege under
any of the Funding Agreements, no delay or omission in exercising any right or
remedy, and no course of dealing between the parties shall preclude any other or
further exercise of or the exercise of any other right, power or privilege. The
rights and remedies in the Funding Agreements expressly provided are cumulative
and not exclusive of any other rights or remedies conferred by the Funding
Agreements.

5.11 Entire Agreement and Amendments
     -------------------------------

     The Funding Agreements represent the entire agreement between the parties
with respect to the Loan, the Put Option and the transactions contemplated by
this Agreement and, except as expressly provided in this Agreement, shall not be
affected by reference to any other documents.

5.12 Nonassignability; Parties in Interest
     -------------------------------------

     Except as specifically provided, neither the Funding Agreements nor any of
the rights, interests or obligations under any of the Funding Agreements shall
be assigned by any of the parties (whether by operation of law or otherwise)
without the prior written consent of the other party.  Subject to the preceding
sentence, each of the Funding Agreements will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.

                                      -19-
<PAGE>

5.13 Severability
     ------------

     If any provision of the Funding Agreements is held invalid under applicable
law, the parties agree to renegotiate such provision in good faith, so as to
effect as closely as possible the original intent of the parties with respect to
the provision rendered unenforceable.  In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(a) such provision shall be excluded from such agreement, (b) the balance of
such agreement shall be interpreted as if such provision were so excluded and
(c) the balance of such agreement shall be enforceable in accordance with its
terms.

5.14 Descriptive Headings
     --------------------

     The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.

5.15 Counterparts
     ------------

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

5.16 Governing Law; Venue
     --------------------

     Each of the Funding Agreements, all acts and transactions pursuant to the
Funding Agreements and the rights and obligations of the parties shall be
governed, construed and interpreted in accordance with the laws of the state of
Delaware, without giving effect to principles of conflicts of law.  Each of the
parties consents to the exclusive jurisdiction and venue of the state and
federal courts of the state of New York.

5.17 Rules of Construction
     ---------------------

     The parties agree that they have been represented by counsel during the
negotiation, preparation and execution of the Funding Agreements and therefore
waive the application of any law, regulation, holding or rule of construction
providing that ambiguities in the Funding Agreements will be construed against
the party drafting such agreement.

5.18 Specific Performance
     --------------------

     The parties agree that irreparable damage would occur in the event that any
provision of the Funding Agreements is not performed in accordance with its
terms and that the parties shall be entitled to an injunction or injunctions to
prevent breaches of and to enforce specifically the terms and provisions of such
agreements in any federal or state court in the state of New York, in addition
to any other remedy to which they are entitled at law or in equity.

                                      -20-
<PAGE>

     IN WITNESS WHEREOF, Targeted and Biogen have caused this Agreement to be
duly executed as of the date first above written.

                              TARGETED GENETICS CORPORATION

                              By: /s/ H. Stewart Parker
                                 ----------------------
                              Name: H Stewart Parker
                              Its: President & CEO

                              BIOGEN, INC.

                              By: /s/ James C. Mullen
                                  -------------------
                              Name: James C. Mullen
                              Its: President

                                      -21-
<PAGE>

                                   EXHIBIT A
                           to the Funding Agreement

                                PROMISSORY NOTE

$10,000,000                                                      August __, 2000

     For value received, the undersigned, TARGETED GENETICS CORPORATION
("Targeted"), promises to pay to the order of BIOGEN, INC. ("Biogen"), at 14
  --------                                                   ------
Cambridge Center, Cambridge, Massachusetts  02142, or such other place or places
as the holder of this Note may designate in writing, the principal sum of the
lesser of (a) Ten Million Dollars ($10,000,000) and (b) so much of such
principal sum as has been advanced by Biogen to Targeted, in accordance with the
terms and conditions of the Funding Agreement, dated as of the date of this
Note, by and between Targeted and Biogen (together with all supplements,
exhibits, amendments and modifications to such agreement, the "Funding
                                                               -------
Agreement").  Targeted also promises to pay interest on the unpaid principal
---------
balance of this Note, commencing as of the first date of an advance under this
Note, in like money in accordance with the terms and conditions of, and at the
rate or rates provided in, the Funding Agreement.  All such interest is payable
annually, commencing one year from the first date of an Advance under this Note.
All principal is due and payable in full on the Maturity Date or such earlier
date as provided in the Funding Agreement.

     Targeted waives presentment for payment, demand, notice of nonpayment,
notice of protest and protest of this Note, and all other notices in connection
with the delivery, acceptance, performance, default, dishonor or enforcement of
the payment of this Note, except such notices as are specifically required by
this Note or by the Funding Agreement, and agrees that its liability shall be
unconditional without regard to the liability of any other party and shall not
be in any manner affected by any indulgence, extension of time, renewal, waiver
or modification granted or consented to by Biogen.  Targeted consents to any and
all extensions of time, renewals or waivers that may be granted by Biogen with
respect to payment or other provisions of this Note and the Funding Agreement.

     This Note is the Note referred to in the Funding Agreement and as such is
entitled to all of the benefits and obligations specified in the Funding
Agreement.  Reference is made to the Funding Agreement for provisions for the
repayment of this Note and the acceleration of the maturity of this Note.

     All capitalized terms used and not otherwise defined in this Note shall
have the meanings given to such terms in the Funding Agreement.

                              TARGETED GENETICS CORPORATION

                              By __________________________
                              Name ________________________
                              Its _________________________

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