Document:

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                                                                    Exhibit 10.7

                                 ALKERMES, INC.

                             1999 STOCK OPTION PLAN

                                   ARTICLE I

                                     PURPOSE

     The purpose of the 1999 Stock Option Plan (the "Plan") is to enable
Alkermes, Inc. (the "Company") to offer to certain officers, employees,
directors and consultants of the Company or any of its Subsidiaries options to
acquire equity interests in the Company, thereby helping to attract, retain and
reward such persons, and strengthen the mutuality of interests between such
persons and the Company's shareholders.

                                   ARTICLE II

                                   DEFINITIONS

     For purposes of the Plan, the following terms shall have the following
meanings:

     2.1 "ADMINISTRATOR" shall mean the Board or, if the Board has delegated its
responsibility to administer the Plan pursuant to Section 3.1, the committee
and/or subcommittee of the Board to which such responsibility has been
delegated.

     2.2 "BOARD" shall mean the Board of Directors of the Company.

     2.3 "CHANGE OF CONTROL" shall mean

          (a) The acquisition, directly or indirectly, other than from the
Company, by any person, entity or "group" (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), excluding, for this purpose, the Company, it subsidiaries, and
any employee benefit plan of the Company or its subsidiaries which acquires
beneficial ownership of voting securities of the Company) (a "Third Party") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or

          (b) Individuals who, as of December 14, 2000, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to such date whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the Incumbent
Directors who are directors at the time of such vote shall be, for purposes of
this Agreement, an Incumbent Director; or

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          (c) Consummation of (i) a reorganization, merger or consolidation, in
each case, with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or consolidation (other
than the acquiror) do not, immediately thereafter, beneficially own more than
50% of the combined voting power of the reorganized, merged or consolidated
company's then outstanding voting securities entitled to vote generally in the
election of directors, or (ii) a liquidation or dissolution of the Company or
the sale of all or substantially all of the assets of the Company (whether such
assets are held directly or indirectly) to a Third Party.

     2.4 "CODE" shall mean the Internal Revenue Code of 1986, as amended.

     2.5 "COMMON STOCK" shall mean the Common Stock, par value $.01 per share,
of the Company.

     2.6 "DISABILITY" shall mean a disability that results in a Participant's
Termination of Employment, as determined pursuant to standard Company
procedures.

     2.7 "EFFECTIVE DATE" shall mean the date on which the Plan is adopted by
the Board.

     2.8 "FAIR MARKET VALUE" for purposes of the Plan, unless otherwise required
by any applicable provision of the Code or any regulations issued thereunder,
shall mean, as of any date, the average of the high and low sales prices of a
share of Common Stock as reported on the principal national securities exchange
on which the Common Stock is listed or admitted to trading, or, if not listed or
traded on any such exchange, on the Nasdaq Stock Market ("Nasdaq"), or, if such
sales prices are not available, the average of the bid and asked prices per
share reported on Nasdaq, or, if such quotations are not available, the fair
market value as determined by the Board, which determination shall be
conclusive.

     2.9 "INCENTIVE STOCK OPTION" shall mean any Stock Option that is intended
to be and is designated as an "incentive stock option" within the meaning of
Section 422 of the Code.

     2.10 "NON-QUALIFIED STOCK OPTION" shall mean any Stock Option that is not
an Incentive Stock Option.

     2.11 "PARTICIPANT" shall mean an officer, employee, director or consultant
of the Company or a Subsidiary to whom an Option has been granted under the
Plan.

     2.12 "STOCK OPTION" or "OPTION" shall mean any option to purchase shares of
Common Stock granted pursuant to Article VI of the Plan.

     2.13 "SUBSIDIARY" shall mean any corporation, limited partnership, limited
liability company or any other entity of which the Company owns more than 50% of
the voting stock or equity or a controlling interest.

     2.14 "TERMINATION OF EMPLOYMENT" shall mean, as appropriate, (a) the
termination of a Participant's employment with the Company and its subsidiaries
for reasons

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other than a military or personal leave of absence granted by the Company, (b)
termination of a Participant's consulting relationship with the Company or (c)
termination of a Participant's service as a member of the Board.

                                  ARTICLE III

                                 ADMINISTRATION

     3.1 THE ADMINISTRATOR. The Plan shall be administered and interpreted by
the Board; provided, however, that the Board may delegate this responsibility to
a committee, which may in turn delegate this responsibility to a subcommittee
thereof, each such committee and subcommittee to be comprised of two or more
members of the Board; and provided further, however, that notwithstanding the
foregoing, the Board may also delegate to a committee, which may in turn
delegate to a subcommittee thereof, each such committee and subcommittee to be
comprised of one or more members of the Board, the authority to grant from time
to time Options to purchase not more than 5,000 shares of Common Stock to each
person eligible under Article V (who is not subject to the reporting
requirements of Section 16(a) of the Securities Exchange Act of 1934, as
amended).

     3.2 AWARDS. The Administrator shall have full authority to grant, pursuant
to the terms of the Plan, Stock Options to persons eligible under Article V. In
particular, the Administrator shall have the authority:

          (a) to select the officers, employees, directors and consultants to
whom Stock Options may from time to time be granted;

          (b) to determine whether and to what extent Stock Options are to be
granted to one or more officers, employees, directors and consultants eligible
to receive Options under Article V;

          (c) to determine the number of shares of Common Stock to be covered by
each Option granted pursuant to Article VI; and

          (d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Option granted under Article VI (including, but not
limited to, the option price, the option term, installment exercise or waiting
period provisions and provisions relating to the waiver or acceleration
thereof).

     3.3 GUIDELINES. Subject to Article VII hereof, the Administrator shall have
the authority to adopt, alter and repeal such administrative rules, guidelines
and practices governing the Plan as it shall, from time to time, deem advisable;
to interpret the terms and provisions of the Plan and any Option granted under
the Plan (and any agreements relating thereto); and to otherwise supervise the
administration of the Plan. The Administrator may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any Option in the
manner and to the extent it shall deem necessary to carry out the purposes of
the Plan. Notwithstanding the foregoing, no action of the Administrator under
this Section 3.3 shall impair the rights of any Participant without the
Participant's consent, unless otherwise required by law.

     3.4 DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by the Administrator arising out of or in connection with
the Plan shall be final, binding and conclusive on the Company, all
Participants, officers, employees, directors and consultants, and their
respective heirs, executors, administrators, successors and assigns.

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                                   ARTICLE IV

                                SHARE LIMITATION

     4.1 SHARES. The maximum aggregate number of shares of Common Stock that may
be issued under the Plan is Nine Million Nine Hundred Thousand (9,900,000)
(subject to increase or decrease pursuant to Section 4.2), which may be either
authorized and unissued shares of Common Stock or authorized and issued shares
of Common Stock reacquired by the Company. If any Option granted under the Plan
shall expire, terminate or be cancelled for any reason without having been
exercised in full, the number of shares of Common Stock not purchased under such
Option shall again be available for the purposes of the Plan.

     4.2 CHANGES. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a regular cash dividend), stock split, or
other change in corporate structure affecting the Common Stock, such
substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the maximum number of shares with
respect to which Options may be granted to any individual during any year, and
the number and option price of shares subject to outstanding Options, as may be
determined to be appropriate by the Board, in its sole discretion, provided that
the number of shares subject to any Option shall always be a whole number.

                                   ARTICLE V

                                  ELIGIBILITY

     5.1 EMPLOYEES. Officers and other employees of the Company or any of its
Subsidiaries are eligible to be granted both Incentive Stock Options and
Non-Qualified Stock Options under the Plan.

     5.2 DIRECTORS AND CONSULTANTS. Directors and consultants of the Company or
any of its Subsidiaries are eligible to be granted Non-Qualified Stock Options,
but may not receive Incentive Stock Options unless they are employees of the
Company or a Subsidiary corporation within the meaning of Section 424 of the
Code.

                                   ARTICLE VI

                             GRANT OF STOCK OPTIONS

     6.1 GRANTS. The Administrator shall have the authority to grant to any
person, to the extent eligible under Article V, one or more Incentive Stock
Options, Non-Qualified Stock Options, or both types of Stock Options. To the
extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify as
an Incentive Stock Option shall constitute a separate Non-Qualified Stock
Option.

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     6.2 INCENTIVE STOCK OPTIONS. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.

     6.3 TERMS OF OPTIONS. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable:

          (a) STOCK OPTION CERTIFICATE. Each Stock Option shall be evidenced by,
and subject to the terms of, a Stock Option Certificate executed by the Company.
The Stock Option Certificate shall specify whether the Option is an Incentive
Stock Option or a Non-Qualified Stock Option, the number of shares of Common
Stock subject to the Stock Option, the option price, the option term, and the
other terms and conditions applicable to the Stock Option.

          (b) OPTION PRICE. The option price per share of Common Stock to be
delivered upon exercise of a Stock Option shall be determined by the
Administrator at the time of grant, but shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.

          (c) OPTION TERM. The term of each Stock Option shall be fixed by the
Administrator at the time of grant, but no Stock Option shall be exercisable
more than ten years after the date it is granted.

          (d) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at the time of grant; provided, however, that the Administrator
may waive any installment exercise or waiting period provisions, in whole or in
part, at any time after the date of grant, based on such factors as the
Administrator shall deem appropriate in its sole discretion.

          (e) METHOD OF EXERCISE. Subject to such installment exercise and
waiting period provisions as may be imposed by the Administrator, Stock Options
may be exercised in whole or in part at any time during the option term by
delivering to the Company written notice of exercise specifying the number of
shares of Common Stock to be purchased and the aggregate option price therefor.
The notice of exercise shall be accompanied by payment in full of the option
price and, if requested by the Company, by the representation described in
Section 9.2. Payment of the option price may be made (i) in cash or by check
payable to the Company, (ii) unless otherwise determined by the Administrator on
or after the date of grant, in shares of Common Stock duly owned by the
Participant (and for which the Participant has good title, free and clear of any
liens and encumbrances) or (iii) in the case of an Option that is not an
Incentive Stock Option unless otherwise determined by the Administrator on or
after the date of grant, by reduction in the number of shares of Common Stock
issuable upon such exercise, based, in each case, on the Fair Market Value of
the Common Stock on the date of exercise. Upon satisfaction of the conditions
provided herein, a stock certificate representing the number of shares of

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Common Stock to which the Participant is entitled shall be issued and delivered
to the Participant.

          (f) DEATH. Unless otherwise determined by the Administrator on or
after the date of grant, in the event of a Participant's Termination of
Employment by reason of death, any Stock Option held by such Participant which
was exercisable on the date of death may thereafter be exercised by the legal
representative of the Participant's estate until the earlier of one year after
the date of death or the expiration of the stated term of such Stock Option, and
any Stock Option not exercisable on the date of death shall be forfeited.

          (g) DISABILITY. Unless otherwise determined by the Administrator on or
after the date of grant, in the event of a Participant's Termination of
Employment by reason of Disability, any Stock Option held by such Participant
that was exercisable on the date of such Termination of Employment may
thereafter be exercised by the Participant until the earlier of one year after
such date or the expiration of the stated term of such Stock Option, and any
Stock Option not exercisable on the date of such Termination of Employment shall
be forfeited. If the Participant dies during such one-year period, any
unexercised Stock Options held by the Participant at the time of death may
thereafter be exercised by the legal representative of the Participant's estate
until the earlier of one year after the date of the Participant's death or the
expiration of the stated term of such Stock Option. If an Incentive Stock Option
is exercised after the expiration of the exercise period that applies for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.

          (h) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Administrator on or after the date of grant, in the event of a Participant's
Termination of Employment by reason of retirement or for any reason other than
death or Disability, any Stock Option held by such Participant which was
exercisable on the date of such Termination of Employment may thereafter be
exercised by the Participant until the earlier of three months after such date
or the expiration of the stated term of such Stock Option, and any Stock Option
not exercisable on the date of Termination of Employment shall be forfeited.

          (i) CHANGE OF CONTROL. Notwithstanding the provisions of Section 4.2,
in the event of a Change of Control, all outstanding Stock Options shall
immediately become fully exercisable, and upon payment by the Participant of the
option price (and, if requested, delivery of the representation described in
Section 9.2), a stock certificate representing the Common Stock covered thereby
shall be issued and delivered to the Participant; provided, however, that the
exercisability of the Stock Options shall not be accelerated if, in the opinion
of the Board, such acceleration would prevent pooling of interests accounting
treatment for the Change of Control transaction and such accounting treatment is
desired by the parties to such transaction. This Section 6.3(i) shall apply to
any outstanding Stock Options which are Incentive Stock Options to the extent
permitted by Code Section 422(d), and any outstanding Incentive Stock Options in
excess thereof shall, immediately upon the occurrence of such a Change of
Control be treated for all purposes of the Plan as Non-Qualified Stock Options
and shall be immediately exercisable as set forth in this Section 6.3(i).

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          (j) MERGER AND OTHER FUNDAMENTAL TRANSACTIONS. In the event the
Company is succeeded by another company in a reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation, the
successor company shall assume all of the outstanding Options granted under this
Plan or shall substitute new options for them, which shall provide that each
Participant, at the same cost, shall be entitled upon the exercise of each such
option to receive such securities as the Board of Directors (or equivalent
governing body) of the succeeding, resulting or other company shall determine to
be equivalent, as nearly as practicable, to the nearest whole number and class
of shares of stock or other securities to which the Participant would have been
entitled under the terms of the agreement governing the reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation as
if, immediately prior to such event, the Participant had been the holder of
record of the number of shares of Common Stock which were then subject to the
outstanding Option granted under this Plan.

          (k) NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator on or after the date of grant, Stock Options shall not be
transferrable by the Participant otherwise than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant.

          (l) INCENTIVE STOCK OPTION LIMITATIONS. To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any Subsidiary or parent corporation
(each within the meaning of Section 424 of the Code) exceeds $100,000, such
Options shall be treated as Options which are not Incentive Stock Options.

          (m) TEN-PERCENT SHAREHOLDER RULE. Notwithstanding any other provision
of the Plan to the contrary, no Incentive Stock Option shall be granted to any
person who, immediately prior to the grant, owns stock possessing more than ten
percent of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation (each within the meaning of
Section 424 of the Code), unless the option price is at least 110% of the Fair
Market Value of the Common Stock on the date of grant and the Option, by its
terms, expires no later than five years after the date of grant.

     Should any of the foregoing provisions not be necessary in order for the
Stock Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Board may amend the Plan accordingly, without the
necessity of obtaining the approval of the shareholders of the Company.

     6.4 RIGHTS AS SHAREHOLDER. A Participant shall not be deemed to be the
holder of Common Stock, or to have any of the rights of a holder of Common
Stock, with respect to shares subject to an Option, unless and until the Option
is exercised and a stock certificate representing such shares of Common Stock is
issued to the Participant.

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                                  ARTICLE VII

                            TERMINATION OR AMENDMENT

     7.1 TERMINATION OR AMENDMENT OF PLAN. The Board may at any time amend,
discontinue or terminate the Plan or any part thereof (including any amendment
deemed necessary to ensure that the Company may comply with any regulatory
requirement referred to in Article IX) or amend any Option previously granted,
prospectively or retroactively (subject to Article IV); provided, however, that,
in either case unless otherwise required by law, the rights of a Participant
with respect to Options granted prior to such amendment, discontinuance or
termination may not be impaired without the consent of such Participant and,
provided further, that the Company will seek the approval of the Company's
shareholders for any amendment if such approval is necessary to comply with the
Code, Federal or state securities laws or any other applicable rules or
regulations.

                                  ARTICLE VIII

                                  UNFUNDED PLAN

     8.1 UNFUNDED STATUS. The Plan is intended to constitute an "unfunded" plan
for incentive compensation. With respect to any payment not yet made to a
Participant by the Company, nothing contained herein shall give any such
Participant any rights that are greater than those of a general creditor of the
Company.

                                   ARTICLE IX

                               GENERAL PROVISIONS

     9.1 NONASSIGNMENT. Except as otherwise provided in the Plan, any Option
granted hereunder and the rights and privileges conferred thereby shall not be
sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Option, right or privilege contrary to
the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Option and the rights and privileges conferred thereby shall
immediately terminate and the Option shall immediately be forfeited to the
Company.

     9.2 LEGEND. The Company may require each person acquiring shares upon
exercise of an Option to represent to the Company in writing that the
Participant is acquiring the shares for the Participant's own account and
without a view to the distribution thereof. The stock certificates representing
such shares may include any legend which the Company deems appropriate to
reflect any restrictions on transfer.

     All certificates representing shares of Common Stock delivered under the
Plan shall be subject to such stop transfer orders and other restrictions as the
Company may deem advisable under the rules, regulations and other requirements
of the Securities and Exchange

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Commission, any stock exchange or stock market upon which the Common Stock is
then listed or traded, any applicable Federal or state securities law, and any
applicable corporate law, and the Company may cause a legend or legends to be
put on any such certificates to make appropriate reference to such restrictions.

     9.3 OTHER PLANS. Nothing contained in the Plan shall prevent the Company
from adopting other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.

     9.4 NO RIGHT TO EMPLOYMENT. Neither the Plan nor the grant of any Option
shall give any Participant or other officer, employee, consultant or director
any right with respect to continuance of office, employment, consulting
relationship or directorship, as the case may be, with the Company or any
Subsidiary, nor shall the Plan impose any limitation on the right of the Company
or any Subsidiary by which a Participant is employed to terminate a
Participant's office, employment or consulting relationship at any time. Neither
the Plan nor the grant of any Option shall give any director the right to
continue as a member of the Board or obligate the Company to nominate any
director for reelection by the Company's shareholders.

     9.5 WITHHOLDING OF TAXES. The Company shall have the right to reduce the
number of shares of Common Stock otherwise deliverable upon exercise of an
Option by an amount that would have a Fair Market Value equal to the amount of
all Federal, state and local taxes required to be withheld, or to deduct the
amount of such taxes from any cash payment otherwise to be made to the
Participant, pursuant to the Plan or otherwise. In connection with such
withholding, the Company may make such arrangements as are consistent with the
Plan as it may deem appropriate.

     9.6 LISTING AND OTHER CONDITIONS.

          (a) If the Common Stock is listed on a national securities exchange or
Nasdaq, the issuance of any shares of Common Stock upon exercise of an Option
shall be conditioned upon such shares being listed on such exchange or Nasdaq.
The Company shall have no obligation to issue any shares of Common Stock unless
and until such shares are so listed, and the right to exercise any Option shall
be suspended until such listing has been effected.

          (b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock upon exercise of an Option is or
may in the circumstances be unlawful or result in the imposition of excise taxes
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or registration under
the Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Options, and the right to exercise any Option shall be suspended
until, in the opinion of such counsel, such sale or delivery shall be lawful or
shall not result in the imposition of excise taxes.

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          (c) Upon termination of any period of suspension under this Section
9.6, any Option affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend the term of any Option.

     9.7 GOVERNING LAW. The Plan and actions taken in connection herewith shall
be governed and construed in accordance with the laws of the Commonwealth of
Pennsylvania without regard to the conflict of law principles thereof.

     9.8 CONSTRUCTION. Wherever any words are used in the Plan in the masculine
gender they shall be construed as though they were also used in the feminine
gender in all cases where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though they were also
used in the plural form in all cases where they would so apply.

     9.9 LIABILITY OF THE BOARD. No member of the Board nor any employee of the
Company or any of its Subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any other member of the Board
or officer or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself or herself.

     9.10 COSTS. The Company shall bear all expenses incurred in administering
the Plan, including expenses related to the issuance of Common Stock upon
exercise of Options.

     9.11 SEVERABILITY. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.

     9.12 SUCCESSORS. The Plan shall be binding upon and inure to the benefit of
any successor or successors of the Company.

     9.13 HEADINGS. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.

                                   ARTICLE X

                                  TERM OF PLAN

     10.1 EFFECTIVE DATE. The Plan shall be effective as of the Effective Date,
but the grant of any Option hereunder is subject to the express condition that
the Plan be approved by the shareholders of the Company within 12 months after
the Effective Date.

     10.2 TERMINATION DATE. Unless sooner terminated, the Plan shall terminate
ten years after the Effective Date and no Options may be granted thereafter.
Termination of the Plan shall not affect Options granted before such date.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

                                                                   Exhibit 10.16
                                                                  Execution Copy

                        MANUFACTURE AND SUPPLY AGREEMENT

     This MANUFACTURE AND SUPPLY AGREEMENT is made and effective as of January
1, 2000 (the "EFFECTIVE DATE"), by and between Genentech, Inc., a Delaware
corporation having an address of One DNA Way, South San Francisco, CA, 94080
("Genentech") and Alkermes Controlled Therapeutics, Inc., a Pennsylvania
corporation having an address at 64 Sidney Street, Cambridge, Massachusetts
02139-4136 ("Alkermes") (each singularly a "PARTY" and collectively the
"PARTIES"):

     RECITALS:

     A.   Genentech manufactures and markets various formulations of human
growth hormone; and

     B.   Alkermes has developed sustained release PLGA technology for
formulating human proteins; and

     C.   Genentech and Alkermes have entered into that certain License
Agreement dated April 14, 1999 (as may be amended from time to time, the
"License Agreement") through which Alkermes granted Genentech certain licenses
to Alkermes' technology related to sustained release formulations of recombinant
human growth hormone; and

     D.   Genentech and Alkermes are now entering into this Manufacture and
Supply Agreement related to the supply by Genentech of bulk human growth
hormone, and the processing by Alkermes of said bulk into finished form
sustained release formulations of human growth hormone in accordance with the
terms and conditions set forth below.

     NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth below, the Parties agree as follows:

                             SECTION 1: DEFINITIONS

     The following terms have the following meanings in this Agreement:

     1.1  "ADMINISTRATION NEEDLES" means the needles currently intended for and,
to be provided by Alkermes for use with Finished Product.

     1.2  "AGREEMENT" means this Manufacture and Supply Agreement, including any
exhibits, schedules or attachments attached and incorporated into this Agreement
(including the Specifications), and any valid amendments to any of the
foregoing.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     1.3  "ALKERMES MATERIALS" means all materials that Alkermes is obligated to
furnish for Processing, including, without limitation, Administration Needles,
Nutropin Depot Diluent and Packaging Materials.

     1.4  "BATCH" means a single lot comprised of the number(s) of Dosage
Containers OR volume of Bulk Product the Parties may agree upon in writing from
time to time.

     1.5  "BULK INTERMEDIATES" means bulk rhGH-containing powders derived from
both the PPP (protein powder process) and MSP (microsphere process)
manufacturing steps.

     1.6  "BULK PRODUCT" means bulk rhGH-containing solutions provided to
Alkermes by Genentech for Processing.

     1.7  "CAMPAIGN" means Processing of a Batch or Batch(es) during a specified
time period without interruption (except as customary between Batches).

     1.8  "CGMPS" mean the current Good Manufacturing Practices for Finished
Pharmaceuticals pursuant to 21 C.F.R. 211 ET SEQ., as amended from time to time,
and any foreign equivalents thereof.

     1.9  "DEDICATED EQUIPMENT" shall mean all parts of the process train which
are in direct contact with Genentech Materials at any stage of the Processing.

     1.10 "DOSAGE CONTAINER" means any final dosage form container(s) the
Parties may agree upon in writing from time to time.

     1.11 "EFFECTIVE DATE" is defined in the introductory paragraph.

     1.12 "FACILITIES" means the Alkermes manufacturing facility located at 281
Albany Street, Cambridge, Massachusetts.

     1.13 "FINISHED FORM" means Bulk Product Processed into vialed, unlabeled
Dosage Containers, together with Nutropin Depot Diluent and/or Administration
Needles.

     1.14 "FINISHED PRODUCT" means Finished Form together with Packaging
Materials.

     1.15 "GENENTECH EQUIPMENT" is defined in SECTION 2.2.

     1.16 "GENENTECH MATERIALS" means all materials that Genentech provides to
Alkermes for Processing or that result from Processing, including intermediate
inventories of Bulk Product, Finished Form and Finished Product.

     1.17 "GENENTECH'S DISTRIBUTORS" shall have the meaning set forth in Section
1.23 of the License Agreement.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     1.18 "LICENSE AGREEMENT" shall have the meaning set forth in Recital C
above.

     1.19 "LOST FINISHED PRODUCT" is defined in SECTION 4.3.

     1.20 "NET SALES PRICE" means "Net Sales" as defined in the License
Agreement divided by the number of vials sold.

     1.21 "NUTROPIN DEPOT DILUENT" means the diluent for use as a component of
Bulk Product to constitute Finished Form.

     1.22 "PACKAGING MATERIALS" means all boxes, labels, package inserts,
shipping containers and other materials required under the Specifications.

     1.23 "PROCESS" or "PROCESSING" means the aseptic processing, manufacturing,
testing and/or packaging of Bulk Product into Finished Product in accordance
with this Agreement (including the Specifications).

     1.24 "PROCESSING DATE" means the day on which Processing is scheduled to
commence or does commence.

     1.25 "PROCESSING FEES" are defined in SECTION 6.1.

     1.26 "PROCESSING PLAN" is defined in SECTION 3.1.

     1.27 "PROPRIETARY INFORMATION" shall have the meaning ascribed to the term
"Confidential Information" in Section 8 of the License Agreement.

     1.28 "REGULATORS" means the United States Food and Drug Administration or
foreign counterpart and any other governmental entity (federal, state, local or
foreign) with jurisdiction over Processing under this Agreement.

     1.29 "RHGH" shall mean recombinant human growth hormone.

     1.30 "SPECIFICATIONS" means the procedures, requirements, standards,
quality control testing and other data and the scope of services, as all of the
foregoing are set forth in EXHIBITS A and B attached and incorporated into this
Agreement, and any valid amendments or modifications to any of the foregoing.
The Specifications may be amended upon mutual written agreement of the Parties
and there may be separate and different specifications for Finished Product to
be supplied to Genentech and any of Genentech's Distributors to accommodate
foreign Regulatory requirements which separate specifications shall be subject
to mutual agreement of the Parties, which agreement shall not be unreasonably
withheld or delayed. If there is any conflict between the terms of this
Agreement and the Specifications, this Agreement will control.

     1.31 "SUPPLY FORECAST" is defined in SECTION 3.1.

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     1.32 "TERM" is defined in SECTION 8.1.

                  SECTION 2: PROCESSING SUPPLIES AND EQUIPMENT

     2.1  PROCESSING SUPPLIES. Subject to the other terms of this Agreement,
during the Term:

          (a)  ALKERMES MATERIALS AND FACILITIES. Alkermes will make available
at the Facilities for Processing all Alkermes Materials in quantities sufficient
to meet the Processing Plan, and will perform the Processing pursuant to the
terms of this Agreement. As further described in the License Agreement, and
except as otherwise agreed by the Parties (including pursuant to Section 2.2
below), Alkermes shall be responsible for, and shall bear the capital costs
(including, without limitation, costs of construction of Facilities, equipment
purchases and mechanical installation) associated with, manufacturing process
scale-up and Facility construction as reasonably necessary to Process in
accordance with the Supply Forecast. For non-capital costs related to
manufacturing scale-up and expansion of capacity to meet the Supply Forecasts
(including, without limitation, costs of process development, qualification,
validation and regulatory filings), such costs shall be borne by the Parties as
follows: [***].

          (b)  GENENTECH MATERIALS. At no cost to Alkermes, Genentech will
supply to Alkermes for Processing all Genentech Materials in quantities
sufficient to meet the Processing Plan. Genentech will supply Bulk Product for
Processing and representative satellite samples for testing at least fourteen
(14) days before its scheduled Processing Date. Prior to Processing, Alkermes
will test all Bulk Product received in accordance with the Specifications and
will notify Genentech of all test results. In the event that such Bulk Product
does not pass any test required by the Specifications, Alkermes agrees to
consult with Genentech and to determine the steps necessary to make a final
disposition of the Bulk Product. Genentech, at its sole discretion, shall choose
the mode of transportation and the carrier, and will be responsible for all
shipper damage claims relating to delivery of Genentech Materials to Alkermes.
Alkermes will provide reasonable assistance in connection with any such claim at
Genentech's request and expense.

     2.2  GENENTECH EQUIPMENT. Genentech may purchase from Alkermes certain
capital equipment on mutually acceptable terms and conditions and install
certain of its own capital equipment at the Facilities at its own expense and at
times and under conditions reasonably acceptable to Alkermes, all for use in
Processing. All such capital equipment at the Facilities is referred to as the
"GENENTECH EQUIPMENT".

     2.3  EXCLUSIVITY. Alkermes will use Genentech Materials, Dedicated
Equipment and Genentech Equipment solely and exclusively for Processing, and
Alkermes will dedicate the necessary suite or suites in the Facilities solely
and exclusively to manufacture Bulk Intermediate or vialing during each Campaign
during the Term. Alkermes agrees not to use the Facilities for processing of any
antibiotic or cytotoxic materials during the Term, but may use the suite or
suites in the Facilities for processing of other materials when not dedicated to
Genentech,

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

provided that Alkermes reasonably cooperates with Genentech, in the evaluation
and elimination of potential concerns regarding cross-contamination in light of
applicable Regulator requirements and recommendations (including cGMPs).
Alkermes' cooperation will include, if requested by Genentech, providing
Genentech with [***] notice (provided that no such [***] period shall apply to
Alkermes' manufacture of [***]) of other materials to be processed in the
Facilities and post-processing cleaning methods, subject to applicable
confidentiality obligations. Alkermes may request on a case by case basis that
Genentech consent to shorten such notice period, and Genentech shall not
unreasonably withhold such consent.

     2.4  STORAGE, HANDLING AND CLEANING OF GENENTECH EQUIPMENT, DEDICATED
EQUIPMENT AND GENENTECH MATERIALS. Alkermes will store and handle all Genentech
Materials, Dedicated Equipment and Genentech Equipment under storage conditions
consistent with Alkermes' standard operating procedures, at Alkermes' expense,
in accordance with this Agreement. Promptly before and after each Campaign,
Alkermes will clean and service all Genentech Equipment, Dedicated Equipment and
all other Alkermes machinery, equipment and utilities used in Processing in
compliance with the Specifications and applicable standard operating procedure.
Alkermes will (i) keep Bulk Product, Finished Product and Finished Form
segregated at all times from other pharmaceutical, biological or chemical agents
at Alkermes, and will (ii) securely store moveable Genentech Equipment and
Dedicated Equipment in segregated storage when not in use for Processing or
being cleaned, in each case pursuant to procedures agreed upon in advance by the
parties. Alkermes will take such actions as are reasonably necessary to protect
Genentech Materials, Dedicated Equipment and Genentech Equipment located at
Alkermes from damage, destruction, deterioration or other harm. Alkermes will
supply Genentech with monthly reports specifying their current inventories of
Bulk Product, Finished Form, Finished Product, Dosage Containers and Packaging
Materials. In addition, Alkermes and Genentech shall agree on mutually
acceptable inventory procedures to assure compliance with FDA and financial
auditing requirements.

                     SECTION 3: PURCHASE ORDERS; PROCESSING

     3.1  GENENTECH SUPPLY FORECAST AND PROCESSING PLAN.

     (a)  SUPPLY FORECAST. At least thirty (30) days prior to the start of each
calendar [***], Genentech will provide Alkermes with Genentech's good faith
non-binding written projection of Processing for which Alkermes shall be
responsible for the next [***], including estimates of the Genentech Materials
to be delivered to Alkermes during such period and the nature of the Processing
to be performed, which rolling [***] forecast, as amended from time to time by
Genentech, shall be the "SUPPLY FORECAST". Notwithstanding the foregoing, if
during any given calendar [***] Genentech reasonably believes that the most
recently delivered Supply Forecast is no longer an accurate projection,
Genentech shall promptly inform Alkermes as to the circumstances that have
changed and if necessary, deliver a new Supply Forecast with corrected
projections.

     (b)  PROCESSING PLAN. Based on factors including anticipated demand, the
Supply Forecast, the availability of Alkermes' Processing capacity in the
Facilities and comparable

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

Alkermes facilities, changes in Batch sizes, Dosage Containers and/or
Specifications, and anticipated changes in any of the foregoing, on an on-going
basis during the Term, Genentech no later than sixty (60) days before the start
of each calendar [***] will provide Alkermes with a written processing plan
(each, a "PROCESSING PLAN") for [***]. Among other things, each Processing Plan
shall specify the Genentech Materials to be delivered to Alkermes during the
period covered by such Processing Plan, the amount of Bulk Product (expressed in
kilograms) to be delivered to Alkermes for Processing, the nature of the
Processing to be performed (including whether Bulk Product should be Processed
into Finished Product or Finished Form, the number of Dosage Containers (vials)
of each that Genentech requests to be delivered, and the amount of material, by
weight, to be placed in such Dosage Containers), and the approximate timing of
shipment of Finished Form and/or Finished Product. [***] Each Processing Plan
shall be binding as to the first [***] and non-binding as to the next [***]. In
the event that Genentech delivers a Processing Plan to Alkermes that widely
diverges (unless agreed to by the parties taking into account then current
circumstances, divergences of greater than [***] shall be considered "wide"
divergences) from the Processing Plan delivered the previous [***] in terms of
the amount of Bulk Product that Genentech will send to Alkermes or the amount of
Finished Form or Finished Product to be Processed, such that it will not have
the capacity to accommodate such Processing, Alkermes shall promptly notify
Genentech, and the parties shall use commercially reasonable efforts to resolve
such capacity issue. Within twenty (20) days of receipt of each Processing Plan,
Alkermes will acknowledge it in writing, thereby committing for Processing the
Facilities, all Dedicated Equipment and Genentech Equipment at the Facilities
used in Processing, sufficient appropriately trained Alkermes personnel and all
other Alkermes resources required under this Agreement for Processing. The
Parties may mutually agree in writing to amend a Processing Plan, based on
factors including those listed in this SECTION 3.1(b). If both Parties agree, an
alternative method of providing Processing Plans may be used in which the demand
for Finished Form or Finished Product could take into account more than one
[***].

     3.2  PURCHASE ORDERS; CHANGE ORDERS AND BINDING AMOUNT. On an on-going
basis, Genentech will order Processing under each Processing Plan pursuant to
individual purchase orders specifying the number of Dosage Containers (vials) of
Finished Form or Finished Product, as the case may be, that Genentech requests
to be delivered, the number of Dosage Containers that should be included in each
Batch, the amount of material, by weight, to be placed in such Dosage
Containers, and shipping instructions. Genentech will submit each purchase order
to Alkermes at least forty-five (45) days in advance of the first desired
shipping date listed on the purchase order, and, except as set forth below,
Alkermes shall ship Finished Form and Finished Product, as the case may be,
together with Alkermes' certificate of analysis and certificate of compliance,
in conformance with the shipping dates set forth in such purchase orders.
Alkermes may suggest alternative shipping date(s) so long as they satisfy
Genentech's supply requirements under the Processing Plan, and the Parties will
confirm any rescheduled shipping date(s) in writing. Genentech may modify a
purchase order only by submitting a written change order to Alkermes at least
thirty (30) days in advance of the relevant shipping date covered by the change
order. Notwithstanding the foregoing, Alkermes shall use reasonable efforts to
accommodate a change order submitted less than thirty (30) days in advance of
such shipping date. The aggregate amount of Finished Product and Finished Form
ordered by Genentech in all purchase orders with delivery dates in a given [***]
must be within [***] of the amount forecasted to be

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

ordered in the binding Processing Plan for such [***], unless the divergence in
question is less than [***] Dosage Containers. If such aggregate amount is more
than [***] under such forecasted amount and the difference is greater than [***]
Dosage Containers, Alkermes will notify Genentech who will have 15 days to
designate the dosage form, number of Dosage Containers and the shipping
instructions to make up the difference. If Alkermes does not receive such
instructions within 15 days of its notice to Genentech, then Alkermes will ship
to Genentech that amount of Finished Form and/or Finished Product, in the dosage
form that Alkermes chooses to make up such difference.

     3.3  DEGREE OF EFFORT; UNPLANNED DELAY OR ELIMINATION OF PROCESSING. Each
Party will use commercially reasonable best efforts to meet each Processing Plan
and purchase orders (subject to change orders) and, subject to the other terms
of this Agreement, Alkermes will Process a given Campaign until it has
completely Processed each Batch within such Campaign. Alkermes will provide
Genentech with as much advance notice as possible (and will use its commercially
reasonable efforts to provide at least fifteen (15) days' advance written notice
where possible) if Alkermes determines that any Processing will be delayed or
eliminated for any reason. Thereafter, the Parties agree to use their
commercially reasonable efforts to provide the maximum possible amount of
conforming Finished Product to Genentech, subject to SECTION 4.3.

     3.4  WARRANTIES. Each Party warrants and covenants that it will perform all
its obligations under this Agreement in accordance with this Agreement and all
applicable laws and regulations. Without limiting the generality of the
foregoing, Genentech warrants and covenants that all Genentech Materials will
meet applicable Specifications and will have been produced in compliance with
cGMPs. Without limiting the generality of the foregoing, Alkermes warrants and
covenants that (i) Finished Form or Finished Product that it has Processed, and
all Alkermes Materials, will meet the Specifications and is expected to do so
over their approved shelf life, as the case may be, based on stability trend
results; (ii) Finished Form or Finished Product that it has Processed, and all
Alkermes Materials, will have been produced in compliance with applicable SOPs,
and with FDA and European Union cGMPs and validated parameters demonstrated to
meet sterility assurance levels required for an aseptically processed sterile
parenteral product; (iii) Finished Form or Finished Product that it has
Processed, and all Alkermes Materials, shall conform to the requirements set
forth in the applicable New Drug Application and Marketing Authorization
Application; (iv) [***] and (v) that it will store and handle all Genentech
Materials, Dedicated Equipment and Genentech Equipment in accordance with the
relevant procedures. EXCEPT AS PROVIDED IN THIS SECTION 3.4, THE PARTIES MAKE NO
EXPRESS OR IMPLIED WARRANTIES OF ANY KIND.

     3.5  GENENTECH INSPECTION AND PROCESSING INPUT. During the Term, Genentech
representatives may inspect the Facilities during regular business hours.
Before, during and after each Campaign, Genentech may base a reasonable number
of Genentech representatives (currently estimated to be 2 people) at the
Facilities to oversee Processing, and Alkermes will provide the Genentech
representatives with work space and access to telephone, facsimile and
electronic mail services at Alkermes as reasonably necessary. Alkermes shall
consult regularly with the Genentech representatives, and will not unreasonably
reject suggestions or recommendations made by such representatives in writing
(or orally if promptly confirmed in writing) relating to the Processing.
Alkermes will promptly correct any aspect of the Alkermes Materials, the
Genentech Equipment or Dedicated Equipment located at Alkermes, any other
machinery, equipment or utilities at Alkermes used in Processing or the
Processing itself that Genentech, acting in good faith, notifies Alkermes in
writing (or orally if confirmed in

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

writing) is not in compliance with this Agreement (including the Specifications)
or applicable laws and regulations (including cGMPs). Any such corrections will
be performed in compliance with the applicable change control SOP (CS-010-033)
where appropriate.

     3.6  ALKERMES MODIFICATIONS; SAFETY. Except as required in SECTION 3.5 or
the Specifications or with Genentech's prior written consent, Alkermes will not
modify the Genentech Equipment or Dedicated Equipment at all, and Alkermes will
not modify the Facilities, plant operating procedures or any machinery,
equipment or utilities at Alkermes used in Processing if it would directly
affect Processing or the then current Processing Plan. Before making any such
change, Alkermes will give Genentech advance written notice of the nature and
effective date of such change per applicable standard operating procedures (SOP
CS-010-033; Change Control). Notwithstanding the foregoing, the Parties agree to
collaborate in good faith to modify the equipment, plant operating procedures or
machinery [***], and the Parties agree not to unreasonably withhold approval of
implementation of any such modifications or improvements, although this good
faith collaboration shall not change the financial responsibilities of the
Parties set forth herein or in the License Agreement. In the event of a conflict
between the Specifications and Alkermes' plant operating procedures, the
Specifications will control. Notwithstanding the foregoing, any change to the
Facilities, machinery, equipment, utilities or the operating procedures
necessary to protect the immediate safety of Alkermes' employees will be
considered an "emergency change" as described in SOP CS-010-033; change control.

     3.7  PROCESSING DEVIATIONS. In the event that Alkermes encounters any
significant problem with or deviation from its standard operating procedures,
plant operating procedures or the Specifications, or recognizes an unexpected
need for such a deviation, during a Campaign, Alkermes will notify Genentech
immediately and will suspend Processing if such suspension does not adversely
affect ongoing Processing or employee safety. Genentech shall respond as
promptly as is reasonably practicable. Any changes to the process documentation
shall be subject to Genentech review and approval, as set forth in SOP
CS-010-033.

                              SECTION 4: LIABILITY

     4.1  TESTING AND REJECTION OF FINISHED PRODUCT. Alkermes will provide
Genentech, accompanying each delivery of Finished Form and/or Finished Product
delivered pursuant to Section 3.2, Alkermes' written certificate of analysis and
certificate of compliance, certifying that the Finished Form or Finished Product
included in such delivery complies with the Specifications. No later than
sixty-five (65) days after Genentech's or Genentech's Distributor's receipt of
delivered Finished Product or Finished Form, as the case may be, Genentech or
Genentech's Distributor will test the Finished Product or Finished Form, as the
case may be, and will notify Alkermes of any claim that any such Finished
Product or Finished Form, as the case may be, does not conform with the
Specifications or the purchase order. Such notice shall be in

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

writing and shall indicate the non-conforming characteristics of the Finished
Form or Finished Product, as the case may be. If Genentech or Genentech's
Distributor does not notify Alkermes of non-conformity within such sixty-five
(65)-day period, such Finished Form or Finished Product shall be deemed accepted
and Alkermes shall be released from any claim of non-conformity. If Genentech or
Genentech's Distributor does notify Alkermes of non-conformity within such
sixty-five (65)-day period, the appropriate personnel at the Parties shall in
good faith investigate and attempt to resolve such non-conformity for a period
of sixty-five (65) days. In the event that Genentech or Genentech's Distributor
claim that the Finished Form or Finished Product has not met the Specifications
and Alkermes does not agree after such sixty-five (65)-day period, the Parties
will mutually agree (such agreement not to be unreasonably withheld) upon a
third party to review records, test data and other relevant information and
ascertain responsibility. Such third party shall execute an appropriate
Confidentiality Agreement approved in form and substance by Alkermes and
Genentech. The third party's findings will be binding on both Parties, and the
costs of such third-party testing and review will be borne by the Party found
responsible.

     4.2  DETERMINATION OF RESPONSIBILITY FOR NON-CONFORMING FINISHED FORM OR
FINISHED PRODUCT. Alkermes will be responsible for non-conforming Finished Form
or Finished Product on account of Alkermes' breach of its obligations in Section
3.4 (and Section 2.1(a) only with regard to Alkermes obligation to perform
Processing). Genentech will be responsible for non-conforming Finished Form or
Finished Product on account of Genentech's breach of its obligations in Sections
2.1(b) or 3.4. If the Parties, after good faith negotiation, cannot agree that
the Finished Form or Finished Product is non-conforming (for example, there is
disagreement whether it was produced in accordance with applicable SOPs or
cGMPs) or upon which Party is responsible for non-conforming Finished Form,
Finished Product or Lost Finished Product (as defined below), the Parties will
mutually agree (such agreement not to be unreasonably withheld) upon a third
party to review records, test data and other relevant information and ascertain
conformity and/or responsibility. Such third party shall execute an appropriate
Confidentiality Agreement approved in form and substance by Alkermes and
Genentech. The third party's findings will be binding on both Parties, and the
costs of such third-party testing and review will be borne by the Party found
responsible.

     4.3  LOST FINISHED FORM AND FINISHED PRODUCT. For purposes of this
Agreement and subject to SECTION 8.2, Finished Form and Finished Product is
considered lost if the Processing of Bulk Product is not performed for any
reason (including, without limitation, due to the ruin, destruction or
expiration of such Bulk Product, but not including instances where Alkermes is
excused from making changes to a purchase order under Section 3.2), or if Bulk
Product is actually Processed into Finished Form or Finished Product but such
Finished Form or Finished Product is determined to be non-conforming under
SECTION 4.1 or SECTION 4.2 (in each case, "LOST FINISHED PRODUCT"); provided,
however, that Lost Finished Product will not include Finished Form or Finished
Product determined to be non-conforming for any reason other than as set forth
in SECTION 4.2. If any Lost Finished Product occurs for any reason, Alkermes
will Process an amount of Finished Form or Finished Product, as the case may be,
equivalent to the amount of Lost Finished Product, and will use its commercially
reasonable efforts to do so on whatever timing basis (regular or priority) is
necessary to continue to meet Genentech's or Genentech's

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

Distributor's supply requirements under the Processing Plan. Responsibility for
Lost Finished Product shall be determined as follows:

          (a)  ALKERMES. Alkermes shall be considered "responsible" for causing
Lost Finished Product in the following situations: (i) Alkermes fails to provide
Alkermes Materials in compliance with SECTION 2.1(a) or otherwise fails to take
all necessary steps to Process as required under this Agreement (including the
Specifications); (ii) Alkermes delays or fails to perform Processing altogether
(e.g., due to the ruin or destruction of Bulk Product), unless SECTION 4.3(b)(i)
applies (in which case Genentech is responsible) or unless SECTION 8.2 applies;
or (iii) Alkermes is found responsible for non-conforming Finished Product under
SECTIONS 4.1 AND 4.2. With regard to Lost Finished Product for which Alkermes is
responsible, Genentech shall owe Alkermes for Processing Fees for the
replacement Processing, but Genentech shall not owe Alkermes Processing Fees for
the Lost Finished Product. [***]

          (b)  GENENTECH. Genentech shall be considered "responsible" for
causing Lost Finished Product in the following situations: (i) Genentech fails
to provide Genentech Materials in compliance with SECTION 2.1(b); (ii) Genentech
submits a change order reducing or increasing Processing without providing a
change order at least thirty (30) days in advance as required under SECTION 3.2,
unless SECTION 4.3(a)(i) applies (in which case Alkermes is responsible),
PROVIDED, HOWEVER, that Alkermes has used reasonable efforts to accommodate such
change order and is unable to do so; or (iii) Genentech is found responsible for
non-conforming Finished Product under SECTIONS 4.1 AND 4.2. With regard to Lost
Finished Product for which Genentech is responsible, Genentech shall pay
Alkermes for the Processing Fees owed for the replacement Processing, as well as
for Lost Finished Product actually Processed by Alkermes.

          With respect to any Finished Form or Finished Product (including any
portion of a Batch Processed) that does not come under the definition of "Lost
Finished Product" or no one is found to be "responsible" under this SECTION 4.3,
this SECTION 4.3 will not apply and the other terms of this Agreement
(including, for example, SECTION 6 regarding payment for Processing) will govern
such Finished Form or Finished Product.

                          SECTION 5: DELIVERIES; TITLE

     5.1  DELIVERY. Upon completion of Processing and such testing as is
necessary to complete a certificate of analysis and certificate of compliance,
Alkermes will deliver Finished Product and/or Finished Form in accordance with
the applicable purchase order, FOB Alkermes' loading dock. As long as the amount
of Finished Form or Finished Product delivered is within +/- 5% of the amount
ordered in the purchase order (and the difference is less than [***]) and the
delivery is within +/- 5 business days of the requested delivery date, Alkermes
shall be in compliance with its obligations under this Agreement, the Processing
Plan and the purchase orders. If Alkermes is unable to deliver Finished Form or
Finished Product to Genentech within +/- 5 business days of the requested
delivery date due to delay caused by Genentech in signing the batch record,
Alkermes shall not be in breach of its obligations under this paragraph.
Alkermes shall invoice Genentech for any applicable Processing Fees concurrent
with shipment, and Genentech shall pay such Processing Fees, in accordance with
SECTION 6. Alkermes will

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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

provide shipment preparation and packaging of Finished Product and/or Finished
Form in Packaging Materials in accordance with the Specifications. In order to
meet the delivery requirements under the Processing Plans and purchase orders,
the Parties will agree within six (6) months of the Effective Date to the
amounts of safety stock of Bulk Intermediates and Finished Form to be held at
the Facility, based on the Parties' experience with Processing Bulk Product into
Finished Form. From the Effective Date until the Parties have reached the
agreement contemplated by the previous sentence, the amount of safety stock to
be held will be (i) the number of grams of Bulk Intermediates necessary to
support [***] of projected sales, and (ii) the number of Dosage Containers of
Finished Form necessary to support [***] of projected sales.

     5.2  TITLE; RISK OF LOSS. All Genentech Materials and Genentech Equipment
in the custody of Alkermes will be and remain the exclusive property of
Genentech at all times, and Genentech will own any domestic or foreign
governmental rights, registrations or licenses associated with Bulk Product,
Finished Form or Finished Product. Alkermes specifically waives any and all
liens or security interests that it might acquire (whether by operation of law
or otherwise) with respect to any property of Genentech. Alkermes' care,
custody, control and use of any property of Genentech is determined solely by
the terms of this Agreement, and Alkermes will never have the power of sale or
disposal over any of it except with the express prior written consent of
Genentech.

                         SECTION 6: PRICING AND PAYMENT

     6.1  PROCESSING FEES. Subject to the express terms of Section 4, in
consideration for Processing and performing the other obligations of this
Agreement, Genentech will pay to Alkermes the processing fees described in this
SECTION 6.1. The processing fee ("Processing Fee") shall equal a fee per dosage
form of [***] of the Net Sales Price per dosage form (or similar quantity)
shipped to Genentech and Genentech's Distributors. In the event Alkermes is
supplying Finished Form or Finished Product and opts to supply the other,
Alkermes shall give written notice to Genentech at least 180 days prior to such
change or such shorter period as the Parties agree upon in writing. In the event
that Alkermes supplies only Finished Form, Genentech shall be entitled to deduct
its or Genentech's Distributors' Fully Burdened Manufacturing Costs of
Processing Finished Form into Finished Product from the amount otherwise payable
to Alkermes. The Processing Fee shall be determined as follows:

          (a)  FORECASTED WEIGHTED AVERAGE NET SALES PRICE. The Processing Fee
per vial of the Finished Form or Finished Product to be invoiced by Alkermes
during a calendar year (or such portion of the first calendar year that the
Licensed Product is commercially launched) shall be calculated as [***] of the
estimated weighted average price per dosage form offered (or forecasted to be
offered) by Genentech and Genentech's Distributors in arm's length sales to
independent third parties for the Finished Product. Such weighted average price
will be calculated based on the forecasted Net Sales Price of the Finished
Product in each dosage form (expressed in USD in accordance with the License
Agreement) in each country where Genentech and Genentech's Distributors intend
to sell the Finished Product in such dosage form.

                                       11
<PAGE>   12
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

          (b)  CHANGES IN NET SALES PRICE. Promptly upon increasing or
decreasing the Net Sales Price of a particular dosage form by greater than
[***], Genentech shall notify Alkermes of the then current Net Sales Price or
forecasted Net Sales Price, as the case may be, and the weighted average price
per dosage shall be recalculated for purposes of calculating the Processing Fee
to be charged in each invoice.

          (c)  YEAR END RECONCILIATION. In the month of [***] following each
calendar year, adjustment shall be made if there is deviation between the
estimated weighted average Net Sales Price per dosage form and the actual
weighted average Net Sales Price of the Finished Product per dosage form
(expressed in USD in accordance with the License Agreement). Any corrective
payment to be made resulting from such reconciliation will be paid by the party
owing such a payment within [***] after such reconciliation.

     6.2  PAYMENT. Alkermes will invoice Genentech for any Processing Fee
applicable to Finished Form or Finished Product on the date Alkermes delivers
the Finished Form or Finished Product to which the invoice corresponds as set
forth in SECTION 5.1, and Processing Fees will be due and payable net [***]
after Genentech's receipt of Alkermes' invoice therefor.

                     SECTION 7: RECORDS; REGULATORY MATTERS

     7.1  BATCH RECORDS AND DATA. Within forty-five (45) days following the
completion of Processing of each Campaign, Alkermes will provide Genentech with
a copy of properly completed and reviewed Batch records (including manufacturing
tickets and assay data sheets) prepared in accordance with the Specifications.

     7.2  RECORDKEEPING; AUDIT RIGHTS.

          (a)  Alkermes will maintain and retain true and accurate books,
records, test and laboratory data, reports and all other information relating to
Processing under this Agreement, including all information required to be
maintained under this Agreement (including the Specifications) or applicable
laws and regulations (including cGMPs) as well as records of work performed
specifically for Genentech's Distributors. Alkermes will maintain all such
information only in separate forms, notebooks and records to the extent possible
(not commingled with other information) and will maintain all such information
for a period of at least two (2) years from the relevant Finished Product
expiration date or longer if required under applicable laws and regulations
(including cGMPs).

          (b)  Genentech will keep for at least three (3) years, its records
(and the records of Genentech's Distributors that it receives) (i) of all sales
of Finished Form and Finished Product and the gross invoiced sales price charged
for such Finished Form and Finished Product in sufficient detail to permit
Alkermes to confirm the accuracy of the calculations of Net Sales Price per
dosage form, the weighted average of Net Sales Price and the Processing Fee (the
"Processing Fee Records") and (ii) of its and Genentech's Distributors' Fully
Burdened

                                       12
<PAGE>   13
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

Manufacturing Costs, if any, of Processing Finished Form into Finished Product
in sufficient detail to permit Alkermes to confirm the accuracy of same (the
"FBMC Records"). At the request of, upon at least thirty (30) days prior written
notice, and at the expense of Alkermes, Genentech shall permit a nationally
recognized, independent, certified public accountant appointed by Alkermes and
reasonably acceptable to Genentech to examine either or both of the Processing
Fee Records or the FBMC Records solely to the extent necessary to verify such
calculations, provided that such accountant has entered into a confidentiality
agreement with Genentech that is substantially similar to the confidentiality
provisions of the License Agreement, and that limits the use and disclosure of
such information to purposes germane to this Section 7.2(b). Results of any such
examination shall be made available to Alkermes and to Genentech. If such
examination reveals an underpayment of Processing Fees or an overpayment of
Fully Burdened Manufacturing Cost by [***] or more, Genentech shall pay all
costs of such examination. In the event such accountant concludes that
additional Processing Fees are owed and/or the Fully Burdened Manufacturing Cost
was overpaid, the additional Processing Fees and/or excess costs shall be paid
by Genentech to Alkermes within thirty (30) days of the date Alkermes delivers
to Genentech the accountant's written report reflecting such conclusion. In the
event such accountant concludes that excess Processing Fees have been paid
and/or additional Fully Burdened Manufacturing Cost is owed, the excess
Processing Fees shall be refunded and/or the additional costs will be paid to
Genentech within thirty (30) days of the date Alkermes delivers to Genentech the
accountant's written report reflecting such conclusion. This Section 7.2(b)
shall survive any termination of this Agreement for three (3) years.

     7.3  REGULATORY COMPLIANCE. Genentech will be solely responsible for all
permits and licenses required by any Regulator with respect to Finished Product
under this Agreement, including any New Drug Applications or amendments and
product licenses, in connection therewith, PROVIDED, HOWEVER, that Genentech
shall be responsible for the costs of such permits and licenses only to the
extent that Alkermes would not be required to obtain such permits or licenses
but for the sale of Finished Product and the Processing to be performed pursuant
to this Agreement. Alkermes will be solely responsible for all other permits,
licenses and amendments required by any Regulator, including those with respect
to the Facilities and the Nutropin Depot Diluent, PROVIDED, HOWEVER, that
Genentech shall be responsible for the costs of such permits and licenses to the
extent that Alkermes would not be required to obtain such permits or licenses
but for the sale of Finished Product and the Processing to be performed pursuant
to this Agreement. Each Party intends and commits to cooperate to satisfy all
applicable laws and regulations with respect to Processing under this Agreement.

     7.4  AUDIT. During Alkermes' regular business hours and upon reasonable
advanced notice, or as required by the FDA, Alkermes will make available any
technical processing books and records, test and laboratory data, reports and
all other information relating to Processing under this Agreement, including all
information required to be maintained under this Agreement (including under the
Specifications) or applicable laws and regulations (including cGMPs), to
Genentech, Genentech's Distributors and Regulators for inspection and copying.
Other than as set forth in Section 7.2(b), Alkermes shall have no right to audit
Genentech.

                                       13
<PAGE>   14
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     7.5  GOVERNMENTAL INSPECTIONS AND REQUESTS. Upon any Regulator's request to
inspect the Facilities or audit Alkermes' technical processing books and records
(under SECTION 7.4) or any other Regulator inquiry (oral or written) with
respect to Processing under this Agreement, Alkermes will notify Genentech
within one (1) business day by telephone, electronic mail, and/or, telecopy,
including a copy of any written document received from the Regulator (with
written confirmation copy to follow by regular mail). Alkermes will permit any
Regulator to inspect the Facilities and any machinery, equipment, utilities at
Alkermes or Packaging Materials used in Processing, and any Genentech Materials,
Genentech Equipment, Dedicated Equipment and Finished Product located at
Alkermes. Genentech may send Genentech representatives to be present at, and
participate to the extent allowed by the FDA, any Regulator inspection, audit or
other inquiry with respect to Processing under this Agreement, as deemed
appropriate by Genentech. Alkermes shall be responsible for any costs or
expenses incurred in order to comply with observations by any Regulator.

     7.6  PRODUCT RECALL. In the event that any governmental agency having
jurisdiction shall request or order, or if Genentech shall reasonably determine
to undertake, any recall of Finished Product, Genentech shall be responsible for
all costs and expenses of any such recall except as provided herein. Genentech
shall also be responsible for managing the recall and Alkermes will cooperate
with Genentech as Genentech may reasonably request. Alkermes shall be
responsible for all costs incurred due to a recall to the extent that it is
attributable to a breach by Alkermes of any of its warranties or obligations
contained in this Agreement.

                         SECTION 8: TERM AND TERMINATION

     8.1  TERM. The term of this Agreement will start on the Effective Date and
expire, unless terminated under Section 8.3, on expiration of the License
Agreement (as may be terminated or extended, the "TERM").

     8.2  TERMINATION BY EITHER PARTY.

          (a)  MATERIAL BREACH. Either Party may terminate this Agreement
effective upon ninety (90) days' prior written notice to the other Party, if the
other Party commits a material breach of this Agreement which is not cured by
the end of the notice period (except as otherwise provided in SECTION 8.2 (c)).
Any material monetary breach of this Agreement by either Party shall be a
material breach by such Party of the License Agreement.

          (b)  BANKRUPTCY. Either Party may terminate this Agreement effective
upon sixty (60) days' prior written notice to the other Party, if the other
Party files a petition for bankruptcy, takes advantage of the insolvency laws of
any state, makes an assignment for the benefit of its creditors or has a
receiver, trustee or other court officer appointed for its properties or assets,
any of which is not cured by the end of the notice period.

          (c)  FORCE MAJEURE. If any default or delay occurs which prevents or
materially impairs a Party's performance and is due to a cause beyond the
Party's reasonable

                                       14
<PAGE>   15
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

control, including but not limited to an act of God, flood, fire, explosion,
earthquake or other natural disaster, casualty, accident, war, revolution, civil
commotion, sabotage (to the extent it could not have reasonably been prevented),
fuel shortages, blockade or embargo, injunction, law, proclamation, order,
regulation or governmental demand, the affected Party promptly will notify the
other Party in writing of such cause and will exercise diligent efforts to
resume performance under this Agreement as soon as possible. Neither Party will
be liable to the other Party for any loss or damage due to such cause. Neither
Party may terminate this Agreement because of such default or delay except upon
ninety (90) days' prior written notice to the other Party if the default or
delay has existed for six (6) months and is continuing at the end of the notice
period.

     8.3  EFFECT OF TERMINATION.

          (a)  ACCRUED RIGHTS AND OBLIGATIONS. Except as otherwise provided in
SECTION 8.3(B), any expiration or termination of this Agreement will be without
prejudice to any rights accrued to the benefit of either Party prior to
expiration or termination, will not relieve either Party of any obligations
accrued prior to expiration or termination. Upon any expiration or termination
of this Agreement, there shall be a final reconciliation under Section 6.1(c)
conducted in the month following such expiration or termination. The following
provisions shall survive any expiration or termination of this Agreement:
SECTIONS 3.4, 7, 8.3(b), 9, 10, 11.3 , 11.7, 11.8 and 11.10.

          (b)  DELIVERIES UPON TERMINATION OR EXPIRATION. If either Party
terminates this Agreement under SECTION 8.2(a), effective upon such termination
the only obligations of either Party will be those obligations and warranties
that survive under SECTION 8. No later than thirty (30) days after any
expiration or termination of this Agreement, each Party will deliver to the
other Party all copies in its possession of the other Party's Proprietary
Information (except that each Party's legal department or counsel may retain one
(1) copy for the sole purpose of complying with the obligations of Section 9),
Alkermes will deliver to Genentech all copies of all records and information
Alkermes has maintained under this Agreement (except that Alkermes' legal
department OR counsel may retain one (1) copy), and Alkermes will deliver to
Genentech all Genentech Materials and Genentech Equipment then located at
Alkermes (with all such deliveries at Genentech's expense unless Genentech has
terminated this Agreement under Section 8.2(a)).

          (c)  TERMINATION BY GENENTECH FOR MATERIAL BREACH OR BANKRUPTCY OF
ALKERMES. Additional to, and not in replacement of, SECTION 5.2 of the License
Agreement, if Genentech terminates this agreement pursuant to SECTION 8.2(a) for
a material breach by Alkermes, which breach has not been cured within the period
specified, or pursuant to SECTION 8.2(b), Alkermes shall transfer to and fully
enable Genentech with the then most current version of all materials,
intellectual property regulatory filings, knowhow, reagents, expertise,
equipment, data, and other information or materials necessary or useful for
Genentech or its designee (if such designee agrees to confidentiality
provisions) to undertake the Processing of Bulk Product into Finished Product
for the sole purpose of Processing Bulk Product into Finished Product. All said
transfer of materials and information shall be free of charge to Genentech.
Notwithstanding the termination of this agreement, Alkermes agrees to continue
to Process Bulk Product into

                                       15
<PAGE>   16
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

Finished Product until, in Genentech's reasonable opinion, Genentech is fully
enabled to Process. Processing of Bulk Product into Finished Product may be done
partially by Alkermes and partially by Genentech, at Genentech's option and, in
which case, the Processing Fee payable by Genentech to Alkermes under SECTION 6
above shall be based only on the sales of Finished Form or Finished Product
Processed by Alkermes. Genentech shall not owe Alkermes any payments under
SECTION 6 for any Processing done by Genentech.

                       SECTION 9: PROPRIETARY INFORMATION

     9.1  NONDISCLOSURE. Information exchanged by the parties under this
Agreement shall be subject to the provisions of Section 8 (Confidentiality) of
the License Agreement.

     9.2  PUBLIC ANNOUNCEMENTS. During the Term, neither Party will make any
press release or other disclosure regarding this Agreement except as required
under applicable law (with advance notice to the other Party of the required
disclosure) or with the other Party's express prior written consent.

                    SECTION 10: INDEMNIFICATION AND INSURANCE

     10.1 INDEMNIFICATION BY ALKERMES. Alkermes will indemnify and hold harmless
Genentech and its directors, officers, employees and agents from and against any
suits, claims, losses, demands, liabilities, damages, costs and expenses
(including court costs, reasonable attorneys' fees and reasonable investigative
costs) in connection with any suit, demand or action by any third party arising
out of or resulting from (a) any act or omission, proven or alleged, of Alkermes
in its performance of this Agreement, except to the extent that any of the
foregoing arises out of or results from the gross negligence or willful
misconduct of Genentech, and (b) any proven or alleged claim of patent
infringement, violation of intellectual property rights or unfair competition
relating to any equipment, method, process or design used by Alkermes in its
performance of this Agreement (other than patent rights or other intellectual
property rights owned or controlled by Genentech).

     10.2 INDEMNIFICATION BY GENENTECH. Genentech will indemnify and hold
harmless Alkermes and its directors, officers, employees and agents from and
against any suits, claims, losses, demands, liabilities, damages, costs and
expenses (including court costs, reasonable attorneys' fees and reasonable
investigative costs) in connection with any suit, demand or action by any third
party arising out of or resulting from (a) any act or omission, proven or
alleged, of Genentech in its performance of this Agreement, except to the extent
that any of the foregoing arises out of or results from the gross negligence or
willful misconduct of Alkermes, and (b) any proven or alleged claim of patent
infringement, violation of intellectual property rights or unfair competition
relating to any equipment, method, process or design used by Genentech in its
performance of this Agreement (other than patent rights or other intellectual
property rights owned or controlled by Alkermes).

                                       16
<PAGE>   17
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     10.3 INDEMNIFICATION PROCEDURES. All indemnification obligations in this
Agreement are subject to, and shall be governed by the indemnification
procedures set forth in SECTION 11 of the License Agreement.

     10.4 LIMITATION OF LIABILITY. Neither Party will be liable to the other
Party for indirect, incidental or consequential damages arising out of
performance under this Agreement.

     10.5 INSURANCE.

          (a)  ALKERMES. During the Term and for five (5) years thereafter,
Alkermes will obtain and maintain comprehensive general liability insurance
including broad form general liability, completed operations and products
liability, personal injury liability, blanket contractual liability and broad
form property damage liability) with limits of not less than $5,000,000 combined
single limit for bodily injury and property damage liability per occurrence and
annual aggregate, containing a cross-liability or severability of interests
clause, and with any reasonable deductible or self-insured retention. During the
Term, Alkermes will obtain and maintain worker's compensation insurance as
required under applicable law and employer's liability insurance with a limit of
not less than $1,000,000. With respect to all insurance coverage required under
this SECTION 10.5(a): (i) all insurance carriers will be reputable; (ii)
Alkermes will furnish Genentech with certificates of insurance evidencing at
least the required coverage as soon as practicable after the Effective Date and
each anniversary of the Effective Date during the Term (and for five (5) years
thereafter if such coverage is then required hereunder); and (iii) all policies
will include provisions for at least ten (10) days' prior written notice of any
material change or cancellation (whether for non-payment or otherwise).

          (b)  GENENTECH. During the Term and for five (5) years thereafter,
Genentech will obtain and maintain comprehensive general liability insurance
including broad form general liability, completed operations and products
liability, personal injury liability, blanket contractual liability and broad
form property damage liability) with limits of not less than $5,000,000 combined
single limit for bodily injury and property damage liability per occurrence and
annual aggregate, containing a cross-liability or severability of interests
clause. During the Term, Genentech will obtain and maintain worker's
compensation insurance as required under applicable law and employer's liability
insurance with a limit of not less than $1,000,000. With respect to all
insurance coverage required under this SECTION 10.5(b): (i) all insurance
carriers shall be reputable; (ii) Genentech will furnish Alkermes with
certificates of insurance evidencing at least the required coverage as soon as
practicable after the Effective Date and each anniversary of the Effective Date
during the Term (and for five (5) years thereafter if such coverage is then
required hereunder); and (iii) all policies will include provisions for at least
ten (10) days' prior written notice of any material change or cancellation
(whether for non-payment or otherwise).

                            SECTION 11: MISCELLANEOUS

     11.1 ENTIRE AGREEMENT; CONFLICTS; AMENDMENTS. This Agreement is the entire
understanding between the Parties and supersedes any contracts, agreements or
understandings

                                       17
<PAGE>   18
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

(oral or written ) of the Parties with respect to the subject matter hereof,
except the License Agreement. In the event of any conflict between the terms
hereof and the terms of the License Agreement, the License Agreement shall
control. No terms of this Agreement may be amended except upon written agreement
of both Parties, unless provided otherwise in this Agreement.

     11.2 NO WAIVER. Failure by either Party to insist upon strict compliance
with any term of this Agreement in one (1) or more instances will not be deemed
to be a waiver of its rights to insist upon such strict compliance with respect
to any subsequent failure.

     11.3 NOTICES. Any notice from either Party to the other Party will be
effective upon receipt and must be personally delivered to such Party or sent to
such Party by deposit in the United States mail, first class, postage prepaid,
via a reputable overnight courier, or by telecopy transmission (with written
confirmation copy to follow via United States mail), to the address for such
Party below or such other address as a Party may designate from time to time in
accordance with this Section:

To Genentech:   Genentech, Inc.
                One DNA Way
                South San Francisco, California 94080
                Attn: Corporate Secretary
                Fax:  (650) 952-9881/9882

To Alkermes:    Alkermes Controlled Therapeutics, Inc.
                64 Sidney Street
                Cambridge, Massachusetts 02139-4136
                Attn: President
                Fax:  (617) 494-9263

     11.4 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon and inure
to the benefit of the Parties, their successors and permitted assigns. Neither
Party may assign this Agreement, in whole or in part, without the prior written
consent of the other Party, except pursuant to: (a) a merger, consolidation or
reorganization of the assigning Party or the sale of substantially all of the
assets of the assigning Party; or (b) an assignment to any corporate entity
which controls, is controlled by or is under common control with the assigning
Party.

     11.5 INDEPENDENT CONTRACTORS. The relationship of the Parties is that of
independent contractors, and neither Party will incur any debts or make any
commitments for the other Party except to the extent expressly provided in this
Agreement. Nothing in this Agreement is intended to create or will be construed
as creating between the Parties the relationship of joint venturers,
co-partners, employer/employee or principal and agent.

     11.6 FURTHER ASSURANCES. The Parties agree to execute, acknowledge and
deliver such further instruments and do all such other incidental acts as may be
reasonably necessary or appropriate to carry out the purpose and intent of this
Agreement.

                                       18
<PAGE>   19
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     11.7 ARBITRATION. All disputes, controversies or disagreements which may
arise between the Parties in connection with this Agreement will be subject to
non-binding mediation in accordance with the then existing alternative dispute
resolution rules of the American Arbitration Association, and thereafter, if not
settled, final and exclusive settlement by arbitration in accordance with the
then existing commercial arbitration rules of the American Arbitration
Association. Arbitration will be conducted in the jurisdiction of the defendant
Party, which in the case of Alkermes will be Massachusetts and in the case of
Genentech will be California.

     11.8 PREVAILING PARTY. In any litigation, dispute, controversy or other
proceeding between the Parties in connection with this Agreement, the prevailing
Party will be entitled to its reasonable attorneys' fees and costs in such
proceeding.

     11.9 SEVERABILITY. If any term of this Agreement is declared invalid or
unenforceable by a court or other body of competent jurisdiction, the remaining
terms of this Agreement will continue in full force and effect.

     11.10 GOVERNING LAW. This Agreement will be governed by and construed under
the laws of the State of California.

     11.11 HEADINGS. The headings in this Agreement are only for convenience and
are not a part of this Agreement.

     11.12 COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.

                                       19
<PAGE>   20
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION.

     IN WITNESS WHEREOF, the Parties have caused their duly authorized
representative to execute this Manufacture and Supply Agreement effective on the
Effective Date.

     ALKERMES CONTROLLED                     GENENTECH, INC.
     THERAPEUTICS, INC.

     By:    /s/ Michael Landine              By:    /s/ David Ebersman
         ------------------------               ----------------------------
     Name:  Michael Landine                  Name:  David Ebersman
           ----------------------                 --------------------------
     Title: Vice President                   Title: Senior Vice President
            ---------------------                  -------------------------

                                       20

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