Document:

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                                                                    EXHIBIT 10.8

              CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
               PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
                REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
               REDACTED VERSION OF THIS DOCUMENT HAS BEEN SENT TO
               THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT.

                             COLLABORATION AGREEMENT
                                     BETWEEN
                           HUMAN GENOME SCIENCES, INC.
                                       AND
                      PRAECIS PHARMACEUTICALS INCORPORATED

                                JANUARY 31, 2000
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                                TABLE OF CONTENTS

DEFINITIONS.................................................................  3

GRANTS AND COVENANTS........................................................ 12

DRUG DISCOVERY EFFORTS...................................................... 14

MILESTONES, ROYALTIES AND CERTAIN OTHER PAYMENTS............................ 29

CONFIDENTIALITY............................................................. 33

OWNERSHIP; PATENT PROSECUTION AND LITIGATION................................ 36

STATEMENTS AND REMITTANCES.................................................. 43

TERM AND TERMINATION........................................................ 46

WARRANTIES AND REPRESENTATIONS.............................................. 50

INDEMNIFICATION; INSURANCE.................................................. 53

FORCE MAJEURE............................................................... 58

DISPUTE RESOLUTION.......................................................... 58

SEPARABILITY................................................................ 61

ENTIRE AGREEMENT............................................................ 61

NOTICES..................................................................... 62

ASSIGNMENT.................................................................. 63

COUNTERPARTS................................................................ 64

WAIVER...................................................................... 64

INDEPENDENT RELATIONSHIP.................................................... 65

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                             COLLABORATION AGREEMENT

This Agreement ("Agreement"), dated as of the 31st of January 2000 (the
"Effective Date"), is entered into by Human Genome Sciences, Inc. ("HGS"), a
Delaware corporation, having a place of business at 9410 Key West Avenue,
Rockville, Maryland 20850, and Praecis Pharmaceuticals Incorporated, a Delaware
corporation, having a place of business at One Hampshire Street, Cambridge,
Massachusetts 02139 ("PPI").

1. DEFINITIONS

1.1 "ANNUAL BUDGET" has the meaning set forth in Paragraph 3.8.

1.2 "AFFILIATES" shall mean any individual or entity directly or indirectly
controlling, controlled by or under common control with, the specified
individual or entity. For purposes of this Agreement, the direct or indirect
ownership of over fifty percent (50%) of the outstanding voting securities of an
entity, or the right to receive over fifty (50%) of the profits or earnings of
an entity shall be deemed to constitute control. Such other relationship as in
fact gives such individual or entity the power or ability to control the
management, business and affairs of an entity shall also be deemed to constitute
control.

1.3 "**" shall mean the ** (**) ** described in the international patent
application **.

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1.4 "**" shall mean the ** (**) ** described in international patent application
**.

1.5 "COST OF GOODS" shall mean the sum of the actual direct and indirect costs
for active and other ingredients, supplies, material, and labor and an allocated
portion of overheads, incurred in manufacturing a PRODUCT, as determined in
accordance with Generally Accepted Accounting Principles in the United States.

1.6 "COST SHARING DEVELOPMENT PERIOD" shall have the meaning set forth in
Paragraph 3.8.

1.7 "COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT" has the meaning
set forth in Paragraph 3.8.

1.8 "DEVELOPMENT PLAN" has the meaning set forth in Paragraph 3.8.

1.9 "FIELD" shall mean the treatment and/or prevention of a disease or disorder
in humans through the use of a SMALL MOLECULE DRUG directed against a RESEARCH
TARGET.

1.10 "HGS PATENT(S)" shall mean all patents and patent applications to the
extent that they claim HGS TECHNOLOGY or RESEARCH TECHNOLOGY, which are or
become owned by HGS or to which HGS otherwise has, now or in the future, the
right to grant licenses. Included within the definition of HGS PATENTS are all
continuations, continuations-in-part, divisions, patents of addition, reissues,

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renewals, registrations, confirmations, re-examinations or extensions, and any
provisional applications thereof and all related SPCs.

1.11 "HGS/PPI PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which
(i) PPI has exercised the PPI CONTINUED PARTICIPATION OPTION and not made on
OPT-OUT ELECTION and (ii) HGS has not made an OPT-OUT ELECTION.

1.12 "HGS/PPI PRODUCT REIMBURSEMENT STATEMENT" has the meaning set forth in
Paragraph 3.13.

1.13 "HGS PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which (i) PPI
has not exercised the PPI CONTINUED PARTICIPATION OPTION or has made an OPT-OUT
ELECTION and (ii) HGS has not made an OPT-OUT ELECTION.

1.14 "HGS TECHNOLOGY" shall mean, collectively, any and all data, substances,
processes, materials, formulae, know-how and inventions with respect to RESEARCH
TARGETS which may be useful within the FIELD and which are developed by or on
behalf of HGS during or prior to the RESEARCH TERM and which are owned by HGS or
with respect to which HGS has the right to grant a license.

1.15 "INEFFECTIVE RESEARCH TARGET" has the meaning set forth in Paragraph 3.6.

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1.16 "INITIAL SCREENING DATE" has the meaning set forth in Paragraph 3.4.

1.17 "LONG RANGE PLAN" has the meaning set forth in Paragraph 3.13.

1.18 "LRP ANNUAL BUDGET" has the meaning set forth in Paragraph 3.13.

1.19 "NET SALES" shall mean proceeds actually received from sales of a PRODUCT
(calculated on a PRODUCT by PRODUCT basis) by PPI, HGS, or SB as the case may
be, or, except as provided below in this definition, by their respective
AFFILIATES, licensees (or sublicensees) of such entities or such AFFILIATES,
distributors trading on their respective accounts, joint ventures or other
associated companies, less deductions for (i) transportation, shipping and
postage charges, including transportation insurance and customs duties to the
extent separately invoiced; (ii) sales and excise taxes and duties paid or
allowed by a selling party and any other governmental charges imposed upon the
production, importation, use or sale of such PRODUCT (including value added
taxes or other governmental charges otherwise measured by the billing amount
when included in billing); (iii) normal and customary trade, quantity and cash
discounts allowed and charge back payments and rebates granted to managed health
care organizations or to federal, state and local governments, their agencies
and purchasers and reimbursees, including but not limited to Medicaid rebates or
to trade customers, including but not limited to wholesalers, chain and pharmacy
buying groups; (iv) rebates (or equivalents thereof)

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granted to or charged by national, state or local government authorities in
countries other than the United States; and (v) allowances or credits to
customers on account of rejection or return of such PRODUCT or on account of
retroactive price reductions affecting such PRODUCT. Sales between or among PPI,
its AFFILIATES, licensees (or sublicensees) of PPI or such AFFILIATES,
distributors trading on such entities' respective accounts, joint ventures or
other associated companies, sales between or among HGS, its AFFILIATES,
licensees (or sublicensees) of HGS or such AFFILIATES, distributors trading on
such entities' respective account, joint ventures or other associated companies,
and sales between or among SB, its AFFILIATES, licensees (or sublicensees) of SB
or such AFFILIATES, distributors trading on such entities' respective accounts,
joint ventures or other associated companies, as applicable, shall be included
within NET SALES only if such purchaser is an end-user of the PRODUCT.
Otherwise, NET SALES shall only include the subsequent, final sales to THIRD
PARTIES.

1.20 "OPERATING PROFIT" shall mean NET SALES less (i) COST OF GOODS, (ii)
royalties paid to THIRD PARTIES, (iii) costs and expenses of Phase IV studies,
i.e., post-marketing clinical studies and (iv) marketing, promotion,
distribution and selling expenses of HGS or PPI or their AFFILIATES as the case
may be, all as determined in accordance with Generally Accepted Accounting
Principles in the United States.

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1.21 "OPT-OUT ELECTION" has the meaning set forth in Paragraph 3.12.

1.22 "OPT-OUT PARTY" has the meaning set forth in Paragraph 3.12.

1.23 "PHASE IIa", as used herein, shall have the same meaning as such term is
used in the SB/HGS License Agreement.

1.24 "PI DEVELOPMENT COST AMOUNT" has the meaning set forth in Paragraph 4.5.

1.25 "PPI PATENT(S)" shall mean all patents and patent applications to the
extent that they claim PPI TECHNOLOGY, which are or become owned by PPI or to
which PPI otherwise has, now or in the future, the right to grant licenses.
Included within the definition of PPI PATENTS are all continuations,
continuations-in-part, divisions, patents of addition, reissues, renewals,
registrations, confirmations, re-examinations or extensions, and any provisional
applications thereof and all related SPCs.

1.26 "PPI PRODUCT" shall mean a SB NON-PARTICIPATING PRODUCT as to which (i) PPI
has exercised the PPI CONTINUED PARTICIPATION OPTION and not made an OPT-OUT
ELECTION and (ii) HGS has made an OPT-OUT ELECTION.

1.27 "PPI TECHNOLOGY" shall mean, collectively, any and all data, substances,
processes, methods, materials, formulae, know-how and inventions with respect to
biology-based and chemistry-based combinatorial systems for screening of

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compounds that bind to molecular targets, including all improvements and
modifications thereof, which may be useful within the FIELD and which are
developed by or on behalf of PPI during or prior to the RESEARCH TERM and which
are owned by PPI or with respect to which PPI has the right to grant a license
to HGS.

1.28 "PRODUCT" shall mean a PRODUCT LEAD that has been advanced into pre-IND
testing pursuant to Paragraph 3.5. Included within the definition of PRODUCT is
any preparation, formulation or product containing a PRODUCT LEAD, whether as
the sole active ingredient or mixed with any other active ingredient, and
whether or not such PRODUCT LEAD is altered or modified after its advancement
into pre-IND testing.

1.29 "PRODUCT LEAD" shall mean a SMALL MOLECULE DRUG directed to a RESEARCH
TARGET that may be useful in the FIELD (i) which SMALL MOLECULE DRUG is
identified as a result of the screening of such SMALL MOLECULE DRUG against a
RESEARCH TARGET pursuant to or in connection with this Agreement, or (ii) the
identification of which SMALL MOLECULE DRUG involved or utilized, in any manner,
PPI TECHNOLOGY or RESEARCH TECHNOLOGY.

1.30 "PRODUCT LEAD ADVANCEMENT CRITERIA" has the meaning set forth in Paragraph
3.1.

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1.31 "PRODUCT LEAD ADVANCEMENT DATE" has the meaning set forth in Paragraph 3.5.

1.32 "RESEARCH PATENTS" shall mean all HGS PATENTS to the extent they claim
RESEARCH TECHNOLOGY.

1.33 "RESEARCH PLAN" shall mean a plan for screening of RESEARCH TARGETS to
discover PRODUCT LEADS and PRODUCTS. An example of such a plan is shown in
Appendix A.

1.34 "RESEARCH TARGET" shall mean ** and **, as applicable, and/or a target
substituted for a RESEARCH TARGET pursuant to Paragraph 3.6.

1.35 "RESEARCH TECHNOLOGY" shall mean, collectively, any and all information,
data, substances, processes, methods, materials, formulae, know-how and
inventions solely with respect, and solely to the extent applicable, to RESEARCH
TARGETS, PRODUCT LEADS or PRODUCTS, including SAR INFORMATION and all
improvements and modifications with respect to the foregoing, in each case
solely to the extent developed or discovered during the RESEARCH TERM pursuant
to the collaboration provided for in this Agreement.

1.36 "RESEARCH TERM" shall mean the period beginning on the Effective Date and
ending on November 1, 2004, as such period may be extended by mutual agreement
of the parties, unless this Agreement is earlier terminated (or earlier
terminated with respect to a RESEARCH TARGET or a PRODUCT) in accordance

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with ARTICLE 8 hereof, in which event the RESEARCH TERM (or the RESEARCH TERM
with respect to such RESEARCH TARGET or PRODUCT) shall terminate on the
effective date of such termination.

1.37 "SAR INFORMATION" shall mean structure activity relationships information,
and information with respect to chemical structure, in each case with respect to
SMALL MOLECULE DRUGS screened against a RESEARCH TARGET pursuant to or in
connection with this Agreement

1.38 "SB" shall mean SmithKline Beecham Corporation and/or SmithKline Beecham
p.l.c., as defined in the SB/HGS LICENSE AGREEMENT.

1.39 "SB ADVERSE EVENT" has the meaning set forth in Paragraph 10.2.

1.40 "SB/HGS LICENSE AGREEMENT" shall mean the SB/HGS License Agreement dated
June 28, 1996 between SmithKline Beecham Corporation, SmithKline Beecham p.l.c.,
and Human Genome Sciences, Inc., and all predecessor and successor agreements,
in each case as amended or supplemented after the date hereof.

1.41 "SB OPTION" has the meaning set forth in Paragraph 3.11.

1.42 "SB NON-PARTICIPATING PRODUCT" has the meaning set forth in Paragraph 3.11.

1.43 "SB PARTICIPATING PRODUCT" has the meaning set forth in Paragraph 3.11.

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1.44 "SMALL MOLECULE DRUGS" shall mean compounds of molecular weight less than
** kilodaltons, including synthetic peptides and non-peptides, but excluding
natural ligands, soluble receptors, antibodies and antisense.

1.45 "SPC" shall mean a right based upon an underlying patent such as a
Supplementary Protection Certificate.

1.46 "THIRD PARTY" shall mean any party other than HGS or PPI or an AFFILIATE of
PPI or HGS.

2. GRANTS AND COVENANTS

2.1 Subject to the terms and conditions of this Agreement, PPI grants to HGS a
non-exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, and HGS grants to PPI a
non-exclusive, non-transferable, worldwide license under HGS TECHNOLOGY,
RESEARCH TECHNOLOGY and HGS PATENTS, to perform research and development on
behalf of HGS in the FIELD during the RESEARCH TERM solely with respect to
RESEARCH TARGETS.

2.2 Subject to the terms and conditions of this Agreement, PPI grants to HGS an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, solely to the extent such PPI
TECHNOLOGY and/or PPI PATENTS are required to practice any RESEARCH

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TECHNOLOGY in performing research and development solely with respect to PRODUCT
LEADS and PRODUCTS.

2.3 Subject to the terms and conditions of this Agreement, HGS grants to PPI an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under HGS TECHNOLOGY, RESEARCH TECHNOLOGY, and HGS PATENTS to perform
research and development on behalf of HGS in the FIELD solely with respect to
PRODUCT LEADS and PRODUCTS.

2.4 Subject to the terms and conditions of this Agreement, PPI grants to HGS an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under PPI TECHNOLOGY and PPI PATENTS, solely to the extent such PPI
TECHNOLOGY and/or PPI PATENTS are required to make, have made, use, import,
export, offer to sell and sell PRODUCTS in the FIELD.

2.5 Subject to the terms and conditions of this Agreement, HGS grants to PPI an
exclusive, non-transferable (except as expressly provided herein), worldwide
license under HGS TECHNOLOGY, RESEARCH TECHNOLOGY, and HGS PATENTS, solely to
the extent such HGS TECHNOLOGY, RESEARCH TECHNOLOGY and/or HGS PATENTS are
required to perform research and development with respect to, or to make, have
made, use, import, export, offer to sell and sell, HGS/PPI PRODUCTS or PPI
PRODUCTS, in the FIELD.

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Miscellaneous

2.6 During and after the RESEARCH TERM, PPI agrees to use HGS TECHNOLOGY,
RESEARCH TECHNOLOGY and HGS PATENTS only as licensed and permitted hereunder.
During and after the RESEARCH TERM, HGS agrees to use PPI TECHNOLOGY and PPI
PATENTS only as licensed and permitted hereunder.

2.7 Except as provided in Article 16, (i) the rights and licenses granted to HGS
by PPI are sublicensable and/or transferable by HGS to a THIRD PARTY only for
the purpose of developing and/or commercializing a specific HGS PRODUCT or a
specific SB PARTICIPATING PRODUCT and (ii) the rights and licenses granted to
PPI by HGS are sublicensable and/or transferable by PPI to a THIRD PARTY only
for the purpose of developing and/or commercializing a specific PPI PRODUCT.

3. DRUG DISCOVERY EFFORTS

3.1 PPI and HGS shall form a Joint Research Committee ("JRC") to coordinate the
collaboration provided for herein with respect to RESEARCH TARGETS and make
determinations to the extent specified herein, including establishing criteria
which should be met for a PRODUCT LEAD to be advanced into pre-IND testing (such
criteria, as modified by action of JRC from time to time, together with the
other factors to be considered by the JRC in determining whether a PRODUCT LEAD
should advance into pre-IND testing as set forth in Paragraph 3.5, being
referred to as the "PRODUCT LEAD ADVANCEMENT CRITERIA"). PPI shall

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have final decision-making authority as to the precise methods and procedures to
be used in screening SMALL MOLECULE DRUGS against the RESEARCH TARGETS.

      (1)   The JRC shall consist of three (3) representatives of each party,
            but each party shall have only one vote. JRC actions shall be taken
            only by unanimous vote.

      (2)   Each party shall notify the other party in writing of its initial
            representatives to the JRC within ten (10) days after the Effective
            Date, and may substitute one or more representatives from time to
            time effective upon written notice to the other party.

      (3)   The JRC shall meet not less than twice each calendar year during the
            RESEARCH TERM so long as discovery or development of a PRODUCT is
            being diligently pursued by the parties hereunder, at such times and
            places as mutually agreed by the parties, alternating between
            Cambridge, Massachusetts and Rockville, Maryland or such other
            places as the parties mutually agree. If the parties mutually agree,
            any meeting of the JRC may be held by telephone or video conference.
            At each such meeting, the JRC representatives shall discuss the
            status of all screening activities directed to RESEARCH TARGETS.

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      (4)   Within thirty (30) days following each JRC meeting, the party
            hosting the meeting (or entitled to host the meeting, if held by
            telephonic or video conference or at a location other than
            Cambridge, Massachusetts or Rockville, Maryland) shall prepare and
            provide to the other party mutually acceptable, reasonably detailed
            written minutes describing all matters reviewed or considered by the
            JRC and all determinations and actions of the JRC and the reasons
            therefor.

3.2 At the first meeting of the JRC, which shall occur as soon as reasonably
practicable after the Effective Date, PPI will present for review by the JRC a
preliminary outline of a research plan for identifying PRODUCT LEADS.

3.3 For each RESEARCH TARGET, HGS shall provide to PPI sufficient biological
material (including without limitations clones and other available biological
material) to facilitate the initial screening by PPI of SMALL MOLECULE DRUGS
directed to such RESEARCH TARGET.

3.4 For each RESEARCH TARGET, as soon as reasonably practicable following the
first meeting of the JRC and PPI's receipt of the biological materials referred
to in Section 3.3 (and in any event no later than twelve (12) months after such
first meeting and PPI's receipt of such biological materials), subject to PPI
receiving the notification from HGS referred to below that a RESEARCH PLAN has
been submitted, PPI shall undertake screening of such RESEARCH TARGET in an
effort

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to identify PRODUCT LEADS that meet the criteria for such RESEARCH TARGET. PPI
will notify HGS of the date on which PPI commences such initial screening of a
RESEARCH TARGET (with respect to each RESEARCH TARGET, the "INITIAL SCREENING
DATE"). Based solely on information provided by HGS to PPI, PPI acknowledges
that pursuant to the SB/HGS LICENSE AGREEMENTS, HGS may not initiate screening
to evaluate multiple chemical entities for activity with respect to a RESEARCH
TARGET without first submitting to SB a RESEARCH PLAN, and must submit annual
updates to each such plan. PPI agrees not to undertake any screening of a
RESEARCH TARGET, until notified by HGS that a RESEARCH PLAN has been submitted.
PPI further agrees to assist, as reasonably requested by HGS, in the preparation
of the RESEARCH PLAN and in any and all annual updates. HGS covenants and agrees
that it will submit the aforesaid RESEARCH PLAN to SB within thirty (30) days of
the EFFECTIVE DATE and will promptly notify PPI of such submission.

3.5 As soon as reasonably practicable after identifying a PRODUCT LEAD which PPI
believes meets the PRODUCT LEAD ADVANCEMENT CRITERIA, PPI shall present such
PRODUCT LEAD to the JRC, along with all material data related to such PRODUCT
LEAD. The JRC shall review such PRODUCT LEAD and such data to determine whether
such PRODUCT LEAD meets the PRODUCT LEAD ADVANCEMENT CRITERIA and whether such
PRODUCT LEAD should

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advance into pre-IND testing. In making this decision, the JRC shall consider
not only such PRODUCT LEAD's characteristics, but also the prevailing market
conditions, the status of competitive products and the status of the parties'
and competitors' applicable intellectual property rights. If the JRC, in its
sole discretion (provided that each party will cause its representatives on the
JRC to act reasonably and in good faith) and by unanimous vote, determines that
such PRODUCT LEAD should advance into pre-IND testing (the date of such
determination with respect to a particular PRODUCT LEAD being referred to as the
"PRODUCT LEAD ADVANCEMENT DATE"), then such PRODUCT LEAD shall thereupon be
deemed a PRODUCT for the purposes of this Agreement.

3.6 If, after performing reasonable screening efforts with respect to a RESEARCH
TARGET, PPI determines that it is not reasonably likely that one or more PRODUCT
LEADS will be identified which meet the PRODUCT LEAD ADVANCEMENT CRITERIA, (i)
PPI may advise the JRC of such determination and the bases therefor (a RESEARCH
TARGET as to which PPI has made such a determination and so advised the JRC
being referred to as an "INEFFECTIVE RESEARCH TARGET"), (ii) the JRC will
thereupon consider in good faith whether an alternative target should be
substituted by HGS for such INEFFECTIVE RESEARCH TARGET, and (iii) if the JRC
determines that such a substitution should occur, then from and after the date
of such determination, for all purposes of this

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Agreement such alternative target shall be deemed a RESEARCH TARGET and such
INEFFECTIVE RESEARCH TARGET shall cease to be a RESEARCH TARGET; provided that
the JRC shall not be required to consider such a substitution with respect to
more than one RESEARCH TARGET.

3.7 As soon as reasonably practicable after the PRODUCT LEAD ADVANCEMENT DATE,
HGS and PPI shall form a Joint Development Committee ("JDC").

      (a)   The JDC shall consist of three (3) representatives of each party,
            but each party shall have only one vote. All decisions of the JDC
            shall be by unanimous vote.

      (b)   Each party shall notify the other party in writing of its initial
            representatives to the JDC within thirty (30) days after the PRODUCT
            LEAD ADVANCEMENT DATE. Each party may substitute one or more
            representatives from time to time effective upon written notice to
            the other party.

      (c)   The JDC shall meet not less than twice each calendar year so long as
            development and commercialization of a PRODUCT is being diligently
            pursued by the parties hereunder, at such times and places as
            mutually agreed by the parties, alternating between Cambridge,
            Massachusetts and Rockville, Maryland or such other places as the
            parties mutually agree. If the parties mutually agree, any meeting
            of

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            the JRC may be held by telephone or video conference. At each such
            meeting, the JDC representatives shall discuss and make decisions
            with respect to the development of PRODUCTS.

3.8 The JDC shall direct and coordinate all activities related to pre-IND
testing, IND filing and the planning and implementation of clinical trials with
respect to a PRODUCT from and after the PRODUCT LEAD ADVANCEMENT DATE with
respect to such PRODUCT through and including the conclusion of Phase IIa (the
"COST SHARING DEVELOPMENT PERIOD"). As soon as reasonably practicable after a
PRODUCT LEAD ADVANCEMENT DATE, the JDC will prepare and approve a DEVELOPMENT
PLAN for the PRODUCT which was the subject of such PRODUCT LEAD ADVANCEMENT
DATE, which shall describe in detail the development work with respect to such
PRODUCT, which party shall perform which tasks, the budget for such work for the
ensuing year and including, in the case of the first such annual budget, the
remaining months of the then current year (the "ANNUAL BUDGET"), as well as
milestones, time frames and operating plans (as amended from time to time by the
JDC, the "DEVELOPMENT PLAN"). The DEVELOPMENT PLAN shall be reviewed annually by
the JDC and the ANNUAL BUDGET for the ensuing year shall be approved by the JDC
no later than December 15th of the then current year. The DEVELOPMENT PLAN shall
allocate responsibilities to the respective parties consistent with their
respective capabilities and, to

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the extent possible, so as to maximize the expeditious and cost-effective
development of the PRODUCT. PPI and HGS shall each be responsible for one-half
of all direct costs (including direct labor costs to be charged at mutually
agreed upon rates) and out-of-pocket expenses (i) reasonably incurred in
connection with the development of a PRODUCT during the COST SHARING DEVELOPMENT
PERIOD and prior to approval by the JDC of the first ANNUAL BUDGET and (ii)
incurred during the COST SHARING DEVELOPMENT PERIOD and after approval by the
JDC of the first ANNUAL BUDGET, provided, in the case of clause (ii), such cost
or expense item is provided for in the ANNUAL BUDGET then in effect and the
amount thereof is not inconsistent in any material respect with the amount(s)
for such item(s) contemplated by such ANNUAL BUDGET. Any payments to a THIRD
PARTY for services (e.g., toxicology studies, clinical trial expenses) performed
in connection with pre-clinical or clinical studies to the extent not provided
for in the ANNUAL BUDGET, must be approved by the JDC prior to the incurrence of
any such expense. If a party is claiming reimbursement pursuant to this
Paragraph 3.8, then within forty-five (45) days after the end of a calendar
quarter during which the costs or expenses for which reimbursement is being
claimed were incurred, a party will submit to the other a statement (each a
"COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT") itemizing in
reasonable detail such cost and expenses and setting forth the total amount, if
any, of such costs and

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expenses to be reimbursed by the other party pursuant to this Paragraph 3.8.
Such reimbursement amounts shall be paid within thirty (30) days after receipt
of a COST-SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT, except to the
extent such COST SHARING DEVELOPMENT PERIOD REIMBURSEMENT STATEMENT is being
disputed in good faith. Except as otherwise provided herein, each party shall
assume full responsibility for its own costs and expenses with respect to a
PRODUCT incurred during the COST SHARING DEVELOPMENT PERIOD.

3.9 With respect to any PRODUCT, during the COST SHARING DEVELOPMENT PERIOD the
parties shall each use reasonable efforts consistent with prudent business
practices and this Agreement to expeditiously develop such PRODUCT through the
conclusion of PHASE IIa.

3.10 HGS shall have responsibility for filing all INDs with respect to a PRODUCT
(and any subsequent INDs with respect to such PRODUCT, including for different
indications) and coordinating with the U.S. Food and Drug Administration, and
all foreign counterparts, with respect thereto.

3.11 Based solely on information provided by HGS to PPI, PPI acknowledges that,
with respect to the RESEARCH TARGETS, SB may have an option for
co-development/co-marketing rights with HGS for any PRODUCT (with respect to any
PRODUCT, if applicable, the "SB OPTION"). For any such Product for which SB

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has and exercises the SB Option and its rights to co-development/co-marketing (a
"SB PARTICIPATING PRODUCT"), (i) PPI shall have no right to continue to
participate in the development or to participate in the commercialization of
such SB PARTICIPATING PRODUCT, but shall have only the right to receive the
royalties and milestones set forth in Paragraph 4.1, (ii) the license granted by
HGS to PPI pursuant to Section 2.3, to the extent such license is with respect
to such SB PARTICIPATING PRODUCT or the related PRODUCT LEAD, shall
automatically terminate and be without further force or effect, and (iii) to the
extent legally permissible, PPI will take all action reasonably necessary to
assign to HGS all of its right, title and interest in, and transfer possession
and control to HGS of, any regulatory or patent filings prepared, submitted or
filed by PPI, to the extent that such filings related to such SB PARTICIPATING
PRODUCT or the related PRODUCT LEAD. HGS shall keep PPI fully apprised of any
communications to or from SB relating to the SB OPTION, including without
limitation notifying PPI promptly upon sending or receiving (and providing PPI
with a summary of the nature and substance of) any notice or other writing with
respect to a PRODUCT pursuant to SECTION 10.3(c) of the SB/HGS LICENSE
AGREEMENT, and upon expiration of the sixty (60) day period referred to in such
SECTION 10.3(c) without SB having exercised the SB OPTION.

                                       23
<PAGE>

3.12 For any Product for which SB does not have or does not exercise or waives
or relinquishes, the SB Option or its co-development/co-marketing rights (a "SB
NON-PARTICIPATING PRODUCT"), PPI shall have the option (the "PPI CONTINUED
PARTICIPATION OPTION") to continue to fund fifty percent (50%) of all remaining
direct development, and to fund fifty percent (50%) of all direct marketing,
sales and other, costs and expenses associated with commercialization of such SB
NON-PARTICIPATING PRODUCT, as provided in Paragraph 3.13, in return for fifty
percent (50%) of the OPERATING PROFIT with respect to such SB NON-PARTICIPATING
PRODUCT, so long as PPI has not exercised an OPT-OUT ELECTION (as defined below)
with respect to such SB NON-PARTICIPATING PRODUCT. If PPI does not exercise the
CONTINUED PARTICIPATION OPTION with respect to a SB NON-PARTICIPATING PRODUCT,
then (i) PPI shall have no right to continue to participate in the development,
or to participate in the commercialization, of such SB NON-PARTICIPATING
PRODUCT, but shall have only the right to receive the royalties, and the
milestone payments (solely with respect to milestones achieved after such
failure to exercise the CONTINUED PARTICIPATION OPTION) set forth in Paragraph
4.2 with respect to such SB NON-PARTICIPATING PRODUCT, (ii) the license granted
by HGS to PPI pursuant to Section 2.3, to the extent such license is with
respect to such SB NONPARTICIPATING PRODUCT or the related PRODUCT LEAD, shall
automatically terminate and be without

                                       24
<PAGE>

further force or effect, and (iii) to the extent legally permissible, PPI will
take all action reasonably necessary to assign to HGS all of its right, title
and interest in, and transfer possession and control to HGS of, any regulatory
or patent filings prepared, submitted or filed by PPI, to the extent that such
filings relate to such SB NON-PARTICIPATING PRODUCT or the related PRODUCT LEAD.
At any time after the COST SHARING DEVELOPMENT PERIOD, either HGS or PPI may opt
out of further co-development/co-marketing with respect to a SB
NON-PARTICIPATING PRODUCT (an "OPT-OUT ELECTION"), in which event (i) if such
OPT-OUT ELECTION is by HGS, the licenses granted by PPI to HGS pursuant to
Paragraphs 2.2 and 2.4, to the extent such licenses are with respect to such SB
NON-PARTICIPATING PRODUCT or the related PRODUCT LEAD, shall automatically
terminate and be without further force or effect, (ii) if such OPT-OUT ELECTION
is by PPI, the licenses granted by HGS to PPI pursuant to Sections 2.3 and 2.5,
to the extent such licenses are with respect to such SB NON-PARTICIPATING
PRODUCT or the related PRODUCT LEAD, shall automatically terminate and be
without further force or effect, (iii) the party making such OPT-OUT ELECTION
(the "OPT-OUT PARTY") shall be responsible for the payment of such OPT-OUT
PARTY'S share of costs and expenses which were accrued or as to which
commitments were made prior to the time of the OPT-OUT PARTY'S OPT-OUT ELECTION,
(iv) to the extent legally permissible, the OPT-OUT PARTY will take all action
reasonably necessary

                                       25
<PAGE>

to assign to the other party all of its right, title and interest in, and
transfer possession and control to the other party of, any regulatory or patent
filings prepared, submitted or filed by the OPT-OUT PARTY, and any regulatory
approvals received by the OPT-OUT PARTY, to the extent that such filings or
approvals related to such SB NON-PARTICIPATING PRODUCT or the related PRODUCT
LEAD and (v) the party which has not made an OPT-OUT ELECTION the remaining
party shall pay to the OPT-OUT-PARTY the royalties, and the milestones (solely
with respect to milestones achieved after such OPT-OUT ELECTION) as provided in
Paragraph 4.2.

3.13 The JDC, or any additional committee(s) or persons selected by the JDC
(which for purposes of this Section 3.13 shall collectively be referred to as
the "JDC"), shall direct and coordinate all activities with respect to the
further development and commercialization of a HGS/PPI PRODUCT, including,
without limitation, the filing and the planning and implementation of clinical
trials, obtaining all required regulatory approvals, development and
implementation of plans for the manufacture, marketing and distribution of such
HGS/PPI PRODUCT, and determining whether and on what terms any or all aspects of
such further development and commercialization should be licensed, sublicensed
or assigned to THIRD PARTIES. In this connection, the JDC will prepare and
approve a LONG RANGE PLAN for such development and commercialization, which
shall describe in detail the development and commercialization work with respect
to such HGS/PPI PROD-

                                       26
<PAGE>

UCT, which party shall perform which tasks, the budget for such work for the
ensuing year and including, in the case of the first such annual budget, the
remaining months of the then current year (the "LRP ANNUAL BUDGET"), as well as
milestones, time frames, and operating plans (as amended from time to time by
the JDC, the "LONG RANGE PLAN"). The LONG RANGE PLAN shall be reviewed annually
by the JDC and the LRP ANNUAL BUDGET for the ensuing year shall be approved by
the JDC no later than December 15th of the then current year. The LONG RANGE
PLAN shall allocate responsibilities to the respective parties consistent with
their respective capabilities, and to the extent possible, so as to maximize the
expeditious and cost-effective development of the HGS/PPI PRODUCT. Unless
otherwise agreed by the parties in writing, PPI and HGS shall each be
responsible for one-half of all direct costs (including direct labor costs to be
charged at mutually agreed upon rates) and out-of-pocket expenses (i) reasonably
incurred in connection with the development and commercialization of a HGS/PPI
PRODUCT after the COST SHARING DEVELOPMENT PERIOD and prior to approval by the
JDC of the first LRP ANNUAL BUDGET and (ii) incurred after the COST SHARING
DEVELOPMENT PERIOD and after approval by the JDC of the first LRP ANNUAL BUDGET,
provided, in the case of clause (ii), such cost or expense item is provided for
in the LRP ANNUAL BUDGET then in effect and the amount thereof is not
inconsistent in any material respect with the amount(s) for such item(s)

                                       27
<PAGE>

contemplated by such LRP ANNUAL BUDGET. Any payments to a THIRD PARTY for
services (e.g., clinical trial expenses, manufacturing), to the extent not
provided for in the LRP ANNUAL BUDGET, must be approved by the JDC prior to the
incurrence of such expense. If a party is claiming reimbursement pursuant to
this Paragraph 3.13, then within forty-five (45) days after the end of a
calendar quarter during which the costs or expenses for which reimbursement is
being claimed were incurred, a party will submit to the other a statement (each
a "HGS/PPI PRODUCT REIMBURSEMENT STATEMENT") itemizing in reasonable detail such
costs and expenses and setting forth the total amount, if any, of such costs and
expenses to be reimbursed by the other party pursuant to this Paragraph 3.13.
Such reimbursement amounts shall be paid within thirty (30) days after receipt
of a HGS/PPI PRODUCT REIMBURSEMENT STATEMENT, except to the extent such HGS/PPI
PRODUCT REIMBURSEMENT STATEMENT is being disputed in good faith. Except as
otherwise provided herein, each party shall assume full responsibility for its
own costs and expenses with respect to a HGS/PPI PRODUCT incurred after the COST
SHARING DEVELOPMENT PERIOD.

3.14 If at any time, the JDC decides to discontinue pre-IND testing and/or
clinical trials of a PRODUCT, then such drug shall cease to be a PRODUCT and all
licenses and rights under this Agreement with respect to such PRODUCT shall
terminate.

                                       28
<PAGE>

3.15 Each party shall keep complete and accurate records of its activities
conducted under this Agreement regarding screening of, and other research and
development activities with respect to, RESEARCH TARGETS, PRODUCT LEADS and
PRODUCTS and the results thereof. Within thirty (30) days after the end of each
calendar quarter during the Research Term, each party shall prepare and provide
the other party with a reasonably detailed written report of such activities and
results, through such date.

3.16 With respect to any SB NON-PARTICIPATING PRODUCT which is a HGS/PPI
PRODUCT, the parties will use reasonable efforts consistent with prudent
business practices to expeditiously develop and commercialize such PRODUCT. With
respect to any SB PARTICIPATING PRODUCT or any SB NON-PARTICIPATING PRODUCT
which is a HGS PRODUCT, HGS will use reasonable efforts consistent with prudent
business practices to expeditiously develop and commercialize such PRODUCT. With
respect to any SB NONPARTICIPATING PRODUCT which is a PPI PRODUCT, PPI, will use
reasonable efforts consistent with prudent business practices to expeditiously
develop and commercialize such PRODUCT.

4. MILESTONES, ROYALTIES AND CERTAIN OTHER PAYMENTS

4.1 Subject to Paragraph 4.3, with respect to each SB Participating PRODUCT, HGS
shall pay to PPI the following royalties and milestones (which milestone
payments shall be due and payable within thirty (30) days after the milestone
event is

                                       29
<PAGE>

achieved by or on behalf of HGS, SB, their respective AFFILIATES, or any direct
or indirect licensee, sublicensee, assignee or transferee of such entities.

      (1)   ** U.S. Dollars ($**) upon first submission of an application for
            regulatory approval in a major country (i.e., United States, Canada,
            Japan, United Kingdom, France, Germany, Italy or Spain) for such SB
            PARTICIPATING PRODUCT;

      (2)   ** U.S. Dollars ($**) upon the first regulatory approval in a major
            country (i.e., United States, Canada, Japan, United Kingdom, France,
            Germany, Italy or Spain) of such SB PARTICIPATING PRODUCT for
            commercial sale; and

      (3)   a royalty of ** percent (**%) of NET SALES of such SB PARTICIPATING
            PRODUCT.

4.2 Subject to Paragraph 4.3, with respect to each PPI PRODUCT, PPI shall pay to
HGS, and with respect to each HGS PRODUCT, HGS shall pay to PPI, the following
royalties and milestones (payment of which milestone payments shall be in
accordance with and subject to Paragraph 3.12 and shall be due and payable
within thirty (30) days after the milestone event is achieved by or on behalf of
the party required to make such payment or its AFFILIATES or any direct or
indirect licensee, sublicensee, assignee or transferee of such entities):

                                       30
<PAGE>

      (1)   ** U.S. Dollars ($**) upon first submission of an application for
            regulatory approval in a major country (i.e., United States, Canada,
            Japan, United Kingdom, France, Germany, Italy or Spain) for such SB
            NON-PARTICIPATING PRODUCT;

      (2)   ** U.S. Dollars ($**) upon the first regulatory approval in a major
            country (i.e., United States, Canada, Japan, United Kingdom, France,
            Germany, Italy or Spain) of such SB NON-PARTICIPATING PRODUCT for
            commercial sale;

      (3)   a royalty of ** percent (**%) of NET SALES during each calendar year
            in which NET SALES are ** dollars ($**) or less;

      (4)   a royalty of ** percent (**%) of NET SALES during each calendar year
            in which NET SALES exceed ** dollars ($**), but are ** ($**) or
            less;

      (5)   a royalty of ** percent (**%) of NET SALES during each calendar year
            in which NET SALES exceed ** dollars ($**).

4.3 The milestone payments provided for in Paragraphs 4.1 and 4.2 shall only be
made once for each PRODUCT and shall not be made in the case of improvements or
modifications such as, but not limited to, changed forms, formats, line
extensions, formulations, indications, processes or protocols of a PRODUCT for
which such payments were previously made. Royalty obligations under Paragraphs
4.1 and 4.2

                                       31
<PAGE>

with respect to a PRODUCT, shall terminate on a country-by-country basis and on
a PRODUCT by PRODUCT basis on the later of (i) ten (10) years after first
country-wide launch of such PRODUCT in such country or (ii) if such royalty is
payable by HGS, expiration of the last to expire RESEARCH PATENT or PPI PATENT
which covers the making, having made, importing, exporting, offering to sell or
using or selling of such PRODUCT in such country or (iii) if such royalty is
payable by PPI, expiration of the last to expire RESEARCH PATENT or HGS PATENT
which covers the making, having made, importing, exporting, offering to sell or
using or selling of such PRODUCT in such country.

4.4 For each SB NON-PARTICIPATING PRODUCT, as to which PPI either does not
exercise the PPI CONTINUED PARTICIPATION OPTION or makes an OPT-OUT ELECTION and
HGS makes an OPT-OUT ELECTION, the licenses granted by the parties hereunder
shall automatically terminate and the parties shall cooperate in the
outlicensing of such SB NON-PARTICIPATING PRODUCT and shall share equally in all
outlicensing fees and royalties.

4.5 With respect to any PRODUCT, if SB exercises the SB OPTION and the aggregate
costs and expenses in respect of such PRODUCT paid or payable by PPI during the
COST SHARING DEVELOPMENT PERIOD (the "PPI DEVELOPMENT COST AMOUNT") exceed **
dollars ($**), then upon first submission of an application for regulatory
approval in a major country (i.e., United States, Canada,

                                       32
<PAGE>

Japan, United Kingdom, France, Germany, Italy or Spain) for such PRODUCT HGS
will promptly pay to PPI an amount equal to the positive difference between the
PPI DEVELOPMENT COST AMOUNT and ** dollars ($**), provided that in no event
shall HGS be required to pay to PPI an amount in excess of ** dollars ($**)
pursuant to this Section 4.5.

Miscellaneous

4.6 The manner in which statements and remittances of royalty and other payments
shall be rendered and made shall be as provided in Article 7 hereof.

4.7 All payments to be made hereunder shall be by wire transfer of immediately
available funds to an account designated by PPI or HGS, whichever is to be the
recipient of such funds.

5. CONFIDENTIALITY

5.1 Subject to Paragraph 5.2, the parties agree not to disclose and/or provide
to a THIRD PARTY any information and/or materials received from the other party
pursuant to this Agreement and agree to use the information and materials
received from the other party pursuant to this Agreement only as licensed or
otherwise provided hereunder.

5.2 Unless otherwise restricted by this Agreement, the confidentiality
obligations of Paragraph 5.1 shall not apply to information and/or materials
which:

                                       33
<PAGE>

      (1)   was known to the receiving party or generally known to the public
            prior to its disclosure hereunder; or

      (2)   subsequently becomes known to the public by some means other than a
            breach of this Agreement;

      (3)   is disclosed to the receiving party by a THIRD PARTY having a lawful
            right to make such disclosure and who is not under an obligation of
            confidentiality to the other party;

      (4)   is required by law or bona fide legal process regulation, rule, act
            or order of any governmental agency or authority to be disclosed,
            provided that the party making disclosure takes all reasonable steps
            to restrict and maintain confidentiality of such disclosure and
            provides reasonable advance notice, to the extent such advance
            notice is possible, to the other party;

      (5)   is approved for release by the parties; or

      (6)   is independently developed by the employees or agents of a party or
            its AFFILIATES, without any knowledge of the information and/or
            materials provided by the other party, provided that such
            independent development can be properly demonstrated by the first
            party.

5.3 All confidential information disclosed by one party to the other party shall
remain the intellectual property of the disclosing party. In the event that a
court or

                                       34
<PAGE>

other legal or administrative tribunal, directly or through an appointed master,
trustee or receiver, assumes partial or complete control over the assets of a
party to this Agreement based on the insolvency or bankruptcy of such party, the
bankrupt or insolvent party shall promptly notify the court or other tribunal
(i) that confidential information received from the other party under this
Agreement remains the property of the other party and (ii) of the
confidentiality obligations under this Agreement. In addition, the bankrupt or
insolvent party shall, to the extent permitted by law, take all steps necessary
or desirable to maintain the confidentiality of the other party's confidential
information and to ensure that the court, other tribunal or appointee maintains
such information in confidence in accordance with the terms of this Agreement.

5.4 No public announcement concerning (i) the existence of or terms of this
Agreement, (ii) research and/or discoveries made by one party, (iii) milestones
achieved by one party, and (iv) exercise by one party of rights and options
granted under this Agreement, shall be made by the other party to this Agreement
without prior written notice, to the extent practicable under the circumstances,
and, except as a party determines in good faith may be legally required, or as a
party determines in good faith may be required for recording purposes, without
first obtaining the written approval of the other party and agreement upon the
nature and text of such announcement, such agreement and/or approval not to be
unreasonably withheld. To the

                                       35
<PAGE>

extent practicable under the circumstances, the party desiring to make any such
public announcement shall inform the other party of the proposed announcement or
disclosure at least three (3) business days prior to public release, and, to the
extent practicable under the circumstances, shall provide the other party with a
written copy thereof. This Paragraph shall not apply to any information (i) in a
public announcement that is information essentially identical to that contained
in a previous public announcement agreed to pursuant to this paragraph or (ii)
any disclosure which a party determines is reasonably necessary in connection
with any financing, strategic transaction, acquisition or disposition involving
such party.

5.5 Without the written consent of both parties, neither party shall submit for
written or oral publication any manuscript, abstract or the like which includes
RESEARCH TECHNOLOGY prior to the earlier of (i) eighteen months after PPI or HGS
files a patent which claims such PRODUCT or (ii) the date on which such PRODUCT
is disclosed in a printed publication other than through breach of this
Paragraph.

6. OWNERSHIP; PATENT PROSECUTION AND LITIGATION

6.1 Subject to the grants of license herein, all right, title and interest in
and to any and all data, substances, processes, methods, materials, formulae,
know-how and inventions with respect to biology-based and chemistry-based
combinatorial systems for screening of compounds that bind to molecular targets,
including all improve-

                                       36
<PAGE>

ments and modifications thereof, which may be useful within the FIELD and which
are developed by or on behalf of PPI during, prior to or after the RESEARCH
TERM, and all patent rights and other intellectual property rights therein,
shall belong solely to PPI, except to the extent any of the foregoing which is
developed by or on behalf of PPI during the RESEARCH TERM constitutes RESEARCH
TECHNOLOGY. PPI shall have the sole right and responsibility for the filing,
prosecution and maintenance of patents and patent applications with respect to
PPI TECHNOLOGY (including any extensions or SPCs relating thereto).

6.2 Subject to the grants of license herein, all right, title and interest to
the HGS TECHNOLOGY and RESEARCH TECHNOLOGY and all patent rights and other
intellectual property rights therein shall belong solely to HGS. Except as set
forth in Section 6.3, as between the parties, HGS shall have the sole right and
responsibility for the filing, prosecution and maintenance of patents and patent
applications directed thereto (including any extensions or SPCs relating
thereto).

6.3 As between the parties, with respect to RESEARCH TECHNOLOGY, HGS shall, in
its sole discretion, determine whether, when, and in which jurisdictions to file
any patent applications related thereto. HGS shall control the filing,
prosecution and maintenance of any such patent applications and any patents
issuing therefrom, including the filing of any extensions or SPCs relating
thereto. The foregoing rights shall not apply with respect to any patent or
patent application to the extent the

                                       37
<PAGE>

claims thereof are directed exclusively to a PPI PRODUCT, as to which PPI shall
have the sole right, in its discretion to file, prosecute and maintain any
patent applications and patents issuing therefrom, including the filing of any
extensions or SPCs relating thereto. Except as otherwise specified herein, the
parties shall share equally the costs of all such filing, prosecution and
maintenance. If HGS determines not to file a patent application covering the
RESEARCH TECHNOLOGY after request by PPI, or not to prosecute any such patent
application or to maintain any such patents, HGS shall timely provide PPI with
written notice of such determination, in which event PPI shall have the right to
file or prosecute such application or maintain such patents entirely at its own
expense, unless HGS reasonably determines (and includes in such written notice
the basis for such determination) that such filing or prosecution would be
detrimental to the commercial prospects of a possible PRODUCT LEAD or PRODUCT.

6.4 In addition, the party entitled to file, prosecute and maintain a patent or
patent application (the "Prosecuting Party") claiming RESEARCH TECHNOLOGY shall
keep the other party (the "NON-PROSECUTING PARTY") reasonably informed with
regard to filing, prosecution and maintenance activity for such patent or patent
application. The NON-PROSECUTING PARTY shall have the right to consult in
advance with the PROSECUTING PARTY with respect to strategies for the filing,
prosecution and maintenance of such patents and patent applications. Without

                                       38
<PAGE>

limitation of the foregoing, the NON-PROSECUTING PARTY shall have the right to
request that the PROSECUTING PARTY cause additional claims to be added, at the
NON-PROSECUTING PARTY's expense, to a patent application claiming RESEARCH
TECHNOLOGY, which request shall not be unreasonably refused by the PROSECUTING
PARTY.

6.5 Both parties will provide the other reasonable assistance to enable the
other to prepare, file, prosecute and maintain patents pursuant to this Article
6.

6.6 In the event of the institution of any suit or any threatened suit by a
THIRD PARTY,

      (1)   against HGS or PPI for infringement of any third-party intellectual
            property right in connection with the manufacture, use, import,
            export, offer for sale, sale, distribution or marketing of a PPI
            PRODUCT, the party against whom such suit is brought or threatened
            shall promptly notify the other in writing. As between HGS and PPI,
            PPI shall be solely responsible for, and shall indemnify HGS
            against, any and all cost and expense incurred in connection with
            such action or threatened action and any liability including,
            without limitation, any third-party royalties required to be paid in
            respect thereof (collectively, "IP LOSSES") which results therefrom;
            provided, however, that PPI shall be entitled to offset such IP
            Losses against any royalties

                                       39
<PAGE>

            owed by PPI to HGS hereunder to the extent such IP Losses result
            from a claim that the use by PPI or its licensees of any HGS
            TECHNOLOGY in accordance with this Agreement infringes any
            intellectual property right of any THIRD PARTY; provided further,
            however, that PPI may not offset in such manner in any calendar
            quarter more than ** (**) of the royalties which are owed to HGS in
            respect of such calendar quarter.

      (2)   against HGS or PPI, for infringement of any third-party intellectual
            property right in connection with the manufacture, use, import,
            export, offer for sale, sale, distribution or marketing of a HGS
            PRODUCT or SB PARTICIPATING PRODUCT, the party against whom such
            suit is brought or threatened shall promptly notify the other in
            writing. As between HGS and PPI, HGS shall be solely responsible for
            any IP LOSSES which result therefrom; provided, however, that HGS
            shall be entitled to offset such IP LOSSES against any royalties
            owed by HGS to PPI hereunder to the extent such IP LOSSES result
            from a claim that the use by HGS or its licensees of any PPI
            TECHNOLOGY in accordance with this Agreement infringes any
            intellectual property right of any THIRD PARTY; provided further,
            however, that HGS may not offset in such manner in any calendar
            quarter more

                                       40
<PAGE>

            than ** (**) of the royalties which are owed to PPI in respect of
            such calendar quarter.

      (3)   against HGS or PPI, for patent infringement involving the
            manufacture, use, import, export, offer for sale, sale, distribution
            or marketing of a HGS/PPI PRODUCT, the party against whom such suit
            is brought or threatened shall promptly notify the other in writing.
            HGS and PPI shall be jointly responsible for and shall jointly
            control the defense of any such action, and shall bear equally any
            IP LOSSES which result therefrom.

      (4)   The party defending an action under subsection (a) or (b) of this
            paragraph shall have sole control over its conduct, including
            settlement thereof, provided such settlement shall not be made
            without the prior written consent of the other party if it would
            adversely affect the patent or other rights of such party.

6.7 In the event that HGS or PPI becomes aware of actual or threatened
infringement of a PPI PATENT, HGS PATENT or RESEARCH PATENT covering a PRODUCT,
that party shall promptly notify the other party in writing. The owner of the
PPI PATENT, HGS PATENT or RESEARCH PATENT shall have the first right but not the
obligation to bring, at its own expense, an infringement action against any
THIRD PARTY and to use the other party's name in connection therewith as

                                       41
<PAGE>

necessary to create or maintain standing. If the owner of the patent does not
commence a particular infringement action within ninety (90) days, the other
party, after notifying the owner in writing, shall be entitled to bring such
infringement action, in its own name and/or in the name of the patent owner, at
its own expense, to the extent that such party is licensed thereunder. The
foregoing notwithstanding, in the event that an alleged infringer certifies
pursuant to 21 U.S.C. ss. 355(b)(2)(A)(iv) against an issued PPI PATENT, HGS
PATENT or RESEARCH PATENT covering a PRODUCT, the party receiving notice of such
certification shall immediately notify the other party of such certification,
and if fourteen (14) days prior to expiration of the forty five (45) day period
set forth in 21 U.S.C. ss. 355(c)(3)(C), the owner of the patent fails to
commence an infringement action, the party receiving notice, in its sole
discretion, at its own expense and to the extent that it is licensed under the
patent, shall be entitled to bring such infringement action in its own name
and/or in the name of the patent owner. The party conducting an action under
this paragraph shall have full control over its conduct, including settlement
thereof, provided such settlement shall not be made without the prior written
consent of the other licensing party or licensed party if it would adversely
affect the patent or other rights of such party. The parties shall reasonably
assist one another and cooperate in any such litigation at the other's request,
each party paying its own costs and expenses.

                                       42
<PAGE>

6.8 Any recovery made by a party as the result of an action for patent
infringement it has conducted under Paragraph 6.6 shall be distributed as
follows:

      (1)   The party conducting the action shall recover its actual
            out-of-pocket expenses, and then shall reimburse the other party for
            any unreimbursed actual and out-of-pocket expenses incurred by the
            other party in connection therewith.

      (2)   To the extent that the recovery exceeds the total of item (a), the
            excess shall be kept by the party conducting the action, provided,
            however, that to the extent that (i) the recovery is based on an
            award of lost sales/profits, and (ii) the party conducting the
            action would have incurred a royalty obligation to the other party
            based upon such sales, the party to whom such royalties would have
            been due shall receive a proportion of the excess recovery
            corresponding to the royalty percentage it would have otherwise been
            due.

6.9 The parties shall periodically keep one another reasonably informed of the
status of their respective activities regarding any such litigation or
settlement thereof.

7. STATEMENTS AND REMITTANCES

7.1 PPI and HGS, as the case may be, shall keep and require its licensees to
keep complete and accurate records of all sales and calculations for NET SALES
of products for which royalties are due hereunder. Each party shall have the
right,

                                       43
<PAGE>

through a certified public accountant or like person reasonably acceptable to
the other party, to examine pertinent financial records during regular business
hours upon reasonable advance written notice during the life of this Agreement
and for twelve (12) months after its termination for the purpose of verifying
and reporting to HGS or PPI as to the computation of the royalty payments made
hereunder; provided, however, that such examination shall not take place more
often than once a year; provided further that such accountant shall report only
as to the accuracy of the royalty statements and payments, including the
magnitude and source of any discrepancy. PPI, HGS, and their licensees shall be
required to maintain such records for three (3) years. The accountant shall
execute customary confidentiality agreements prior to any examination,
reasonably satisfactory in form and substance to both parties, to maintain in
confidence all information obtained during the course of any such examination,
except for disclosure to the parties, as necessary for the above purpose. The
fees charged by such accountant shall be paid by the party requesting the
examination unless such examination discloses that the royalties reported for
the examined period are incorrect by more than five percent (5%), in which case
the reporting party shall pay the reasonable fees and expenses charged by such
accountant.

7.2 Within sixty (60) days after the close of each calendar quarter, PPI and
HGS, as the case may be, shall deliver to the other party a report containing a
true account-

                                       44
<PAGE>

ing of all sales of products subject to royalty hereunder during such calendar
quarter and shall at the same time pay all royalties due in respect of such
sales by wire transfer, in immediately available funds, to a bank account
designated by the other party.

7.3 All royalties and other payments due under this Agreement shall be payable
in U.S. dollars. Amounts due and payable hereunder but not paid by the date due
hereunder will be subject to an interest charge from the date such payment was
due until payment, at an interest rate equal to the highest U.S. Prime Interest
Rate per annum published in The Wall Street Journal on the first business day
after the payment first became due, plus 3.0 percentage points.

7.4 Royalties payable on sales in countries other than the United States shall
be calculated by multiplying the appropriate royalty rate by the NET SALES in
the currency in which they are made and converting the resulting amount into
United States dollars, at the rates of exchange as reported in The New York
Times, or, if not in the Times, then in The Wall Street Journal, on the last
business day in New York, New York of each royalty period. Such payments shall
be without deduction of exchange, collection, or other charges. If, due to
restrictions or prohibitions imposed by a national or international authority,
payments cannot be made as aforesaid, the parties shall consult with a view to
finding a prompt and acceptable solution lawfully direct at no additional
out-of-pocket expense to the party owed the royalty. Notwith-

                                       45
<PAGE>

standing the foregoing, if royalties cannot be remitted for any reason within
six (6) months after the end of the calendar quarter during which they are
earned, then the party owing the royalty shall be obligated to deposit the
royalties in a bank account in Switzerland in the name of the other party. Each
party shall deduct any taxes which the party is obligated to pay and/or withhold
in a country based on royalties due to the other based on NET SALES in such
country from royalty payments due for such country under this Agreement and pay
them to the proper authorities as required by applicable laws. Each party shall
maintain official receipts of payment of any such taxes and forward these
receipts to the other along with the royalty report covering the calendar
quarter in which such receipts were issued.

8. TERM AND TERMINATION

8.1 This Agreement shall come into effect as of the date first written above,
and shall remain in full force and effect unless earlier terminated as provided
in this Article 8. This Agreement shall terminate automatically upon the
expiration of the RESEARCH TERM if prior to such expiration no PRODUCT LEAD
shall have been identified.

8.2 (i) A party shall have the right to terminate this Agreement with respect to
any PRODUCT or in its entirety (a) upon the material breach by the other party
of the other party's obligations to pay any amounts owing hereunder with respect
to such PRODUCT or otherwise, if such breach is not cured within thirty (30)
days

                                       46
<PAGE>

after receipt of written notice from such party thereof or (b) upon the material
breach by the other party of the other party's obligations (other than
obligations to pay any amounts owing hereunder with respect to such PRODUCT, but
including, without limitation, failure to use diligent efforts with respect to
such PRODUCT as required by Paragraphs 3.9 and 3.16), if such breach is not
cured within sixty (60) days after receipt of written notice from such party
thereof.

      (ii) PPI shall have the right to terminate this Agreement with respect to
any PRODUCT or in its entirety if an SB ADVERSE EVENT shall have occurred.

      (iii) Notwithstanding the foregoing, a party may not terminate this
Agreement pursuant to this Section 8.2 during the pendency of an arbitration
proceeding under this Agreement in which the other party reasonably contests
that it has breached this Agreement such that the first party is entitled to
terminate pursuant to this Section 8.2.

8.3 Either party may terminate this Agreement in its entirety or with respect to
one or more PRODUCTS if, at any time, the other party shall file in any court or
agency pursuant to any statute or regulation of any state or country, a petition
in bankruptcy or insolvency or for reorganization or for an arrangement or for
the appointment of a receiver or trustee of the party or of its assets, or if
the other party proposes a written agreement of composition or extension of its
debts, or if the other party shall be served with an involuntary petition
against it, filed in any insolvency

                                       47
<PAGE>

proceeding, and such petition shall not be dismissed within sixty (60) days
after the filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make an assignment
for the benefit of creditors.

8.4 PPI may, upon thirty (30) days prior written notice to HGS, at any time
after the first anniversary of the INITIAL SCREENING DATE with respect to a
RESEARCH TARGET, terminate this Agreement with respect to such RESEARCH TARGET
prior to the occurrence of a PRODUCT LEAD ADVANCEMENT DATE with respect to a
PRODUCT LEAD directed at such RESEARCH TARGET. HGS may, upon thirty (30) days
prior written notice to PPI, at any time commencing eighteen (18) months after
the INITIAL SCREENING DATE with respect to a RESEARCH TARGET, terminate this
Agreement with respect to such RESEARCH TARGET prior to the occurrence of a
PRODUCT LEAD ADVANCEMENT DATE with respect to a PRODUCT LEAD directed at such
RESEARCH TARGET.

8.5 Neither party shall have the right to terminate this Agreement except under
Paragraphs 8.2, 8.3, or 8.4, provided however that nothing in this Agreement
(including this Article 8) shall limit any remedies for breach which may be
available pursuant to a judgment of a court, in law or equity, including
termination of this Agreement or of any or all rights hereunder, except that any
action seeking remedies for breach of this Agreement (other than an action for
specific performance or other injunctive relief) shall be conducted in
accordance with Article 12.

                                       48
<PAGE>

8.6 Upon termination of this Agreement with respect to a PRODUCT, or in its
entirety, pursuant to and in accordance with this Article 8, then all rights,
licenses and obligations with respect to such PRODUCT, or this Agreement in its
entirety, shall be void and of no further force or effect, except as otherwise
provided in this Article 8; provided that (i) in any event, notwithstanding any
termination of this Agreement with respect to a PRODUCT or in its entirety, or
any other provision of this Agreement, the rights and obligations of the parties
under Articles 5, 6, 7, 8, 9, 10 and 12 through 20, and any obligations of a
party which accrued prior to such termination, shall survive any such
termination, as well as any rights or obligations which shall continue to apply
pursuant to the other provisions of this Article 8 or which are clearly meant to
survive termination of this Agreement, (ii) in the case of termination by PPI
pursuant to and in accordance with this Article 8 with respect to an HGS
PRODUCT, an HGS/PPI PRODUCT, or this Agreement in its entirety, HGS shall have
no further right to continue, and shall immediately cease, all research,
development, manufacturing, marketing and sales activities with respect to such
HGS PRODUCT, HGS/PPI PRODUCT, or all HGS PRODUCTS and HGS/PPI PRODUCTS in the
case of such a termination by PPI of this Agreement in its entirety and (iii) in
the case of termination by HGS pursuant to and in accordance with this Article 8
with respect to a PPI PRODUCT, HGS/PPI PRODUCT, or this Agreement in its
entirety, PPI shall have no further right to continue, and shall

                                       49
<PAGE>

immediately cease, all research, development, manufacturing, marketing and sales
activities with respect to such PPI PRODUCT, HGS/PPI PRODUCT, or all PPI
PRODUCTS and HGS/PPI PRODUCTS in the case of such a termination by HGS of this
Agreement in its entirety.

9. WARRANTIES AND REPRESENTATIONS

9.1 Each of HGS and PPI hereby represents, warrants and covenants to the other,
as of the date of this Agreement, as follows:

      (1)   it is a corporation duly organized and validity existing under the
            laws of the state of its incorporation;

      (2)   the execution, delivery and performance of this Agreement by such
            party has been duly authorized by all requisite corporate action;

      (3)   it has the power and authority to execute and deliver this Agreement
            and to perform its obligations hereunder, including, without
            limitation, the right, power and authority to grant the licenses
            under Article 2;

      (4)   the execution, delivery and performance by such party of this
            Agreement and its compliance with the terms and provisions hereof do
            not and will not conflict with or result in a breach of any of the
            terms and provisions of or constitute a default under (i) any loan
            agreement, guaranty, financing agreement, agreement affecting a
            Product or other

                                       50
<PAGE>

            agreement or instrument binding or affecting it or its property;
            (ii) any provision of its charter documents or bylaws; (iii) any
            order, writ, injunction or decree of any court or governmental
            authority entered against it or by which any of its property is
            bound or (iv) any other agreement to which it is a party or by which
            it is bound.

      (5)   this Agreement constitutes such party's legal, valid and binding
            obligation enforceable against it in accordance with its terms,
            subject, as to enforcement, to bankruptcy, insolvency,
            reorganization and other laws of general applicability relating to
            or affecting creditors' rights and to the availability of particular
            remedies under general equity principles.

9.2 No party to this Agreement has in effect, and, after the date of this
Agreement, no party shall enter into any written agreement that would be
inconsistent with any provision hereof.

9.3 HGS further represents and warrants to PPI that, to the best of its
knowledge, neither the grant of any license to PPI under this Agreement nor the
exercise of any right or performance of any obligation under this Agreement by
HGS or PPI will conflict with or result in a breach of any other agreement to
which HGS is a party.

9.4 HGS agrees that HGS will fully perform all of its obligations under the
SB/HGS LICENSE AGREEMENT or any similar agreement to the extent that such

                                       51
<PAGE>

obligations relate to RESEARCH TARGETS or otherwise relate to the subject matter
of this Agreement.

9.5 HGS agrees that it will not consent to any modification or waiver of any
existing agreement to which it is a party, or enter into any new agreement with
a THIRD PARTY, which relates to the subject matter of this Agreement and which
would adversely affect PPI's rights and/or interests under this Agreement. PPI
acknowledges that the granting of rights to a THIRD PARTY with respect to HGS
TECHNOLOGY for the screening of RESEARCH TARGETS shall not be a breach of this
Agreement.

9.6 EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTY THAT
PPI PATENTS, HGS PATENTS OR RESEARCH PATENTS ARE VALID OR ENFORCEABLE OR THAT
THEIR PRACTICE OR THE PRACTICE OF HGS TECHNOLOGY, PPI TECHNOLOGY, OR RESEARCH
TECHNOLOGY DOES NOT INFRINGE ANY PATENT RIGHTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS OF THIRD PARTIES. EXCEPT AS EXPRESSLY SET FORTH HEREIN, A HOLDING OF
INVALIDITY OR UNENFORCEABILITY OF ANY SUCH PATENT, FROM WHICH NO FURTHER APPEAL
IS OR CAN BE TAKEN, SHALL NOT AFFECT ANY OBLIGATION HEREUNDER, BUT SHALL ONLY
ELIMINATE

                                       52
<PAGE>

ROYALTIES OTHERWISE DUE UNDER SUCH PATENT FROM THE DATE SUCH HOLDING BECOMES
FINAL.

9.7 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN, HGS AND PPI MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

9.8 Each party represents and warrants to the other that its use of any
materials provided to it by the other party under this Agreement shall comply
with all applicable laws and regulations.

10. INDEMNIFICATION; INSURANCE

10.1 PPI shall defend, indemnify and hold harmless HGS, licensors of HGS and
each of their respective directors, officers, shareholders, agents and
employees, from and against any and all liability, loss, damages, costs and
expenses, including reasonable attorneys' fees and expenses, (i) arising from or
in connection with a breach by PPI of any of the representations and warranties
contained in Section 9 hereof or (ii) resulting from claims, demands, costs or
judgments which may be threatened, made or instituted against any of them
arising out of the development manufacture, possession, distribution, use,
testing, sale or other disposition of a PRODUCT by, on behalf of or through PPI
or any THIRD PARTY granted rights by

                                       53
<PAGE>

PPI in accordance with this Agreement (other than in connection with a suit or
threatened suit covered by Section 6.6 hereof). PPI's obligation to defend,
indemnify and hold harmless shall include claims, demands, costs or judgments,
whether for money damages or equitable relief by reason of alleged personal
injury (including death) to any person or alleged property damage; provided,
however, the indemnity shall not extend to any claim against an indemnified
party to the extent such claim results from the gross negligence, willful
misconduct or material breach of this Agreement of or by such indemnified party.
PPI shall have the exclusive right to control the defense of any action which is
to be indemnified in whole by PPI hereunder, including the right to select
counsel reasonably acceptable to HGS to defend HGS, and to settle any such
action; provided that, without the written consent of HGS (which shall not be
unreasonably withheld or delayed), PPI shall not agree to settle any claim
against HGS to the extent the settlement of such claim has a material adverse
effect on HGS. The provisions of this paragraph shall survive and remain in full
force and effect after any termination, expiration or cancellation of this
Agreement and the obligation hereunder shall apply whether or not such claims
are rightfully brought. PPI shall require each of its sublicensees hereunder to
agree to indemnify HGS in a manner consistent with this Paragraph 10.1.

10.2 HGS shall defend, indemnify and hold harmless PPI, licensors of PPI and
each of their respective directors, officers, shareholders, agents and
employees, from

                                       54
<PAGE>

and against any and all liability, loss, damages, costs and expenses, including
reasonable attorneys' fees and expenses, (i) arising from or in connection with
a breach by HGS of any of the representations or warranties contained in Section
9 hereof, (ii) arising from or in connection with (A) any actual or threatened
action, suit or proceeding, or (B) any other act or omission, in the case of
either (A) or (B), by SB or any other THIRD PARTY in connection with or relating
to the SB/HGS License Agreement or any other agreement to which SB (or its
AFFILIATES) or any such THIRD PARTY (or its AFFILIATES), and HGS, are parties
that relates to the subject matter of this Agreement, provided that in the case
of (B), HGS' indemnification obligation under this Paragraph 10.2 shall (1) only
apply if such act or omission has the direct or indirect effect of depriving PPI
of any material benefit of this Agreement or impairs the right or ability of PPI
or HGS to perform their respective obligations hereunder (any such act or
omission which has such effect being referred to as a "SB ADVERSE EVENT") and
(2) be limited to PPI's direct and indirect costs and expenses (including
reasonable attorneys fees and expenses) incurred by PPI in connection with this
Agreement, including without limitation the performance by PPI of its
obligations hereunder, or (iii) resulting from claims, demands, costs or
judgments which may be made or instituted against any of them arising out of the
development, manufacture, possession, distribution, use, testing, sale or other
disposition of a PRODUCT by, on behalf of or through HGS or any THIRD PARTY

                                       55
<PAGE>

granted rights by HGS (other than in connection with a suit or threatened suit
covered by Section 6.6 hereof). HGS' obligation to defend, indemnify and hold
harmless shall include claims, demands, costs or judgments, whether for money
damages or equitable relief by reason of alleged personal injury (including
death) to any person or alleged property damage; provided, however, the
indemnity shall not extend to any claim against an indemnified party to the
extent such claim results from the gross negligence, willful misconduct or
material breach of this Agreement of or by such indemnified party. HGS shall
have the exclusive right to control the defense of any action which is to be
indemnified in whole by HGS hereunder, including the right to select counsel
reasonably acceptable to PPI to defend PPI and to settle such action; provided
that, without the written consent of PPI (which shall not be unreasonably
withheld or delayed), HGS shall not agree to settle any claim against PPI to the
extent such claim has a material adverse effect on PPI. The provisions of this
paragraph shall survive and remain in full force and effect after any
termination, expiration or cancellation of this Agreement and HGS' obligation
hereunder shall apply whether or not such claims are rightfully brought. HGS
shall require each of its sublicensees hereunder to agree to indemnify PPI in a
manner consistent with this Paragraph 10.2.

10.3 A person or entity that intends to claim indemnification under this Article
10 (the "Indemnitee") shall promptly notify the other party (the "Indemnitor")
of any

                                       56
<PAGE>

loss, claim, damage, liability, or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor, after it determines
that indemnification is required of it, shall assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
Indemnitee shall have the right to retain its own counsel, with the fees and
expenses to be paid by the Indemnitor, if Indemnitor does not assume the defense
thereof; or, if representation of such Indemnitee by the counsel retained by the
Indemnitor would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such
proceedings. The indemnity agreement in this Article 10 shall not apply to
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of the Indemnitor, which consent
shall not be withheld unreasonably. The failure to deliver notice to the
Indemnitor within a reasonable time after the commencement of any such action
shall relieve the Indemnitor of any liability to the Indemnitee under this
Article 10 solely to the extent the Indemnitor suffers material prejudice as a
result of such failure, but failure to deliver notice to the Indemnitor will not
relieve it of any liability that it may have to any Indemnitee otherwise than
under this Article 10. The Indemnitee under this Article 10, its employees and
agents, shall cooperate fully with the Indemnitor and its legal representatives
in the investigations of any action, claim or liability covered by this
indemnification. In the event that each party claims

                                       57
<PAGE>

indemnity from the other and one party is finally held liable to indemnify the
other, the Indemnitor shall additionally be liable to pay the reasonable legal
costs and attorneys' fees incurred by the Indemnitee in establishing its claim
for indemnity.

10.4 The parties shall maintain insurance coverage with respect to their
activities and potential liabilities hereunder as is commercially reasonable in
the circumstances.

11. FORCE MAJEURE

11.1 If the performance of any party of this Agreement, or of any obligation
under this Agreement, is prevented, restricted, interfered with or delayed by
reason of any cause beyond the reasonable control of the party liable to
perform, the party so affected shall, upon giving written notice to the other
party, be excused from such performance to the extent of such prevention,
restriction, interference or delay, provided that the affected party shall use
its reasonable best efforts to avoid or remove such causes of non-performance
and shall continue performance with the utmost dispatch whenever such causes are
removed. When such circumstances arise, the parties shall discuss what, if any,
modification of the terms of this Agreement may be required in order to arrive
at an equitable solution.

12. DISPUTE RESOLUTION

12.1 This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware.

                                       58
<PAGE>

12.2 In the event of any controversy, dispute or claim which may arise out of or
in connection with this Agreement, or the breach, termination or validity
thereof, other than with respect to patent validity and other than where a party
is seeking specific performance or other injunctive relief (collectively,
"DISPUTES"), the parties shall try to settle the Dispute amicably between
themselves in the manner set forth in this Paragraph 12.2. First, promptly upon
(and in any event within ten days after) the written request of either party to
the other, the JRC or the JDC, as applicable, shall meet to attempt to resolve
the Dispute. If at such meeting the Dispute is not fully resolved to the mutual
satisfaction of the parties, the Dispute shall promptly (and in any event within
five days after the aforesaid meeting of the JRC or JDC) be submitted to the
respective Chief Technical Officers of the parties who shall attempt to resolve
the Dispute. If the Dispute is not fully resolved to the mutual satisfaction of
the parties within fifteen days after being submitted to the respective Chief
Technical Officers of the parties, the Dispute shall promptly (and in any event
with three days after expiration of the fifteen day period referred to
immediately above) be submitted to the respective Chief Executive Officers of
the parties who shall attempt to resolve the Dispute. If the Dispute is not
fully resolved to the mutual satisfaction of the parties within fifteen days
after being submitted to the respective Chief Executive Officers of the parties,
the Dispute may be referred by either party for arbitration in accordance with
subsections 12.3 and 12.4 under the guidelines of the American

                                       59
<PAGE>

Arbitration Association ("AAA") in Wilmington, Delaware under the commercial
rules then in effect for AAA, except as otherwise provided for herein.

12.3 A party shall notify the other in writing should it intend to initiate
arbitration. The parties shall select, by mutual agreement, one arbitrator
within a time period of thirty (30) days after receipt of such notice. Should no
arbitrator be chosen within such period, the AAA shall appoint the arbitrator
within thirty (30) days after the end of such period. Within thirty (30) days
after selection of such arbitrator, each party shall submit to the arbitrator a
proposed resolution of the DISPUTE and the reasons supporting such resolution.
Should either party desire, a joint meeting before the arbitrator shall be held
within thirty (30) days after the end of the above resolution submission period.

      Within thirty (30) days after the later of (i) the end of the resolution
submission period or (ii) holding of a joint meeting, the arbitrator shall
decide the matter.

12.4 Unless otherwise agreed to by the parties, the arbitrator shall make such
decisions based on the following factors in descending order of importance: (a)
consistency with the provisions of this Agreement; (b) consistency with the
intent of the parties as reflected in this Agreement; and (c) customary and
reasonable provisions included in comparable agreements. The decision of the
arbitrator will be binding upon the parties without the right of appeal, and
judgment upon the decision may be entered in any court having jurisdiction
thereof.

                                       60
<PAGE>

12.5 The parties shall share equally the reasonable documented cost of such
arbitration proceeding, but not the individual cost of the parties in
participating in such proceeding.

12.6 This Article 12 shall not limit in any way the right of a party to bring an
action (and enforce a judgment) for equitable relief in any court of competent
jurisdiction.

13. SEPARABILITY

13.1 In the event any portion of this Agreement shall be held illegal, void or
ineffective, the remaining portions hereof shall remain in full force and
effect.

13.2 If any of the terms or provisions of this Agreement are in conflict with
any applicable statute or rule of law, then such terms or provisions shall be
deemed inoperative to the extent that they may conflict therewith and shall be
deemed to be modified to conform with such statute or rule of law.

13.3 In the event that the terms and conditions of this Agreement are materially
altered as a result of Paragraphs 13.1 or 13.2, the parties will, in good faith,
renegotiate the terms and conditions of this Agreement to resolve any
inequities.

14. ENTIRE AGREEMENT

14.1 This Agreement, together with the Appendices hereto, entered into as of the
date written above constitute the entire agreement between the parties relating
to the subject matter hereof and supersede all previous writings and
understandings. No

                                       61
<PAGE>

terms or provisions of this Agreement shall be varied or modified by any prior
or subsequent statement, conduct or act of either of the parties, except that
the parties may amend this Agreement by written instruments specifically
referring to and executed in the same manner as this Agreement.

15. NOTICES

15.1 Any notice required or permitted under this Agreement shall be
hand-delivered or sent by express delivery service or certified or registered
mail, postage prepaid, or by fax with written confirmation by mail, to the
following addresses of the parties:

HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, MD 20850
Attention: Business Development
Fax: 301-309-0092

copy to:

HUMAN GENOME SCIENCES, INC.
9410 Key West Avenue
Rockville, Maryland 20850
Attention: General Counsel
Fax: 301-309-8439

PRAECIS PHARMACEUTICALS INCORPORATED
One Hampshire Street
Fifth Floor
Cambridge, MA 02139-1572
Attention: Marc Silver
           Vice President, Corporate Development
Fax: 617-494-8414

                                       62
<PAGE>

copy to:

SKADDEN, ARPS, SLATE,
  MEAGHER & FLOM LLP
One Beacon Street
31st Floor
Boston, MA 02108
Attention: Kent Coit
Fax: 617-573-4822

15.2 Any notice required or permitted to be given concerning this Agreement
shall be effective upon receipt by the party to whom it is addressed.

16. ASSIGNMENT

16.1 This Agreement and the licenses herein granted shall be binding upon and
inure to the benefit of the assignees and successors in interest of the
respective parties. Neither this Agreement nor any interest hereunder shall be
assignable by a party without the prior written consent of the other parties and
any attempted assignment contrary to this paragraph shall be void and without
force and effect provided, however, that without obtaining the consent of the
other party, a party may assign this Agreement or any of its rights or
obligations hereunder to any AFFILIATE or to any THIRD PARTY which acquires or
acquires control of such party's entire business or that part of its business to
which this Agreement relates, whether pursuant to license, merger,
consolidation, stock purchase, recapitalization, asset sale or otherwise,
provided that the assigning party remains liable under this Agreement and that,
unless the obligations of the assigning party would be assumed by the

                                       63
<PAGE>

THIRD PARTY by operation of law, the THIRD PARTY assignee or surviving entity
assumes in writing all of its obligations under this Agreement.

17. COUNTERPARTS

17.1 This Agreement may be executed in counterparts, and each such counterpart
shall be deemed an original instrument, but such counterparts together shall
constitute but one agreement.

18. WAIVER

18.1 Any delay or failure in enforcing a party's rights under this Agreement or
any waiver as to a particular default or other matter shall not constitute a
waiver of such party's rights to the future enforcement of its rights under this
Agreement, nor operate to bar the exercise or enforcement thereof at any time or
times thereafter, excepting only as to an express written and signed waiver as
to a particular matter for a particular period of time.

18.2 Notwithstanding the foregoing, in the event PPI or HGS challenges whether
any payments contemplated hereunder (including, without limitation royalties or
milestones) are due, it shall have the right, but not the obligation, to make
such payments under protest (reserving all rights hereunder) pending resolution
of such dispute.

                                       64
<PAGE>

19. INDEPENDENT RELATIONSHIP

19.1 Nothing herein contained shall be deemed to create an employment, agency,
joint venture or partnership relationship between the parties hereto or any of
their agents or employees, or any other legal arrangement that would impose
liability upon one party for the act or failure to act of the other party. No
party shall have any power to enter into any contracts or commitments or to
incur any liabilities in the name of, or on behalf of, the other party, or to
bind the other party in any respect whatsoever.

      IN WITNESS WHEREOF, the parties, through their authorized officers, have
executed this Agreement as of the date first written above.

PRAECIS PHARMACEUTICALS INCORPORATED

BY: /s/ Malcolm L. Gefter
    ------------------------------------

Title: Chairman of the Board, Chief Executive Officer and President

HUMAN GENOME SCIENCES, INC.

BY: /s/ Arthur M. Mandell
    ------------------------------------
     Arthur M. Mandell
Title: Senior Vice President, Corporate and Business Development

                                       65
<PAGE>

                                   Appendix A
                            Sample DRUG RESEARCH PLAN

1.    Target Identification (HGS Sequence ID#)

2.    Rationale

            -     Brief description of hypothesis
            -     Brief summary of supporting biological data on target
            -     Expected Indications for Product

3.    Status of full length cloning and expression

            -     Nucleotide sequence encoding Target (as available)

4.    Patent status

5.    Estimated date for the start of small molecule screening. (No description
      of the screen is required.)

6.    Chemical optimization

            -     No details required
            -     Estimated date of start (can be updated)

7.    Plan updates if and when a potential development compound is identified

            -     R&D Product (compound) code #/INN name/generic name (when
                  available)
            -     Notification when a compound enters preclinical development
            -     Notification when a compound enters clinical development
            -     Notification when regulatory approvals are sought

                                       66<PAGE>

                                                                    EXHIBIT 10.9

              CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN
               PORTIONS OF THIS DOCUMENT. SUCH PORTIONS HAVE BEEN
                REDACTED AND MARKED WITH ASTERISKS (**). THE NON-
            REDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED WITH THE
                 SECURITIES AND EXCHANGE COMMISSION PURSUANT TO
                   AN APPLICATION FOR CONFIDENTIAL TREATMENT.

                                                                  EXECUTION COPY

                       COLLABORATION AND LICENSE AGREEMENT

                                 by and between

                          PHARMACEUTICAL PEPTIDES, INC.

                                       and

                     BOEHRINGER INGELHEIM INTERNATIONAL GmbH

                           dated as of August 1, 1996
<PAGE>

                                TABLE OF CONTENTS

ARTICLE 1. DEFINITIONS..............................................1
            1.1  AAI................................................1
            1.2  Abandonment Date...................................1
            1.3  Affiliate..........................................1
            1.4  Applicable Base Royalty Rate.......................2
            1.5  BI Compound........................................2
            1.6  BI Patent Rights...................................2
            1.7  BI Product.........................................2
            1.8  Develop or Development.............................2
            1.9  Designated BI Compound.............................2
            1.10  Effective Date....................................2
            1.11  Exchange Information..............................3
            1.12  Exclusivity Period................................3
            1.13  First Commercial Sale.............................3
            1.14  FTE...............................................3
            1.15  Indemnitee........................................3
            1.16  Indemnitor........................................3
            1.17  Information.......................................3
            1.18  Licensed Diagnostic Compound......................3
            1.19  Marketing Authorization...........................3
            1.20  Net Sales.........................................3
            1.21  Patent Expiration Date............................4
            1.22  Phase 0...........................................4
            1.23  Phase I...........................................5
            1.24  Phase II..........................................5
            1.25  Phase III.........................................5
            1.26  PPI Change of Control Transaction.................5
            1.27  PPI Compound......................................5
            1.28  PPI Information...................................5
            1.29  PPI Patent Rights.................................6
            1.30  PPI Product.......................................6
            1.31  Publishing Party..................................6
            1.32  Recognized Agent..................................6
            1.33  Reviewing Party...................................7
            1.34  Sale Date.........................................7
            1.35  SAR Information...................................7
            1.36  Screening Data....................................7
            1.37  Screening Program.................................7
            1.38  Screening Term....................................7
            1.39  Screening Term Year...............................7
            1.40  SEC...............................................7
            1.41  Section 10.4.1(a) Notice..........................7
            1.42  Territory.........................................7
            1.43  Third Party.......................................7

                                  i
<PAGE>

            1.44  Third Party AD Product............................7
            1.45  Work Plan.........................................8
            1.46  ***% Royalty Rate.................................8
            1.47  ***% Royalty Rate.................................8

ARTICLE 2. SCREENING PROGRAM........................................8
            2.1  Screening Services.................................8
            2.2  Payments...........................................8
            2.3  Expense Reimbursement..............................9
            2.4  Screening Term.....................................9
            2.5  Exclusivity.......................................10

ARTICLE 3. LICENSE GRANTS; DEVELOPMENT, MANUFACTURING
               AND MARKETING OF BI PRODUCTS........................11
            3.1  Grant of License Rights by PPI to BI..............11
            3.2  Sublicense Rights.................................12
            3.3  Diligence; Limit on Sales to
                    Recognized Agents..............................12
            3.4  Failure to Market Due to Currency
                    Difficulties...................................12
            3.5  Future License Rights.............................13
                    3.5.1  PPI's Future License Right..............13
                    3.5.2  BI's Right of First
                             Refusal...............................14

ARTICLE 4. EXCHANGE OF INFORMATION.................................15
            4.1  Information to be Provided........................15
            4.2  Information Not Required to be
                    Provided; Restriction on Certain
                    Research Activities............................16

ARTICLE 5. INTELLECTUAL PROPERTY RIGHTS............................16

ARTICLE 6. ROYALTIES...............................................17
            6.1  Royalties on Net Sales............................17
                    6.1.1  Royalty Rate............................17
                    6.1.2  Third Party Patents;
                           Combination BI Products; Bundled
                           Products ...............................19
                    6.1.3  Sublicense Royalties....................19
            6.2  Royalty Reports; Exchange Rates...................20
            6.3  Audits............................................20
            6.4  Royalty Payment Terms.............................21
            6.5  Withholding Taxes.................................21
            6.6  Application for Tax Exemption.....................22
            6.7  Interest on Late Payments.........................22

                                 ii
<PAGE>

            6.8  Duration of Royalties; Step Down..................22

ARTICLE 7. CONFIDENTIALITY.........................................23
            7.1  Nondisclosure Obligations.........................23
                    7.1.1  General.................................23
                    7.1.2  Limitations.............................23
            7.2  Terms of this Agreement...........................24
            7.3  Publications......................................25
                    7.3.1  Procedure...............................25
                    7.3.2  Delay...................................25
                    7.3.3  Resolution..............................25
            7.4  Injunctive Relief.................................26

ARTICLE 8. REPRESENTATIONS AND WARRANTIES..........................26

ARTICLE 9. INDEMNITY...............................................26
            9.1  BI Indemnity Obligations..........................26
            9.2  PPI Indemnity Obligations.........................27
            9.3  Procedure.........................................27
            9.4  Insurance.........................................28

ARTICLE 10. TERMINATION............................................28
            10.1  Termination......................................28
                    10.1.1  Material Breach........................28
                    10.1.2  Failure of BI to Pay...................28
                    10.1.3  Failure of BI to Use
                              Diligent Efforts.....................29
                  10.1.4  Bankruptcy...............................29
                  10.1.5  Change of Control........................29
            10.2  Effect of Termination Generally..................29
                  10.2.1  Existing Obligations.....................29
                  10.2.2  Survival.................................29
            10.3  Effect of Termination by PPI.....................30
                  10.3.1  Termination by PPI Prior
                             to Commencement of Phase III..........30
                  10.3.2  Termination By PPI After
                             Commencement of Phase III.............30
            10.4  Effect of Termination by BI......................30
                  10.4.1  Termination for PPI Breach...............30
                  10.4.2  Termination for Change of
                             Control...............................32

ARTICLE 11. MISCELLANEOUS..........................................32
            11.1  Force Majeure....................................32
            11.2  Assignment.......................................33
            11.3  Severability.....................................33

                                 iii
<PAGE>

            11.4  Notices..........................................34
            11.5  Applicable Law...................................35
            11.6  Dispute Resolution; Choice of
                        Forum......................................35
            11.7  Arbitration......................................35
            11.8  Entire Agreement.................................35
            11.9  Headings.........................................36
            11.10  Independent Contractors.........................36
            11.11  Agreement Not to Solicit
                        Employees..................................36
            11.12  Exports.........................................36
            11.13  Waiver..........................................37
            11.14  Counterparts....................................37

Appendix A - PPI Patent Rights
Appendix B - Recognized Agents of BI
Appendix C - Work Plan

                                 iv
<PAGE>

                       COLLABORATION AND LICENSE AGREEMENT

            This COLLABORATION AND LICENSE AGREEMENT (the "Agreement") is made
as of August 1, 1996, by and between Pharmaceutical Peptides, Inc., a Delaware
corporation having its principal place of business at One Hampshire Street,
Cambridge, Massachusetts 02139-1572 ("PPI"), and Boehringer Ingelheim
International GmbH, a limited liability company organized under the laws of the
Federal Republic of Germany having its principal place of business at D-55216
Ingelheim Rhein Germany ("BI").

            WHEREAS, PPI is the owner of certain proprietary screening
technology which enables PPI to identify compounds as lead candidates for
discovery program for compounds and drug development; and

            WHEREAS, PPI has a discovery program for compounds which exhibit
A(beta) peptide amyloid aggregation inhibition activity with a view to
developing and commercializing such compounds as pharmaceutical products; and

            WHEREAS, BI possesses certain compounds which it desires to have
screened by PPI in order to identify if any such compounds or their derivatives
exhibit A(beta) peptide amyloid aggregation inhibition activity with a view to
developing and commercializing such compounds as pharmaceutical products;

            NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties and agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                             ARTICLE 1. DEFINITIONS

            1.1 "AAI" shall mean amyloid aggregation inhibition.

            1.2 Abandonment Date" shall have the meaning set forth in Section
3.5.

            1.3 "Affiliate" shall mean any corporation or other entity which
controls, is controlled by, or is under
<PAGE>

common control with a party to this Agreement. A corporation or other entity
shall be regarded as in control of another corporation or entity if it owns or
directly or indirectly controls more than fifty percent (50%) of the voting
stock or other ownership interest of the other corporation or entity, or if it
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of the corporation or other entity or the power to
elect or appoint fifty percent (50%) or more of the members of the governing
body of the corporation or other entity.

            1.4 "Applicable Base Royalty Rate" shall have the meaning set forth
in Section 6.1.

            1.5 "BI Compound" shall mean and include any of (i) any compound
which is screened by PPI pursuant to Article 2 hereof and exhibits AAI activity
in any of such screens or (ii) any compound which is developed by BI utilizing,
or is based upon, any PPI Information.

            1.6 "BI Patent Rights" shall mean all patents, patent applications,
patent extensions, certificates of invention or applications for certificates of
invention, together with any divisions, continuations or continuations-in-part
thereof, which are owned or controlled by, or licensed (or sublicensed) to, BI
with respect to any Designated BI Compound. BI agrees to provide a list to PPI
of BI Patent Rights at least annually.

            1.7 "BI Product" shall mean any pharmaceutical preparation or
product containing a BI Compound, whether as the sole active ingredient or mixed
with any other active ingredient.

            1.8 "Develop" or "Development" shall mean all work involved in
Phases O, I, II and III, as applicable, with respect to a BI Compound or a BI
Product.

            1.9 "Designated BI Compound" shall mean any BI Compound referred to
in clause (i) of the definition of BI Compound (Section 1.5) which exhibits AAI
activity in each of the Nucleation Assay and the Neurotoxicity Assay referred to
in Section I of the Work Plan.

            1.10 "Effective Date" shall mean the date first written above.

                                       2
<PAGE>

            1.11 "Exchange Information" shall have the meaning set forth in
Section 4.1.

            1.12 "Exclusivity Period" shall have the meaning set forth in
Section 2.5.

            1.13 "First Commercial Sale" shall mean the first sale for use or
consumption by the general public of a BI Product, PPI Product or a product
containing a Licensed Diagnostic Compound, as applicable, in any country based
upon the required marketing and pricing approval granted by the governing health
authority of such country.

            1.14 "FTE" shall mean a full time professional employee dedicated to
the Screening Program.

            1.15 "Indemnitee" shall have the meaning set forth in Section 9.3.

            1.16 "Indemnitor" shall have the meaning set forth in Section 9.3.

            1.17 "Information" shall have the meaning set forth in Section 7.1.

            1.18 "Licensed Diagnostic Compound" shall have the meaning set forth
in Section 3.5.1.

            1.19 "Marketing Authorization" shall mean all allowances and
approvals (including pricing and reimbursement approvals) granted by the
appropriate federal, state and local regulatory agencies, departments, bureaus
or other governmental entities within a country necessary to market and sell a
BI Product.

            1.20 "Net Sales" shall mean the invoiced sales price per unit for
each of the BI Products or PPI Products, as applicable, billed to independent
customers or Recognized Agents by a party or its Affiliates, or permitted
sublicensees of either party, less, to the extent such amounts are included in
the invoiced sales price, actual (a) credited allowances to such independent
customers for such BI Products or PPI Products which were spoiled, damaged,
out-dated or returned; (b) freight and insurance costs incurred in transporting
BI Products or PPI Products to such customers; (c) quantity and other trade
discounts

                                       3
<PAGE>

actually allowed and taken; (d) sales, use, value added and other taxes or
governmental charges incurred in connection with the sale, exportation or
importation of the BI Products or PPI Products in finished packaged form; and
(e) charge back payments and/or rebates provided to managed health care
organizations or federal, state and local governments, their agencies,
purchasers and reimburses, including reimbursements to social security
organizations. The transfer of the BI Products or PPI Products by a party or one
of its Affiliates to (i) another Affiliate of such party or (ii) a permitted
sublicensee of such party shall not be considered a sale; in such cases, Net
Sales shall be determined based on the invoiced sales price by the Affiliate or
permitted sublicensee to its customer, less the deductions allowed under this
Section. Every other commercial use or disposition of BI Products or PPI
Products by a party, its Affiliates or permitted sublicensees, other than
reasonable quantities of promotional samples or bona fide sale to a bona fide
customer, shall be considered a sale of the BI Products or PPI Products at the
weighted average Net Sales price then being invoiced by the seller in arm's
length transactions.

            A party or its Affiliates shall be deemed to have sold a "Bundled
Product" if the BI Products or PPI Products are sold by a party or its
Affiliates pursuant to an agreement with an independent customer or a Recognized
Agent specifying, for a combination of products or services, (i) a single
price, (ii) other terms of purchase not separately identifying either a price
per product or the effective deductions referred to above per product or (iii) a
price for units of the BI Products or PPI Products which is discounted below a
party's or its Affiliates' standard invoice price per unit of the BI Products or
PPI Products by at least five percentage points more than the amount that any
other product of service in the Bundled Product is discounted below such other
product's or service's standard invoice price.

            1.21 "Patent Expiration Date" shall have the meaning set forth in
Section 6.8

            1.22 "Phase 0" shall mean that portion of Development which starts
after a candidate has been selected and approved by BI or a Third Party licensee
thereof for start of development as a product as evidenced by the approval in
writing of such start of development by

                                       4
<PAGE>

BI's International Steering Committee or equivalent body. Phase 0 generally
includes toxicological and pharmacological studies as well as drug substance
and drug product formulation and manufacturing development necessary to obtain
the permission of regulatory authorities to begin and continue human clinical
testing.

            1.23 "Phase I" shall mean that portion of Development which starts
with the first introduction into humans of a product with the purpose of
determining safety, metabolism, absorption, elimination and other
pharmacological action in humans as well as additional development work on
animal toxicity, metabolism, drug substance and drug product formulation and
manufacturing development to ensure continuation of human clinical testing.

            1.24 "Phase II" shall mean that portion of Development which
includes initial trials on a limited number of patients for the purposes of
determining dose and evaluating safety and preliminary efficacy data in the
proposed therapeutic indication as well as additional development work on animal
toxicity, metabolism, drug substance and drug product formulation and
manufacturing development to ensure continuation of human clinical testing.

            1.25 "Phase III" shall mean that portion of Development which
includes continued trials in sufficient numbers of patients to establish safety
and efficacy to support Marketing Authorization in the proposed indication. In
addition, all other development work on animal toxicity, metabolism, drug
substance and drug product formulation and manufacturing development will be
finalized.

            1.26 "PPI Change of Control Transaction" shall mean any transaction
described in Section 10.1.5.

            1.27 "PPI Compound" shall mean any compound owned by or licensed
(with the right to sublicense) to PPI which exhibits AAI activity.

            1.28 "PPI Information" shall mean information, knowledge and
know-how (i) possessed by PPI before the Effective Date relating to the
Screening Program or (ii) generated solely by PPI personnel during the Screening
Program, including but not limited to screening methods and results during the
Screening Term in the course of performing the Screening Program, as well as SAR
Information with

                                       5
<PAGE>

respect to PPI Compounds, which in each case is disclosed to BI hereunder.

            1.29 "PPI Patent Rights" shall mean (i) the specific composition of
matter claims and the specific methods claims listed on Appendix A hereto (under
the heading "Claims Included") contained in the patent application and the
continuation in part thereof listed on Appendix A, as such claims are pending in
said applications as of the Effective Date, (ii) the claims referred to in
clause (i) to the extent granted in any resultant U.S. letters patent, (iii) the
claims referred to in clauses (i) and (ii) to the extent contained in any
corresponding Patent Co-operation Treaty applications, European Patent
Convention applications or applications under similar administrative
international conventions, or in any corresponding national patents and patent
applications, (iv) equivalents of the claims referred to in clauses (i), (ii)
and (iii) and (v) any divisional, continuation, substitution, reissue,
extension, supplementary protection certificate or other application solely to
the extent based on the claims referred to in clauses (i) through (iv). PPI
Patent Rights shall exclude all other claims set forth on Appendix A hereto
under the heading "Claims Excluded."

            1.30 "PPI Product" shall mean any pharmaceutical preparation
containing a PPI Compound, whether as the sole active ingredient or mixed with
any other active ingredient and which is intended for prophylactic or
therapeutic purposes.

            1.31 "Publishing Party" shall have the meaning set forth in Section
7.3.

            1.32 "Recognized Agent" shall mean an entity, other than an
Affiliate of PPI or BI, as applicable, through which PPI or BI, as applicable,
distributes and sells its products in a particular country or region. From and
after the First Commercial Sale of a BI Product, PPI Product or a product
containing a Licensed Diagnostic Compound, the selling party will provide the
other party with a complete list of its Recognized Agents and will update such
list at least once annually.

            1.33 "Reviewing Party" shall have the meaning set forth in Section
7.3.

                                       6
<PAGE>

            1.34 "Sale Date" shall have the meaning set forth in Section 6.8.

            1.35 "SAR Information" shall mean and include structure activity
relationships information, and information with respect to chemical structure,
in each case with respect to PPI Compounds, whether in existence on the
Effective Date or generated thereafter.

            1.36 "Screening Data" shall have the meaning set forth in Section
7.3.

            1.37 "Screening Program" shall mean the collaboration by PPI and BI
during the Screening Term provided for in Article 2.

            1.38 "Screening Term" shall mean the two-year period commencing on
the Effective Date, as extended pursuant to Section 2.4 hereof, unless this
Agreement is earlier terminated in accordance with Article 10 below, in which
event the Screening Term shall terminate on the effective date of such
termination.

            1.39 "Screening Term Year" shall have the meaning set forth in
Section 2.3.

            1.40 "SEC" shall mean the United States Securities and Exchange
Commission.

            1.41 "Section 10.4.1(a) Notice" shall have the meaning set forth in
Section 10.4.

            1.42 "Territory" shall mean all countries and territories in the
world.

            1.43 "Third Party" shall mean any entity other than PPI and BI,
their respective Affiliates and Recognized Agents.

            1.44 "Third Party AD Product" shall mean a pharmaceutical product
(other than a BI Product or a PPI Product) for the prevention or treatment of
Alzheimer's Disease which achieves its prophylactic or therapeutic effect
through A(beta) peptide AAI activity.

            1.45 "Work Plan" shall mean the description of, and certain terms
and conditions applicable to, the

                                       7
<PAGE>

screening services to be carried out by PPI pursuant to this Agreement,
including the scope and timing of such work, the in vitro and in vivo assays to
be utilized by PPI in performing such work, the anticipated annual capital
budget (and particular items of equipment to be purchased by PPI) in connection
with performing such work, as set forth in Appendix B, as it may be amended by
mutual agreement of the parties from time to time.

            1.46 "***% Royalty Rate" shall have the meaning set forth in Section
6.1.

            1.47 "***% Royalty Rate" shall have the meaning set forth in Section
6.1.

                          ARTICLE 2. SCREENING PROGRAM

            2.1 Screening Services. Subject to and in accordance with the terms
and provisions of the Work Plan, during the Screening Term, PPI shall screen
compounds provided by BI.

            2.2 Payments. Subject to the last two sentences of Section 11.1, BI
shall pay PPI *** Approximately 15 lines omitted ***. In the event the
conditions for payment in the preceding sentence are not met on the first
anniversary of the Effective Date for reasons associated with the nature of the
compounds provided by BI (PPI agreeing to use best efforts, but without
incurring significant additional expense or materially adversely delaying the
Work Plan, to minimize or eliminate any such reasons) or because of delays to
the Work Plan caused by BI, BI agrees to make such payment on such first
anniversary, provided PPI is then in compliance in all material respects with
the terms and provisions of this Agreement (other than any non-compliance for
reasons associated with the nature of the compounds provided by BI or because of
delays to the Work Plan caused by BI).

            2.3 Expense Reimbursement.

                  (a) BI shall reimburse PPI for the following expenses in
respect of each consecutive twelve-month period during the Screening Term (a
"Screening Term Year"): (i) $250,000 per FTE; provided, that BI shall not be

                                       8
<PAGE>

required to reimburse PPI for more than four FTEs, and (ii) actual amounts
expended for capital budget items as set forth in the Work Plan; provided,
however, that BI shall not be required to reimburse PPI pursuant to this Section
2.3 for expenses in excess of an aggregate of $2.5 million in respect of the
first two Screening Term Years and an aggregate of $1.25 million in respect of
any Screening Term Year.

                  (b) BI shall reimburse PPI at the end of each quarter for
expenses incurred by PPI during such quarter pursuant to paragraph (a) above,
such reimbursement payments to be received by PPI within fifteen days of BI's
receipt of a reasonably itemized invoice for such expenses prepared by PPI. For
purposes of this clause (b), expenses incurred by PPI for any FTE hired prior to
the Effective Date shall be deemed to be reimbursable expenses under paragraph
(a) above and shall be included in the first quarterly invoice prepared by PPI.

            2.4 Screening Term.

                  (a) BI shall have the option, exercisable on any number of
occasions by delivering written notice to PPI not later than six months prior to
the expiration of the Screening Term then in effect, to extend such Screening
Term for an additional one (1) year period commencing on the later of the
expiration of the Screening Term then in effect or the expiration of any
extension thereof pursuant to subsection 2.4(b), provided that on or prior to
the commencement of such additional one (1) year period (i) BI pays (and
delivery of such notice shall constitute BI's agreement to pay) PPI $*** in cash
and (ii) the parties have agreed in writing to an amended Work Plan.

                  (b) Notwithstanding subsection 2.4(a), if (i) BI is in
compliance with the terms and provisions of this Agreement (including without
limitation the Work Plan), and (ii) at the expiration of the Screening Term then
in effect, PPI has not completed the screening contemplated by the Work Plan
then in effect, then (A) PPI shall, if BI so requests by written notice to PPI
within fifteen (15) days after expiration of the Screening Term then in effect,
complete any such screening and the Screening Term shall be automatically
extended until the completion of such screening and (B) BI shall not be required
to pay PPI the $*** in cash referred to in subsection 2.4(a) in

                                       9
<PAGE>

respect of the extension of the Screening Term pursuant to this subsection
2.4(b) or to reimburse PPI in accordance with Section 2.3 for expenses incurred
by PPI during such extension.

            2.5 Exclusivity.

                  (a) So long as (i) the Screening Term is in effect and BI has
supplied PPI with compounds in accordance with the Work Plan or (ii) BI is
pursuing Development or marketing of any BI Compound or BI Product with diligent
efforts at least consistent with those of BI with respect to other BI products
with similar commercial potential (the "Exclusivity Period"), PPI shall not
screen any Third Party compounds for A(beta) peptide AAI activity; provided,
however, that this restriction on screening during the Exclusivity Period only
applies to screening of compounds as potential prophylactics or therapeutics.
Without limitation of the foregoing restriction, PPI covenants and agrees with
BI that during the Exclusivity Period, if PPI enters into any agreement with a
Third Party to screen compounds of such Third Party for AAI activity, such
agreement shall provide that such Third Party shall not (i) utilize any
information provided by PPI to such Third Party in connection with the
development of, or (ii) develop, any such Third Party compound for use as a
prophylactic or therapeutic product for Alzheimer's Disease. PPI shall use its
reasonable efforts to enforce any such provision in any such agreement with such
a Third Party. For purposes of this Section 2.5(a), "Third Party" includes any
Recognized Agent of PPI.

                  (b) During the Exclusivity Period, BI shall not provide any
compounds to any Third Party for screening for A(beta) peptide AAI activity.
Without limitation of the foregoing restriction, BI covenants and agrees with
PPI that during the Exclusivity Period, if BI provides any compounds to any
Third Party for screening for AAI activity, BI will not, and will obtain an
agreement from such Third Party that such Third Party will not, (i) utilize any
information provided to or by such Third Party pursuant to such arrangement in
connection with the development of, or (ii) develop, any such compounds for use
as a prophylactic, therapeutic or diagnostic product for Alzheimer's Disease. BI
shall use its reasonable efforts to enforce any such provision in any such
agreement with such a Third Party. For purposes of this Section 2.5(b), "Third
Party" includes any Recognized Agent of BI.

                                       10
<PAGE>

                     ARTICLE 3. LICENSE GRANTS; DEVELOPMENT,
                   MANUFACTURING AND MARKETING OF BI PRODUCTS

            3.1 Grant of License Rights by PPI to BI. Subject to the terms and
conditions of this Agreement, PPI hereby grants to BI an exclusive (except as to
PPI, its Affiliates and their respective sublicensees) right and license in the
Territory during the Exclusivity Period, under the PPI Information and the PPI
Patent Rights, to develop BI Compounds, and to develop, manufacture or have
manufactured, use and sell or have sold BI Compounds as incorporated into a BI
Product, in each case solely for use (i) as a prophylactic or therapeutic or
(ii) as a diagnostic solely to the extent that any such BI Compound is required
as a diagnostic in order to commercialize a BI Compound, and sell the
corresponding BI Product, as a prophylactic or therapeutic. It is understood
that BI will have no right to, and BI agrees that it will not, develop,
manufacture or have manufactured, use, sell or have sold any BI Compound or BI
Product for use as a diagnostic, except as and to the extent that such BI
Compound or BI Product is required as a diagnostic in order for BI to
commercialize a BI Compound, and for BI to sell the corresponding BI Product,
as a prophylactic or therapeutic.

            3.2 Sublicense Rights. BI shall have the right to grant sublicenses
with respect to the license granted in Section 3.1 to Affiliates of BI, BI's
Recognized Agents and third parties.

            3.3 Diligence; Limit on Sales to Recognized Agents. BI shall (i) use
diligent efforts at least consistent with BI's normal business practices with
respect to other BI products with similar commercial potential, to (A) Develop
BI Compounds (and shall immediately advise PPI in writing if a BI Compound has
been selected and approved for start of development as described in the
definition of Phase 0 (Section 1.22)), manufacture, market and distribute the
corresponding BI Products throughout the Territory and obtain all requisite
regulatory licenses, permits or approvals relating thereto and (B) obtain and
enforce patent and other relevant intellectual property protection in the
Territory for BI Compounds and BI Products with respect to which BI is required
to use diligent efforts pursuant to clause (A) immediately above, and (ii)
provide PPI on a semi-annual basis with status reports in reasonable detail
with respect to such activities. BI covenants

                                       11
<PAGE>

and agrees with PPI that in no event will the amount of Net Sales in any year of
any BI Product in the Territory to BI's Recognized Agents exceed 10% of the
total amount of Net Sales of such BI Product in the Territory during such year.

            3.4 Failure to Market Due to Currency Difficulties. It shall not be
considered a breach of BI's obligations under Section 3.3 if BI reduces or
halts shipments of BI Products to a country which by law, regulation or fiscal
policy, has restricted or forbidden the transfer of funds of a convertible
currency to Germany, provided that BI notifies PPI of any such circumstance and
resumes the obligations to market the BI Products in such country promptly after
such circumstance no longer exists. BI shall, however, remain obligated to pay
royalties to PPI on its Net Sales, if any, in such country as provided in
Article 6.

            3.5 Future License Rights.

                  3.5.1 PPI's Future License Right. In the event (i) BI has not,
within *** after the end of the Screening Term, either (A) commenced Development
of at least one BI Compound or (B) granted a license to at least one BI Compound
to a Third Party which is financially and otherwise reasonably capable of
pursuing the development and commercialization of such BI Compound and which
imposes on such Third Party diligence obligations no less stringent than those
imposed upon BI pursuant to this Agreement, or (ii) if after commencing such
Development or granting such a license to such a Third Party, BI or such Third
Party ceases to pursue such Development or such license is terminated, PPI
shall have the right to obtain an exclusive royalty-bearing license in the
Territory, with the right to grant sublicenses, under any and all applicable BI
Patent Rights and BI know-how, on royalty and other customary terms to be
negotiated in good faith by the parties hereto, to use, develop, manufacture and
have manufactured, any one BI Compound, and to use, manufacture, have
manufactured, distribute for sale, sell and have sold, any corresponding BI
Product. PPI shall have the same license right, to the same extent set forth in
the immediately preceding sentence, with respect to any BI Compound, and
corresponding BI Product, which PPI determines it will seek to develop and
commercialize as a diagnostic, other than any such BI Compound which is required
by BI as a diagnostic in order

                                       12
<PAGE>

to commercialize any BI Compound, and sell the corresponding BI Product, as a
prophylactic or therapeutic, and of which BI or a Third Party licensee thereof
has commenced and not ceased Development (any such BI Compound as to which PPI
makes such a determination being referred to as a "Licensed Diagnostic
Compound"). BI or any Third Party referred to above shall be deemed to have
ceased Development of a BI Compound if, (i) in the case of BI, it fails to meet
the diligence requirements set forth in Section 3.3 above with respect to
Development of such BI Compound or, in the case of such Third Party it fails to
meet the analogous diligence requirements in the applicable license to such
Third Party or (ii) BI or any Third Party referred to above abandons Development
of such BI Compound or the license held by such Third Party terminates prior to
the Development and commercialization of such BI Compound (the date of any such
cessation or abandonment being referred to herein as an "Abandonment Date"). In
order that PPI may realize the benefits of this Section 3.5.1, (i) BI shall
promptly provide PPI with such information as PPI may reasonably require and
request with respect to each Designated BI Compound if BI has not taken either
of the actions referred to in clause (i) of the first sentence of this Section
3.5.1 within the time period specified in such clause and (ii) BI shall promptly
notify PPI in writing after becoming aware of the occurrence of an Abandonment
Date. Upon the occurrence of an Abandonment Date, or, with respect to any
Licensed Diagnostic Compound, upon notice from PPI that it will seek to develop
such Licensed Diagnostic Compound, BI shall promptly provide PPI with such
information as PPI may reasonably require and request with respect to the BI
Compound which is the subject of such Abandonment Date and/or with respect to
such Licensed Diagnostic Compound, subject to PPI's execution of an appropriate
confidentiality agreement reasonably acceptable to BI, and within fifteen (15)
days of the written request of PPI, the parties shall commence good faith
negotiations with respect to the royalty and other terms of the license of such
BI Compound(s) and/or Licensed Diagnostic Compound(s) to PPI in accordance with
this Section 3.5.1. If within sixty (60) days of the commencement of such
negotiations the parties have not entered into a definitive license agreement
with respect to such BI Compound(s) and/or Licensed Diagnostic Compound(s), the
terms of such license agreement shall be determined by binding arbitration in
accordance with Section 11.7 hereof, and the par-

                                       13
<PAGE>

ties shall be obligated to promptly execute and deliver a definitive license
agreement containing such terms.

                  3.5.2 BI's Right of First Refusal. BI shall, subject to and in
accordance with the provisions set forth below, have a right of first
negotiation to obtain an exclusive royalty-bearing license in the Territory with
respect to any PPI Compound, solely for use as a prophylactic or therapeutic
for Alzheimer's Disease, which PPI has determined to seek to license to a Third
Party. PPI shall promptly notify BI of such determination (a "PPI License
Notice"), and BI shall have twenty (20) days after receipt of a PPI License
Notice to notify PPI (an "Initial BI License Response Notice") that it may seek
to enter into such negotiations and, as part of such Initial BI License Response
Notice, to request such information with respect to such PPI Compound as it
reasonably requires to determine whether to enter into such negotiations. If BI
has timely delivered an Initial BI License Response Notice, PPI shall promptly
provide such information with respect to such PPI Compound as BI has requested
in the Initial BI License Response Notice and is available to PPI, subject to
BI's execution of an appropriate confidentiality agreement reasonably acceptable
to PPI. BI shall have thirty (30) days after PPI's substantial compliance with
the information request included as part of the Initial BI License Response
Notice to notify PPI in writing that it has determined to enter into such
negotiations (a "BI Negotiation Notice"). If BI has not timely delivered a BI
Negotiation Notice, PPI shall be free to enter into an agreement with a Third
Party to license such PPI Compound on such terms and conditions as PPI shall
determine. If BI timely delivers a BI Negotiation Notice, then for a period of
sixty (60) days after PPI's receipt of such BI Negotiation Notice, PPI will
negotiate exclusively with BI with respect to the terms of such a license. If at
the end of such sixty (60) day period the parties have not entered into a
definitive license agreement with respect to such PPI Compound, then PPI shall
be free to enter into an agreement with a Third Party to license such PPI
Compound, provided that the terms of such license agreement shall not, taken as
a whole, be materially more favorable to such Third Party than the terms, if
any, last offered in writing by BI to PPI during the aforesaid sixty (60) day
period, unless PPI has first offered BI in writing the opportunity to enter into
the license agreement containing such more favorable terms and BI has not
executed and delivered such

                                       14
<PAGE>

license agreement within twenty (20) days after receipt of such written offer
from PPI.

                       ARTICLE 4. EXCHANGE OF INFORMATION

            4.1 Information to be Provided. During the Screening Term, each
party shall promptly provide the other party with information and results
generated from the Screening Program (the "Exchange Information"), and, without
limiting the generality of the foregoing, PPI shall promptly provide BI with SAR
Information to the extent reasonably necessary to facilitate BI's selection of a
BI Compound for Development; provided, however, that PPI shall not be required
to provide BI with any clinical data relating to any PPI Compound. However, PPI
agrees to provide BI with copies of its clinical plans and protocols relating to
clinical trials with respect to each PPI Compound, and PPI agrees, and BI shall
have the right for a sixty (60) day period after receipt of such clinical plans
or protocols, to negotiate in good faith the financial and other terms and
conditions upon which BI would gain access to such clinical data.

            4.2 Information Not Required to be Provided; Restriction on
Certain Research Activities. Notwithstanding Section 4.1 or any other
provision of this Agreement, (i) so long as the withholding of Exchange
Information does not materially adversely affect the Screening Program,
neither party shall be required to provide the other party with general,
enabling technology or with other general technical information or know-how
which is applicable outside the scope of the Screening Program and (ii)
neither party will analyze the chemical and/or physical properties of any
compound provided by such party to the other party hereunder or otherwise
undertake any analysis of such compound to derive or elucidate such
structural information; provided, that upon BI's selection of a BI Compound
for Development, or PPI's exercise of its license rights with respect to a BI
Compound (including a Licensed Diagnostic Compound) pursuant to Section
3.5.1, BI shall promptly disclose to PPI structural information with respect
to such BI Compound(s).

                                       15
<PAGE>

                     ARTICLE 5. INTELLECTUAL PROPERTY RIGHTS

            Except to the extent expressly set forth in this Agreement, (a) all
right, title and interest in PPI Patent Rights, other patent or intellectual
property rights of any kind relating to any PPI Compounds, all PPI Information
and any PPI Compounds shall be and remain vested solely and exclusively in PPI,
(b) all right, title and interest in all BI Patent Rights, BI Information and
BI Compounds shall be and remain vested solely and exclusively in BI and (c)
under no circumstances shall a party hereto, as a result of this Agreement,
obtain any ownership interest in or other right to any technology, know-how,
patents, pending patent applications, products or biological materials of the
other party, including items owned, controlled or developed by the other party,
or transferred by the other party to said party, at any time pursuant to this
Agreement.

                              ARTICLE 6. ROYALTIES

            6.1 Royalties on Net Sales.

                  6.1.1 Royalty Rate.

                  (a) In consideration of the rights granted to BI under
Section 3.1, with respect to any BI Product, BI shall pay PPI (i) a royalty in
the amount equal to ***% of annual Net Sales of such BI Product (the "***%
Royalty Rate") up to $***, and (ii) a royalty in the amount equal to ***% of
that portion of annual Net Sales of such BI Product (the "***% Royalty Rate")
greater than $***. Each of the ***% Royalty Rate and the ***% Royalty Rate are
referred to herein as the "Applicable Base Royalty Rate." The Applicable Base
Royalty Rate is subject to increase as provided in Section 6.1.1(b), and to
reduction as provided in Section 6.1.1(c) and Section 6.8.

                  (b) If, within three years after PPI's First Commercial Sale
of a PPI Product in a country, BI introduces a BI Product to the market in such
country, the Applicable Base Royalty Rate with respect to Net Sales of such BI
Product in such country for the first and second consecutive twelve-month
periods, respectively, commencing on the First Commercial Sale of such BI

                                       16
<PAGE>

Product in such country, shall be the Applicable Base Royalty Rate with respect
to such Net Sales, plus ***% and ***%, respectively; provided, however, that the
maximum amount of additional royalties (over and above the amount of royalties
payable pursuant to paragraph (a) above) which BI shall be obligated to pay PPI
pursuant to this paragraph (b) shall not exceed 50% of the Net Sales of such PPI
Product in such country during the consecutive twelve calendar months
immediately preceding the First Commercial Sale of such BI Product in such
country.

                  (c) If (i) in any calendar year commencing after the end of
the first full calendar year following the First Commercial Sale of a BI
Product in a country, Net Sales of such BI Product in the Territory are less
than $*** and (ii) in such country the number of units of a Third Party AD
Product sold in such country during such year exceeds ***%, ***%, ***%, ***% or
***%, respectively, of the number of units of such BI Product sold in such
country during such year, the Applicable Base Royalty Rate with respect to Net
Sales of such BI Product in such country during such year shall be reduced by
***%, ***%, ***%, ***% or ***%, respectively, provided that in no event shall
such Applicable Base Royalty Rate be reduced by more than ***% (including
pursuant to the operation of Section 6.1.1(c), alone or together with Section
6.8.) The percentage reduction(s) (if any) of the Applicable Base Royalty Rate
in any country in respect of any year pursuant to this Section 6.1.1(c) shall
be set forth in the quarterly royalty report of BI for the last quarter of such
year contemplated by Section 6.2. If any such reduction is applicable, then the
amount of any royalties previously paid by BI during such year in excess of the
amount which would have been payable based on the Applicable Base Royalty Rate,
as so reduced, shall be an offset against the amount of royal ties payable by BI
in respect of the last quarter of such year (calculated without giving effect to
any such reduction) and, as necessary, against the amount of royalties
otherwise payable thereafter; provided that BI shall not be entitled to offset
more than ***% of the amount of royalties which would otherwise be payable to
PPI in any fiscal quarter.

                  (d) With respect to any BI Compound or BI Product, promptly
after completion of Phase II and pro-

                                       17
<PAGE>

vided a PPI Change of Control Transaction has not occurred, BI shall provide
PPI with all information relating to the Development thereof, all data,
clinical results and protocols for the commencement of Phase III with respect
thereto, and, whether or not a PPI Change of Control Transaction has occurred, a
detailed budget which sets forth a fair and reasonable estimate of the costs
associated with such Phase III. Within ninety (90) days of receipt of such
information, PPI may elect by written notice to BI to reimburse BI on a
quarterly basis for ***%, ***% or ***% of the actual Phase III Development costs
paid by BI, and, from and after delivery of such notice by PI, the royalty rate
payable by BI with respect to Net Sales of a BI Product shall be the rate which
would otherwise be applicable pursuant to Sections 6.1(a), (b) and (c), plus
***%, ***% or ***%, respectively (such applicable additional percentage being
referred to as the "PPI Investment Percentage Royalty Rate Increase"), and PPI
shall be obligated to make such reimbursement payments within fifteen (15) days
after receiving an invoice therefor containing a reasonable itemization of
such costs. It is understood and agreed that BI shall have sole responsibility
with respect to any decision regarding the Phase III referred to in this
Section 6.1.1(d).

                  6.1.2 Third Party Patents; Combination BI Products; Bundled
Products.

                  (a) If BI, its Affiliates or sublicensees can demonstrate
that, in order to operate under or exploit any license granted under Section
3.1 in any country they must make payments (including without limitation
royalties, option fees or license fees) to one or more Third Parties to obtain a
license or similar right in the absence of which the BI Product could not be
legally manufactured or sold in such country, BI and PPI shall enter into good
faith negotiations with a view to agreeing on a reasonable amount that BI may
deduct from the royalties payable to PPI hereunder in respect of Net Sales of
such BI Product in such country in any given quarter.

                  (b) If a BI Product contains an active ingredient in addition
to a BI Compound, then BI and PPI shall enter into good faith negotiations with
a view to agreeing on an appropriate reduction in the Applicable

                                       18
<PAGE>

Base Royalty Rate with respect to Net Sales of such BI Product.

                  (c) If a Bundled Product (as defined in Section 1.20) is sold,
the parties will promptly negotiate mutually agreeable royalty terms with
respect to sales of such Bundled Product. If within sixty (60) days of the
commencement of such negotiations, such royalty terms have not been agreed to in
writing by the parties, such royalty terms shall be determined by binding
arbitration in accordance with Section 11.7 hereof.

                  6.1.3 Sublicense Royalties. If BI grants a sublicense
hereunder to any Third Party to make, have made, use, distribute for sale or
sell the BI Products in any country, BI shall pay to PPI royalties on Net Sales
of the BI Products sold by such Third Party in such country at the royalty rate
set forth in Section 6.1.1 that would be applicable had such sales been made by
BI.

            6.2 Royalty Reports; Exchange Rates. Following the First Commercial
Sale of any BI Product in any country, BI shall within thirty (30) days after
each calendar quarter furnish to PPI a written quarterly report showing: (i) the
gross sales of the BI Product sold by BI, its Affiliates and sublicensees,
including sales by BI to Recognized Agents during the reporting period and the
calculation of Net Sales from such gross sales; (ii) withholding taxes, if any,
required by law to be deducted in respect of such sales; and (iii) the exchange
rates used in determining the amount of United States dollars. All sales in
currencies other than United States dollars shall first be converted into German
marks and then into United States dollars using in both cases the average
monthly exchange rates as published regularly by Deutsche Bank in Frankfurt am
Main, Germany, and as customarily used by BI in its accounting system. If no
royalty is due for any royalty period hereunder, BI shall so report. BI shall
keep complete and accurate records in sufficient detail to properly reflect all
gross sales and Net Sales and to enable the royalties payable hereunder to be
determined.

            6.3 Audits. Upon the written request of PPI, BI shall permit an
independent public accountant selected by PPI and acceptable to BI, which
acceptance shall not be unreasonably withheld, to have access during normal

                                       19
<PAGE>

business hours to such records of BI as may be reasonably necessary to verify
the accuracy of the royalty reports described herein, in respect of any fiscal
year ending not more than thirty-six (36) months prior to the date of such
request. All such verifications shall be conducted at PPI's expense and not more
than once in each calendar year. In the event such PPI representative concludes
that additional royalties were owed to PPI during such period, the additional
royalty shall be paid by BI within thirty (30) days of the date PPI delivers to
BI such representative's written report so concluding. The fees charged by such
representative shall be paid by PPI unless the audit discloses that the
royalties payable by BI for the audited period are incorrect by more than five
percent (5%), in which case BI shall pay the reasonable fees and expenses
charged by such representative. BI shall include in each Third Party sublicense
granted by it pursuant to this Agreement a provision requiring the sublicensee
to make reports to BI, to keep and maintain records of sales made pursuant to
such sublicense and to grant access to such records by PPI's representatives to
the same extent required of BI under this Agreement. PPI agrees that all
information subject to review under this Section 6.3 or under any sublicense
agreement is confidential and that PPI shall cause its representatives to
retain all such information in confidence.

            6.4 Royalty Payment Terms. Royalties shown to have accrued by each
royalty report provided for under this Agreement shall be due thirty (30) days
after the end of each calendar quarter. Payment of royalties in whole or in part
may be made in advance of such due date. Royalties determined to be owing with
respect to any prior quarter shall be added, together with interest thereon
accruing under this Agreement from the date of the report for the quarter for
which such amounts are owing, to the next quarterly payment hereunder.

            6.5 Withholding Taxes. BI shall deduct any withholding taxes from
the payments agreed upon under this Agreement and pay them to the proper tax
authorities required by the laws of the Federal Republic of Germany applicable
at the date of payment. BI shall not deduct any other withholding or any other
governmental charges from the payments agreed upon under this Agreement,
including but not limited to any such taxes or charges incurred as a result of
an assignment or sublicense by BI

                                       20
<PAGE>

to any Affiliate or any Third Party, except as noted above. BI shall maintain
official receipts of payment of any withholding taxes and forward these receipts
to PPI.

The parties will exercise their best efforts to ensure that any withholding
taxes imposed are reduced as far as possible under the provisions of the current
or any future double taxation agreement between the United States and the
Federal Republic of Germany. According to existing German Law, this reduction
requires that the German Bundesamt fur Finanzen issue a Certificate of Tax
Exemption. In order to achieve such reduction, PPI shall provide BI with an
application for a certificate of tax exemption for royalties under the US-German
Double Taxation Treaty performed on the official German form (Application for
Tax Exemption) and signed by PPI. The Certification of Filing a Tax Return (IRS
Form 6166) must be enclosed with the Application For Tax Exemption. BI shall
provide PPI with the official German form. Once every three years after PPI
first provides BI with an Application For Tax Exemption, it will provide BI with
a new such Application unsolicited which complies with the above mentioned
prerequisites.

            6.6 Application for Tax Exemption. The payments are not due until
PPI provides BI with the Application for Tax Exemption fulfilling the
prerequisites set out in Section 6.5 of this Agreement. Payments arising after
expiration of any Certification of Tax Exemption are not due until the next
Application for Tax Exemption is filed with BI. Notwithstanding the preceding
provisions of this Section 6.6, in the event of any extended delay in approval
or effectiveness of the Application for Tax Exemption, PPI may require payment
of any amounts due pursuant to this Agreement after deduction of any applicable
withholding taxes. PPI shall be notified by BI of any changes regarding the
filing of Applications for Tax Exemption.

            6.7 Interest on Late Payments. Any payments by BI to PPI that are
not paid on or before the date such payments are due under this Agreement shall
bear interest, to the extent permitted by applicable law, at two (2) percentage
points above the Prime Rate of interest declared from time to time by The First
National Bank of Boston in Boston, Massachusetts, calculated on the number of
days payment is delinquent.

                                       21
<PAGE>

            6.8 Duration of Royalties; Step Down. If (a) the expiration date of
the last to expire of the PPI Patent Rights in any country (with respect to such
country, the "Patent Expiration Date") occurs prior to the date which is ten
(10) years after the First Commercial Sale of a BI Product in such country (with
respect to such country, the end of such tenth year being referred to herein as
the "Sale Date"), (i) the Applicable Base Royalty Rate with respect to Net Sales
of such BI Product in such country shall (A) decrease by ***% on such Patent
Expiration Date (unless, with respect to the year in which the Patent Expiration
Date occurs in such country and any subsequent year, the Applicable Base Royalty
Rate with respect to Net Sales of such BI Product in such country for such year
has already been reduced pursuant to Section 6.1.1(c)) and (B) decrease by an
additional ***% (or such lesser percentage such that, together with any
reduction of the Applicable Base Royalty Rate pursuant to Section 6.1.1(c), the
Applicable Base Royalty Rate with respect to Net Sales of such BI Product in
such country in the year in which the Sale Date occurs and any subsequent year
is decreased by ***%) on such Sale Date and (ii) any PPI Investment Percentage
Royalty Rate Increase in effect with respect to Net Sales of such BI Product in
such country shall decrease by ***% on such Sale Date, and (b) if the Sale Date
occurs prior to the Patent Expiration Date, (i) the Applicable Base Royalty Rate
with respect to Net Sales of such BI Product in such country shall decrease by
***% (or such lesser percentage such that, together with any reduction of the
Applicable Base Royalty Rate pursuant to Section 6.1.1(c), the Applicable Base
Royalty Rate with respect to Net Sales of such BI Product in such country in the
year in which the Sale Date occurs and any subsequent year is decreased by ***%)
on such Sale Date and (ii) any PPI Investment Percentage Royalty Rate Increase
in effect with respect to Net Sales of such BI Product in such country shall
decrease by ***% on such Sale Date; provided, that in no event shall the
Applicable Base Royalty Rate be decreased by more than ***% (including pursuant
to the operation of Section 6.1.1(c), alone or together with this Section 6.8),
and provided further that no royalties with respect to Net Sales of a BI Product
in a country shall be payable in accordance with this Article 6 after the date

                                       22
<PAGE>

which is fifteen (15) years after the First Commercial Sale of a BI Product in
such country.

ARTICLE 7. CONFIDENTIALITY

            7.1 Nondisclosure Obligations.

                  7.1.1 General. Except as otherwise provided in this Article 7,
both parties shall maintain in strict confidence and use only for purposes
specifically authorized under this Agreement (i) information and data received
from the other party resulting from or related to the Screening Program
(including without limitation SAR Information and PPI Information) or the
Development of any BI Product and (ii) all information and data not described in
clause (i) but supplied by the other party under this Agreement and marked
"Confidential." For purposes of this Article 7, information and data described
in clause (i) or (ii) shall be referred to as "Information."

                  7.1.2 Limitations. To the extent it is reasonably necessary or
appropriate to fulfill its obligations or exercise its rights under this
Agreement, a party may disclose Information it is otherwise obligated under this
Section not to disclose to its Affiliates, sublicensees, consultants, outside
contractors and clinical investigators, on a need-to-know basis on condition
that such entities or persons agree to keep the Information confidential to the
same extent as such party is required to keep the Information confidential; and
a party or its sublicensees may disclose such Information to government or other
regulatory authorities to the extent that such disclosure is reasonably
necessary to obtain patents or authorizations to conduct clinical trials of, and
to commercially market, the BI Products. The obligation not to disclose
Information shall not apply to any part of such Information that: (i) is or
becomes part of the public domain other than by unauthorized acts of the party
obligated not to disclose such Information or its Affiliates or sublicensees;
(ii) can be shown by written documents to have been disclosed to the receiving
party or its Affiliates or sublicensees by a Third Party, provided such
Information was not obtained by such Third Party directly or indirectly from the
other party under this Agreement pursuant to a confidentiality agreement; (iii)
prior to disclosure under this Agree-

                                       23
<PAGE>

ment, was already in the possession of the receiving party or its Affiliates or
sublicensees, provided such Information was not obtained directly or indirectly
from the other party under this Agreement pursuant to a confidentiality
agreement; (iv) can be shown by written documents to have been independently
developed by the receiving party or its Affiliates without breach of any of the
provisions of this Agreement; or (v) is disclosed by the receiving party
pursuant to interrogatories, requests for information or documents, subpoena,
civil investigative demand issued by a court or governmental agency or as
otherwise required by law; provided, that the receiving party notifies the other
party immediately upon receipt thereof (and provided that the disclosing party
furnishes only that portion of the Information which it is advised by counsel is
legally required).

            7.2 Terms of this Agreement. PPI and BI each agree not to disclose
any terms or conditions of this Agreement to any Third Party without the prior
written consent of the other party, except as required by applicable law,
including without limitation the rules and regulations of the SEC governing
disclosure to shareholders or potential investors. If PPI determines that it is
required to file with the SEC or other governmental agency this Agreement for
any reason, PPI shall request confidential treatment of such portions of this
Agreement as it and BI shall together determine. Notwithstanding the foregoing,
prior to execution of this Agreement, PPI and BI shall agree upon the substance
of information that can be used as a routine reference in the usual course of
business to describe the terms of this Agreement, and PPI and BI may disclose
such information, as modified by mutual agreement from time to time, without the
other party's consent.

            7.3 Publications.

                  7.3.1 Procedure. Each party recognizes the mutual interest in
avoiding premature publication of information and data with respect to the
results of the Screening Program ("Screening Data"). In the event that, either
party, its employees or consultants or any other Third Party under contract to
such party wishes to make a publication (including any oral disclosure made
without obligation of confidentiality) disclosing any Screening Data (the
"Publishing Party"), such party shall transmit

                                       24
<PAGE>

to the other party (the "Reviewing Party") a copy of the proposed written
publication at least forty-five (45) days prior to submission for publication,
or an abstract of such oral disclosure at least thirty (30) days prior to
submission of the abstract or the oral disclosure, whichever is earlier. The
Reviewing Party shall have the right (a) to propose modifications to the
publication for patent reasons, (b) to request a delay in publication or
presentation in order to protect patentable information, or (c) to request that
the information be maintained as a trade secret and, in such case, the
Publishing Party shall not make such publication.

                  7.3.2 Delay. If the Reviewing Party requests a delay as
described in subsection 7.3.1.(b), the Publishing Party shall delay submission
or presentation of the publication for a period of ninety (90) days to enable
patent applications protecting each party's rights in such information to be
filed.

                  7.3.3 Resolution. Upon the receipt of written approval of the
Reviewing Party, the Publishing Party may proceed with the written publication
or the oral presentation.

            7.4 Injunctive Relief. The parties hereto understand and agree that
remedies at law may be inadequate to protect against any breach of any of the
provisions of this Article 7 by either party or their employees, agents,
officers or directors or any other person acting in concert with it or on its
behalf. Accordingly, each party shall be entitled to the granting of injunctive
relief by a court of competent jurisdiction against any action that constitutes
any such breach of this Article 7.

                    ARTICLE 8. REPRESENTATIONS AND WARRANTIES

            Each party represents and warrants to the other that it has the
legal right and power to enter into this Agreement, to extend the rights and
licenses granted to the other in this Agreement, and that the performance of
such obligations will not conflict with its charter documents or any agreements,
contracts or other arrangements to which it is a party. BI further represents
and warrants to, and covenants with, PPI that (a) BI is a

                                       25
<PAGE>

limited liability company duly organized, validly existing and in good standing
under applicable German law and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement and (b) upon the
execution and delivery of this Agreement, this Agreement shall constitute a
valid and binding obligation of BI enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

                              ARTICLE 9. INDEMNITY

            9.1 BI Indemnity Obligations. BI agrees to defend, indemnify and
hold PPI, its Affiliates and their respective employees and agents harmless from
all claims, losses, damages or expenses arising as a result of: (a) actual or
asserted violations of any applicable law or regulation by BI, its Affiliates or
sublicensees in connection with the manufacture, distribution or sale or use of
any BI Compounds or BI Products; (b) claims for bodily injury, death or property
damage attributable to the manufacture, distribution, sale or use of BI Com
pounds or BI Products by BI, its Affiliates or sublicensees; or (c) a BI
Product recall ordered by a governmental agency or required by a confirmed BI
Product failure as reasonably determined by the parties hereto.

            9.2 PPI Indemnity Obligations. PPI, its Affiliates and their
respective employees and agents shall not be entitled to the indemnities set
forth in Section 9.1 to the extent the loss, damage or expense for which
indemnification is sought was caused by the negligence, willful misconduct or
material breach of this Agreement by PPI or its Affiliates or sublicensees.
Further, should BI be found responsible for claims, losses or expenses caused by
any such negligence, willful misconduct or breach by PPI or its Affiliates and
not attributable to other causes for which BI is responsible, BI shall be
entitled to an indemnity from PPI to the same extent as PPI would be so entitled
from BI under Section 9.1 above.

                                       26
<PAGE>

            9.3 Procedure. A party or any of its Affiliates or their respective
employees or agents (the "Indemnitee") that intends to claim indemnification
under this Article 9 shall promptly notify the other party (the "Indemnitor") of
any loss, claim, damage, liability or action in respect of which the Indemnitee
intends to claim such indemnification, and the Indemnitor shall assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an Indemnitee shall have the right to retain its own counsel,
with the fees and expenses to be paid by the Indemnitor, if representation of
such Indemnitee by the counsel retained by the Indemnitor would be inappropriate
due to actual or potential differing interests between such Indemnitee and any
other party represented by such counsel in such proceedings. The indemnity
agreement in this Article 9 shall not apply to amounts paid in settlement of any
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Indemnitor, which consent shall not be unreasonably
withheld. The failure to deliver notice to the Indemnitor within a reasonable
time after the commencement of any such action, if prejudicial to its ability
to defend such action, shall relieve such Indemnitor of any liability to the
Indemnitee under this Article 9, but the omission so to deliver notice to the
Indemnitor will not relieve it of any liability that it may have to any
Indemnitee otherwise than under this Article 9. The Indemnitee under this
Article 9, its employees and agents, shall cooperate fully with the Indemnitor
and its legal representatives in the investigation of any action, claim or
liability covered by this indemnification. In the event that each party claims
indemnity from the other and one party is finally held liable to indemnify the
other, the Indemnitor shall additionally be liable to pay the reasonable legal
costs and attorneys' fees incurred by the Indemnitee in establishing its claim
for indemnity.

            9.4 Insurance. BI shall maintain appropriate product liability
insurance with respect to the Development, manufacture and sales of BI Products
by BI in such amount as BI customarily maintains with respect to sales of
similar products. BI shall maintain such insurance for so long as it continues
to manufacture or sell BI Products, and thereafter for so long as BI maintains
insurance for itself covering such manufacture or sales.

                                       27
<PAGE>

                             ARTICLE 10. TERMINATION

            10.1 Termination. This Agreement may be terminated in the following
circumstances:

                  10.1.1 Material Breach. By a party upon written notice to the
other party by reason of a material breach by such other party not described in
Section 10.1.2 or 10.1.3 that the breaching party fails to remedy within ninety
(90) days after written notice thereof by the non-breaching party;

                  10.1.2 Failure of BI to Pay. By PPI, if BI fails to make (i)
any payment to PPI required under Section 2.2 or 2.3 within fifteen (15) days
after such payment becomes payable or (ii) any royalty payment under Section 6.1
within thirty (30) days after such payment becomes payable, and, in either such
case, such failure is not remedied within thirty (30) days after notice thereof
from PPI;

                  10.1.3 Failure of BI to Use Diligent Efforts. By PPI, if BI
fails to use diligent efforts as required by Section 3.3, and BI fails to remedy
or take reasonable action to initiate a remedy of such default within ninety
(90) days after the notice thereof by PPI;

                  10.1.4 Bankruptcy. By either party upon bankruptcy,
insolvency, dissolution or winding up of the other; and

                  10.1.5 Change of Control. By BI if, prior to the end of the
Screening Term, a transaction with a Third Party is consummated involving (a)
the acquisition, merger or consolidation of PPI and (i) PPI is not the
acquiring, surviving or continuing corporation or (ii) PPI is the surviving or
continuing corporation, but, in connection with such transaction, the then out
standing shares of the capital stock of PPI were changed into or exchanged for
stock or other securities of such Third Party or cash or other property or the
then out standing shares of the capital stock of PPI represented less than fifty
percent (50%) of the outstanding shares and share equivalents of the surviving
or continuing corporation immediately after consummation of such transaction or
(b) the sale or other disposition of more than fifty percent (50%) of the voting
capital stock of PPI or

                                       28
<PAGE>

all or substantially all of the assets of PPI to a Third Party, and such Third
Party is a major pharmaceutical company that is in competition with BI.

            10.2 Effect of Termination Generally.

                  10.2.1 Existing Obligations. Termination pursuant to Section
10.1 of this Agreement for any reason shall not relieve the parties of any
obligation accruing prior to such termination.

                  10.2.2 Survival. Except as otherwise expressly provided below
in this Article 10, the provisions of Sections 2.2 and 2.3 (with respect only
to payments and expense reimbursement payments accrued at the time of
termination but not yet paid), Article 3, Articles 5 through 9, this Section
10.2, Section 10.3 (if this Agreement is terminated by PPI pursuant to Section
10.1), Section 10.4.1 (if this Agreement is terminated by BI pursuant to Section
10.1.1), Section 10.4.2 (if this Agreement is terminated pursuant to Section
10.1.5) and Article 11 (as applicable to such surviving provisions) shall
survive termination of this Agreement pursuant to Section 10.1.

            10.3 Effect of Termination by PPI.

                  10.3.1 Termination By PPI Prior to Commencement of Phase III.
In the event that this Agreement is terminated by PPI pursuant to Section 10.1
prior to the time that a BI Compound or BI Product enters Phase III (such time
being referred to as the "Phase III Initiation Date"), then (i) all licenses
and rights granted to BI hereunder shall terminate, except to the extent PPI
otherwise determines and advises BI in writing, and BI will immediately cease
Development of any BI Compound, (ii) BI shall, (a) to the extent legally
permissible, take all action reasonably necessary to assign all of its right,
title and interest in and transfer possession and control to PPI of the
regulatory filings prepared by BI, and regulatory approvals received by BI, to
the extent that such filings and approvals relate to a BI Compound and/or any BI
Product and (b) grant PPI, and take any other action necessary to provide PPI
with, a worldwide, perpetual, exclusive, fully-paid and royalty free right and
license, with the right to grant sublicenses, under any and all applicable BI
Patent Rights and BI know-how

                                       29
<PAGE>

to develop such BI Compound, and to develop, manufacture or have manufactured,
use and sell or have sold such BI Compound as incorporated into a BI Product and
(iii) PPI shall retain any and all remedies which may be available to it at law
or in equity.

                  10.3.2 Termination By PPI After Commencement of Phase III. In
the event that PPI is entitled to terminate this Agreement pursuant to Section
10.1 after the Phase III Initiation Date, then from and after the time such
right of termination first arises, (i) the Applicable Base Royalty Rate
applicable to Net Sales of any BI Product in any country shall be *** times such
Applicable Base Royalty Rate as would have otherwise applied and (ii) PPI shall
retain any and all remedies which may be available to it at law or in equity.

            10.4 Effect of Termination by BI.

                  10.4.1 Termination for PPI Breach. (a) In the event that BI is
entitled to terminate this Agreement pursuant to Section 10.1.1, BI may elect,
by notice to PPI (a "Section 10.4.1(a) Notice") not later than thirty (30) days
after such right first arises, to either (i) terminate this Agreement, in which
case all licenses and rights granted to BI shall terminate, except to the extent
the parties otherwise agree in writing, and BI will immediately cease
Development of any BI Compound and will cease to manufacture and sell any BI
Products except as provided in this Section 10.4.1(a) and except as the parties
otherwise agree in writing, and BI shall retain any and all remedies which may
be available to it at law or in equity or (ii) pursue the remedy set forth in
Section 10.4.1(b) below (it being understood and agreed that if BI fails to
deliver to PPI a Section 10.4.1(a) Notice within the required thirty (30) day
period, BI shall be deemed to have elected such remedy set forth in Section
10.4.1(b) below). If BI elects to terminate this Agreement pursuant to clause
(i) above, then (x) BI may dispose of its inventory of BI Products on hand as of
the effective date of termination, and may fill any orders for twelve (12)
months after the effective date of termination and (y) within thirty (30) days
after disposition of such inventory and fulfillment of such orders (and in any
event within seven (7) months after termination) BI will forward to PPI a final
report and, subject to Section 10.5, if applicable, pay all royalties due for
Net Sales in such period.

                                       30
<PAGE>

            (b) If BI elects, pursuant to Section 10.4.1, to pursue the remedy
set forth in this paragraph (b), then (i) BI shall have the right and option, if
it has obtained a final judgment or award of monetary damages and/or costs
against PPI based on such breach, (A) to offset the amount of such damages
and/or costs against any amounts would otherwise be payable to PPI under Article
2 or Article 6 and (B) if the breach which gave rise to BI's right to terminate
this Agreement was PPI's material breach of BI's right to exclusivity pursuant
to Section 2.5 or Section 3.1, (1) BI may cease paying royalties to PPI
hereunder (and in such event BI shall be deemed to have a paid-up and royalty
free license equivalent to that set forth in Section 3.1 hereof), (2) PPI's
rights pursuant to Section 3.5.1 shall automatically terminate, if such breach
occurs prior to the Phase III Initiation Date or equivalent development stage of
a Licensed Diagnostic Compound and (3) the parties acknowledge and agree that if
such breach occurs after the Phase III Initiation Date or equivalent development
stage of a Licensed Diagnostic Compound, the royalties which would otherwise be
payable by PPI to BI pursuant to the license agreement referred to in Section
3.5.1 (or which would be considered customary for purposes of the license
negotiation referred to in such Section) shall be multiplied by 3, and (ii) BI
shall retain any and all remedies (other than termination of this Agreement)
which may be available to it at law or in equity.

                  10.4.2 Termination for Change of Control. In the event that BI
is entitled to terminate this Agreement pursuant to Section 10.1.5, BI may
terminate this Agreement, in which case all licenses and rights granted to BI
shall terminate, except to the extent PPI otherwise determines and advises BI in
writing, and BI will immediately cease Development of any BI Compound.

                            ARTICLE 11. MISCELLANEOUS

            11.1 Force Majeure. Neither party shall be held liable or
responsible to the other party nor be deemed to have defaulted under or breached
this Agreement for failure or delay in fulfilling or performing any term of this
Agreement when such failure or delay is caused by or results from causes beyond
the reasonable control of the affected party, including but not limited to fire,
floods, embargoes, war, acts of war (whether war is declared or

                                       31
<PAGE>

not), insurrections, riots, civil commotions, strikes, lockouts or other labor
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party; provided, however, that the party so
affected shall use reasonable commercial effects to avoid or remove such causes
of non-performance, and shall continue performance hereunder with reasonable
dispatch whenever such causes are removed. Either party shall provide the other
party with prompt written notice of any delay or failure to perform that occurs
by reason of force majeure. The parties shall mutually seek a resolution of the
delay or the failure to perform as noted above. It is understood and agreed that
if this Section 11.1 is applicable to a party's failure or delay in performing
its obligations under the Work Plan, the other party will not be obligated
thereunder until the first party has so performed, and if such failure or delay
is by PPI, BI will not be obligated to pay PPI the payment required by Section
2.2(b) until such failure or delay is cured. It is further agreed that if such
failure or delay by either party continues for more than twelve consecutive
months, the other party shall have the right to terminate this Agreement with
the effect provided in Section 10.3.1. (if such failure or delay is by BI) or
Section 10.4.1 (if such failure or delay is by PPI).

            11.2 Assignment. This Agreement may not be assigned or otherwise
transferred by either party without the consent of the other party; provided,
however, that either PPI or BI may, without such consent, assign its rights and
obligations under this Agreement (i) in connection with a corporate
reorganization, to any Affiliate, all or substantially all of the equity
interest of which is owned and controlled by such party or its direct or
indirect parent corporation, or (ii) in connection with a merger, consolidation
or sale of substantially all of such party's assets to an unrelated third party;
provided, however, that such party's rights and obligations under this Agreement
shall be assumed (by operation of law or otherwise) by its successor in interest
in any such transaction and shall not be transferred separate from all or
substantially all of its other business assets, including those business assets
that are the subject of this Agreement. Any purported assignment in violation
of the preceding sentence shall be void. Any permitted assignee

                                       32
<PAGE>

shall assume all obligations of its assignor under this Agreement.

            11.3 Severability. Each party hereby agrees that it does not intend
to violate any public policy, statutory or common laws, rules, regulations,
treaty or decision of any government agency or executive body thereof of any
country or community or association of countries. Should one or more provisions
of this Agreement be or become invalid, the parties hereto shall substitute, by
mutual consent, valid provisions for such invalid provisions which valid
provisions in their economic effect are sufficiently similar to the invalid
provisions that it can be reasonably assumed that the parties would have entered
into this Agreement with such valid provisions. In case such valid provisions
cannot be agreed upon, the invalidity of one or several provisions of this
Agreement shall not affect the validity of this Agreement as a whole, unless the
invalid provisions are of such essential importance to this Agreement that it is
to be reasonably assumed that the parties would not have entered into this
Agreement without the invalid provisions.

            11.4 Notices. Any consent, notice or report required or permitted to
be given or made under this Agreement by one of the parties hereto to the other
shall be in writing, delivered personally or by facsimile (and promptly
confirmed by telephone, personal delivery or courier) or courier, postage
prepaid (where applicable), addressed to such other party at its address
indicated below, or to such other address as the addressee shall have last
furnished in writing to the addressor and shall be effective upon receipt by the
addressee.

  If to PPI:            Pharmaceutical Peptides, Inc.
                        One Hampshire Street
                        Cambridge, Massachusetts  02139
                        Attention: President
                        Telephone: (617) 494-8400
                        Telecopy: (617) 494-8414

  with copy to:         Skadden, Arps, Slate, Meagher & Flom
                        One Beacon Street, 31st Floor
                        Boston, Massachusetts  02108
                        Attention: Kent A. Coit, Esq.
                        Telephone: (617) 573-4835
                        Telecopy: (617) 573-4822

                                       33
<PAGE>

  If to BI:             Boehringer Ingelheim International GmbH
                        Postbox 200
                        D-55216 Ingelheim, Rhein
                        Germany
                        Attention: Corporate Licensing
                        Telephone: 011 49 61 32 77 34 08
                        Telecopy: 011 49 61 32 77 35 83

  with a copy to:       Boehringer Ingelheim International GmbH
                        Postbox 200
                        D-55216 Ingelheim, Rhein
                        Germany
                        Attention:  Head of Legal Department
                        Telephone:  011 49 61 32 77 21 06
                        Telecopy:  011 49 61 32 77 35 83

            11.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflicts of law provisions thereof.

            11.6 Dispute Resolution; Choice of Forum. Any disputes arising
between the parties relating to, arising out of or in any way connected with
this Agreement or any term or condition hereof, or the performance by either
party of its obligations hereunder, whether before or after the termination
pursuant to Section 10.1 of this Agreement, shall be promptly presented to the
Chief Executive Officer of PPI and the Member of the Corporate Board of BI
responsible for Pharmaceuticals for resolution and if they or their designees
cannot promptly resolve such disputes, then either party shall have the right to
bring an action to resolve such dispute before a court of competent
jurisdiction. The parties hereby submit to the exclusive jurisdiction of the
federal or state courts located within the State or City of New York for the
conduct of any suit, action or proceeding arising out of or relating to this
Agreement.

            11.7 Arbitration. If the parties are unable to enter into the
definitive license agreement referenced in Section 3.5.1 within the time period
specified in such Section, or are unable to reach agreement on royalty terms for
a Bundled Product as provided in Section 6.1.2(c) within the time period
specified in such Section, the terms of such license agreement or such royalty
terms, as applicable, shall be settled by arbitration. Such arbitra-

                                       34
<PAGE>

tion shall be conducted in the City of New York, in accordance with the
Commercial Arbitration rules then pertaining to the American Arbitration
Association with a panel of three (3) arbitrators. The arbitrators shall be
selected from the National Panel of Arbitrators of the American Arbitration
Association. The laws of the State of New York shall apply to the arbitration
proceedings. The decision of the arbitrators with respect to the terms of such
license agreement, or such royalty terms, as applicable, shall be final and
binding on the parties and their legal successors.

            11.8 Entire Agreement. This Agreement, together with the appendices
hereto contains the entire understanding of the parties with respect to the
subject matter hereof and supersedes the Confidentiality Agreement dated August
8, 1995 between PPI and BI. All express or implied agreements and
understandings, either oral or written, heretofore made are expressly merged in
and made a part of this Agreement. This Agreement may be amended, or any term
hereof modified, only by a written instrument duly executed by both parties
hereto.

            11.9 Headings. The captions to the several Articles and Sections
hereof are not a part of this Agreement, but are merely guides or labels to
assist in locating and reading the several Articles and Sections hereof.

            11.10 Independent Contractors. It is expressly agreed that PPI and
BI shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency. Neither PPI
nor BI shall have the authority to make any statements, representations or
commitments of any kind, or to take any action, which shall be binding on the
other, without the prior consent of the other party to do so.

            11.11 Agreement Not to Solicit Employees. During the term of this
Agreement and for a period of two (2) years following the termination of this
Agreement, PPI and BI agree not to seek to persuade or induce any employee of
the other company who is or was involved in the collaboration provided for
herein to discontinue his or her employment with that company in order to
become employed by or associated with any business, enterprise or effort that is
associated with its own business.

                                       35
<PAGE>

            11.12 Exports. The parties acknowledge that the export of technical
data, materials or products is subject to the exporting party receiving any
necessary export licenses and that the parties cannot be responsible for any
delays attributable to export controls which are beyond the reasonable control
of either party. PPI and BI agree not to export or re-export, directly or
indirectly, any information, technical data, the direct product of such data,
samples or equipment received or generated under this Agreement in violation of
any governmental regulations which may be applicable, including, but not limited
to, the Export Administration Act of 1979, as amended, its rules and
regulations, including, but not limited to, Part 779 of the United States Export
Control Regulations, published by the United States Department of Commerce, and
other applicable export control laws. PPI and BI agree to obtain similar
covenants from their licenses, sublicenses and contractors with respect to the
subject matter of this Section 11.12.

            11.13 Waiver. The waiver by either party hereto of any right
hereunder or the failure to perform or of a breach by the other party shall not
be deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.

            11.14 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and together shall
constitute one and the same instrument.

                                       36
<PAGE>

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

                                                PHARMACEUTICAL PEPTIDES, INC.

                                                By /s/ Joseph M. Limber
                                                  ------------------------------
                                                   Name: Joseph M. Limber
                                                   Title: President/COO

                                                BOEHRINGER INGELHEIM
                                                  INTERNATIONAL GmbH

                                                By /s/ Hohbach Muller
                                                  ------------------------------
                                                   Name: Hohbach Muller
                                                   Title: Authorized Signatories

                                       37
<PAGE>

                                   APPENDIX A

--------------------------------------------------------------------------------
    Patent Application            Claims Included            Claims Excluded
    ------------------            ---------------            ---------------
--------------------------------------------------------------------------------
U.S. Patent Appli-          Compositions of            Compositions of
cation Serial No.           Matter:                    Matter:
08/404,831
                            13-17 and 30-32            1-12 and 20-29

                            Methods:                   Methods:

                            18-19, 37-44, 50-52        33-36, 45-49 and
                            and 59-62                  53-58
--------------------------------------------------------------------------------
U.S. Continuation-          Compositions of            Compositions of
in-Part Patent              Matter:                    Matter:
Application
Serial No.                  14-18 and 32-34            1-13 and 21-31
08/475,579
                            Methods:                   Methods:

                            19-20 and 40-47            35-39
--------------------------------------------------------------------------------
<PAGE>

                                   APPENDIX B

                               WORK PLAN UNDER THE
                       COLLABORATION AND LICENSE AGREEMENT
                           DATED AS OF AUGUST 1, 1996
                                 BY AND BETWEEN
                          PHARMACEUTICAL PEPTIDES, INC.
                                       AND
                     BOEHRINGER INGELHEIM INTERNATIONAL GmbH

This is the Work Plan referred to in, and which forms a part of, the
Collaboration and License Agreement dated as of August 1, 1996 by and between
Pharmaceutical Peptides, Inc. and Boehringer Ingelheim International GmbH (the
"Collaboration Agreement"). Capitalized terms used but not defined herein have
the respective meanings ascribed thereto in the Collaboration Agreement.

I. Screening Program

During the Screening Term, PPI will employ exclusively assays A-D as described
below to screen for A(beta) peptide polymerization inhibition activity for
50,000 compounds selected and supplied by BI. *** Depending on activity levels
seen in Assay A, PPI may require additional material for Assays B-D and
subsequent in vivo assays. PPI will deliver to BI SAR data on existing PPI
Compounds within 6 weeks of the Effective Date. BI will deliver to PPI at least
13,000, 25,000, 37,500, and 50,000 compounds within 2.0, 5.0, 12.0, and 16.0
months respectively, of the Effective Date and PPI anticipates, barring any
unforeseen technical issues, screening 25,000 compounds in its Nucleation Assay
within 12 months and 50,000 compounds in its Nucleation Assay within 24 months
of the Effective Date. Compounds jointly designated will be further screened in
secondary assays described below.

Assay                    Functional Measurement          Manpower
-----                    ----------------------          --------
A. Nucleation Assay      ***                             *** FTE
B. Extension Assay       ***                             *** FTE
C. Neurotoxicity         ***                             *** FTE
D. Specificity           ***                             *** FTE
<PAGE>

PPI will make available *** FTE's to the Screening Program immediately following
the Effective Date. These FTE's will either be new hires or redeployments of
existing personnel. PPI anticipates that it will be evaluating BI compounds in
assays A-D within 6 weeks of first receiving compounds from BI. All Applicable
data will be supplied to BI in PC compatible form (e.g. ASCI II or Excel files).
All BI compounds will be handled or disposed of in accordance with BI's written
instructions.

A. Nucleation Assay: A rapid high-throughput primary screen

The nucleation assay *** Approximately 13 lines omitted ***

B. Extension Assay: ***

The extension assay *** Approximately 6 lines omitted ***

C. Neurotoxicity Assay: in vitro Cellular Efficacy

*** Approximately 10 lines omitted ***

D. ***: Amyloid Specificity Assays

*** Approximately 9 lines omitted ***

II. Development of Animal Model for A(beta)Peptide Polymerization Inhibitors

      Assay        Functional Measurement           Manpower
      -----        ----------------------           --------
   Animal Model    ***                              ***

                                       40
<PAGE>

PPI will dedicate *** to the development of an animal model immediately
following the Effective Date. *** will either be *** new hire or a redeployment
of *** The *** for assay 5 will be active in the identification, in-house
development, and validation of an efficacy model for testing A(beta) peptide
polymerization inhibitors.

*** Approximately 9 lines omitted ***

III. Capital Budget Items

Capital Budget items include dedicated equipment and assay specific supplies
purchased during the Screening Program. These will include but not be limited
to:

      Dedicated Equipment
      o     2 rotary shakers
      o     Plate-reader flourimeter
      o     Spectrophotometer (96-well Plate Reader)
      o     Spectrophotometer (Cuvette)
      o     Computers (data management, direct connection to flourimeter)
      o     Cryostat
      o     Stereotaxtic Apparatus

      Assay Specific Supplies
      o     Pipet tips
      o     Multi-pipettors
      o     Low-Bind 96 well plates
      o     Standard 96 well plates
      o     Reservoirs
      o     Computer Software
      o     Disposable Cuvettes
      o     Tissue Culture Media and Supplies
      o     Histochemical Supplies
      o     Animal Purchase Costs/Supplies/Housing
<PAGE>

      o     Osmotic Pumps

      *** Approximately 4 lines omitted ***

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