Document:

<PAGE>

                                                                   EXHIBIT 10.18

INSULIN
-------

     Agreement, dated August 6, 1982, between Zymos Corporation, a Washington
corporation ("Zymos"), and Novo Industri A/S, a corporation organized under the
laws of The Kingdom of Denmark ("Novo").

     WHEREAS, Novo wishes Zymos to conduct research in respect of the Program
(as defined herein) and Zymos wishes to grant to Novo certain rights in respect
thereof.

     NOW, THEREFORE, Zymos and Novo agree as follows:

     1.   Definitions
          -----------

     For purposes of this Agreement,

     (a)  "Human Insulin" shall mean insulin having an amino acid sequence and
disulfide linkages and biological activity identical to those of the insulin
produced by the pancreas glands of humans or any product containing such
insulin.

     (b)  "Human Pro-insulin" shall mean pro-insulin having an amino acid
sequence and disulfide linkages and biological activity identical to those of
the proinsulin produced by the pancreas glands of humans or any product
containing such insulin.

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     (c)  "Program" shall mean the program set forth in Exhibit A hereto to
develop a commercial method to produce Human Insulin and Human Pro-insulin
through recombinant DNA and other mutational technology in accordance with the
time-table set forth therein.

     (d)  "Insulin Organism" shall mean a micro-organism developed by the Zymos
Group carrying the DNA structural information for Human Insulin and/or Human
Pro-insulin and from which micro-organism Human Insulin and/or Human Pro-insulin
can be produced.

     (e)  "Bonus Goal" shall mean the demonstration by Zymos and verification by
Novo of the secretion of Human Insulin and/or Human Pro-insulin in a stable
strain of yeast or other eukaryotic micro-organism at the level of [ * ]
molecules per liter at [ * ] cell protein per liter. Such demonstration and
verification shall be effected by chemical and biochemical methods (such as RIA,
HPLC and bioassay).

     (f)  "Cost Reduction" shall mean a saving of the Novo Group's direct costs
of labor, energy and material used in the manufacture of Human Insulin by means
of an Insulin Organism or Technical Information as compared with such direct
costs incurred to manufacture its semi-synthetic Human Insulin as

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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calculated pursuant to the formula set forth in Exhibit B attached hereto.

     (g)  "Technical Information" shall mean information, inventions, know-how,
practical experience, technical and scientific data, specifications and
formulae, whether patentable or not, which the Zymos Group presently or
hereafter owns, controls, develops or, to the extent it is free to disclose, has
acquired or shall acquire from third parties, directly relating to the Program,
including, but not limited to, chemical, pharmacological and clinical
information necessary for the proper filing of applications for approval of
Human Insulin and/or Human Pro-insulin in countries throughout the world;
provided, however, that Technical Information shall not include information
which: (i) was lawfully in the Novo Group's possession at the time of receipt
from the Zymos Group; (ii) is in the public domain or becomes part of the public
domain through no fault of the Novo Group; or (iii) is lawfully received by the
Novo Group from a third party.

     (h)  "Patents" shall mean all patents, inventor's certificates and
applications therefor throughout the world, including any extensions, reissues,
renewals, substitutions, divisions or continuations thereof, which the Zymos
Group

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -3-
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presently or hereafter owns or controls or under which it now has, or hereafter
shall have, the right to sublicense, in respect of Insulin Organisms, and/or the
production of Human Insulin and/or Human Pro-insulin and all Improvement Patents
as to which Novo elects to receive a license under Section 5(b) hereof.

     (i)  "Zymos Group" shall mean Zymos, the consultants of Zymos and any
company controlling, controlled by, or under common control with Zymos.

     (j)  "Novo Group" shall mean Novo, the consultants of Novo and any company,
controlled by, controlling, or under common control with, Novo.

     2.   Conduct of the Program
          ----------------------

     (a)  Zymos shall carry out the Program in its facilities and shall allocate
the manpower thereto as set forth in Exhibit A hereto.

     (b)  Zymos represents, warrants and agrees as follows:

          (1) Benjamin D. Hall (Hall), Earl W. Davie ("Davie") and Michael Smith
     ("Smith") have entered into Consulting Agreements with Zymos, copies of
     which have been provided to Novo;

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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          (2) Zymos shall perform under such Consulting Agreements so as to
     ensure consummation of the transactions contemplated by this Agreement;

          (3) Hall has been assigned to supervise the Program and Gustav Ammerer
     is to be the project leader for the Program;

          (4) Hall, Smith and Davie have agreed with Zymos that until January
     29, 1989, they shall not engage in or supervise research relating to Human
     Insulin or Human Pro-insulin for any person, firm or corporation other than
     Zymos and shall not, at any time, encumber or otherwise dispose of rights
     in, or disclose facts concerning, any such research or the results thereof
     other than to Zymos;

          (5) This Agreement has been duly authorized, executed and delivered on
     behalf of Zymos and is enforceable against Zymos in accordance with its
     term; and

          (6) Neither the execution of this Agreement nor the implementation of
     the provisions hereof shall constitute a breach of, or a default under, any
     agreement or other

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -5-
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     instrument to which Zymos is a party or which is applicable to the property
     of Zymos.

     (c)  Novo has assigned Niels Fiil to supervise the Program for Novo.

     (d)  Zymos will provide Novo, or its designated representative, with
quarterly written status reports relating to progress on the Program.  Zymos
will also provide Novo with a final written status report relating to the
Program at the completion of each phase of the Program.  Each such report shall
be submitted to Novo within a reasonable period of time, not to exceed thirty
(30) days following completion of work on each such phase.  Zymos shall also
make available personnel on reasonable notice and for reasonable time periods at
Zymos' facility to review with Novo, or its representatives, progress on each
phase of the Program.

     (e)  Zymos shall schedule semi-annual meetings of Novo and Zymos
representatives at Zymos' facilities to review and discuss research progress.
Zymos shall provide the quarterly reports referred to in Section 2(d) at least
two weeks prior to each such meeting.

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

     (f)  Zymos shall make available to Novo all Technical Information and shall
deliver to Novo from time to time biological materials produced under the
Program.

     3.   Involvement of Novo Staff
          -------------------------

     (a)  For a total period of 3 man months per year, Zymos shall accept a
suitably qualified employee or employees of Novo into any facility where work on
the Program will be carried out; provided that (i) such employee is a person
reasonably acceptable to Zymos, (ii) such employee's activities shall be limited
to research and development work being carried out under the Program and (iii)
such employee shall abide by all rules and regulations of Zymos applicable to
employees generally.

     (b)  Novo shall bear all expenses of such employee, including, without
limitation, salary, travelling, living, hotel, work-permit and out-of-pocket
expenses, taxes and insurance.

     4.   Consideration.
          --------------

     (a)  In consideration of Zymos undertaking the Program, Novo shall pay
Zymos the sums set forth in Exhibit A and the following additional payments:

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

          (i)  the sum of $[ * ] if the Bonus Goal is reached by August 1, 1985;
     or

          (ii) the sum of $[ * ] if the Bonus Goal is reached by August 1, 1986.

     (b)  If the Bonus Goal is not reached by August 1, 1986, no additional
payments shall be due under this Section 4.  However, Zymos shall be entitled to
any payments required pursuant to Section 5 hereof even if the Bonus Goal is not
reached within the time frame set forth herein or not at all.

     (c)  Any taxes, duties or other similar levies imposed by The Kingdom of
Denmark on making such payments to Zymos shall be for Novo's account and shall
not operate so as to reduce any sum owing hereunder.

     5.   Insulin License
          ---------------

     (a)  Zymos hereby grants to Nova a perpetual, exclusive, irrevocable,
worldwide license (with the right to sublicense) to manufacture, have
manufactured, use and sell Human Insulin and Human Pro-insulin and/or to use
Insulin Organisms, Technical Information and/or Patents.

     (b)  If Zymos makes or acquires any further improvements or inventions
relating to Technical Information, Patents or

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -8-
<PAGE>

Human Insulin, Human Pro-insulin, or Insulin Organisms, or the mode of using
them, (hereinafter, "Improvements"), or becomes the owner of or be entitled to
license any Improvements, either through Patents or otherwise, it shall
communicate Improvements to Novo and give Novo full information with respect
thereto, and Novo shall be entitled to extend the license granted hereunder to
such Improvements with all rights which are hereby granted to Novo without
making any additional payments with respect thereto.

     (c)  In consideration of receiving the license granted hereunder, Novo
shall make the following payments to Zymos:

          (1)  Definitions:

               (i)  "Participation Year" shall mean each successive twelve (12)
          month period commencing on the date of the First Commercial Sale.

               (ii) "Net Sales" shall mean gross revenues to the Novo Group from
          the sale of Human Insulin and/or Human Pro-insulin produced through
          the use of Insulin Organisms, Technical Information or Patents under
          this license realized in each Participation Year less: insurance and
          delivery charges paid or allowed by the Novo Group; trade and cash
          discounts

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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          and commissions; returns, credits or allowances; and sales and excise
          taxes, duties or other governmental charges [other than taxes on the
          Novo Group's profits). Net sales shall not include sales between
          members of the Novo Group.

               (iii)  "First Commercial Sale" shall mean the first sale of Human
          Insulin and/or Human Pro-insulin produced through the use of Insulin
          Organisms, Technical Information or Patents under this license by a
          member of the Novo Group to any company not a member of the Novo Group
          for consideration in an arms' length transaction.

          (2)  Payments:

               (i)    Subject to sub-paragraphs (iii) and (iv) below, an amount
          with respect to each Participation Year equal to the total of:

                      (aa) [ * ] of any Cost Reduction realized in such Year not
               exceeding a [ * ] Cost Reduction;

                      (bb) [ * ] of that portion of the Cost Reduction realized
               in such Year between [ * ];

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

                      (cc) [ * ] of that portion of the Cost Reduction realized
               in such Year between [ * ];

                      (dd) [ * ] of that portion of the Cost Reduction realized
               in such Year in excess of [ * ]; and

                      (ee) [ * ] of Net Sales during each such year of Human
               Pro-insulin (i.e., "X" in the following formula):

                                   Number of Molecules of Pro-insulin Sold
            X                                  During Such Year
--------------------------    =    ========================================
     Net Sales During              Number of Molecules of Human Insulin and
        Such Year                  Human Pro-insulin Sold During Such Year

               (ii)   The obligation of Novo to make such payments shall
          commence, in respect to each country where Human Insulin and/or Human
          Pro-insulin is sold under this license, on the date of its First
          Commercial Sale and shall continue for a period of [ * ] or, subject
          to the provision of Section 7(b) hereof, for the normal life of any
          Patents licensed in respect of such country, whether such normal life
          is longer or shorter .

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -11-
<PAGE>

               (iii)  As from the First Commercial Sale, for each of the first
          [ * ] Participation Years, the aggregate payments under Sections
          5(c)(2)(i) and 5(c)(2)(v) hereof shall not be less than [ * ] per
          year.

               (iv)   The aggregate payments under Sections 5(c)(2)(i) and
          5(c)(2)(v) for each Participation Year shall in no event exceed [ * ]
          of Net Sales during each such year.

               (v)    Subject to Novo's approval and upon terms and conditions
          satisfactory to Novo, Zymos shall acquire any patent and other rights
          required from third parties with respect to the license granted
          hereunder. In such event, Novo shall pay any royalty required to be
          paid to such third party and the payments under Section 5(c)(2)(i)
          shall be reduced by [ * ] of the amount of such royalty paid to the
          third party (other than the University of Washington or the University
          of British Columbia, in which case, such payments shall be reduced by
          [ * ] of such amount) but the payments to Zymos under Section
          5(c)(2)(i) shall not be reduced by operation of this

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -12-
<PAGE>

          Section 5(c)(2)(v) below [ * ] of their original amount.

               (vi)   If Novo enters into any sublicense, other than a
          sublicense to a member of the Novo Group, pursuant to the provisions
          of Section 5(a) hereof, it shall pay to Zymos [ * ] of the aggregate
          amount of any royalties received by Novo in connection with such
          sublicense.

     (d)  If after delivery of the Insulin Organism, such Insulin Organism is
killed, destroyed, becomes non-viable or is otherwise lost so that no viable
cultures thereof are available to Novo, Zymos will, on Novo's request, replace
the Insulin Organism from a stock of frozen Insulin Organisms, if available,
retained by Zymos, or if not available, again produce a culture of the Insulin
Organism for Novo at Novo's expense.

     6.   License For Other Products  If Novo wishes to manufacture, have
          --------------------------
manufactured, use and sell any product other than Human Insulin and Human Pro-
insulin produced through the use of Insulin Organisms, Technical Information
and/or any Patents, Zymos shall grant to Novo a perpetual, exclusive,
irrevocable, worldwide license (with the right to sublicense)

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

for such purpose containing such terms as to royalties as Zymos and Novo shall
in good faith agree.

     7.   General License Provisions
          --------------------------

     (a)(i).   Novo shall deliver to Zymos after the end of each Participation
Year, a written accounting showing its computation of payments due under this
Agreement.

     (a)(ii).  At the termination of the payment period with respect to any
country, Novo shall render a final report to Zymos with respect to such country
within sixty (60) days after the end of the Participation Year in which such
payment period terminates, and payments shall be made to Zymos for the portion
of the Participation Year ending at the date of the termination of the payment
period.

     (b)  If and when, before the normal expiration thereof, any Patent should
be held judicially to be invalid, Novo shall be relieved from further payment
liability to Zymos with respect to Net Sales of products utilizing such Patent
and any sublicense of such patent within the jurisdiction of the court rendering
the adverse decision; provided, however, that in such event such payment
liability shall continue for a period of twelve (12) years from the First
Commercial Sale.

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

     (c)  All royalty payments required to be made under this Agreement shall be
converted to United States dollars at a rate equivalent to the exchange rate of
United States dollars for Danish kroner as quoted by the National Bank of
Denmark on the last day of the applicable Participation Year; provided that if
by reason or any cause beyond the control of the reporting party, including laws
or regulations controlling exchange in any country, a royalty payment in United
States dollars cannot be effected, or is limited, the reporting party shall make
or cause to be made the so affected royalty payment or portion of said royalty
payment, by depositing in the respective local currency in a local bank or local
banks designated by Zymos in Zymos' name in accordance with the applicable laws
or regulations; provided further that the reporting party or its sublicensees
may withhold any amounts of royalties required to be withheld pursuant to
applicable laws, statutes, regulations, or requirements of any governmental
body.

     (d)  Novo shall pay to Zymos, [ * ] quarterly during the six (6) year
period commencing with the First Commercial Sale pursuant to Section
5(c)(2)(iii). Payments for royalty exceeding such quarterly payments shall
become due within 60 days of the end of the Participation Year to which they
relate.

[ * ] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -15-
<PAGE>

     (e)  Novo shall keep, and shall require the Novo Group to keep, full, true
and accurate books of accounts and other records containing all particulars
which may be necessary properly to ascertain and verify the amounts payable
hereunder for a period of not less than four (4) years from the date of the
final report provided under Section 7(a)(ii) hereof.  Zymos shall have the right
to select a firm of independent certified public accountants reasonably
satisfactory to Novo to audit such reports.

     (f)  With respect to any patentable subject matter licensed to Novo under
this Agreement, Zymos shall with reasonable diligence and prior to any
disclosure which would serve as a novelty destroying disclosure in any foreign
country a member of the International Convention for Protection of Industrial
Property, prepare, file and prosecute patent applications in the United States
Patent Office and such other countries as Novo may request within six months of
filing of applications in the United States Patent Office. Novo shall cooperate
with Zymos in preparing, filing and prosecuting such applications and shall
assume the responsibility for preparing, filing and prosecuting patent
applications in such countries as Novo shall elect. Zymos may file in other
countries at its expense. Novo shall promptly reimburse Zymos for all patent
filing, prosecution and

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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<PAGE>

maintenance costs incurred by Zymos for filing in Novo selected countries and in
the United States. Novo may deduct from earned royalty payments to Zymos
pursuant to Sections 5(c)(2)(i) and 5(c)(2)(vi) any direct costs incurred in
those countries it elects to file, prosecute and maintain patent applications or
patents on a country by country basis up to [ * ] of the total amount of such
royalty payments made by Novo until Novo recovers such costs reimbursed to Zymos
and such direct costs incurred by Novo in assuming such responsibility.

     (g)  At least 45 days prior to filing any patent application or amendment
thereto in the United States Patent Office, or the equivalent thereof n any
foreign country, Zymos or Novo, as the case may be, shall provide each other
with a copy thereof and shall not unreasonably withhold its consent to making
any changes in such applications or amendments at the request of Novo or Zymos.

     (h)  If Zymos shall fail to diligently prepare or file any patent
application, or to pursue any such application to final issuance or rejection of
a patent, Novo may, at its own expense, take over the filing and/or prosecution
of such application in its own name. Any patent issuing as a result of such
efforts by Novo shall be its sole property, and Zymos shall execute such
assignment or other documents which Novo

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -17-
<PAGE>

may request in order to ensure Novo's ownership of such patent.

     (i)  Zymos and Novo shall each permit the other party to participate in any
proceedings to which it may be a party (at the expense of the party wishing to
participate, except as provided in paragraph (l) hereof) relating to any Patent
or patent application.

     (j)  Zymos shall execute any formal license or other documents as may be
required by the laws of any country for the purpose of registration of Novo as a
licensee under the Patents in any patent office of such country.

     (k)  Zymos represents, warrants and agrees that:

          (1)  it shall not disclose any Technical Information, or provide any
     Insulin Organism or other biological material relating to the Program (all
     of which being herein referred to as the "Confidential Material"), as to
     which Novo is or may be licensed hereunder, to any third party, without the
     prior written approval of Novo; and

          (2)  it has not and shall not grant to any other person, firm, or
     corporation, any rights, licenses or privileges with respect to any
     Confidential Material, as

[*] designates portions of this document that have been omitted pursuant to a a
request for confidential treatment filed separately with the Commission.

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<PAGE>

     to which Novo is or may be licensed hereunder; provided, however, that (i)
     if such Confidential Material relates to matters in addition to the
     Program, Zymos may disclose such Confidential Material, and (ii)
     immediately subsequent to any such disclosure Zymos shall notify Novo in
     writing as to the nature of such disclosure and the identity of its
     recipient.

     (1) Novo shall promptly notify Zymos of any material infringement of any
Technical Information, Insulin Organism or biological material relating to the
Program which may be licensed to Novo hereunder. Zymos shall have the
opportunity to bring an action for such infringement at its own expense. Any
amount recovered shall have deducted therefrom any expense incurred by Zymos in
bringing any such action and the remainder, if any, shall be divided equally
between Novo and Zymos. Novo shall, if requested and at Zymos' expense, actively
assist in the prosecution of such action.

     If, after reasonable notice, Zymos fails to bring such action, Novo shall
have the right to bring an action against the infringer at its expense. If Novo
finds it necessary or desirable to join Zymos as a party plaintiff, Zymos shall
not unreasonably object to such joinder and shall execute all papers necessary
or perform such other acts as may reasonably

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -19-
<PAGE>

be required by Novo. If Novo is successful in abating the infringement, any
amount recovered from the infringer shall be divided equally between Zymos and
Novo, after first deducting from such amount any expense incurred by Novo in
bringing such action. Zymos shall, if requested and at Novo's expense, actively
assist in the prosecution of such action.

     (m)    will indemnify Zymos and hold it harmless of and from, all claims,
actions, liabilities and judgements arising out of personal injury, death or
property damage that may be asserted or commenced by reason of the manufacture,
use or sale of Human Insulin or Human Pro-insulin, manufactured by the; pursuant
to Technical Information and/or employing the insulin organism.

     (n)    Zymos makes no warranties, representations or undertakings with
respect to utility, efficacy, nontoxicity, safety or appropriateness of using
Technical Information, Insulin Organisms, Human Insulin and/or Human Pro-insulin
except that Zymos represents and warrants that it has fully disclosed and will
fully disclose in good faith to Novo all data and information in its possession,
knowledge or control relating to such utility, efficacy, non-toxicity, safety or
appropriateness and all other data and information relating to

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -20-

<PAGE>

the Technical Information, Insulin Organisms, Human Insulin and/or Human Pro-
insulin.

     (o) Zymos does not warrant or represent that any processes which it has
developed or the processes which it may develop in the future are useful for
commercial production of the Human Insulin and/or Human Pro-insulin.

     8.  Termination
         -----------

     (a) Subsequent to August 1, 1983, Novo shall have the right at any time to
terminate the Program by giving to Zymos 3 months' prior written notice to that
effect.

     (b) Any termination by Novo of the Program pursuant to paragraph 8(a)
hereof shall not in any manner affect Novo's rights to the license granted to it
pursuant to Section 5 hereof.

     (c) Notice of Termination of this Agreement or any license granted
hereunder may be given by Zymos to Novo if Novo fails to make any payments
required to be made by it hereunder and such failure is not corrected by Novo
within thirty (30) days of receipt of written notice from Zymos.

     9.   Altered Insulin and/or Altered Pro-insulin
          ------------------------------------------

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

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     If Zymos develops Altered Insulin and/or Altered Proinsulin, Novo may elect
by written notice to Zymos to receive a license to manufacture, have
manufactured, use and sell Altered Insulin and or Altered Pro-insulin and/or to
use any micro-organism developed by the Zymos Group carrying the DNA structural
information for Altered Insulin and/or Altered Pro-insulin and from which micro-
organism Altered Insulin and/or Altered Pro-insulin can be produced and related
Technical Information on the same terms and conditions as the license contained
herein with respect to Human Pro-insulin. For the purposes of this Section 9,
Altered Insulin and/or Altered Pro-insulin shall mean analogues of Human Insulin
and/or Human Pro-insulin molecules with alterations which provide pharmaceutical
and pharmacological advantages over the natural forms of these proteins, or
precursors thereof which can easily be converted to Altered Insulin and/or
Altered Pro-insulin.

     10. Confidentiality and Publication
         -------------------------------

     (a) Novo shall take all reasonably practicable steps to preserve the
confidentiality of all Technical Information; provided that Novo shall be free
to disclose Technical Information insofar as such disclosure is necessary to
allow Novo to defend itself against litigation, to file and

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -22-
<PAGE>

prosecute patent applications, to comply with governmental regulations, to
conduct clinical trials or to market any product with respect to which any
license has been granted hereunder. Zymos shall take such steps with respect to
confidential information received from Novo.

     (b) Notwithstanding the foregoing, Zymos shall be permitted to disclose to
members of the Zymos Group any such Novo confidential information if subject to
like terms of confidentiality, and Novo shall likewise be permitted to disclose
any Technical Information to the Novo Group, again if subject to like terms of
confidentiality.

     (c) Notwithstanding the foregoing provisions of this clause, Zymos and Novo
each reserves the right, for itself and for any members of the Zymos Group and
the Novo Group, respectively, to publish information of scientific importance,
including any of the Technical Information, and any such publication shall not
constitute a breach of this clause; provided, however, that such Technical
Information or the material part thereof shall have been made the subject of a
patent application, or that the other party shall have given its prior written
agreement to such publication. Each party shall furnish the other party with
copies of all such party's publications pursuant to this paragraph.

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -23-
<PAGE>

     (d) Zymos shall not make any public announcement which mentions any member
of the Novo Group or the results of any research under the Program or otherwise
with respect to the subject matter of this Agreement without the prior written
approval of Novo.

     11. Performance  Either party may perform its obligations hereunder
         -----------
through any of its wholly-owned subsidiaries provided that neither party shall
be thereby relieved of its liabilities hereunder if any of its whollyowned
subsidiaries fails to perform any obligation hereunder assigned to it.

     12. Notices
         -------

     (a) All notices hereunder shall be given by personal delivery or by
registered or certified mail (postage prepaid and return receipt requested),
addressed as follows:

     If to Zymos:

         Zymos Corporation
         2121 North 35th Street
         Attention: President

     If to Novo:

         Novo Industri A/S
         DK 2880 Bagsvaerd
         Attention: Peter Tang

     with a copy to:

         Rosenman Colin Freund Lewis & Cohen
         575 Madison Avenue
         New York, New York 10022
         Attention: Robert I. Fisher

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -24-
<PAGE>

     (b) Any notice shall be deemed (in the absence of evidence of earlier
receipt) to have been delivered 10 working days after dispatch, and, in proving
the time of dispatch, it shall be sufficient to show that the envelope
containing such notice was properly addressed, stamped, registered and posted.

     13. Applicable Law  This Agreement shall be construed in accordance with
         --------------
the laws of the State of Washington.

     14. Parties Bound  This Agreement shall be binding upon and inure to the
         -------------
benefit of the parties hereto and their successors and assigns; provided,
however, that neither party shall assign any of its rights or obligations
hereunder without the prior written consent of the other party, except as an
incident to the merger, consolidation, reorganization, or acquisition of stock
or assets affecting substantially all of the assets or actual voting control of
the assigning party.

     15. Severability  Should any one section, or portion thereof, of this
         ------------
Agreement be held invalid or invalidated by reason of any law, statute or
regulation existing now or in the future in any jurisdiction by any court of
competent jurisdiction or by a legally enforceable directive of any

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -25-
<PAGE>

governmental body, such section or portion thereof shall be validly reformed so
as to approximate the intent of the parties as nearly as possible and if
unreformable, shall be divisible and deleted in such jurisdiction; elsewhere,
this Agreement shall not be affected.

     16.  Entire Agreement  This Agreement constitutes the entire agreement
          ----------------
between the parties hereto concerning this subject matter and supersedes all
previous agreements, whether written or oral.  This Agreement may not be
modified orally, and no modifications or any claimed waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom such modification or waiver is sought.

     17.  Waiver.  The waiver by any party hereto of a breach of any provision
          ------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.

     IN WITNESS WHEREOF, Novo and Zymos have executed this Agreement as of the
date first above written.

                                      ZYMOS CORPORATION

                                      By: /s/ Andrew C. Barnes
                                          --------------------------------------

                                      NOVO INDUSTRI A/S

                                      By: /s/ ILLEGIBLE
                                          --------------------------------------

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                     -26-
<PAGE>

                                   Exhibit A

                             Insulin Research Plan
                             ---------------------

Phase 1
-------

a.   Construction:

     Initial studies on insulin-proinsulin expression in yeast will employ the
     proinsulin cDNA cloned at NOVO. This will be attached to upstream yeast
     regulatory/signal peptide DNA sequence in four different arrangements.

     1.   tpi promoter (and untranslated leader) -- nco i linker -- ATG -- pre-
          proinsulin -- yeast transcription terminator.

     2.   tpi promoter and untranslated leader -- ATG -- proinsulin --
          transcription terminator.

     3.   tpi promoter and untranslated leader -- ATG -- yeast prepro alpha-
          factor (AAA AGA GAG GCT GAA GCT) proinsulin -- transcription
          terminator.

     4.   The same as 3, but with a different alpha factor -- insulin junction,
          as follows: (AAA AGA -- TTT GTG AAC CAA).

     These constructions will require that oligonucleotides be made (by Zymos)
     in order to appropriately shorten coding sequences at the desired points.
     Zymos now has this capability.

b.   Expression:

     Each of the hybrid transcription units described above will be cloned in
     the shuttle vector yepl3. Each of the four plasmids will then be
     transformed into an appropriate leu2 recipient yeast strain. Yeast cultures
     grown in 4 percent glucose will be assayed for their content of insulin,
     proinsulin, or related polypeptides using column chromatography, RIA, and
     gel electrophoresis (western blot) assays. The objective of the research in
     phase 1 will be to achieve at least a minimal level (0.01 to 0.1 percent of
     total soluble protein) as intact intracellular insulin/proinsulin, or as a
     hybridprotein from which intact insulin/proinsulin can easily be obtained
     by enzymatic or chemical conversion.

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

     Phase II
     --------

     The objective of phase II is to construct a genetically stable yeast strain
     that accumulates intact human insulin/proinsulin or a hybrid protein from
     which intact insulin/proinsulin can easily be obtained by enzymatic or
     chemical conversion at [ * ] molecules per 1 at [ * ] cellprotein per 1.

     By combination of the following approaches this goal will be reached.

     -    Variation in the plasmid vector, particularly as regards its copy
          number, replication control, segregation mechanism.

     -    Chromosomal integration of the hybrid transcription unit at multiple
          sites.

     -    Regulatory modulation of the expression of tpi/or other yeast
          promoter -- both by mutation and by cloning and over-production of
          gene products required for transcription.

     -    Exploration of the effect of unfavorable codon usage in the proinsulin
          coding sequence upon expression of proinsulin in yeast. The remedy for
          this could be to construct a wholly or partially synthetic proinsulin
          gene with codons which are optimally used in yeast.

     -    Explore the possibilities of using as host organism, other eukaryotic
          microorganism, that is acceptable for large scale production for NOVO.

     -    Application of general principles for optimizing gene expression in
          yeast, e.g.: chloramphenical acetyl transferase -- attached in the
          context of many different sequences at crucial points in the
          translation unit.

     Phase III
     ---------

     The specific approaches to be followed in optimizing insulin secretion from
     yeast will depend strongly upon the relative efficacy of various leader
     peptide constructions used in the phase 1 experiments.

     In order to increase the level of insulin secretion from yeast, genetic
     variations will be made in the sequences

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -2-

<PAGE>

     (leader, pre, C-peptide) concerned with protein processing. In addition to
     the alpha-factor pre-sequence and spacer, those for other yeast secretory
     proteins will also be used.

     The chromosomal genes of yeast concerned with secretion are only beginning
     to be understood in detail. For example, ste 13 appears to encode the
     dipeptidyl peptidase which removes the N-terminal glu ala dipeptides from
     alpha-factor molecules. As these genes become understood, mutants are
     obtained, and genes are cloned and manipulated, variations in yeast cell
     genotype can become an important part of the approach to optimize
     secretion. It may in fact be possible to phenotypically screen for yeast
     mutants that secrete insulin more effectively.

     By a variety of approaches, mostly ones yet to be devised, a yeast strain
     will be developed which secretes human insulin/proinsulin at a level of
     [ * ] molecules per 1 at [ * ] cellprotein per 1.

     Phase IV
     --------

     Development of a stable insulin/proinsulin organism for commercial
     production, that secretes [ * ]  intact insulin/proinsulin molecules per 1
     at [ * ] cellprotein per 1.

     Estimated duration
     ------------------

     Phase 1:       8 months
     Phase II:      12 months
     Phase III:     16 months
     Phase IV:      18 months

     Staffing
     --------

     Phase I:       Equivalent of 2 fully supported scientists for first 4
                    months

                    Equivalent of 2.5 fully supported scientists for second 4
                    months

                    Average: 2.25 scientist over 8 months

     Phase II:      Equivalent of 3 fully supported scientists

     Phase III:     Equivalent of 2 fully supported scientists

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -3-
<PAGE>

     Phase IV:       Equivalent of 2 fully supported scientists

     Research costs  (Based on [ * ] US $ year per fully supported scientist)
     Phase I:        US $[ * ]

     Phase II:       US $[ * ] (7% inflation adjustment)

     Phase III:      US $[ * ] (15% inflation adjustment)

     Phase IV:       US $[ * ] (22% inflation adjustment)

     The research costs are to be paid quarterly, in advance.

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -4-
<PAGE>

                                   EXHIBIT B

     A.   Definitions

     1.   "Variable Costs" shall mean the sum of the following costs for the
production per megaunit of Human Insulin of MC Purity:

     Raw materials costs

     Energy costs

     Direct salaries and wages, including direct fringe benefits

     Control analysis costs

     Costs for effluent disposal (i.e. charges imposed by local municipalities
or other public authorities on Novo for disposal of solid and liquid wastes from
Novo's premises)

     Less credits for by-products.

In calculating Variable Costs for The Novo Method the costs of conversion from
porcine insulin into Human Insulin shall be included.

     2.   "Provo Method" shall mean Novo's production method for Human Insulin
whereby semi-synthetic changes are made to the molecular structure of insulin
extracted from porcine pancreas glands.

     3.   "Zymos Method" shall mean the production method for Human Insulin
using Insulin Organisms and/or Technical

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.
<PAGE>

Information and/or Patents licensed to Novo by Zymos pursuant to the Agreement.

     4.   "Cost Reduction" shall mean the amount per megaunit of Human Insulin
produced by which the Variable Costs for The Novo Method exceed the Variable
Costs for The Zymos Method.

     5.   Other definitions used in this schedule shall have the same meaning as
are assigned thereto in Section 1 of the Agreement.

     B.   Calculation of Cost Reduction

     1.   As of the date Novo informs Zymos of its decision to undertake
production under the insulin license the Variable Costs for the Novo Method and
the Cost Reduction shall be calculated by Novo and as soon as practicable
thereafter full details thereof given to Zymos.  Such Variable Costs will be
increased as of 1st January of each Participation Year by 5% or by 25% of the
total increase in the Danish wholesale price index during the twenty-four (24)
month period proceeding the 1st January in question, whichever is the greater
and the Cost Reduction for such Participation Year shall be calculated
accordingly as of such January 1.

     2.   The right for Zymos under Section 7(e) of the Agreement to audit the
books, records and all supporting data of the Novo Group shall be extended to
enable Zymos to verify

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -2-
<PAGE>

the initial calculation under the preceding paragraph of the Variable Costs for
the Novo Method and the Cost Reduction as of the date of the First Commercial
Sale.

     C.   Zymos' Participation in Cost Reduction

     1.   Zymos' participation in Cost Reduction will be calculated in
accordance with the principles set out in the Agreement under Section 5 (c)(2)
based upon total megaunits of Human Insulin produced by the Zymos Method and
sold by The Novo Group during the relevant Participation Year.

     2.   In order to calculate the amount of Zymos' participation in Cost
Reduction as aforesaid in United States dollars, the currency or currencies in
which such cost reductions are calculated shall be converted into U.S. dollars
at the rate equivalent to the exchange rate of United States dollars for such
currency or currencies as quoted by the National Bank of Denmark.

[*] designates portions of this document that have been omitted pursuant to a
request for confidential treatment filed separately with the Commission.

                                      -3-<PAGE>

                                                                   EXHIBIT 10.19

                                                          Telex: 37173
                                                          Telecopy: (02)98 27 33
                                                          Telegrams: Telanovo
                                                          A/S Reg. No. 16201

--------------------------------------------------------------------------------
Mr. Gregory D. Phelps
President
ZymoGenetics, Inc.
2121 N 35th Street
Seattle, WA 98103
U.S.A.
--------------------------------------------------------------------------------

Your ref.:                  Our ref.:                   Date:
                            HaP/MPL                   1987-03-13

Dear Greg:

Re.: Human Glucagon, Analogues of Human Glucagon, Analogues of Human Insulin
--------------------------------------------------------------------------------

Pursuant to Section 6 of the Agreement dated August 6, 1982, between
ZymoGenetics, Inc. (formerly Zymos Corporation) and Novo Industri A/S (the
"Agreement") and with reference to our discussions at Novo on January 22, 1987,
we write to confirm the Agreement of ZymoGenetics, Inc. to the following terms
and conditions:

     1.        ZymoGenetics, Inc. ("ZYMO") hereby grants to Novo Industri A/S
               ("NOVO") a perpetual, exclusive, irrevocable, worldwide license
               (with the right to sublicense) to manufacture, have manufactured,
               use and sell Human Glucagon, Analogues of Human Glucagon and
               Analogues of Human Insulin through the use of Insulin Organisms,
               Technical Information and/or any Patents, the terms "Insulin
               Organisms", "Technical Information" and "Patents", having in this
               document the same meanings as in the Agreement.

     2.        In consideration of receiving the aforesaid licence, NOVO shall
               make payments to ZYMO as set forth below:

               (a)  Definitions:

                    (i) "Participation Year" shall mean each successive twelve
                    (12) month period commencing on the date of the First
                    Commercial Sale;

                    (ii) "Net Sales" shall mean gross revenues to the NOVO Group
                    from the sale of Glucagon, Analogues of Glucagon and/or
                    Analogues of Insulin produced through the use of Insulin

[*] designates portions of this document that have been omitted pursuant to a
confidential treatment filed separately with the Commission.
<PAGE>

                    Organisms, Technical Information and/or Patents under this
                    licence realized in each Participation Year less:

                    - insurance and delivery charges paid or allowed by the NOVO
                    Group;

                    - trade and cash discounts and commissions;

                    - returns, credits or allowances; and

                    - sales and excise taxes, duties or other governmental
                    charges (other than taxes on the NOVO Group's profits). Net
                    sales shall not include sales between members of the NOVO
                    Group;

                    (iii) "First Commercial Sale" shall mean with respect to
                    Glucagon, Analogues of Glucagon or Analogues of Insulin the
                    first sale of each produced through use of Insulin
                    Organisms, Technical Information and/or Patents under this
                    licence by a member of the NOVO Group to any company not a
                    member of the NOVO Group for consideration in an arms-length
                    transaction.

               (b)  Payments:

                    an amount with respect to each Participation Year equal to:
                    [*] of the first [*] in aggregate Net Sales of Glucagon and
                    Analogues of Glucagon, [*] of the first [*] in aggregate Net
                    Sales of Analogues of Human Insulin, and [*] of all
                    remaining Net Sales.

               (c)  Term:

                    The obligation of NOVO to make such payments shall commence
                    with respect to each country where Glucagon, Analogues of
                    Glucagon, or Analogues of Insulin are sold under this
                    licence on the date of the First Commercial Sale of such
                    product and shall continue until December 31, 2000, or,
                    subject to the terms of Section 7(b) of the Agreement, for
                    the normal life of any Patents licensed in respect of each
                    country, whether such normal life is shorter or longer.

               (d)  If NOVO enters into any sublicense, other than a sublicense
                    to a member of the MONO Group, pursuant to the provisions
                    hereof, it shall pay to ZYMO [*] of the aggregate amount
                    of any royalties received by NOVO in connection with such
                    sublicense.

[*] designates portions of this document that have been omitted pursuant to a
confidential treatment filed separately with the Commission.

                                     [-2-]
<PAGE>

               3.   The provisions of Sections l(a), (b), (d), (g), (h), (i) and
                    (j), 7 (except 7(d)) and (g), 10, 11, 12, 13, 14, 15, 16 and
                    17 of the Agreement are incorporated herein by reference and
                    made a part hereof as if fully set out herein. The
                    provisions of Sections 7 (m), (n), and (o) shall apply with
                    equal force to Human Glucagon, Analogues of Human Glucagon
                    and Analogues of Human Insulin.

Please indicate ZYMO's acceptance of the foregoing by signing, dating and
returning both copies of this letter as soon as convenient, whereupon they will
be executed here at NOVO and one copy returned to you.

Sincerely,                                 Read and Agreed to
NOVO INDUSTRI A/S                          ZYMOGENETICS, INC.

/s/ P. Tang                                /s/ Gregory D. Phelps
--------------------------------------     -------------------------------------
Peter Tang                                 Gregory D. Phelps
Vice President                             President
Product Research and Development
Pharmaceuticals Division

[*] designates portions of this document that have been omitted pursuant to a
confidential treatment filed separately with the Commission.

                                     [-3-]

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