Document:

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                                                                  EXHIBIT 10.278

October 1, 2004

Eric S. Groves, M.D., Ph.D.
Vice-President, Project Management
Ligand Pharmaceuticals Incorporated
10275 Science Center Drive

San Diego, CA 92121

Dear Eric:

          The purpose of this letter agreement is to document the terms of the
severance package to which you will be entitled should your employment with
Ligand Pharmaceuticals Incorporated (the "Company") terminate under certain
specified circumstances.

          Part One of this letter agreement sets forth certain definitional
provisions to be in effect for purposes of determining your benefit
entitlements. Part Two specifies the terms and conditions upon which you may
become entitled to receive severance benefits. Severance benefits accrue under
this letter agreement in the event your employment with the Company were to be
terminated involuntarily in connection with certain changes in control of the
Company. Part Three concludes this letter agreement with a series of general
terms and conditions applicable to your severance benefits.

                             PART ONE -- DEFINITIONS

          Definitions. For purposes of this letter agreement, including in
particular the application of the special benefit limitations of Part Three, the
following definitions will be in effect:

     1.   Average Compensation means your average W-2 wages from the Company for
          the five (5) calendar years completed immediately prior to the
          calendar year in which the Change in Control is effected. Any W-2
          wages for a partial year of employment will be annualized, in
          accordance with the frequency with which such wages are paid during
          such partial year, before inclusion within your Average Compensation.

     2.   Board means the Company's Board of Directors.
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 2

     3.   Change in Control means any of the following events:

               (i) a merger or consolidation in which the Company is not the
          surviving entity, except for a transaction the principal purpose of
          which is to change the state in which the Company is incorporated,

               (ii) the sale, transfer or other disposition of all or
          substantially all of the assets of the Company other than in the
          ordinary course of business,

               (iii) any reverse merger in which the Company ceases to exist as
          an independent corporation and becomes the subsidiary of another
          corporation, except where there is an insubstantial change in the de
          facto voting control of the Company (e.g. the creation of a holding
          company),

               (iv) any Hostile Take-Over,

               (v) the acquisition by any person (or related group of persons),
          whether by tender or exchange offer made directly to the Company's
          stockholders, private purchases from one or more of the Company's
          stockholders, open market purchases or any other transaction, of
          beneficial ownership of securities possessing more than thirty percent
          (30%) of the total combined voting power of the Company's outstanding
          securities,

               (vi) the acquisition by any person (or related group of persons),
          whether by tender or exchange offer made directly to the Company's
          stockholders, private purchases from one or more of the Company's
          stockholders, open market purchases or any other transaction, of
          additional securities of the Company which increase the total holdings
          of such person (or group) to a level of securities possessing more
          than fifty percent (50%) of the total combined voting power of the
          Company's outstanding securities, or

               (vii) the acquisition by any person (or related group of
          persons), whether by tender or exchange offer made directly to the
          Company's stockholders, private purchases from one or more of the
          Company's stockholders, open market purchases or any other
          transaction, of securities of the Company possessing sufficient voting
          power in the aggregate to elect an absolute majority of the members of
          the Board (rounded up to the nearest whole number).
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 3

     4.   COBRA means the continuation-of-coverage provisions of the
          Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

     5.   Code means the Internal Revenue Code of 1986, as amended.

     6.   Common Stock means the Company's common stock, par value $0.001 per
          share.

     7.   Equity Incentive Plans means any of the following equity incentive
          plans of the Company: 1992 Stock Option/Stock Issuance Plan, the 2002
          Stock Incentive Plan, and the Restricted Stock Purchase Plan, together
          with any amendments or successors to such plans.

     8.   Equity Parachute Payment means, with respect to any Option (whether
          Acquisition-Accelerated or Severance-Accelerated) or unvested Stock
          Issuance, the portion deemed to be a parachute payment under Code
          Section 280G and the Treasury Regulations issued thereunder. Such
          Equity Parachute Payment shall be calculated in accordance with the
          valuation provisions established under Code Section 280G and the
          applicable Treasury Regulations and will include an appropriate dollar
          adjustment to reflect the lapse of your obligation to remain in the
          Company's employ as a condition to your vesting in the accelerated
          portion of such Option or Stock Issuance.

     9.   ERISA means the Employee Retirement Income Security Act of 1974, as
          amended.

     10.  Health Care Coverage means the health care benefits provided by the
          Company to you and your eligible dependents for which you are eligible
          to continue coverage under the provisions of COBRA.

     11.  Hostile Take-Over means either of the following events:

               (i) the acquisition by any person (or related group of persons)
          whether by tender or exchange offer made directly to the Company's
          stockholders, private purchases from one or more of the Company's
          stockholders, open market purchases or any other transaction, of
          beneficial ownership of securities possessing more than thirty percent
          (30%) of the total combined voting power of the Company's outstanding
          securities pursuant to a tender offer made directly to the Company's
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 4

          stockholders which the Board does not recommend such stockholders to
          accept, or

               (ii) a change in the composition of the Board over a period of
          thirty-six (36) consecutive months or less such that a majority of the
          Board members (rounded up to the next whole number) ceases, by reason
          of one or more contested elections for Board membership, to be
          comprised of individuals who either (a) have been Board members
          continuously since the beginning of such period or (b) have been
          elected or nominated for election as Board members during such period
          by at least a majority of the Board members described in clause (a)
          who were still in office at the time such election or nomination was
          approved by the Board.

     12.  Involuntary Termination means the termination of your employment with
          the Company:

               (i) upon your involuntary discharge or dismissal, or

               (ii) upon your resignation in connection with any of the
          following changes to the terms and conditions of your employment: (A)
          a change in your position with the Company which materially reduces
          your level of responsibility, (B) a greater than ten percent (10%)
          reduction in your level of compensation (including base salary, fringe
          benefits and participation in non-discretionary bonus programs under
          which awards are payable pursuant to objective financial or
          performance standards, but excluding equity compensation) or (C) a
          relocation of your principal place of employment by more than fifty
          (50) miles.

                    The following guidelines shall determine whether one or more
          reductions in compensation should be taken into account for purposes
          of clause (ii)(B):

                    (a) Any reduction in compensation which occurs in connection
               with an across-the-board reduction in the level of compensation
               payable to the Company's executive officers or senior management
               shall not constitute grounds for a clause (ii)(B) resignation,
               unless implemented within eighteen (18) months after a Change in
               Control.

                    (b) In the event of a Hostile Take-Over, the greater than
               ten percent (10%) standard of clause (ii)(B) shall be reduced to
               zero percent (0%) so that any reduction in the level of your
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 5

               compensation shall constitute grounds for a clause (ii)(B)
               resignation.

                    In no event shall an Involuntary Termination be deemed to
          occur should your employment terminate by reason of death or permanent
          disability.

     13.  Option means any option granted to you under any of the Equity
          Incentive Plans which is outstanding at the time of your Involuntary
          Termination or any earlier Change in Control. Your outstanding options
          are to be divided into two separate categories as follows:

               (i) Acquisition-Accelerated Options: any outstanding Option (or
          installment thereof) which accelerates upon a Change in Control in
          accordance with the automatic acceleration provisions of the Equity
          Incentive Plans.

               (ii) Severance-Accelerated Options: any outstanding Option (or
          installment thereof) which is not an Acquisition-Accelerated Option
          but which accelerates upon your Involuntary Termination, whether or
          not in connection with a Change in Control, as part of your severance
          benefits under this letter agreement.

     14.  Other Parachute Payments mean any payments in the nature of
          compensation to which you may become entitled under this letter
          agreement (other than the Equity Parachute Payment) or any other
          arrangement with the Company, to the extent such payments qualify as
          parachute payments within the meaning of Code Section 280G(b)(2) and
          the Treasury Regulations issued thereunder or would so qualify if the
          aggregate present value of such payments exceeded the amount specified
          in Code Section 280G(b)(2)(ii).

     15.  Stock Issuance means the issuance of unvested shares of Common Stock
          under the Company's Restricted Stock Plan or any other Equity
          Incentive Plan.

     16.  Termination for Cause means an Involuntary Termination or resignation
          of your employment with the Company by reason of your conviction of
          any felony or other criminal act, your commission of any act of fraud
          or embezzlement, your unauthorized use or disclosure of confidential
          or proprietary information or trade secrets of the Company or its
          subsidiaries, or any other intentional misconduct on your part which
          adversely affects the business or affairs of the Company in a material
          manner.
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 6

                  PART TWO -- INVOLUNTARY TERMINATION BENEFITS

          You will be entitled to receive the severance benefits specified below
should there occur an Involuntary Termination of your employment during the term
of this letter agreement effected in connection with a Change in Control, other
than a Termination for Cause. However, in the absence of a Hostile Take-Over,
these benefits will continue to be paid you only for so long as you remain
available for any consulting services required of you under Part Two, Paragraph
4 and abide by the restrictive covenants set forth in Part Two, Paragraph 5.

     1.   Severance Payments. You will receive severance payments from the
          Company for a period of twelve (12) months following your Involuntary
          Termination in an aggregate amount equal to the sum of (A) one (1)
          times the annual rate of base salary in effect for you at the time of
          your Involuntary Termination or at the time of the relevant Change in
          Control, whichever is higher plus (B) one (1) times the average of the
          bonuses (excluding any signing bonus) paid to you for services
          rendered in the two (2) fiscal years immediately preceding the fiscal
          year of your Involuntary Termination (annualized if paid for a partial
          fiscal year). If a bonus is paid to you for only one of those years,
          then the bonus amount under Clause (B) will be equal to one (1) times
          such bonus amount. The aggregate severance payments shall be paid to
          you in equal installments over the twelve-month period in accordance
          with the Company's normal payroll practices and subject to all
          applicable withholding taxes. The severance payments will immediately
          terminate if and only if (i) you should cease to remain available for
          the consulting services required of you under Section 4, or (ii) you
          fail to abide by the restrictive covenants set forth in Section 5 .
          However, in the event your Involuntary Termination occurs in
          connection with a Hostile Take-Over, your severance payments will be
          paid to you in the form of a single lump sum amount within thirty (30)
          days after such Involuntary Termination, and the provisions of
          Sections 4 and 5 of this Part Two will not apply.

     2.   Health Care Coverage. The Company will, at its expense, make any COBRA
          payments for you and your eligible dependents in order to continue
          your Health Care Coverage until the earlier of (i) twelve (12) months
          after the effective date of your Involuntary Termination (other than a
          Termination for Cause) or (ii) the first date that you are covered
          under another employer's (or, in the event of rehire, the Company's)
          health benefit program which provides substantially the same level of
          benefits without exclusion for pre-existing medical conditions. Such
          payments will be in lieu of any other continued health care coverage
          to
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 7

          which you or your dependents would otherwise be entitled pursuant to
          the requirements of Code Section 4980B by reason of your termination
          of employment.

     3.   Option Acceleration and Lapse of Restrictions. Each of your
          outstanding Options under the Equity Incentive Plans will (to the
          extent not then otherwise exercisable) automatically accelerate so
          that each such Option will become immediately exercisable for the
          total number of shares of Common Stock at the time subject to that
          Option. Each such accelerated Option, together with all of your other
          vested Options, will remain exercisable for a period of twelve (12)
          months following your Involuntary Termination until the end of the
          specified ten (10)-year option term. Such Option(s) may be exercised
          for any or all of the option shares in accordance with the exercise
          provisions of the option agreement evidencing the grant. In addition,
          all restrictions applicable to the Stock Issuances you hold (to the
          extent those restrictions have not previously lapsed in accordance
          with the terms of the issuance agreements) will automatically lapse
          upon your Involuntary Termination (except a Termination for Cause).

     4.   Consulting Services. Unless your Involuntary Termination occurs in
          connection with a Hostile Take-Over, you will make yourself available
          to perform consulting services reasonably requested of you during the
          twelve (12)-month period following your Involuntary Termination. You
          will be compensated at an hourly rate to be agreed upon by you and the
          Company at the time such consulting services are to be rendered, and
          you will be reimbursed for all reasonable out-of-pocket expenses
          incurred in rendering such services upon your submission of
          appropriate documentation for those expenses.

     5.   Restrictive Covenants. For the one hundred twenty (120)-day period
          following your Involuntary Termination:

               (i) You will not directly or indirectly, whether for your own
          account or as an employee, director, consultant or advisor, provide
          services to any business enterprise which is at the time in
          competition with any of the Company's then existing or formally
          planned product lines and which is located geographically in an area
          where the Company maintains substantial business activities, unless
          you obtain the prior written consent of the Board of Directors.

               (ii) You will not directly or indirectly encourage or solicit any
          individual to leave the Company's employ for any reason or interfere
          in any other manner with the employment relationships at the time
          existing between the Company and its current or prospective employees.
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 8

               (iii) You will not induce or attempt to induce any customer,
          supplier, distributor, licensee or other business relation of the
          Company to cease doing business with the Company or in any way
          interfere with the existing business relationship between any such
          customer, supplier, distributor, licensee or other business relation
          and the Company.

          You acknowledge that monetary damages may not be sufficient to
          compensate the Company for any economic loss which may be incurred by
          reason of your breach of the foregoing restrictive covenants.
          Accordingly, in the event of any such breach, the Company shall, in
          addition to the cessation of the severance benefits provided you under
          this letter agreement and any remedies available to the Company at
          law, be entitled to obtain equitable relief in the form of an
          injunction precluding you from continuing to engage in such breach.

          None of the foregoing restrictive covenants in this section 5 shall be
          applicable in the event your Involuntary Termination occurs in
          connection with a Hostile Take-Over.

     6.   Benefit Reduction.

               (i) Benefit Reduction. If the Change in Control does not
          constitute a Hostile Take-Over, first the dollar amount of your
          severance payment under Paragraph 1 will be reduced to the extent
          necessary to assure that the present value of those benefits will not,
          when added to the present value of your Equity Parachute Payment and
          your Other Parachute Payments, exceed 2.99 times your Average
          Compensation. In the event of a Hostile Take-Over, no reduction will
          be made to your severance payment (or any other benefit to which you
          become entitled hereunder), unless necessary to provide you with the
          maximum after-tax benefit available, after taking into account any
          parachute excise tax which might otherwise be payable by you under
          Code Section 4999 and any analogous State income tax provision.

               (ii) Resolution of Disputes. In the event there is any
          disagreement between you and the Company as to whether one or more
          benefits to which you become entitled (whether under this letter
          agreement or otherwise) in connection with a Change in Control
          constitute Equity Parachute Payments or Other Parachute Payments, such
          dispute is to be resolved as follows:

                    A. The matter shall be submitted for resolution to
          independent counsel mutually acceptable to you and the Company
          ("Independent Counsel").
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 9

          The resolution reached by Independent Counsel shall be final and
          controlling. However, should the Independent Counsel determine that
          the status of the benefits in dispute can be resolved by obtaining a
          private letter ruling from the Internal Revenue Service, a formal and
          proper request for such ruling shall be prepared and submitted by
          Independent Counsel, and the determination made by the Internal
          Revenue Service in the issued ruling shall be controlling. All
          expenses incurred in connection with the retention of Independent
          Counsel and (if applicable) the preparation and submission of the
          ruling request shall be paid by the Company.

                    B. The present value of each Equity Parachute Payment and
          each of the Other Parachute Payments (including your severance payment
          and Health Care Coverage) shall be determined in accordance with the
          provisions of Code Section 280G(d)(4) and the Treasury Regulations
          issued thereunder.

          The full amount of your severance benefit under Paragraph 1 shall not
          be paid to you until any amounts in dispute under this Paragraph 6(ii)
          have been resolved in accordance herewith. However, any portion of
          such severance payment which would not otherwise exceed the benefit
          limitation of Paragraph 6(i) even if all amounts in dispute under this
          Paragraph 6(ii) were to be resolved against you will be paid to you in
          accordance with the applicable provisions of this letter agreement.

               (iii) Overriding Limitation. You will in all events be entitled
          to receive the full amount of your severance payment under Paragraph
          1, to the extent those benefits, when added to the present value of
          your Equity Parachute Payment and your Other Parachute Payments
          (excluding such severance payment), will nevertheless qualify as
          reasonable compensation within the standards established under Code
          Section 280G(b)(4).

               (iv) Interpretation. The provisions of this Section 6 shall in
          all events be interpreted in such manner as will avoid the imposition
          of excise taxes under Code Section 4999, and the disallowance of
          deductions under Code Section 280G(a), with respect to your severance
          benefits under this letter agreement.

                     PART THREE -- MISCELLANEOUS PROVISIONS

     1.   Termination for Cause. Should your termination constitute a
          Termination for Cause, then the Company shall only be required to pay
          you (i) any unpaid compensation earned for services previously
          rendered through the date of such termination and (ii) any accrued but
          unpaid vacation benefits or sick days, (iii)
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 10

          any reimbursements then owed to you by the Company and no benefits
          will be payable to you under this letter agreement.

     2.   Term of Agreement. The provisions of this letter agreement will
          continue in effect for a period of five (5) years from the date
          hereof.

     3.   General Creditor Status. The benefits to which you may become entitled
          under this letter agreement (except those attributable to your Options
          or Stock Issuances) will be paid, when due, from the general assets of
          the Company. Your right (or the right of the executors or
          administrators of your estate) to receive any such payments will at
          all times be that of a general creditor of the Company and will have
          no priority over the claims of other general creditors of the Company.

     4.   Death. Should you die before receipt of all benefits to which you
          become entitled under this letter agreement, then the payment of such
          benefits will be made, on the due date or dates hereunder had you
          survived, to the executors or administrators of your estate. Should
          you die before you exercise your Severance-Accelerated Options (if
          any) or any other of your outstanding vested Options, then each such
          Option may be exercised, during the applicable exercise period in
          effect hereunder for those options at the time of your death, by the
          executors or administrators of your estate or by person to whom the
          Option is transferred pursuant to your will or in accordance with the
          laws of inheritance.

     5.   Miscellaneous. The provisions of this letter agreement will be
          construed and interpreted under ERISA. To the extent ERISA is
          inapplicable, then the laws of the State of California shall control,
          without regard to that state's choice of law provisions. This letter
          agreement incorporates the entire agreement between you and the
          Company relating to the subject of severance benefits and supersedes
          all prior agreements and understandings with respect to such subject
          matter. This letter agreement may only be amended by written
          instrument signed by you and another duly-authorized officer of the
          Company. If any provision of this letter agreement as applied to any
          party or to any circumstance should be adjudged by an arbitrator or
          court of competent jurisdiction to be void or unenforceable for any
          reason, the invalidity of that provision shall in no way affect (to
          the maximum extent permissible by law) the application of such
          provision under circumstances different from those so adjudicated, the
          application of any other provision of this letter agreement, or the
          enforceability or invalidity of this letter agreement as a whole.
          Should any provision of this letter agreement become or be determined
          to be invalid, illegal or unenforceable in any jurisdiction by reason
          of the scope, extent or duration of
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 11

          its coverage, then such provision shall be deemed amended to the
          extent necessary to conform to applicable law so as to be valid and
          enforceable or, if such provision cannot be so amended without
          materially altering the intention of the parties, then such provision
          shall be stricken and the remainder of this letter agreement shall
          continue in full force and effect.

     6.   Remedies. All rights and remedies provided pursuant to this letter
          agreement or by law will be cumulative, and no such right or remedy
          will be exclusive of any other. A party may pursue any one or more
          rights or remedies hereunder or may seek damages or specific
          performance in the event of another party's breach hereunder or may
          pursue any other remedy by law or equity, whether or not stated in
          this letter agreement.

     7.   Arbitration. Any controversy which may arise between you and the
          Company with respect to the construction, interpretation or
          application of any of the terms, provisions or conditions of this
          letter agreement or any monetary claim arising from or relating to
          this letter agreement will be submitted to and exclusively decided by
          final and binding arbitration in San Diego, California in accordance
          with the rules of the American Arbitration Association then in effect.

     8.   No Employment or Service Contract. Nothing in this letter agreement
          shall confer upon you any right to continue in the employment of the
          Company for any period of specific duration or interfere with or
          otherwise restrict in any way the rights of the Company or you, which
          rights are hereby expressly reserved by each, to terminate your
          employment at any time for any reason whatsoever, with or without
          cause.

     9.   Proprietary Information. You hereby acknowledge that the Company may,
          from time to time during your employment with the Company, disclose to
          you confidential information pertaining to the Company's business and
          affairs. All information and data, whether or not in writing, of a
          private or confidential nature concerning the business or financial
          affairs of the Company is and will remain subject to a separate
          Proprietary Information and Inventions Agreement (or the like) between
          you and the Company.

               Please indicate your acceptance of the foregoing provisions of
this severance agreement by signing the enclosed copy of this letter agreement
and returning it to the Company.
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Eric S. Groves, M.D., Ph.D.
October 1, 2004
Page 12

Very truly yours,

LIGAND PHARMACEUTICALS INCORPORATED

/S/ DAVID E. ROBINSON
--------------------------------------
David E. Robinson
Chairman, President and CEO

DER:bjo
severance groves 2004-10-01.doc

ACCEPTED BY AND AGREED TO

Signature: /S/ ERIC S. GROVES
           ---------------------------
Dated: 11/5/04<PAGE>
                                                                  EXHIBIT 10.279

     DISTRIBUTION, STORAGE, DATA AND INVENTORY MANAGEMENT SERVICES AGREEMENT

     This Distribution, Storage, Data and Inventory Management Services
Agreement ("Agreement") is entered into as of _______________ (the "Effective
Date") by and between Ligand Pharmaceuticals Incorporated, a Delaware
corporation with its principal place of business located at 10275 Science Center
Drive, San Diego, California, 92121 ("Ligand"), and ________________ with its
principal place of business located at _____________ ("Distributor").

                                    RECITALS

     WHEREAS, the parties wish to provide for certain additional distribution,
storage, data and inventory services to Ligand, including
certain-product-specific services to be provided monthly.

     NOW THEREFORE, in consideration of the foregoing, the mutual
representations, warranties and covenants contained in this Agreement, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:

                                    ARTICLE 1
                                   Definitions

1.1. "AGGREGATE INVENTORY" means, at any given time, the total of saleable
     Products in units that Distributor has on hand at all of its storage and/or
     distribution facilities and that Distributor has on order from Ligand.

1.2. "BASE SERVICES" means the value-added processing and data services that
     Distributor will provide as set forth in paragraph 2.1.

1.3. "CONFIDENTIAL INFORMATION" means the confidential information described in
     Section 4.2.

1.4. "AVERAGE WEEKLY MOVEMENT" means, at any given time, the total quantity of
     Products in units (by NDC number) sold by Distributor to Customers over the
     immediately preceding thirteen (13) weeks divided by thirteen (13).

1.5. "CUSTOMERS" means the purchaser of Products from Distributor in the United
     States.

1.6. "EFFECTIVE DATE" means the first date appearing above.

1.7. "INVENTORY AND SALES REPORTS" means the reports described in Sections 2.21
     (C).

                                       1
<PAGE>
1.8. "ON HAND INVENTORY" means saleable Product in Distributor's individual
     distribution centers.

1.9. "ON ORDER INVENTORY" means Distributor's unfilled orders of Product from
     Ligand.

1.10. "NEW PRICE" means the price charged by Ligand to its wholesale customers
     for Products from and after the effective date and time of a price change
     instituted by Ligand at any time following the Effective Date of this
     Agreement.

1.11. "OLD PRICE" means the price charged by Ligand to its wholesale customers
     immediately preceding the institution of a New Price.

1.12 "PRODUCTS" means the FDA approved pharmaceutical products listed in
     Attachment A.

                                    ARTICLE 2
                            Purchasing and Inventory

2.1. Base Distribution and Inventory Management Services. - Distributor agrees
     to provide the following "Base Services" to Ligand for products identified
     on Attachment A:

          -    Daily consolidated deliveries to providers

          -    Emergency shipments to providers 24/7/365

          -    Returns and Recall processing

          -    Customer Service for those end users serviced by Distributor

          -    Consolidated accounts receivable management

          -    Contract and Chargeback administration, consolidation and
               processing

          -    Licensed, environmentally controlled, PDMA compliant, secure
               facilities for product storage, appropriate inventory rotation
               and distribution

     Ligand shall pay Distributor for the Base Services as set forth in
     Attachment A.

2.2  Additional Distribution, Storage, data and Inventory Management Services. -
     In addition to the "Base Services" Distributor agrees to provide to Ligand
     the following Distribution and Inventory Management Services which it
     desires:

     2.2.1 Inventory Management

          Inventory Levels & Storage. During the term of this Agreement,
          Distributor will maintain an aggregate inventory level of Ligand
          Products, as specified on Attachment A. Compliance with this inventory
          level will be measured on the last working day of each month
          ("Compliance Measurement Date"). Orders may be placed as needed,
          provided that orders necessary to reach the established inventory
          level in any month will be placed and received by Ligand no later than
          10 working days prior to the Compliance Measurement Date for that
          month.

                                       2
<PAGE>
          Product Availability. Distributor will work with Ligand to minimize
          product shortages and maximize product availability by agreeing to the
          following:

               a.   Distributor will institute an automated balancing system on
                    Ligand Products in order to optimize the use of existing
                    inventories across the entire Distributor network, including
                    brokerage. This will be done using parameters agreed upon by
                    Distributor and Ligand.

               b.   During backorder situations and limited product availability
                    and upon Ligand's request, Distributor will implement more
                    frequent order and receiving cycles to help reduce inventory
                    requirements.

     2.2.2 Special Handling

          Special Handling Distributor will provide for the special handling
          required for products identified in Schedule A. These requirements
          include, but are not limited to frozen product storage, special
          shipping and/or packaging, and CII vault storage

     2.2.3 Data Services

          A.   Inventory and Sales Reports. Distributor shall prepare inventory
               reports detailing the status of its Aggregate Inventory of
               Products and movement of Products by NDC number ("Inventory and
               Sales Reports") and, for the duration of this Agreement, provide
               Ligand with such Inventory Reports (852's) weekly and Sales
               Reports (867's) weekly. All such Inventory and Sales Reports
               shall be transmitted in EDI format within 7 days of the end of
               each week pursuant to this section and shall include such
               information as reasonably requested by Ligand, including but not
               limited to the following:

               On Hand Inventory level by distribution center; and On Order
               Inventory level by distribution center; and Sales out by
               distribution center

               Distributor may, due to contractual requirements, be required to
               block certain data in the 867's that discloses Customer identity.
               This may include Customer name and DEA number, and any other data
               that would identify a Customer. In no event will Distributor be
               required to provide Customer identifying information to Ligand in
               the event it is contractually prohibited from doing so.

               Distributor Inventory and Sales Reports shall be transmitted to
               Ligand in an EDI 852 and EDI 867 format respectively.

               Within thirty (30) days after entering into this Agreement, the
               parties shall examine and test the capability of their respective
               EDI systems and complete implementation of a mutually agreeable
               system whereby transfers of information can be made effectively
               on a consistent basis. In the event that critical internal
               support systems and electronic communication links including

                                       3
<PAGE>
               EDI, are not available for five (5) consecutive business days,
               the parties will cooperate to promptly implement substitute
               procedures to document the information customarily sent by EDI
               and prevent interruptions to each other's business.

          B.   Returns, Chargebacks and order overage/shortage reconciliation
               Distributor will process and provide sufficient documentation to
               support any claims as defined below. If a dispute occurs
               concerning a claim for payment then the disputed invoices/claims
               will be resolved within 90 calendar days after the date of
               receipt of the claim. Ligand will not be responsible for
               insufficiently documented claims or disputed claims not resolved
               with such 90 days. Non-disputed claims will be processed under
               normal provisions.

                    Returns - Documentation will include either return of the
                    product to a Ligand approved facility or a signed proof of
                    destruction form.

                    Chargebacks - Detailed breakout of all chargeback claims by
                    end users by date.

                    Overage/Shortage - Documentation for claims will include
                    order number, P.O. number and the amount of
                    overage/shortage.

2.3  Invoices. Distributor will invoice Ligand for all services hereunder within
     5 days of the end of each quarter. The invoices may be transmitted by
     e-mail or by mail. Payment will be made as described in Attachment A.

2.4  Inspections. Upon reasonable prior notice and during normal business hours,
     Distributor shall allow permanent employees of Ligand to enter into each of
     Distributor's facilities to inspect Distributor's books and records
     relating solely to inventory and supply of Products (including relevant
     electronic information), and inspect and take physical counts of inventory,
     not more than once during each consecutive twelve (12) month period of this
     Agreement to ensure compliance with this Agreement, and to assist
     Distributor in keeping such inventory clean, complete and moving to
     minimize returned Products. In no event shall any such inspection relate to
     any transaction or event that occurred more than twelve (12) months prior
     to the date of such inspection.

2.5  Purchase Limits. Ligand agrees to ship all Distributor purchase orders in
     full subject to the limits set forth in section 2.2.1 provided however that
     Ligand has the right to question and cancel any order that exceeds 150% of
     Distributor's Average Weekly Movement if Distributor is not able to provide
     reasonable demand-related justifications and/or explanations. Ligand must
     give Distributor notice of such cancellation within 48 hours of receiving
     such order from Distributor.

2.6  Right to Audit: Upon reasonable prior notice and during normal business
     hours, Distributor shall allow permanent employees of Ligand to enter into
     each of Distributor's facilities to inspect Distributor's books and records
     relating solely to claims related to

                                       4
<PAGE>
     Chargebacks and Returns. Such inspections must be scheduled within 30 days
     of request and shall only cover claims in dispute. Such inspections can
     only occur if other efforts to resolve the dispute have failed and
     Distributor has deducted for the amount of the claim.

                                    ARTICLE 3
                         Term and Termination; Remedies

3.1. Term and Termination. This Agreement shall remain in full force and effect
     for one (1) year ("INITIAL TERM") from the Effective Date, i.e. through
     _____, 20__. Thereafter, this Agreement will automatically renew for
     subsequent one year periods unless terminated as provided herein. Either
     party may request review and negotiation of the terms hereof by giving the
     other written notice at least ninety (90) days prior to the expiration of
     the current term. In event of such notice the parties will immediately
     enter into good faith negotiations for a period of up to 30 days.

3.2. Either party may terminate this Agreement at any time (a) immediately upon
     a breach by the other part of any of the terms of this Agreement that is
     not cured within thirty (30) days of written notification thereof by the
     non-breaching party; or (b) without cause after the Initial Term, upon
     sixty (60) days' prior written notice of termination to the other party; or
     (c) immediately by written notice upon insolvency or the institution
     (whether voluntarily or involuntarily) of bankruptcy, liquidation or
     similar proceedings by or against the other party, or the assignment of
     such party's assets for the benefit of creditors.

                                    ARTICLE 4
                                  Miscellaneous

4.1. Nature of Relationship. The relationship between Ligand and Distributor is
     that of independent contractor, and no agency, franchise, partnership,
     joint venture or other relationship shall be construed to exist between the
     parties by virtue of this Agreement.

4.2. Confidentiality. During the term of this Agreement, each party, its
     respective agents, employees and representatives (collectively, the
     "receiving party") may receive or have access to confidential materials and
     information of the other party (the "disclosing party"). All such materials
     and information (including, but not limited to the terms of this Agreement,
     Products information, operations, methods, strategies, formulas, price
     lists, discount programs, incentives, rebates, records of unit movement for
     Products, shipping and warehousing, and confidential proprietary
     information from third parties), are collectively referred to herein as
     "Confidential Information" and constitute the property of the disclosing
     party. During the term hereof and for a period of three (3) years
     thereafter the receiving party shall not use or disclose to third persons
     any such Confidential Information without the disclosing party's prior
     written consent, excepting those (a) disclosures made on a confidential
     basis to and used by the directors, officers, employees, and agents of the
     receiving party who have a reasonable need to know such information in
     connection with the receiving party's performance of this Agreement, (b)
     disclosures which are required by law or government agencies, as reasonably
     determined

                                       5
<PAGE>
     by the receiving party or its legal counsel, or are made on a confidential
     basis to the receiving party's attorneys, accountants, and other
     professional advisors in connection with matters relating to this
     Agreement, (c) disclosures of Confidential Information that become public
     through no fault of the receiving party hereunder; (d) disclosures of
     Confidential Information received without restriction from a third party
     with a valid right to disclose it; (e) with respect to Ligand's AVINZA
     product only, disclosure by Ligand of this Agreement and information
     received hereunder to its affiliates, to Organon USA Inc and affiliates of
     such organization, and to its authorized representative for audit purposes,
     provided that any such authorized representative is under similar
     obligations of confidentiality and non-disclosure. Ligand understands and
     agrees that Distributor may, in its sole discretion, elect to sell
     warehouse - withdrawal, sales, and other data to IMS/DDD and/or other third
     parties without contribution to Ligand.

     Upon termination of this Agreement (for any reason) each party will
     promptly: (i) return to the other party all documentation and other
     materials (including copies of original documentation or other materials)
     containing any confidential information of the other party; or (ii) certify
     to the other party, pursuant to a certificate in form and substance
     reasonably satisfactory to the other party, as to the destruction of all
     such documentation and other materials.

4.3. Assignment and Delegation. Neither party may assign this Agreement without
     the prior written consent of the other party; provided, however, that
     either party may assign this Agreement without such consent to an
     Affiliate, provided that the assigning party shall remain ultimately liable
     for any financial obligations under this Agreement. For the purpose of this
     Section 4.3, an Affiliate shall be defined to include any company
     controlling, controlled by, or under common control with Distributor or
     Ligand as the case may be through stock ownership, direct or indirect. This
     Agreement shall be binding upon and shall inure to the benefit of the
     successors and assigns of the parties.

4.4. Severability; Waiver. The invalidity of all or part of any provision of
     this Agreement shall not affect the validity of any other provision of this
     Agreement or the remaining portion of the applicable provision. Either
     party's failure to insist on compliance or enforcement of any provision of
     this Agreement shall not affect its validity or enforceability or
     constitute a waiver of future enforcement of that provision or of any other
     provision of this Agreement.

4.5. Statute of Frauds. All EDI transmissions made pursuant to this Agreement
     shall be deemed by the parties to be the same as written communication for
     all purposes, and for all applications of law and statutes, including but
     not limited to, the Statue of Frauds under the Uniform Commercial Code.

4.6. Force Majeure. Neither party shall be liable for delay in delivery or
     nonperformance in whole or in part nor shall the other party have the right
     to terminate this Agreement where delivery or performance has been affected
     by a condition of force majeure. If either party is affected by a force
     majeure event, such party shall, within 10 days of its occurrence, give
     notice to the other party stating the nature of the event, its anticipated

                                       6
<PAGE>
     duration and any action being taken to avoid or minimize its effect. The
     suspension of performance shall be of no greater scope and no longer
     duration than is reasonably required and the non-performing party shall use
     its best efforts to remedy its inability to perform.

4.7. Notices. All notices to either party (each a "Notice") shall be in writing,
     shall refer specifically to this Agreement and shall be hand delivered or
     sent by express courier service, costs prepaid, or by facsimile to the
     respective addresses specified below (or to such other address as may be
     specified by Notice to the other party). Notices shall be effective upon
     receipt.

     If to Distributor, to:

     If to Ligand, to:   Ligand Pharmaceuticals Inc.
                         10275 Science Center Drive
                         San Diego, CA 92121-1117
                         Attention: Commercial Contract Services
                         Telecopier: (858) 550-7707

     With a copy to:    Ligand Pharmaceuticals Inc.
                        10275 Science Center Drive
                        San Diego, CA 92121-1117
                        Attention General Counsel
                        Telecopier: (858) 550-1825

4.8. Entire Agreement. This Agreement constitutes the entire agreement between
     the parties and supersedes all prior contracts, agreements and
     understandings between the parties whether written or oral with regard to
     the subject matter hereof. To the extent this Agreement contains terms
     inconsistent with the terms of any other existing Agreement between the
     parties this Agreement will control. This Agreement may not be amended
     except in writing signed by authorized representatives of the parties
     hereto.

4.9. Public Announcements. Neither party shall issue any press release or other
     public announcement, verbally or in writing, referring to the other party
     or any entity which controls, is controlled by or under common control of
     such party. Nothing contained herein shall limit the right of either party
     to issue a press release or public announcement if, in the opinion of such
     party's counsel, such press release or public announcement is required
     pursuant to state or federal securities laws, rules or regulations, or
     other applicable laws, in which case the party required to make the press
     release or public announcement shall use commercially reasonable efforts to
     obtain the approval of the other party as to the form, nature and extent of
     the press release or public announcement prior to issuing the press release
     or making the public announcement

                                       7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day first above written.

LIGAND PHARMACEUTICALS INC.             DISTRIBUTOR

By:                                     By:
    ---------------------------------       ------------------------------------
Name:                                   Name:
      -------------------------------         ----------------------------------
Title:                                  Title:
       ------------------------------          ---------------------------------

EDI Contact Person:                     EDI Contact Person:

Name:                                   Name:
      -------------------------------         ----------------------------------
E-mail:                                 E-Mail:
        -----------------------------           --------------------------------
Phone:                                  Phone:
       ------------------------------          ---------------------------------

                                       8
<PAGE>
                                                                    ATTACHMENT A

PRODUCT:   NAME

__ mg      NDC Code: __________
__ mg      NDC Code: __________
__ mg      NDC Code: __________
__ mg      NDC Code: __________

Term: _________, 20__ - __________, 20__

Total Service Fee: The total of the fee for all services described and covered
by the agreement related to this product will be $______ earned and paid
quarterly. A breakout of this fee by service area is described below. All such
fees will be paid to Distributor in the form of a check. For purposes of this
Agreement a "calendar quarter" shall mean the following consecutive three
calendar month periods: January 1 - March 31, April 1 - June 30, July 1 -
September 30 and October 1 - December 31. . Ligand shall pay such fees no later
than thirty (30) days after receipt of an invoice as set forth in section 2.3

BASE SERVICE FEE: Quarterly Fee for Base Services is $_______

INVENTORY LEVEL:

PRODUCT __ mg   Minimum ___   Maximum ___ units
PRODUCT __ mg   Minimum ___   Maximum ___ units
PRODUCT __ mg   Minimum ___   Maximum ___ units
PRODUCT __ mg   Minimum ___   Maximum ___ units

Quarterly fee for inventory management services $______

SPECIAL HANDLING REQUIREMENTS:

[DESCRIPTION]

Quarterly fee for special handling services $_______

DATA REQUIREMENTS:

Quarterly fee for data services $______

                                       9

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