Document:

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                                                                   EXHIBIT 10.10
                                                                  EXECUTION COPY

                               LICENSE AGREEMENT

                                BY AND BETWEEN

                              CELTRIX NEWCO LTD.

                               A BERMUDA COMPANY

                                      AND

                       ELAN PHARMACEUTICAL TECHNOLOGIES,
                      A DIVISION OF ELAN CORPORATION, PLC

                               AN IRISH COMPANY
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                               TABLE OF CONTENTS

<TABLE>
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SECTION                                                                  PAGE
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<S>                                                                      <C>
1.   DEFINITIONS........................................................  1

2.   GRANT OF RIGHTS....................................................  7

3.   SUBLICENSE AND ASSIGNMENT RIGHTS...................................  8

4.   TRADEMARKS.........................................................  9

5.   NON-COMPETITION.................................................... 11

6.   FINANCIAL PROVISIONS..............................................  11

7.   CONFIDENTIAL INFORMATION..........................................  13

8.   WARRANTIES/INDEMNITIES............................................  16

9.   INTELLECTUAL PROPERTY OWNERSHIP RIGHTS............................  17

10.  TERM AND TERMINATION OF AGREEMENT.................................  18

11.  IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE......................  20

12.  SETTLEMENT OF DISPUTES; PROPER LAW................................  20

13.  ASSIGNMENT........................................................  20

14.  NOTICES...........................................................  21

15.  MISCELLANEOUS CLAUSES.............................................  22
</TABLE>
<PAGE>

LICENSE AGREEMENT dated April 21, 1999 between Celtrix Newco Ltd., a Bermuda
limited company, and Elan Pharmaceutical Technologies, a division of Elan
Corporation, plc, an Irish limited company.

                                    WHEREAS

     A.   Contemporaneously herewith, Elan, Celtrix, EIS and Newco (capitalized
terms used herein are defined below) are entering into the Development Agreement
for the purpose of recording the terms and conditions of a joint venture and of
regulating their relationship with each other and certain aspects of the affairs
of and their dealings with Newco.

     B.   Elan owns all right, title and interest in and to certain patents that
have been granted or are pending in relation to the development and production
of various drug delivery technologies.

     C.   Newco desires to obtain from Elan, and Elan desires to grant to Newco,
an exclusive license under the Elan Intellectual Property to develop, use,
import, sell, offer for sale and otherwise distribute Products in the Field and
in the Territory on the terms and subject to the conditions set forth herein.

     D.   The Parties entered into a letter agreement dated March 31, 1999,
pursuant to which the Parties agreed to enter into the Definitive Documents.

     NOW THEREFORE IT IS HEREBY AGREED AS FOLLOWS:

1.   DEFINITIONS.

     1.1  In this Agreement, the following definitions shall apply:

          "Affiliate" shall mean any corporation or entity other than Newco
controlling, controlled by or under the common control with Elan or Celtrix, as
the case may be. For the purposes of this definition, "control" shall mean
direct or indirect ownership of fifty percent (50%) or more of the outstanding
stock or shares of a corporation entitled to vote for the election of directors
or comparable equity interest in any other type of entity and "controlling" and
"controlled" shall be construed accordingly.

          "Agreement" shall mean this agreement (which expression shall be
deemed to include the Recitals and the Schedule hereto).

          "Business Plan" shall mean the business plan and program of
development to be agreed to by Elan and Celtrix within sixty (60) days of the
Effective Date with respect to the research, development, prosecution and
commercialization of the Products, which Business Plan shall be reviewed and
mutually agreed to in writing by Elan and Celtrix on an annual basis.

          "Celtrix" shall mean Celtrix Pharmaceuticals, Inc. a Delaware
corporation, its successors and permitted assigns.
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

          "Celtrix Improvements" shall mean any improvements to the Celtrix
Patent Rights and/or Celtrix Know-How developed (a) [*****] whether or not
pursuant to the Project, (b) [*****] pursuant to the Project, [*****] pursuant
to the Project, except as limited by agreements with third parties. Celtrix
Improvements shall be deemed, immediately upon development, to be included in
the license of the Celtrix Intellectual Property granted to Newco under the
Celtrix License Agreement. The Celtrix License shall specifically exclude any
right to use Celtrix Improvements outside of the Field. If the inclusion of a
Celtrix Improvement in the license of Celtrix Intellectual Property granted to
Newco under the Celtrix License Agreement is restricted or limited by a third
party agreement, then Celtrix shall use reasonable commercial efforts to exclude
or where applicable to minimize any such restriction or limitation. All rights,
title, and interest to any Celtrix Improvements [*****] Newco, Elan and any such
third party shall execute and deliver documents, and take such other actions as
Celtrix may reasonably request, to effect or evidence such ownership.

          "Celtrix Intellectual Property" shall mean the Celtrix Know-How, the
Celtrix Patent Rights and/or the Celtrix Improvements. Notwithstanding anything
contained in this Agreement to the contrary, Celtrix Intellectual Property shall
exclude (a) inventions, patents and know-how [*****], and (b) inventions,
patents and know-how that are subject to contractual obligations of Celtrix to
Independent Third Parties as of the Effective Date; provided, however, that if
the inclusion of inventions, patent rights and know-how in the license of
Celtrix Intellectual Property granted to Newco under the Celtrix License
Agreement is restricted or limited by such contractual obligations of Celtrix to
Independent Third Parties, then Celtrix shall use reasonable commercial efforts
to exclude or, where applicable, to minimize any such restriction or limitation.

          "Celtrix Know-How" shall mean any and all rights owned or licensed by
Celtrix with respect to any knowledge, information, discovery, invention, trade
secret, technique, process, system, formulation, design, data and expertise
relating to SomatoKine whether or not covered by any patent, copyright, design,
trademark, trade secret or other industrial or intellectual property right.

          "Celtrix License" shall have the meaning set forth in Clause 2.1 of
the Celtrix License Agreement.

          "Celtrix License Agreement" shall mean that certain license agreement,
of even date herewith, entered into between Celtrix and Newco.

          "Celtrix Patent Rights" shall mean the patents and patent applications
(including provisional applications) relating to SomatoKine(R) that are set
forth in Schedule 1 of the Celtrix License Agreement, and that are owned or
licensed by or on behalf of Celtrix. Celtrix Patent Rights shall also include
all extensions, continuations, continuations-in-part,

                                      -2-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

divisionals, patents-of-addition, re-examinations, re-issues, supplementary
protection certificates and foreign counterparts of such patents and patent
applications and any patents issuing thereon and extensions of any patents
licensed under the Celtrix License Agreement.

          "Celtrix Securities Purchase Agreement" shall mean that certain
securities purchase agreement, of even date herewith, by and between Celtrix and
EIS.

          "Celtrix Trademark" shall have the meaning ascribed to such term in
the Celtrix License Agreement.

          "cGCP", "cGLP" and "cGMP" shall mean current Good Clinical Practices,
current Good Laboratory Practices and current Good Manufacturing Practices
respectively.

          "Change of Control Event" shall mean the occurrence of the following:
a Technological Competitor of Elan shall, directly or indirectly, (a) acquire
[*****] or more of the capital stock of Celtrix or Newco, or (b) otherwise
control or influence in any material respect their management or business, or
(c) otherwise merge, consolidate or enter into any similar transaction (or
binding agreement in respect thereof) with either of such entities, or (d)
otherwise have entered into any joint venture, collaboration, license or other
arrangement with Celtrix or Newco to such an extent that such Technological
Competitor of Elan is materially engaged or involved with the business or
development of Celtrix or Newco.

          "Definitive Documents" shall mean this Agreement, the Celtrix License
Agreement, the Development Agreement, the Celtrix Securities Purchase Agreement,
the Funding Agreement, the Registration Rights Agreements and associated
documentation of even date herewith, by and among Newco, Elan, Celtrix and EIS,
as applicable.

          "Development Agreement" shall mean the Subscription, Joint Development
and Operating Agreement of even date herewith entered into among Celtrix, Elan,
EIS and Newco.

          "Effective Date" shall mean the date upon which the Definitive
Documents are executed and delivered by Elan, Celtrix and Newco and the
transactions effected thereby are closed.

          "EIS" shall mean Elan International Services, Ltd., a Bermuda company.

          "Elan" shall mean Elan Pharmaceutical Technologies, a division of Elan
Corporation, plc, a public limited company incorporated under the laws of
Ireland, its successors and permitted assigns.

          "Elan Improvements" shall mean any improvements to the Elan Patent
Rights and Elan Know-How developed (a) [*****] whether or not pursuant to the
Project, (b) [*****] pursuant to the Project, and/or (c) [*****] pursuant to the
Project,

                                      -3-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

except as limited by agreements with third parties. Elan Improvements shall be
deemed, immediately upon development, to be included in the license of the Elan
Intellectual Property granted to Newco hereunder. The Elan License specifically
excludes any right to use Elan Improvements outside of the Field. If the
inclusion of an Elan Improvement in the license of Elan Intellectual Property
granted to Newco hereunder is restricted or limited by a third party agreement,
then Elan shall use reasonable commercial efforts to exclude or where applicable
to minimize any such restriction or limitation. All rights, title, and interest
to any Elan Improvements [*****] Newco, Celtrix and any such third party shall
execute and deliver documents, and take such other actions as Elan may
reasonably request, to effect or evidence such ownership.

          "Elan Intellectual Property" shall mean the Elan Know-How, the Elan
Patent Rights and/or the Elan Improvements. Notwithstanding anything contained
in this Agreement to the contrary, Elan Intellectual Property shall consist of
Elan Know-How, Elan Patent Rights and/or Elan Improvements controlled by Elan
Corporation plc doing business as Elan Pharmaceutical Technologies, and shall
exclude (a) inventions, patents and know-how [*****] and [*****] including,
without limitation, [*****] and (b) inventions, patents and know-how that are
subject to contractual obligations of Elan to third parties as of the Effective
Date; provided, however, that if the inclusion of inventions, patent rights and
know-how in the license of Elan Intellectual Property granted to Newco hereunder
is restricted or limited by such contractual obligations of Elan to third
parties, then Elan shall use reasonable commercial efforts to exclude or, where
applicable, to minimize any such restriction or limitation.

          "Elan Know-How" shall mean any and all rights owned or licensed by
Elan with respect to any knowledge, information, discovery, invention, trade
secret, technique, process, system, formulation, design, data and expertise
relating to the MEDIPAD(R) Drug Delivery System whether or not covered by any
patent, copyright, design, trademark, trade secret or other industrial or
intellectual property right.

          "Elan License" shall have the meaning set forth in Clause 2.1 hereof.

          "Elan Patent Rights" shall mean the patents and patent applications
(including provisional applications) relating to the MEDIPAD(R) Drug Delivery
System that are set forth in Schedule 1 attached hereto, and that are owned or
licensed by or on behalf of Elan. Elan Patent Rights shall also include all
extensions, continuations, continuations-in-part, divisionals, patents-of-
addition, re-examinations, re-issues, supplementary protection certificates and
foreign counterparts of such patents and patent applications and any patents
issuing thereon and extensions of any patents licensed hereunder.

          "Elan Trademark(s)" shall mean one or more trademarks, trade names, or
service marks that are owned or licensed by or on behalf of Elan that Elan may
nominate and approve in writing from time to time for use in connection with the
sale or promotion of the

                                      -4-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

Product by Newco. For the purposes of this Agreement, the trademark [*****] is
deemed to be an Elan Trademark hereunder.

          "Exchange Right" shall have the meaning set forth in the Amended and
Restated Certificate of Incorporation of Celtrix in effect on the date hereof.

          "Exchange Right Term" shall mean the period commencing on the
Effective Date and ending on the exercise by Elan of the Exchange Right.

          "FDA" shall mean the United States Food and Drug Administration or any
successors or agency the approval of which is necessary to commercially market a
product in the United States of America.

          "Field" shall mean the [*****]

          "First Commercial Sale" shall mean the first commercial sale for use
or consumption of a Product. A sale to an Affiliate or sublicensee shall not
constitute a "First Commercial Sale," unless the Affiliate or sublicensee is the
end user of the Product.

          "Funding Agreement" shall mean the Funding Agreement, dated as of the
date hereof, between EIS and Celtrix.

          "Independent Third Party" shall mean any person other than Newco,
Elan, Celtrix or any of their respective Affiliates.

          "In Market" shall mean [*****] or where applicable by a sublicensee or
a distributor, [*****] such as a [*****].

          "Licensed Technologies" shall mean the Elan Intellectual Property and
the Celtrix Intellectual Property.

          "Licenses" shall mean the Elan License and the Celtrix License.

          "Lien" shall mean any and all liens, security interests, restrictions,
claims, encumbrances or rights of third parties of every kind and nature.

          "Management Committee" shall have the meaning set forth in the
Development Agreement.

          "Marketing Authorization" shall mean the procurement of registrations
and permits required by applicable government authorities in a country in the
Territory for the marketing, sale, and distribution of a Product in such
country.

                                      -5-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

          "MEDIPAD(R) Drug Delivery System" shall mean the [*****] as disclosed
in the Elan Patent Rights set forth in Schedule 1 attached hereto.

          "Net Sales" shall mean [*****]

          "Newco" shall mean Celtrix Newco Ltd., a Bermuda limited company.

          "Newco Intellectual Property" shall mean all rights to technology,
patents and know-how belonging to Newco, other than the Elan Intellectual
Property and the Celtrix Intellectual Property, including any technology
acquired by or licensed to Newco from or by a third party and any newly
developed technology that is not Elan Intellectual Property or Celtrix
Intellectual Property.

          "Osteoporosis" shall mean a skeletal condition characterized by
decreased density of normally mineralized bone, which bone density, as measured
by dual-energy x-ray absorptiometry (DXA), is more than 2.5 standard deviations
below the mean for the young adult reference range.

          "Parties" shall mean Elan and Newco.

          "Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, or other entity of whatever nature.

          "Project" shall mean all activity as undertaken by Elan, Celtrix and
Newco in order to develop the Products in accordance with the Business Plan.

          "Products" shall mean the MEDIPAD(R) Drug Delivery System
incorporating SomatoKine(R) as its primary active ingredient.

          "Registration Rights Agreements" shall mean the Registration Rights
Agreements of even date herewith relating to Newco and Celtrix respectively.

                                      -6-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

          "Regulatory Authority" shall mean any regulatory authority outside the
United States of America, the approval of which is necessary to market a
Product.

          "SomatoKine(R)" shall mean [*****]

          "Technological Competitor of Elan" shall mean [*****]

          "Term" shall have the meaning set forth in Section 10 hereof.

          "Territory" shall mean [*****] and

          "United States Dollar" and "US$" shall mean the lawful currency for
the time being of the United States of America.

     1.2. Interpretation. In this Agreement the following shall apply:

          1.2.1   The singular includes the plural and vice versa, the
masculine includes the feminine and vice versa.

          1.2.2.  Any reference to a Clause or Schedule shall, unless
otherwise specifically provided, be to a Clause or Schedule of this Agreement.

          1.2.3.  The headings of this Agreement are for ease of reference
only and shall not affect its construction or interpretation.

2.   GRANT OF RIGHTS.

     2.1. Elan hereby grants to Newco an exclusive license for the Term in the
Territory under the Elan Intellectual Property to develop, import, use, offer
for sale, sell and otherwise distribute Products, and [*****] practice any
process or method covered by the Elan Patent Rights, in the Field, subject to
any contractual obligations of Elan to third parties as of the Effective Date
and, unless prohibited by Clause 5 hereof ("Non-Competition"), contractual
obligations that Elan may enter into after the Effective Date (the "Elan
License"). Except as expressly provided herein, [*****] with respect to [*****]
shall at all times remain solely with [*****]

     2.2. To the extent royalty or other compensation obligations to third
parties that are payable with respect to Elan Intellectual Property would be
triggered by a proposed use of such Elan Intellectual Property in connection
with the Project, Elan will inform Newco and Celtrix of such royalty or
compensation obligation promptly upon Elan becoming aware that

                                      -7-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

such proposed use may trigger such royalty or compensation obligation. [*****]

     2.3. If [*****] on such terms [*****] If the Celtrix representatives on the
Management Committee determine that Newco should not [*****] shall be free to
fully exploit [*****] with respect thereto.

     2.4. Celtrix shall be a third party beneficiary to this Agreement and shall
have the right to cause Newco to enforce Newco's rights against Elan hereunder.

     2.5. Notwithstanding anything contained in this Agreement to the contrary,
Elan shall have the right and except as otherwise provided in Section 5.1
hereof, outside of the Field, to fully exploit and grant licenses and
sublicenses with respect to the Elan Intellectual Property.

3.   SUBLICENSE AND ASSIGNMENT RIGHTS

     3.1. Newco shall not assign any of its rights under the Elan License and/or
the Newco Intellectual Property without the prior written consent of Elan.

     3.2. Newco shall not sublicense any of its rights under the Elan License
and/or the Newco Intellectual Property without the prior written consent of
Elan, which consent shall not be unreasonably withheld or delayed; provided,
however, that the consent of Elan may be withheld in Elan's sole discretion in
the case of a proposed sublicense of such rights to a Technological Competitor
of Elan.

     3.3. Newco shall not enter into any agreement with any third party for
development or exploitation of the Elan Intellectual Property without the prior
written consent of Elan, which consent may be withheld in Elan's sole
discretion. Any agreement between Newco and any permitted third party for the
development or exploitation of the Elan Intellectual Property shall require: (i)
such third party to maintain the confidentiality of all information concerning
the Elan Intellectual Property provided that such obligation of confidentiality
shall be no less stringent than that set forth in Clause 7 herein, (ii) shall
provide that all right, title and interest in and to any Elan Improvements shall
be owned by Elan, and (iii) shall permit an assignment of rights by Newco to
Elan in accordance with the terms of Clause 3.7 hereof.

                                      -8-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

     3.4. Newco shall not enter into any agreement with any third party for
development of the Newco Intellectual Property without the prior approval of the
Management Committee.

     3.5. Notwithstanding anything to the contrary herein, upon thirty (30) days
prior notice in writing from Elan to Newco and Celtrix, Newco shall assign the
Newco Intellectual Property, including, without limitation, all rights and
obligations related thereto, from Newco to a wholly-owned subsidiary of Newco to
be incorporated in Ireland, which company shall be newly incorporated by Elan
and Celtrix to facilitate such assignment.

     3.6. Newco shall remain responsible for all acts and omissions of any
sublicensee, including Celtrix, as if such acts and omissions were those of
Newco.

     3.7. Rights of permitted third party sublicensees in and to the Elan
Intellectual Property granted by Newco in accordance with Clause 3.2 above shall
survive the termination of the Elan License granting said intellectual property
rights to Newco; and Newco and Elan shall in good faith agree upon the form most
advantageous to Elan in which the rights of the sublicensor under any such
sublicenses are to be held (which form may include continuation of Newco solely
as the holder of such licenses or assignment of such rights to a third party or
parties, including an assignment to Elan). Upon any such assignment, Elan and
Celtrix shall enter into good faith negotiations with respect to additional
reasonable confidentiality protections which Elan or Celtrix shall reasonably
require.

4.   TRADEMARKS

     4.1. Elan hereby grants to Newco for the Term a [*****] in the Territory to
use the Elan Trademarks solely to research, develop, import, use, offer for sale
and sell the Products in the Field in the Territory, in accordance with the
terms and conditions of this Agreement including, without limitation, the
following:

          4.1.1  Newco shall ensure that each reference to and use of an Elan
Trademark by Newco is in a manner approved by Elan and accompanied by an
acknowledgement, in a form approved by Elan, that the same is a trademark of
Elan.

          4.1.2  From time to time, upon the reasonable request of Elan, Newco
shall submit samples of the Product to Elan or its duly appointed agent to
ensure compliance with quality standards and specifications. Elan, or its duly
appointed agent, shall have the right to inspect the premises of Newco where the
Product is held or stored, and Newco shall permit such inspection, upon advance
notice at any reasonable time, of the methods and procedures used in the storage
and sale of the Product. Newco shall not sell or otherwise dispose of any
Product under the Elan Trademarks that fails to comply with the quality
standards and specifications referred to in this Clause 4, as determined by
Elan.

          4.1.3  Newco shall not use any Elan Trademark in any way that might
materially prejudice its distinctiveness or validity or the goodwill of Elan
therein.

                                      -9-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

          4.1.4  The Parties recognize that the Elan Trademarks have
considerable goodwill associated therewith. Newco shall not use in relation to
the Products any trademarks other than the Elan Trademarks (except for the
Celtrix Trademarks) without obtaining the prior consent in writing of Elan with
respect to such use and display, which consent may not be unreasonably withheld
or delayed. However, such use and display that has been so approved by Elan must
not conflict with the use and display of any Elan Trademark.

          4.1.5  Newco shall not use in the Territory any trademarks or trade
names so resembling any Elan Trademark as to be likely to cause confusion,
dilution or deception.

          4.1.6  Newco shall promptly notify Elan in writing of any alleged
infringement or unauthorized use of which it becomes aware by a third party of
the Elan Trademarks and provide Elan with any applicable evidence of
infringement or unauthorized use.

          4.1.7  Newco shall favorably consider promoting and using the Elan
Trademarks in each country of the Territory and provide proof of such use upon
request by Elan.

     4.2. Newco shall not be permitted to assign or sublicense any of its rights
under the Elan Trademarks without the prior written consent of Elan, which
consent shall not be unreasonably withheld or delayed.

     4.3. Elan shall, [*****], file and prosecute applications to register and
maintain registrations of the Elan Trademarks in the Territory. Newco shall
reasonably co-operate with Elan in such efforts.

     4.4. Elan will be entitled to conduct all enforcement proceedings relating
to the Elan Trademarks and shall at its sole discretion decide what action, if
any, to take in respect to any enforcement proceedings related to the Elan
Trademarks or any other claim or counter-claim brought in respect to the use or
registration of the Elan Trademarks. Any such proceedings shall be conducted
[*****] and for its own benefit. Newco and Celtrix shall reasonably cooperate
with Elan in such efforts, [*****].

     4.5. Newco shall promptly notify Elan in writing in the event that Newco
becomes aware that any Elan Trademark has been challenged by a third party in a
judicial or administrative proceeding in a country in the Territory as
infringing on the rights of a third party and Elan shall have the first right to
decide whether or not to defend against such allegations, or to adopt an
alternative mark. If Elan decides not to defend the Elan Trademark, then Newco
may request Elan to defend the Elan Trademark[*****]; provided, however, that if
Elan believes that such requested defense is unsubstantiated and without merit,
then Elan may elect not to initiate defense proceedings.

                                     -10-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

     4.6. Newco will have no ownership rights in or to the Elan Trademarks or of
the goodwill associated therewith, and Newco hereby acknowledges that, except as
expressly provided in this Agreement, it shall not acquire any rights in respect
thereof and that all such rights and goodwill are, and will remain, vested in
Elan.

     4.7. Nothing in this Agreement shall be construed as a warranty on the part
of Elan regarding the Elan Trademarks, including without limitation, that use of
the Elan Trademarks in the Territory will not infringe the rights of any third
parties. Accordingly, Newco acknowledges and agrees that Elan makes no warranty
regarding the Elan Trademarks.

     4.8. Elan assumes no liability to Newco or to any third parties with
respect to the quality, performance or characteristics of any of the goods
manufactured or sold by Newco under the Elan Trademarks pursuant to this
Agreement.

5.   NON-COMPETITION

     5.1.    [*****]

     5.2.    [*****]

6.   FINANCIAL PROVISIONS.

     6.1. In consideration of the license to the Elan Patent Rights, Newco shall
pay to Elan the following amounts:

          (i)    [*****]

                                     -11-
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[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

                 [*****]

                         Notwithstanding anything contained herein to the
contrary, payments to Newco by Independent Third Parties with respect to
development work performed on behalf of Newco by Elan or Celtrix, as the case
may be, shall be paid to the party that performed such development work.

     6.2. Payment of royalties pursuant to Clause 6.1(ii), if any, shall be made
quarterly within thirty (30) days after the end of the calendar quarter in which
payments from Net Sales are received by Newco. The method of payment shall be by
wire transfer to an account specified by Elan and shall be nonrefundable to
Newco. Each payment made to Elan shall be accompanied by a written report
showing a true accounting of all Products sold by Newco, its Affiliates and its
sublicensees, if any, during such quarter. Such accounting shall include, on a
country-by-country and Product-by-Product basis, Net Sales (and the calculation
thereof) and each calculation of royalties with respect thereto, including the
calculation of all adjustments and currency conversions.

     6.3. Newco shall maintain and keep clear, detailed, complete, accurate and
separate records for a period of three (3) years after a calendar quarter in
sufficient detail to permit Elan to confirm the accuracy of any royalties on Net
Sales due hereunder, including, without limitation, any deductions made in
determining Net Sales.

     6.4. All payments due hereunder shall be made in United States Dollars.
Payments due on Net Sales of any Product for each calendar quarter made in a
currency other than United States Dollars shall first be calculated in the
foreign currency for the country of origin of such payment and then converted to
United States Dollars on the basis of the average exchange rate in effect for
such quarter for the purchase of United States Dollars with such foreign
currency quoted in The Wall Street Journal (or comparable publication if not
quoted in The Wall Street Journal) with respect to the currency of the country
of origin of such payment, determined by averaging the rates so quoted on each
business day of such quarter.

     6.5. If, at any time, legal restrictions in the Territory prevent the
prompt payment when due of royalties or any portion thereof to Elan, the Parties
shall meet to discuss suitable and reasonable alternative methods of reimbursing
Elan the amount of such royalties. In the event that Newco is prevented from
making any payment under this Agreement to Elan by virtue of the statutes, laws,
codes or government regulations of the country from which the payment is to be
made, then such payments may be paid by depositing them in the currency

                                     -12-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

in which they accrue to Elan's account in a bank acceptable to Elan in the
country the currency of which is involved or as otherwise agreed by the Parties.

     6.6.  Elan and Newco agree to cooperate in all respects necessary to take
advantage of any double taxation agreements or similar agreements as may, from
time to time, be available.

     6.7.  Any taxes payable by Elan on any payment made to Elan pursuant to
this Agreement shall be paid by Elan for its own account. If so required by
applicable law, any payment made pursuant to this Agreement shall be made by
Newco after deduction of the appropriate withholding tax, in which event the
Parties shall cooperate to obtain the appropriate tax clearance as soon as is
practicable. On receipt of such clearance and a refund of any such amount, Newco
shall ensure that the amount so withheld is promptly paid to Elan.

     6.8.  Newco shall [*****], permit Elan or its duly authorized
representatives upon reasonable notice and at any reasonable time during normal
business hours to inspect and audit the accounts and records of Newco and any
other book, record, voucher, receipt or invoice relating to the calculation of
the royalty payments on Net Sales or any other payments made by Newco to Elan
hereunder. Any such inspection of Newco's records shall be at the expense of
Elan, except that if any such inspection reveals a deficiency in the amount of
the royalty actually paid to Elan hereunder in any calendar quarter of [*****]
or more of the amount of any royalty actually due to Elan hereunder, then the
expense of such inspection shall be borne solely by Newco. Any amount of
deficiency shall be paid promptly to Elan by Newco. If such inspection reveals a
surplus in the amount of royalties actually paid to Elan by Newco, Elan shall
reimburse Newco the surplus within fifteen (15) days after determination.

     6.9.  In the event of any unresolved dispute regarding any alleged
deficiency or overpayment of royalty payments hereunder, the matter will be
referred to mutually agreeable independent firm of accountants for a resolution
of such dispute. Any decision by the said independent firm of accountants shall
be binding on the Parties.

     6.10. The parties acknowledge and agree that the methods for calculating
the royalties and fees hereunder are for the purposes of the convenience of the
parties, are freely chosen and not coerced.

7.   CONFIDENTIAL INFORMATION.

     7.1. The Parties acknowledge that it may be necessary, from time to time,
to disclose to each other confidential and/or proprietary information,
including, without limitation, inventions, works of authorship, trade secrets,
specifications, designs, data, know-how and other information relating to the
Field, the Products, the Elan Intellectual Property, the Newco Intellectual
Property or this Agreement, as the case may be, whether in oral,

                                     -13-
<PAGE>

written, graphic or electronic form (collectively, "Confidential Information").
Any Confidential Information revealed by either Party to the other Party shall
be maintained confidential in accordance with this Clause 7 and shall be used by
the receiving Party exclusively for the purposes of fulfilling the receiving
Party's obligations under this Agreement and the Development Agreement and for
no other purpose.

     7.2. Each Party agrees to disclose Confidential Information of the other
Party only to those employees, representatives and agents requiring knowledge
thereof in connection with their duties directly related to the fulfilling of
the Party's obligations under this Agreement, so long as such persons are
parties to appropriate written agreements that contain an obligation of
confidentiality no less stringent than as set forth herein. Each Party further
agrees to inform all such employees, representatives and agents of the terms and
provisions of this Agreement and their duties hereunder and to obtain their
consent hereto as a condition of receiving Confidential Information. Each Party
agrees that it will exercise the same degree of care, but in no event less than
a reasonable degree of care to preserve the proprietary and confidential nature
of the Confidential Information disclosed by the other Party, as the receiving
Party would exercise to preserve its own Confidential Information. Each Party
agrees that it will, upon request of the other Party, return all documents and
any copies thereof containing Confidential Information belonging to or disclosed
by such Party. Each Party shall promptly notify the other Party upon discovery
of any unauthorized use or disclosure of the other Party's Confidential
Information.

     7.3. Notwithstanding the foregoing, each Party may use or disclose
Confidential Information disclosed to it by the other Party to the extent such
use or disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, complying with patent
applications, complying with applicable governmental regulations or otherwise
submitting information to tax or other governmental authorities, conducting
clinical trials, or granting a permitted sublicense or otherwise exercising its
rights hereunder, provided that if a Party is required to make any such
disclosure of the other Party's Confidential Information, other than pursuant to
a confidentiality agreement, such Party shall inform the recipient of the terms
and provisions of this Agreement and such recipient's duties hereunder and
obtain such recipient's written consent hereto as a condition to receiving such
Confidential Information.

     7.4. Any breach of this Clause 7 by any employee, representative or agent
of a Party is considered a breach by the Party itself.

     7.5. Confidential Information shall not include:

          (i)   information that becomes publicly available, except through a
                breach of this Agreement by the receiving Party ;

          (ii)  information which is made public by the disclosing Party or with
                such Party's prior written consent;

                                     -14-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

          (iii)  information which is independently developed by the receiving
                 Party as evidenced by such Party's records, without the aid,
                 application, use of or reference to the disclosing Party's
                 Confidential Information;

          (iv)   information that is published or otherwise becomes part of the
                 public domain without any disclosure by the receiving Party, or
                 on the part of the receiving Party's directors, officers,
                 agents, representatives or employees;

          (v)    information that becomes available to the receiving Party on a
                 non-confidential basis, whether directly or indirectly, from a
                 source other than the disclosing Party, which source did not
                 acquire this information on a confidential basis; or

          (vi)   information which the receiving Party is required to disclose
                 pursuant to:

                 (A)   a valid order of a court or other governmental body or
                       any political subdivision thereof having competent
                       jurisdiction or otherwise as required by law, rule or
                       regulation; or

                 (B)   any other requirement of law or the rules of any
                       applicable securities exchange;

          (vii)  information which was already in the possession of the
                 receiving Party at the time of receiving such information, as
                 evidenced by its records, provided such information was not
                 previously provided to the receiving party from a source which
                 was under an obligation to keep such information confidential;
                 or

          (viii) information that is the subject of a written permission to
                 disclose, without restriction or limitation, by the disclosing
                 Party;

     7.6. if the receiving Party becomes legally required to disclose any
Confidential Information, the receiving Party shall give the disclosing Party
prompt notice of such fact so that the disclosing Party may obtain a protective
order or confidential treatment or other appropriate remedy concerning any such
disclosure. The receiving Party shall fully cooperate with the disclosing Party
in connection with the disclosing Party's efforts to obtain any such order or
other remedy. If any such order or other remedy does not fully preclude
disclosure, the receiving Party shall make such disclosure only to the extent
that such disclosure is legally required.

     7.7. The provisions relating to confidentiality in this Clause 7 shall
remain in effect during the Term, and for a period of [*****] following the
expiration or earlier termination of this Agreement.

                                     -15-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

     7.8. The Parties agree that the obligations of this Clause 7 are necessary
and reasonable in order to protect the Parties' respective businesses, and each
Party expressly agrees that monetary damages would be inadequate to compensate a
Party for any breach by the other Party of its covenants and agreements set
forth in this Clause 7. Accordingly, the Parties agree and acknowledge that any
such violation or threatened violation will cause irreparable injury to a Party
and that, in addition to any other remedies that may be available, in law or in
equity or otherwise, any Party shall be entitled to obtain injunctive relief
against the threatened breach of the provisions of this Clause 7, or a
continuation of any such breach by the other Party, specific performance and
other equitable relief to redress such breach together with its damages and
reasonable counsel fees and expenses to enforce its rights hereunder, without
the necessity of proving actual or express damages.

8.   WARRANTIES/INDEMNITIES

     8.1. Elan represents and warrants to Newco and Celtrix that, as of the
Effective Date, to Elan's best knowledge (a) Elan has the right to grant the
Elan License and any other rights granted herein, (b) Schedule 1 contains the
Elan Patent Rights existing as of the Effective Date, and (c) [*****]

     8.2. Newco represents and warrants to Elan that the execution of this
Agreement by Newco and the full performance and enjoyment of the rights of Newco
under this Agreement will not breach the terms and conditions of any license,
contract, understanding or agreement, whether express, implied, written or oral
between Newco and any third party.

     8.3. Newco represents and warrants to Elan that the Products shall be
developed, transported, stored, handled, packaged, marketed, promoted,
distributed, offered for sale and sold in accordance with all regulations and
requirements of the FDA and Regulatory Authorities including, without
limitation, cGCP, cGLP, cGMP regulations. The Products shall not be adulterated
or misbranded as defined by the United States Federal Food, Drug and Cosmetic
Act (or applicable foreign law) and shall not violate any section of such Act if
introduced in interstate commerce.

     8.4. In addition to any other indemnifications provided for herein, Elan
shall indemnify and hold harmless Newco and its Affiliates and their respective
employees, agents, partners, officers and directors from and against any claims,
losses, liabilities or damages (including reasonable attorney's fees and
expenses) incurred or sustained by Newco arising out of any (a) breach of any
representation, covenant, warranty or obligation by Elan hereunder, or (b) any
act or omission on the part of Elan or any of its agents or employees in the
performance of this Agreement.

     8.5. In addition to any other indemnifications provided for herein, Newco
shall indemnify and hold harmless Elan and its Affiliates and their respective
employees, agents, partners, officers and directors from and against any claims,
losses, liabilities or damages

                                     -16-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

(including reasonable attorney's fees and expenses) incurred or sustained by
Elan arising out of or in connection with any (a) breach of any representation,
covenant, warranty or obligation by Newco hereunder, or (b) any act or omission
on the part of Newco or any of its agents or employees in the performance of
this Agreement .

     8.6. The Party seeking an indemnity shall:

          8.6.1  fully notify the other Party of any claim or proceeding, or
threatened claim or proceeding within thirty (30) days of becoming aware of such
claim or threatened claim;

          8.6.2  permit the indemnifying Party to take sole control of the
defense and/or settlement of such claim or proceeding;

          8.6.3  cooperate in the investigation, defense and/or settlement of
such claim or proceeding;

          8.6.4  not compromise or otherwise settle any such claim or proceeding
without the prior written consent of the other Party, which consent shall not be
unreasonably withheld, conditioned or delayed; and

          8.6.5  take all reasonable steps to mitigate any loss or liability in
respect of any such claim or proceeding.

     8.7. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO
EVENT SHALL ELAN OR NEWCO BE LIABLE TO THE OTHER BY REASON OF ANY REPRESENTATION
OR WARRANTY, CONDITION OR OTHER TERM OR ANY DUTY OF COMMON LAW, OR UNDER THE
EXPRESS TERMS OF THIS AGREEMENT, FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL,
PUNITIVE OR INDIRECT LOSS OR DAMAGE (WHETHER FOR LOSS OF PROFIT OR OTHERWISE)
AND WHETHER OCCASIONED BY THE NEGLIGENCE OF THE RESPECTIVE PARTIES, THEIR
EMPLOYEES OR AGENTS OR OTHERWISE.

     8.8. [*****] ELAN IS GRANTING THE LICENSES HEREUNDER ON AN "AS IS" BASIS
WITHOUT RECOURSE, REPRESENTATION OR WARRANTY WHETHER EXPRESS OR IMPLIED,
INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR
INFRINGEMENT OF THIRD PARTY RIGHTS, AND ALL SUCH WARRANTIES ARE EXPRESSLY
DISCLAIMED.

9.   INTELLECTUAL PROPERTY OWNERSHIP RIGHTS

     9.1. Subject to the terms and conditions of this Agreement, [*****] shall
own all legal and equitable right, title and interest in and to the [*****]

                                     -17-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

     9.2.  Subject to the terms and conditions of this Agreement, [*****] shall
own all legal and equitable right, title and interest in and to the [*****]

     9.3.  Newco hereby grants to Elan a [*****] license, with the right to
sublicense, to the [*****] on an as-is basis to make, use, offer for sale and
sell the [*****]

     9.4.  Newco represents and warrants that it has the sole, exclusive and
unencumbered right to grant the licenses and rights herein granted to Elan and
that it has not granted any option, license, right or interest in or to the Elan
Intellectual Property, the Newco Intellectual Property, or other property to any
third party which would conflict with the rights granted by this Agreement and
the Definitive Documents.

10.  TERM AND TERMINATION OF AGREEMENT.

     10.1. The term of this Agreement (the "Term") shall commence as of the
Effective Date and expire on a Product-by-Product basis and on a country-by-
country basis on the last to occur of:

           10.1.1  [*****] years from the date of the First Commercial Sale of a
Product in a particular country in the Territory; or

           10.1.2  the last to expire of the patents covering the Product in
such particular country in the Territory or a method of making or using the
Product included in the Elan Patent Rights and/or patents resulting from the
Newco Intellectual Property in such particular country in the Territory.

     10.2. If either party breaches any material provision of this Agreement and
if such breach not cured within sixty (60) days after the non-breaching party
gives written notice of the breach to the breaching party, the non-breaching
party may terminate this Agreement immediately by giving notice of the
termination, effective on the date of the notice, provided, however, that if any
such breach is not capable of being cured within such sixty (60) day period, so
long as the breaching party commences to cure the breach promptly after
receiving notice of the breach from the non-breaching party and thereafter
diligently prosecutes the cure to completion as soon as is practicable, the non-
breaching Party may not terminate this Agreement unless the breaching party,
notwithstanding such efforts, is unable to cure the breach within ninety (90)
days after the other party gives notice of the default, in which case the non-
breaching party may terminate this Agreement immediately by giving notice of the
termination, effective on the date of the notice.

                                     -18-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

   10.3.   In the event that a Change of Control Event shall occur, at the sole
option of Elan and upon written notice to Celtrix and Newco, Elan shall have the
right to terminate the Elan License immediately.

   10.4.   Either Party may terminate this Agreement prior to the expiration of
the Term in the event that (a) an application or petition for bankruptcy,
corporate re-organization, composition, administration, examination, arrangement
or any other procedure similar to any of the foregoing under the law of any
applicable jurisdiction, including, without limitation, the United States of
America or Bermuda (other than as part of a bona fide restructuring or
reorganization), is filed by or against the other Party and is not discharged
within forty-five (45) days, or (b) if the other Party applies for or consents
to the appointment of a liquidator, receiver, administrator, examiner, trustee
or similar officer over such Party or over all or a material part of its assets,
rights or revenues, or (c) the assets and/or the business of the other Party are
for any reason seized, confiscated or condemned.

   10.5.   Upon exercise of those rights of termination as specified in Clause
10.1 to Clause 10.4 inclusive or elsewhere within this Agreement, or the wind-up
of Newco's business, this Agreement shall, subject to the provisions of this
Agreement that survive termination as set forth in this Agreement, automatically
terminate forthwith and be of no further legal force or effect.

   10.6.   Upon expiration or termination of the Agreement:

           10.6.1  any sums that were due from Newco to Elan with respect to the
license granted hereunder, including without limitation royalties on Net Sales,
in the Territory or in such particular country or countries in the Territory (as
the case may be) prior to the expiration or termination of this Agreement as set
forth herein shall be paid in full within sixty (60) days after the expiration
or termination of this Agreement for the Territory or for such particular
country or countries in the Territory (as the case may be);

           10.6.2  Clauses [*****] shall survive termination or expiration of
this Agreement and shall remain in full force and effect;

           10.6.3  all representations, warranties and indemnities shall
insofar as are appropriate remain in full force and effect;

           10.6.4  expiration or termination of this Agreement for any reason
shall not release any Party hereto from any liability which, at the time of such
termination, has already accrued to the other Party or which is attributable to
a period prior to such termination nor preclude either Party from pursuing all
rights and remedies it may have hereunder or at law or in equity with respect to
any breach of this Agreement;

           10.6.5  except as provided in Clause 3.7, the Elan Intellectual
Property and all rights and licenses granted in and pursuant to this Agreement
shall cease for the Territory or

                                     -19-
<PAGE>

for such particular country or countries in the Territory (as the case may be)
and shall immediately revert to Elan. Following such expiration or termination,
Newco may not thereafter use in the Territory or in such particular country or
countries in the Territory (as the case may be) (a) any valid and unexpired Elan
Patent Rights, (b) any Elan Intellectual Property and/or (c) any Elan
Trademarks;

           10.6.6  all rights to Newco Intellectual Property shall be
transferred to and jointly owned by Elan and Celtrix and may be utilized by one
party with the consent of the other pursuant to a written agreement to be
negotiated in good faith.

11.  IMPOSSIBILITY OF PERFORMANCE - FORCE MAJEURE.

     11.1.   Neither Party to this Agreement shall be liable for delay in the
performance of any of its obligations hereunder if such delay results from
causes beyond its reasonable control, including, without limitation, acts of
God, fires, strikes, acts of war, or intervention of a government authority,
non-availability of raw materials, provided that any such delay or failure shall
be remedied by such Party as soon as practicable.

12.  SETTLEMENT OF DISPUTES; PROPER LAW.

     12.1.   The Parties will attempt in good faith to resolve any dispute
arising out of or relating to this Agreement promptly by negotiation between
executives of the Parties. In the event that such negotiations do not result in
a mutually acceptable resolution, the Parties agree to consider other dispute
resolution mechanisms including mediation. In the event that the Parties fail to
agree on a mutually acceptable dispute resolution mechanism, any such dispute
shall be finally settled by the courts of competent jurisdiction.

     12.2.   This Agreement is construed under and governed by the laws of
the State of New York without giving effect to any choice conflict of law
provision or rule. For the purpose of this Agreement the Parties submit to the
personal jurisdiction of the United States District Court for the State of New
York. The Parties each further irrevocably consent to the service of any
complaint, summons, notice or other process by delivery thereof to it by any
manner in which notices may be given pursuant to this Agreement.

13.  ASSIGNMENT.

     13.1.   This Agreement may not be assigned by either Party without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld, conditioned or delayed; subject to the following (a) that
either Party may, without such consent, assign this Agreement to its respective
Affiliates, provided that such assignment does not have any material adverse tax
consequence on the other Party; and (b) that either Party may, without such
consent, assign its rights and obligations hereunder in connection with a sale
of all or substantially all its assets to an Independent Third Party or merger,
combination or reorganization of either Party such that the stockholders of such
Party hold less than fifty percent (50%) of the capital stock of the successor
following completion of such transaction, unless such action shall constitute a

                                     -20-
<PAGE>

Change of Control Event. Elan and Newco will discuss any assignment by either
Party to an Affiliate prior to its implementation in order to avoid or reduce
any additional tax liability to the other Party resulting solely from different
tax law provisions applying after such assignment to an Affiliate. For the
purpose hereof, an additional tax liability shall be deemed to have occurred if
either Party would be subject to a higher net tax on payments made hereunder
after taking into account any applicable tax treaty and available tax credits
than such Party was subject to before the proposed assignment. Notwithstanding
any assignment hereof, each Party will remain fully liable hereunder.

14.  NOTICES.

     14.1.   Any notice to be given under this Agreement shall be sent in
writing in English by registered airmail or telefaxed to the following
addresses:

               If to Newco at:   Newco
                                 102 St. James Court
                                 Flatts, Smiths FL04
                                 Bermuda
                                 Attention:  Secretary
                                 Telephone:  441-292-9169
                                 Telefax:    441-292-2224

               with a copy to:   Celtrix Pharmaceuticals, Inc.
                                 2033 Gateway Place, Suite 600
                                 San Jose, CA 95110
                                 Attention: Andreas Sommer, Ph.D.
                                 Telephone: (408) 573-6263
                                 Telefax: (408) 573-6228

               with a copy to:   Venture Law Group
                                 2800 Sand Hill Road
                                 Menlo Park, CA 94025
                                 Attention:  Ned Ruffin, Esq.
                                 Telephone:  (650) 854-4488
                                 Telefax:    (650) 233-8386

                If to Elan at:   Elan Corporation plc
                                 Lincoln House, Lincoln Place, Dublin 2, Ireland
                                 Attention: Vice President, General Counsel,
                                 Elan Pharmaceutical Technologies,
                                 a division of Elan Corporation, plc
                                 Telephone:  + 353 1 709 4000
                                 Telefax:    + 353 1 662 4960

                                     -21-
<PAGE>

     or to such other address(es) and telefax numbers as may from time to time
     be notified by either Party to the other hereunder.

     14.2.   Any notice sent by mail shall be deemed to have been delivered
within seven (7) working days after dispatch and any notice sent by telex or
telefax shall be deemed to have been delivered within twenty four (24) hours of
the time of the dispatch. Notice of change of address shall be effective upon
receipt.

15.  MISCELLANEOUS CLAUSES.

     15.1.   No waiver of any right under this Agreement shall be deemed
effective unless contained in a written document signed by the Party charged
with such waiver, and no waiver of any breach or failure to perform shall be
deemed to be a waiver of any other breach or failure to perform or of any other
right arising under this Agreement.

     15.2.   If any provision in this Agreement is agreed in writing by the
Parties to be, or is deemed to be, or becomes invalid, illegal, void or
unenforceable under any law that is applicable hereto, (i) such provision will
be deemed amended to conform to applicable laws so as to be valid and
enforceable without materially altering the intention of the Parties, and (ii)
the validity, legality and enforceability of the remaining provisions of this
Agreement shall not be impaired or affected in any way.

     15.3.   The Parties shall use reasonable efforts to ensure that the Parties
and any necessary third party shall execute and perform all such further deeds,
documents, assurances, acts and things as any of the Parties hereto may
reasonably require by notice in writing to the other Party or such third party
to carry out the provisions of this Agreement.

     15.4.   This Agreement shall be binding upon and inure to the benefit of
the Parties hereto, their successors and permitted assigns and sub-licenses.

     15.5.   This Agreement (including the Schedules attached hereto), and the
other Definitive Documents set forth all of the agreements and understandings
between Parties hereto with respect to the subject matter hereof, and supersedes
and terminates all prior agreements and understandings between the Parties with
respect to the subject matter hereof, either oral or written, between the
Parties other than as set forth in this Agreement and the other Definitive
Documents. No provision of this Agreement shall be construed so as to negate,
modify or affect in any way the provisions of any other agreement between the
Parties unless specifically referred to, and solely to the extent provided, in
any such other agreement. In the event of a conflict between the provisions of
this Agreement and the provisions of the Development Agreement, the terms of the
Development Agreement shall prevail unless this Agreement specifically provides
otherwise.

     15.6.   No amendment, modification or addition hereto shall be effective or
binding on either Party unless set forth in writing and executed by a duly
authorized representative of each

                                     -22-
<PAGE>

Party. Amendments hereto shall be subject to the prior written approval of
Celtrix, which approval shall not be unreasonably withheld or delayed.

     15.7.   This Agreement may be executed in any number of counterparts, each
of which when so executed shall be deemed to be an original and all of which
when taken together shall constitute this Agreement.

     15.8.   Each of the Parties undertakes to do all things reasonably within
its power which are necessary or desirable to give effect to the spirit and
intent of this Agreement.

     15.9.   Each of the Parties hereby acknowledges that in entering into this
Agreement it has not relied on any representation or warranty except as
expressly set out herein or in any document referred to herein.

     15.10.  Nothing contained in this Agreement is intended or is to be
construed to constitute Elan, Celtrix and Newco as partners, or Elan as an
employee or agent of Newco or Celtrix, or Newco and Celtrix as an employee or
agent of Elan. Neither Party hereto shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of the
other Party or to bind the other Party to any contract, agreement or undertaking
with any third party without the prior written consent of the other Party.

                                     -23-
<PAGE>

IN WITNESS WHEREOF the Parties hereto have executed this Agreement in duplicate.

ELAN PHARMACEUTICAL TECHNOLOGIES,
A DIVISION OF ELAN CORPORATION, PLC

By: /s/ Kevin Insley
   -----------------------------------------
Name:  Kevin Insley
     ---------------------------------------
Title: Authorized Signatory
      --------------------------------------

CELTRIX NEWCO LTD.

By: /s/ Andreas Sommer
   -----------------------------------------
Name:  Andreas Sommer
     ---------------------------------------
Title: President
      --------------------------------------

AGREED TO:

CELTRIX PHARMACEUTICALS, INC.

By: /s/ Andreas Sommer
   -----------------------------------------
Name:  Andreas Sommer
     ---------------------------------------
Title: President and Chief Executive Officer
      --------------------------------------

                                     -24-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

                                  SCHEDULE 1

                              ELAN PATENT RIGHTS

--------------------------------------------------------------------------------
File Number    Brief Description       Country         Status
--------------------------------------------------------------------------------
[*****]        [*****] Medipad         Australia       Granted (693136)

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       New Zealand     Granted (276485)

                                       Taiwan          Granted (079227)

                                       United States   2 Granted (5,527,288;
                                                       5,848,991); [*****]

                                       South Africa    Granted (94/9185)

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

[*****]        Medipad-[*****]         [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       Ireland         Granted (77523)

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       United States   Granted (5,814,020)

                                       [*****]         [*****]

                                       South Africa    Granted (96/7502)

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

[*****]        [*****] Medipad         [*****]         [*****]

                                       [*****]         [*****]
<PAGE>

                                       [*****]         [*****]

                                       [*****]         [*****]

                                       Taiwan          Granted (090339)

                                       [*****]         [*****]

                                       South Africa    Granted (96/10374)

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

[*****]        [*****]                 [*****]         [*****]

                                       [*****]         [*****]

                                       South Africa    Granted (97/5065)

                                       Taiwan          Published

                                       [*****]         [*****]

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

                                     -25-
<PAGE>

[*****] INDICATES THAT CONFIDENTIAL MATERIAL HAS BEEN OMITTED AND FILED
SEPARATELY IN A REQUEST FOR CONFIDENTIAL TREATMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION.

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[*****]        [*****]                      [*****]         [*****]

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[*****]    Design of Medipad Housing (3ml)  United States   Granted (D404482)

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[*****]    Design of Bolus Medipad Housing  United States  Granted (D405524)

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[*****]        [*****]                      [*****]        [*****]
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All countries are initially designated when filing in the European Patent Office
or the Patent Cooperation Treaty, and are then selected during the regional or
national phase.<PAGE>

                                                                  EXHIBIT 10.11

                               License Agreement

     This Agreement is entered into effective as of April 1, 1993 ("Effective
Date") between Celtrix Pharmaceuticals, Inc., a Delaware corporation, with its
principal offices at 3055 Patrick Henry Drive, Santa Clara, California 95054-
1815, ("Celtrix") and Genentech, Inc., a Delaware corporation, with its
principal offices at 460 Point San Bruno Boulevard, South San Francisco,
California 94080-4990 ("Genentech").

     Genentech has certain patent rights relating to TGF-beta and the TGF-beta
receptor that Celtrix desires to license from Genentech, and Genentech is
willing to grant such licenses to Celtrix. Celtrix has certain patent rights
relating to TGF-beta that Genentech wishes to license from Celtrix, and Celtrix
is willing to grant such licenses to Genentech. Concurrently with entering into
this Agreement, Genentech will purchase from Celtrix under a separate Stock
Purchase Agreement, shares of Celtrix common stock having a fair market value of
$4.0 million. Therefore, Genentech and Celtrix agree as follows:

     1.0  Definitions. As used in this Agreement, the following words will have
          -----------
the following meanings:

          1.1  "Celtrix Common Stock" shall mean shares of that class of Celtrix
                --------------------
stock referred to in Celtrix's Certificate of Incorporation as common stock.

          1.2  "Celtrix Licensed Product" shall mean any pharmaceutical
                ------------------------
formulation or product or method or system which contains the protein TGF-beta
2, TGF-beta Heterodimer or TGF-beta Receptor and which, but for the licenses
granted hereunder, would infringe a Valid Claim of a Genentech Patent in the
country in which such formulation, product, method or system is made, used

                                       1
<PAGE>

or sold. Specifically excluded from this definition shall be gene therapy or
similar biological techniques aimed at establishing endogenous TGF-beta 2, TGF-
beta Heterodimer or TGF-beta Receptor production. "Endogenous" for purposes of
this Agreement shall mean that the protein or product is produced in the person
for whom it is intended to have its therapeutic effect.

          1.3  "Celtrix Net Sales" shall mean the gross invoice sales price
                -----------------
charged by Celtrix or its sublicensees hereunder for all Celtrix Licensed
Products in arm's length sales to third parties (excluding sales for clinical
trial purposes), after deduction of the following items, to the extent that such
items were incurred during such calendar quarter with respect to sales of
Celtrix Licensed Products hereunder regardless of the calendar quarter in which
such sales were made, are included in the price charged, and do not exceed
reasonable and customary amounts in the market in which such sale occurred:

               (i)   trade and quantity discounts or rebates;

               (ii)  credits or allowances given or made for rejection or return
of and for uncollectible amounts on previously sold Celtrix Licensed Products or
for retroactive price reductions;

               (iii) any tax or government charge (other than an income tax)
levied on the sale, transportation or delivery of a Celtrix Licensed Product and
borne by the seller thereof; and

               (iv)  any charges for freight or insurance in a CIF (cost,
insurance, freight) sale.

                                       2
<PAGE>

          1.4  "Celtrix Patents" shall mean the reissue of U.S. Patent 4,843,063
                ---------------
comprising any patent that issues from reissue application USSN 07/664,766 filed
March 5, 1991.

          1.5  "Closing" shall mean the closing, to be held on April 2, 1993, of
                -------
the purchase and sale of Celtrix Common Stock to Genentech under the Stock
Purchase Agreement.

          1.6  "Closing Price" shall mean the price, as reported in the Wall
                -------------
Street Journal, on the applicable exchange or in over-the-counter market at the
close of trading on that day.

          1.7  "Combination Product" shall mean any pharmaceutical formulation
                -------------------
or method or system for use in humans which contains (i) TGF-beta, TGF-beta 2,
TGF-beta Heterodimer or TGF-beta Receptor and (ii) at least one other ingredient
or substance which is also Therapeutically Active. "Therapeutically Active"
                                                    ----------------------
shall mean biologically active but shall not include diluent, vehicles or
specific adjuvants or any other ingredient or substance which does not have any,
or has only incidental, therapeutic properties when present alone and is
included to aid or enhance the activity of TGF-beta, TGF-beta 2, TGF-beta
Heterodimer or TGF-beta Receptor.

          1.8  "Genentech Licensed Product" shall mean any pharmaceutical
                --------------------------
formulation or product or method or system which contains the protein TGF-beta
and which, but for the licenses granted hereunder, would infringe a Valid Claim
of a Celtrix Patent in the country in which such formulation, method or system
is made, used or sold. Specifically excluded from this definition shall be gene
therapy or similar biological techniques aimed at establishing endogenous TGF-
beta production.

                                       3
<PAGE>

          1.9  "Genentech Net Sales" shall mean the gross invoice sales price
                -------------------
charged by Genentech or its sublicensees hereunder for all Genentech Licensed
Products in arm's length sales to third parties (excluding sales for clinical
trial purposes), after deduction of the following items, to the extent that such
items were incurred during such calendar quarter with respect to sales of
Genentech Licensed Products hereunder regardless of the calendar quarter in
which such sales were made, are included in the price charged, and do not exceed
reasonable and customary amounts in the market in which such sale occurred:

               (i)   trade and quantity discounts or rebates;

               (ii)  credits or allowances given or made for rejection or return
of and for uncollectible amounts on previously sold Genentech Licensed Products
or for retroactive price reductions;

               (iii) any tax or government charge (other than an income tax)
levied on the sale, transportation or delivery of a Genentech Licensed Product
and borne by the seller thereof; and

               (iv)  any charges for freight or insurance in a CIF (cost,
insurance, freight) sale.

          1.10 "Genentech Patents" shall mean those patents listed on Exhibit A
                -----------------
hereto and any other patents owned or licensed by Genentech as of the Effective
Date (to the extent Genentech is permitted to grant sublicenses to Celtrix and
to the extent Celtrix agrees to pay to the licensor, royalties or licensing fees
that arise out of, and as a result of, the sublicense granted hereunder) which
are necessary to make, use or

                                       4
<PAGE>

sell TGF-beta 2, TGF-beta Heterodimer or the TGF-beta Receptor pursuant to the
licenses granted by Genentech herein.

          1.11 "Licensed Product" shall mean either a Genentech Licensed
                ----------------
Product or Celtrix Licensed Product, as appropriate.

          1.12 "Major Market Country" shall include the United States, Canada,
                --------------------
United Kingdom, Germany, France, Italy, Spain, Japan and Australia.

          1.13 "Net Sales" shall mean either Celtrix Net Sales or Genentech Net
                ---------
Sales, as appropriate.

          1.14 "Party" shall mean, when used in the singular, either Celtrix or
                -----
Genentech, as appropriate, and "Parties" shall mean Celtrix and Genentech.

          1.15 "Phase I/II Clinical Trial" shall mean a controlled study in
                -------------------------
humans of the safety and efficacy of a Celtrix Licensed Product for a particular
indication or indications in subjects having the disease or condition under
investigation and which is sufficient in both the number of subjects evaluated
and design to permit a reasonable decision as to whether to undertake a clinical
trial designed to be sufficient to serve as the basis for regulatory approval of
the sale of that Celtrix Licensed Product (e.g., sufficient to support the
approval of a Product License Application by the U.S. Food and Drug
Administration).

          1.16 "PHS Patents" shall mean those patents licensed by Genentech
                -----------
from the Public Health Service ("PHS") pursuant to a License Agreement between
the PHS and Genentech dated March 2, 1993 (the "PHS License Agreement").

                                       5
<PAGE>

          1.17 "Stock Purchase Agreement" shall mean that agreement between
                ------------------------
Celtrix and Genentech for the sale to Genentech of shares of Celtrix Common
Stock having an aggregate market value of $4.0 million.

          1.18 "TGF-beta" shall mean any protein which is a member of that
                --------
class of proteins designated as TGF-beta or transforming growth factor-beta (but
excluding TGF-beta 2 or TGF-beta Heterodimer), and/or (i) fragments, fusions or
precursors of the foregoing, and/or (ii) any derivative protein which results
from making deletions, substitutions and/or additions of one or more amino acids
to the structure of a TGF-beta (but excluding TGF-beta 2 or TGF-beta
Heterodimer), provided that such derivative protein is more similar in structure
to the TGF-beta from which it was derived than it is to TGF-beta 2 or TGF-beta
Heterodimer and provided that the primary biological activity of the derivative
protein is substantially the same as the primary biological activity of the TGF-
beta from which it was derived.

          1.19 "TGF-beta 2" shall mean a protein comprising the amino acid
                ----------
sequence set forth on Exhibit B hereto, and/or (i) fragments, fusions or
precursors of the foregoing, and/or (ii) any derivative protein which results
from making deletions, substitutions or additions of one or more amino acids to
the structure identified on Exhibit B, provided that such derivative protein is
more similar in structure to the protein identified on Exhibit B than it is to
the structure of any other TGF-beta and provided that the primary biological
activity of the derivative protein is substantially the same as the primary
biological activity of the protein set forth on Exhibit B.

                                       6
<PAGE>

          1.20 "TGF-beta Heterodimer" shall mean the TGF-beta 2.3 heterodimer
                --------------------
generally described on Exhibit B.

          1.21 "TGF-beta Receptor" shall mean a protein, including a
                -----------------
lipoprotein or glycoprotein, that interacts with TGF-beta so as to modulate its
activity and that binds TGF-beta with high affinity (Kd 1000nM or less). Such
TGF-beta Receptor may be cell associated or in soluble form.

          1.22 "Valid Claim" shall mean a subsisting claim of an issued and
                -----------
unexpired patent that has not been held invalid, unpatentable or unenforceable
by a decision of a governmental body or court of competent jurisdiction, that is
unappealable or unappealed within the time allowed for appeal, and that has not
been rendered unenforceable through disclaimer or otherwise.

     2.0  License Fee. In consideration of the licenses under the Genentech
          -----------
Patents granted in Sections 3.0 and 6.0 below, Celtrix will pay Genentech in
cash the nonrefundable sum of $4.0 million at the Closing.

     3.0  Licenses to Celtrix Under Genentech Patents. Effective commencing upon
          -------------------------------------------
the Closing, Genentech grants to Celtrix the following licenses, expressly
limited as stated, under the Genentech Patents, and Celtrix agrees to observe
all stated limitations in the licenses:

          3.1  Ophthalmological Uses. Genentech grants a nonexclusive, worldwide
               ---------------------
license to Celtrix to make, have made, use and sell TGF-beta 2 and TGF-beta
Heterodimer as part of a Celtrix Licensed Product solely for the treatment or
prophylaxis of diseases and conditions of the eye ("Ophthalmological Uses").
Celtrix may grant sublicenses under this license only to one

                                       7
<PAGE>

other party in any country for each indication of an Ophthalmological Use at any
one time. Celtrix shall pay Genentech a royalty of 5% of Net Sales of all
Celtrix Licensed Products sold for Ophthalmological Uses.

          3.2  Local Dermal Wound Healing Use.
               ------------------------------

               (a)  Genentech grants to Celtrix an exclusive, worldwide license
to make, have made, use and sell TGF-beta 2 and a nonexclusive, worldwide
license to make, have made, use and sell TGF-beta Heterodimer, in either case as
part of a Celtrix Licensed Product solely for the local treatment or prophylaxis
of wounds, diseases or conditions primarily affecting the dermis, including,
without limitation, chronic and acute wounds and burns ("Local Dermal Uses").
Except as set forth below, Celtrix may grant one sublicense under this license
only to one other party in any country for all indications of Local Dermal Use
at any one time. Celtrix shall pay Genentech a royalty of 10% of Net Sales of
all Celtrix Licensed Products sold for Local Dermal Uses (excluding from Net
Sales the actual cost of the portion of any such product consisting of a
collagen delivery matrix).

               (b)  Celtrix shall have an option ("Royalty Reduction Option"),
exercisable once at any time on or before December 31, 1995 that the average
Closing Price of Celtrix Common Stock has been equal to or greater than $15 per
share for the ten (10) consecutive trading days preceding the exercise of the
Royalty Reduction Option, to issue 250,000 shares of Celtrix Common Stock to
Genentech and receive one of the following reductions of royalties payable on
Net Sales of Celtrix Licensed Products sold for Local Dermal Uses:

                                       8
<PAGE>

               (i)  If at the time of the exercise of the Royalty Reduction
Option, the average Closing Price of Celtrix Common Stock has been at least $15
per share but less than $30 per share for the ten (10) consecutive trading days
preceding the exercise of the Royalty Reduction Option, the royalty rate for Net
Sales of Celtrix Licensed Products for Local Dermal Uses shall thereafter be
reduced from 10% to 7.5%.

               (ii) If at the time of the exercise of the Royalty Reduction
Option, the average Closing Price of Celtrix Common Stock has been at least $30
per share for the ten (10) consecutive trading days preceding the exercise of
the Royalty Reduction Option, the royalty rate for Net Sales of Celtrix Licensed
Products for Local Dermal Uses shall thereafter be reduced from 10% to 5%.

If Celtrix decides to exercise the Royalty Reduction option, it shall promptly
provide written notice of such to Genentech and within ten (10) days of the date
of exercise issue and deliver to Genentech 250,000 shares of Celtrix Common
Stock. Those shares shall be subject to the registration rights and other
provisions contained in the Stock Purchase Agreement. References to stock prices
and number of shares in this Section 3.2 shall be appropriately adjusted for
stock splits and stock dividends occurring after the date of this Agreement.

          3.3  Systemic, Local or Regional Administration.
               ------------------------------------------

               (a)  Subject to Genentech's rights hereunder, Genentech grants a
nonexclusive, worldwide license to Celtrix to make, have made, use and sell TGF-
beta 2 and TGF-beta Heterodimer as part of a Celtrix Licensed Product (i) for
systemic administration for the treatment or prophylaxis of autoimmune

                                       9
<PAGE>

diseases or conditions ("Autoimmune Use"), osteoporosis ("Osteoporosis Use"),
and soft tissue wound healing (other than the healing of soft tissue wounds
caused principally by vascular ischemia or reperfusion injury) ("Wound Healing
Uses") and for bone marrow and stem cell protection allowing high dose cytotoxic
chemotherapy in cancer patients ("Chemotherapy Use"), and (ii) for systemic or
local or regional administration for direct anti-proliferative effects on solid
cancerous tumors and lymphomas ("Cancer Use") and for the treatment or
prophylaxis of prostatic hypertrophy ("Prostate Use") (collectively these six
Uses are referred to as "Systemic Uses"). Celtrix may grant one sublicense under
this license only to one other party in any country for each Systemic Use at any
one time. Celtrix shall pay Genentech a royalty of 5% of all Net Sales of
Celtrix Licensed Products sold for Systemic uses except for those sold as part
of a codevelopment arrangement with Genentech concluded pursuant to Sections
3.3(b) and 3.3(c).

               (b)  In December of each year appropriate Celtrix personnel will
prepare and deliver to Genentech a written report summarizing in reasonable
detail, subject to the confidentiality provisions set forth in Section 8.0,
below, all material preclinical and clinical data which Celtrix has developed or
has had developed for Systemic Uses. Upon completion of a Phase I/II Clinical
Trial for any Systemic Use, Celtrix shall provide to Genentech in writing all
material information with respect to the conduct and results of such Clinical
Trial. If Celtrix decides to enter into a license or other arrangement with a
third party in which that third party will receive rights with respect to
marketing or selling a Celtrix Licensed Product for a Systemic Use in a Major
Market Country, Celtrix shall provide written notice of such to Genentech. At
the earlier of such time as (i) Celtrix has completed and provided in writing to
Genentech

                                       10
<PAGE>

all material information with respect to the conduct and results of a Phase I/II
Clinical Trial for a Systemic Use, or (ii) Celtrix notifies Genentech in writing
that it has determined to enter into a license or other arrangement with a third
party in which that third party will receive rights with respect to marketing or
selling a Celtrix Licensed Product for a Systemic Use in a Major Market Country
and provides Genentech all important information and data developed by Celtrix
relating to the rights to be licensed, Genentech shall have the option to
negotiate in good faith with Celtrix an agreement for the codevelopment of
Celtrix Licensed Products for that relevant Systemic Use in all (in the case of
(i) above) or the involved (in the case of (ii) above) Major Market Countries
(the "Right of First Discussion"), Genentech shall notify Celtrix whether it
desires to enter into such discussions within (15) days after its receipt of
notice from Celtrix under (i) or (ii) above.

               (c)  Genentech shall have sixty (60) days from the day it
exercises its Right of First Discussion as set forth in Section 3.3(b) above to
discuss exclusively and in good faith with Celtrix an agreement for the
codevelopment of Celtrix Licensed Products for the relevant Systemic Use (i) for
all Major Market Countries in the event the CoDevelopment Option arises as a
result of the completion of a Phase I/II Clinical Trial for that Systemic Use or
(ii) only for the Major Market Countries for which Celtrix has determined to
enter into an arrangement with a third party. During such sixty (60) day period
Genentech shall deliver to Celtrix a specific written proposal on all material
business topics related to such codevelopment (including any payments to be made
to Celtrix), which shall be subject to the confidentiality provisions in Section
8.0 below. If after good faith negotiations the Parties do not conclude an
agreement within such sixty (60) day period or any mutually agreeable

                                       11
<PAGE>

extension thereof, Celtrix shall have no further obligation to negotiate
exclusively with Genentech or to disclose preclinical or clinical information to
Genentech for that Systemic Use. However, Celtrix shall continue to discuss such
codevelopment with Genentech for an additional sixty (60) day period if
Genentech desires to do so on a nonexclusive basis and shall not enter into an
arrangement with a third party before the expiration of such second sixty (60)
day period or thereafter on terms less favorable, when viewed in the aggregate,
to Celtrix than those last offered to Celtrix by Genentech, as determined by a
good faith, written opinion of the investment banking firm advised Celtrix in
the transaction. If the Right of First Discussion arose because Celtrix
determined to enter in an arrangement with a third party, and Celtrix does not
enter into such an arrangement within twelve (12) months of the initial
notification of Genentech by Celtrix, Celtrix shall notify Genentech of such,
and Genentech shall again have a Right of First Discussion for sixty (60) days
from the date of such notice, to exclusively discuss a codevelopment agreement
with Celtrix for the relevant Systemic Use in the relevant Major Market
Countries. Celtrix shall again disclose to Genentech at each inception of such
discussions all relevant preclinical and clinical data relating to such Systemic
Use.

          3.4  Research, Diagnostic and Veterinary Uses. Genentech grants a
               ----------------------------------------
nonexclusive, worldwide, license to Celtrix to make, have made, use and sell
TGF-beta 2 and TGF-beta Heterodimer as part of a Celtrix Licensed Product solely
for research, diagnostic reagents or veterinary uses ("Research, Diagnostic and
Veterinary Uses"). Celtrix may grant sublicenses under this license only to one
other party in any country for each indication of a Research, Diagnostic and
Veterinary Use at any one time. Celtrix will pay Genentech a royalty of 2% of
Net Sales

                                       12
<PAGE>

of Celtrix Licensed Products (i) which are sold solely for Research, Diagnostic
and Veterinary Uses and (ii) to the extent that such Net Sales in any calendar
year exceed $250,000 and in that case royalties shall be payable on all Net
Sales in that calendar year of Celtrix Licensed Products which are sold solely
for Research, Diagnostic and Veterinary uses.

          3.5  TGF-beta Receptor. Genentech grants a nonexclusive, worldwide
               -----------------
license to Celtrix to make, have made, use and sell TGF-beta Receptor as a part
of a Celtrix Licensed Product solely for the treatment or prophylaxis of disease
("TGF-beta Receptor Uses") or solely to be used as part of a process used to
identify compounds useful in the treatment or prophylaxis of disease ("TGF-beta
Receptor Process"). Celtrix may grant one sublicense under this license only to
one other party in any country for each indication or research application at
any one time. Celtrix will pay Genentech a royalty on Net Sales of Celtrix
Licensed Products sold for TGF- beta Receptor Uses or developed using the TGF-
beta Receptor Process. Such royalty shall be 2% of Net Sales where Net Sales of
Celtrix Licensed Products covered by the license granted under this Section 3.4
do not exceed $100 million per annum and 5% of Net Sales to the extent Net Sales
of Celtrix Licensed Products covered by the license granted under this Section
3.4 exceed $100 million per annum.

     4.0  Sublicense Option to Celtrix Under PHS Patents. Effective commencing
          ----------------------------------------------
upon the Closing, Genentech grants to Celtrix an option to acquire a
nonexclusive, nonsublicenseable sublicense under the PHS Patents to make, have
made, use and sell TGF-beta 2 or TGF-beta Heterodimer as part of a Celtrix
Licensed Product only for Ophthalmological Uses, Local Dermal Uses and Systemic
Uses. The option set forth in the preceding sentence may only be exercised once,
whether it is exercised for all Uses or

                                       13
<PAGE>

for any particular Use or Uses. Upon notice from Celtrix that it is considering
in good faith the exercise of such option, Genentech shall provide a copy of the
PHS License Agreement to Celtrix for the sole purpose of evaluating whether to
exercise such option, and Celtrix shall have sixty (60) days after receipt of
the PHS License Agreement to decide whether to exercise such option. If Celtrix
exercises such option (which it may do at any time during the term of this
Agreement upon written notice to Genentech), Celtrix shall be responsible for,
and the sublicense granted hereunder shall be subject to its performance with
respect to TGF-beta 2 or TGF-beta Heterodimer, of those obligations set forth in
the PHS License Agreement relating to Licensed Products, including the
performance of those obligations set forth in Article VIII of the PHS License
Agreement and the payment to Genentech of those royalty obligations set forth in
Paragraph 4.3 of the PHS License Agreement. If Celtrix exercises such option,
pursuant to Paragraph 2.4 of the PHS License Agreement, Celtrix agrees that the
obligations to PHS of Paragraphs 3.1, 3.2, 5.1, 6.2, 11.2 and 11.3 of the PHS
License Agreement shall be binding upon Celtrix as if at were a party to the PHS
License Agreement. Celtrix acknowledges that the grant of this sublicense will
be subject to the approval of the PHS pursuant to Paragraph 2.4 of the PHS
License Agreement.

     5.0  Licenses to Genentech. As additional consideration for the granting of
          ---------------------
the licenses under Sections 3.0 and 6.0 by Genentech, effective commencing upon
the Closing, Celtrix grants a nonexclusive, worldwide license to Genentech under
the Celtrix Patents to make, have made, use and sell TGF-beta as part of a
Genentech Licensed Product for any use. Genentech may grant sublicenses under
this license only to one other party in any country for a particular use at any
one time. Genentech will pay

                                      14
<PAGE>

Celtrix a royalty of 5% of Net Sales of Genentech Licensed Products.

     6.0  Future Patents.
          --------------

          6.1  Genentech Patents. If after the Effective Date and prior to
               -----------------
December 31, 2002, Genentech is granted a patent or issued a notice of allowance
with respect to a patent application in any country (i) in which the licenses
granted above to Celtrix with respect to TGF-beta 2 or TGF-beta Heterodimer for
Ophthalmological Uses, Local Dermal Uses, Systemic Uses or Research, Diagnostic
and Veterinary Uses or (ii) in which the licenses granted above to Celtrix with
respect to TGF-beta Receptor for TGF-beta Receptor Uses or the TGF-beta Receptor
Process, could not be practiced in that country without infringing such patent,
Celtrix shall automatically receive a royalty-free, nonexclusive license for
such Use or Process in such country. If after the Effective Date and prior to
December 31, 2002, Genentech is granted a license by a third party under a
patent of that party in any country (iii) in which the licenses granted above to
Celtrix with respect to TGF-beta 2 or TGF-beta Heterodimer for Ophthalmological
Uses, Local Dermal Uses, Systemic Uses or Research, Diagnostic and Veterinary
Uses (but not including any future license to Genentech from the Public Health
Service) or (iv) in which the licenses granted above to Celtrix with respect to
TGF-beta Receptor for TGF-beta Receptor Uses or the TGF-beta Receptor Process,
could not be practiced in that country without infringing such third party
patent, Genentech shall grant Celtrix a sublicense under such license for such
Uses or Process to the fullest extent it is permitted to do so under the terms
of such license, provided that Celtrix agrees to pay and does pay any applicable
royalties, licensing fees and the like required by such license to Genentech and
otherwise

                                       15
<PAGE>

agrees to all appropriate terms of such license. Except as set forth above, no
license, express or implied, is granted under any other Genentech patent.

          6.2  Celtrix Patents. If after the Effective Date and prior to
               ---------------
December 31, 2002, Celtrix is granted a patent or issued a notice of allowance
with respect to a patent application in any country (i) in which the license
granted above to Genentech with respect to TGF-beta for any use in that country
could not be practiced without infringing such patent or (ii) with respect to
TGF-beta Receptor for TGF-beta Receptor Uses or the TGF-beta Receptor Process,
Genentech shall automatically receive a royalty-free, nonexclusive license for
such use or Process in such country. If after the Effective Date and prior to
December 31, 2002, Celtrix is granted a license by a third party under a patent
of that party in any country (iii) in which the license granted to Genentech
with respect to TGF-beta for any use could not be practiced without infringing
such patent or (iv) with respect to TGF-beta Receptor for TGF-beta Receptor Uses
or the TGF-beta Receptor Process, Celtrix shall grant Genentech a sublicense
under such license for such use or Process, to the fullest extent it is
permitted to do so under the terms of such license, provided that Genentech
agrees to pay and does pay any applicable royalties, licensing fees and the like
required by such license to Celtrix and otherwise agrees to all appropriate
terms of such license. Except as set forth above, no license, express or
implied, is granted under any other Celtrix patent.

     7.0  Royalty Payments.
          ----------------

          7.1  Payment Dates. Royalties payable hereunder shall be paid within
               -------------
forty five (45) days of the end of each calendar quarter for Net Sales for that
calendar quarter. Such payment

                                       16
<PAGE>

shall be accompanied by a statement showing the amount of each Licensed Product
sold in each country, the Net Sales of each Licensed Product in that country's
currency in each country in which Net Sales occurred, the royalties payable in
local currency, the applicable exchange rate as set forth in Section 7.3 below
for that currency, and the royalties payable in U.S. Dollars.

          7.2  Records and Accounting. A Party shall keep and require its
               ----------------------
sublicensees to keep complete and accurate records of the latest three (3)
calendar years of Net Sales with respect to which a royalty is payable under
this Agreement. The Party receiving royalties shall have the right at its own
expense to have an independent, certified public accountant, reasonably
acceptable to the Party paying royalties, review the paying Party's records upon
reasonable notice and during reasonable business hours for the purpose of
verifying the payments provided for in this Agreement. This right may not be
exercised more than once for any calendar year with respect to the records of
the paying Party and each of its sublicensees. Should such review lead to the
discovery of a underreporting of royalties due hereunder of greater than five
percent (5%), the Party underreporting such royalties, in addition to promptly
paying the unpaid royalties, shall pay the full cost and expense of such review.

          7.3  Currency of Payments. All payments under this Agreement shall be
               --------------------
made in United States Dollars by wire transfer (or such other reasonable means
as the receiving Party may direct) to such bank account as the receiving Party
may designate from time to time. If a wire transfer is to be made, the remitting
Party shall provide notice at least five (5) days prior to the date of transfer
of the amount of payment and the date it

                                       17
<PAGE>

is to be made. Such notice should be given to the Treasurer of the receiving
Party at the address set forth at the beginning of this Agreement or such other
address as the receiving Party may subsequently direct. Any payments due
hereunder on sales outside of the United States shall first be calculated in the
currency in which sales took place and then converted to United States Dollars
at the average of the rate published in the Wall Street Journal for the last
business day of each of the three (3) months of the calendar quarter for which
royalties are payable. If by law, regulation or fiscal policy of a particular
country, remittance of royalties in United States Dollars is restricted or
forbidden, notice thereof will be promptly given to the receiving Party, and
payment of the royalty shall be made by the deposit thereof in local currency to
the credit of the receiving Party in a recognized banking institution designated
by the receiving Party. When in any country the law or regulations prohibit both
the transmittal and deposit of royalties on sales in such a country, royalty
payments shall be suspended for as long as such a prohibition is in effect and
as soon as such prohibition ceases to be in effect, all royalties which the
paying Party would have been under obligation to transmit or deposit but for the
prohibition, shall forthwith be deposited or transmitted promptly to the extent
allowable.

          7.4  Combination Product Net Sales. In determining the Net Sales of
               -----------------------------
Combination Products, Net Sales shall first be calculated in accordance with the
definition of Net Sales and then multiplied by the percentage value of the
Licensed Product contained in the Combination Product, such percentage value
being the quotient obtained by dividing the current market price of the Licensed
Product by the sum of the separate current market price of the Licensed Product
and other ingredients which are Therapeutically Active contained in the
Combination Product. The

                                       18
<PAGE>

current market price of each Therapeutically Active ingredient and of the
Licensed Product shall be for a quantity comparable to that contained in the
Combination Product and of the same class, purity and potency. When no current
market price is available for a Therapeutically Active ingredient or Licensed
Product in a Combination Product, the Parties shall calculate a hypothetical
market price for such ingredient or Licensed Product, allocating the same
proportions of costs, overhead and profit as are then allocated to all similar
substances then being made and marketed by the Party marketing the Combination
Product and having an ascertainable market price.

     8.0  Confidentiality. In the course of performance of this Agreement, one
          ---------------
Party may disclose to the other or receive written information from the other
relating to the subject matter of this Agreement which information, if so
identified in writing either pursuant to this Section 8.0 or otherwise upon
disclosure, shall be considered to be the disclosing Party's Confidential
Information. Each Party agrees that it will take the same steps to protect the
confidentiality of the other Party's Confidential Information as it takes to
protect its own proprietary and confidential information. Each Party shall
protect and keep confidential and shall not use, publish or otherwise disclose
to any third party, except as permitted by this Agreement or with the other
Party's written consent, the other Party's Confidential Information for a period
of five (5) years from the date of termination of this Agreement. For the
purposes of this Agreement, Confidential Information shall not include such
information that:

          (i)  was known to the receiving Party at the time of disclosure;

                                       19
<PAGE>

          (ii)   was generally available to the public or was otherwise part of
the public domain at the time of disclosure or became generally available to the
public or otherwise part of the public domain after disclosure other than
through any act or omission of the receiving Party in breach of this Agreement;

          (iii)  became known to the receiving Party after disclosure from a
source that had a lawful right to disclose such information to others; or

          (iv)   is required to be disclosed by the receiving Party to comply
with applicable laws, to defend or prosecute litigation or to comply with
governmental regulations, provided that the receiving Party provides prior
written notice of such disclosure to the other Party and takes reasonable and
lawful actions to avoid and/or minimize the degree of such disclosure.

     9.0  Default; Bankruptcy; Survival.
          -----------------------------

          9.1  Default. Failure by either Party (the "defaulting Party") to
               -------
comply with any of the material obligations contained in this Agreement shall
entitle the other Party (the "nondefaulting Party") to give the defaulting Party
notice specifying the nature of the default and requiring it to cure such
default. If such default is not cured within the sixty (60) day period after the
receipt of such notice, the nondefaulting Party shall be entitled, except as
otherwise specifically provided in this Agreement and without prejudice to any
of its other rights conferred on it by this Agreement, to terminate all or part
of this Agreement or the licenses granted herein.

          9.2  Termination for Bankruptcy or Insolvency. Either Party may, in
               ----------------------------------------
addition to any other remedies available to it by

                                       20
<PAGE>

law or in equity, terminate this Agreement, in whole or in part as the
terminating Party may determine, by written notice to the other Party in the
event the other Party shall have become insolvent or bankrupt, or shall have
made an assignment for the benefit of its creditors, or there shall have been
appointed a trustee or receiver for the other Party or for all or a substantial
part of its property, or any case or proceeding shall have been commenced or
other action taken by or against the other Party in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement, composition
or readjustment of its debts or any other relief under any bankruptcy,
insolvency, reorganization or other similar act or law of any jurisdiction now
or hereafter in effect, or there shall have been issued a warrant of attachment,
execution, distraint or similar process against any substantial part of the
property of the other Party, and any such event shall have continued for sixty
(60) days undismissed, unbonded and undischarged; except that the terminating
Party shall retain the rights granted to it as a licensee under Section 365(n)
of the United States Bankruptcy Code in case of the bankruptcy, insolvency or
winding-up of the other Party.

          9.3  Survival of Provisions. The obligations of the Parties under
               ----------------------
Section 8 shall survive any termination of this Agreement.

     10.0  General Provisions.
           ------------------

          10.1  Notices. All notices which may be required pursuant to this
                -------
Agreement (i) shall be in writing, (ii) shall be addressed, in the case of
Genentech (except as otherwise specified herein), to the Corporate Secretary at
the address set forth at the beginning of this Agreement, and in the case of

                                       21
<PAGE>

Celtrix to the President at the address set forth at the beginning of this
Agreement, (or to such other person or address as either Party may so designate
from time to time), (iii) shall be mailed, postage-prepaid, by registered mail
or certified mail, return receipt requested, or transmitted by courier for hand
delivery or by telegram and (iv) shall be deemed to have been given on the date
of receipt if sent by mail or on the date of delivery if transmitted by courier
or telegram.

          10.2  Governing Law. This Agreement shall be governed by and construed
                -------------
in accordance with the laws of the State of California.

          10.3  Entire Agreement. This Agreement is the entire Agreement between
                ----------------
the Parties regarding the subject matter hereof, and there are no prior written
or oral promises or representations not incorporated herein. No amendment or
modification of the terms of this Agreement shall be binding on either Party
unless reduced to writing and signed by an authorized officer of the Party to be
bound.

          10.4  Binding Effect. This Agreement shall be binding upon and inure
                --------------
to the benefit of the Parties hereto and their respective successors and
permitted assigns. This Agreement shall not be assignable by either Party
without the other's prior written consent except to a successor to all or
substantially all of a Party's business by merger, sale of assets, sale of stock
or otherwise.

          10.5  Waiver. The waiver by a Party hereto of any breach of or default
                ------
under any of the provisions of this Agreement or the failure of a Party to
enforce any of the provisions of this Agreement or to exercise any right
thereunder

                                       22
<PAGE>

shall not be construed as a waiver of any other breach or default or as a waiver
of any such rights or provisions hereunder.

          10.6  Severability. If any part of this Agreement shall be invalid or
                ------------
unenforceable under applicable law, such part shall be ineffective only to the
extent of such invalidity or unenforceability, without in any way affecting the
remaining parts of this Agreement. In addition, the part that is ineffective
shall be reformed in such a manner as to as nearly approximate the intent of the
Parties as possible.

          10.7  Publicity. Genentech and Celtrix shall not issue any public
                ---------
statement concerning the transactions contemplated by this Agreement or the
Stock Purchase Agreement without the other party's reasonable prior written
consent; provided, however, that either party may disclose the transaction or
         --------  -------
the terms hereof or thereof from time to time without the other party's approval
(i) if such approval has been requested and not received and such party
concludes (after consulting with counsel) that it is required by law to disclose
the transaction or the terms thereof or (ii) to the extent that similar
disclosure has been previously approved pursuant to this Section 10.7.

          10.8  No Partnership.  Nothing in this Agreement is intended or shall
                --------------
be deemed to constitute a partnership, agency, employer-employee or joint
venture relationship between the Parties. No Party shall incur any debts or make
any commitments for the other.

          10.9  Counterparts.  This Agreement may be executed in counterparts,
                ------------
and each such counterpart shall be deemed an original for all purposes.

                                       23
<PAGE>

          10.10  Patent Representations.  Neither Party makes any representation
                 ----------------------
or warranty to the other Party concerning the validity or absence of third party
infringement of any Genentech Patent or Celtrix Patent licensed hereunder.

GENENTECH, INC.                         CELTRIX PHARMACEUTICALS, INC.

By:  /s/ John P. McLaughlin             By:  /s/ Sandra McNamara
   ----------------------------            ------------------------------

Title: VP and General Counsel           Title: VP and CFO
       ------------------------                --------------------------

                                      24

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