Document:

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                                                                   EXHIBIT 10.21

                  *** CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
                  DOCUMENT (INDICATED BY ASTERISKS) HAS BEEN OMITTED AND FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
                  PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER 17
                  C.F.R. SECTIONS 200.80(B)(4), 200.83 AND 230.406.

                                    AGREEMENT

         This Agreement is made effective December 20, 2002 (the "Effective
Date"), by and among ICN Pharmaceuticals, Inc., a Delaware corporation, with
offices at 3300 Hyland Avenue, Costa Mesa, California 92626 ("ICN"), Ribapharm
Inc., a Delaware corporation with offices at 3300 Hyland Avenue, Costa Mesa,
California 92626 ("Ribapharm"), Devron Averett, an individual residing at
[...***...] ("Averett"), and Anadys Pharmaceuticals, Inc., a Delaware
corporation, with offices at 9050 Camino Santa Fe, San Diego, California 92121
("Anadys"), with ICN and Ribapharm being collectively referred to herein from
time to time as "Licensors", and ICN, Ribapharm, Averett and Anadys being
collectively referred to herein from time to time as the "Parties".

                                   WITNESSETH

         WHEREAS ICN and Averett entered into a letter agreement effective
January 22, 1999 (the "1999 Letter Agreement"), wherein ICN licensed various
intellectual property rights to Averett, a true and correct copy of which is
attached hereto as Exhibit A;

         WHEREAS ICN and Averett entered into a license agreement effective
October 11, 1999 (the "1999 License Agreement"), wherein ICN licensed various
intellectual property and compound rights to Averett, a true and correct copy of
which is attached hereto as Exhibit B;

         WHEREAS in March 2000, Averett (i) sublicensed to Anadys, formerly
known as Scriptgen Pharmaceuticals, Inc., all of his rights arising from the
1999 Letter Agreement and 1999 License Agreement and (ii) granted to Anadys a
power of attorney; a true and correct copy of such sublicense agreement is
attached hereto as Exhibit C.

         WHEREAS ICN has transferred certain of the relevant intellectual
property rights to Ribapharm in 2002; and

         WHEREAS a dispute exists among the Parties as to whether the "1999
License Agreement" supercedes the "1999 Letter Agreement", and additional
disputes have arisen among the Parties with respect to their various rights and
obligations under the 1999 Letter and 1999 License Agreements (the "Dispute").

         NOW THEREFORE the Parties have agreed to a full and final settlement of
the Dispute under the terms and conditions set forth below.

                                    AGREEMENT

         In consideration of the above, and the mutual covenants set forth in
this Agreement, and other good and valuable consideration received by the
Parties, the Parties agree as follows.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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         1. Definitions and Interpretation

         1.1.     "Active Metabolite" means any chemical entity, whose detection
                  and structure are demonstrable to the satisfaction of
                  reviewers at either the US FDA or the Journal of Medicinal
                  Chemistry, that is derived from a Compound after
                  administration of a Compound to humans, provided that such
                  derived chemical entity both retains specific biological
                  activity in an assay in which the compound is active and is
                  produced in sufficient quantity in humans after administration
                  of a Compound to humans such that the arithmetic result of the
                  biological activity of the active metabolite multiplied by the
                  levels achieved in human plasma is at least [...***...]
                  percent ([...***...]%) of the result of a similar arithmetic
                  operation applied to a Compound or Prodrug. Furthermore, a
                  derived chemical entity is an Active Metabolite only if it
                  retains [...***...] of the structural integrity (atoms and
                  their covalent bonds) of the Compound.

         1.2.     "Compounds" means the following:

                  [...***...] (ICN Registry Number [...***...]);

                                  [...***...]

                  [...***...] (ICN Registry Number [...***...]);

                                  [...***...]

                  [...***...] (ICN Registry Number [...***... ]);

                                  [...***...]

                  [...***...] (ICN Registry Number [...***...]);

                                    [...***...]

                  [...***...] (ICN Registry Number [...***...])

                                  [...***...]

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  and/or

                  [...***...] (ICN Registry Number [...***...]

                                    [...***...].

While not explicitly shown, the Compounds include their naturally occurring
[...***...].

(In the event of a discrepancy between the name listed and the chemical
structure, the structure controls.)

         1.3      "Inactive Metabolite" means any chemical entity, whose
                  detection and structure are demonstrable to the satisfaction
                  of reviewers at either the US FDA or the Journal of Medicinal
                  Chemistry, that is derived from a Compound after
                  administration of a Compound to humans, provided that such
                  derived chemical entity is neither an Active Metabolite nor a
                  Prodrug.

         1.4      "Anadys Prosecuted Applications" means those patent
                  applications that are to be prosecuted by or at the direction
                  of Anadys to secure formal patent protection with respect to
                  any of the Intellectual Property Rights, including reissues,
                  extensions, divisionals, continuations, continuations-in-part,
                  and/or any other applications claiming priority to the same.
                  Among other things, Exhibit D-1, which is incorporated herein,
                  identifies currently existing applications deemed to be Anadys
                  Prosecuted Applications, which applications are identified in
                  Exhibit D-1 as being prosecuted by Anadys. For ease of
                  reference, Exhibit D-1 also identifies additional applications
                  and patents which Anadys has only a license to under the terms
                  of this Agreement, which applications and patents are
                  identified in Exhibit D-1 as being prosecuted by Licensors. In
                  addition, Anadys shall be able to prosecute additional claims
                  within the Anadys Prosecuted Applications to both (i)
                  intellectual property created or owned solely by Anadys and
                  (ii) intellectual property deriving from the subject matter
                  disclosed in PCT applications US [...***...] and US
                  [...***...], and corresponding and subsequent US and foreign
                  applications and patents, including reissues, extensions,
                  divisionals, continuations, continuations-in-part, and/or any
                  other applications claiming priority to the same. Subject to
                  the provisions of this Agreement, Licensors own all rights in
                  all Anadys Prosecuted Applications and applications claiming
                  priority to the Anadys Prosecuted Applications.

         1.5      "Licensor Prosecuted Applications" means those patent
                  applications that are to be prosecuted by or at the direction
                  of ICN or Ribapharm to secure formal patent protection with
                  respect to subject matter disclosed in PCT

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  applications US [...***...] and US [...***...], and
                  corresponding and subsequent US and foreign applications and
                  patents, including reissues, extensions, divisionals,
                  continuations, continuations-in-part, and/or any other
                  applications claiming priority to the same. Exhibit D-2, which
                  is incorporated herein, identifies applications deemed to be
                  Licensor Prosecuted Applications. Licensor owns all rights in
                  all Licensor Prosecuted Applications subject to the provisions
                  of this Agreement.

         1.6      "Intellectual Property Rights" means the rights ICN or
                  Ribapharm owns now, and/or during the term of this Agreement
                  that were disclosed in any of US Patents [...***...] and
                  [...***...], PCT applications [...***...] and [...***...], and
                  corresponding, priority and subsequent US and foreign
                  applications and patents, with respect to a) any of the
                  Compounds, b) all Prodrugs and Metabolites of such Compounds,
                  and c) all methods of using the Compounds, Prodrugs and/or
                  Metabolites.

         1.7      "Metabolite" means a chemical entity that is an Active
                  Metabolite and/or a Phosphorylated Metabolite, but expressly
                  excludes the following compounds:[...***...], [...***...],
                  [...***...], [...***...], and [...***...] and any other
                  compounds that Licensors have commercialized or are actively
                  pursuing in human clinical trials pursuant to an
                  Investigational New Drug Application that has been filed with
                  the United States Food and Drug Administration or equivalent
                  filing with an equivalent foreign body at the time a
                  Metabolite is identified pursuant to Section 2.3.

         1.8      "Net Sales" means, in relation to a Product, the gross amount
                  received by Anadys, and its respective sublicensees from third
                  parties that are not affiliates or sublicensees of the selling
                  party (unless such affiliate or sublicensees is the end user
                  of such Product, in which case the amount billed therefor
                  shall be deemed to be the amount that would have been billed
                  to a third party in an arm's-length transaction) for sales of
                  Products to third parties, less the following items, as
                  allocable to such Product (if not previously deducted from the
                  amount invoiced): (a) trade discounts, credits or allowances;
                  (b) credits or allowances additionally granted upon returns,
                  rejections or recalls (except where any such recall arises out
                  of Anadys' or its sublicensee's gross negligence, willful
                  misconduct or fraud); (c) freight, shipping and insurance
                  charges; (d) taxes, duties or other governmental tariffs
                  (other than income taxes); and (e) government mandated
                  rebates. With regard to a Product that is comprised as part of
                  one or more Products and in part of one or more other active
                  ingredients that are not Products (a "Combination Product"),
                  Net Sales shall be determined by multiplying Net Sales of such
                  Combination Product (calculated in accordance with the
                  preceding sentence) by the fraction A/A+B, in which A is the
                  fair market value of the Product included in the Combination
                  Product, and B is the fair market value of the other active
                  ingredient(s) included in the Combination Product.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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         1.9      "[...***...]" means a chemical entity related to a Compound by
                  incorporation into a Compound of a [...***...] at the
                  [...***...]- or [...***...] - position, or a
                  [...***...],[...***...] or [...***...] at the [...***...] -
                  position.

         1.10     "Prodrug" means any chemical entity that upon or after
                  administration to a human is transformed into a Compound,
                  wherein said Compound and/or its metabolites are substantially
                  the only pharmaceutically active metabolic products.

         1.11     "Product" means any human or animal pharmaceutical product
                  containing, in whole or as a component, one or more of the
                  Compounds, a Prodrug, or a Metabolite.

         1.12     In this Agreement, unless the context requires otherwise: the
                  singular includes the plural and vice versa; words denoting
                  persons include corporations, partnerships and other legal
                  persons; a reference to a specified section, paragraph or
                  schedule is a reference to that specified section, paragraph
                  or schedule of this Agreement; the article and section
                  headings are for convenience only and do not affect the
                  interpretation of this Agreement; "including" means including
                  without limitation; and a reference to a Party includes its
                  successors and permitted assigns.

2.       Grant

         2.1      Licensors hereby grant to Anadys an exclusive (even as to
                  Licensors), worldwide license to Intellectual Property Rights,
                  with the right to sublicense, to develop, make, have made,
                  market, import, export, distribute, use, offer for sale, sell,
                  or have sold any of the Compounds, Prodrugs, and/or
                  Metabolites. For clarity, the license grant in this Section
                  2.1 includes, without limitation, rights to the Intellectual
                  Property Rights disclosed in any of the patents or
                  applications listed in Exhibits D-1 or D-2. Simultaneously
                  with the execution of this Agreement, Licensors shall execute
                  an assignment to Anadys of all US and foreign patents
                  corresponding to US Patent [...***...], US Patent [...***...],
                  US Patent [...***...] and US Patent Application No.
                  [...***...], which assignment is attached as Exhibit E to this
                  Agreement. Licensors also grant Anadys a paid-up, irrevocable,
                  non-exclusive, worldwide license to Licensor technical
                  information related to the Compounds, but only for technical
                  information in existence as of the Execution Date of this
                  Agreement.

         2.2      During the term of this Agreement, Licensors agree not to sue,
                  threaten to sue, or otherwise object to, Anadys, its
                  sublicensees, assigns or others receiving any of Anadys'
                  rights herein, under any existing or future Licensor patents
                  with respect to developing, making, having made, marketing,
                  importing, exporting, distributing, using, offering for sale,
                  selling or having sold any of the Compounds, Prodrugs, and/or

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  Metabolites, unless Anadys, its sublicensees, assigns or
                  others receiving rights herein, sell a Combination Product (as
                  defined in Section 1.8) which includes as a component of such
                  Combination Product a proprietary compound owned or acquired
                  by Licensors and not licensed herein.

         2.3      During the term of this Agreement, Licensors agree not to sue,
                  threaten to sue, or otherwise object to, Anadys, its
                  sublicenses, assigns or others receiving any of Anadys' rights
                  herein, under any existing or future Licensor patents with
                  respect to the formation, presence or activity of an Inactive
                  Metabolite resulting from the administration of a Compound,
                  Prodrug and/or Metabolite to a human. Prior to the
                  determination of whether a metabolite is an Active Metabolite
                  or an Inactive Metabolite, Anadys shall be free to synthesize
                  and characterize all metabolites for the purpose of full
                  structural characterization and determination of activity. If,
                  after completion of the studies permitted pursuant to the
                  immediately preceding sentence, it is determined that a
                  metabolite is an Inactive Metabolite, then Anadys' rights with
                  respect to such Inactive Metabolite shall be limited to those
                  contained in this Section 2.3. If at any time a metabolite is
                  determined to meet the criteria for an Active Metabolite as
                  set forth in Section 1.1, Anadys will promptly notify
                  Licensors of such determination and such metabolite will be
                  deemed a Metabolite for the duration of this Agreement and all
                  the rights to Metabolites as set forth in this Agreement will
                  apply; provided, however, that if, within thirty (30) days of
                  receiving such notification from Anadys, Licensors can show
                  that as of the date of receiving the notification from Anadys,
                  the identified metabolite has been commercialized by Licensors
                  or is being actively pursued in human clinical trials by
                  Licensors pursuant to an Investigational New Drug Application
                  that has been filed with the United States Food and Drug
                  Administration or equivalent filing with an equivalent foreign
                  body, then such metabolite will be treated as an Inactive
                  Metabolite with Anadys' rights restricted to the freedom to
                  operate considerations in this Section 2.3. Once a
                  determination is made that a metabolite is an Inactive
                  Metabolite, Anadys' rights with respect to Inactive
                  Metabolites are limited to the context of administration of
                  the Compound to a human and the freedom to operate
                  considerations in this Section 2.3.

 3.      Royalty

         3.1      Anadys will pay a royalty to Licensors based on Net Sales of
                  all Products, computed on a country by country basis, as
                  follows. The royalty shall be [...***...] percent
                  ([...***...]%) of the Net Sales for those Products containing
                  a Compound, and shall be [...***...] percent ([...***...]%) of
                  the Net Sales for those Products containing a Prodrug or
                  Metabolite. Only a single royalty shall be paid on sales of
                  Product no matter how many patents licensed under the
                  Intellectual Property Rights contain claims encompassing
                  Product. In any event, the royalty payments due for each

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  Product in each country shall terminate upon the expiration of
                  the last patent within the Intellectual Property Rights in
                  that country having a claim reading on the Product.

         3.2      Royalties shall be remitted to Ribapharm quarterly, no later
                  than sixty (60) days following the end of each calendar
                  quarter, and shall be calculated according to then-applicable
                  United States Generally Accepted Accounting Standards
                  ("GAAP").

         3.3      Anadys shall pay a minimum annual royalty (a "Minimum Annual
                  Royalty") of [...***...] United States Dollars (US
                  $[...***...]) for calendar year [...***...], [...***...]
                  United States Dollars (US $[...***...]) for calendar year
                  2007, and [...***...] United States Dollars (US $[...***...])
                  for each calendar year thereafter through [...***...].

                  3.3.1    The Minimum Annual Royalty shall be due and payable
                           in advance, on or before the first day of December of
                           the preceding year, (the "Due Date"), and will be
                           credited as an advance payment of royalties which may
                           accrue during the applicable calendar year.

                  3.3.2    In no event shall a Minimum Annual Royalty payment be
                           carried over as a pre-payment of royalties for any
                           subsequent year, nor shall any minimum royalty
                           payment be refunded in whole or in part.

                  3.3.3    In the event that Anadys fail to make any minimum
                           annual royalty within ninety (90) days following any
                           Due Date, all of the Granted Rights shall
                           automatically revert back to Licensors. Any such
                           result is subject to the cure provision of subsection
                           6.3.

         3.4      All applicable taxes relating to the sale of Products are the
                  responsibility of Anadys, its sublicensee, and assignees, and
                  shall not be charged to or against Licensors.

         4.       Special Duties and Responsibilities of Licensors

         4.1      At their own expense, Licensors will execute the documents
                  which constitute Powers of Attorney attached to this Agreement
                  as Exhibits F and letters to foreign associates, and will
                  comply with and honor the terms of such documents.

         4.2      To assist Anadys in prosecuting the Anadys Prosecuted
                  Applications, Licensors will offset the actual out-of-pocket
                  costs of Anadys' expenses in prosecuting the Anadys Prosecuted
                  Applications up to a maximum of [...***...] United States
                  Dollars (US $[...***...]). Licensors agree to pay such
                  expenses within thirty (30) days of receiving written invoices
                  from Anadys indicating such costs.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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         4.3      At all times during the Term of this Agreement, Licensors will
                  fully cooperate with Anadys in the prosecution of all the
                  Anadys Prosecuted Applications, including, but not limited to,
                  promptly signing all declarations, powers of attorney, and
                  other papers needed to be executed to further the prosecution
                  of such applications.

         4.4      Within sixty (60) days, after receiving written notice from
                  Anadys that an Anadys Prosecuted Application has been issued
                  as a patent in a country, and after establishing in good faith
                  that (a) the claims of such patent do not extend beyond the
                  Intellectual Property Rights, and that (b) an assignment to
                  Anadys will not adversely affect the prosecution of any of
                  Licensor Prosecuted Applications, Licensors will execute an
                  assignment assigning such patent to Anadys. Such an assignment
                  is voided ab initio if the assigned patent subjects any of
                  Licensor or Anadys Prosecuted Applications to any rejections
                  that may be overcome by showing the co-ownership of the
                  assigned patent and the rejected application, provided, in no
                  event shall an assignment be voided more than four (4) years
                  after its execution. Licensors or Anadys shall notify the
                  other in writing if the assignment is voided, and will provide
                  written documentation establishing that the co-ownership is
                  necessary. If an assignment is voided pursuant to this
                  subsection 4.4, Anadys shall retain an exclusive worldwide
                  license to the affected Anadys or Licensor Prosecuted
                  Application as set forth in subsection 2.1. In the event of
                  any dispute between the Parties under this subsection 4.4, the
                  Parties agree to submit such a dispute to an independent
                  patent attorney mutually selected by the Parties, and the
                  decision of the patent attorney shall be binding.

         4.5      For the first Product proposed to be commercialized for each
                  of the Compounds (or its Prodrugs or Metabolites), Licensors
                  shall make milestone payments to Anadys as follows:

                  4.5.1    [...***...] United States Dollars (US $[...***...])
                           upon filing of an Investigational New Drug
                           Application with the United States Food and Drug
                           Administration (the "FDA") for the proposed Product;

                  4.5.2    [...***...] United States Dollars (US $[...***...])
                           upon regulatory approval to initiate Phase 2 studies
                           of the proposed Product;

                  4.5.3    [...***...] United States Dollars (US $[...***...])
                           upon regulatory approval to initiate Phase 3 studies
                           of the proposed Product; and

                  4.5.4    [...***...] United States Dollars (US $[...***...])
                           each for the first two proposed Products and
                           [...***...] United States Dollars (US $[...***...])
                           for each proposed Product thereafter, upon regulatory
                           approval by the FDA for commercial sale of the
                           proposed Product.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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                  4.5.5    Such payments shall be due and payable upon written
                           notification to Licensors by Anadys or their duly
                           authorized agents, of the occurrence of the
                           triggering event.

         4.6      Failure by Licensors to make any milestone payment within
                  ninety (90) days of such written notification shall
                  automatically result in a fully paid-up, worldwide,
                  irrevocable, exclusive license to Anadys and their
                  sublicensees for the corresponding Product. Any such result is
                  subject to the cure provision of subsection 6.3.

         4.7      Licensors shall be jointly and severally liable for all
                  Licensor obligations under this Agreement.

5.       Special Duties and Responsibilities of Anadys and Averett

         5.1      At all times during the Term of this Agreement, Anadys and
                  Averett will fully cooperate with Licensors in the prosecution
                  of all the Licensor Prosecuted Applications, including, but
                  not limited to, promptly signing all declarations, powers of
                  attorney, and other papers needed to be executed to further
                  the prosecution of such applications.

         5.2      Anadys shall use commercially reasonable efforts to
                  commercialize the Compounds, Prodrugs, and/or Metabolites.

         5.3      Anadys shall ensure that no Products will be marketed using
                  the names ICN(R) or Ribapharm(TM) without written permission
                  of the respective owner.

6.       Term and Termination

         6.1      The Term of this Agreement shall be effective on a country by
                  country basis from the Effective Date set forth above until
                  the last patent within the Intellectual Property Rights
                  claiming any of the Compounds, Prodrugs, or Metabolites shall
                  expire in that country, and shall continue in full force and
                  effect, unless terminated earlier according to the provisions
                  hereof.

         6.2      Anadys may terminate this Agreement upon sixty (60) days
                  written notice to Licensors, with or without cause, as to any
                  of the Compounds, their Prodrugs or Metabolites of such
                  Compounds, without further obligation on their part with
                  respect to same except as to accrued hold harmless rights and
                  accrued but unpaid royalties, by assigning back to Licensors
                  all right, title, and interest that Anadys, its sublicensees,
                  and assigns had previously obtained herein with respect to
                  such Compounds, Prodrugs and Metabolites, and in such instance
                  Anadys, its sublicensees, and assigns would thereupon also be
                  relieved of their royalty obligations with respect to such
                  Compounds, Prodrugs and Metabolites.

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         6.3      If any Party fails to perform any of its material obligations
                  under this Agreement, the non-defaulting Parties may give
                  written notice of the default to the defaulting Party. Unless
                  such default is cured within sixty (60) days after such
                  notice, the non-defaulting Party may give a final written
                  notice of the default to the defaulting Party. If the default
                  is not cured within thirty (30) days after such final notice,
                  the Agreement may be terminated. Notwithstanding the
                  foregoing, to the extent a material breach of this Agreement
                  relates to one or more Compounds, Metabolites, Prodrugs, or
                  Products, but not all Compounds, Metabolites, Prodrugs or
                  Products, then any termination of this Agreement in accordance
                  with this Section 6.3 shall apply solely to the affected
                  Compound(s), Metabolite(s), Prodrug(s) or Product(s) only, and
                  in such case this Agreement will remain in full force and
                  effect with respect to the Compounds, Metabolites, Prodrugs or
                  Products that are not terminated. If this Agreement is
                  terminated by Anadys under this Section 6.3 for the willful
                  breach by Licensors of Section 4.1, 4.2, 4.3 or 4.4, then the
                  financial obligations of Anadys and its sublicensees under
                  this Agreement with respect to the Compound, Metabolite,
                  Prodrug affected by such breach shall be extinguished and
                  Anadys shall have a fully paid-up, worldwide, irrevocable,
                  exclusive license to (a) such Compound, Prodrug, and/or
                  Metabolite, and (b) to the Intellectual Property Rights
                  associated therewith.

         6.4      In the event that this Agreement is terminated or rejected by
                  a Party or its receiver or trustee under applicable bankruptcy
                  laws due to such Party's bankruptcy, then all rights and
                  licenses granted under or pursuant to this Agreement by such
                  Party are, and shall otherwise be deemed, for purposes of
                  Section 365(n) of the Bankruptcy Code and any similar law or
                  regulation in any other country, licenses or rights to
                  "intellectual property" as defined under Section 101(52) of
                  the Bankruptcy Code. The Parties agree that all Intellectual
                  Property Rights licensed hereunder, including without
                  limitation, any patents or patent applications in any country
                  of a Party covered by the license grants under this Agreement
                  are part of the definition of "intellectual property" under
                  the Bankruptcy Code or any similar law or regulation in any
                  other country.

         6.5      All provisions of this Agreement required to interpret and
                  enforce the Parties' rights and obligations under this
                  Agreement also will survive to the extent required for the
                  full observation and performance of this Agreement by the
                  Parties. The termination or expiration of this Agreement for
                  any reason shall be without prejudice to any rights that shall
                  have accrued to the benefit of any other Party under this
                  Agreement prior to such termination or expiration, including,
                  but not limited to, injunctive relief, and any damages arising
                  from any breach hereunder.

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7.       Records and Record Keeping

         7.1      Beginning the calendar quarter following execution of this
                  Agreement, Anadys shall submit written quarterly reports to
                  Ribapharm notifying Licensors of (i) any Prodrugs or
                  Metabolites that have been identified in the preceding quarter
                  and (ii) summarizing what trials and non-clinical work is
                  being conducted in an effort to bring Products to market. Upon
                  receipt of the first regulatory approval for any of the
                  Products, Anadys shall submit royalty reports with each
                  quarterly payment, setting forth the quantity and net selling
                  price of each Product sold in that quarter and the date of
                  such sale, and the total amount of royalties being paid for
                  that quarter.

         7.2      Anadys will keep and shall require its sublicensees and
                  assignees to keep, full, accurate and complete books and
                  records (together with supporting documentation) as are
                  necessary to establish compliance with the terms and
                  conditions of this Agreement. Such records shall be maintained
                  for a period of at least five (5) years from the end of the
                  reporting period to which they relate.

         7.3      During the term of this Agreement with at least thirty (30)
                  days' prior written notice to Anadys, Licensors have the right
                  to have a duly authorized independent agent or representative
                  of its selection audit, inspect, and verify all books,
                  records, and supporting documentation relating to the
                  royalties contemplated herein, whether kept by Anadys, its
                  sublicensees, assignees or others receiving any of Anadys'
                  rights herein, at a place mutually agreed upon by the Parties
                  involved during regular business hours. Such audit shall be
                  for the purpose of verifying compliance with the terms and
                  conditions of this Agreement, including verification of
                  reports and payments made hereunder. Other information
                  disclosed during such audit shall be considered confidential
                  to the audited Party and shall not be revealed to Licensors by
                  their agent or representative other than as required under the
                  audit provisions of this subsection 7.3.

         7.4      Should Licensors or their representatives determine that a
                  royalty deficiency exists, such deficiency shall become
                  immediately due and owing, and shall be subject to interest at
                  a rate equal to the lesser of: [...***...] of the sum of the
                  then current US annual prime rate and [...***...] percent
                  ([...***...]%) per month, or the maximum interest rate allowed
                  by law. Said interest shall accrue and be calculated from the
                  date the corresponding royalty was originally due. In the
                  event an audit shall disclose a royalty deficiency of greater
                  than [...***...] percent ([...***...]%), the costs of such
                  audit shall be borne by Anadys.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

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8.       Licensing, Sublicensing and Assigning

         8.1      Anadys shall ensure that all of their sublicensees, assignees,
                  and others receiving any of Anadys' rights herein ("Other
                  Parties") are subject to the same royalties, duties and
                  responsibilities, and other obligations required of Anadys
                  herein, as though each such entity had been a party to this
                  Agreement. This Agreement binds all such Other Parties.

         8.2      This Agreement shall be attached as an Exhibit to any such
                  agreement ("Other Party Agreement") under which all Other
                  Parties receive any of any of Anadys' rights herein. Anadys
                  shall have the right to redact the financial terms from this
                  Agreement prior to attaching it as an Exhibit.

         8.3      Within 30 days of the execution or modification of any Other
                  Party Agreement, Anadys shall furnish Licensors with a true
                  and complete copy of same.

         8.4      Any Party may assign any of its rights or obligations under
                  this Agreement, provided, however, that such assignment shall
                  not relieve the assigning party or its assigns of the
                  responsibilities for performance under this Agreement. Each
                  assigning party shall provide written notice to the other
                  Parties of any assignment within thirty (30) days.

         8.5      For purposes of this Agreement, the Parties are not joint
                  venturers, partners, principal and agent, master and servant
                  or employer and employee. With respect to the subject matter
                  of this Agreement, the Parties have no power to bind or
                  obligate each other in any manner, other than as expressly set
                  forth in this Agreement. A change of this relationship,
                  however, is not precluded by this Agreement.

9.       Patent Application and Maintenance

         9.1      Licensors are responsible for prosecution fees and costs with
                  respect to all Licensor Prosecuted Applications.

         9.2      Licensors covenant and agree that they will not, prior to
                  [...***...], intentionally abandon any Licensor Prosecuted
                  Application (including by virtue of issuance of any patents)
                  for which a continuation or divisional application has not
                  been filed unless they give Anadys at least one hundred twenty
                  (120) days prior written notice (unless such period of advance
                  notice is not possible due to no fault of Licensors' or their
                  counsel, in which case the maximum possible notice under such
                  shorter period shall be provided) of such intended abandonment
                  or issuance; provided, however, that the unavoidable
                  abandonment of a Licensor Prosecuted Application will not be
                  deemed a breach of this Section 9.2 so long as Licensors
                  actively pursue any revival possibilities; and provided
                  further, that if Anadys at its sole discretion no longer needs
                  access to a particular Licensor Prosecuted Application, Anadys
                  shall give notice of

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                     12 of 23

<PAGE>

                  such fact to Licensors and as of the date of Licensors'
                  receipt of such notice, such Licensor Prosecuted Application
                  shall no longer remain subject to this Section 9.2. For
                  purposes of this Section 9.2, "intentionally abandon" shall
                  include, without limitation, Licensors' or Licensors'
                  counsel's failure to respond to a notification of an upcoming
                  abandonment or the failure to take action which leads to an
                  abandonment.

         9.3      Subject to subsection 4.2, Anadys is responsible for
                  prosecution fees and costs with respect to all Anadys
                  Prosecuted Applications.

         9.4      Anadys has no obligation to pursue or maintain any of the
                  Anadys Prosecuted Applications.

         9.5      Both Licensors and Anadys shall promptly notify the other, in
                  writing, upon the issuance of any patent issued from the
                  Anadys Prosecuted Applications or Licensor Prosecuted
                  Applications claiming Intellectual Property Rights or claiming
                  priority to PCT applications US[...***...], or US [...***...]
                  or US provisional applications [...***...], [...***...],
                  [...***...] or [...***...] and promptly upon receiving any
                  notice of allowance related to the foregoing.

10.      Infringement

         10.1     None of the Parties has any obligation to enforce any patents
                  issuing under the Intellectual Property Rights. However, if
                  called upon by another Party to assist in a legal action
                  against an alleged infringer, each of the Parties will assist
                  to the best of its abilities, provided that it is compensated
                  for reasonable out-of-pocket expenses on an ongoing basis for
                  such assistance.

         10.2     In the event that a Party does take legal action against an
                  alleged infringer of any of the Intellectual Property Rights
                  at its own expense, then such acting Party is under no
                  obligation to distribute any awards that may arise from such
                  legal action to the other Parties.

11.      Validity and Enforceability

         11.1     Anadys and Averett agree that they will not challenge directly
                  or indirectly the validity or enforceability of any patents
                  issued from Licensor Prosecuted Applications of which patents
                  Averett is an assignor.

         11.2     Licensors agree that they will not challenge directly or
                  indirectly the validity or enforceability of any patents
                  issued from Anadys Prosecuted Applications of which patents
                  Licensor is an assignor.

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                     13 of 23

<PAGE>

         11.3     The parties agree that the failure of either party to satisfy
                  its obligations set forth in any of Sections 4.1, 4.3, 4.4,
                  5.1, 5.3 and 14.13, will subject the non-breaching party to
                  immediate and irreparable harm that will leave the
                  non-breaching party without an adequate remedy at law, and
                  entitle the non-breaching party to immediate injunctive relief
                  in a court of law to compel the breaching party to comply with
                  its obligations under paragraphs 4.1, 4.3, 4.4, 5.1, 5.3 and
                  14.13, as well as such further relief as may be granted by a
                  court of competent jurisdiction.

12.      Representations And Warranties

         12.1     Licensors (as well as their employees and agents) make no
                  representation or warranty as to the patentability of the
                  Intellectual Property Rights.

         12.2     Licensors and Anadys (as well as their employees and agents)
                  make no representation or warranty with respect to any aspect
                  of the drafting, prosecution, or content of the Licensor
                  Prosecuted Applications, the Anadys Prosecuted Applications,
                  or any patents maturing from any such applications, except
                  that Licensors represent and warrant that to their best
                  knowledge they have fully disclosed all existing issued
                  patents related to Intellectual Property Rights, all existing
                  Anadys Prosecuted Applications and all existing Licensor
                  Prosecuted Applications to Anadys. Should Licensors become
                  aware of any other existing patents and applications related
                  to Intellectual Property Rights, Licensors will promptly
                  disclose them to the Anadys and provide to Anadys copies of
                  such patents and applications.

         12.3     Licensors represent and warrant that they own the Intellectual
                  Property Rights and that they have full right and power to
                  grant the licenses and assignments contained herein. Licensors
                  represent and warrant that to their best knowledge their
                  rights to the listed patent applications and patents set forth
                  in Exhibits D-1, D-2 and E are unencumbered by any liens,
                  security interests, or other rights or claims of any third
                  party, and that no other person or entity has or shall have
                  any claim of ownership, except as defined by this Agreement.
                  Licensors also represent and warrant that to their best
                  knowledge they have not assigned or transferred Intellectual
                  Property Rights to any third party, except as provided for
                  under this Agreement, and they know of no fact that does or
                  could materially adversely affect the rights granted to Anadys
                  under this Agreement.

         12.4     LICENSORS AND ANADYS (AS WELL AS THEIR EMPLOYEES AND AGENTS)
                  MAKE NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR
                  FITNESS FOR A PARTICULAR PURPOSE OF ANY SUBJECT MATTER HEREIN
                  OR DEFINED BY THE CLAIMS OF ANY OF THE LICENSOR PROSECUTED

                                     14 of 23

<PAGE>

                  APPLICATIONS, THE ANADYS PROSECUTED APPLICATIONS, OR ANY
                  PATENTS MATURING FROM ANY SUCH APPLICATIONS.

         12.5     Anadys shall not indemnify, but will hold harmless Licensors,
                  their employees, agents, consultants and representatives, from
                  and against all liability, demands, damages, expenses, and
                  losses, including, but not limited to, death, personal injury,
                  illness, or property damage in connection with or arising out
                  of the design, manufacture, distribution, or use by Anadys,
                  its sublicensees, assignees, or others receiving any of
                  Anadys' rights herein, of any Product or materials or other
                  products of processes developed in connection with or arising
                  out of any of Anadys' rights herein.

         12.6     Each of the Parties warrants that it has all requisite legal
                  and (where appropriate) corporate power and authority to carry
                  on its business and to perform its obligations under this
                  Agreement. Each Party warrants that it has taken all action
                  necessary for the execution and delivery of this Agreement and
                  the performance of its obligations under this Agreement. Each
                  of the corporate entities warrants that the person(s)
                  executing this Agreement on its behalf has all necessary
                  corporate powers and have been duly authorized to execute and
                  deliver this Agreement on its behalf.

13.      Release

         13.1     Except for the liabilities and obligations arising out of this
                  Agreement, the Licensors, for themselves and to the full
                  extent that execution of this Agreement renders it legally
                  possible, for each of their predecessors, successors,
                  partners, assigns, parents, subsidiaries, divisions, officers,
                  employees, directors, shareholders, and agents, release and
                  forever discharge Anadys and Averett, and each of their
                  respective predecessors, successors, assigns, agents,
                  affiliates, representatives, heirs, parents, subsidiaries,
                  divisions, officers, employees, directors, shareholders, and
                  attorneys from any and all claims, demands, debts,
                  liabilities, obligations, damages, accounts, actions, and
                  causes of action of every kind in law, equity, or otherwise,
                  and every other thing whatsoever, whether known or unknown,
                  suspected or unsuspected, certain or speculative, which each
                  Licensor ever had, or now has, against Anadys or Averett,
                  existing as of the Effective Date of this Agreement or which
                  may have at any time prior to the Effective Date hereof come
                  into existence or which may in the future arise out of any
                  acts or omissions of Anadys or Averett taken at any time prior
                  to Effective Date hereof, including, without limitation, any
                  and all claims, demands, debts, liabilities, obligations,
                  damages, accounts, actions, and causes of action known or
                  suspected that relate in any manner to the Dispute.

         13.2     Except for the liabilities and obligations arising out of this
                  Agreement, Anadys, for itself and to the full extent that
                  execution of this Agreement

                                     15 of 23

<PAGE>

                  renders it legally possible, for its predecessors, successors,
                  partners, assigns, parents, subsidiaries, divisions, officers,
                  employees, directors, shareholders, and agents, release and
                  forever discharge Licensors herein, and each of their
                  respective predecessors, successors, assigns, agents,
                  affiliates, representatives, heirs, parents, subsidiaries,
                  divisions, officers, employees, directors, shareholders, and
                  attorneys from any and all claims, demands, debts,
                  liabilities, obligations, damages, accounts, actions, and
                  causes of action of every kind in law, equity, or otherwise,
                  and every other thing whatsoever, whether known or unknown,
                  suspected or unsuspected, certain or speculative, which Anadys
                  ever had, or now has, against Licensors, existing as of the
                  Effective Date of this Agreement or which may have at any time
                  prior to the Effective Date hereof come into existence or
                  which may in the future arise out of any actions or omissions
                  of Licensors taken at any time prior to the Effective Date
                  hereof, including, without limitation, any and all claims,
                  demands, debts, liabilities, obligations, damages, accounts,
                  actions, and causes of action know or suspected that relate in
                  any manner to the Dispute.

         13.3     Except for the liabilities and obligations arising out of this
                  Agreement, Averett, for himself and to the full extent that
                  execution of this Agreement renders it legally possible, for
                  each of his predecessors, successors, partners, assigns,
                  parents, subsidiaries, divisions, officers, employees,
                  directors, shareholders, and agents, releases and forever
                  discharges Licensors herein, and each of their respective
                  predecessors, successors, assigns, agents, affiliates,
                  representatives, heirs, parents, subsidiaries, divisions,
                  officers, employees, directors, shareholders, and attorneys
                  from any and all claims, demands, debts, liabilities,
                  obligations, damages, accounts, actions, and causes of action
                  of every kind in law, equity, or otherwise, and every other
                  thing whatsoever, whether known or unknown, suspected or
                  unsuspected, certain or speculative, which Averett ever had,
                  or now has, against Licensors, existing as of the Effective
                  Date of this Agreement or which may have at any time prior to
                  the Effective Date hereof come into existence or which may in
                  the future arise out of any actions or omissions of Licensors
                  taken at any time prior to the Effective Date hereof,
                  including, without limitation, any and all claims, demands,
                  debts, liabilities, obligations, damages, accounts, actions,
                  and causes of action know or suspected that relate in any
                  manner to the Dispute.

         13.4     Each of the Parties hereto acknowledges that it is aware of,
                  has read, has had explained to it by its attorneys,
                  understands and expressly waives any and all rights it has or
                  may have under California Civil Code Section 1542 and every
                  like provision in any foreign jurisdiction. Section 1542
                  provides as follows:

                           "A general release does not extend to
                           claims which the creditor does not know or
                           suspect to exist in his favor at the time
                           of executing the release, which if

                                     16 of 23

<PAGE>

                           known by him must have materially affected
                           his settlement with the debtor."

         13.5     Each of the Parties hereto acknowledges that it may later
                  discover facts different from or in addition to those which it
                  knows or believes to be true with respect to these released
                  claims, and it agrees that, in such event, this Agreement
                  shall nevertheless remain effective in all respects,
                  notwithstanding such different or additional facts or the
                  discovery of those facts, except as to facts represented,
                  warranted, and/or covenanted under this Agreement.

14.      General

         14.1     This Agreement may not be altered or otherwise amended except
                  by an instrument in writing signed by each of the Parties;
                  provided, however, that an alteration or amendment to this
                  Agreement shall not require Averett's signature unless
                  Averett's rights hereunder are prejudiced by such amendment.

         14.2     None of the Parties herein may waive or release any of its
                  rights under this Agreement except if the same be in writing.
                  The failure of any Party to assert a right hereunder or to
                  insist upon compliance with any term or condition of this
                  Agreement shall not constitute a waiver of that right or
                  excuse a similar subsequent failure to perform any such term
                  by any of the other Parties.

         14.3     The failure or omission by a Party in the performance of any
                  obligation under this Agreement will not be deemed a breach of
                  this Agreement or create any liability if it arises from any
                  cause or causes beyond the control of the Party, such as
                  strikes, riots, war, acts of God, invasion, fire, explosion,
                  floods, delay of carrier, shortage or failure in the supply of
                  materials, energy shortage and acts of government or
                  governmental agencies or instrumentalities. If due to such an
                  event a Party is delayed or hindered in or prevented from the
                  performance of its duties or doing acts required under the
                  terms of this Agreement, the performance of such act will be
                  excused for the period of the delay not to exceed ninety (90)
                  days. A Party subject to such an excusable delay will take all
                  reasonable steps to resolve any condition forming the basis of
                  the delay.

         14.4     All notices, consents, requests, waivers and other
                  communications in connection with this Agreement: must be in
                  writing, signed by an authorized officer of the sender, and
                  sent by personal delivery, fax (with confirmation copy),
                  internationally recognized courier, or certified or registered
                  mail, postage prepaid (airmail where applicable); will be
                  deemed to be given when actually received; and must be sent to
                  the receiving Party at the address or fax number, as
                  applicable, set forth

                                     17 of 23

<PAGE>

                  below, or any replacement address or fax number notified to
                  the sender by notice actually received by the sender.

                  above, or any replacement address or fax number notified to
                  the sender by notice actually received by the sender.

         If to Devron Averett:
                  Devron Averett, Ph.D.
                  [...***...]

         If to Anadys:
                  Anadys Pharmaceuticals, Inc.
                  9050 Camino Santa Fe
                  San Diego, CA 92121
                  Attn: Michael Kamdar, Vice President, Corporate Development

         With copy to:
                  Elizabeth E. Reed,
                  Senior Director, Legal Affairs

         If to ICN Pharmaceuticals:
                           3300 Hyland Avenue
                           Costa Mesa, CA 92626
                           Attn: Harry Roosje, VP Legal

         If to Ribapharm, Inc:
                           3300 Hyland Avenue
                           Costa Mesa, CA 92626,
                           Attn: Roger Loomis, General Counsel

         14.5     Except as expressly provided otherwise in this Agreement, all
                  legal and other costs and expenses incurred in connection with
                  the negotiation and entering into of this Agreement and the
                  transactions contemplated by this Agreement will be paid by
                  the Party incurring such costs or expenses. Notwithstanding
                  the foregoing, a Party prevailing in a litigation shall be
                  entitled to recover attorney's fees and costs as a result of
                  the successful enforcement of the terms of this Agreement.

         14.6     Except as expressly provided elsewhere in this Agreement, each
                  Party will at its expense promptly execute and deliver any
                  further instruments and documents and take any further action
                  as the other Party may reasonably request in order to give
                  effect to the transactions contemplated by this Agreement.

         14.7     The Parties have participated jointly in the negotiation and
                  drafting of this Agreement. If a question of intent or
                  interpretation arises, this Agreement will be construed as if
                  drafted jointly by the Parties and no presumption or

                                             ***CONFIDENTIAL TREATMENT REQUESTED

                                     18 of 23

<PAGE>

                  burden of proof will arise favoring or disfavoring a party
                  because of the authorship of any provision of this Agreement.

         14.8     The Exhibits identified in this Agreement are incorporated by
                  reference and made a part of this Agreement.

         14.9     The provisions of this Agreement are severable, and in the
                  event that any provision of this Agreement is determined to be
                  invalid or unenforceable under any controlling body of law,
                  such determination shall not in any way affect the validity or
                  enforceability of the remaining portions of this Agreement.

         14.10    This Agreement and the exhibits hereto contains the entire
                  agreement between the Parties related to the subject matter
                  herein, and all prior negotiations, representations,
                  agreements, and understandings are merged into, extinguished
                  by, and completely expressed by this Agreement and the
                  exhibits hereto. This Agreement supercedes the 1999 License
                  Agreement and the 1999 Letter Agreement.

         14.11    This Agreement will be governed by and construed in accordance
                  with the laws of the State of California.

         14.12    This Agreement may be executed in any number of counterparts
                  and by facsimile, each of which will be deemed to be an
                  original and all of which together will constitute one and the
                  same agreement.

         14.13    The Parties agree that the material terms of this Agreement
                  will be considered confidential information of the Parties.
                  Notwithstanding the foregoing, each Party shall have the right
                  to disclose the material terms of this Agreement (a) in
                  confidence to any bona fide potential investor, investment
                  banker, acquirer, merger partner or other potential financial
                  partner, and where reasonably practicable, shall obtain an
                  adequate agreement of confidentiality consistent with the
                  terms of this Agreement; (b) to exercise its rights under this
                  Agreement and in connection with regulatory filings or to
                  comply with applicable laws or regulations or valid court
                  orders; and/or (c) to record assignment documents.
                  Notwithstanding the foregoing, in the event a Party is
                  required to make a disclosure of the material terms of this
                  Agreement pursuant to (b) above, it will give reasonable
                  advance written notice to the other Party of such disclosure
                  and endeavor in good faith to secure confidential treatment of
                  such information or a protective order related to such
                  information. In any event, the Parties agree to take all
                  reasonable action to avoid disclosure of the material terms of
                  this Agreement. The parties also agree that the reports and
                  disclosures made under Section 2.3 and Section 7.1 shall be
                  deemed "Confidential Information" and shall be subject to the
                  terms of the Confidentiality and Non-Disclosure Agreement
                  dated as of the date hereof by and between the Parties and
                  attached hereto as Exhibit G.

                                     19 of 23

<PAGE>

         14.14    The obligations of the parties under Sections 5.3, 11.1, 11.2,
                  12.5, 13 and 14.13 shall survive the termination of this
                  Agreement.

         In Witness whereof, the Parties have caused this Agreement to be
signed, effective as of the Effective Date set forth above.

ICN PHARMACEUTICALS, INC.

By: /s/ Harry Roosje
    ------------------
    Harry Roosje
    V.P. Legal

RIBAPHARM INC.

By: /s/ Johnson Lau
    ---------------------------
    Johnson Lau, MD, Ph.D.
    Chief Executive Officer

DEVRON AVERETT

/s/ Devron Averett
-------------------

ANADYS PHARMACEUTICALS, INC.

By: /s/ Kleanthis G. Xanthopoulos
    ------------------------------------

       Kleanthis G. Xanthopoulos, Ph.D.
       President and CEO

            [SIGNATURE PAGE TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                     20 of 23

<PAGE>
                                   EXHIBIT A

ICN Pharmaceuticals, Inc.            [LOGO]

                                January 22, 1999

BY HAND

Mr. Devron R. Averett
[...***...]
[...***...], [...***...]

      Dear Devron:

      As we have discussed, [...***...]. After due review and consideration, and
[...***...], it is the intent of the Company to license these compounds to you
on a contract basis, by compound.

      Subject to the negotiation of a definitive License Agreement, the Company
and yourself ("Averett") hereby agree as follows:

      1. The compounds subject to this Agreement ("Compound(s)") are listed in
Exhibit 1, appended to this Agreement.

      2. Nothing in this Agreement is to be construed as limiting [...***...].
On a compound by compound basis, the Company will [...***...] and [...***...] as
to [...***...]. This [...***...] shall be [...***...].

      3. Should the Company [...***...], or [...***...], Averett shall
[...***...].

      4. Averett and the Company shall have 120 days in which to decide to
license said compound(s) and negotiate a definitive license agreement. Should
the parties be unable to negotiate terms satisfactory to both parties, the
Company shall have the right to seek other licensees. However, the Company will
not enter into a license agreement with a third party with respect to such
compound on terms and conditions which, in the aggregate, are more favorable
than those offered to Averett unless Averett has i) declined in writing to
accept such terms or ii) has not responded after a period of sixty (60) days
from the date of such offer.

      5. However, should the [...***...], the Company shall [...***...].

      6. With respect to those compounds that the Company [...***...], the
Company's continuing [...***...]. Thus, the Company agrees [...***...]. Averett
shall have the right to a semi-annual executive summary of the progress of said
Compound(s) in development [...***...]. Averett agrees to hold information
received in such executive summary confidential upon terms customarily
associated with confidential disclosures.

      7. Should any dispute arise between the parties regarding any terms of
this agreement, said dispute shall be submitted for arbitration through an
agreed arbitrator with expertise in the field.

                                  Page 1 of 3

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
      Should these terms meet with your approval, please execute in the
designated space and return to me.

                                        ICN Pharmaceuticals, Inc.

                                        /s/ David C. Watt
                                        ----------------------------------------
                                        David C. Watt
                                        Executive Vice President, General
                                        Counsel and Corporate Secretary

Agreed and Accepted this 22nd day of January, 1999.

Signature: /s/ Devron R. Averett
          --------------------------
               Dr. Devron R. Averett

                                  Page 2 of 3
<PAGE>
EXHIBIT 1: Compounds per the ICN/Averett License Agreement

<TABLE>
<CAPTION>
ICN Registry Number          Compound name, as in ICN Registry
-------------------          ---------------------------------
<S>                          <C>
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
[...***...]                           [...***...]
</TABLE>

                                  Page 3 of 3

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
                                   EXHIBIT B

                                LICENSE AGREEMENT

      This Agreement is made effective this 11th day of October, 1999 by and
between ICN Pharmaceuticals, Inc., a Delaware corporation with offices at 3300
Hyland Avenue, Costa Mesa, California 92626, (hereinafter referred to as "ICN"),
and Devron R. Averett, an individual with an address of [...***...],
[...***...], [...***...], [...***...], (hereinafter referred to as "Averett").

WITNESSETH:

      WHEREAS, ICN has a substantial library of proprietary compounds which may
be suitable for use as human pharmaceutical products; and

      WHEREAS, Averett acquired knowledge relating to ICN's proprietary
compounds during the course of his employment as Senior Vice President for
Research and Development at ICN, and wishes to further develop ICN's proprietary
compounds on his own behalf; and

      WHEREAS, Averett wishes to obtain a license to use the know how and data
developed by ICN concerning ICN's proprietary compounds.

      NOW THEREFORE, in consideration of the above and foregoing, and the mutual
covenants, promises and undertakings contained herein, the parties intending to
be legally bound hereby agree as follows:

      1. a. GRANT OF LICENSE. Subject to the terms and conditions contained
herein, during the term of this Agreement as set forth below, ICN hereby grants
to Averett an exclusive right and license to further develop or have developed,
produce or have produced, make or have made, use or have used, sell or have
sold, and promote or have promoted the compounds described as [...***...] (ICN
Registry Number [...***...]); [...***...] (ICN Registry Number [...***...]);
[...***...] (ICN Registry Number [...***...]); [...***...] (ICN Registry Number
[...***...]); [...***...] (ICN Registry Number [...***...]); [...***...] (ICN
Registry Number [...***...]); (collectively the "ICN Compounds") for use as
human pharmaceutical products, (the "Products") on a worldwide basis.

      b. SCOPE. Without limiting in any way the rights described above, the
grant of right and license to the listed compounds shall also include copies of
all intellectual property, assignment documentation, patent applications,
synthetic routes, primary data, results of tests, data sheets, data summaries,
correspondence, publications, and disclosures related to said compounds
(collectively, the information), and all existing physical samples of said
compounds, except that ICN may retain copies of the information and a 10 mg (ten
milligram) sample of each compound for archival purposes. ICN agrees to not
submit such archival samples to any other entity for any purpose unless
compelled by legitimate court order. In addition, this grant of right and
license includes any and all metabolites of such compounds as may be
subsequently identified, and shall not limit Averett's rights in any way to
improve upon said compounds by the identification of prodrugs or other modified
forms as may be identified in the course of development. Also, this agreement
does not provide to ICN any rights to any inventions by Averett in the ordinary
course of his activities.

      2. ROYALTY. In Consideration of the grant of the exclusive license set
forth above, Averett shall pay to ICN a royalty of [...***...] percent
([...***...]%) of the Net Sales of the Products. In

                                  Page 1 of 5

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
the event that the commercialized form of the Product is a chemically distinct
form of a compound described in Section 1a, which upon administration gives rise
to a compound described in Section 1a, Averett shall pay to ICN a royalty of
[...***...] percent ([...***...]%) of the Net Sales of the Products. For
purposes of this Agreement, "Net Sales" shall mean the total revenues generated
by Averett from the sale, supply, or sublicense of a Product, less returns and
refunds. Said royalty shall be remitted to ICN quarterly, no later than sixty
(60) days following the end of each calendar quarter, and shall be calculated
according to United States Generally Accepted Accounting Standards ("GAAP").

Averett shall pay a minimum annual royalty of fifty thousand dollars ($
50,000.00) for calendar year 2004, seventy five thousand dollars ($ 75,000.00)
for calendar year 2005, and one hundred thousand dollars ($ 100,000.00) for each
calendar year thereafter for a period equivalent to the currently existing
patent term for any marketed compound listed in Section One (a) of this
agreement. The minimum annual royalty set forth above shall be due and payable
in advance, on or before the first day of December of the preceding year, (the
"Due Date") and will be credited as an advance payment of royalties which may
accrue during the applicable calendar year. In no event shall a minimum annual
royalty payment be carried over as pre payment of royalties for any subsequent
year, nor shall any minimum annual royalty payment be refunded in whole or in
part. In the event that Averett fails to make any minimum annual royalty within
ninety (90) days following any Due Date, the license granted in Section One
hereof, shall automatically terminate.

      3. AVERETT'S PERFORMANCE; MILESTONES. During the continuance of this
Agreement, Averett shall use commercially reasonable efforts to commercialize
the ICN Compounds and bring products stemming therefrom to market. For each
compound listed in Section One (a) ICN shall pay Averett milestone payments as
follows: fifty thousand dollars ($ 50,000.00) upon filing of an IND with the
U.S. FDA, seventy five thousand dollars ($ 75,000.00) upon regulatory approval
to initiate Phase 2 studies, one hundred thousand dollars ($ 100,000.00) upon
regulatory approval to initiate Phase 3 studies, and two hundred thousand
dollars ($ 200,000.00) upon approval for commercial sale by the FDA. Such
payment shall be due and payable upon written notification to ICN by Averett or
his duly authorized agent. Failure to make any milestone payment within 90 days
following said notification shall result in forfeiture by ICN to any rights
described under this agreement, and result in a fully paid-up exclusive license
(exclusive even with respect to ICN) to the compounds described in this
agreement.

      4. TERM AND TERMINATION. This Agreement shall be effective from the date
of its execution, which is set forth above, and shall continue in full force and
effect in perpetuity unless terminated earlier according to the provisions
hereof. Notwithstanding anything to the contrary contained herein, in the event
that Averett is in default in the performance of any obligation under this
Agreement, and the default has not been cured within ninety (90) days following
written notice of such default, ICN may terminate this Agreement by written
notice. Averett shall have the right to terminate this agreement by giving ICN
ninety (90) days written notice thereof. In the event that ICN is in default in
the performance of any obligation under this agreement, and the default has not
been cured within ninety (90) days following written notice of such default,
[...***...].

      In the event Averett becomes insolvent, files a petition in bankruptcy,
has such a petition filed against him, determines to file a petition in
bankruptcy, or receives notice of a third party's intention to file an
involuntary petition in bankruptcy, Averett shall immediately notify ICN in
writing.

                                  Page 2 of 5

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
      Upon termination of this Agreement, Averett shall cease development,
production, making, selling, and promoting the ICN Compounds and the Products,
and all right, title, and interest therein shall revert to ICN automatically.
Within ninety (90) days after termination hereunder, a final royalty report
shall be submitted by Averett. Any royalty payments, or patent expense if
applicable, shall become immediately due and payable upon termination.

      5. REPORTING AND RECORD KEEPING. Beginning the calendar quarter following
execution of this Agreement, Averett shall submit quarterly reports to ICN
detailing his efforts to bring the ICN Compounds to market. Upon receipt of the
first regulatory approval for any ICN Product, royalty reports shall be included
with each quarterly payment, setting forth the quantity and net selling price of
each Product sold in that quarter and the date of such sale, and the total
amount of royalties being paid for that quarter.

      Averett agrees to keep and shall require his sublicensees to keep, full,
accurate and complete books and records (together with supporting documentation)
as are necessary to establish compliance with the terms and conditions of this
Agreement. Such records shall be maintained for a period of five (5) years from
the end of the reporting period to which they relate.

      6. AUDIT. During the continuance of this Agreement, ICN shall have the
right to have a duly authorized agent, employee, or representative audit,
inspect, and verify all books, records, and supporting documentation relating to
the ICN Compounds or the Products, kept by Averett or his sublicensees, at
Averett's or his sublicensees premises, or at a place mutually agreed upon by
the parties involved. Such audit shall be for the purpose of verifying
compliance with the terms and conditions of this Agreement, including
verification of reports and payments hereunder. Should ICN or its representative
determine that a royalty deficiency exists, such deficiency shall become
immediately due and owing, and shall be subject to interest at a rate equal to
the lesser of: one twelfth of the then current U.S. prime rate plus 0.5% per
month, or the maximum interest rate allowed by law. Said interest shall accrue
and be calculated from the date the corresponding royalty was originally due. In
the event an audit shall disclose a royalty deficiency of greater than five
percent (5%), the costs of such audit shall be born by Averett.

      7. SUBLICENSING. Averett may enter into sublicensing agreement(s) under
his rights granted herein. Averett agrees that any sublicenses shall provide
that the obligations to ICN shall be binding on the sublicensee as if it were a
party to this Agreement. This Agreement shall be attached as an Exhibit to any
sublicense granted by Averett.

      Any sublicenses granted by Averett shall provide for termination of the
sublicense, or the conversion of the sublicense to a license between the
sublicensees and ICN for the portion of the rights reverting to ICN, contingent
upon acceptance by the sublicensee of the provisions of this Agreement, at the
option of the sublicensee, upon termination of this Agreement.

Within thirty (30) days after the issuance or modification of any sublicense
hereunder, Averett shall furnish ICN with a true and complete copy of the
sublicense or any modification thereof. ICN shall be entitled to [...***...]
percent ([...***...]%) of any sublicensing fee, lump sum, or milestone payment
due under any sublicense granted by Averett in excess of any recoupment or
reimbursement of Averett's development expenses, which shall be paid to ICN
within forty five (45) days following the effective date of any sublicense
agreement granted hereunder or the date of payment, if later.

                                  Page 3 of 5
<PAGE>
      8. PATENT APPLICATION AND MAINTENANCE. Except as otherwise provided
herein, Averett agrees to take responsibility for, but to consult with ICN in
the preparation, filing, prosecution, and maintenance of any and all patent
applications or patents included in the licensed rights, and shall furnish
copies of all relevant patent related documents to ICN. [...***...]. Averett
shall select registered patent attorneys or patent agents to provide services on
behalf of Averett and ICN. ICN shall provide appropriate powers of attorney and
other documents necessary to undertake such actions to the patent attorneys or
patent agents providing such services. Averett shall provide ICN sufficient
opportunity to comment on any document that Averett intends to file or to cause
to be filed with the relevant intellectual property or patent office.

      In the event Averett fails to fully comply with his obligation to prepare,
file, prosecute and maintain any and all patent applications or patents
hereunder, ICN may by written notice to Averett, assume control thereof. If ICN
so elects, Averett shall cooperate fully with ICN, its attorneys and agents, and
provide ICN with complete copies of all documents or other materials that ICN
deems necessary to undertake such responsibilities. Notwithstanding the above
and foregoing, Averett shall be responsible for all costs associated with
transferring patent responsibilities to ICN's agents or attorneys, and for all
costs associated with said responsibilities during the continuance of this
Agreement.

      9. REPRESENTATIONS AND WARRANTIES. ICN makes no representation or warranty
as to the validity of any patents covering the ICN Compounds or of the scope of
any of the claims contained therein or that the exercise of this license will
not result in the infringement of other patents. Neither ICN nor its employees
assume any liability whatsoever resulting from the exercise of this license. ICN
MAKES NO WARRANTIES, EXPRESS OR IMPLIED, OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF ANY SUBJECT MATTER HEREIN OR DEFINED BY THE CLAIMS OF ANY
LICENSED PATENT RIGHTS.

      ICN does not represent that it will commence legal actions against third
parties infringing the rights granted hereunder. Averett will have the right to
prosecute such legal actions, and ICN will cooperate fully in any such legal
actions initiated by Averett.

      Averett shall not indemnify but will hold harmless ICN, its employees,
agents, consultants and representatives from and against all liability, demands,
damages, expenses, and losses, including but not limited to death, personal
injury, illness, or property damage in connection with or rising out of the use
by or on behalf of Averett, his sublicensees, employees, or third parties of any
licensed rights, or the design, manufacture, distribution, or use of any Product
or materials by Averett, or other products or processes developed in connection
with or arising out of the licensed rights.

      10. GENERAL. Neither party may waive or release any of its rights under
this Agreement except if the same be in writing. The failure of either ICN or
Averett to assert a right hereunder or to insist upon compliance with any term
or condition of this Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term by the other party.
This Agreement contains the entire agreement between the parties relating to the
subject matter herein, and all prior negotiations, representations, agreements
and understandings are merged into, extinguished by, and completely expressed by
this Agreement. The provisions of this Agreement are severable, and in the event
that any provision of this Agreement is determined invalid or unenforceable
under any controlling body of law, such determination shall not in any way
affect the validity or enforceability of the remaining portions of this
Agreement. This Agreement shall not be assigned by Averett without the

                                  Page 4 of 5

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
prior written agreement of ICN, except that Averett may and without such consent
assign this agreement to a corporation ("Newco") in exchange for stock in Newco
and any subsequent merger of Newco with or other acquisition of Newco by another
corporation shall not be considered an assignment of this Agreement.

      IN WITNESS WHEREOF, the parties have caused this Agreement to be signed,
effective as of the date set forth above.

DEVRON R. AVERETT                ICN PHARMACEUTICALS, INC.

/s/ Devron R. Averett            By: /s/ David C. Watt
---------------------               --------------------------------
                                         David C. Watt
                                         Executive Vice President,
                                         General Counsel and Corporate Secretary

                                  Page 5 of 5

<PAGE>
                                   EXHIBIT C

                              SUBLICENSE AGREEMENT

      SUBLICENSE AGREEMENT made as of the first day of March 2000, between
Scriptgen Pharmaceuticals, Inc. ("Scriptgen") and Devron R. Averett ("Averett").

      WHEREAS, Averett desires to grant to Scriptgen an exclusive sublicense of
compounds under that certain License Agreement dated October 11, 1999 (the
"License Agreement") by and between Averett and ICN Pharmaceuticals, Inc.
("ICN") attached hereto as Exhibit A;

      WHEREAS , Scriptgen desires to obtain a license to use the compounds that
are a subject of the License Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants herein set forth
and for other good and valuable consideration, the receipt of which is hereby
acknowledged, it is agreed as follows:

      1. License. Averett hereby grants to Scriptgen an exclusive right and
license to further develop or have developed, produce or have produced, make or
have made, use or have used, sell or have sold, and promote or have promoted the
compounds set forth in Section 1.a. of the License Agreement with the same scope
as provided to Averett under Section 1.b. of the License Agreement. Scriptgen
agrees that the obligations to ICN as set forth in the License Agreement shall
be binding on Scriptgen as if it were a party to the License Agreement. Averett
agrees that Scriptgen will be entitled to all of the rights and benefits of
Averett under the License Agreement as if Scriptgen were a party to the License
Agreement.

      2. Sublicense Fee. Scriptgen shall pay to Averett a sublicense fee of
$[...***...] in connection with his grant of the license hereunder.

      3. Representations and Warranties. Averett represents and warrants that
(i) the License Agreement is in full force and effect and is the legal, valid
and binding agreement of the parties thereto, (ii) there are no defaults
currently existing or threatened under the License Agreement, (iii) Averett is
not a party to or bound by any agreement, instrument, arrangement, contract,
obligation, commitment or understanding of any character, whether written or
oral, express or implied, other than this Agreement and the License Agreement
relating to the compounds set forth in Section 1.a. of the License Agreement and
(iv) Averett has full power and authority to enter into this Agreement and to
grant the sublicense pursuant hereto.

      4. Covenants. Averett hereby covenants and agrees that he will (i) use his
best efforts to perform his obligations under the License Agreement and to take
all actions reasonably necessary to ensure that such License Agreement remains
in full force and effect, (ii) notify Scriptgen immediately of any
correspondence or notice given by ICN under either the License Agreement or the
Letter Agreement, (iii) give Scriptgen notice of any default or likely default
on the part of the Averett under the License Agreement or the Letter Agreement,
and (iv) give Scriptgen a reasonable opportunity to cure on his behalf any
default by the Averett under the License Agreement or the Letter Agreement.

                                  Page 1 of 4

                                             ***CONFIDENTIAL TREATMENT REQUESTED

<PAGE>
      5. Right of First Refusal, Power of Attorney. Averett agrees that if he
enters into a further license agreement with ICN pursuant to the terms of the
Letter Agreement dated January 22, 1999 (the "Letter Agreement") between ICN and
Averett for any of the compounds set forth on Exhibit 1 of the Letter Agreement,
Averett will grant to Scriptgen a license with respect to such compounds on
substantially the same terms and conditions set forth herein, with the exception
that no additional sublicense fee shall be payable. In connection therewith,
Averett hereby irrevocably constitutes and appoints Scriptgen his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to exercise his rights under the Letter Agreement and any and all
agreements, contracts, certificates or regulatory filings necessary to be
executed by Averett in order to effect the license of such compounds, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary fully to all intents and
purposes as it might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

      5. Miscellaneous.

            a. Term and Termination. This Agreement shall be effective from the
date of its execution, which is set forth above, and shall continue in full
force and effect in perpetuity unless terminated earlier in accordance with the
provisions hereof. Scriptgen will have the right to terminate this Agreement by
giving Averett ninety (90) days written notice thereof. If, pursuant to the last
sentence of the first paragraph of Section 4 of the License Agreement, the
termination of the License Agreement results in Averett receiving a fully
paid-up exclusive license (exclusive even with respect to ICN) in perpetuity to
the compounds described in the License Agreement, then Scriptgen will be
entitled to an identical fully paid-up exclusive, perpetual license with respect
to the same compounds. At Scriptgen's option, upon termination of the License
Agreement, the sublicense granted hereunder will either terminate or will
convert to a direct license between Scriptgen and ICN for the portion of any
rights reverting to ICN pursuant to the same terms and conditions set forth in
the License Agreement.

            b. Further Assurances. Each party shall, upon request of another
party, from time to time, execute and deliver, and use its reasonable best
efforts to cause other persons to execute and deliver all such further documents
and instruments, and will do or use its reasonable best efforts of cause to be
done such other acts, as such other party may reasonably request more completely
to consummate and make effective the transactions contemplated by this
Agreement.

            c. Notices. Notices and other communications provided for herein
shall be in writing (including wire, telecopy or similar writing) and shall be
sent, delivered, or telecopied to the addresses designated by each party in
writing.

            d. Section Headings. The section headings in this Agreement are
included for convenience only, are not a part of this Agreement, and shall not
be used in construing it.

            e. Severability. In the event that any provision or any part of any
provision of this Agreement is held to be illegal, invalid or unenforceable,
such illegality, invalidity or

                                  Page 2 of 4
<PAGE>
unenforceability shall not affect the validity or enforceability of any other
provision or part hereof.

            f. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

            g. Governing Law. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without regard to conflicts
of law principles.

            h. Jurisdiction; Consent to Service of Process. Each party hereby
irrevocably and unconditionally submits, for itself and its property, to the
jurisdiction of any state court or Federal court of the United States of America
sitting in the District of Massachusetts in the Commonwealth of Massachusetts,
and any appellate court from any thereof, in any action or proceeding arising
out of or relating to this Agreement, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Massachusetts state or
federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

            i. Amendment and Modifications. This Agreement may be amended,
modified and supplemented only by written agreement of the parties.

            j. Waiver of Compliance. No failure or delay by either party to
exercise any right under this Agreement, and no partial or single exercise of
that right, shall constitute a waiver of that or any other right, unless
otherwise expressly provided herein.

            k. Binding Effect. This Assignment shall be binding upon and inure
to the benefit of the heirs, successors and assigns of each of the parties.

                                  Page 3 of 4
<PAGE>
      IN WITNESS WHEREOF, this Agreement is executed under seal as of the day
and year first above written.

AVERETT:

                               /s/ Devron R. Averett
                               -------------------------------------------------
                               Devron R. Averett

SCRIPTGEN:

                               SCRIPTGEN PHARMACEUTICALS, INC.

                               By:  /s/ Mark T. Weedon
                                  ----------------------------------------------
                                    Name:  Mark T. Weedon
                                    Title: President and Chief Executive Officer

                                  Page 4 of 4
<PAGE>

                                   EXHIBIT D-1

                ANADYS PROSECUTED AND OTHER LICENSED APPLICATIONS

<Table>
<Caption>
   COUNTRY
RUTAN & TUCKER                                                                                                         PROSECUTED
 DOCKET NO.           APPL. NO.            TITLE                      INVENTOR                          STATUS             BY
--------------        ---------            -----                      --------                          ------         -----------
<S>                  <C>                 <C>                          <C>                               <C>            <C>

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Allowed           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

</Table>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-1 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 1 of 5

<PAGE>

<Table>
<Caption>
   COUNTRY
RUTAN & TUCKER                                                                                                         PROSECUTED
 DOCKET NO.           APPL. NO.            TITLE                      INVENTOR                          STATUS             BY
--------------        ---------            -----                      --------                          ------         -----------
<S>                  <C>                 <C>                          <C>                               <C>            <C>
[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys
</Table>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-1 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 2 of 5

<PAGE>

<Table>
<Caption>
   COUNTRY
RUTAN & TUCKER                                                                                                         PROSECUTED
 DOCKET NO.           APPL. NO.            TITLE                      INVENTOR                          STATUS             BY
--------------        ---------            -----                      --------                          ------         -----------
<S>                  <C>                 <C>                          <C>                               <C>            <C>
[...***...]          [...***...]         [...***...]                  [...***...]                       Abandoned         Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys
</Table>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-1 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 3 of 5

<PAGE>

<Table>
<Caption>
   COUNTRY
RUTAN & TUCKER                                                                                                         PROSECUTED
 DOCKET NO.           APPL. NO.            TITLE                      INVENTOR                          STATUS             BY
--------------        ---------            -----                      --------                          ------         -----------
<S>                  <C>                 <C>                          <C>                               <C>            <C>
[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Anadys

[...***...]          [...***...]         [...***...]                  [...***...]                       Issued/6,479,463  Licensors

</Table>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-1 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 4 of 5

<PAGE>

<Table>
<Caption>
   COUNTRY
RUTAN & TUCKER                                                                                                         PROSECUTED
 DOCKET NO.           APPL. NO.            TITLE                      INVENTOR                          STATUS             BY
--------------        ---------            -----                      --------                          ------         -----------
<S>                  <C>                 <C>                          <C>                               <C>            <C>

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Licensors

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Licensors

[...***...]          [...***...]         [...***...]                  [...***...]                       Issued[...***...] Licensors

[...***...]          [...***...]         [...***...]                  [...***...]                       Pending           Licensors

[...***...]          [...***...]         [...***...]                  [...***...]                       Issued[...***...] Licensors

[...***...]          [...***...]         [...***...]                  [...***...]                       Issued[...***...] Licensors

</Table>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-1 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 5 of 5
<PAGE>

                                   EXHIBIT D-2

                              LICENSOR PATENTS AND
                               PATENT APPLICATIONS

<TABLE>
<CAPTION>
       COUNTRY
RUTAN & TUCKER DOCKET
         NO.                  APPL. NO.       TITLE             INVENTOR                 STATUS
<S>                          <C>            <C>                <C>                 <C>
     [...***...]             [...***...]    [...***...]        [...***...]         Issued/[...***...]
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Issued/[...***...]
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Issued/[...***...]
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
     [...***...]             [...***...]    [...***...]        [...***...]         Pending
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-2 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 1 of 3

<PAGE>

<TABLE>
<S>                     <C>            <C>                <C>          <C>
[...***...]             [...***...]    [...***...]        [...***...]  Allowed
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Issued/[...***...]
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Issued/[...***...]
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Issued/[...***...]
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Issued/[...***...]
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Issued/[...***...]
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
[...***...]             [...***...]    [...***...]        [...***...]  Pending
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-2 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                   Page 2 of 3

<PAGE>

<TABLE>
<S>              <C>              <C>              <C>                  <C>
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Issued/[...***...]
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Issued/[...***...]
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Superceded
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Issued/[...***...]
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Pending
[...***...]      [...***...]      [...***...]      [...***...]          Issued/[...***...]
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

              [EXHIBIT D-2 TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 3 of 3

<PAGE>

                                   ASSIGNMENT

         WHEREAS, ICN Pharmaceuticals, Inc., a Delaware corporation, with
offices at 3300 Hyland Avenue, Costa Mesa, California 92626 ("ICN"), and
Ribapharm Inc., a Delaware corporation with offices at 3300 Hyland Avenue, Costa
Mesa, California 92626 ("Ribapharm"), with ICN and Ribapharm being collectively
referred to herein from time to time as "Assignors," own the rights to the
patents and patent applications listed in Schedule A;

         AND WHEREAS, Anadys Pharmaceuticals, Inc., a Delaware corporation, with
offices at 9050 Camino Santa Fe, San Diego, California 92121 ("Anadys"), Anadys
being referred to herein from time to time as "Assignee," is desirous of
acquiring the entire right, title and interest in and to said patents and patent
applications listed in Schedule A;

         NOW THEREFORE, to all whom it may concern, be it known that pursuant to
the Agreement dated December 20, 2002, Assignors have sold, assigned, and
transferred, and by these presents do sell, assign and transfer unto said
Assignee, its successors or assigns, the entire right, title and interest in and
to all inventions and improvements claimed in all patents listed in Schedule A,
and in and to all renewals thereof, which may be granted therefrom, and all
extensions of such patents, which assignment is subject to Section 4.4 of the
Agreement; and Assignors do hereby authorize and request the Commissioner of
Patents and Trademarks to issue any and all United States Letters Patent for the
aforesaid inventions and improvements to the Assignee as the assignee of the
entire right, title and interest in and to the same, for the use of the
Assignee, its successors and assigns;

                  AND, in accordance with the Agreement signed on December 20,
2002, Assignors do hereby agree that we and our executors and legal
representatives will make, execute and deliver any and all other instruments in
writing including any and all further application papers, affidavits,
assignments and other documents, and will testify in all legal proceedings and
generally do all things which may be necessary or desirable more effectually to
secure to and vest in said Assignee, its successors or assigns the entire

<PAGE>

right, title and interest in and to the patents, rights, titles, benefits,
privileges and advantages hereby sold, assigned and conveyed, or intended so to
be;

                  AND, furthermore Assignor covenants and agrees with said
Assignee, its successors and assigns, that no assignment, grant, mortgage,
license or other agreement affecting the rights and property herein conveyed has
been made to others by Assignors and that full right to convey the same as
herein expressed is legally possessed.

                  IN TESTIMONY WHEREOF, I have hereunto set my hand this 20th
day of December, 2002.

ICN PHARMACEUTICALS, INC.

By: /s/ Harry Roosje
    ---------------------------
    Harry Roosje
    V.P. Legal

RIBAPHARM INC.

By: /s/ Johnson Lau
    ---------------------------
    Johnson Lau, MD, Ph.D.
    Chief Executive Officer

<PAGE>

                            SCHEDULE A TO ASSIGNMENT

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  COUNTRY                    APPL. NO.                  TITLE                INVENTOR           PATENT NO.
----------------------------------------------------------------------------------------------------------
<S>                        <C>                       <C>                    <C>                <C>
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

        [SCHEDULE A TO EXHIBIT E OF THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 1 of 4

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  COUNTRY                    APPL. NO.                  TITLE                INVENTOR           PATENT NO.
----------------------------------------------------------------------------------------------------------
<S>                        <C>                       <C>                    <C>                <C>
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
</TABLE>

                                           ***CONFIDENTIAL TREATMENT REQUESTED

        [SCHEDULE A TO EXHIBIT E OF THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 2 of 4

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  COUNTRY                    APPL. NO.                  TITLE                INVENTOR           PATENT NO.
----------------------------------------------------------------------------------------------------------
<S>                        <C>                       <C>                    <C>                <C>
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

        [SCHEDULE A TO EXHIBIT E OF THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 3 of 4

<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  COUNTRY                    APPL. NO.                  TITLE                INVENTOR           PATENT NO.
----------------------------------------------------------------------------------------------------------
<S>                        <C>                       <C>                    <C>                <C>
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

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[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
[...***...]                [...***...]               [...***...]            [...***...]        [...***...]

----------------------------------------------------------------------------------------------------------
</TABLE>

                                             ***CONFIDENTIAL TREATMENT REQUESTED

        [SCHEDULE A TO EXHIBIT E OF THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 4 of 4
<PAGE>

                                    EXHIBIT F

                    UNITED STATES PATENT AND TRADEMARK OFFICE

<TABLE>
<S>               <C>             <C>                     <C>
Applicant:        [...***...]     Examiner:               [...***...]
Serial No.:       [...***...]     Group Art Unit:         1623
Filed:            [...***...]     Docket No.:             [...***...]
Title:            [...***...]
</TABLE>

                      REVOCATION AND NEW POWER OF ATTORNEY

Commissioner for Patents
Washington, D.C. 20231

Dear Sir:

         The undersigned assignee of record hereby revokes any existing Powers
of Attorney and appoints Merchant & Gould, P.C. as attorneys and/or patent
agents with the full power to represent the applicant in connection with the
above-identified application.

         Please direct all correspondence to [...***...], MERCHANT & GOULD P.C.,
P.O. Box 2903, Minneapolis, MN 55402-0903, telephone [...***...] and list This
application to the Merchant & Gould Customer No. 23552.

                                                 ICN PHARMACEUTICALS, INC.

Date:______________________                      By: ___________________________
                                                     Harry Roosje
                                                     V.P. Legal

                                                 RIBAPHARM INC.

Date:______________________                      By: ___________________________
                                                     Johnson Lau, MD, Ph.D.
                                                     Chief Executive Officer

                                             ***CONFIDENTIAL TREATMENT REQUESTED

               [EXHIBIT F TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 1 of 2

<PAGE>

                    UNITED STATES PATENT AND TRADEMARK OFFICE

<TABLE>
<S>               <C>                <C>                   <C>
Applicant:        [...***...]        Examiner:             [...***...]
Serial No.:       [...***...]        Group Art Unit:       1623
Filed:            [...***...]        Docket No.:           [...***...]
Title:            [...***...]
</TABLE>

                      REVOCATION AND NEW POWER OF ATTORNEY

Commissioner for Patents
Washington, D.C. 20231

Dear Sir:

         The undersigned assignee of record hereby revokes any existing Powers
of Attorney and appoints Merchant & Gould, P.C. as attorneys and/or patent
agents with the full power to represent the applicant in connection with the
above-identified application.

         Please direct all correspondence to [...***...], MERCHANT & GOULD P.C.,
P.O. Box 2903, Minneapolis, MN 55402-0903, telephone [...***...] and list This
application to the Merchant & Gould Customer No. 23552.

                                               ICN PHARMACEUTICALS, INC.

Date:______________________                    By: _____________________________
                                                   Harry Roosje
                                                   V.P. Legal

                                               RIBAPHARM INC.

Date:______________________                    By: _____________________________
                                                   Johnson Lau, MD, Ph.D.
                                                   Chief Executive Officer

                                             ***CONFIDENTIAL TREATMENT REQUESTED

               [EXHIBIT F TO THE AGREEMENT DATED DECEMBER 20, 2002
               BY AND BETWEEN ICN, RIBAPHARM, ANADYS AND AVERETT]

                                  Page 2 of 2<PAGE>

                                                                   EXHIBIT 10.25

                               SEVERANCE AGREEMENT

      This SEVERANCE AGREEMENT (the "AGREEMENT") is made and entered into
effective as of November 13, 2003 (the "EFFECTIVE Date"), by and between ANADYS
PHARMACEUTICALS, INC., a Delaware corporation (the "COMPANY"), and STEVE WORLAND
(the "EXECUTIVE"). The Company and the Executive are hereinafter collectively
referred to as the "PARTIES", and individually referred to as a "PARTY".

                                    AGREEMENT

      In consideration of the mutual promises and covenants herein contained,
and for other good and valuable consideration, the Parties, intending to be
legally bound, agree as follows:

      1.    LOYALTY; AT WILL EMPLOYMENT. During the Executive's employment by
the Company, the Executive shall devote Executive's full business energies,
interest, abilities and productive time to the proper and efficient performance
of Executive's duties as an officer of the Company. Executive's employment with
the Company is at-will and not for any specified period and may be terminated at
any time, with or without cause, by either Executive or Company, subject to the
provisions of section 2.2 below.

      2.    TERM; COMPENSATION UPON TERMINATION.

            2.1   TERM. The term of this Agreement (the "TERM") shall begin on
the Effective Date and shall continue until Executive's employment with the
Company is terminated for any reason.

            2.2   COMPENSATION UPON TERMINATION.

                  2.2.1 DEATH OR COMPLETE DISABILITY. If the Executive's
employment with the Company is terminated as a result of death or Complete
Disability, the Company shall pay to Executive, and/or Executive's heirs, the
Executive's base salary and accrued and unused vacation benefits earned through
the date of termination at the rate in effect at the time of termination, less
standard deductions and withholdings, and the Company shall thereafter have no
further obligations to the Executive and/or Executive's heirs under this
Agreement.

                  2.2.2 WITH CAUSE OR WITHOUT GOOD REASON. If the Executive's
employment with the Company is terminated by the Company for Cause or if the
Executive terminates his employment with the Company without Good Reason, the
Company shall pay the Executive's base salary and accrued and unused vacation
benefits earned through the date of termination at the rate in effect at the
time of termination, less standard deductions and withholdings, and the Company
shall thereafter have no further obligations to the Executive under this
Agreement.

                  2.2.3 WITHOUT CAUSE OR WITH GOOD REASON. If the Company
terminates the Executive's employment without Cause or the Executive resigns
with Good Reason, the Company shall pay the Executive's base salary and accrued
and unused vacation

                                       1.
<PAGE>
earned through the date of termination, at the rate in effect at the time of
termination subject to standard deductions and withholdings. In addition,
subject to the limitations stated in Section 2.2.4 herein and upon the
Executive's furnishing to the Company an effective waiver and release of claims
(a form of which is attached hereto as Exhibit A), the Executive shall be
entitled to:

                  (I)   The equivalent of six (6) months of the Executive's
annual base salary in effect at the time of termination, less standard
deductions and withholdings;

                  (II)  Reimbursement for continued health insurance coverage
under COBRA, provided that Executive elects such coverage, for the same portion
of Executive's COBRA health insurance premium that it paid during the
Executive's employment up until the earlier of either (i) nine (9) months after
the date of termination or, (ii) the date on which the Executive begins
full-time employment with another company or business entity, which provides
Executive with similar benefits; and

                  (III) Outplacement services for a period of six (6) months to
be provided by an outplacement firm mutually acceptable to the Company and
Executive.

                  2.2.4 COVENANT NOT TO COMPETE. Notwithstanding any provisions
in this Agreement to the contrary, including any provisions contained in this
Section 2.2, the Company's obligations, and the Executive's rights, pursuant to
Section 2.2.3 shall cease and be rendered a nullity immediately should the
Executive violate any provision of Section 1 herein, or should the Executive
violate the terms and conditions of the Executive's Agreement for Employees
dated March 22, 2001 (proprietary information and inventions agreement) with the
Company.

                  2.2.5 TERMINATION OF OBLIGATIONS. In the event of the
termination of the Executive's employment with the Company, the Company shall
have no obligation to pay Executive any base salary, bonus or other compensation
or benefits, except as provided in this Section 2 or for benefits due to the
Executive (and/or the Executive's dependents) under the terms of the Company's
benefit plans. The Company may offset any amounts Executive owes it or its
subsidiaries against any amount it owes Executive pursuant to this Section 2.2.

            2.3   DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:

                  2.3.1 COMPLETE DISABILITY. "COMPLETE DISABILITY" shall mean
the inability of the Executive to perform the Executive's duties under this
Agreement because the Executive has become permanently disabled within the
meaning of any policy of disability income insurance covering employees of the
Company then in force. In the event the Company has no policy of disability
income insurance covering employees of the Company in force when the Executive
becomes disabled, the term "COMPLETE DISABILITY" shall mean the inability of the
Executive to perform the Executive's duties under this Agreement by reason of
any incapacity, physical or mental, which the Board, based upon medical advice
or an opinion provided by a licensed physician acceptable to the Board,
determines to have incapacitated the Executive from satisfactorily performing
all of the Executive's usual services for the Company for a period of at

                                       2.
<PAGE>
least one hundred twenty (120) days during any twelve (12) month period (whether
or not consecutive). Based upon such medical advice or opinion, the
determination of the Board shall be final and binding and the date such
determination is made shall be the date of such Complete Disability for purposes
of this Agreement.

                  2.3.2 GOOD REASON. "GOOD REASON" for the Executive to
terminate the Executive's employment hereunder shall mean the occurrence of any
of the following events without the Executive's consent:

                  (I)   a significant adverse change in the nature or scope of
Executive's job responsibilities;

                  (II)  the relocation (or demand for relocation) of Executive's
place of employment to a point more than thirty (30) miles from Executive's
current place of employment; and

                  (III) a reduction in the total annual compensation package
paid to Executive as initially set forth in this Agreement.

                  2.3.3 FOR CAUSE. "CAUSE" for the Company to terminate
Executive's employment hereunder shall mean the occurrence of any of the
following events:

                  (I)   the Executive's failure to satisfactorily perform
Executive's assigned duties with the Company, or any successor thereof, in the
best interest of the Company (except for the failure resulting from Executive's
incapacity due to Complete Disability, or any such actual or anticipated failure
resulting from a Good Reason termination which is not corrected within thirty
(30) days of receiving notice of such failure from the Company specifying in
reasonable detail the nature of such failure);

                  (II)  the Executive's commission of an act that materially
injures the business of the Company;

                  (III) the Executive's conviction of a felony involving moral
turpitude; and

                  (IV)  the Executive's engaging or in any manner participating
in any activity which is directly competitive with or injurious to the Company
or any of its Affiliates or which violates any material provisions of the
Executive's Agreement for Employees dated March 22, 2001 (proprietary
information and inventions agreement) with the Company.

            2.4   SURVIVAL OF CERTAIN SECTIONS. Sections 1.2, 2.2.3, 2.2.4,
2.2.5 and 2.4 of this Agreement will survive the termination of this Agreement.

      3.    GENERAL. This Agreement is made in San Diego, California. This
Agreement shall be construed and interpreted in accordance with the internal
laws of the State of California. This Agreement supercedes and replaces any
other agreement between Executive and the Company regarding severance benefits
and cannot be amended or modified except by written agreement between Executive
and the Company. This Agreement may be executed in two

                                       3.
<PAGE>
counterparts, each of which shall be deemed an original, all of which together
shall contribute one and the same instrument.

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

ANADYS PHARMACEUTICALS, INC.

By:  /s/ Kleanthis G. Xanthopoulos, Ph.D.
     ---------------------------------------
Its:   President and Chief Executive Officer
       -------------------------------------

Dated:  November 14, 2003
        ---------------------------------

EXECUTIVE:

/s/ Steve Worland
-----------------------------------------
STEVE WORLAND

Dated:  November 14, 2003
        ---------------------------------

                                       4.
<PAGE>
                                    EXHIBIT A

                          RELEASE AND WAIVER OF CLAIMS

      In consideration of the payments and other benefits set forth in Section
2.2 of the Severance Agreement dated November 13, 2003, to which this form is
attached, I, STEVE WORLAND, hereby furnish ANADYS PHARMACEUTICALS, INC. (the
"COMPANY"), with the following release and waiver ("RELEASE AND WAIVER").

      In exchange for the consideration provided to me by the Severance
Agreement that I am not otherwise entitled to receive, I hereby generally and
completely release the Company and its directors, officers, employees,
shareholders, partners, agents, attorneys, predecessors, successors, parent and
subsidiary entities, insurers, Affiliates, and assigns from any and all claims,
liabilities and obligations, both known and unknown, that arise out of or are in
any way related to events, acts, conduct, or omissions occurring prior to my
signing this Release and Waiver. This general release includes, but is not
limited to: (1) all claims arising out of or in any way related to my employment
with the Company or the termination of that employment; (2) all claims related
to my compensation or benefits from the Company, including, but not limited to,
salary, bonuses, commissions, vacation pay, expense reimbursements, severance
pay, fringe benefits, stock, stock options, or any other ownership interests in
the Company; (3) all claims for breach of contract, wrongful termination, and
breach of the implied covenant of good faith and fair dealing; (4) all tort
claims, including, but not limited to, claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (5) all federal,
state, and local statutory claims, including, but not limited to, claims for
discrimination, harassment, retaliation, attorneys' fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990, the federal Age Discrimination in
Employment Act of 1967 (as amended) ("ADEA"), and the California Fair Employment
and Housing Act (as amended).

      I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to any claims I may have against the
Company.

      I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which I was already entitled as an executive of
the Company. If I am 40 years of age or older upon execution of this Release and
Waiver, I further acknowledge that I have been advised, as required by the Older
Workers Benefit Protection Act, that: (a) the release and waiver granted herein
does not relate to claims under the ADEA which may arise after this Release and
Waiver is executed; (b) I have the right to consult with an attorney prior to
executing this Release and Waiver (although I may choose voluntarily not to do
so); and (c) I have twenty-one (21) days from the date of termination of my
employment with the Company in which to consider this Release and Waiver
(although I may choose voluntarily to execute this Release and Waiver earlier);
(d) I have seven (7) days

                                       1.
<PAGE>
following the execution of this Release and Waiver to revoke my consent to this
Release and Waiver; and (e) this Release and Waiver shall not be effective until
the seven (7) day revocation period has expired.

      If I am less than 40 years of age upon execution of this Release and
Waiver, I acknowledge that I have the right to consult with an attorney prior to
executing this Release and Waiver (although I may choose voluntarily not to do
so); and (c) I have five (5) days from the date of termination of my employment
with the Company in which to consider this Release and Waiver (although I may
choose voluntarily to execute this Release and Waiver earlier).

      I acknowledge my continuing obligations under my Agreement for Employees
dated March 22, 2001 (proprietary information and inventions agreement), a copy
of which is attached hereto as Exhibit B. Pursuant to the Agreement for
Employees I understand that among other things, I must not use or disclose any
confidential or proprietary information of the Company and I must immediately
return all Company property and documents (including all embodiments of
proprietary information) and all copies thereof in my possession or control. I
understand and agree that my right to the severance pay I am receiving in
exchange for my agreement to the terms of this Release and Waiver is contingent
upon my continued compliance with my Agreement for Employees.

      This Release and Waiver, including Exhibit B hereto, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated herein.
This Release and Waiver may only be modified by a writing signed by both me and
a duly authorized officer of the Company.

Date:                                       By:
      ------------------                        --------------------------------
                                                STEVE WORLAND

                                       2.

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