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License Agreement - SmithKline Beecham Corp., SmithKline Beecham plc and Human Genome Sciences Inc.

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                            SB/HGS LICENSE AGREEMENT

         This Agreement is effective as of this 28th day of June,  1996 between,
on the one hand,  SmithKline Beecham Corporation,  a corporation organized under
the laws of the Commonwealth of Pennsylvania,  having a place of business at One
Franklin Plaza, Philadelphia, Pennsylvania 19101, U.S.A. ("SB corp"), SmithKline
Beecham p.l.c.,  a corporation  organized under the laws of England and having a
place of business at Great West Road, Brentford,  Middlesex,  U.K. ("SB p.l.c.")
(individually  and  collectively  "SB"),  and, on the other hand,  Human  Genome
Sciences, Inc., 9410 Key West Avenue, Rockville, Maryland 20850 ("HGS").

                                WITNESSETH THAT:

         WHEREAS  SB corp and HGS,  entered  into  the  COLLABORATION  AGREEMENT
(defined  below)  relating to sequencing of expressed  genes and  development of
practical applications therefor; and

         WHEREAS SB corp,  SmithKline Beecham Intercredit,  B.V. and HGS entered
into the AMENDED AND RESTATED  LICENSE  AGREEMENT  (defined  below)  pursuant to
which HGS granted to SB certain licenses under HGS patents and HGS technology to
make,  have made, use and sell  collaboration  products;  and to license certain
technologies  to TAKEDA  (defined  below)  pursuant to the  SB/TAKEDA  AGREEMENT
(defined below),

         WHEREAS  SB and HGS  now  wish to form  alliances  with  THIRD  PARTIES
(defined  below) in addition to TAKEDA to  collaborate  and/or grant licenses to
COLLABORATION  PARTNERS  (defined  below) under HGS TECHNOLOGY and SB TECHNOLOGY
(each defined below) in the SB FIELD (defined  below) and GENE THERAPY  VACCINES
(defined below) causing the parties to now supersede the COLLABORATION AGREEMENT
and the AMENDED AND RESTATED  LICENSE  AGREEMENT  (defined  below) as to such SB
FIELD and GENE THERAPY VACCINES (defined below), and to replace those agreements
only as to such fields with this Agreement;

         NOW,  THEREFORE,  in  consideration  of the covenants  and  obligations
expressed  herein,  and intending to be legally bound, and otherwise to be bound
by proper and reasonable conduct, the parties agree as follows:


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         The parties now agree that the COLLABORATION AGREEMENT is superseded in
accordance  with Paragraph  23.01 of such agreement and the AMENDED AND RESTATED
LICENSE  AGREEMENT  is  superseded  both with  respect  to the SB FIELD and GENE
THERAPY VACCINES to read as follows:

1.       DEFINITIONS
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1.0. "AFFILIATE" shall mean any corporation,  firm, partnership or other entity,
     whether de jure or de facto, which directly or indirectly owns, is owned by
     or is under common  ownership  with a party to this Agreement to the extent
     of at least fifty  percent  (50%) of the equity (or such lesser  percentage
     which is the  maximum  allowed  to be owned by a foreign  corporation  in a
     particular  jurisdiction) having the power to vote on or direct the affairs
     of the entity  and any  person,  firm,  partnership,  corporation  or other
     entity actually  controlled by,  controlling or under common control with a
     party to this Agreement.
1.1. "AMENDED AND RESTATED LICENSE  AGREEMENT" shall mean the agreement  between
     SB and HGS entered into May 31, 1995.
1.2. "ANTIBODY  PRODUCT" shall mean an antibody  (monoclonal or polyclonal)  and
     fragments and  constructs  thereof which may be useful for the treatment or
     prevention of a disease or disorder in humans.
1.3. "ANTIBODY  RESEARCH PLAN" shall mean a plan for  researching and developing
     an  ANTIBODY  PRODUCT  which is a  COLLABORATION  PRODUCT  in the SB FIELD.
     Appendix A is an example of such plan.
1.4. "ANTISENSE"  shall mean  inhibiting or  preventing in vivo  expression in a
     human or animal of a gene product by use of an  oligonucleotide or modified
     oligonucleotide  which  binds  to  RNA  or DNA  to  prevent  and/or  impair
     expression of the gene product.
1.5. "BLOCKING CLAIM" shall mean a claim under any patent application or granted
     patent anywhere in the world which generically but not specifically  claims
     (i) any and all compounds  (and/or the use thereof)  which interact with or
     prevent  interaction  with a  specified  TARGET  which  is a  COLLABORATION
     PRODUCT and/or (ii) any and all antibodies (and/or the use thereof) against
     a specific  TARGET or THERAPEUTIC  PROTEIN each of which is a COLLABORATION
     PRODUCT.  The following are examples of "blocking  claims":  (1) a compound
     which interacts with, or is capable of interacting with,  receptor X; (2) a
     compound  which prevents  binding  between or to receptor X and its ligand,
     (3) a process for activating receptor X, comprising:  contacting receptor X
     with a

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     compound which binds thereto and activates the receptor;  (4) a process for
     preventing activation of receptor X comprising contacting receptor X with a
     compound which prevents binding between receptor X and its ligand.

1.6. "BIOINFORMATICS"  shall mean computer  software and know-how useful for the
     analysis,  comparison,  and curation of human nucleic acid  sequences;  and
     information  related to such sequences;  and software for the  construction
     and  maintenance  of databases for the  compilation  of such  sequences and
     their associated information;  each developed from May 19, 1993 through the
     end of the INITIAL RESEARCH TERM. BIOINFORMATICS shall include software for
     the prediction of the three-dimensional  structure of proteins from primary
     sequence  information  but  BIOINFORMATICS  shall not include  software for
     rational  drug design  based on such  three-dimensional  structure.  To the
     extent  BIOINFORMATICS  includes  software licensed from a THIRD PARTY such
     THIRD PARTY software is not included  except to the extent that a party has
     the right to transfer to the other party such  software and its use and the
     other  party  agrees to pay any  royalty  owed to the THIRD  PARTY for such
     software and its use.

1.7.  "cDNA" shall mean complementary DNA prepared from human cells.
1.8. "cDNA DATABASE" means the Human cDNA Database  established  pursuant to the
     Human  cDNA  Database  Agreement  (the  HUMAN  cDNA  DATABASE   AGREEMENT),
     effective as of July 7, 1994,  among SB, HGS and The  Institute for Genomic
     Research (TIGR) and as may be amended from time to time.
1.9. "CLINICAL  STUDY" shall mean a study in humans of a product  which study is
     intended  for use in  obtaining  approval  to sell the  product in a "Major
     Market"  However,  in the case of a  product  for  which no human  clinical
     studies are required,  then CLINICAL STUDY shall mean, instead,  initiation
     of country-wide  sales of a product in a "Major Market".  By "Major Market"
     is meant the United States, Canada, Japan, Great Britain,  France, Germany,
     or Italy.
1.10."COLLABORATION  AGREEMENT" shall mean the  Collaboration  Agreement entered
     into  between SB and HGS  effective  as of May 19,  1993,  as amended as of
     immediately before the EFFECTIVE DATE.
1.11."COLLABORATION  PARTNER"  shall mean those  entities which are set forth in
     Appendix  B and  any  entity  added  to such  Appendix  by  mutual  written
     agreement between SB and HGS. TAKEDA is not a COLLABORATION PARTNER.

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1.12."COLLABORATION  PARTNER AGREEMENT" shall mean an agreement among HGS and SB
     and a  COLLABORATION  PARTNER and  designated in writing by SB and HGS as a
     COLLABORATION PARTNER AGREEMENT.
1.13."COLLABORATION   PARTNER   PATENT"   shall  mean  all  patents  and  patent
     applications  filed  during the INITIAL  RESEARCH  TERM which are or become
     owned  by a  COLLABORATION  PARTNER  or to  which a  COLLABORATION  PARTNER
     otherwise has, now or in the future,  the right to grant licenses,  only to
     the  extent HGS and SB have the rights to grant  licenses  thereto  under a
     COLLABORATION   PARTNER  AGREEMENT.   Included  within  the  definition  of
     COLLABORATION PARTNER PATENTS are all continuations, continuations-in-part,
     divisions,   patents   of   addition,   reissues,   renewals,   extensions,
     registrations,  confirmations,  re-examinations thereof and any provisional
     applications and all SPCs
1.14."COLLABORATION  PRODUCT"  shall  mean  any  product,  process,   substance,
     composition  or  service  which (i) is based on the use of or is derived by
     use of HGS TECHNOLOGY  and/or SB TECHNOLOGY and/or (ii) is covered by a HGS
     PATENT and/or (iii) is covered by a SB PATENT;  and/or (iv) is covered by a
     COLLABORATION  PARTNER PATENT;  and/or (v) is based on or is derived by use
     of a TARGET and/or is a THERAPEUTIC  PROTEIN and/or biological  information
     on such  TARGET  or  THERAPEUTIC  PROTEIN  all as to  which SB  and/or  HGS
     receives rights from a COLLABORATION  PARTNER under a COLLABORATION PARTNER
     AGREEMENT.  An incidental or immaterial use (or no use) of such  technology
     or  patents  in  (i)-(v)  shall not cause a  product,  process,  substance,
     composition or service to become a COLLABORATION PRODUCT.
1.15."CORIGHTS PRODUCT" shall mean a product subject to a COLLABORATION  PARTNER
     AGREEMENT as to which SB obtains  rights to promote and/or market from such
     COLLABORATION PARTNER.
1.16."COST OF GOODS" shall mean the sum of the actual direct and indirect  costs
     for  active and other  ingredients,  supplies,  material,  and labor and an
     allocated  portion of overheads,  incurred in manufacturing a SB PRODUCT or
     an HGS  PRODUCT,  as  determined  in  accordance  with  Generally  Accepted
     Accounting Principles in the United States.

1.17."DIAGNOSTIC(S)"  shall mean a  COLLABORATION  PRODUCT which is any product,
     process, substance, composition or service

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     intended to predict, detect or identify a disease or determine the presence
     of a pathologic condition in a human.
1.18."DISCOVERED"  shall  mean,  with  respect  to a  COLLABORATION  PRODUCT  or
     CORIGHTS PRODUCT, the earlier of (a) the date of the specific disclosure of
     the  COLLABORATION  PRODUCT or CORIGHTS  PRODUCT,  in an application  for a
     patent filed in any country by or in the name of the discovering  party; or
     (b) the date of the specific  disclosure of such  COLLABORATION  PRODUCT or
     CORIGHTS   PRODUCT  in  a  written  document  other  than  a  filed  patent
     application.
1.19."DRUG PRODUCT" shall mean a product  (including  VACCINES),  which is not a
     THERAPEUTIC PROTEIN, GENE THERAPY VACCINE or ANTIBODY PRODUCT, which may be
     useful for the treatment or prevention of a disease or disorder in a human.
1.20."DRUG  RESEARCH  PLAN"  shall  mean a plan  for  screening  of  TARGETS  to
     discover a DRUG PRODUCT  which is a  COLLABORATION  PRODUCT in the SB FIELD
     and shall also mean a plan for  researching  and  developing a GENE THERAPY
     VACCINE  pursuant to Section 7 or a plan for  researching  and developing a
     VACCINE  which is a  COLLABORATION  PRODUCT in the SB FIELD.  An example of
     such a plan is shown in Appendix C.
1.21. "EFFECTIVE DATE" shall mean the date first written above.
1.22."EST"shall mean a partial cDNA sequence,  i.e., a cDNA which corresponds to
     less than the entire expressed portion of a complete human gene, determined
     by  Expressed  Sequence  Tag  analysis.  The ESTs  shall  comprise  as many
     nucleotides  from the 5' end or the 3' end of a cDNA  (exclusive  of vector
     nucleotides) as is practicable in order to enhance the informational  value
     of the ESTs and shall otherwise meet specifications  previously established
     by the RC and as amended from time to time. 1.23.  "GENE" shall mean a cDNA
     or a human  gene or a family of such  human  genes or any  portion  of such
     cDNA, gene or genes.
1.24."GENE  THERAPY"  shall  mean  treatment  or  prevention  of a  disease,  or
     remedying a gene deficiency of humans or animals by genetic modification of
     human somatic  cells or animal  somatic or germ cells (in vivo, in vitro or
     ex vivo)  with DNA  (RNA)  for the  purpose  of  expressing  a  protein  or
     oligo(poly)nucleotide encoded by said DNA (RNA) in a human or animal.
1.25.GENE THERAPY  VACCINE"  shall mean a VACCINE  which  achieves a therapeutic
     and/or prophylactic  effect by inducing an antigen-specific  humoral and/or
     cellular immune system response by GENE THERAPY.

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1.26. "HGS" shall mean Human Genome Sciences, Inc.
1.27."HGS FIELD" shall mean:  (i) GENE  THERAPY,  GENE THERAPY  VACCINES  (other
     than GENE THERAPY  VACCINES as to which SB obtains rights under Section 7),
     (ii)  ANTISENSE,   (iii)   biotransformation   of  a  chemical  to  prepare
     pharmaceutically  active  agents for human or animal use, or  intermediates
     therefor,  which active agents or intermediates  were discovered before May
     19, 1993.
1.28."HGS  PATENT(S)"  shall mean all  patents  and patent  applications  to the
     extent they claim HGS  TECHNOLOGY,  which are or become  owned by HGS or to
     which HGS otherwise has, now or in the future, the right to grant licenses.
     Included  within  the  definition  of HGS  PATENTS  are all  continuations,
     continuations-in-part,  divisions, patents of addition, reissues, renewals,
     extensions, registrations,  confirmations,  re-examinations thereof and any
     provisional applications and all SPCs.
1.29."HGS PRODUCT" shall mean (1) a  COLLABORATION  PRODUCT in the HGS FIELD; or
     (2) a COLLABORATION PRODUCT in the SB FIELD (a) to which HGS obtains rights
     in  accordance  with Section 6; and/or (b) which is a  THERAPEUTIC  PROTEIN
     discovered  or developed by or on behalf of HGS after the INITIAL  RESEARCH
     TERM; and/or (c) which is a DRUG PRODUCT or ANTIBODY PRODUCT  discovered or
     developed by or on behalf of HGS at any time.
1.30."HGS  TECHNOLOGY"  shall  mean  any and all  data,  substances,  processes,
     materials,  formulae,  know-how and inventions with respect to GENES and/or
     expression  products  thereof  (including  sequence and function) which are
     useful  within the HGS FIELD or the SB FIELD and which are  developed by or
     on behalf of HGS during or prior to the INITIAL RESEARCH TERM and which are
     owned by HGS or with  respect  to which HGS has a right to grant a license.
     In the event HGS  in-licenses  from a THIRD PARTY a DRUG PRODUCT,  ANTIBODY
     PRODUCT or  THERAPEUTIC  PROTEIN in each case  discovered  by a THIRD PARTY
     with no use of HGS TECHNOLOGY,  such product and  information  generated by
     HGS directly related to the research and development of such product, shall
     not be HGS TECHNOLOGY.
1.31."HGS  SPECIAL  TECHNOLOGY  shall mean (1) all HGS  TECHNOLOGY  in existence
     prior to the EFFECTIVE  DATE and required to be  transferred or transferred
     to SB  under  the  COLLABORATION  AGREEMENT  and  (2)  all  HGS  TECHNOLOGY
     developed  by or for HGS after the  EFFECTIVE  DATE and during the  INITIAL
     RESEARCH TERM required to be  transferred or transferred to SB by HGS which
     is: (a) sequence data with respect to cDNA and

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     expression  products  thereof  and  BIOINFORMATICS  relating  thereto,  (b)
     information on biological function of TARGETS and screens for such TARGETS,
     and/or (c) biological  information on THERAPEUTIC PROTEINS for their use as
     TARGETS, and (3) HGS clones containing sequences in (1) and 2(a).
1.32."INITIAL  RESEARCH  TERM"  shall mean the term  beginning  May 19, 1993 and
     ending June 30, 2001.
1.33."make,  have made, use and sell" shall mean all exclusionary  rights now or
     in the future  conferred by a patent or  equivalent  of a patent  (e.g.,  a
     SPC),  copyright,  or  trade  secret  law  of  each  applicable  respective
     jurisdiction of the world,  including but not limited to the right to make,
     have made, use, offer to sell, sell, import, copy, display, and distribute.
1.34."NET  SALES"  shall  mean  gross  receipts  from  sales of a  COLLABORATION
     PRODUCT (on a product-by-product basis) by SB or HGS or, except as provided
     below, their respective AFFILIATES, licensees, distributors trading on SB's
     or HGS's  account or joint  ventures or other  associated  companies,  less
     deductions for (i) transportation,  shipping and postage charges, including
     transportation  insurance  and  customs  duties  to the  extent  separately
     invoiced;  (ii)  sales and  excise  taxes and  duties  paid or allowed by a
     selling  party  and  any  other  governmental   charges  imposed  upon  the
     production,  importation,  use or sale of such  product;  (iii)  normal and
     customary trade,  quantity and cash discounts allowed and rebates including
     but not limited to Medicaid and Medicaid-like  rebates; and (iv) allowances
     or credits to  customers  on account of rejection or return of such product
     or on account of retroactive price reductions affecting such product. Sales
     between or among a party to this Agreement and its  respective  AFFILIATES,
     licensees, distributors trading on SB's or HGS's account, or joint ventures
     or other  associated  companies  shall be included within NET SALES only if
     such purchaser is an end-user of the COLLABORATION PRODUCT.  Otherwise, NET
     SALES shall only include the subsequent, final sales to THIRD PARTIES.
1.35."OPERATING  PROFITS"  shall  mean NET SALES  less (i) COST OF  GOODS,  (ii)
     royalties paid to a party or to THIRD PARTIES,  (iii) costs and expenses of
     Phase IV studies, i.e., post-marketing clinical studies and (iv) marketing,
     promotion,  distribution and selling expenses of SB and its AFFILIATES,  in
     the case of a SB PRODUCT,  or of HGS, in the case of a HGS PRODUCT,  all as
     determined in accordance with Generally Accepted  Accounting  Principles in
     the United States.
1.36."OUTLICENSE  FEES"  shall  mean  all  royalties,  license  fees  and  other
     payments or product rights received by HGS or SB from THIRD

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"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     PARTIES based on licensing  permitted  under this Agreement after deducting
     therefrom fees reasonably paid to compensate HGS or SB, as the case may be,
     for  services  rendered to the  licensee  after the  effective  date of the
     agreement with the licensee.  Throughout this Agreement,  "outlicense"  and
     "license" and forms thereof, are used interchangeably.
1.37."PROTEIN  RESEARCH  PLAN" shall mean a written plan to research and develop
     a  THERAPEUTIC  PROTEIN  which is a  COLLABORATION  PRODUCT in the SB FIELD
     which  plan  includes,   at  a  minimum,   scientific  data,  research  and
     development  efforts,  milestones,  and which is  sufficient  to reasonably
     monitor  diligence  of the  research  and  development  of the  THERAPEUTIC
     PROTEIN.  A  representative  example  of  such a  plan  forms  Appendix  D.
     THERAPEUTIC  PROTEIN PROPOSALS and/or RESEARCH PROGRAMS directed to the six
     (6) HGS  PRODUCTS  in  Paragraph  6.3(a) are deemed to be PROTEIN  RESEARCH
     PLANS submitted by HGS under this Agreement.
1.38."RC" shall mean the  Research  Committee  which shall  consist of three (3)
     appointees  of HGS and three (3)  appointees  of SB and shall be chaired by
     one (1) of the SB appointees.
1.39."RESEARCH PLAN" shall mean  individually  and  collectively a DRUG RESEARCH
     PLAN,  ANTIBODY RESEARCH PLAN and PROTEIN RESEARCH PLAN.  RESEARCH PROGRAMS
     (other than the one directed to [***] under the COLLABORATION AGREEMENT are
     deemed DRUG RESEARCH PLANS submitted by SB under this Agreement.
1.40."RESEARCH   PROGRAM"  shall  have  the  meaning   ascribed  to  it  in  the
     COLLABORATION AGREEMENT.
1.41."RESEARCH TERM  EXTENSIONS"  shall mean extensions of the INITIAL  RESEARCH
     TERM obtained pursuant to Paragraph 8.6.
1.42."SB" shall mean SmithKline Beecham  Corporation and/or SmithKline  Beecham,
     p.l.c.,  and any past  (from May 19,  1993  through  the  EFFECTIVE  DATE),
     present or future  AFFILIATE  thereof,  which  AFFILIATE holds the relevant
     right  and/or is or was or will be  necessary  or  required  to perform any
     obligations of SB under this Agreement and/or obligations of either of them
     are subsequently  assigned and/or delegated  pursuant to Section 25 of this
     Agreement.
1.43."SB/TAKEDA  AGREEMENT" shall mean the agreement entered into between TAKEDA
     and SB effective  June 8, 1995 as amended or restated and  superseded as of
     immediately  before the EFFECTIVE DATE of this Agreement  which is attached
     as Appendix F and as may be amended from time to time.

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"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

1.44."SB FIELD" shall mean human health care,  excluding  both  DIAGNOSTICS  and
     the HGS FIELD  (except as to GENE  THERAPY  VACCINES).  The SB FIELD  shall
     include without  limitation  VACCINES and GENE THERAPY VACCINES (other than
     GENE  THERAPY  VACCINES to which HGS obtains  rights to pursuant to Section
     7).
1.45."SB  PATENT(s)"  shall  mean all  patents  and patent  applications  to the
     extent  they  claim SB  TECHNOLOGY,  which are or become  owned by SB or to
     which SB otherwise has, now or in the future,  the right to grant licenses.
     Included  within  the  definition  of SB  PATENTS  are  all  continuations,
     continuations-in-part,  divisions, patents of addition, reissues, renewals,
     extensions, registrations,  confirmations,  re-examinations thereof and any
     provisional  applications  and all SPCs. SB PATENTS  shall  include  TAKEDA
     PATENTS  to the  extent  such  patents  and  patent  applications  claim SB
     TECHNOLOGY.
1.46."SB PRODUCT shall mean (1) a GENE THERAPY  VACCINE which is a COLLABORATION
     PRODUCT  to which SB obtains  rights  pursuant  to Section 7;  and/or (2) a
     THERAPEUTIC  PROTEIN  which is a  COLLABORATION  PRODUCT in the SB FIELD to
     which SB obtains rights  pursuant to Section 6; and/or (3) a  COLLABORATION
     PRODUCT  in the SB FIELD  which  results  from a DRUG  RESEARCH  PLAN or an
     ANTIBODY  RESEARCH PLAN,  each submitted by SB during the INITIAL  RESEARCH
     TERM and/or in the case of a DRUG RESEARCH  PLAN,  which is submitted by SB
     during RESEARCH TERM EXTENSIONS.
1.47."SB  TECHNOLOGY"  shall  mean  any and  all  data,  substances,  processes,
     materials, formulas, know-how, inventions and information useful within the
     HGS FIELD  and/or SB FIELD  which are based on the use of or derived by use
     of HGS SPECIAL  TECHNOLOGY  and are  developed by or on behalf of SB during
     the INITIAL  RESEARCH TERM, or RESEARCH TERM EXTENSIONS or under a RESEARCH
     PLAN submitted by SB pursuant to this Agreement prior to the later of [***]
     years after the INITIAL  RESEARCH  TERM or [***] years after  RESEARCH TERM
     EXTENSIONS.  SB  TECHNOLOGY  shall not  include  technologies,  reagents or
     materials  made by SB merely because of an incidental or immaterial use (or
     no  use  of)  of  HGS  SPECIAL   TECHNOLOGY  in  the  development  of  such
     technologies,  reagents or materials or merely  because of an incidental or
     immaterial use of (or no use of) such  technologies,  reagents or materials
     in a RESEARCH PLAN. SB TECHNOLOGY  shall include  TAKEDA  TECHNOLOGY to the
     extent that such TAKEDA TECHNOLOGY is based on the use of or derived by use
     of (a) HGS SPECIAL

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     TECHNOLOGY,  or (b) SB TECHNOLOGY as defined in the preceding two sentences
     of this Paragraph.
1.48."SOUTHEAST ASIA" shall mean Burma, Cambodia,  Hong Kong, Indonesia , Japan,
     Laos, Malaysia, Papua New Guinea, People's Republic of China,  Philippines,
     Singapore, South Korea, Taiwan, Thailand, and Viet Nam.
1.49. "SP" shall mean Schering Plough Corporation and its AFFILIATES.
1.50. SPC" shall mean a right  based upon a patent to exclude  others from makin
     g, using or selling a product, process, substance,  composition or service,
     such as a Supplementary Protection Certificate.
1.51."SPECIAL SB  TECHNOLOGY"  shall mean (1) all SB TECHNOLOGY  developed by or
     on behalf of SB in existence  prior to the  EFFECTIVE  DATE  required to be
     transferred or transferred to HGS by SB under the COLLABORATION  AGREEMENT,
     (2) after the EFFECTIVE DATE all SB TECHNOLOGY developed by or on behalf of
     SB which SB is required to transfer to HGS or  transfers to HGS pursuant to
     this Agreement,  and/or (3) SB TECHNOLOGY  otherwise  lawfully  obtained by
     HGS. With respect to information  contained in a RESEARCH PLAN submitted by
     SB  pursuant to this  Agreement,  SPECIAL SB  TECHNOLOGY  shall not include
     items of the type  identified  in sections 1, 2, or 3 of the RESEARCH  PLAN
     outlines attachedas appendices A, C, and D.
1.52. "TAKEDA" shall mean Takeda Chemical Industries, Ltd., and its AFFILIATES.
1.53."TAKEDA PATENT" shall mean all patents and patent  applications which claim
     TAKEDA TECHNOLOGY as defined herein, which are or become owned by TAKEDA or
     to which TAKEDA  otherwise  has,  now or in the future,  the right to grant
     licenses,  to the  extent of SB's  rights  under the  SB/TAKEDA  AGREEMENT.
     Included  within the  definition of TAKEDA  PATENTS are all  continuations,
     continuations-in-part,  divisions,  patents of addition, reissues, renewals
     or extensions thereof and all SPCs
1.54."TAKEDA  PRODUCT" shall mean  individually or collectively a TAKEDA PRODUCT
     or  SB/TAKEDA  JOINT  PRODUCT as those terms are  defined in the  SB/TAKEDA
     AGREEMENT.

1.55."TAKEDA  TECHNOLOGY"  shall mean all technology  required to be transferred
     or transferred to SB under the SB/TAKEDA  AGREEMENT  prior to the EFFECTIVE
     DATE and such other technology required to be transferred or transferred to
     SB pursuant to the  SB/TAKEDA  AGREEMENT in each case which SB is permitted
     to transfer to or share with HGS pursuant to the SB/TAKEDA

                                       10
<PAGE>

     AGREEMENT  and is required to transfer or transfers to HGS pursuant to this
     Agreement.
1.56."TARGET" shall mean a GENE or expression product thereof (e.g.,  receptors,
     enzymes or ion  channels)  which could be used for  screening or other drug
     discovery purpose to identify compounds or antibodies with a biochemical or
     pharmacological effect.
1.57. "TERRITORY" shall mean all the countries and territories in the world.
1.58."THERAPEUTIC  PROTEIN"  shall mean a  polypeptide  derived from a GENE (not
     including  an ANTIBODY  PRODUCT)  which may be useful for the  treatment or
     prevention of a disease or disorder in humans.
1.59."THERAPEUTIC PROTEIN PROPOSAL" shall have the meaning ascribed to it in the
     COLLABORATION AGREEMENT.
1.60."THIRD  PARTY(IES)"  shall  mean  any  party  other  than a  party  to this
     Agreement or an AFFILIATE of SB, or HGS.
1.61."VACCINE"  shall  mean any  substance  which  achieves  a  prophylactic  or
     therapeutic effect by inducing an antigen-specific  humoral and/or cellular
     immune system response but shall not include a GENE THERAPY VACCINE.

2.   GRANTS
     ------

     Research and Development
     ------------------------

2.1.  (a) HGS hereby grants to SB a non-exclusive, world-wide  license under HGS
     SPECIAL TECHNOLOGY, claims of HGS PATENTS that cover HGS SPECIAL TECHNOLOGY
     and  COLLABORATION  PARTNER PATENTS to perform  research and development in
     the SB FIELD during the INITIAL RESEARCH TERM pursuant to this Agreement.
     (b) HGS hereby grants to SB a non-exclusive,  world-wide  license under HGS
     SPECIAL TECHNOLOGY, claims of HGS PATENTS that cover HGS SPECIAL TECHNOLOGY
     and  COLLABORATION  PARTNER PATENTS to perform  research and development of
     TARGETS and DRUG PRODUCTS which are COLLABORATION  PRODUCTS in the SB FIELD
     during RESEARCH TERM EXTENSIONS.
2.2. HGS hereby  grants to SB a  non-exclusive,  world-wide,  license  under HGS
     SPECIAL TECHNOLOGY, claims of HGS PATENTS that cover HGS SPECIAL TECHNOLOGY
     and  COLLABORATION  PARTNER PATENTS to perform  research and development in
     the SB FIELD after the INITIAL  RESEARCH  TERM  pursuant to a RESEARCH PLAN
     submitted by SB pursuant to this Agreement.

                                       11
<PAGE>


2.3. HGS hereby  grants to SB a  non-exclusive, world-wide,  license  under HGS
     SPECIAL  TECHNOLOGY,  HGS  PATENTS  and  COLLABORATION  PARTNER  PATENTS to
     perform  research and  development  in the HGS FIELD only in furtherance of
     research and  development  in the SB FIELD (i) during the INITIAL  RESEARCH
     TERM and RESEARCH TERM EXTENSIONS, and (ii) after the INITIAL RESEARCH TERM
     under a RESEARCH PLAN submitted by SB pursuant to this  Agreement.  For the
     avoidance of doubt,  no license is granted (other than to perform  research
     and  development  pursuant to this  Paragraph 2.3) to SB hereunder to make,
     have made, use and sell COLLABORATION PRODUCTS in the HGS FIELD.
2.4. SB hereby grants to HGS a non-exclusive,  world-wide, license under SPECIAL
     SB TECHNOLOGY  and claims of SB PATENTS that cover SPECIAL SB TECHNOLOGY to
     perform  research  and  development  in the SB  FIELD  during  the  INITIAL
     RESEARCH TERM.
2.5. SB hereby grants to HGS a non-exclusive,  world-wide, license under SPECIAL
     SB TECHNOLOGY  and claims of SB PATENTS that cover SPECIAL SB TECHNOLOGY to
     perform research and development in the SB FIELD after the INITIAL RESEARCH
     TERM  pursuant  to a  RESEARCH  PLAN  submitted  by HGS  pursuant  to  this
     Agreement during the INITIAL RESEARCH TERM.
2.6. Notwithstanding  any  rights  obtained  by  a  party,  with  respect  to  a
     THERAPEUTIC PROTEIN under Section 6 or a GENE THERAPY VACCINE under Section
     7, HGS and SB each acknowledges and agrees that HGS and SB, as the case may
     be, retain the right under HGS SPECIAL TECHNOLOGY,  HGS PATENTS, SPECIAL SB
     TECHNOLOGY and SB PATENTS to use  THERAPEUTIC  PROTEINS and/or GENE THERAPY
     VACCINES as to which the other  obtains  rights under Section 6 or 7 solely
     for the purposes of discovering,  researching, developing, marketing, using
     and  selling a DRUG  PRODUCT or an  ANTIBODY  PRODUCT  each in the SB FIELD
     pursuant to the applicable provisions of this Agreement.

     Research And Development in the HGS FIELD
     -----------------------------------------

2.7. (a) SB hereby grants to HGS an exclusive, world-wide, license under SPECIAL
     SB TECHNOLOGY and SB PATENTS to perform research and development in the HGS
     FIELD;

     (b)  Notwithstanding  subparagraph (a), HGS acknowledges and agrees that SB
     and  COLLABORATION  PARTNERS  as the case may be,  retain  the right  under
     SPECIAL SB TECHNOLOGY and SB PATENTS to perform research and development in
     the HGS FIELD as  provided  in this  Agreement  and  COLLABORATION  PARTNER
     AGREEMENTS.
                                       12

<PAGE>

SB PRODUCTS.
- ------------

2.8. HGS hereby grants to SB an exclusive,  sublicenseable world-wide license in
     the SB FIELD under HGS SPECIAL TECHNOLOGY and HGS PATENTS and COLLABORATION
     PARTNER  PATENTS to make,  have made, use and sell in the  TERRITORY,  each
     THERAPEUTIC  PROTEIN as to which SB obtains rights under Section 6 and each
     GENE THERAPY VACCINE as to which SB obtains rights under Section 7.
2.9. HGS hereby grants to SB a non-exclusive, sublicenseable world-wide, license
     in  the  SB  FIELD  under  HGS  SPECIAL  TECHNOLOGY  and  HGS  PATENTS  and
     COLLABORATION  PARTNER  PATENTS with respect to claims  directed to TARGETS
     (and the manufacture and use thereof) which are COLLABORATION  PRODUCTS and
     also with respect to BLOCKING  CLAIMS,  to make, have made, use and sell in
     the  TERRITORY,  (1) DRUG PRODUCT  which is a  COLLABORATION  PRODUCT which
     results  from a DRUG  RESEARCH  PLAN  submitted  by SB during  the  INITIAL
     RESEARCH TERM and RESEARCH TERM EXTENSIONS,  and (2) ANTIBODY PRODUCT which
     is a COLLABORATION PRODUCT and which results from an ANTIBODY RESEARCH PLAN
     submitted by SB during the INITIAL RESEARCH TERM.
2.10.(a) SB agrees not to grant to a THIRD  PARTY  rights in or to an SB PRODUCT
     in the TERRITORY outside of SOUTHEAST ASIA except as follows:

(i)  SB shall  have  the  right to  grant a  license  to a THIRD  PARTY to an SB
     PRODUCT which is a THERAPEUTIC  PROTEIN as to which SB obtains rights under
     Section 6 the earlier of (1) after SB has established proof of efficacy for
     such SB  PRODUCT  in Phase  II  clinical  tests;  or (2)  after  sufficient
     evidence to establish efficacy for one or more indications is available;
(ii) SB shall  have the right to license SB  PRODUCTS  which are DRUG  PRODUCTS,
     GENE THERAPY VACCINES or ANTIBODY PRODUCTS at any time; and
(iii)SB shall have the right to grant a license to SB PRODUCTS in the  TERRITORY
     to TAKEDA pursuant to the SB/TAKEDA AGREEMENT.

(b)  SB shall have the right at any time to grant rights and licenses to any and
     all SB PRODUCTS in SOUTHEAST ASIA.

(c)  In  addition  to (a) and (b),  the  rights  granted to SB by HGS under this
     Agreement are  licenseable  and/or  transferable  by SB to a  COLLABORATION
     PARTNER  provided HGS and SB mutually  agree to the terms and conditions of
     the relevant agreement.

                                       13
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

(d)  Except for agreements  permitted by Paragraph 12.3, the SB/TAKEDA AGREEMENT
     or COLLABORATION PARTNER AGREEMENTS,  the rights granted to SB by HGS under
     this  Agreement  and  SB's  rights  to SB  TECHNOLOGY  and SB  PATENTS  are
     licenseable and/or transferable by SB to a THIRD PARTY only with respect to
     a SB  PRODUCT,  and only  pursuant  to an  Agreement  by which SB  grants a
     license to a THIRD PARTY to an SB PRODUCT as permitted under this Paragraph
     2.10 and in which the THIRD PARTY agrees to covenants and obligations  with
     respect to the use of such SB PRODUCT, and any HGS TECHNOLOGY, HGS PATENTS,
     SB PATENTS and SB  TECHNOLOGY  to be licensed to such THIRD PARTY which are
     essentially  identical to the  covenants and  obligations  of SB under this
     Agreement.

HGS PRODUCTs
- ------------

2.11.SB hereby grants to HGS an  exclusive,  sublicenseable  world-wide  license
     under SPECIAL SB TECHNOLOGY and SB PATENTS to make, have made, use and sell
     in the TERRITORY within the SB FIELD each  THERAPEUTIC  PROTEIN which is an
     HGS PRODUCT as to which HGS obtains  rights under  Section 6 and within the
     HGS FIELD each GENE THERAPY VACCINE which is an HGS PRODUCT as to which HGS
     obtains rights under Section 7.
2.12.With  respect to  THERAPEUTIC  PROTEINS in the SB FIELD as to which HGS has
     obtained  rights  under  Section  6 and  ANTIBODY  PRODUCTS  which  are HGS
     PRODUCTS in the SB FIELD developed under a ANTIBODY RESEARCH PLAN submitted
     by HGS during the INITIAL  RESEARCH  TERM,  in each case HGS shall have the
     right to grant  licenses  to THIRD  PARTIES  only  after  HGS has  obtained
     sufficient pharmacological,  biological and other data to permit a decision
     to be  made  as to  whether  or not to  complete  studies  required  for an
     Investigational  New Drug Application (IND) provided,  however,  during the
     INITIAL  RESEARCH  TERM such  licensing  rights  are  limited to a total of
     [***] such THERAPEUTIC PROTEINS and [***] such ANTIBODY PRODUCTS.

2.13.SB hereby  grants to HGS a  non-exclusive,  sublicenseable  subject  to the
     limitations of Paragraphs  2.12,  2.14, 2.20 and 2.21,  world-wide  license
     under  SPECIAL  SB  TECHNOLOGY  and under SB PATENTS  only with  respect to
     claims  directed to TARGETS (and the manufacture and use thereof) which are
     COLLABORATION  PRODUCTS and also only with respect to BLOCKING  CLAIMS,  to
     make, have made, use and sell in the TERRITORY, HGS PRODUCTS which are DRUG
     PRODUCTS  within the SB FIELD  developed  pursuant to a DRUG  RESEARCH PLAN
     submitted by HGS during the

                                       14
<PAGE>


     INITIAL RESEARCH TERM and HGS PRODUCTS which are ANTIBODY PRODUCT in the SB
     FIELD  developed  pursuant to a ANTIBODY  RESEARCH  PLAN  submitted  by HGS
     during the INITIAL RESEARCH TERM.

2.14.Except for  agreements  permitted  by  Paragraph  12.3,  during the INITIAL
     RESEARCH TERM the rights to SPECIAL SB TECHNOLOGY and SB PATENTS granted to
     HGS by SB under  this  Agreement  in the SB FIELD  are  licenseable  and/or
     transferable by HGS to a THIRD PARTY only with respect to an HGS PRODUCT in
     the SB FIELD,  and only  pursuant  to an  Agreement  by which HGS  grants a
     license to a THIRD  PARTY to an HGS  PRODUCT  in the SB FIELD as  permitted
     under this  Agreement  and in which the THIRD PARTY agrees to covenants and
     obligations  which limit the use of SB PATENTS  and  SPECIAL SB  TECHNOLOGY
     which are  essentially  identical to the covenants and  obligations  of HGS
     under this Agreement.
2.15.SB hereby grants to HGS an exclusive,  world-wide  license,  with the right
     to grant  sublicenses,  (i) under SB  PATENTS,  and (ii)  under  SPECIAL SB
     TECHNOLOGY  developed by or on behalf of SB prior to the EFFECTIVE DATE, in
     each case to make, have made, use and sell an HGS PRODUCT in the HGS FIELD;
     provided  that  in  any  agreement   with  a  THIRD  PARTY  (other  than  a
     COLLABORATION  PARTNER)  with respect to such SPECIAL SB  TECHNOLOGY,  such
     THIRD PARTY will only be provided with such SPECIAL SB TECHNOLOGY by HGS on
     a  gene-by-gene  basis after prior  written  notice to SB of the SPECIAL SB
     TECHNOLOGY to be provided and further  provided  that HGS will  incorporate
     the  following  terms  into  all  THIRD  PARTY  agreements  (other  than  a
     COLLABORATION  PARTNER)  in the HGS FIELD with  respect to such  SPECIAL SB
     TECHNOLOGY:  (i) such THIRD PARTY will  develop and  maintain a  'firewall'
     plan reasonably acceptable to both HGS and SB; and (ii) SB has the right to
     directly  enforce  breaches of any such  agreement  by the THIRD PARTY with
     respect to its use of SPECIAL SB TECHNOLOGY.
    
     Copromotion.
     ------------
2.16.(a) HGS hereby  grants to SB an option to  co-promote  HGS PRODUCT  sold by
     HGS  in  the  HGS  FIELD  (other  than  a  GENE  THERAPY  VACCINE),   on  a
     country-by-country  basis, in the TERRITORY. SB may exercise this option as
     provided in Paragraph  10.2.  The option does not extend to any HGS PRODUCT
     which is  primarily  a  service.

                                       15

<PAGE>

(b)  HGS hereby grants to SB an option to develop,  sell,  promote and/or market
     HGS  PRODUCTS in the SB FIELD  (other than a GENE  THERAPY  VACCINE) in the
     TERRITORY, which option may be exercised as provided in Paragraph 10.3.
(c)  SB hereby  grants to HGS an option to  co-promote  SB PRODUCT sold by SB in
     the SB FIELD (other than a GENE THERAPY VACCINE),  on a  country-by-country
     basis in the United States,  Canada,  Mexico,  and Europe. HGS may exercise
     this option as provided in  Paragraph  10.1.  The option does not extend to
     any SB PRODUCT which is primarily a service.
    
     Takeda.
     -------

2.17.(a) HGS  acknowledges  that it has reviewed the  SB/TAKEDA  AGREEMENT as it
     exists as of the  EFFECTIVE  DATE as may be amended with the consent of HGS
     and hereby  confirms  its  approval of, and consent to SB's entry into such
     agreement.
(b)  HGS  hereby  grants to SB the  right to grant to  TAKEDA,  pursuant  to the
     SB/TAKEDA  AGREEMENT as it exists as of the EFFECTIVE DATE and as it may be
     amended with the consent of HGS, an exclusive or  non-exclusive  sublicense
     under LICENSED PATENTS,  LICENSED TECHNOLOGY,  SB PATENTS and SB TECHNOLOGY
     (to the full extent of the interest of HGS  therein),  to make,  have made,
     use and sell SB PRODUCTS and TAKEDA PRODUCTS.
(c)  HGS  hereby  grants to SB the right to grant to  TAKEDA,  a  non-exclusive,
     non-transferable,  paid-up  sublicense  under  LICENSED  PATENTS,  LICENSED
     TECHNOLOGY,  SB  PATENTS  and SB  TECHNOLOGY  (to the  full  extent  of the
     interest of HGS therein), to carry out research and development pursuant to
     the SB/TAKEDA AGREEMENT as it exists as of the EFFECTIVE DATE and as it may
     be amended with the consent of HGS.
(d)  LICENSED  PATENTS and LICENSED  TECHNOLOGY as used in this  Paragraph  2.17
     shall have the meaning ascribed to them in the SB/TAKEDA AGREEMENT.

     Other License Terms.
     --------------------

2.18.HGS grants to SB an  irrevocable,  royalty-free  non-exclusive  world-wide,
     license   (sublicenseable   only   to   COLLABORATION   PARTNERS   under  a
     COLLABORATION  PARTNER AGREEMENT and TAKEDA under the SB/TAKEDA AGREEMENT),
     to use  BIOINFORMATICS  which is HGS  TECHNOLOGY  to perform  research  and
     development   after  the  INITIAL  RESEARCH  TERM.   Without  limiting  the
     generality of the forgoing,  HGS hereby grants to SB the rights to grant to
     TAKEDA an irrevocable,  paid-up,  non-

                                       16

<PAGE>


     exclusive,  world-wide license to any and all  BIOINFORMATICs  which is HGS
     TECHNOLOGY  transferred to TAKEDA during the INITIAL RESEARCH TERM pursuant
     to the SB/TAKEDA AGREEMENT.
2.19.If during  the  INITIAL  RESEARCH  TERM HGS  develops  a  biotransformation
     process within the HGS FIELD for preparing pharmaceutically active human or
     animal agents sold by SB prior to May 19, 1993, HGS hereby grants to SB the
     first right to an exclusive license under HGS know-how and patents to make,
     have made,  use and sell such agents under terms to be  negotiated.  If the
     parties are unable to reach  agreement on the terms  thereof  within ninety
     (90) days of notice by HGS that such process has been  developed,  then HGS
     shall  have the right to grant  such  license  to a THIRD  PARTY  provided,
     however,  that HGS shall not grant such  license to a THIRD  PARTY on terms
     more  favorable  than those last extended to SB without first offering such
     terms to SB.
2.20.Except for (i) licenses  granted by HGS to SB under this Agreement,  TAKEDA
     under  the  SB/TAKEDA  AGREEMENT,  and/or  COLLABORATION  PARTNERS  under a
     COLLABORATION PARTNER AGREEMENT; and (ii) licenses granted to THIRD PARTIES
     in the SB FIELD with respect to THERAPEUTIC  PROTEINS or ANTIBODY  PRODUCTS
     as permitted by Paragraph 2.12, during the INITIAL RESEARCH TERM, HGS shall
     not  grant  any  rights  or  license  to  THERAPEUTIC  PROTEINS  which  are
     COLLABORATION  PRODUCTS  in the SB FIELD or  ANTIBODY  PRODUCTS  which  are
     COLLABORATION PRODUCTS in the SB FIELD.

2.21.Except  for  licenses  granted by HGS to SB under  this  Agreement,  TAKEDA
     under  the  SB/TAKEDA  AGREEMENT,  and/or  COLLABORATION  PARTNERS  under a
     COLLABORATION  PARTNER  AGREEMENT,  (a) for the  period  commencing  on the
     expiration  of  the  INITIAL  RESEARCH  TERM  and  ending  four  (4)  years
     thereafter, HGS agrees not to grant any rights or licenses to a THIRD PARTY
     in the SB FIELD with respect to TARGETS  which are  COLLABORATION  PRODUCTS
     and which are the subject of a DRUG RESEARCH PLAN or ANTIBODY RESEARCH PLAN
     submitted  prior to the end of the INITIAL  RESEARCH  TERM by SB or similar
     research plan  submitted  prior to the end of the INITIAL  RESEARCH TERM by
     TAKEDA under the SB/TAKEDA  AGREEMENT and/or a COLLABORATION  PARTNER under
     such COLLABORATION  PARTNER AGREEMENT,  and (b) HGS agrees not to grant any
     rights or license to a THIRD PARTY in the SB FIELD with  respect to

                                       17
<PAGE>


     TARGETS which are COLLABORATION PRODUCTS during the INITIAL RESEARCH TERM.
2.22 (a) HGS shall not use TARGETS  which are  COLLABORATION  PRODUCTS  for DRUG
     PRODUCT  discovery in the SB FIELD until three (3) years from the EFFECTIVE
     DATE,  and (b) HGS  further  agrees  that after such  period and during the
     INITIAL  RESEARCH  TERM HGS shall not use TARGETS  which are  COLLABORATION
     PRODUCTS for DRUG  PRODUCT  discovery in the SB FIELD which are the subject
     of a DRUG RESEARCH PLAN submitted by SB or an equivalent  plan submitted by
     a COLLABORATION  PARTNER under a COLLABORATION  PARTNER AGREEMENT or TAKEDA
     under the SB/TAKEDA AGREEMENT prior to the end of the INITIAL RESEARCH TERM
     unless prior to the submission of such plan by SB, TAKEDA or  COLLABORATION
     PARTNER, HGS has either submitted to SB biological data with respect to the
     TARGET to which such plans are  directed or HGS has  submitted to SB a DRUG
     RESEARCH  PLAN  with  respect  to such  TARGET.  For the  purposes  of this
     Paragraph 2.22, biological data shall mean for example, nucleotide sequence
     from a single clone  encoding the complete  open reading frame for the full
     length TARGET and/or transient or stable functionally expressing cell lines
     each of which are generated by or on behalf of HGS.
2.23.During the INITIAL  RESEARCH TERM, HGS shall not use TARGETs or THERAPEUTIC
     PROTEINS which are COLLABORATION PRODUCTS for ANTIBODY PRODUCT discovery in
     the SB FIELD which are the subject of an ANTIBODY  RESEARCH PLAN  submitted
     by SB in accordance  with this Agreement  unless prior to the submission of
     such  ANTIBODY  RESEARCH  PLAN by SB, HGS has either  submitted an ANTIBODY
     RESEARCH  PLAN  with  respect  to such  TARGET or HGS has  submitted  to SB
     biological  data with respect to the TARGET to which the ANTIBODY  RESEARCH
     PLAN is directed.  For the purposes of this Paragraph biological data shall
     mean for example,  nucleotide  sequence  from a single  clone  encoding the
     complete open reading frame for the full length TARGET and/or  transient or
     stable functionally expressing cell lines each of which are generated by or
     on behalf of HGS.
2.24.Notwithstanding  anything  else  to the  contrary,  SPECIAL  SB  TECHNOLOGY
     developed after the EFFECTIVE DATE and claims of SB PATENTS that cover such
     SPECIAL SB  TECHNOLOGY  developed  after the EFFECTIVE  DATE,  and RESEARCH
     PROGRAMS submitted under the COLLABORATION AGREEMENT shall not be disclosed

                                       18

<PAGE>


     by HGS to SP or a THIRD PARTY until such patents and technology have, prior
     to such  disclosure,  become  generally  available to the public other than
     through a breach of this Agreement.
2.25.All  the  grants  in this  Section  2 are  subject  to all  the  terms  and
     conditions of the Agreement.
2.26.HGS  and SB each  agree  that:  (i)  either  party  may  compare  microbial
     nucleotide  sequences  with  human  cDNA  sequences  which are HGS  SPECIAL
     TECHNOLOGY or SPECIAL SB TECHNOLOGY  to determine  homologies  between such
     sequences; (ii) such use of HGS SPECIAL TECHNOLOGY or SPECIAL SB TECHNOLOGY
     by SB during the INITIAL RESEARCH TERM or RESEARCH TERM EXTENSIONS shall be
     deemed to be an "immaterial  use" of such  technologies  (as such phrase is
     used in this  Agreement)  with  respect  to any  microbial  gene based drug
     discovery target or vaccine  identified by SB (or a licensee of SB) by such
     use, and such use alone shall not cause such microbial  nucleotide sequence
     or such target and/or such vaccine to be SB  TECHNOLOGY or a  COLLABORATION
     PRODUCT nor any antimicrobial  product  discovered or developed by SB (or a
     licensee of SB) by such use of any such  microbial  nucleotide  sequence or
     such  target  and/or  such  vaccine  to be a  COLLABORATION  PRODUCT  or SB
     TECHNOLOGY  under  this  Agreement,  (iii)  such use  alone of HGS  SPECIAL
     TECHNOLOGY  or  SPECIAL  SB  TECHNOLOGY  by HGS  shall  not  cause any such
     microbial  nucleotide  sequence or any microbial  gene based drug discovery
     target or vaccine  identified  by HGS (or a licensee of HGS) by such use to
     be a COLLABORATION  PRODUCT,  nor any antimicrobial  product  discovered or
     developed  by HGS (or a licensee of HGS) by such use of any such  microbial
     nucleotide   sequence  or  such  target   and/or  such   vaccine  to  be  a
     COLLABORATION PRODUCT or HGS TECHNOLOGY under this Agreement.

3.   PAYMENTS AND ROYALTIES
     ----------------------

     Payments to HGS
     ---------------

3.1  SB shall pay the following royalties on NET SALES of each SB PRODUCT (other
     than a GENE THERAPY VACCINE) and TAKEDA PRODUCT,  each which are sold by SB
     or SB licensees (other than TAKEDA or its licensees) which royalty shall be
     calculated on a product by product basis, with the applicable  royalty rate
     for each such SB PRODUCT or TAKEDA  PRODUCT in a calendar  year being based
     on world-wide  sales for such SB PRODUCT or TAKEDA  PRODUCT in the calendar
     year and this determined royalty rate being applied to all world-wide sales
     (other than sales by TAKEDA or its

                                       19

<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

  licensees) of such SB PRODUCT or TAKEDA
     PRODUCT in such calendar year:
        i.6% (six percent) of NET SALES of each SB PRODUCT and/or TAKEDA PRODUCT
        during  each  calendar  year in which the NET  SALES of such SB  PRODUCT
        and/or TAKEDA  PRODUCT do not exceed  [***];
        ii.8% (eight percent) of such NET SALES of each SB PRODUCT and/or TAKEDA
        PRODUCT  during  each  calendar  year in which  the NET SALES of such SB
        PRODUCT  and/or TAKEDA  PRODUCT  exceed [***];
        iii.9% (nine percent) of such NET SALES of each SB PRODUCT and/or TAKEDA
        PRODUCT  during  each  calendar  year in which  the NET SALES of such SB
        PRODUCT  and/or TAKEDA  PRODUCT  exceed [***];
        iv.10%  (ten  percent)  of such  NET  SALES  of each SB  PRODUCT  and/or
        TAKEDA  PRODUCT during each calendar year in which the NET SALES of such
        SB PRODUCT and/or TAKEDA PRODUCT exceed [***]).
3.2  SB shall have the right on a product by product  basis,  to credit  against
     any royalty  payment due to HGS pursuant to Paragraph  3.1 for any calendar
     half-year,  [***] of the royalties due TAKEDA  pursuant to Section 3 of the
     SB/TAKEDA  AGREEMENT for that half-year on sales of TAKEDA PRODUCT by SB or
     its licensees;  provided however, that in no event shall the royalty due to
     HGS on such  sales in such  half-year  be  reduced  more than  [***] of the
     royalty that would  otherwise be due HGS under  Paragraph 3.1 on such sales
     in such half-year.
3.3  SB shall  pay  royalties  to  HGS  for  sales  made by  SB of each CORIGHTS
     PRODUCT in an amount  equal to [***] of the royalty  which would be due HGS
     under Paragraph 3.1, as if such CORIGHTS PRODUCT were a SB PRODUCT.
3.4  No  royalties  are due HGS under  Paragraph  3.1 for any  product for which
     royalties are due HGS under Paragraph 3.5 or 3.6.
3.5  SB  shall  pay to HGS  the  royalties  owed by  TAKEDA  to SB  pursuant  to
     Paragraph 3.3 of the SB/TAKEDA  AGREEMENT on sales of TAKEDA  PRODUCTS sold
     by TAKEDA or its licensees (other than SB).
3.6  SB shall pay to HGS fifty (50%) percent of the royalties  owed by TAKEDA to
     SB pursuant to  Paragraph  3.3 of the  SB/TAKEDA  AGREEMENT  on sales of SB
     PRODUCTS  sold by TAKEDA or its  licensees  other than SB  pursuant  to the
     SB/TAKEDA AGREEMENT.
                                       20
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."


3.7  Notwithstanding  anything herein to the contrary, SB shall not be obligated
     to pay any royalties or make any milestone  payments and HGS shall not have
     co-promotion rights each with respect to the following: 

         (a) SB PRODUCT, CORIGHT PRODUCT or TAKEDA PRODUCT encompassed by a DRUG
     RESEARCH  PLAN  or  ANTIBODY  RESEARCH  PLAN  submitted  by SB  under  this
     Agreement (or in the case of a CORIGHT PRODUCT or TAKEDA PRODUCT  submitted
     under a research  plan  pursuant to an agreement  with SB and/or HGS) which
     product is not covered by a claim of a granted HGS PATENT and which product
     is  DISCOVERED  after the later of (i) [***]  after the end of the
     INITIAL RESEARCH TERM or (ii) [***] years after the end of RESEARCH TERM
     EXTENSIONS;  or (b) SB PRODUCT which is a THERAPEUTIC  PROTEIN which is not
     covered  by a granted  claim of a HGS  PATENT,  SB PATENT or  COLLABORATION
     PARTNER  PATENT  licensed to SB under this  Agreement and of which at least
     95%  of   the  full  length   DNA  coding   sequence   for,  or   the  cDNA
     corresponding  to the amino acid  sequence  of the final  form of,  such SB
     PRODUCT is independently identified by SB without the use of HGS TECHNOLOGY
     or SB TECHNOLOGY.

Payments to SB
- --------------
3.8  If a HGS PRODUCT (other than a GENE THERAPY  VACCINE) (i) is sold by HGS in
     the HGS FIELD and is covered by a SB PATENT or  incorporates or is based on
     or is  derived  by use of SB  TECHNOLOGY  or  (ii) is sold by HGS in the SB
     FIELD, then HGS shall pay the following  royalties on NET SALES of each HGS
     PRODUCT  sold by HGS which  royalty  shall be  calculated  on a product  by
     product basis,  with the applicable  royalty rate for each HGS PRODUCT in a
     calendar year being based on world-wide  sales by HGS and its licensees for
     such HGS PRODUCT in the  calendar  year and this  determined  royalty  rate
     being  applied to all  world-wide  sales by HGS of such HGS PRODUCT in such
     calendar year:
         i 6% (six  percent) of NET SALES during each calendar year in which the
         NET SALES do not exceed [***];
         ii 8% (eight  percent) of all NET SALES  during each  calendar  year in
         which  the  NET  SALES  exceed  [***];

         iii 9% (nine  percent) of all NET SALES of the HGS PRODUCT  during each
         calendar  year  in which  the NET SALES exceed [***]  but do not exceed
         [***];


                                       21
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

         iv 10% (ten  percent) of all NET SALES of the HGS  PRODUCT  during each
         calendar year in which the NET SALES exceed [***]).
3.9  With respect to
         (i) each  THERAPEUTIC  PROTEIN  as to which HGS  obtains  rights  under
         Section 6;
         (ii) each DRUG PRODUCT or ANTIBODY PRODUCT in each case which is an HGS
         PRODUCT  in the SB FIELD  DISCOVERED  prior  to the end of the  INITIAL
         RESEARCH TERM; and
         (iii) each DRUG PRODUCT or ANTIBODY  PRODUCT which is an HGS PRODUCT in
         the SB  FIELD  which  results  from a TARGET  which is a  COLLABORATION
         PRODUCT  which  is the  subject  of a DRUG  RESEARCH  PLAN or  ANTIBODY
         RESEARCH PLAN submitted  prior to the end of the INITIAL  RESEARCH TERM
         by HGS and  which  is  also  the  subject  of a DRUG  RESEARCH  PLAN or
         ANTIBODY  RESEARCH  PLAN  submitted  by SB,  where the DRUG  PRODUCT or
         ANTIBODY  PRODUCT is DISCOVERED by HGS prior to the period ending [***]
         years after the end of the INITIAL RESEARCH TERM,
     which HGS  PRODUCTS  are  licensed by HGS to a THIRD PARTY in the SB FIELD,
     HGS shall pay SB: 
         (a) [***] percent [***]  of any  OUTLICENSE FEES (excluding  royalties)
     received by HGS from a THIRD PARTY with respect thereto; and
        (b) the following  percentage of royalties (Royalty Share) due HGS from
     such THIRD  PARTY which  percentage  shall be based on all  world-wide  NET
     SALES for such HGS PRODUCT in a calendar year:

          Net Sales                   Royalty Share to SB
          ----------------------------------------------
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]

3.10 Except as provided in Paragraphs 3.9, 10.2 and 10.3, HGS shall be obligated
         to pay royalties on and shall have other obligations pursuant  to  this
         Agreement only with respect to:
         (a) any HGS PRODUCT which is covered by an issued SB PATENT; and/or

                                       22

<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     (b) any HGS PRODUCT in the HGS FIELD  (other than a GENE  THERAPY  VACCINE)
     which is not covered by an issued SB PATENT, where such product is based on
     the use of, or is derived by the use of SPECIAL SB TECHNOLOGY; and/or
     (c) any HGS  PRODUCT in the SB FIELD  which is a DRUG  PRODUCT or  ANTIBODY
     PRODUCT DISCOVERED during the INITIAL RESEARCH TERM; and/or
     (d) any HGS  PRODUCT in the SB FIELD  which is a DRUG  PRODUCT or  ANTIBODY
     PRODUCT which is not covered by an issued SB PATENT,  where such product is
     based on the use of, or derived by the use of SPECIAL SB TECHNOLOGY  and is
     DISCOVERED  during  the  period  commencing  after  the end of the  INITIAL
     RESEARCH TERM and ending [***] years thereafter; and/or
     (e) any HGS PRODUCT in the SB FIELD which is a THERAPEUTIC PROTEIN to which
     HGS has obtained rights under Section 6; and/or
     (f) any HGS  PRODUCT  which is a GENE  THERAPY  VACCINE  to  which  HGS has
     obtained rights under Section 7.
3.11 If a HGS  PRODUCT  is sold in the HGS FIELD by a  licensee  of HGS,  and is
     covered by a SB PATENT or  incorporates or is based on or is derived by use
     of SB  TECHNOLOGY,  then  HGS  shall  pay  to SB  [***]  percent  [***]  of
     OUTLICENSE FEES received by HGS for such HGS PRODUCT.
3.12 Notwithstanding  any of the provisions of this Section 3, HGS shall not owe
     SB any  royalties or have any other  obligations  to SB with respect to the
     [***]  HGS PRODUCTS  for which SP elects to obtain and obtains co-promotion
     or co-marketing  rights under a COLLABORATION  PARTNER  AGREEMENT among SP,
     HGS and SB.
3.13  Notwithstanding any of the provisions of this Section 3, HGS shall not owe
     SB any royalties and SB shall not owe HGS royalties  with respect to an HGS
     PRODUCT  in  countries  and/or  territories  for  which SB  obtains  rights
     pursuant to Paragraphs 2.16(b) and 10.3.

Milestone payments
- ------------------

3.14 (a) In addition to royalties  as provided  above,  for each SB PRODUCT,  SB
     shall pay to HGS [***] dollars  [***] upon  initiation by SB, a licensee of
     SB (except TAKEDA under the SB/TAKEDA AGREEMENT or a COLLABORATION  PARTNER
     under a COLLABORATION  PARTNER AGREEMENT) or by a THIRD PARTY authorized by
     SB (subject to the above exceptions) of the first CLINICAL STUDY and [***]

                                       23
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     dollars [***] upon acceptance of the first filing of a New Drug Application
     or a Product License Application (or equivalent thereof in a Major Market).
     Such milestone  payments shall be applicable to all SB PRODUCTS  except any
     SB PRODUCT where  expected  worldwide NET SALES are less than [***] million
     dollars [***] per year.  (b) In the case of SB PRODUCTS for which  expected
     worldwide  NET  SALES  are less  than US  [***],  SB shall pay to HGS [***]
     dollars  [***] upon  initiation of  country-wide  sales of the product in a
     Major  Market.  If the actual  annual  worldwide  NET SALES of such product
     exceed the US [***] then SB shall thereupon pay to HGS [***].
(c)  The milestone  payments  provided in this Paragraph 3.14 shall only be made
     once for each SB PRODUCT and shall not be made in the case of  improvements
     or modifications such as but not limited to changed forms, formats,  salts,
     formulations,  indications,  processes  or  protocols  of an SB PRODUCT for
     which the payments were previously made.
(d)  Notwithstanding  anything in this Paragraph 3.14 to the contrary,  payments
     to HGS in connection  with  milestone  payments for TAKEDA  PRODUCTS and SB
     PRODUCTS sold by TAKEDA or its sublicencees  under the SB/TAKEDA  AGREEMENT
     are governed by Section 3 of such agreement.
(e)  In the event SB licenses an SB PRODUCT to a THIRD  PARTY,  SB shall  credit
     the  share  of  OUTLICENSE  FEE  paid HGS on such SB  PRODUCT  against  any
     milestone payments due HGS under this Paragraph 3.14 for such SB PRODUCT.
3.15 SB and HGS shall share equally (i) any  milestone  payments  received by SB
     from TAKEDA  pursuant to Paragraph 3.8 of the SB/TAKEDA  AGREEMENT and (ii)
     milestone payments due to HGS and/or SB from COLLABORATION PARTNERS under a
     COLLABORATION PARTNER AGREEMENT.

COLLABORATION PARTNER PAYMENTS.
- -------------------------------

3.16 HGS and SB shall  share on an equal basis any up front  contract  execution
     fees  received  by HGS  and/or  SB  from a  COLLABORATION  PARTNER  under a
     COLLABORATION  PARTNER  AGREEMENT,  which fees include only:  (1) the forty
     five (45,000,000)  Million U.S. Dollar payment due SB and HGS from SP which
     fee is due  and  payable  over a five  year  period,  (2) the  thirty  five
     (35,000,000)  Million U.S.  Dollar  payment due SB and HGS from Merck which
     fee is due  and  payable  over a five  year  period,  (3) the  twenty  five
     (25,000,000) U.S. Dollar payment due SB and HGS from Synthelabo which

                                       24

<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     fee is due and  payable  over a five  year  period,  and (4)  similar  fees
     received from another COLLABORATION PARTNER.

Other.
- ------

3.17 With  respect  to any SB  PRODUCT  or HGS  PRODUCT  in any  country  in any
     calendar year, in the event that royalties are paid to a THIRD PARTY on NET
     SALES of such HGS PRODUCT or SB PRODUCT in such  country for such  calendar
     year and the royalties  actually  owed to such THIRD PARTY when  aggregated
     with the royalties owed to HGS or SB as the case may be for such product in
     such country in such calendar year causes the royalty rate on NET SALES for
     such product in such country in such calendar  year to exceed  [***],  then
     one-half of the royalties which are to be actually paid to such THIRD PARTY
     may be credited  against the  royalties due to SB or HGS as the case may be
     for such product in such country in such calendar year until the aggregated
     royalty  rate for such  product in such  country in such  calendar  year is
     reduced to [***] provided  however,  that in no event shall the royalty due
     to SB or HGS as the case may be on such NET SALES in such  year be  reduced
     to less than [***].
3.18 Royalties owed HGS by COLLABORATION  PARTNERS under a COLLABORATION PARTNER
     AGREEMENT shall be paid to and collected by HGS.
3.19.Royalty  obligations on TAKEDA  PRODUCTS sold by SB and HGS PRODUCTS and SB
     PRODUCTS in the SB FIELD and GENE THERAPY  VACCINES,  under this  Agreement
     shall terminate on a country-by-country and product-by-product basis on the
     later of (i) ten (10) years after first country-wide launch of each product
     in each country or (ii) expiration of the SB PATENT,  COLLABORATION PARTNER
     PATENT or HGS  PATENT  which  covers the  making,  using or selling of such
     product in such country.
3.20 Royalty  obligations on HGS PRODUCTs in the HGS FIELD, under this Agreement
     shall terminate on a country-by-country and product-by-product basis on the
     later of (i) ten (10) years after first country-wide launch of each product
     in each  country  or (ii)  expiration  of the SB PATENT  which  covers  the
     making, using or selling of such product in such country.
3.21 Royalty obligations under this Agreement on CORIGHTS PRODUCTS sold by SB or
     a licensee of SB shall terminate when such royalty obligations expire under
     the  relevant   COLLABORATION  PARTNER  AGREEMENT  covering  such  CORIGHTS
     PRODUCT, but in no event sooner than ten (10) years after the first country
     wide

                                       25
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     launch of such  CORIGHTS  PRODUCT in each  country  in which  such  CORIGHT
     PRODUCT is sold by SB.
3.22 Royalty  obligations  under this Agreement with respect to or deriving from
     sales by TAKEDA or its  licensees  (other  than SB or its  licensees)  of a
     TAKEDA  PRODUCT  or SB  PRODUCT  shall  terminate  simultaneously  with the
     termination,  on a  country-by-country  and  product-by-product  basis,  of
     TAKEDA's  obligation to pay royalties on the sale of such TAKEDA PRODUCT or
     SB PRODUCT pursuant to the SB/TAKEDA AGREEMENT.
3.23 If  the  SB   PRODUCT  or  HGS   PRODUCT   sold   comprises   one  or  more
     pharmaceutically active agents or antigens which are not SB PRODUCTS or HGS
     PRODUCTS  respectively,  then the royalty  rates set forth in this  Section
     shall be adjusted by mutual  agreement of the parties  provided  that in no
     event shall such rates exceed those provided for in said Section.
3.24 If the SB PRODUCT sold by SB or a THIRD PARTY authorized by SB is a service
     or a  component  of a  service,  then  SB  shall  pay to HGS a  royalty  in
     accordance  with the  schedule in Paragraph  3.1,  except that such royalty
     rate schedule shall be adjusted by mutual  agreement of the parties if such
     adjustment  is  necessary  to  equitably  reflect  the value of the service
     component  of the product  relative to the value of the  component  derived
     from or based upon HGS TECHNOLOGY or SB  TECHNOLOGY,  but in no event shall
     such royalties exceed those payable under Paragraph 3.1.
3.25 If the HGS PRODUCT sold by HGS or a THIRD PARTY authorized by HGS in the SB
     FIELD or in the HGS FIELD is a service or a  component  of a service,  then
     HGS shall pay to SB a royalty in accordance  with the schedule in Paragraph
     3.8,  except that such  royalty rate  schedule  shall be adjusted by mutual
     agreement  of the parties if such  adjustment  is  necessary  to  equitably
     reflect the value of the service  component of the product  relative to the
     value of the  component  derived  from or based upon HGS  TECHNOLOGY  or SB
     TECHNOLOGY, but in no event shall such royalties exceed those payable under
     Paragraph 3.8.

3.26 Except for SB PRODUCTS,  TAKEDA  PRODUCTS,  and/or  CORIGHTS  PRODUCTS sold
     under the licenses  granted to TAKEDA  under the  SB/TAKEDA  AGREEMENT  and
     licenses granted to a COLLABORATION  PARTNER under a COLLABORATION  PARTNER
     AGREEMENT, for any license granted by SB to a THIRD PARTY for a SB PRODUCT,
     SB  shall  pay to HGS  [***]  of all  OUTLICENSE  FEES  (except  royalties)
     received with respect to

                                       26


<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     such SB PRODUCT and  royalties  in  accordance  with Section 3 based on NET
     SALES of such SB PRODUCT by such THIRD PARTY.
3.27 Notwithstanding  anything else in this Section to the contrary, but subject
     to Paragraph  3.7 and 3.10,  for each HGS PRODUCT or SB PRODUCT  which is a
     GENE THERAPY VACCINE, the only payments made under this Section shall be as
     follows:  each party shall pay the other (a) [***] of the  OUTLICENSE  FEES
     paid to it for such product  under a license to a THIRD PARTY for such GENE
     THERAPY VACCINE;  and/or (b)[***] of the NET SALES on each product which is
     a GENE THERAPY VACCINE sold by it.

4.   THE RESEARCH COMMITTEE
     ----------------------

4.1  The RC  shall  have  the  duties  and  responsibilities  specified  in this
     Agreement or otherwise  accorded to it by mutual  agreement of the parties.
     The RC shall  meet two (2)  times  during  the year,  at times  and  places
     mutually agreed upon. All RC decisions shall be decided by majority vote of
     all members, including the chair. To constitute a quorum, at least four (4)
     members must be present,  two of whom were appointed by HGS and two of whom
     were  appointed  by SB.  To  constitute  a valid  decision  of the RC,  the
     majority vote must always  include at least one  concurring (1) vote from a
     member  appointed by SB and at least one (1) concurring  vote from a member
     appointed by HGS. Tie votes shall be resolved by senior  management of both
     SB and HGS. Tie votes which cannot be resolved by senior management of both
     companies  shall be  resolved  by binding  arbitration  as  provided in the
     arbitration  agreement  between SB and HGS dated 19 August,  1993 as may be
     amended from time to time.

5.       SEQUENCING
         ----------

5.1  The  parties  acknowledge  that  some of the  sequencing  of GENES had been
     carried out by a THIRD PARTY, The Institute for Genomic Research  ("TIGR"),
     and that neither HGS nor SB controls TIGR or its activities.
5.2  During the INITIAL RESEARCH TERM,  HGS sequencing  capacity equal to 35 ABI
     373 automated DNA sequencers  (which capacity is 160,000 sequences per year
     meeting quality  specifications agreed to by the parties promptly after the
     EFFECTIVE DATE) shall be at the complete  disposal of the RC for sequencing
     GENES.  HGS shall keep the RC regularly and fully informed of the extent of
     the usage  requested  by the RC  relative  to the total  capacity  under RC
     direction. To the extent the full sequencing capacity under RC direction is
     not absorbed by requests from the RC, HGS may use the residual capacity


                                       27
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     for other efforts,  provided,  such other efforts do not impede the efforts
     requested by the RC. All  sequencing  of GENES by HGS or by TIGR during the
     INITIAL  RESEARCH TERM shall be at no expense to SB. HGS retains its rights
     to utilize other sequencing  capacity for any purpose provided that all HGS
     sequencing of GENES or cDNAs shall be subject to this Agreement.
5.3  SB and  HGS  will  meet  during  1996 to  jointly  determine  a  sequencing
     strategy,  which may be  amended  from time to time,  for use of such 35 RC
     dedicated  sequencers  or their  equivalent  capacity  until the end of the
     INITIAL RESEARCH TERM. HGS shall provide adequate staff and reagent to keep
     such 35 RC dedicated  sequencers or their  equivalent  capacity  running at
     capacity  during the  INITIAL  RESEARCH  TERM.  In the event SB and HGS are
     unable to jointly  determine such strategy,  the matter will be referred to
     the RC for  resolution.  Any  tie  vote  on such  matter  will be  resolved
     according to Paragraph  4.1;  provided  however that during the  resolution
     process defined in Paragraph 4.1, the Chair of the RC shall be empowered to
     direct the utilization of the RC directed sequencers, and HGS shall use its
     reasonable  best efforts to carry out such  activities  as are requested by
     the Chair of the RC to this end.
5.4. Fifty percent (50%) of the  sequencing  requirements  of the  COLLABORATION
     PARTNERS  which are  Synthelabo  and Merck will come from the RC sequencing
     capacity of Paragraph 5.2.
5.5  HGS shall use diligent  efforts to complete any sequencing  done under this
     Section   subject  to  timely  receipt  by  HGS  of  directions   regarding
     prioritization and/or cDNA libraries suitable for such sequencing from SB.
5.6  Sequencing  pursuant to Paragraph 5.2 shall include a reasonable  number of
     second walks and clone sequence confirmations requested by SB and/or TAKEDA
     for any reason.  Such reasonable  number shall mean a total of [***] second
     walks  and/or  clone  sequence  confirmations  for which SB  requests  such
     sequence confirmation.
5.7  During the INITIAL RESEARCH TERM, HGS shall maintain its annual  sequencing
     activities  of GENES  and  cDNAs at a level at least  equal to the level of
     such  sequencing  during  the one  year  period  immediately  prior  to the
     EFFECTIVE DATE.
5.8  All ESTs and second walks  sequenced by HGS pursuant to this  Agreement and
     clones developed by HGS containing such sequences shall be owned by HGS and
     shall be HGS TECHNOLOGY under this Agreement.

                                       28

<PAGE>

6.       THERAPEUTIC PROTEINS
         --------------------

6.1  SB,  HGS,  TAKEDA,  and  COLLABORATION  PARTNERS  shall  obtain  rights  in
     accordance with Section 2 of this Agreement,  the SB/TAKEDA  AGREEMENT or a
     COLLABORATION PARTNER AGREEMENT as the case may be to a THERAPEUTIC PROTEIN
     which is a COLLABORATION  PRODUCT,  provided
     (a) as among SB, TAKEDA,  such COLLABORATION  PARTNERS and HGS, such entity
     is the first to submit a dossier as  permitted  under this  Agreement  or a
     COLLABORATION PARTNER AGREEMENT or the SB/TAKEDA AGREEMENT prior to the end
     of the INITIAL RESEARCH TERM,
       (1) which dossier demonstrates  evidence of in vivo activity for any such
       THERAPEUTIC PROTEIN. Such evidence of in vivo biological activity must be
       statistically  different (p less than 0.05) from control for at least one
       data point,  and must be  demonstrated  in an  experiment  using at least
       three (3) dosages of the test substance in which at least a trend of dose
       related activity is demonstrated, or,
       (2) in the case of a  THERAPEUTIC  PROTEIN for which (a) in vivo activity
       cannot be demonstrated  after bona fide attempts to do so in at least two
       (2) sub-primate species, or (b) it is demonstrated by documented evidence
       (from  scientific  literature  or in house  studies)  that  the  relevant
       effector system does not exist in sub-primates, or (c) it is demonstrated
       by documented  evidence (from scientific  literature or in-house studies)
       that  there  is  an  absence  of  reactivity  with  relevant  targets  in
       subprimates,  such dossier  demonstrates  evidence of in vitro biological
       activity  in at least  one  relevant  cellular  based  assay for any such
       THERAPEUTIC  PROTEIN.  Such evidence of in vitro biological activity must
       be  statistically  different (p less than 0.05) from control for at least
       one data point,  and must be demonstrated in an experiment using multiple
       concentrations  of the test  substance  in which at least a trend of dose
       related activity is demonstrated.
       (3) The preparation used to demonstrate biological activity shall be:
       (i) a  purified  preparation  in which at least 75% (w/w) of the  protein
       component of the preparation is the THERAPEUTIC PROTEIN; or
       (ii) a purified  preparation in which the relative  concentration  and/or
       specific activity of the THERAPEUTIC  PROTEIN has been increased at least
       1000 fold as compared to an unpurified preparation.

         In no case shall the  concentration of the THERAPEUTIC  PROTEIN be less
         that one (1)  microgram/ml in the purified

                                       29

<PAGE>

         preparation of (i) or (ii). Such purified preparation shall be shown to
         have a  biological  activity  which is not  attributable  to  endotoxin
         contamination;
     (b) such  rights  to such  THERAPEUTIC  PROTEIN  have  not been  previously
     granted to SB, TAKEDA,  COLLABORATION PARTNER or HGS in accordance with the
     requirements of this Paragraph 6.1 or under Paragraph 6.3 of this Agreement
     or under a provision comparable to Paragraph 6.1 in the SB/TAKEDA AGREEMENT
     or a COLLABORATION PARTNER AGREEMENT; and
     (c) SB, TAKEDA, a COLLABORATION PARTNER or HGS, as the case may be, submits
     with the dossier a PROTEIN RESEARCH PLAN therefor.
6.2  (a) The RC will  appoint one person from SB and one person from HGS to meet
     within five (5) working  days of the  receipt of a dossier  submitted  by a
     COLLABORATION  PARTNER  (other than SP) or TAKEDA and notify the submitting
     party in writing within ten (10) working days of receipt of such dossier as
     to whether or not such dossier received meets the requirements set forth in
     the COLLABORATION PARTNER AGREEMENT or the SB/TAKEDA AGREEMENT, as the case
     may be,  and if it does  meet such  requirements  and  unless a dispute  is
     pending as set forth in Paragraph  6.2(f) or a comparable  provision of the
     SB/TAKEDA  AGREEMENT or a COLLABORATION  PARTNER  AGREEMENT,  rights to the
     THERAPEUTIC  PROTEIN  which is the subject of such dossier  shall have been
     obtained  by such  submitting  party.  The  failure of HGS or SB to respond
     within  such  period  shall be deemed to be  notification  that the dossier
     meets  the  requirements  set  forth  in the  SB/TAKEDA  AGREEMENT  or such
     COLLABORATION AGREEMENT as the case may be.
     (b) In the case of a dossier  submitted by HGS or SB, HGS or SB as the case
     may be shall  submit the  dossier to the other  party and such other  party
     shall  notify the other in writing  within ten (10) working days of receipt
     of such dossier as to whether or not it meets the requirements of Paragraph
     6.1 and if it does meet such  requirements  and unless a dispute is pending
     as set  forth  in  Paragraph  6.2(f)  ) or a  comparable  provision  of the
     SB/TAKEDA  AGREEMENT or a COLLABORATION  PARTNER  AGREEMENT,  rights to the
     THERAPEUTIC  PROTEIN which is the subject of such dossier shall be obtained
     by such  submitting  party.  The failure of HGS or SB as the case may be to
     respond  within such  period  shall be deemed to be  notification  that the
     dossier meets the requirements of set forth in Paragraph 6.1.

                                       30

<PAGE>

     (c) HGS and/or SB will also notify all other COLLABORATION  PARTNERS (other
     than SP) and TAKEDA in writing  within ten (10) working days of such rights
     to  a  THERAPEUTIC   PROTEIN  being  obtained  by  HGS,  SB,  TAKEDA  or  a
     COLLABORATION  PARTNER and such notification will only include the identity
     of the THERAPEUTIC PROTEIN so claimed by HGS Sequence ID number and not the
     name of the obtaining party. Subject to subparagraph (g) of this Paragraph,
     any  notification  or failure to notify pursuant to this Paragraph is final
     and binding on the parties.
     (d) HGS alone shall receive,  approve and/or reject dossiers  received from
     SP in accordance  with the  applicable  provisions of this  Agreement and a
     COLLABORATION PARTNER AGREEMENT among SP, SB and HGS and in accordance with
     the timelines  and  procedures  in this  Paragraph  and in a  COLLABORATION
     PARTNER AGREEMENT among SP, SB and HGS. In the event that SB is notified by
     HGS that a  COLLABORATION  PARTNER has been granted rights to a THERAPEUTIC
     PROTEIN under a COLLABORATION  PARTNER  AGREEMENT,  such notification shall
     also include a  certification  on behalf of HGS, signed by a senior officer
     of HGS,  that such dossier met all of the  requirements  of the  applicable
     provisions in such COLLABORATION PARTNER AGREEMENT.
     (e) Any written  notification by HGS pursuant to this Paragraph 6.2 that SP
     has been granted rights to a THERAPEUTIC PROTEIN shall be binding on SB and
     HGS.
     (f) Following the receipt of any written notification pursuant to Paragraph
     6.2 by HGS or SB that a  dossier  submitted  by SB or HGS does not meet the
     requirements  of  Paragraph  6.1,  the  parties  shall meet within ten (10)
     working  days to discuss  such  notification.  If the parties are unable to
     agree  that  such  dossier  does not meet the  data  and/or  RESEARCH  PLAN
     requirements  of Paragraph  6.1 within ten (10) working  days,  the parties
     shall  immediately  submit such  dossier to a neutral  expert  qualified to
     determine  whether or not such dossier meets such requirements of Paragraph
     6.1. If such dispute is not resolved  within twenty (20) days,  then either
     party  shall have the right to submit such  dispute to binding  arbitration
     under Paragraph 27.
     (g)  While a  dispute  is  pending  as to  whether  SB,  HGS,  TAKEDA  or a
     COLLABORATION  PARTNER is entitled  to  exclusive  rights to a  THERAPEUTIC
     PROTEIN,  all dossiers  submitted to HGS and SB under this  Agreement,  the
     SB/TAKEDA  AGREEMENT and a COLLABORATION  PARTNER AGREEMENT directed to the
     same
                                       31

<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     THERAPEUTIC  PROTEIN shall be dated, held and no rights shall be granted to
     such  THERAPEUTIC  PROTEIN  pending  resolution  of  the  dispute  to  such
     THERAPEUTIC PROTEIN..
6.3  (a) The following six (6)  THERAPEUTIC  PROTEINS are hereby declared as HGS
     PRODUCTS  and HGS  shall  have  rights  to such  products  as if they  were
     obtained pursuant to Paragraph 6.1:

     Name                               HGS Sequence ID
     --------------------------------------------------
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]

     (b) The following six (6)  THERAPEUTIC  PROTEINS are hereby  declared as SB
PRODUCTS  and SB shall have  rights to such  products  as if they were  obtained
pursuant to Paragraph 6.1:
     Name                               HGS Sequence ID
     --------------------------------------------------
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]
          [***]                              [***]

     (c) SP may obtain  rights to  [***]   THERAPEUTIC  PROTEINS  pursuant  to a
     COLLABORATION  PARTNER  AGREEMENT  among SB, HGS and SP without meeting the
     data requirements of Paragraph 6.1(a).
6.4  It is understood  that any sequence ID number used under this  Agreement is
     for  identification  purposes  only  and  that all  clones,  sequences  and
     polypeptides  associated with any and all THERAPEUTIC  PROTEINS as to which
     rights are obtained under this Section, shall include muteins and fragments
     thereof.
6.5  (a) During the INITIAL  RESEARCH  TERM,  HGS shall have the right to obtain
     rights pursuant to Paragraph 6.1 to THERAPEUTIC PROTEINS as HGS PRODUCTS as
     follows: 
     (i) For each  THERAPEUTIC  PROTEIN  as to which HGS  grants a license  to a
     THIRD  PARTY  pursuant  to  Paragraph  2.12,  HGS may obtain  rights  under
     Paragraph 6.1 to one additional THERAPEUTIC PROTEIN;
     (ii) For each  THERAPEUTIC  PROTEIN  as to which HGS  initiates  a CLINICAL
     STUDY,  HGS  may  obtain  rights  under  Paragraph  6.1 to  one  additional
     THERAPEUTIC PROTEIN; and

                                       32

<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     (iii) For each  THERAPEUTIC  PROTEIN as to which HGS  surrenders in writing
     its exclusive rights thereto (excluding those in subparagraph 6.5 (b)), HGS
     may obtain rights under Paragraph 6.1 to an additional THERAPEUTIC PROTEIN.
     (b) It is expressly  understood  and agreed that HGS hereby  surrenders any
     rights it had with  respect to  THERAPEUTIC  PROTEINS  which had become HGS
     PRODUCTS  in the SB FIELD prior to the  EFFECTIVE  DATE other than those in
     Paragraph  6.3.
     (c) During the INITIAL  RESEARCH  TERM,  HGS may not obtain  rights to more
     than  eight (8) THERAPEUTIC  PROTEINS pursuant  to  Paragraph  6.1  in  any
     rolling twelve month period beginning with the EFFECTIVE DATE.
6.6  Neither  party shall have any  liability to the other party with respect to
     any  decisions  made with respect to rights to a  THERAPEUTIC  PROTEIN made
     under this  section  unless there has been  willful  misconduct  by a party
     concerning such decision.

7.   OTHER COLLABORATION PRODUCTS
     ----------------------------

7.1 (a)A DRUG RESEARCH PLAN and/or ANTIBODY  RESEARCH PLAN may only be submitted
     to the RC by SB during the INITIAL  RESEARCH TERM; or in the case of a DRUG
     RESEARCH PLAN, also during RESEARCH TERM EXTENSIONS.
     (b) A PROTEIN  RESEARCH  PLAN may only be  submitted  to the RC during  the
     INITIAL  RESEARCH TERM and only in accordance  with Section 6. Such PROTEIN
     RESEARCH PLAN shall be deemed to also be an ANTIBODY RESEARCH PLAN.
     (c) SB agrees that without first  submitting to the RC a DRUG RESEARCH PLAN
     (i) during the INITIAL  RESEARCH  TERM SB will not  initiate  screening  to
     evaluate  multiple  chemical  entities for activity or a formal  program of
     rational  drug design  with  respect to a TARGET  which is a  COLLABORATION
     PRODUCT;  and (ii) during  RESEARCH TERM  EXTENSIONS,  SB will not initiate
     screening to evaluate  multiple  chemical entities for activity or a formal
     program  of  rational  drug  design  with  respect  to a TARGET  which is a
     COLLABORATION PRODUCT.
     (d) Except as provided in Paragraphs  7.2 and 7.3, a DRUG RESEARCH PLAN may
     not be submitted to the RC by HGS prior to June 30, 1999;
     (e) During the INITIAL  RESEARCH TERM, HGS agrees that it will not initiate
     screening to evaluate  multiple  chemical entities for activity or a formal
     program of  rational  drug design with  respect to a TARGET  without  first
     submitting to the RC a DRUG RESEARCH PLAN.

                                       33
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     (f) SB and HGS each agree that during the INITIAL  RESEARCH TERM, they will
     not conduct  dedicated  activities  for the discovery of ANTIBODY  PRODUCTS
     which are  COLLABORATION  PRODUCTS  without  first  submitting  an ANTIBODY
     RESEARCH PLAN therefor.
     (g) During the INITIAL  RESEARCH  TERM,  HGS agrees that it shall submit no
     more than ten (10) ANTIBODY RESEARCH PLANS per year under this Agreement.
7.2  SB or HGS (or HGS on behalf of its licensees)  shall obtain rights pursuant
     to  Paragraphs  2.6,  2.8 and  2.11  to GENE  THERAPY  VACCINES  which  are
     COLLABORATION PRODUCTS, provided that SB or HGS, as the case may be, is the
     first to  submit  a  dossier  to the  other  party  prior to the end of the
     INITIAL  RESEARCH  TERM which,  demonstrates  a biological  activity  which
     activity  included  evidence of in vivo  induction  of an antigen  specific
     humoral and/or cellular immune system response, and
     (i) exclusive  rights to the GENE THERAPY  VACCINE have not been previously
     granted to SB, HGS or a licensee of HGS, and
     (ii) the dossier includes a DRUG RESEARCH PLAN therefor.
7.3  HGS or SB shall  submit  dossiers  pursuant to  Paragraph  7.2 to the other
     party and such party  shall  notify  the other in  writing  within ten (10)
     working  days of receipt of such  dossier as to whether or not it meets the
     requirements of Paragraph 7.2 and if it does meet such requirements, rights
     to the GENE THERAPY VACCINE which is the subject of such dossier shall have
     been obtained by such submitting party. The failure of HGS or SB to respond
     within  such  period  shall be deemed to be  notification  that the dossier
     meets the  requirements of set forth in Paragraph 7.2. Subject to Paragraph
     7.4, any  notification  or failure to notify  pursuant to this Paragraph is
     final and binding on the parties.
7.4  Following the receipt of any written notification pursuant to Paragraph 7.3
     by HGS or SB that a  dossier  submitted  by SB or HGS  does  not  meet  the
     requirements  of  Paragraph  7.2,  the  parties  shall meet within ten (10)
     working  days to discuss  such  notification.  If the parties are unable to
     agree that such dossier  does not meet the  requirements  of Paragraph  7.2
     within ten (10) working  days,  the parties shall  immediately  submit such
     dossier to a neutral  expert  qualified  to  determine  whether or not such
     dossier  meets the  requirements  of Paragraph  7.2. If such dispute is not
     resolved within twenty (20) days, then either party shall have the right to
     submit such dispute to binding  arbitration  under  Paragraph 27. Until any
     dispute is resolved with respect to a GENE THERAPY VACCINE for which SB, or
     HGS is the

                                       34
<PAGE>

     first to submit a dossier, no rights shall be obtained with respect to such
     GENE THERAPY VACCINE pursuant to Paragraph 7.2.
7.5  HGS agrees that during the INITIAL  RESEARCH  TERM  licensees of HGS cannot
     obtain  exclusive  rights to GENE THERAPY  VACCINES  other than through the
     procedure as set forth in Paragraph 7.2.

8.   RESEARCH MATTERS
     ----------------

8.1  Human  sequence data  generated  during the INITIAL  RESEARCH TERM shall be
     electronically  transferred  to SB  as  near  to  simultaneously  upon  HGS
     obtaining such data as reasonably possible and shall be stored by HGS in an
     electronic  database having  appropriate  database  encryption and security
     provisions,  in a manner specified by the RC. The electronic database shall
     provide the capability of transferring  the data directly to a database for
     patent application  filings.  In addition to electronic storage of sequence
     data,  physical  samples of all cDNAs will be deposited  in a manner,  with
     consistent archival coding parameters,  and in a location designated by the
     RC. An inventory of the depository  shall be stored in electronic  form and
     made  accessible  to SB. HGS and SB shall each  establish  and/or  maintain
     respective   standard  operating   procedures  for  the  documentation  and
     archiving  of  original   laboratory   notebooks  and  other  data  sources
     sufficient to support  examination of patent applications and/or litigation
     using criteria jointly agreed upon by the parties.  All data electronically
     stored  by HGS  shall  conform  to  security  and  data  format  provisions
     specified by the RC.
8.2  The sequencing carried out under this Agreement during the INITIAL RESEARCH
     TERM shall be performed in accordance with sequencing and quality assurance
     procedures and specifications set by the RC. The RC shall determine whether
     or not sequence  data  provided to SB were  generated  and are otherwise in
     compliance  with  such  procedures  and  specifications.  Unless  otherwise
     requested by the RC, ESTs provided after September 1, 1993 shall be derived
     from the 5' end of the cDNAs.
8.3  The RC shall have a reasonable period of time following  transfer to the RC
     and SB of sequence  data from HGS within which to determine if the sequence
     data meet the criteria  established  by the RC. If the RC  determines  that
     sequence data do not meet the criteria, then HGS shall use its best efforts
     to cure the defects.  Such  sequence  data shall  nevertheless  be included
     within HGS SPECIAL  TECHNOLOGY  and can be used by SB in the same manner as
     acceptable sequence data.
8.4  During the  INITIAL  RESEARCH  TERM,  HGS shall  provide SB and the RC with
     yeast gene sequence (S.  cerevisiae) and function

                                       35
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     information  which  is or  becomes  known to HGS,  but  only to  facilitate
     decision-making,  and otherwise to advance research and development,  under
     this Agreement.
8.5  During  the  INITIAL  RESEARCH  TERM,  at  the  request  of  the  RC and as
     prioritized  by the RC, HGS agrees to  sequence  and  provide to SB partial
     cDNA  sequences  of  animal  genes  from  libraries  prepared  by SB  which
     sequencing is to be performed  using the sequencing  capacity  specified in
     Section 5 hereof. Such partial cDNA sequences of animal genes shall be used
     by SB only to facilitate  decision making and otherwise to advance research
     under this Agreement.
8.6  The INITIAL RESEARCH TERM may be extended by SB as RESEARCH TERM EXTENSIONS
     for up to 5 additional  years on a year-by-year  basis by written notice to
     HGS at least sixty (60) days prior to the end of the INITIAL  RESEARCH TERM
     or at least  sixty  (60)  days  prior to the end of any one year  extension
     thereof,  which  written  notice shall include a payment of [***]  for each
     additional year.

9.   PRODUCT DEVELOPMENT
     -------------------

9.1  SB shall have full control and authority over development, registration and
     commercialization  of SB  PRODUCT,  including  SB  PRODUCT  which  HGS  has
     indicated it intends to co-promote  with SB as provided in this  Agreement.
9.2  As between the parties to this  Agreement,  SB shall also have full control
     and authority over the development,  registration and  commercialization of
     SB PRODUCTS  in the SB FIELD in  SOUTHEAST  ASIA and of TAKEDA  PRODUCT and
     CO-RIGHTS  PRODUCT  elsewhere  in  the  world,  and SB  may  delegate  such
     responsibilities in whole or in part to its licensees.
9.3  Each party  shall keep the other  informed  of  progress  of its efforts to
     develop and commercialize  royalty bearing SB PRODUCT or HGS PRODUCT.  Each
     party  shall  keep the  other  party  informed  of its,  and its  licensees
     progress to develop and  commercialize  royalty  bearing SB PRODUCTS or HGS
     PRODUCTS  as the  case  may be.  SB shall  keep  HGS  informed  of SB's and
     TAKEDA's  progress  to develop and  commercialize  royalty  bearing  TAKEDA
     PRODUCTS.
9.4  SB shall use its diligent efforts to develop,  market,  promote and sell SB
     PRODUCT  as to which SB  obtains  rights  under  Section  6 and  Section  7
     equivalent  to those  efforts it uses with  respect to  products of similar
     value and  status,  subject to SB's right to  terminate  such  efforts  and
     surrender such rights in and to such product.
9.5  HGS shall use its diligent efforts to develop, promote and sell HGS PRODUCT
     as to which HGS obtains  rights to under Section 6 and Section 7 equivalent
     to those  efforts it uses with  respect to  products  of similar  value and
     status, subject to HGS's right to terminate such efforts and surrender such
     exclusive rights in and to such product

                                       36
<PAGE>

9.6  After the  RESEARCH  TERM,  each of HGS and SB shall use  diligent  efforts
     screen for DRUG PRODUCTS pursuant to any DRUG RESEARCH PLAN submitted by SB
     or HGS as the case may be prior  to the end of the  INITIAL  RESEARCH  TERM
     and/or  RESEARCH  TERM  EXTENSIONS  equivalent  to those efforts it uses to
     develop  and screen  its other  proprietary  targets  of similar  value and
     status.
9.7  Within  sixty (60) days  after the end of each  calendar  year,  SB and HGS
     shall provide to each other in writing  annual reports with respect to work
     performed by or for it under  RESEARCH PLANS which shall consist of updates
     to RESEARCH PLANS substantially in the form of the APPENDICES A, C, and D.
9.8  SB and HGS  shall  not  use any  information  or  data  in  RESEARCH  PLANS
     submitted  by the  other,  other  than  information  which  is HGS  SPECIAL
     TECHNOLOGY  and SPECIAL SB TECHNOLOGY as specified in section 1, 2 and 3 of
     a RESEARCH PLAN.

10.      CO-PROMOTION/CORIGHTS
         ---------------------

10.1.For each SB PRODUCT  which is to be sold by SB (but not licensees of SB) in
     the United  States,  Canada,  Mexico or a country in Europe,  SB shall give
     prompt   notice  to  HGS  of   acceptance   by  the  U.S.   Food  and  Drug
     Administration,  or like  agency of such  country,  of an  application  for
     approval to sell SB PRODUCT under 21 U.S.C.  355, or like law or regulation
     of the U.S. or such  country.  HGS may  exercise  its option to  co-promote
     under Paragraph  2.16(c) in such country on a  country-by-country  basis by
     giving  written  notice  thereof to SB within sixty (60) days of receipt of
     each such notice of acceptance. In this event, the parties shall enter into
     a  definitive  co-promotion  agreement  which shall set forth all terms and
     conditions for the co-promotion  and which shall  incorporate the following
     principles, to the extent legally permissible.
         (i)      SB shall be solely responsible for pricing.
         (ii) HGS and SB will co-promote a single brand of the SB PRODUCT in one
     or more of the United States,  Canada, Mexico and Europe (the "Co-promotion
     Territory"), using a trademark selected and controlled by SB.
         (iii)  A   Marketing   Committee   will  be  formed   composed   of  SB
     representatives  and two  representatives  of HGS. The Marketing 

                                       37
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     Committee  shall make all  decisions on sales,  marketing,  promotion,  and
     advertising,  including the target prescribers whom HGS will detail and the
     number  and  manner  of  details.  The  Marketing  Committee  will  also be
     responsible  for approving in advance all marketing,  selling and promotion
     expenses.  SB shall chair the Marketing  Committee and shall make all final
     decision thereof.
         (iv) HGS  will  have the  right  to provide [***] and shall  provide at
     least [***], of the total  promotion  effort in each   country where it co-
     promotes.
         (v) HGS will  receive a  percentage  of the  OPERATING  PROFITS  in the
     countries  where  HGS  co-promotes  from the  sales of the  co-promoted  SB
     PRODUCT which  percentage shall be equal to the percentage of the promotion
     effort  provided  by HGS,  but  shall  not  exceed  [***] of the  OPERATING
     PROFITS.
        (vi) HGS's name will appear on the SB PRODUCT  packaging or promotional
     materials as decided by the Marketing Committee.
         (vii) HGS shall use only SB promotional materials and SB samples in its
     co-promotion  activities,  as approved by the  Marketing  Committee  and in
     accordance with all relevant laws, regulations and accepted practices.  The
     costs of such materials and samples shall be included within SB's aggregate
     marketing and promotion expenses.
         (viii) HGS shall have the right to  transfer  this  co-promotion  right
     only in connection  with a transfer of all of HGS's rights and  obligations
     under this Agreement to another single entity.
10.2.For  each HGS  PRODUCT  which  is to be sold by HGS in the HGS  FIELD,  HGS
     shall give  prompt  notice to SB of  acceptance  by the U.S.  Food and Drug
     Administration,  or like agency of another  country,  of an application for
     approval to sell HGS PRODUCT under 21 U.S.C. 355, or like law or regulation
     of the U.S. or another  country.  SB may exercise its option to  co-promote
     under  Paragraph  2.16(a) on a  country-by-country  basis by giving written
     notice  thereof to SB within sixty (60) days of receipt of each such notice
     of  acceptance.  In this event,  the parties  shall enter into a definitive
     co-promotion  agreement  which shall set forth all terms and conditions for
     the co-promotion and which shall incorporate the following  principles,  to
     the extent legally permissible.
         (i) HGS shall be solely responsible for pricing.
         (ii) SB and HGS will  co-promote  a single  brand of the HGS PRODUCT in
     one or more countries in the TERRITORY.
         (iii)  A   Marketing   Committee   will  be  formed   composed  of  HGS
     representatives  and two  representatives  of SB. The  Marketing  Committee
     shall make all decisions on sales, marketing,  promotion,

                                       38
<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     and advertising,  including the target  prescribers whom SB will detail and
     the number and manner of  details.  The  Marketing  Committee  will also be
     responsible  for approving in advance all marketing,  selling and promotion
     expenses.  HGS shall chair the Marketing Committee and shall make all final
     decision thereof.
         (iv) SB will  have  the  right to provide [***],  and shall  provide at
     least [***], of the total  promotion  effort in each country  where  it co-
     promotes.
         (v) SB will  receive  a  percentage  of the  OPERATING  PROFITS  in the
     countries  where SB  co-promotes  from the  sales  of the  co-promoted  HGS
     PRODUCT which  percentage shall be equal to the percentage of the promotion
     effort provided by SB, but shall not exceed [***] of the OPERATING PROFITS.
         (vi) SB's name will appear on the HGS PRODUCT  packaging or promotional
     materials as decided by the Marketing Committee.
         (vii) SB shall use only HGS  promotional  materials  and HGS samples in
     its co-promotion activities,  as approved by the Marketing Committee and in
     accordance with all relevant laws, regulations and accepted practices.  The
     costs  of such  materials  and  samples  shall  be  included  within  HGS's
     aggregate marketing and promotion expenses.
         (viii) SB shall have the right to transfer this co-promotion right only
     in connection with a transfer of all of SB's rights and  obligations  under
     this Agreement to another single entity.
10.3.(a) SB may exercise its option granted pursuant to Paragraph 2.16(b) to the
     following  HGS  PRODUCTS in each country for which HGS has not licensed all
     of its  marketing  rights in and to such  product to a THIRD PARTY prior to
     completion of Phase II(a) CLINICAL STUDIES conducted by or on behalf of HGS
     for such HGS PRODUCT:
(i)  THERAPEUTIC  PROTEINS to which HGS obtains  rights to under Section 6 where
     such HGS PRODUCT has  completed  Phase II(a) in the United  States prior to
     April 30, 2005; and
(ii) DRUG  PRODUCTS  or  ANTIBODY  PRODUCTS  DISCOVERED  prior to the end of the
     INITIAL  RESEARCH  TERM (other than DRUG  PRODUCTS or ANTIBODY  PRODUCTS in
     subparagraph  (iii)) which HGS PRODUCTS have  completed  Phase II(a) in the
     United States prior to June 30, 2005; and
(iii)DRUG PRODUCTS which resulted from a TARGET which TARGET is a  COLLABORATION
     PRODUCT and also the subject of a DRUG RESEARCH  PLAN or ANTIBODY  RESEARCH
     PLAN submitted by SB,  provided the DRUG PRODUCT is DISCOVERED by HGS prior
     to the period  ending four (4) years after the end of the INITIAL  RESEARCH
     TERM; and

                                       39
<PAGE>

(iv) ANTIBODY   PRODUCTS  which  resulted  from  a  TARGET  which  TARGET  is  a
     COLLABORATION  PRODUCT  and also the  subject of a ANTIBODY  RESEARCH  PLAN
     submitted by SB prior to the submission by HGS of an ANTIBODY RESEARCH PLAN
     directed to such TARGET, provided the ANTIBODY PRODUCT is DISCOVERED by HGS
     prior to the  period  ending  four (4) years  after the end of the  INITIAL
     RESEARCH TERM:  all pursuant to an agreement  which shall set forth all the
     terms  and  conditions  for such  rights  and  incorporates  the  following
     principal terms:
         (1)  SB and HGS will  share  equally  in the Phase  III/IV  development
              costs of such HGS PRODUCT;
         (2)  SB and HGS will share equally in the sales and marketing  expenses
              of such HGS PRODUCT;
         (3)  SB and HGS will share equally in the OPERATING PROFIT for such HGS
              PRODUCT;
         (4)  SB shall owe HGS no license  fees or  milestone  payments or other
              such fees.

     (b) This option shall not apply to any HGS PRODUCTS  which are  THERAPEUTIC
     PROTEINS  as to which SP has  exercised  its  option  to  market,  promote,
     co-market and/or co-promote under a COLLABORATION PARTNER AGREEMENT, nor in
     Japan to any HGS PRODUCT  which is subject to an  un-exercised  (but not an
     option  rejected by TAKEDA)  option right or to a license to TAKEDA granted
     pursuant to the HGS/TAKEDA Option and License Agreement dated June 12,1995.
     (c) HGS shall notify SB in writing within thirty (30) days of when each HGS
     PRODUCT  subject to  subparagraphs  (a)(i) and (a)(ii) has  competed  Phase
     II(a) in the  United  States  prior to April  30,  2005;  and when each HGS
     PRODUCT  subject to  subparagraph  (a)(iii) has competed Phase II(a) in the
     United States. Such notice shall include the principal terms and conditions
     stated above for SB to exercise  its option to such HGS  PRODUCT.  If SB is
     offered the option and does not accept the option in writing  within  sixty
     (60) days after  receipt of written  notice by HGS under this  subparagraph
     (c),  SB shall no longer have any rights  thereto  and no royalty  shall be
     payable by HGS to SB for such HGS  PRODUCT. 
     (d) In the event SB would have been  extended  an option to an HGS  PRODUCT
     but for the fact that Phase II(a) CLINICAL STUDIES were not conducted by or
     on behalf of HGS,  and where HGS  begins  selling  such HGS  PRODUCT in any
     country,  SB shall  have an option  pursuant  to 2.16 (b) and if SB accepts
     such option and enters into an agreement

                                       40
<PAGE>


     pursuant to this Paragraph 10.3, SB and HGS shall enter into such agreement
     which shall include the terms in Paragraph 10.3(a)(2)-(4) and shall provide
     for SB to reimburse HGS in an amount equal to half of HGS's expenses in the
     Phase  III/IV  development  costs  of such  HGS  PRODUCT  for the  relevant
     country.  In the  event  that HGS has to  purchase  back  rights  to an HGS
     PRODUCT in order to sell such HGS PRODUCT,  then SB and HGS shall negotiate
     an appropriate allocation of such purchase cost.

11.  HGS RIGHT TO MANUFACTURE
     ------------------------

11.1.SB shall retain the right to make all preclinical,  clinical and commercial
     supplies of any SB PRODUCT sold by SB or by THIRD PARTIES  authorized by SB
     which may be required  during and after the  expiration of this  Agreement.
     However, in the event that SB decides, at its sole discretion,  to have any
     quantity of preclinical,  clinical and/or  commercial  supplies of any such
     THERAPEUTIC  PROTEIN which is an SB PRODUCT made by an entity other than SB
     during the term of this  Agreement,  SB shall  give HGS the first  right to
     supply such  quantity  subject to all terms of an agreement  which shall be
     negotiated in good faith by the parties and which  agreement  shall include
     that HGS shall be required to meet all of SB's  reasonable  cost,  quality,
     quantity and performance requirements;  provided,  however, that such first
     right shall be subject to and shall not conflict  with the rights of TAKEDA
     to make and have made SB PRODUCT under the SB/TAKEDA AGREEMENT.  If HGS and
     SB do not reach such agreement within a reasonable  period of time in light
     of the circumstances,  or if HGS is unable to satisfy SB's reasonable cost,
     quality, quantity and performance requirements, then HGS's rights hereunder
     shall  terminate and SB shall be free to have the SB PRODUCT  supplied from
     another source.

12.  EXCHANGE OF INFORMATION AND CONFIDENTIALITY
- ---  -------------------------------------------

12.1.(a) Promptly after the EFFECTIVE  DATE, HGS shall disclose and supply to SB
     all HGS SPECIAL  TECHNOLOGY  which HGS has not previously  disclosed to SB.
     Thereafter,  HGS  shall  promptly  and  fully  disclose  to SB any  and all
     information  which is HGS  SPECIAL  TECHNOLOGY,  provided  that HGS SPECIAL
     TECHNOLOGY that are clones,  cell lines and vectors shall be provided to SB
     as reasonably requested by SB and as they are reasonably available to HGS.
     (b) Notwithstanding  Paragraph 12.1(a), after the EFFECTIVE DATE, HGS shall
     not be required to transfer to SB sequence data  consisting of second walks
     and full length  sequences not  requested by

                                       41
<PAGE>

     SB  or  biological   information   each  only  with  respect  to  potential
     THERAPEUTIC  PROTEINS  which  HGS in  good  faith  intends  to  study  as a
     THERAPEUTIC  PROTEIN , until HGS obtains rights to such THERAPEUTIC PROTEIN
     pursuant to Section 6.
     (c)  Notwithstanding  subparagraph  (b) HGS  shall  promptly  disclose  the
     results of research under  material  transfer  agreements  (MTAs) listed in
     Appendix E and all other MTAs HGS has  entered  into or enters  into during
     the period  ending at the end of the INITIAL  RESEARCH TERM with respect to
     TARGETS which are COLLABORATION PRODUCTS, provided that SB may not use such
     results to meet the  requirement of Paragraph  6.1(a)(i) for more that four
     (4) THERAPEUTIC PROTEINS per year.
     (d) Promptly  after the EFFECTIVE DATE SB shall disclose to HGS all SPECIAL
     SB  TECHNOLOGY  in  existence as of the  EFFECTIVE  DATE to the extent such
     SPECIAL SB TECHNOLOGY has not already been transferred to HGS.
12.2.During  the term of this  Agreement  and  thereafter,  irrespective  of any
     termination earlier than the expiration of the term of this Agreement,  HGS
     and SB shall not use or reveal or disclose to THIRD PARTIES any information
     or materials  received from the other party,  without  first  obtaining the
     written  consent  of such  other  party  or the  RC,  except  as  permitted
     hereunder.  This  confidentiality and non-use obligation shall not apply to
     disclosures  to or uses by TAKEDA  pursuant to the  SB/TAKEDA  AGREEMENT or
     disclosures to or uses by COLLABORATION  PARTNERS pursuant to COLLABORATION
     PARTNER  AGREEMENTS.  Unless  otherwise  restricted by this Agreement,  the
     confidentiality  and non-use  provisions of this  Paragraph  12.2 shall not
     apply to such information which
         (i)  was known to the receiving  party or generally known to the public
              prior to its disclosure hereunder;
         (ii) subsequently  becomes known to the public by some means other than
              a breach of this Agreement;
         (iii)is subsequently  disclosed to the receiving party by a THIRD PARTY
              having a lawful right to make such disclosure;
         (iv) is  required  by law or bona fide legal  process to be  disclosed,
              provided that the party required to make the disclosure  takes all
              reasonable steps to restrict and maintain  confidentiality of such
              disclosure and provides  reasonable  notice to the party providing
              the information and/or materials;
         (v)  is approved for release by the parties, or
         (vi) is independently  developed by employees or agents of either party
              or their respective parent  corporation or their

                                       42

<PAGE>



     AFFILIATES  and/or  subsidiaries  without any knowledge of the  information
     and/or materials provided by the other party.
12.3.(a) Nothing  in Paragraph  12.2  shall be  construed as  preventing  either
     party from  disclosing  any  information  to an AFFILIATE or to a licensee,
     distributor  or joint venture or other  associated  company of either party
     for the  purpose  of  developing  or  commercializing  SB  PRODUCT,  TAKEDA
     PRODUCT,  CORIGHTS  PRODUCT or HGS PRODUCT as permitted by this  Agreement,
     provided such  AFFILIATE,  licensee,  distributor or joint venture or other
     associated  company has undertaken a similar  obligation of confidentiality
     and non-use with respect to the confidential information. 
     (b) In the event  that SB intends  to  transfer  or  disclose  HGS  SPECIAL
     TECHNOLOGY  or SB  TECHNOLOGY  to a  THIRD  PARTY  collaborator  that  is a
     not-for-profit  entity (and/or an investigator working for a not-for-profit
     entity) no such  transfer or  disclosure  shall take place until such THIRD
     PARTY enters into an agreement  with SB by which SB is granted a license to
     all inventions and patent rights based thereon which result from the use of
     such  technology.  To the extent any such invention would be HGS TECHNOLOGY
     or SB  TECHNOLOGY  if invented or  discovered  by SB and/or HGS,  then such
     invention  shall  be HGS  TECHNOLOGY  or SB  TECHNOLOGY  as the case may be
     subject to the terms and conditions of this  Agreement.  HGS agrees that SB
     may enter into  agreements  pursuant to this  Paragraph  using an Agreement
     substantially  in the  form  of  MTAs  used  by SB  and/or  HGS  under  the
     COLLABORATION AGREEMENT.
     (c) Either party may disclose HGS  TECHNOLOGY  and SB TECHNOLOGY to a THIRD
     PARTY  contractors  or  collaborators  to  facilitate or carry out research
     activities under this Agreement provided that such THIRD PARTIES enter into
     an  agreement  with such party which  contains  confidentiality  provisions
     substantially  the same as those set forth herein and which  provides  that
     all rights in inventions  and which result from the use of such  technology
     by the THIRD PARTY shall be owned by HGS or SB or  exclusively  licensed to
     HGS or SB as the case may be with a right to grant licenses.  To the extent
     any such invention or discovery would be HGS TECHNOLOGY or SB TECHNOLOGY if
     invented or discovered  by SB and/or HGS, then such  invention or discovery
     shall be HGS  TECHNOLOGY or SB TECHNOLOGY as the case may be subject to the
     terms and conditions of this Agreement.
12.4.All  confidential  information  disclosed  by one party to the other  shall
     remain the intellectual property of the disclosing party. In the


                                       43
<PAGE>


     event that a court or other legal or administrative  tribunal,  directly or
     through an  appointed  master,  trustee  or  receiver,  assumes  partial or
     complete  control over the assets of a party to this Agreement based on the
     insolvency  or bankruptcy  of such party,  the bankrupt or insolvent  party
     shall  promptly  notify the court or other  tribunal (i) that  confidential
     information  received from the other party under this Agreement remains the
     property  of the other  party and (ii) of the  confidentiality  obligations
     under this Agreement.  In addition,  the bankrupt or insolvent party shall,
     to the extent  permitted by law,  take all steps  necessary or desirable to
     maintain the confidentiality of the other party's confidential  information
     and to insure that the court,  other  tribunal or appointee  maintains such
     information in confidence in accordance with the terms of this Agreement.
12.5.No public  announcement  concerning  (i) the  existence of or terms of this
     Agreement (ii) research  and/or  discoveries  made by SB, (iii)  milestones
     achieved by SB, and (iv) exercise of SB of rights and options granted under
     this Agreement shall be made,  either directly or indirectly,  by any party
     to this  Agreement  without  prior  written  notice to the other party and,
     except  as may be  legally  required,  or as may be  required  for a public
     offering of  securities,  or as may be  required  for  recording  purposes,
     without first  obtaining the approval of the other party and agreement upon
     the nature and text of such  announcement.  The party  desiring to make any
     such  public  announcement  shall  inform the other  party of the  proposed
     announcement  or disclosure in reasonably  sufficient  time prior to public
     release,  and shall provide the other party with a written copy thereof, in
     order to allow  such  other  party to  comment  upon such  announcement  or
     disclosure.  This  Paragraph  12.5 shall not apply to any  information in a
     public  announcement  which is  information  essentially  identical to that
     contained  in a previous  public  announcement  agreed to  pursuant to this
     Paragraph.
12.6.Without the prior written  approval of the other party,  neither SB nor HGS
     shall submit for written or oral  publication any  manuscript,  abstract or
     the like which is directed to TARGETS and/or to a THERAPEUTIC  PROTEIN each
     of which is a  COLLABORATION  PRODUCT  prior to the earlier of (1) eighteen
     (18) months  after SB or HGS, as the case may be, files an SB PATENT or HGS
     PATENT, as the case may be, which claims such TARGET or THERAPEUTIC PROTEIN
     (but  not  including  EST  omnibus  filings)  or  (2)  with  respect  to  a
     THERAPEUTIC PROTEIN which is a COLLABORATION  PRODUCT, the date on which SB
     or HGS,  as the case may be,  obtains  rights to such  THERAPEUTIC  PROTEIN
     pursuant  to Section 6, or (3)


                                       44
<PAGE>

     the  publication in a printed  publication,  other than through a breach of
     this  Agreement,   of  such  TARGET  or  THERAPEUTIC  PROTEIN  and  related
     information to be submitted in such written or oral  publication;  provided
     that once a party obtains rights to such  THERAPEUTIC  PROTEIN  pursuant to
     Section 6, the other party shall have no rights under this  Paragraph  with
     respect to such THERAPEUTIC PROTEIN.  During the INITIAL RESEARCH TERM, HGS
     shall  provide SB and SB shall  provide HGS with all proposed  publications
     that  include  HGS  TECHNOLOGY  or SB  TECHNOLOGY  received  pursuant  to a
     collaboration with a not-for-profit entity prior to its publication.
12.7.For the avoidance of doubt,  nothing in this  Agreement  shall be construed
     as preventing or in any way  inhibiting  either party from  complying  with
     statutory  and   regulatory   requirements   governing   the   development,
     manufacture,  use and sale or other  distribution of products in any manner
     which  it  reasonably  deems  appropriate,   including,   for  example,  by
     disclosing  to regulatory  authorities  confidential  or other  information
     received from a party or THIRD PARTIES.  The parties shall take  reasonable
     measures to assure that no unauthorized use or disclosure is made by others
     to whom access to such information is granted.
12.8.During the term of this  Agreement,  each party shall  promptly  inform the
     other party of any  information  that it obtains or develops  regarding the
     utility and safety of a COLLABORATION PRODUCT. Prior to initiating clinical
     studies in human  patients or  volunteers  with any  COLLABORATION  PRODUCT
     which will be manufactured,  sold,  promoted or marketed by both parties in
     the same or in different countries anywhere in the world, the parties shall
     first agree on methods and  procedures  for notifying each other of adverse
     drug  experiences  within such time  periods and in such form and manner as
     are  necessary  or  appropriate  in order for each party to comply with its
     standard  practices and procedures for recording  adverse drug  experiences
     and for  reporting  adverse  drug  experiences  to  appropriate  regulatory
     authorities.
12.9.Any  materials  provided  by one party to the other  under  this  Agreement
     shall be subject to the  confidentiality  and non-use provisions set out in
     this  Section.  All such  materials  shall be used in  compliance  with all
     applicable  laws  and  regulations.  SB and HGS each  certifies  that it is
     regularly  engaged in conducting tests in vitro or in animals used only for
     laboratory  research  purposes,  that all materials which SB or HGS receive
     under this  Agreement  will actually be used for these  purposes  only, and
     that no animal  used for such tests

                                       45
<PAGE>

     will be used for any food purposes or kept as a domestic pet or livestock.
12.10. SB and HGS agree to comply with any  applicable  law or regulation of the
     United  States or any country  governing the export or reexport of products
     (including test equipment),  software,  and technical data (and the product
     of such data).
12.11. All rights and licensing  granted under or pursuant to this  Agreement by
     HGS to SB  are,  and  shall  irrevocably  be  deemed  to be,  "intellectual
     property"  as defined in Section  101(56) of the  Bankruptcy  Code.  In the
     event of the  commencement  of a case by or against  either party under any
     Chapter of the Bankruptcy Code, this Agreement shall be deemed an executory
     contract and all rights and  obligations  hereunder  shall be determined in
     accordance  with  Section  365(n)  thereof.  Unless  a party  rejects  this
     Agreement and the other party  decides not to retain its rights  hereunder,
     the other party shall be entitled to a complete  duplicate  of (or complete
     access to, as appropriate) all intellectual property and all embodiments of
     such  intellectual  property  held by the  party  and the  party  shall not
     interfere with the rights of the other party,  which are expressly  granted
     hereunder,  to  such  intellectual  property  and all  embodiments  of such
     intellectual property from another entity. Further, this Agreement shall be
     deemed,  upon  presentation to another entity, to be the same as an express
     instruction by the party to such other entity to provide such  intellectual
     property and all embodiments of such intellectual  property directly to the
     other party.  Without limiting the foregoing  provisions in this paragraph,
     the  other  party   shall  be  entitled  to  all   post-bankruptcy-petition
     improvements,  updates,  or developments of intellectual  property  created
     hereunder.  If such intellectual  property is not fully developed as of the
     commencement  of any bankruptcy  case, the other party shall have the right
     to complete development of the property.
12.12. For the  avoidance of doubt,  HGS shall not disclose to a THIRD PARTY any
     RESEARCH PROGRAMS and/or work request justifications submitted to HGS by SB
     under the COLLABORATION AGREEMENT.

13.  PATENT PROSECUTION AND LITIGATION
     ---------------------------------

13.1.Each  party  shall  have  and  retain  sole  and  exclusive  title  to  all
     inventions,  discoveries,  designs,  works of authorship and other know-how
     which are made,  conceived,  reduced to practice or  generated  only by its
     employees,  agents, or other persons acting under its authority. Each party
     shall own an equal undivided interest in all such

                                       46
<PAGE>

     inventions,  discoveries,  designs,  works of authorship and other know-how
     made,  conceived,  reduced to practice or generated  jointly by  employees,
     agents, or other persons acting under the authority of both parties. In the
     event of jointly owned inventions,  HGS shall have the first right to file,
     prosecute and maintain patents and applications  directed thereto under the
     terms and conditions of Paragraph 13.2. If a joint owner does not desire to
     file,  prosecute  or  maintain  a patent or patent  application  to a joint
     inventions,  such owner shall assign its ownership  interest therein to the
     other.  All patents and patent  applications to joint  inventions which are
     HGS SPECIAL  TECHNOLOGY and SPECIAL SB TECHNOLOGY  shall be both SB PATENTS
     and HGS  PATENTS,  subject to the terms and  conditions  of the  Agreement;
     otherwise, any joint owner shall be free to dispose of its interest therein
     without accounting to the other joint owner.

13.2.HGS shall have the right within its sole  discretion  and at its expense to
     prepare,  file,  prosecute  and maintain  HGS PATENTS.  With respect to HGS
     PATENTS as to which SB retains a license  hereunder,  subject to  Paragraph
     13.10,  HGS  shall  keep  SB  informed  with  respect  to  the  filing  and
     prosecution  thereof.  In the event  that SB  desires  that HGS  obtain and
     maintain  patent  protection  in any  country  with  respect to HGS SPECIAL
     TECHNOLOGY as to which SB retains a license  hereunder,  HGS shall do so at
     the cost and  expense  of SB,  which  expense  shall be SB's pro rata share
     where a  COLLABORATION  PARTNER  and/or  TAKEDA  requests HGS to do so with
     respect to the same HGS SPECIAL TECHNOLOGY  provided that SB shall have the
     right  within its sole  discretion  and at its  expense to  prepare,  file,
     prosecute  and maintain HGS PATENTS to the extent they claim a  THERAPEUTIC
     PROTEIN or GENE THERAPY VACCINE (and the making, using and selling thereof)
     to which SB has obtained exclusive rights pursuant to Section 6 or 7.

13.3.SB shall have the right  within its sole  discretion  and at its expense to
     prepare,  file,  prosecute  and  maintain  SB PATENTS.  With  respect to SB
     PATENTS as to which HGS retains a license  hereunder,  subject to Paragraph
     13.11,  SB  shall  keep  HGS  informed  with  respect  to  the  filing  and
     prosecution  thereof.  In the event  that HGS  desires  that SB obtain  and
     maintain  patent  protection  in any  country  with  respect  to SPECIAL SB
     TECHNOLOGY as to which HGS retains a license  hereunder,  SB shall do so at
     the cost and expense of HGS;  provided that HGS shall have the right within
     its sole discretion to prepare,  file, prosecute and maintain SB PATENTS at
     its expense to the extent they claim a THERAPEUTIC  PROTEIN or GENE THERAPY
     VACCINE
                                       47

<PAGE>

     (and the  making,  using and  selling  thereof)  to which HGS has  obtained
     exclusive  rights  pursuant  to  Section 6 or 7.


13.4.Each party,  on behalf of itself and its  directors,  employees,  officers,
     shareholders,  agents,  successors  and assigns  hereby  waives any and all
     actions  and causes of action,  claims and  demands  whatsoever,  in law or
     equity  of any  kind it or they may  have  against  the  other  party,  its
     officers,  directors,  employees,   shareholders,  agents,  successors  and
     assigns,  which  may  arise  in  any  way,  except  as a  result  of  gross
     negligence,  recklessness,  or willful misconduct, in performance of patent
     activities under this Section.
13.5.In the event of the  institution  of any suit by a THIRD PARTY against HGS,
     SB or its licensees for patent infringement involving the manufacture, use,
     sale,  distribution  or  marketing  of HGS  PRODUCT or SB  PRODUCT,  TAKEDA
     PRODUCT, or CORIGHT PRODUCT, the party sued shall promptly notify the other
     party in writing.  The other  party shall have the right,  to the extent of
     its  interest,  but not the  obligation  to  defend or  participate  in the
     defense  of such  suit at its own  expense.  HGS and SB  shall  assist  one
     another and cooperate in any such litigation at the other's request without
     expense to the requesting party.

13.6.In  the  event  that  HGS or SB  becomes  aware  of  actual  or  threatened
     infringement of a SB PATENT or HGS PATENT  anywhere in the TERRITORY,  that
     party shall promptly notify the other party in writing. The owner of the SB
     PATENT or HGS PATENT shall have the first right but not the  obligation  to
     bring, at its own expense,  an infringement  action against any THIRD PARTY
     and to use the other party's name in connection therewith.  If the owner of
     the patent does not commence a particular infringement action within thirty
     (30) days, the other party, after notifying the owner in writing,  shall be
     entitled to bring such infringement action at its own expense to the extent
     that such party is  licensed  thereunder  and in its own name and/or in the
     name of the owning party. The foregoing notwithstanding,  in the event that
     an alleged infringer certifies pursuant to 21 USC  355(b)(2)(A)(vii)(IV) or
     (j)(2)(A)(iv)  against  an  issued  HGS  PATENT  or SB  PATENT  covering  a
     COLLABORATION  PRODUCT,  the party receiving  notice of such  certification
     shall  immediately  notify the other  party of such  certification,  and if
     fourteen  (14) days prior to  expiration  of the forty fine (45) day period
     set forth in 21 USC  355(c)(3)(C) or  (j)(4)(B)(iii),  the owner of the HGS
     PATENT or SB PATENT  fails to commence an  infringement  action,  the party
     receiving  notice,  in its sole  discretion,  at its own expense and to the
     extent  that it is  licensed  under the HGS PATENT or SB  PATENT,  shall be
     entitled  to bring


                                       48
<PAGE>

     such  infringement  action in its own name and/or in the name of the owning
     party The party  conducting  such action  shall have full  control over its
     conduct, including settlement thereof provided such settlement shall not be
     made  without  the prior  written  consent  of the other  party if it would
     adversely  affect the patent rights of the other party.  In any event,  HGS
     and SB shall assist one another and cooperate in any such litigation at the
     other's request without expense to the requesting party.
13.7.HGS and SB shall recover their respective  actual  out-of-pocket  expenses,
     or  equitable  proportions  thereof,  associated  with  any  litigation  or
     settlement  thereof from any recovery made by any party.  Any excess amount
     shall be  shared  between  SB and HGS in an  amount  proportional  to their
     respective losses and expenses.
13.8.The parties  shall keep one another  informed of the status of and of their
     respective activities regarding any such litigation or settlement thereof.
13.9.The owner of a SB PATENT or HGS PATENT  shall have the first  right to seek
     extensions  of the terms of the patent and to seek to obtain  SPCs. A party
     who is  developing,  selling  or  planning  to sell a product  covered by a
     patent  shall have the second  right.  Each party shall assist the other in
     the obtaining of such extensions or SPCs including by authorizing the other
     party to act as its agent. 
13.10.The disclosure  obligations  of  Paragraph  13.2  shall  only apply to HGS
     PATENTS which include HGS SPECIAL  TECHNOLOGY which HGS has disclosed to SB
     Pursuant to this Agreement.
13.11.The  disclosure  obligations  of Paragraph  13.3  shall  only  apply to SB
     PATENTS  which claim  SPECIAL SB  TECHNOLOGY  which SB has disclosed to HGS
     pursuant to this Agreement.

14.  TRADEMARKS AND NON-PROPRIETARY NAMES
     ------------------------------------

14.1.SB, at its expense,  shall be responsible  for the selection,  registration
     and  maintenance of all trademarks  which it employs in connection  with SB
     PRODUCT  and  shall  own  and  control  such  trademarks.  Nothing  in this
     Agreement shall be construed as a grant of rights, by license or otherwise,
     to HGS to use such  trademarks for any purpose other than  co-promotion  as
     provided in this Agreement.
14.2.SB,  at  its  expense,   shall  be   responsible   for  the  selection  and
     registration of non-proprietary names employed by SB for SB PRODUCT.
14.3.HGS, at its expense,  shall be responsible for the selection,  registration
     and  maintenance of all trademarks  which it employs in

                                       49

<PAGE>

     connection  with HGS  PRODUCT and shall own and  control  such  trademarks.
     Nothing in this  Agreement  shall be  construed  as a grant of  rights,  by
     license or otherwise,  to SB to use such  trademarks  for any purpose other
     than co-promotion as provided in this Agreement.
14.4.HGS,  at  its  expense,   shall  be  responsible   for  the  selection  and
     registration of non-proprietary names employed by HGS for HGS PRODUCT.
14.5.(a) At no expense to HGS, SB and its licensees  under this Agreement  shall
     be  responsible  for the  selection,  registration  and  maintenance of all
     trademarks  which  they  employ in  connection  with a SB PRODUCT in the SB
     FIELD in SOUTHEAST ASIA and TAKEDA PRODUCT,  and shall own and control such
     trademarks.  Nothing in this  Agreement  shall be  construed  as a grant of
     rights,  by license or  otherwise,  to HGS to use such  trademarks  for any
     purpose.
     (b) At no expense to HGS, SB and its licensees  under this Agreement  shall
     be responsible for the selection and registration of non-proprietary  names
     for SB PRODUCT in the SB FIELD in SOUTHEAST ASIA and TAKEDA PRODUCT.

15.  STATEMENTS AND REMITTANCES
     --------------------------

15.1.Each party,  as the case may be,  shall keep and require its  licensees  to
     keep  complete  and accurate  records of all NET SALES of HGS  PRODUCT,  SB
     PRODUCT, CORIGHTS PRODUCT and TAKEDA PRODUCT subject to royalties under the
     licenses  granted  herein  or  in  the  applicable   COLLABORATION  PARTNER
     AGREEMENT or SB/TAKEDA  AGREEMENT.  Each party shall have the right, at its
     expense,  through a certified public  accountant or like person  reasonably
     acceptable  to the other  party,  to examine such  records  during  regular
     business  hours  during the life of this  Agreement  and for six (6) months
     after its termination;  provided,  however, that such examination shall not
     take  place  more often  than once a year and  provided  further  that such
     accountant  shall report only as to the accuracy of the royalty  statements
     and  payments,  including  the  magnitude  and  source of any  discrepancy.
     Neither  party nor their  licensees  shall be  required  to  maintain  such
     records for more than three (3) years.   
15.2.Except for SB PRODUCT and TAKEDA  PRODUCT  sold by TAKEDA or its  licensees
     under the  SB/TAKEDA  AGREEMENT,  within sixty (60) days after the close of
     each  calendar  quarter,  each  party  shall  deliver  to the  other a true
     accounting  of all SB  PRODUCT,  CORIGHTS  PRODUCT,  TAKEDA  PRODUCT or HGS
     PRODUCT sold by it and its licensees and  distributors  during such quarter
     for  which  royalties  are  payable  and  shall  at the  same  time pay all
     royalties due.

                                       50

<PAGE>


     Such   accounting   shall   show   sales   on  a   country-by-country   and
     product-by-product basis.
15.3.Within  ninety  (90)  days  after the  close of each  half  year,  SB shall
     deliver to HGS a true accounting of all SB PRODUCT or TAKEDA PRODUCT,  sold
     under authority of the SB/TAKEDA  AGREEMENT by TAKEDA and its licensees and
     distributors  during  such  half  year and  shall at the same  time pay all
     royalties  due to HGS as a result  of or  deriving  from such  sales.  Such
     accounting shall show sales on a country-by-country  and product-by-product
     basis.
15.4.Any tax paid or required to be withheld on account of the  licensing  party
     based on milestone payments or royalties payable under this Agreement shall
     be deducted from the amount of milestones or royalties otherwise due. Taxes
     paid or  withheld  from monies due SB by TAKEDA or its  licensees  shall be
     deducted  proportionately from the amount of monies otherwise due HGS. Each
     party shall  secure and send to the other proof of any such taxes  withheld
     and paid.
15.5.All royalties due under this  Agreement  shall be payable in U.S.  dollars.
     If governmental regulations prevent remittances from a foreign country with
     respect to sales made in that country,  the  obligation to pay royalties on
     sales in that  country  shall  be  suspended  until  such  remittances  are
     possible.  Each party shall have the right,  upon giving  written notice to
     the other, to receive payment in that country in local currency.
15.6.Monetary  conversations from the currency of a foreign country,  in which a
     product is sold,  into United States currency shall be made at the official
     exchange  rate in force in that country for financial  transactions  on the
     last  business  day of the  calendar  quarter  or half  year for  which the
     royalties are being paid. If there is no such official  exchange  rate, the
     conversation shall be made at the rate for such remittances on that date as
     certified by Citibank, N.A., New York, New York, U.S.A.

16.  TERM AND TERMINATION
     --------------------

16.1.This  Agreement  shall come into effect as of the EFFECTIVE  DATE and shall
     remain in full force and effect  unless  earlier  terminated as provided in
     this Section 16.

16.2.In the event HGS fails to make a payment  to SB under this  Agreement  or a
     co-promotion agreement with respect to an HGS PRODUCT when due, or fails to
     meet its  obligations  under  Section 9 with respect to an HGS PRODUCT,  in
     addition  to any other  remedy  which it may  have,  SB may  notify  HGS in
     writing  that all of HGS's  rights with  respect to such HGS PRODUCT  shall
     terminate as of sixty

                                       51
<PAGE>

     (60) days after such written  notice and HGS's rights with respect  thereto
     shall terminate unless such payment is made or such failure is cured, prior
     to the expiration of such sixty (60) day period.
16.3.In the event SB fails to make a payment  to HGS under this  Agreement  or a
     co-promotion  agreement with respect to an SB PRODUCT when due, or fails to
     meet its  obligations  under  Section 9 with  respect to an SB PRODUCT,  in
     addition  to any  other  remedy  which it may  have,  HGS may  notify SB in
     writing that,  subject to SB licensee rights provided in Paragraph 17.4(a),
     all of SB's rights with  respect to such SB PRODUCT  shall  terminate as of
     sixty (60) days after such  written  notice and SB's  rights  with  respect
     thereto  shall  terminate  unless such  payment is made or such  failure is
     cured, prior to the expiration of such sixty (60) day period.
16.4 Either party may terminate  this Agreement if, at any time, the other party
     shall file in any court or agency  pursuant to any statute or regulation of
     any state or  country,  a  petition  in  bankruptcy  or  insolvency  or for
     reorganization  or for an arrangement or for the  appointment of a receiver
     or trustee of the party or of its assets,  or if the other party proposes a
     written agreement of composition or extension of its debts, or if the other
     party shall be served with an involuntary petition against it, filed in any
     insolvency  proceeding,  and such  petition  shall not be dismissed  within
     sixty (60) days  after the  filing  thereof,  or if the other  party  shall
     propose or be a party to any  dissolution or  liquidation,  or if the other
     party shall make an assignment for the benefit of creditors.
16.5 Notwithstanding  the  bankruptcy  of  HGS  or  SB,  or  the  impairment  of
     performance  by HGS or SB of its  obligations  under  this  Agreement  as a
     result of  bankruptcy  or insolvency of HGS or SB, the other party shall be
     entitled to retain the licenses  granted herein,  and SB licensees shall be
     entitled  to retain  their  rights as provided in  Paragraph  17.4  hereof,
     subject to rights of a party to terminate  this Agreement for reasons other
     than bankruptcy or insolvency as expressly provided in this Agreement.
16.6 Neither party shall have the right to terminate this Agreement except under
     Paragraph 16.4, provided however that nothing in this Agreement shall limit
     any remedies for breach which may be available  pursuant to a judgment of a
     court, in law or equity,  including termination of this Agreement or of any
     or all rights hereunder.
16.7 In the event  that by one (1) year  after the end of the  INITIAL  RESEARCH
     TERM, SB has not obtained the full length DNA coding  sequence for a TARGET
     encompassed  by, and as used in, an  ANTIBODY  RESEARCH  PLAN  and/or  DRUG
     RESEARCH PLAN

                                       52
<PAGE>


     submitted by SB under this  Agreement  and SB has not  certified in writing
     (e.g,  inclusion  of such  sequence  in a  RESEARCH  PLAN) to HGS that such
     sequence(s)  has been  obtained,  HGS by written notice to SB may terminate
     all rights and  licenses to such  TARGETS(S)  and such rights and  licenses
     shall  terminate  thirty  (30)  days  thereafter  unless  SB  prior  to the
     expiration  of such thirty (30) days has  obtained  such  sequence  and has
     certified in writing to HGS that such sequence has been obtained.  Upon any
     termination of rights and licenses to a TARGET under this  Paragraph  16.7,
     SB shall discontinue all work encompassed by such ANTIBODY RESEARCH PLAN or
     DRUG RESEARCH PLAN as the case may be.

17.  RIGHTS AND DUTIES UPON TERMINATION
     ----------------------------------

17.1.Upon  termination  of this Agreement in its entirety or with respect to any
     SB  PRODUCT,  CORIGHTS  PRODUCT,  TAKEDA  PRODUCT or HGS  PRODUCT or to any
     country, each party shall notify the other of the amount of such product it
     and its licensees  and  distributors  then have on hand,  the sale of which
     would, but for the termination,  be subject to royalty,  and such party and
     its licensees and  distributors  shall  thereupon be permitted to sell that
     amount of the product provided that the party shall pay the royalty thereon
     at the time herein provided for provided, however, that no such termination
     of the this  Agreement  shall  affect the rights of an SB  licensee to sell
     such SB PRODUCT or TAKEDA  PRODUCT to the extent such rights  survive  such
     termination under Paragraph 17.4 of this Agreement.
17.2.Termination of this Agreement shall  terminate all outstanding  obligations
     and  liabilities  between the parties  arising from this  Agreement  except
     those described in Paragraphs  2.10, 2.14, 2.24, 12.2, 12.4, 12.7, and 13.1
     and Sections 15, 17, 19, 21, and 28, as well as any provision not specified
     in this  Paragraph  which is clearly meant to survive  termination  of this
     Agreement.
17.3.Termination  of the  Agreement in  accordance  with the  provisions  hereof
     shall not limit remedies which may be otherwise available in law or equity.
17.4.All rights of  licensees  pursuant to  licenses  granted by SB to TAKEDA or
     otherwise to an SB PRODUCT in  SOUTHEAST  ASIA under this  Agreement  shall
     survive  termination  of this  Agreement  pursuant to  Paragraph  16.3,  or
     Paragraph  16.4  thereof in the event of the  bankruptcy  or similar  event
     listed  in such  Paragraph  16.4  with  respect  to SB,  provided  that the
     following  conditions are met: (i) the SB licensee is not then in breach of
     its license; (ii) except for the SB/TAKEDA AGREEMENT, HGS's rate of royalty
     compensation thereunder is no less than the rate of royalty compensation to
     HGS
                                       53

<PAGE>


     under this Agreement;  (iii) HGS assumes no performance  obligations  under
     the  license  agreement;  and (iv) SB and its  licensee  assign the license
     agreement  to HGS within  sixty (60) days after such  termination  and as a
     result of such assignment  such licensee is directly  obligated to HGS. All
     rights of  licensees  with  respect to a SB PRODUCT  pursuant  to  licenses
     granted by SB under this Agreement shall survive termination of SB's rights
     with  respect to such SB PRODUCT  pursuant to  Paragraph  16.3 or Paragraph
     16.4 hereof, provided that the above-stated conditions are met with respect
     to such rights of the licensees.

18.  WARRANTIES AND REPRESENTATIONS
     ------------------------------

18.1.Nothing  in  this  Agreement  shall  be  construed  as a  warranty  that SB
     PATENTS,  COLLABORATION  PARTNER  PATENTS  or  HGS  PATENTS  are  valid  or
     enforceable  or that their  exercise does not infringe any patent rights of
     THIRD  PARTIES.  A holding of  invalidity or  unenforceability  of any such
     patent,  from which no further appeal is or can be taken,  shall not affect
     any  obligation  already  accrued  hereunder,   but  shall  only  eliminate
     royalties  otherwise  due under  such  patent  from the date  such  holding
     becomes final.
18.2.Each  party  warrants  and  represents  that it has the right to enter into
     this Agreement and to perform in accordance therewith.
18.3.HGS hereby  further  represents  and  warrants  that,  during  the  INITIAL
     RESEARCH TERM, HGS will not grant TIGR permission to disclose or provide to
     a THIRD  PARTY  materials  which  are  GENES in  circumstances  where  TIGR
     requires such permission  without SB's prior consent.  HGS' failure to take
     action  against TIGR where TIGR is in breach of an  obligation to HGS shall
     not be  construed as HGS granting  TIGR  permission  to disclose or provide
     such materials.  
18.4.Except as  otherwise  expressly  set forth herein  neither  party makes any
     representations  or extends any  warranties of any kind,  either express or
     implied,  including,  but not limited to, warranties of  merchantability or
     fitness for a particular purpose.
18.5.Each party  guarantees  that its  respective  AFFILIATES  will  perform all
     obligations  under this Agreement as if such AFFILIATES were signatories of
     this Agreement.

                                       54

<PAGE>

19.  INDEMNIFICATION
     ---------------

19.1.SB shall  defend,  indemnify  and hold  harmless  HGS,  AFFILIATES  of HGS,
     licensors of HGS and their respective  directors,  officers,  shareholders,
     agents and employees, from and against any and all liability, loss, damages
     and expenses (including attorneys' fees) as the result of claims,  demands,
     costs or  judgments  which may be made or  instituted  against  any of them
     arising out of the manufacture,  possession,  distribution,  use,  testing,
     sale or other  disposition  by or  through  SB or any THIRD  PARTY  granted
     rights by SB under this  Agreement of any SB PRODUCT.  SB's  obligation  to
     defend, indemnify and hold harmless shall include claims, demands, costs or
     judgments,  whether  for money  damages  or  equitable  relief by reason of
     alleged personal injury (including death) to any person or alleged property
     damage,  provided,  however,  the indemnity  shall not extend to any claims
     against an  indemnified  party which  result from the gross  negligence  or
     willful  misconduct of such indemnified  party. SB shall have the exclusive
     right to control the defense of any action  which is to be  indemnified  in
     whole by SB hereunder,  including the right to select counsel acceptable to
     HGS to defend HGS and to settle  any  claim,  provided  that,  without  the
     written  consent  of HGS  (which  shall  not be  unreasonably  withheld  or
     delayed),  SB shall not agree to settle any claim against HGS to the extent
     such claim has a material  adverse  effect on HGS. The  provisions  of this
     Paragraph  shall  survive  and remain in full  force and  effect  after any
     termination,  expiration or  cancellation  of this Agreement and obligation
     hereunder shall apply whether or not such claims are rightfully brought. SB
     shall  require  each  licensee  to  agree  to  indemnify  HGS  in a  manner
     consistent with this Paragraph.

19.2.HGS  shall  defend,  indemnify  and hold  harmless  SB,  AFFILIATES  of SB,
     licensors of SB and their  respective  directors,  officers,  shareholders,
     agents and employees, from and against any and all liability, loss, damages
     and expenses (including attorneys' fees) as the result of claims,  demands,
     costs or  judgments  which may be made or  instituted  against  any of them
     arising out of the manufacture,  possession,  distribution,  use,  testing,
     sale or other  disposition by or through HGS or its AFFILIATES or any THIRD
     PARTY granted rights by HGS under this Agreement of any HGS PRODUCT.  HGS's
     obligation to defend,  indemnify and hold  harmless  shall include  claims,
     demands, costs or judgments,  whether for money damages or equitable relief
     by reason of alleged  personal  injury  (including  death) to any person or
     alleged property damage, provided,  however, the indemnity shall not extend
     to any claims  against an  indemnified  party  which  result from the gross
     negligence or willful  misconduct of such

                                       55
<PAGE>


     indemnified  party.  HGS shall  have the  exclusive  right to  control  the
     defense of any action which is to be indemnified in whole by HGS hereunder,
     including the right to select counsel  acceptable to SB to defend SB and to
     settle any claim,  provided that,  without the written consent of SB (which
     shall not be  unreasonably  withheld  or  delayed),  HGS shall not agree to
     settle any claim against SB to the extent such claim has a material adverse
     effect on SB. The provisions of this Paragraph  shall survive and remain in
     full force and effect after any termination,  expiration or cancellation of
     this Agreement and HGS obligation hereunder shall apply whether or not such
     claims are rightfully brought.  HGS shall require each licensee to agree to
     indemnify SB in a manner consistent with this Paragraph.
19.3.A person  or  entity  that  intends  to claim  indemnification  under  this
     Section 19 (the  "Indemnitee")  shall promptly  notify the other party (the
     "Indemnitor") of any loss, claim, damage, liability or action in respect of
     which  the  Indemnitee  intends  to  claim  such  indemnification,  and the
     Indemnitor,  after it determines  that  indemnification  is required of it,
     shall assume the defense thereof with counsel mutually  satisfactory to the
     parties;  provided,  however,  that an  Indemnitee  shall have the right to
     retain  its own  counsel,  with  the fees  and  expenses  to be paid by the
     Indemnitor if Indemnitor does not assume the defense; or, if representation
     of such  Indemnitee  by the  counsel  retained by the  Indemnitor  would be
     inappropriate due to actual or potential  differing  interests between such
     Indemnitee  and  any  other  party  represented  by  such  counsel  in such
     proceedings.  The indemnity agreement in this Section 19 shall not apply to
     amounts paid in settlement of any loss, claim, damage,  liability or action
     is such settlement is effected without the consent of the Indemnitor, which
     consent shall not be withheld  unreasonably.  The failure to deliver notice
     to the Indemnitor  within a reasonable  time after the  commencement of any
     such action,  if  prejudicial  to its ability to defend such action,  shall
     relieve  such  Indemnitor  of any  liability to the  Indemnitee  under this
     Section 19, but the omission so to deliver  notice to the  Indemnitor  will
     not  relieve  it of any  liability  that  it  may  have  to any  Indemnitee
     otherwise than under this Section 19. The Indemnitee under this Section 19,
     its employees and agents, shall cooperate fully with the Indemnitor and its
     legal  representatives  in the  investigations  of  any  action,  claim  or
     liability  covered  by this  indemnification.  In the event that each party
     claims  indemnity  from the other and one party is finally  held  liable to
     indemnify the other, the Indemnitor shall additionally be liable to pay the
     reasonable  legal costs and  attorneys'  fees incurred by the Indemnitee in
     establishing its claim for indemnity.


                                       56
<PAGE>

20.  FORCE MAJEURE
     -------------

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

21.  GOVERNING LAW
     -------------

21.1.This  Agreement  shall be deemed to have been made in the  Commonwealth  of
     Pennsylvania  and its form,  execution,  validity,  construction and effect
     shall be  determined  in accordance  with the laws of the  Commonwealth  of
     Pennsylvania, U.S.A.

22.  SEPARABILITY
     ------------

22.1.In the event any portion of this Agreement  shall be held illegal,  void or
     ineffective,  the remaining  portions hereof shall remain in full force and
     effect.
22.2.If any of the terms or  provisions  of this  Agreement are in conflict with
     any applicable  statute or rule of law, then such terms or provisions shall
     be deemed  inoperative  to the extent that they may conflict  therewith and
     shall be deemed to be modified to conform with such statute or rule of law.
22.3.In  the  event  that  the  terms  and  conditions  of  this  Agreement  are
     materially altered as a result of Paragraphs 22.1 or 22.2, the parties will
     renegotiate  in good faith the terms and  conditions  of this  Agreement to
     resolve any inequities.

23.  ENTIRE AGREEMENT
     ----------------

23.1 This Agreement,  entered into as of the date written above, constitutes the
     entire agreement  between the parties relating to the subject matter hereof
     and supersedes all previous  writings and  understandings  relating to such
     subject matter. No terms or provisions of this Agreement shall be varied or
     modified by any prior or subsequent statement,  conduct or act of either of
     the  parties,  except that the parties may amend this  Agreement by written
     instruments  specifically  referring  to and executed in the same manner as
     this Agreement.

                                       57
<PAGE>


23.2 (a) Neither HGS nor SB may enter into any  agreement  with a  COLLABORATION
     PARTNER which amends the terms and conditions of the COLLABORATION  PARTNER
     AGREEMENT to which such COLLABORATION  PARTNER is a party without the prior
     written  consent  of the  other;  and (b) SB may not  amend  the  terms and
     conditions of the SB/TAKEDA  AGREEMENT in a manner that materially  affects
     HGS without the prior  written  consent of HGS,  which consent shall not be
     unreasonably withheld.
23.3.The headings and titles to the Sections and  Paragraphs  of this  Agreement
     are inserted for convenience  only and shall not be deemed a part hereof or
     affect the construction or interpretation of any provision hereof.

24.  NOTICES
     -------

24.1.Any notice  required or permitted under this Agreement shall be sent by air
     mail,  postage pre-paid,  courier or fax to the following  addresses of the
     parties  or such  other  addresses  as may be  notified  to the  parties as
     provided herein:
                  HGS: HUMAN GENOME SCIENCES, INC.
                           9410 Key West Avenue
                           Rockville, Maryland 20850
                           Attention:  Chief Executive Officer
                           fax: 301-309-0092
                  copy to:
                           Mr. Elliot Olstein
                           Carella, Byrne, Bain, Gilfillan, Cecchi & Stewart
                           6 Becker Farm Road
                           Roseland, New Jersey 07068
                           fax: 201-994-1744
                  SB:      SMITHKLINE BEECHAM CORPORATION
                           709 Swedeland Road
                           King of Prussia, Pennsylvania 19103
                  Attention:        Vice-President,
                                    Advanced Technologies in Genetics
                                    SmithKline Beecham Pharmaceuticals
                                    fax: 610-270-6663
         copy to:
                           SMITHKLINE BEECHAM CORPORATION
                           709 Swedeland Road
                           P. O. Box 1539
                           King of Prussia, Pennsylvania 19406
                           Attention:  Corporate Intellectual Property
                           fax: 610-270-4026

                                       58

<PAGE>


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

25.  ASSIGNMENT
     ----------

25.1.This  Agreement and the licenses  herein  granted shall be binding upon and
     inure to the  benefit  of the  successors  in  interest  of the  respective
     parties.  Neither  this  Agreement  nor any  interest  hereunder  shall  be
     assignable  by  either  party  without  the  written  consent  of the other
     provided,  however,  that SB or HGS may assign this Agreement or any of its
     rights or obligations hereunder to any AFFILIATE or to any THIRD PARTY with
     which it may  merge or  consolidate,  or to  which it may  transfer  all or
     substantially  all of its assets to which this Agreement  relates,  without
     obtaining the consent of the other party, subject to Paragraphs 10.1 (viii)
     and 10.2 (viii),  provided the assigning  party  remains  liable under this
     Agreement and that the THIRD PARTY assignee or surviving  entity assumes in
     writing all of its obligations  under this  Agreement.  HGS hereby consents
     and agrees to accept any assignment to HGS of a license agreement by SB and
     its licensee  pursuant to  Paragraph  17.4 if the  conditions  of Paragraph
     17.4(a)(i),(ii)(iii) and (iv) are satisfied. .

26.  RECORDING
     ---------

26.1.SB and HGS shall  have the right,  at any time,  to  record,  register,  or
     otherwise  notify this Agreement in appropriate  governmental or regulatory
     offices  anywhere  in the  TERRITORY,  and the other  party  shall  provide
     reasonable  assistance to the notifying  party in effecting such recording,
     registering or notifying.

27.  DISPUTE RESOLUTION
     ------------------

27.1.Senior  management  of SB and HGS shall  endeavor to resolve  all  disputes
     under this Agreement.
27.2.If there is a tie vote within the RC over an issue within the  jurisdiction
     of the RC,  which tie vote is not  timely  solved by the RC,  and if senior
     management does not timely resolve any such tie vote, then either party may
     submit  such to binding  arbitration  pursuant  to the  SB/HGS  arbitration
     agreement dated 19 August, 1993 as may be amended from time to time.
27.3.Either party may submit  disputes  arising from  Paragraphs  6.2 and 7.4 to
     binding arbitration  pursuant to the SB/HGS Arbitration  Agreement dated 19
     August 1993 as may be amended from time-to-time.

28.  COVENANTS
     ---------

28.1.
         (a)      SB agrees not to use SB TECHNOLOGY except

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         (1) during the INITIAL  RESEARCH TERM and RESEARCH  TERM  EXTENSIONS to
         perform  research and development in the SB FIELD and after the INITIAL
         RESEARCH  TERM and RESEARCH  TERM  EXTENSIONS  to perform  research and
         development in the SB FIELD pursuant to a RESEARCH PLAN submitted by or
         on behalf of SB  pursuant  to this  Agreement, 
         (2) in the HGS FIELD to perform  research and  development  only (i) in
         furtherance  of research  and  development  in the SB FIELD  during the
         INITIAL RESEARCH TERM and RESEARCH TERM EXTENSIONS,  and (ii) after the
         INITIAL  RESEARCH TERM and RESEARCH TERM EXTENSIONS only in furtherance
         of research and development in the SB FIELD pursuant to a RESEARCH PLAN
         submitted by or on behalf of SB pursuant to this Agreement,
         (3) to perform research and development of GENE THERAPY VACCINES during
         the INITIAL RESEARCH TERM,
         (4) to make,  have  made,  use,  and  sell SB  PRODUCT  (other  than SB
         PRODUCTS  to  which  SB's  rights  have  been  terminated  pursuant  to
         Paragraph  16.3),  TAKEDA PRODUCT and CORIGHTS PRODUCT and as expressly
         permitted under this Agreement, HGS PRODUCTS,
         (5) to grant licenses that SB is otherwise  permitted to grant pursuant
         to this Agreement, and
     (b) during and after the INITIAL  RESEARCH  TERM,  SB agrees not to use HGS
     SPECIAL  TECHNOLOGY  except as  licensed  and  permitted  pursuant  to this
     Agreement;
     (c)  Notwithstanding  the  preceding,  SB shall  have  the  right to use SB
     TECHNOLOGY  that is solely based on or derived from  published  information
     and/or   information   which  otherwise   becomes   lawfully  known  to  SB
     independently of this Agreement,  unless: (i) the information is claimed in
     a  published  HGS  PATENT or SB PATENT and there is no THIRD  PARTY  patent
     application  or patent with an earlier  priority  date which  discloses the
     information  or  (ii)  the  SB  TECHNOLOGY  results  from a  RESEARCH  PLAN
     undertaken by SB.
28.2.HGS shall not use SPECIAL SB  TECHNOLOGY  except as  licensed or  permitted
     under this  Agreement.  Notwithstanding  the preceding,  HGS shall have the
     right to use SPECIAL SB TECHNOLOGY  independently of this Agreement if such
     SPECIAL  SB  TECHNOLOGY  is  solely  based  on or  derived  from  published
     information  and/or  information  which otherwise becomes lawfully known to
     HGS independently of this Agreement,  unless: the information is claimed in
     a  published  HGS  PATENT or SB PATENT and there is no THIRD

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<PAGE>

     PARTY  patent  application  or patent with an earlier  priority  date which
     discloses the information.
28.3.Notwithstanding  anything  else to the contrary,  the following  uses of SB
     TECHNOLOGY  and/or  HGS  SPECIAL  TECHNOLOGY  shall not be a breach of this
     Agreement by SB:
     (i) use of unpatented HGS  TECHNOLOGY  outside a RESEARCH PLAN submitted by
     SB in  accordance  with  this  Agreement  after the later of the end of the
     INITIAL  RESEARCH TERM or RESEARCH TERM EXTENSIONS  which HGS TECHNOLOGY at
     the time of such use is generally available to the public, and/or
     (ii) use of SB  TECHNOLOGY  outside  a  RESEARCH  PLAN  submitted  by SB in
     accordance with this Agreement  developed after the later of the end of the
     INITIAL  RESEARCH TERM or RESEARCH TERM  EXTENSIONS  which is SB TECHNOLOGY
     only as a result of the use of unpatented HGS TECHNOLOGY which is generally
     available to the public at the time of such use; and/or
     (iii) use of  BIOINFORMATICS  after the end of the INITIAL RESEARCH TERM or
     RESEARCH TERM EXTENSION which BIOINFORMATICS is SB TECHNOLOGY; and/or

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<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."

     (iv) use of SB TECHNOLOGY with respect  to  any  products  discovered [***]
     years after the later of the end of the INITIAL  RESEARCH  TERM or RESEARCH
     TERM EXTENSIONS  outside a RESEARCH PLAN submitted by SB in accordance with
     this Agreement.

29.  COUNTERPARTS
     ------------

29.1 This Agreement may be executed in any number of counterparts, and each such
     counterpart  shall  be  deemed  an  original   instrument,   but  all  such
     counterparts together shall constitute but one agreement.

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


SmithKline Beecham Corporation


By:______________________________


SmithKline Beecham, p.l.c.


By:______________________________



Human Genome Sciences, Inc.


By:______________________________

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<PAGE>
 

                                   APPENDIX A
                          SAMPLE ANTIBODY RESEARCH PLAN

1.       Target (Antigen) Identification  (HGS Sequence ID#)

2.       Rationale

         -       Brief description of hypothesis
         -       Expected indications for product
         -       Brief summary of supporting biological data on target (antigen)

3.       Status of Cloning and Expression or Synthesis of Target (Antigen)
         -       nucleotide sequence encoding Target (Antigen) (as available)
4.       Patent Status

5.       Estimated date for start of laboratory animal immunization


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<PAGE>
                                   APPENDIX B
                             COLLABORATION PARTNERS
SP
MERCK
SYNTHELABO
any other entity pursuant to Paragraph 1.11


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<PAGE>
                                   APPENDIX C
                            Sample DRUG RESEARCH PLAN

1.       Target Identification  (HGS Sequence ID#)

2.       Rationale

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

3.       Status of full length cloning and expression
         -        nucleotide sequence encoding Target (as available)
4.       Patent status

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

6.       Chemical optimization

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

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

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

                                       65

<PAGE>
                                   APPENDIX D
                          SAMPLE PROTEIN RESEARCH PLAN

1.       Therapeutic Protein Identification (HGS Sequence ID#)

2.       Rationale

         -        Brief description of hypothesis
         -        Expected indications for Product

3.       Biological data on protein

         -        Full length cloning
         -        Expression and purification
                  full length nucleotide sequence of the GENE encoding the
                  THERAPEUTIC PROTEIN


The protein  preparation(s) used for the in vivo activity  demonstration must be
purified to the level specified in Paragraph 6.1(a), and evidence of this purity
level must be included in the research plan.

         -        In  vivo demonstration of relevant  pharmacological   activity
(along  with   supporting demonstration of in vitro or ex vivo demonstrations of
activity if available)

In certain instances, in vivo demonstration of activity will not be possible for
scientific   reasons.   In  these  specific   cases,  an  ex-vivo  or  in  vitro
demonstration of activity will be acceptable.

4.       Patent status(full length gene patent application must have been filed)

5.       Research and development plan

         This  plan need not  contain  detail of these  activities,  but  rather
one-line  descriptions of planned activities (with estimates of timing). Not all
of these plans/timings will be available when the initial plan is submitted, but
will be added as part of the yearly update of the plan.

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<PAGE>


         -        Further preclinical studies of activity
         -        Preclinical development
         -        determination of pharmacokinetic profile
         -        initiation of toxicology studies
         -        Steps to completion of IND package
         -        Certain key milestones in production/scale-up
         -        Clinical development
         -        Major phase transition (when available and appropriate)



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<PAGE>
"The  information  below marked [***] has been omitted pursuant to a request for
confidential treatment. The omitted portions have been separately filed with the
Commission."
                                   APPENDIX E
                               MTAS FOR SECTION 12

         HGS MTA              STATUS        SUBJECT
         -------              ------        -------
     Collaboration #120       Signed          [***]
     Collaboration #121       Signed          [***]
     Collaboration #174       Signed          [***]
     Collaboration #177       Signed          [***]
     Collaboration #199       Signed          [***]
     Collaboration #203       Signed          [***]
     Collaboration #204       Signed          [***]
     Collaboration #207       Signed          [***]
     Collaboration #221       Signed          [***]
     Collaboration #230       Signed          [***]
     Collaboration #235       Signed          [***]
     Collaboration #236       Signed          [***]
     Collaboration #242       SB approved     [***]
     Collaboration #243       Proposed        [***]
     Collaboration #247       Proposed        [***]
     Collaboration #249       Proposed        [***]
     Collaboration #253       Proposed        [***]
     Collaboration/CRADA      SB Approved     [***]
     (Fauci-NIH)  






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<PAGE>
                                   APPENDIX F
            SB/TAKEDA AGREEMENT IN EXISTENCE AS OF THE EFFECTIVE DATE




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